<PAGE>
As filed with the Securities and Exchange Commission on March 20, 1996
Registration No. 333- _____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
FIRST BANK CORPORATE CARD MASTER TRUST
(Issuer with respect to the Certificates)
----------------------
FIRST BANK OF SOUTH DAKOTA
(NATIONAL ASSOCIATION)
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
UNITED STATES 6021 46-0168855
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code No.)
organization)
----------------------
141 NORTH MAIN AVENUE
SIOUX FALLS, SOUTH DAKOTA 57117
(605) 339-8600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------------------
LEE R. MITAU
CORPORATE SECRETARY AND GENERAL COUNSEL
FIRST BANK SYSTEM, INC.
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402
(612) 973-0363
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
COPIES TO:
CHARLES F. SAWYER, ESQ. SUSAN M. CURTIS, ESQ.
DORSEY & WHITNEY LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM
220 SOUTH SIXTH STREET 919 THIRD AVENUE
MINNEAPOLIS, MINNESOTA 55402 NEW YORK, NEW YORK 10022
----------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
----------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Each Class of to be Price Offering Registration
Securities to be Registered Registered Per Unit* Price* Fee
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Class A Asset Backed Certificates $500,000 100% $500,000 $172.42
Class B Asset Backed Certificates $500,000 100% $500,000 $172.41
TOTAL $1,000,000 100% $1,000,000 $344.83
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* Estimated solely for the purpose of calculating the registration fee.
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
Cross Reference Sheet Furnished Pursuant to
Item 501(b) of Regulation S-K
Items and Caption
in Form S-1 Caption in Prospectus
----------- ---------------------
1. Forepart of Registration Statement Forepart of Registration
and Outside Front Cover Page of Statement; Outside Front Cover
Prospectus Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary Information, Risk Factors Summary; Risk Factors; The
and Ratio of Earnings to Fixed Trust; The Receivables;
Charges Certain Legal Aspects of the
Receivables
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Underwriting
9. Description of Securities to Be Summary; The Trust; The
Registered Receivables; Description of
the Certificates
10. Interests of Named Experts and *
Counsel
11. Information with Respect to the First Bank of South Dakota
Registrant (National Association) and
First Bank System, Inc.
12. Disclosure of Commission Position *
on Indemnification for Securities
Act Liabilities
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* Answer negative or Item inapplicable.
<PAGE>
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PRELIMINARY PROSPECTUS Subject to Completion dated _______ __, 1996
FIRST BANK CORPORATE CARD MASTER TRUST
ISSUER
$ ___________________ CLASS A ___% ASSET BACKED CERTIFICATES, SERIES 1996-1
$ ___________________ CLASS B ___% ASSET BACKED CERTIFICATES, SERIES 1996-1
FIRST BANK OF SOUTH DAKOTA (NATIONAL ASSOCIATION)
TRANSFEROR
FBS CARD SERVICES, INC.
SERVICER
Each Class A __% Asset Backed Certificate, Series 1996-1 (collectively, the
"Class A Certificates") and each Class B __% Asset Backed Certificate, Series
1996-1 (collectively, the "Class B Certificates" and, together with the Class A
Certificates, the "Certificates") will represent an undivided interest in the
First Bank Corporate Card Master Trust (the "Trust") created pursuant to a
Pooling and Servicing Agreement among First Bank of South Dakota (National
Association), as transferor, FBS Card Services, Inc., as servicer, and Citibank,
N.A., as trustee. In addition, a Collateral Investor Interest (as defined
herein) having an initial principal amount of $______ will be issued as part of
Series 1996-1, and will be subordinated to the Certificates as described herein.
(COVER CONTINUED ON FOLLOWING PAGE)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS NO
ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH IN "RISK FACTORS" ON PAGE 21.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST BANK OF SOUTH DAKOTA (NATIONAL
ASSOCIATION), FIRST BANK SYSTEM, INC., FBS CARD SERVICES, INC. OR ANY AFFILIATE
THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES NOR THE
UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to the
public (1) discount Transferor (1)(2)
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Per Class A Certificate % % %
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Per Class B Certificate % % %
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Total $ $ $
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(1) Plus accrued interest, if any, calculated from , 1996.
(2) Before deducting expenses estimated to be $ .
The Certificates are offered by the Underwriters when, as, and if issued by the
Trust and accepted by the Underwriters and subject to their right to reject
orders in whole or in part. The Underwriters reserve the right to withdraw,
cancel or modify such offer. It is expected that the Certificates will be
delivered in book-entry form through the facilities of The Depository Trust
Company, Cedel Bank, societe anonyme and the Euroclear System on or about
_________ __, 1996 against payment therefor in immediately available funds.
UNDERWRITERS OF THE CLASS A CERTIFICATES
J.P. Morgan & Co.
UNDERWRITERS OF THE CLASS B CERTIFICATES
J.P. Morgan & Co.
_________ __, 1996
<PAGE>
The Collateral Investor Interest is not offered hereby. The property of the
Trust will include receivables (the "Receivables") generated from time to time
in a portfolio of designated VISA-Registered Trademark- charge card accounts
originated under First Bank's Corporate Card or Purchasing Card programs (the
"Accounts"), all monies due in payment of the Receivables, all proceeds of the
Receivables, any Enhancement (as defined herein), all monies on deposit in
certain bank accounts of the Trust and the right to receive certain amounts of
Net Interchange allocable to the Certificates, as described herein. Certain
capitalized terms used herein are defined elsewhere in this Prospectus. A
listing of the pages on which such terms are defined is found in the "Index of
Terms" on page 82. First Bank initially will own the remaining undivided
interest in the Trust not represented by the Certificates, by the Collateral
Investor Interest, by other investor certificates issued by the Trust and by the
interests of Enhancement providers, if any. Series 1996-1 is the first Series
issued by the Trust. First Bank may from time to time offer and sell other
Series that evidence undivided interests in certain assets of the Trust, which
may have terms significantly different from the Certificates.
Interest will accrue on the Class A Certificates at the rate of __% per
annum. Interest will accrue on the Class B Certificates at the rate of __% per
annum. Interest will accrue on the Certificates from ______ __, 1996 and is
payable semi-annually on ________ and _________ (or, if any such day is not a
business day, the next succeeding business day), commencing ________, 1996, or
in the event an Early Amortization Event shall have occurred, monthly on or
about the 15th day of each month. Principal on the Class A Certificates is
scheduled to be distributed on the _______ Distribution Date, but may be paid
earlier or later under certain limited circumstances described herein.
Principal on the Class B Certificates is scheduled to be distributed on the
_______ Distribution Date, but may be paid earlier or later under certain
limited circumstances described herein. See "Maturity Considerations."
The Class B Certificates will be subordinated to the Class A Certificates
to the extent necessary to fund payments on the Class A Certificates as
described herein. The Collateral Investor Interest will be subordinated to the
Class A Certificates and the Class B Certificates as described herein.
AVAILABLE INFORMATION
This Prospectus (the "Prospectus"), which forms a part of the Registration
Statement, omits certain information contained in such Registration Statement
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "Commission"). For further information, reference is made to the
Registration Statement (including any amendments thereof and exhibits thereto)
and any reports and other documents incorporated herein by reference as
described below under "Incorporation of Certain Documents by Reference," which
are available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
7 World Trade Center, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act of
1934, as amended (the "Exchange Act") subsequent to the date of this Prospectus
and prior to the termination of the offering of the Certificates shall be deemed
to be incorporated by reference into this Prospectus and to be part hereof. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should
be directed to First Bank System, Inc., 601 Second Avenue South, Minneapolis,
Minnesota 55402, Attention: Investor Relations ((602) 973-2263).
2
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Transferor or any agent or Underwriter. This Prospectus does not constitute an
offer or solicitation by anyone in any state in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Transferor or the Receivables or the
Accounts since the date hereof or that the information contained or incorporated
by reference herein is correct as of any time subsequent to its date.
UNTIL ________ __, 199_ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS. UPON RECEIPT OF A REQUEST BY AN INVESTOR OR HIS OR HER
REPRESENTATIVE WITHIN THE PERIOD DURING WHICH THERE IS A PROSPECTUS DELIVERY
OBLIGATION, THE TRANSFEROR OR THE UNDERWRITERS WILL TRANSMIT OR CAUSE TO BE
TRANSMITTED PROMPTLY, WITHOUT CHARGE, AND IN ADDITION TO ANY SUCH DELIVERY
REQUIREMENTS, A PAPER COPY OF A PROSPECTUS, OR A PROSPECTUS ENCODED IN AN
ELECTRONIC FORMAT.
TABLE OF CONTENTS
PAGE
----
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference. . . . . . . . . . . . 2
Reports to Certificateholders. . . . . . . . . . . . . . . . . . . . . 3
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
First Bank's Corporate Card and Purchasing Card Programs . . . . . . . 26
The Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Maturity Considerations. . . . . . . . . . . . . . . . . . . . . . . . 36
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
First Bank of South Dakota (National Association) and
First Bank System, Inc.. . . . . . . . . . . . . . . . . . . . . . . 37
Description of the Certificates. . . . . . . . . . . . . . . . . . . . 37
Certain Legal Aspects of the Receivables . . . . . . . . . . . . . . . 71
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . . . 73
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . . . . 78
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Index of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning the Trust and prepared by the
Servicer, will be sent on behalf of the Trust to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Certificates, pursuant to the Agreement. See "Description of the
Certificates--Book-Entry Registration," "--Reports to Certificateholders" and
"--Evidence as to Compliance." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. The Transferor does not intend to send any of its financial
reports to Certificateholders or to the owners of beneficial interests in the
Certificates ("Certificate Owners"). The Servicer will file with the
Commission such periodic reports with respect to the Trust as are required
under the Exchange Act and the rules and regulations of the Commission
thereunder.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN
CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS.
A LISTING OF THE PAGES ON WHICH SUCH TERMS ARE DEFINED IS FOUND IN THE "INDEX OF
TERMS" BEGINNING ON PAGE 82.
TYPE OF SECURITIES . . . . . . . . Class A __% Asset Backed Certificates,
Series 1996-1 (the "Class A Certificates")
and Class B __% Asset Backed Certificates,
Series 1996-1 (the "Class B Certificates,"
and together with the Class A Certificates,
the "Certificates").
OVERVIEW OF THE TRANSACTION. . . . The First Bank Corporate Card Master Trust
(the "Trust") will be formed for the
purpose of holding the Receivables and
issuing the Certificates and other similar
securities. Each Certificate will
represent the right to receive a portion of
the collections on the Receivables. Such
collections will be used to pay interest
and principal due on such Certificate on
the applicable payment date. The Class A
Certificates will also have the benefits of
certain excess collections, and the
subordination of the Class B Certificates
and the Collateral Investor Interest. The
Class B Certificates will also have the
benefits of certain excess collections not
needed to cover shortfalls in respect of
the Class A Certificates and the
subordination of the Collateral Investor
Interest not used for the benefit of the
Class A Certificates. The Class B
Certificates therefore bear a greater risk
of loss of principal and of shortfalls in
payments of interest than the Class A
Certificates. Accordingly, the Class A
Certificates will receive a higher credit
rating than the Class B Certificates. See
"Summary--Certificate Rating." For a
description of the subordination of the
Class B Certificates, see "Summary--
Subordination of the Class B Certificates
and the Collateral Investor Interest" and
"Risk Factors--Effect of Subordination."
Both the Class A Certificates and the Class
B Certificates are subject to repayment
earlier than expected if certain events
called Early Amortization Events occur.
See "Description of the Certificates--Early
Amortization Events." Both the Class A
Certificates and the Class B Certificates
are also subject to potential delayed
repayment if the principal payment rate on
the Receivables decreases. See "Risk
Factors--Timing of Payments and Maturity"
and "Maturity Considerations." In no
event, however, will principal be paid on
the Class B Certificates prior to the
payment in full of the Class A
Certificates.
For a discussion of other risk factors
applicable to the Certificates, see "Risk
Factors."
TRUST . . . . . . . . . . . . . . The Trust will be formed pursuant to a
pooling and servicing agreement (the
"Agreement"), among First Bank of South
Dakota (National Association) ("First Bank"
or the "Bank"), as transferor,
4
<PAGE>
FBS Card Services, Inc., as servicer, and
Citibank, N.A., as trustee (the "Trustee").
The Trust will be created as a master trust
under which one or more series (each, a
"Series") may be issued pursuant to a
series supplement to the Agreement (each, a
"Series Supplement"). The Certificates
will be issued pursuant to the Agreement,
as supplemented by the Series Supplement
relating to the Certificates (the "Series
1996-1 Supplement") (the term "Agreement,"
unless the context requires otherwise,
refers to the Agreement as supplemented by
the Series 1996-1 Supplement). An interest
referred to as the "Collateral Investor
Interest" and deemed to be a class of
investor certificates will also be issued
as part of Series 1996-1 and will be
subordinated to the Certificates as
described herein. The Collateral Investor
Interest is not offered hereby. As used in
this Prospectus, the term
"Certificateholders" refers to holders of
the Certificates, the term "Class A
Certificateholders" refers to holders of
the Class A Certificates, the term "Class B
Certificateholders" refers to holders of
the Class B Certificates, the term
"Collateral Interest Holder" refers to the
holder of the Collateral Investor Interest
and the term "Series 1996-1" refers to the
Series issued pursuant to the Agreement, as
supplemented by the Series 1996-1
Supplement.
Series 1996-1 is the first Series to be
issued by the Trust. Additional Series
consisting of one or more classes (each, a
"Class") of certificates may be issued from
time to time by the Trust.
THE TRANSFEROR . . . . . . . . . . First Bank of South Dakota (National
Association) (the "Transferor"), a national
banking association organized under the
laws of the United States and a wholly-
owned subsidiary of First Bank System,
Inc., a Delaware corporation. The
principal offices of the Transferor are
located at 141 North Main Avenue, Sioux
Falls, South Dakota 57117, and its
telephone number is (605) 339-8600.
THE SERVICER . . . . . . . . . . . FBS Card Services, Inc. (the "Servicer"), a
Minnesota corporation, and a wholly-owned
subsidiary of First Bank System, Inc.
THE TRUSTEE. . . . . . . . . . . . Citibank, N.A., a national banking
association.
TRUST ASSETS . . . . . . . . . . . The assets of the Trust will include (i)
receivables (the "Receivables") arising
under certain VISA-Registered Trademark-*
charge card accounts (the "Accounts"),
including any Additional Accounts following
their designation, originated under the
Bank's Corporate Card or Purchasing Card
programs and selected from the portfolio of
VISA accounts in such programs owned by the
Bank (the "Bank Portfolio"), (ii) all
monies due in payment of the Receivables
(including recoveries on charged-off
Receivables and amounts, if any, paid by
corporate clients as co-obligors under the
Corporate Card program), (iii) all proceeds
of the Receivables, (iv) the right to
receive
- ---------------
* VISA-Registered Trademark- is a federally registered servicemark of VISA
USA, Inc.
5
<PAGE>
certain amounts of Net Interchange (as
defined herein) allocable to the
Certificates (which right may not be
afforded to other Series issued by the
Trust), (v) all monies on deposit in
certain bank accounts of the Trust (other
than investment earnings on such amounts,
except as otherwise specified herein) and
(vi) any Enhancement (as defined herein)
with respect to any particular Series or
Class as described herein. The
Certificateholders will not be entitled to
the benefits of any Enhancement issued with
respect to any Series other than Series
1996-1, and the holders of certificates of
other Series will not be entitled to the
benefits of any Enhancement issued with
respect to Series 1996-1.
Upon the formation of the Trust, the
Transferor will convey to the Trustee for
the benefit of the Trust all Receivables
existing under certain Accounts that will
be selected from the Bank Portfolio based
on criteria provided in the Agreement as
applied on _____ __, 1996 (the "Cut-Off
Date") and will convey to the Trustee all
Receivables arising under the Accounts from
time to time thereafter until the
termination of the Trust. In addition,
pursuant to the Agreement, the Bank may or
may be obligated to (subject to certain
limitations and conditions) designate
Additional Accounts for inclusion in the
Trust. See "The Receivables" and
"Description of the Certificates--Addition
of Accounts."
INTEREST AND PRINCIPAL . . . . . . Each of the Certificates offered hereby
represents the right to receive certain
payments from the assets of the Trust. The
Trust's assets will be allocated among the
Class A Certificateholders (the "Class A
Investor Interest"), the Class B
Certificateholders (the "Class B Investor
Interest"), the Collateral Interest Holder
(the "Collateral Investor Interest," and
together with the Class A Investor Interest
and the Class B Investor Interest, the
"Investor Interest"), the interest of the
holders of other undivided interests in the
Trust issued pursuant to the Agreement and
applicable Series Supplements, and the
Transferor (the "Transferor Interest"), as
described below. The Collateral Investor
Interest constitutes Enhancement for the
Certificates. Allocations will be made to
the Collateral Investor Interest, and the
Collateral Interest Holder will have voting
and certain other rights, as if the
Collateral Investor Interest were a
subordinated class of Certificates. The
Transferor Interest will represent the
right to the assets of the Trust not
allocated to the Class A Investor Interest,
the Class B Investor Interest, the
Collateral Investor Interest or the holders
of other undivided interests in the Trust.
The principal amount of the Transferor
Interest will fluctuate as the amount of
Receivables in the Trust changes from time
to time.
Each Class A Certificate represents the
right to receive from the assets of the
Trust allocated to the Class A Certificates
payments of (i) interest at the rate of __%
per annum (the "Class A Certificate Rate"),
accruing from _____ __, 1996 (the "Closing
Date") and (ii) principal on the _____ ____
Distribution Date (the "Class
6
<PAGE>
A Expected Final Payment Date") or, under
certain limited circumstances, during the
Early Amortization Period, funded from a
percentage of the payments received with
respect to the Receivables and certain
other funds (including, under the
circumstances specified herein, funds, if
any, on deposit in the Principal Funding
Account), as described herein.
Each Class B Certificate represents the
right to receive from the assets of the
Trust allocated to the Class B Certificates
payments of (i) interest at the rate of __%
per annum (the "Class B Certificate Rate"),
accruing from the Closing Date and (ii)
principal on the _____ ____ Distribution
Date (the "Class B Expected Final Payment
Date") or, under certain limited
circumstances, during the Early
Amortization Period, funded from a
percentage of the payments received with
respect to the Receivables and certain
other funds, as described herein. No
principal will be distributed on the Class
B Certificates until the Class A
Certificates have been paid in full. See
"Description of the Certificates--
Subordination of the Class B Certificates
and the Collateral Investor Interest."
The interest in the Trust represented by
the Class A Certificates (the "Class A
Invested Amount") initially will equal
$______ (the "Class A Initial Invested
Amount") and will decline as principal with
respect to the Class A Certificates is paid
to the Class A Certificateholders or as
Investor Charge-Offs with respect to the
Class A Certificates occur.
The interest in the Trust represented by
the Class B Certificates (the "Class B
Invested Amount") initially will equal
$______ (the "Class B Initial Invested
Amount") and will decline as principal with
respect to the Class B Certificates is paid
to the Class B Certificateholders, as
Principal Collections allocable to the
Class B Certificates are reallocated for
the benefit of the Class A Certificates or
as Investor Charge-Offs with respect to the
Class B Certificates occur.
The interest in the Trust represented by
the Collateral Investor Interest (the
"Collateral Invested Amount" and, together
with the Class A Invested Amount and the
Class B Invested Amount, the "Invested
Amount") initially will equal $______ (the
"Collateral Initial Invested Amount" and,
together with the Class A Initial Invested
Amount and the Class B Initial Invested
Amount, the "Initial Invested Amount") and
will decline as principal with respect to
the Collateral Investor Interest is paid to
the Collateral Interest Holder, as
Principal Collections allocable to the
Collateral Investor Interest are
reallocated for the benefit of the Class A
Certificates and the Class B Certificates
or as Investor Charge-Offs with respect to
the Collateral Investor Interest occur.
During the Accumulation Period, for the
sole purpose of allocating Yield
Collections and the amount of Defaulted
Receivables with
7
<PAGE>
respect to each Collection Period, an
amount equal to the amount on deposit in
the Principal Funding Account from time to
time will be subtracted from the Class A
Invested Amount (as so reduced, the "Class
A Adjusted Invested Amount" and together
with the Class B Invested Amount and the
Collateral Invested Amount, the "Adjusted
Invested Amount").
The Transferor Interest will initially be
held by the Transferor.
The final payment of principal and interest
on the Certificates will be made no later
than __________ __, ____ (the "Stated
Series Termination Date"). After the Stated
Series Termination Date, the Trust will
have no further obligation to pay principal
or interest on the Certificates.
The Class A Certificates, the Class B
Certificates and the Collateral Investor
Interest will each include the right to
receive (but only to the extent needed to
make required payments under the Agreement)
varying percentages of Yield Collections
and Principal Collections and will be
allocated varying percentages of the amount
of Defaulted Receivables during each
calendar month (each, a "Collection
Period"). Yield Collections and the amount
of Defaulted Receivables at all times, and
Principal Collections during the Revolving
Period, will be allocated to the Investor
Interest based on the Floating Allocation
Percentage and will be further allocated
among the Class A Investor Interest, the
Class B Investor Interest and the
Collateral Investor Interest based on the
Class A Floating Percentage, the Class B
Floating Percentage and the Collateral
Floating Percentage, respectively,
applicable during the related Collection
Period. Principal Collections during the
Accumulation Period and the Early
Amortization Period will be allocated to
the Investor Interest based on the Fixed
Allocation Percentage and will be further
allocated among the Class A Investor
Interest, the Class B Investor Interest and
the Collateral Investor Interest based on
the Class A Fixed Percentage, the Class B
Fixed Percentage and the Collateral Fixed
Percentage, respectively. See "Description
of the Certificates--Allocation
Percentages" and "--Early Amortization
Events."
RECEIVABLES. . . . . . . . . . . . The Receivables arise in Accounts that have
been selected from the Bank Portfolio based
on criteria provided in the Agreement as
applied on the Cut-Off Date and, with
respect to certain Additional Accounts, if
any, on subsequent dates. The Receivables
consist of amounts charged by cardholders
for goods and services and cash advances
plus the related amounts billed to the
Accounts in respect of cash advance fees,
annual cardholder fees, late fees, and
other fees and charges. In addition,
certain amounts of Net Interchange
attributed to cardholder charges for goods
and services in the Accounts will be
allocated to the Certificates and treated
as Yield Collections. See "First Bank's
Corporate Card and Purchasing Card
Programs--Interchange."
8
<PAGE>
The aggregate amount of Receivables in the
Accounts as of the beginning of the day on
the Cut-Off Date was $_______. During the
term of the Trust, all new Receivables
arising in the Accounts will be transferred
automatically to the Trust by the
Transferor. The total amount of Receivables
in the Trust will fluctuate from day to
day, because the amount of new Receivables
arising in the Accounts and the amount of
payments collected on existing Receivables
usually differ each day. The Trustee is
not required nor expected to make any
initial or periodic general examination of
the Receivables or any records relating to
the Receivables for the presence or absence
of defects, compliance with the
Transferor's representations and warranties
or for any other purpose.
Pursuant to the Agreement, the Transferor
will have the right (subject to certain
limitations and conditions), and in some
circumstances, will be obligated, to
designate additional eligible VISA charge
card accounts originated under the Bank's
Corporate Card or Purchasing Card programs
(the "Additional Accounts") and to convey
to the Trust all of the Receivables in the
Additional Accounts, whether such
Receivables are then existing or thereafter
created. In addition, the Transferor will
have the right (subject to certain
limitations and conditions) to designate
certain Accounts and to accept the
reconveyance of all the Receivables in such
Accounts (the "Removed Accounts"). See
"The Receivables" and "Description of the
Certificates--Addition of Accounts" and "--
Removal of Accounts."
YIELD FACTOR; COLLECTIONS. . . . . The Receivables originated under the
Accounts are not subject to a monthly
finance charge, and therefore, a portion of
the collections on the Receivables received
during the preceding Collection Period will
be treated as "yield" to the Trust. Such
yield will equal the product of the
aggregate amount of such collections
(excluding Net Interchange, if any) and the
Yield Factor. Such collections, plus
certain amounts of Net Interchange
attributed to cardholder charges in the
Accounts, will be treated as Yield
Collections. The remainder of such
collections will be treated as Principal
Collections. The "Yield Factor" of the
Trust is currently equal to __% and,
subject to certain limitations, may be
changed from time to time by the
Transferor. "Net Interchange" consists of
certain fees received by the Transferor
from VISA as partial compensation for
taking credit risk, absorbing fraud losses
and funding receivables for a limited
period prior to initial billing, net of
VISA dues and rebates to corporate
customers and travel agencies. See "Risk
Factors--Ability to Change Yield Factor"
and "First Bank's Corporate Card and
Purchasing Card Programs--Interchange."
EXCHANGES. . . . . . . . . . . . . The Agreement authorizes the Trustee to
issue two types of certificates: (i) one or
more Series of certificates that will be
transferable and have the characteristics
described below and (ii) a certificate that
evidences the Transferor Interest (the
"Exchangeable Transfer-
9
<PAGE>
or Certificate"), which initially will be
held by the Transferor and which generally
will be retained by the Transferor.
Pursuant to any one or more Series
Supplements to the Agreement, the holder of
the Exchangeable Transferor Certificate may
tender the Exchangeable Transferor
Certificate or, if provided in the relevant
Series Supplement, certificates
representing any Series issued by the Trust
and the Exchangeable Transferor
Certificate, to the Trustee in exchange for
one or more new Series and a reissued
Exchangeable Transferor Certificate (any
such tender, an "Exchange"). Any such
Series may be offered to the public or
other investors under a prospectus or other
disclosure document (a "Disclosure
Document") in offerings pursuant to this
Prospectus or in transactions either
registered under the Securities Act of
1933, as amended (the "Securities Act") or
exempt from registration thereunder,
directly or through one or more other
underwriters or placement agents, in fixed-
price offerings or in negotiated
transactions or otherwise. See
"Description of the Certificates--
Exchanges."
DENOMINATIONS. . . . . . . . . . . Beneficial interests in the Certificates
will be offered for purchase in
denominations of $1,000 and integral
multiples thereof.
REGISTRATION OF CERTIFICATES . . . The Certificates initially will be
represented by Certificates registered in
the name of Cede, as the nominee of DTC.
No Certificate Owner will be entitled to
receive a Definitive Certificate, except
under the limited circumstances described
herein. Certificateholders may elect to
hold their Certificates through DTC (in the
United States) or Cedel or Euroclear (in
Europe). Transfers will be made in
accordance with the rules and operating
procedures described herein. See
"Description of the Certificates--
Definitive Certificates."
SERVICING FEE. . . . . . . . . . . The Servicer will receive a monthly fee as
servicing compensation from the Trust equal
to one-twelfth of the product of __% per
annum and the Adjusted Invested Amount as
of the last day of the second preceding
Collection Period (the "Monthly Investor
Servicing Fee"). So long as Card Services
is acting as Servicer under the Agreement,
a portion of the Monthly Investor Servicing
Fee equal to up to one-twelfth of the
product of __% per annum and the Adjusted
Invested Amount as of the last day of the
second preceding Collection Period will be
payable solely from Net Interchange. See
"Description of the Certificates--Servicing
Compensation and Payment of Expenses."
INTEREST PAYMENTS. . . . . . . . . Interest will accrue on the unpaid
principal balance of the Class A
Certificates at a per annum rate equal to
the Class A Certificate Rate and will
accrue on the unpaid principal balance of
the Class B Certificates at a per annum
rate equal to the Class B Certificate Rate.
Except as otherwise provided herein,
interest will be paid to Certificateholders
semi-annually on _________ and ________
(or, if any such day is not a business day,
on the next succeeding
10
<PAGE>
business day) and on the Class A Expected
Final Payment Date with respect to the
Class A Certificates and on the Class B
Expected Final Payment Date with respect to
the Class B Certificates (each, an
"Interest Payment Date"). If an Early
Amortization Period commences, then
thereafter interest will be distributed to
the Certificateholders monthly on each
Special Payment Date. Interest for any
Interest Payment Date or Special Payment
Date due but not paid on such Interest
Payment Date or Special Payment Date will
be payable on the next succeeding Interest
Payment Date or Special Payment Date,
together with additional interest on such
amount at the applicable Certificate Rate
(such amount, as applicable, "Additional
Interest"). Interest will be calculated on
the basis of a 360-day year comprised of
twelve 30-day months.
Interest payments on each Interest Payment
Date or Special Payment Date will be funded
from the portion of Yield Collections
collected during the Collection Period or
Collection Periods since the later of the
Closing Date or the last date on which a
payment of interest on the Certificates was
made and certain other available amounts
(a) with respect to the Class A
Certificates, allocated to the Class A
Investor Interest, and, if necessary, from
Excess Spread, Shared Excess Yield
Collections and Reallocated Principal
Collections (to the extent available), (b)
with respect to the Class B Certificates,
allocated to the Class B Investor Interest
and, if necessary, from Excess Spread,
Shared Excess Yield Collections and
Reallocated Collateral Principal
Collections (to the extent available) and
(c) with respect to the Collateral Investor
Interest, from Excess Spread and Shared
Excess Yield Collections. See "Description
of the Certificates--Reallocation of Cash
Flows" and "--Application of Collections--
Payment of Interest, Fees and Other Items."
If payments of interest on the Certificates
occur less frequently than monthly, amounts
allocable to interest on the Certificates
will be deposited in one or more trust
accounts and will generally be invested in
certain Eligible Investments pending
distribution to Certificateholders. See
"Description of the Certificates--Interest
Payments."
PRINCIPAL PAYMENTS . . . . . . . . Principal on the Class A Certificates is
scheduled to be paid on the _______
Distribution Date (the "Class A Expected
Final Payment Date"). Principal on the
Class B Certificates is scheduled to be
paid on the_______ Distribution Date (the
"Class B Expected Final Payment Date"). No
principal will be distributed on the Class
B Certificates until the principal balance
of the Class A Certificates has been
reduced to zero. Distributions of
principal with respect to the Class A
Certificates or the Class B Certificates
may commence earlier than the Expected
Final Payment Date for such Class, and the
final distribution of principal with
respect to the Class A Certificates or the
Class B Certificates may be made later than
the Expected Final Payment Date for such
Class, if an Early Amortization Event
occurs and the Early Amortization Period
11
<PAGE>
commences or under certain other
circumstances described herein. See
"Description of the Certificates--Principal
Payments" and "Maturity Considerations."
RECORD DATE. . . . . . . . . . . . The last business day of the month
immediately preceding an Interest Payment
Date or Special Payment Date.
REVOLVING PERIOD . . . . . . . . . No principal will be payable to the Class A
Certificateholders until the Class A
Expected Final Payment Date or, upon the
occurrence of an Early Amortization Event
as described herein, the first Special
Payment Date with respect to the Early
Amortization Period. No principal will be
payable to the Class B Certificateholders
until the Class A Invested Amount is paid
in full. For the period beginning on the
Closing Date and ending with the
commencement of the Accumulation Period or
the Early Amortization Period (the
"Revolving Period"), Principal Collections
otherwise allocable to the
Certificateholders (other than Principal
Collections allocated to the Class B
Certificateholders ("Reallocated Class B
Principal Collections") that are used to
pay any deficiency in the Class A Required
Amount remaining after application of
Reallocated Collateral Principal
Collections) will, subject to certain
limitations, be treated as Shared Principal
Collections and applied to cover principal
payments due to or for the benefit of
certificateholders of other Series, if so
specified in the Series Supplements for
such other Series, or paid to the
Transferor as holder of the Exchangeable
Transferor Certificate or in certain
circumstances, be paid to the Collateral
Interest Holder. See "Description of the
Certificates--Early Amortization Events"
for a discussion of the events which might
lead to the termination of the Revolving
Period prior to the commencement of the
Accumulation Period.
ACCUMULATION PERIOD. . . . . . . . Unless an Early Amortization Event has
occurred, the Revolving Period with respect
to the Certificates is scheduled to end and
the principal accumulation period with
respect to the Certificates (the
"Accumulation Period") is scheduled to
commence at the close of business on the
last day of the _________ ____ Collection
Period. Subject to the conditions set forth
under "Description of the Certificates--
Postponement of Accumulation Period," the
day on which the Revolving Period ends and
the Accumulation Period begins may be
delayed to no later than the close of
business on the last day of the ________
____ Collection Period. Unless an Early
Amortization Event has occurred, the
Accumulation Period will commence at the
close of business on the last day of the
Revolving Period and end on the earliest of
(a) the commencement of the Early
Amortization Period, (b) the payment in
full of the Invested Amount or (c) the
Stated Series Termination Date.
During the Accumulation Period, prior to
the payment of the Class A Invested Amount
in full, amounts equal to the lesser of (a)
the Fixed Allocation Percentage of
Principal Collections with respect to the
preceding Collection Period PLUS the amount
of any Shared
12
<PAGE>
Principal Collections with respect to other
Series that are allocated to Series 1996-1
in accordance with the Agreement MINUS the
amount of Reallocated Principal Collections
for such Collection Period, (b) the
Controlled Deposit Amount for the related
Transfer Date and (c) the Class A Adjusted
Invested Amount with respect to such
Transfer Date will be deposited monthly in
a trust account established by the Servicer
(the "Principal Funding Account") on each
Transfer Date beginning with the Transfer
Date in the month following the
commencement of the Accumulation Period
until the Principal Funding Account Balance
is equal to the Class A Invested Amount.
After the Class A Invested Amount has been
paid in full, on each Transfer Date during
the Accumulation Period, an amount equal to
the lesser of (a) the Fixed Allocation
Percentage of Principal Collections with
respect to the preceding Collection Period
PLUS the amount of any Shared Principal
Collections with respect to other Series
that are allocated to Series 1996-1 in
accordance with the Agreement MINUS the
amount of Reallocated Principal Collections
for such Collection Period MINUS the
portion of such amounts applied to Class A
Monthly Principal on such Transfer Date and
(b) the Class B Invested Amount with
respect to such Transfer Date will be
deposited into the Collection Account for
distribution to the Class B
Certificateholders until the Class B
Invested Amount has been paid in full. If,
for any Collection Period, Principal
Collections allocable to the
Certificateholders for such Collection
Period exceed the applicable Controlled
Deposit Amount, the amount of such excess
will be first paid to the Collateral
Interest Holder to the extent that the
Collateral Invested Amount exceeds the
Required Collateral Invested Amount and
then will be treated as Shared Principal
Collections and allocated to the holders of
other Series of certificates issued and
outstanding, if any, or, subject to certain
limitations, paid to the Transferor as
holder of the Exchangeable Transferor
Certificate. If, for any Collection
Period, Principal Collections allocable to
the Certificateholders for such Collection
Period are less than the applicable
Controlled Deposit Amount, the amount of
such deficiency will be the applicable
"Deficit Controlled Accumulation Amount"
for the succeeding Collection Period. See
"Description of the Certificates--
Application of Collections."
Unless an Early Amortization Event shall
have occurred, prior to the payment of the
Class A Invested Amount in full, all funds
on deposit in the Principal Funding Account
will be invested at the direction of the
Servicer by the Trustee in certain Eligible
Investments. Investment earnings (net of
investment losses and expenses) on funds on
deposit in the Principal Funding Account
(the "Principal Funding Investment
Proceeds") during the Accumulation Period
will be applied as Class A Available Funds.
If, for any Transfer Date, the Principal
Funding Investment Proceeds are less than
the Covered Amount, the amount of such
shortfall (the "Principal Funding
Investment Shortfall") will be funded from
Class A Available Funds or a withdrawal
from the Reserve
13
<PAGE>
Account, to the extent available, or from
Reallocated Principal Collections. The
"Covered Amount" shall mean for any
Transfer Date with respect to the
Accumulation Period or the first Special
Payment Date of the Early Amortization
Period, an amount equal to one-twelfth of
the product of (i) the Class A Certificate
Rate and (ii) the Principal Funding Account
Balance, if any, as of the Record Date
preceding such Transfer Date.
Funds on deposit in the Principal Funding
Account will be available to pay the Class
A Certificateholders in respect of the
Class A Invested Amount on the Class A
Expected Final Payment Date. If the
aggregate principal amount of deposits made
to the Principal Funding Account is
insufficient to pay the Class A Invested
Amount in full on the Class A Expected
Final Payment Date, the Early Amortization
Period will commence as described below.
Although it is anticipated that during the
Accumulation Period prior to the payment of
the Class A Invested Amount in full, funds
will be deposited in the Principal Funding
Account in an amount equal to the
applicable Controlled Deposit Amount on
each Transfer Date and that scheduled
principal will be available for
distribution to the Class A
Certificateholders on the Class A Expected
Final Payment Date, no assurance can be
given in that regard. See "Maturity
Considerations."
EARLY AMORTIZATION PERIOD. . . . . During the period beginning on the day on
which an Early Amortization Event has
occurred and ending on the earlier of (a)
the date on which the Invested Amount has
been paid in full and (b) the Stated Series
Termination Date (the "Early Amortization
Period"), Principal Collections allocable
to the Certificateholders will be applied
to the payment of principal on the
Certificates and will be distributed
monthly on each Special Payment Date,
beginning with the Special Payment Date
following the occurrence of an Early
Amortization Event, to the Class A
Certificateholders and, following payment
of the Class A Invested Amount in full, to
the Class B Certificateholders and,
following payment of the Class B Invested
Amount in full, to the Collateral Interest
Holder. The Early Amortization Period is
intended to result in the fastest possible
distribution of principal to
Certificateholders following an Early
Amortization Event in order to better
ensure the repayment of principal to
Certificateholders. See "Description of
the Certificates--Early Amortization
Events" for a discussion of the events
which might lead to the commencement of the
Early Amortization Period.
PRINCIPAL COLLECTIONS; CERTAIN
ALLOCATIONS. . . . . . . . . . . Principal Collections for any Collection
Period will be allocated on the basis of
varying percentages. Under the Agreement,
such collections will generally be, (i)
during the Revolving Period, treated as
Shared Principal Collections or distributed
to the Transferor; PROVIDED that (a)
Principal Collections allocable to the
Collateral Investor Interest may be used to
cover shortfalls in Yield
14
<PAGE>
Collections used to pay or allocate
interest and other amounts to the Class A
Certificates and the Class B Certificates
on any Transfer Date, and (b) Principal
Collections allocable to the Class B
Certificates may be used to cover remaining
shortfalls in Yield Collections used to pay
or allocate interest and other amounts to
the Class A Certificates on any Transfer
Date; (ii) during the Accumulation Period,
deposited into the Principal Funding
Account in an amount up to the Controlled
Distribution Amount, with any excess (a)
paid to the Collateral Interest Holder as
principal on the Collateral Investor
Interest or (b) after the Collateral
Investor Interest has been paid in full,
treated as Shared Principal Collections or
distributed to the Transferor as holder of
the Exchangeable Transferor Certificate;
(iii) on or after the Class A Expected
Final Payment Date or during any Early
Amortization Period, paid to Class A
Certificateholders in respect of the Class
A Invested Amount or (iv) after the Class
A Certificates have been paid in full, on
or after the Class B Expected Final Payment
Date or during any Early Amortization
Period, paid to Class B Certificateholders
as principal on the Class B Certificates.
See "Description of the Certificates--
Allocation Percentages."
SUBORDINATION OF THE CLASS B
CERTIFICATES AND THE COLLATERAL
INVESTOR INTEREST. . . . . . . . The Class B Certificates and the Collateral
Investor Interest will be subordinated as
described herein to the extent necessary to
fund payments with respect to the Class A
Certificates as described herein. In
addition, the Collateral Investor Interest
will be subordinated as described herein to
the extent necessary to fund certain
payments with respect to the Class B
Certificates. If the Collateral Invested
Amount and the Class B Invested Amount are
each reduced to zero, the Class A
Certificateholders will bear directly the
credit and other risks associated with
their undivided interest in the Trust and
thus will be more likely to suffer a loss.
To the extent the Class A Invested Amount
is reduced, the percentage of Yield
Collections allocable to the Class A
Certificateholders with respect to
subsequent Collection Periods will be
reduced. Moreover, to the extent the amount
of such reduction in the Class A Invested
Amount is not reimbursed, the amount of
principal distributable to the Class A
Certificateholders will be reduced. If the
Collateral Invested Amount is reduced to
zero, the Class B Certificateholders will
bear directly the credit and other risks
associated with their undivided interest in
the Trust and thus will be more likely to
suffer a loss. To the extent the Class B
Invested Amount is reduced, the percentage
of Yield Collections allocable to the
Class B Certificateholders with respect to
subsequent Collection Periods will be
reduced. Moreover, to the extent the amount
of such reduction in the Class B Invested
Amount is not reimbursed, the amount of
principal distributable to the Class B
Certificateholders will be reduced. No
principal will be paid to the Class B
Certificateholders until the Class A
Invested Amount is paid in full. See "Risk
Factors--Effect of Subordination," "De-
15
<PAGE>
scription of the Certificates--Allocation
Percentages," "--Subordination of the
Class B Certificates and the Collateral
Investor Interest" and "--Application of
Collections."
ADDITIONAL AMOUNTS AVAILABLE TO
CERTIFICATEHOLDERS . . . . . . . With respect to any Transfer Date, Excess
Spread and Shared Excess Yield Collections
will be applied to fund the Class A
Required Amount and the Class B Required
Amount, if any. The "Class A Required
Amount" means the amount, if any, by which
the sum of (a) the Class A Monthly Interest
due on the related Distribution Date and
any overdue Class A Monthly Interest and
Class A Additional Interest thereon, (b)
the Class A Servicing Fee for the related
Collection Period and any overdue Class A
Servicing Fee and (c) the Class A Investor
Default Amount, if any, for the related
Collection Period exceeds the Class A
Available Funds for the related Collection
Period. The "Class B Required Amount"
means the amount, if any, equal to the sum
of (a) the amount, if any, by which the sum
of (i) Class B Monthly Interest due on the
related Distribution Date and any overdue
Class B Monthly Interest and Class B
Additional Interest thereon and (ii) the
Class B Servicing Fee for the related
Collection Period and any overdue Class B
Servicing Fee exceeds the Class B Available
Funds for the related Collection Period and
(b) the amount, if any, by which the Class
B Investor Default Amount for the related
Collection Period exceeds the amount of
Excess Spread and Shared Excess Yield
Collections allocable to Series 1996-1
available to cover the Class B Investor
Default Amount for the related Collection
Period. "Excess Spread" for any Transfer
Date will equal the sum of (a) the excess
of (i) Class A Available Funds for the
related Collection Period over (ii) the sum
of the amounts referred to in clauses (a),
(b) and (c) in the definition of "Class A
Required Amount" above, (b) the excess of
(i) Class B Available Funds for the related
Collection Period over (ii) the sum of the
amounts referred to in clauses (a) (i) and
(a) (ii) in the definition of "Class B
Required Amount" above and (c) Collateral
Available Funds for the related Collection
Period not used under certain circumstances
to pay the Collateral Servicing Fee, as
described herein. "Shared Excess Yield
Collections" for any Transfer Date will
equal the aggregate amount of Yield
Collections for the related Collection
Period allocable to other Series in excess
of amounts necessary to make required
payments with respect to such Series, if
any.
If, on any Transfer Date, the sum of Excess
Spread and Shared Excess Yield Collections
is less than the Class A Required Amount,
Reallocated Principal Collections allocable
first to the Collateral Investor Interest
and then to the Class B Investor Interest
with respect to the related Collection
Period will be used to fund the remaining
Class A Required Amount. If Reallocated
Principal Collections with respect to such
Collection Period are insufficient to fund
the remaining Class A Required Amount for
the related Transfer Date, then the
Collateral Invested Amount (after giving
16
<PAGE>
effect to reductions for any Collateral
Charge-Offs and Reallocated Collateral
Principal Collections on such Transfer
Date) will be reduced by the amount of such
deficiency (but not by more than the Class
A Investor Default Amount for such
Collection Period). In the event that such
reduction would cause the Collateral
Invested Amount to be a negative number,
the Collateral Invested Amount will be
reduced to zero, and the Class B Invested
Amount (after giving effect to reductions
for any Class B Investor Charge-Offs and
any Reallocated Class B Principal
Collections on such Transfer Date) will be
reduced by the amount by which the
Collateral Invested Amount would have been
reduced below zero (but not by more than
the excess of the Class A Investor Default
Amount, if any, for such Collection Period
over the amount of such reduction, if any,
of the Collateral Invested Amount with
respect to such Collection Period). In the
event that such reduction would cause the
Class B Invested Amount to be a negative
number, the Class B Invested Amount will be
reduced to zero and the Class A Invested
Amount will be reduced by the amount by
which the Class B Invested Amount would
have been reduced below zero (but not by
more than the excess, if any, of the Class
A Investor Default Amount for such
Collection Period over such reductions in
the Collateral Invested Amount and the
Class B Invested Amount with respect to
such Collection Period) (such reduction, a
"Class A Investor Charge-Off"). If the
Collateral Invested Amount and the Class B
Invested Amount are reduced to zero, the
Class A Certificateholders will bear
directly the credit and other risks
associated with their undivided interest in
the Trust. See "Description of the
Certificates--Reallocation of Cash Flows"
and "--Defaulted Receivables; Rebates and
Fraudulent Changes; Investor Charge-Offs."
If, on any Transfer Date, the sum of Excess
Spread and Shared Excess Yield Collections
not required to pay the Class A Required
Amount and to reimburse Class A Investor
Charge-Offs is less than the Class B
Required Amount, Reallocated Principal
Collections allocable to the Collateral
Investor Interest for the related
Collection Period not required to pay the
Class A Required Amount will be used to
fund the remaining Class B Required Amount.
If such remaining Reallocated Principal
Collections allocable to the Collateral
Investor Interest with respect to such
Collection Period are insufficient to fund
the remaining Class B Required Amount for
the related Transfer Date, then the
Collateral Invested Amount (after giving
effect to reductions for any Collateral
Charge-Offs, Reallocated Collateral
Principal Collections and any adjustments
made thereto for the benefit of the Class A
Certificateholders) will be reduced by the
amount of such deficiency (but not by more
than the Class B Investor Default Amount
for such Collection Period). In the event
that such reduction would cause the
Collateral Invested Amount to be a negative
number, the Collateral Invested Amount will
be reduced to zero, and the Class B
Invested Amount will be reduced by the
amount by which the
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Collateral Invested Amount would have been
reduced below zero (but not by more than
the excess, if any, of the Class B Investor
Default Amount for such Collection Period
over such reduction in the Collateral
Invested Amount with respect to such
Collection Period) (such reduction, a
"Class B Investor Charge-Off"). In the
event of a reduction of the Class A
Invested Amount, the Class B Invested
Amount or the Collateral Invested Amount,
the amounts available to fund payments of
principal and interest with respect to the
Class A Certificates and the Class B
Certificates will be decreased. See
"Description of the Certificates--
Reallocation of Cash Flows" and "--
Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs."
REQUIRED COLLATERAL INVESTED
AMOUNT . . . . . . . . . . . . . The "Required Collateral Invested Amount"
with respect to any Transfer Date means (a)
initially, the Collateral Initial Invested
Amount and (b) on any Transfer Date
thereafter, an amount equal to __% of the
sum of the Class A Adjusted Invested Amount
and the Class B Invested Amount (after
taking into account any reductions thereof
on such Transfer Date); PROVIDED, HOWEVER,
that if an Early Amortization Event occurs,
then the Required Collateral Invested
Amount shall equal the Required Collateral
Invested Amount on the Transfer Date
immediately preceding the occurrence of
such Early Amortization Event. With
respect to any Transfer Date, if the
Collateral Invested Amount is less than the
Required Collateral Invested Amount,
certain Excess Spread and Shared Excess
Yield Collections allocable to Series 1996-
1 will be used to increase the Collateral
Invested Amount to the extent of such
shortfall. If on any Transfer Date, the
Collateral Invested Amount exceeds the
Required Collateral Invested Amount, such
excess may be applied in accordance with
the loan agreement among the Transferor,
the Trustee, the Servicer and the
Collateral Interest Holder (the "Loan
Agreement") and will not be available to
the Certificateholders. See "Description
of the Certificates--Required Collateral
Invested Amount."
SHARED EXCESS YIELD
COLLECTIONS. . . . . . . . . . . Subject to certain limitations, Shared
Excess Yield Collections, if any, with
respect to any Series may be applied to
cover any shortfalls with respect to
amounts payable from Yield Collections
allocable to any other Series, PRO RATA
based upon the amount of the shortfall, if
any, with respect to each Series. See
"Description of the Certificates--Shared
Excess Yield Collections."
SHARED PRINCIPAL
COLLECTIONS. . . . . . . . . . . Principal Collections and certain other
amounts otherwise allocable to other
Series, to the extent such collections are
not needed to make payments to or deposits
for the benefit of the certificateholders
of such other Series, will be applied to
cover principal payments due to or for the
benefit of the holders of the Certifi-
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<PAGE>
cates. See "Description of the
Certificates--Shared Principal
Collections."
OPTIONAL REPURCHASE. . . . . . . . The Invested Amount will be subject to
optional purchase by the Transferor on any
Distribution Date after the Invested Amount
is reduced to an amount less than or equal
to 5% of the Initial Invested Amount, if
certain conditions set forth in the
Agreement are met. The purchase price will
be equal to the Invested Amount plus
accrued and unpaid interest on the
Certificates and the Collateral Investor
Interest, if any. See "Description of the
Certificates--Final Payment of Principal;
Termination."
TAX STATUS . . . . . . . . . . . . In the opinion of counsel to First Bank,
for federal income tax purposes, the
Class A Certificates and the Class B
Certificates will be characterized as debt
and the Trust will not be characterized as
an association or publicly traded
partnership taxable as a corporation.
Under the Agreement, the Transferor, the
Servicer, the Class A Certificateholders
and the Class B Certificateholders will
agree to treat the Class A Certificates and
the Class B Certificates as debt for
federal, state and other tax purposes. See
"Certain Federal Income Tax Consequences"
for additional information concerning the
application of federal income tax laws.
ERISA CONSIDERATIONS . . . . . . . Subject to the conditions discussed in
"ERISA Considerations," the Class A
Certificates may, in general, be purchased
by employee benefit plans subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or plans
subject to Section 4975 of the Internal
Revenue Code of 1986, as amended (the
"Code").
The Class B Certificates may be purchased
by an entity only if less than 25% of the
entity's assets consist of assets of
benefit plan investors. Each Certificate
Owner of a Class B Certificate, by its
acceptance thereof, will be deemed to have
represented that it is either (i) not a
benefit plan investor or (ii) purchasing
the Class B Certificates on behalf of an
entity (including without limitation an
insurance company general account) less
than 25% of whose assets consist of assets
of benefit plan investors.
Benefit plan fiduciaries should consult
with counsel before making a purchase of
Certificates. See "ERISA Considerations."
CERTIFICATE RATING . . . . . . . . It is a condition to the issuance of the
Class A Certificates that they be rated in
the highest rating category by at least one
nationally recognized rating organization
selected by the Transferor (each, a "Rating
Agency"). The rating of the Class A
Certificates is based primarily on the
value of the Receivables as determined by
the applicable Rating Agency and the terms
of the Class B Certificates and the
Collateral Investor Interest. See
"Description of the Certificates--
Subordination of the Class B Certificates
and the
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<PAGE>
Collateral Investor Interest" and "Risk
Factors--Certificate Rating."
It is a condition to the issuance of the
Class B Certificates that they be rated in
one of the three highest rating categories
by at least one Rating Agency. The rating
of the Class B Certificates is based
primarily on the value of the Receivables
as determined by the applicable Rating
Agency and the terms of the Collateral
Investor Interest. See "Description of the
Certificates--Subordination of the Class B
Certificates and the Collateral Investor
Interest" and "Risk Factors--Certificate
Rating."
20
<PAGE>
RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates.
LIMITED LIQUIDITY. It is anticipated that, to the extent permitted, the
Underwriters of the Certificates offered hereby will make a market in the
Certificates, but in no event will any such Underwriter be under an obligation
to do so. There is no assurance that a secondary market will develop with
respect to the Certificates, or if it does develop, that it will provide
Certificateholders with liquidity of investment or that it will continue for the
life of the Certificates.
NON-RECOURSE OBLIGATION. No Certificateholder will have recourse for
payment of its Certificates to any assets of any of the Transferor, the Servicer
or any affiliates thereof. Consequently, Certificateholders must rely solely
upon payments on the Receivables and the Enhancement for the payment of
principal of and interest on the Certificates. Furthermore, under the Agreement,
the Certificateholders have an interest in the Receivables and collections on
the Receivables only to the extent of the Invested Amount. Should the
Certificates not be paid in full on a timely basis, Certificateholders may not
look to any assets of any of the Transferor, the Servicer or any affiliates
thereof to satisfy their claims.
POTENTIAL PRIORITY OF CERTAIN LIENS. The Transferor warrants in the
Agreement that the transfer of the Receivables to the Trust is either a valid
transfer and assignment of the Receivables to the Trust or the grant to the
Trust of a security interest in the Receivables. The Transferor will take all
actions as are required under applicable law to perfect the Trust's interest in
the Receivables and the Transferor warrants that if the transfer by the
Transferor to the Trust granted the Trust a security interest in the
Receivables, such security interest constitutes a first priority perfected
security interest therein and, to the extent provided under the applicable
Uniform Commercial Code (the "UCC"), in proceeds thereof (except for liens for
local taxes and government charges not due and payable or being contested in
good faith by the Transferor). Nevertheless, if the transfer of the Receivables
to the Trust is deemed to create a security interest therein under the UCC, a
tax or government lien on property of the Transferor arising before any
Receivable comes into existence may have priority over the Transferor's or the
Trust's interest in such Receivable. The existence of such liens could reduce
the amounts payable on the Receivables and result in possible reductions in the
amount of payments on the Certificates. See "Certain Legal Aspects of the
Receivables--Transfer of Receivables."
RECEIVERSHIP OF TRANSFEROR. To the extent that the Transferor has granted a
security interest in the Receivables to the Trust and that security interest was
validly perfected before any insolvency of the Transferor and was not granted or
taken in contemplation of insolvency or with the intent to hinder, delay or
defraud the Transferor or its creditors, that security interest should not be
subject to avoidance in the event of insolvency and receivership, and payments
to the Trust with respect to the Receivables should not be subject to recovery
by a conservator or receiver for the Transferor. If, however, the conservator or
receiver were to assert a contrary position, or were to require the Trustee to
establish its right to those payments by submitting to and completing the
administrative claims procedure established under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), or the conservator or
receiver were to request a stay of proceedings with respect to the Transferor as
provided under FIRREA, delays in payments on the Certificates and possible
reductions in the amount of those payments could occur. In the event of a
Servicer Default, if a conservator or receiver is appointed for the Servicer,
and no Servicer Default other than such conservatorship or receivership or
insolvency of the Servicer exists, the conservator or receiver may have the
power to prevent either the Trustee or Certificateholders from effecting a
transfer of servicing to a successor Servicer. If a conservator or receiver were
appointed for the Transferor, pursuant to the Agreement, new Receivables would
not be transferred to the Trust and the Trustee would sell the portion of the
Receivables allocable in accordance with the Agreement to each Series (subject
to certain limited rights of the Certificateholders to instruct otherwise as
described under "Description of the Certificates--Early Amortization Events"),
thereby causing an early termination of the Trust and a pro rata loss to the
Certificateholders if the net proceeds of such sale were insufficient to pay
such Certificates in full. Upon the occurrence of an Early Amortization Event,
if a conservator or receiver were appointed for the Transferor and no Early
Amortization Event other than such
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<PAGE>
conservatorship, receivership or insolvency of the Transferor existed, the
conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the Early
Amortization Period. Such action could cause delays or shortfalls in the
amounts ultimately repaid to Certificateholders. In addition, a conservator or
receiver for the Transferor may have the power to cause the early payment of the
Certificates.
ABILITY TO CHANGE TERMS OF THE RECEIVABLES. Pursuant to the Agreement, the
Transferor does not transfer to the Trust the Accounts but only the Receivables
arising in the Accounts. As owner of the Accounts, the Transferor retains the
right to determine the charges and fees which will be applicable from time to
time to the Accounts and to change various other terms with respect to the
Accounts. Under the Agreement, the Transferor will agree not to change the
terms of the Accounts unless the change is also made applicable to the
comparable segment of its portfolio of accounts with characteristics similar to
the Accounts. In servicing the Accounts, the Servicer will be required to
exercise the same care and apply the same policies that it exercises in handling
similar matters for its own and other comparable accounts. Except as specified
above, there will be no restrictions on the Transferor's ability to change the
terms of the Accounts. The Rating Agencies will not be asked to reassess their
ratings of the Certificates in the event the Transferor changes the terms of the
Accounts. There can be no assurance that a change made in the terms of the
Accounts would not result in a downgrade of the ratings of the Certificates.
There can be no assurance that changes in applicable law, changes in the
marketplace or prudent business practice might not result in a determination by
the Transferor to take actions which would change Account terms in a manner
adverse to the interests of Certificateholders.
ABILITY TO CHANGE YIELD FACTOR. The Receivables originated under the
Accounts are not subject to a monthly finance charge. As a result, in order to
provide yield to the Trust on the Receivables, pursuant to the Agreement a
portion of collections on the Receivables received in any period equal to the
product of the aggregate amount of such collections and the Yield Factor will be
treated as "Yield Collections" and the remainder of such collections will be
treated as "Principal Collections." The Yield Factor is __% under the
Agreement. Any increase in the Yield Factor would result in a higher yield on
the Receivables and a slower payment rate of Principal Collections than
otherwise would occur. Conversely, any decrease in the Yield Factor would
result in less yield on the Receivables and a faster payment rate of Principal
Collections than otherwise would occur. Pursuant to the Agreement, without
notice to or the consent of the Certificateholders, the Transferor has the
ability, after prior written notice to the Trustee, the Servicer and the Rating
Agencies, to change the Yield Factor applied to collections on the Receivables;
the Transferor may not however, reduce the Yield Factor at any time below __%,
nor may the Transferor increase the Yield Factor above __%. In addition, the
Transferor may not otherwise change the Yield Factor if an Early Amortization
Event has occurred and is continuing, or if, as a result of such change, its
reasonable expectation is that an Early Amortization Event would occur. In the
event that the Servicer is not required to make daily deposits of collections on
the Receivables in the Collection Account at the date of such change, the
Transferor may specify either the first day of the current Collection Period or
the first day of the next succeeding Collection Period as the effective date of
such change. Under the Agreement, if the Servicer is required to make daily
deposits of collections on the Receivables in the Collection Account at the time
of such change, the Transferor may specify that the date all of the conditions
specified in the Agreement regarding changing the Yield Factor are met is the
effective date of such change.
EFFECTS OF CONSUMER PROTECTION LAWS AND LITIGATION. The Accounts and the
related Receivables are subject to numerous federal and state consumer
protection laws which impose requirements on the making and collection of
consumer loans. Such laws, as well as any new laws or rulings which may be
adopted, may adversely affect the Servicer's ability to collect on the
Receivables or maintain previous levels of annual cardholder fees and other
charges and fees, and failure by the Servicer to comply with such requirements
also could adversely affect the Servicer's ability to collect on the
Receivables. Pursuant to the Agreement, the Transferor will represent and
warrant that each Receivable complies with all requirements of applicable law
the failure to comply with which would have a material adverse effect on
Certificateholders if such Receivable is charged off as uncollectible or if the
proceeds of such Receivable are not available to the Trust. The Transferor will
also make certain other representations and warranties relating to the validity
and enforceability of the Accounts and the Receivables. The sole remedy if any
such representation or warranty is breached and such breach continues beyond the
applicable
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<PAGE>
cure period, if any, and such Receivables are charged off as uncollectible or
the proceeds of such Receivables are not available to the Trust will be the
assignment of a balance of zero to all affected Receivables for purposes of
determining the Trust Principal Component. In addition, in the event of a
breach of certain representations and warranties, the Servicer may be obligated
to accept the assignment and transfer of the affected Receivables or the
Transferor may be obligated to accept the reassignment of all the Receivables in
the Trust. Such Receivables will be assigned or reassigned without any cost,
direct or indirect, incurred by Certificateholders, except that realization of
amounts due with respect to such Receivables will depend upon the ability of the
Servicer or the Transferor to accept such assignment or reassignment,
respectively. See "Description of the Certificates--Representations and
Warranties" and "--Servicer Covenants" and "Certain Legal Aspects of the
Receivables--Consumer Protection Laws."
A number of lawsuits and administrative actions have been filed in several
states against out-of-state banks (both federally-insured state-chartered banks
and federally-insured national banks) which issue credit and charge cards. These
actions challenge various fees and charges (such as late fees, overlimit fees,
returned check fees and annual cardholder fees) assessed against residents of
the states in which such suits were filed based on restrictions or prohibitions
under such states' laws alleged to be applicable to the out-of-state credit and
charge card issuers. There can be no assurance that First Bank will not be named
as a defendant in future lawsuits or administrative actions challenging the fees
and charges which it assesses residents of other states. Such actions and
similar actions which may be brought in other states as a result of such
actions, if resolved adversely to bank credit and charge card issuers, could
have the effect of limiting certain charges that could be assessed on charge
card accounts of residents of such states and could require charge card issuers
such as First Bank to pay refunds and civil penalties with respect to charges
previously imposed on cardholders in such states. Consequently, such actions
could have an adverse impact on First Bank's charge card operations.
In October 1991, a United States District Court in the Commonwealth of
Massachusetts ruled that Greenwood Trust Company (the Delaware chartered bank
that issues the Discover credit card) was prohibited by Massachusetts law from
assessing late charges on credit card accounts of Massachusetts residents.
However, in August 1992 the United States Court of Appeals for the First Circuit
reversed the federal district court on the grounds that the Massachusetts law
was preempted by applicable federal law, and in January 1993 the United States
Supreme Court declined to review the ruling by the Court of Appeals. In other
cases decided recently in other courts, including the Supreme Court of
California and a federal court in Pennsylvania, rulings similar to that of the
First Circuit have resulted. One state appellate court in Pennsylvania,
however, ruled in favor of a challenge to the assessment of late payment and
other fees in several cases, and thereby rejected the result reached by the
First Circuit in the Greenwood Trust case. In 1995, the Supreme Court of New
Jersey, in two related decisions, also ruled in favor of challenges to the
assessment of late payment and other fees. Other cases of this kind remain
pending in other courts and still others may be brought in the future. It is
likely that some plaintiffs will continue to press such cases and appeals, in
any attempt to obtain results in other courts at variance with the First
Circuit's decision in the Greenwood Trust case and otherwise to draw
distinctions between their cases and Greenwood Trust. On January 19, 1996, the
United States Supreme Court agreed to hear an appeal of the decision of the
Supreme Court of California. A decision by the United States Supreme Court in
this case may have the effect of resolving the conflict between the states with
respect to this issue.
EFFECTS OF DEBTOR RELIEF LAWS. Application of federal and state bankruptcy
and debtor relief laws would affect the interests of the Certificateholders in
the Receivables, if such laws result in any Receivables being written off as
uncollectible. See "Description of the Certificates--Defaulted Receivables;
Rebates and Fraudulent Charges; Investor Charge-Offs."
COMPETITION IN THE CORPORATE CARD/PURCHASING CARD INDUSTRY. The corporate
charge card/purchasing card industry is experiencing increased competition.
Although First Bank is currently one of the dominant issuers in the corporate
card/purchasing card industry, as new charge card issuers enter the market and
all issuers seek to expand their share of the market, there is increased use of
advertising, target marketing and pricing competition. The Trust will be
dependent upon the Transferor's continued ability to generate new Receivables.
If the rate at which new Receivables are generated declines significantly and
the Transferor is unable to designate Additional Accounts with
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<PAGE>
respect to the Trust, an Early Amortization Event could occur, in which case the
Early Amortization Period would commence. Certificateholders might then receive
principal payments earlier than expected.
TIMING OF PAYMENTS AND MATURITY. The Receivables may be paid at any time
and there is no assurance that there will be additional Receivables created in
the Accounts or that any particular pattern of cardholder repayments will occur.
The commencement and continuation of the Accumulation Period will be dependent
upon the continued generation of new Receivables to be conveyed to the Trust. A
significant decline in the amount of Receivables generated could result in the
occurrence of an Early Amortization Event and commencement of the Early
Amortization Period. Certificateholders might then receive principal payments
earlier than expected. Certificateholders should be aware that the Transferor's
ability to continue to compete in the current industry environment will affect
the Transferor's ability to generate new Receivables to be conveyed to the Trust
and may also affect payment patterns. A significant decrease in the monthly
payment rate could slow the return or accumulation of principal payable to
Certificateholders during the Early Amortization Period or Accumulation Period.
No assurance can be given that payments of principal to the Certificateholders
will be made as expected during the Early Amortization Period or, with respect
to an Accumulation Period, on the applicable Expected Final Payment Date.
EFFECT OF SUBORDINATION. The Class B Certificates and the Collateral
Investor Interest will be subordinated to the extent necessary to fund certain
payments with respect to the Class A Certificates. In addition, the Collateral
Investor Interest will be subordinated to the extent necessary to fund certain
payments with respect to the Class B Certificates. Certain principal payments
otherwise allocable to the Class B Certificateholders may be reallocated to
cover amounts in respect of the Class A Certificates and the Class B Invested
Amount may be reduced if the Collateral Invested Amount is equal to zero.
Similarly, certain principal payments allocable to the Collateral Investor
Interest may be reallocated to cover amounts in respect of the Class A
Certificates and the Class B Certificates and the Collateral Invested Amount may
be reduced. To the extent the Class B Invested Amount is reduced, the
percentage of Yield Collections allocated to the Class B Certificates in
subsequent Collection Periods will be reduced. Moreover, to the extent the
amount of such reduction in the Class B Invested Amount is not reimbursed, the
amount of principal and interest distributable to the Class B Certificateholders
will be reduced.
CERTIFICATE RATING. Any rating assigned to the Class A Certificates or the
Class B Certificates by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Class A Certificateholders or Class B
Certificateholders will receive the payments of interest and principal required
to be made under the Agreement and will be based primarily on the value of the
Receivables in the Trust and the availability of the Enhancement. However, any
such rating will not address the likelihood that the principal of the Class A
Certificates or the Class B Certificates will be paid on a scheduled date. In
addition, any such rating will not address the possibility of the occurrence of
an Early Amortization Event or the possibility of the imposition of United
States withholding tax with respect to non-U.S. Certificateholders. The rating
will not be a recommendation to purchase, hold or sell either the Class A
Certificates or the Class B Certificates, and such rating will not comment as to
the marketability of such Certificates, any market price or suitability for a
particular investor. There is no assurance that any rating will remain for any
given period of time or that any rating will not be lowered or withdrawn
entirely by a Rating Agency if in such Rating Agency's judgment circumstances so
warrant. The Transferor will request a rating of the Certificates by at least
one Rating Agency. There can be no assurance as to whether any rating agency
not requested to rate the Certificates will nonetheless issue a rating with
respect to the Certificates or either Class thereof, and, if so, what such
rating would be. A rating assigned to the Certificates or either Class thereof
by a rating agency that has not been requested by the Transferor to do so may be
lower than the rating assigned by a Rating Agency pursuant to the Transferor's
request.
LIMITED ENHANCEMENT. The amount of Enhancement available to the
Certificateholders will be limited. If the amount of the Collateral Invested
Amount is reduced to zero, the Class B Certificateholders will bear directly the
credit and other risks associated with their undivided interest in the Trust and
thus will be more likely to suffer a loss. If the Class B Invested Amount is
reduced to zero, the Class A Certificateholders will bear directly the credit
and other risks associated with their undivided interest in the Trust and thus
will be more likely to suffer a loss. See "Description of the Certificates--
Required Collateral Invested Amount."
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<PAGE>
MASTER TRUST CONSIDERATIONS. The Trust, as a master trust, may issue
Series from time to time. While the principal terms of any Series (the
"Principal Terms") will be specified in a Series Supplement, the provisions of a
Series Supplement and, therefore, the terms of any additional Series, will not
be subject to the prior review by, or consent of, holders of the certificates of
any previously issued Series. Such Principal Terms may include methods for
determining applicable invested percentages and allocating collections,
provisions creating different or additional security or other Enhancement,
provisions subordinating such Series to another Series or other Series (if the
Series Supplement relating to such Series so permits) to such Series, and any
other amendment or supplement to the related Agreement which is made applicable
only to such Series. It will be a condition precedent to the issuance of any
additional Series by the Trust that each Rating Agency that has rated any
outstanding Series deliver written confirmation to the Trustee that the Exchange
will not result in such Rating Agency reducing or withdrawing its rating on any
outstanding Series. There can be no assurance, however, that the Principal Terms
of any other Series, including any Series issued from time to time hereafter,
might not have an impact on the timing and amount of payments received by a
Certificateholder or otherwise adversely affect Series 1996-1. See "Description
of the Certificates--Exchanges."
EFFECT OF ADDITION OF TRUST ASSETS ON CREDIT QUALITY. The Transferor
expects, and in some cases will be obligated, to designate Additional Accounts,
the Receivables in which will be conveyed to the Trust. Such Additional
Accounts may include accounts originated using criteria different from those
which were applied to the Accounts designated on the Cut-Off Date related to the
Trust or to previously-designated Additional Accounts, because such accounts
were originated at a different date. Consequently, there can be no assurance
that Additional Accounts designated in the future will be of the same credit
quality as previously-designated Accounts. The designation of Additional
Accounts will be subject to the satisfaction of certain conditions described
herein under "Description of the Certificates--Addition of Accounts."
CONTROL OF ACTION UNDER AGREEMENT. Subject to certain exceptions, the
Certificateholders may take certain actions, or direct certain actions to be
taken, under the Agreement or the Series 1996-1 Supplement. However, the
Agreement and Series 1996-1 Supplement provide that under certain circumstances
the consent or approval of a specified percentage of the aggregate Invested
Amount or of the invested amount of each Series will be required to direct
certain actions, including amending the Agreement in certain circumstances.
Certificateholders of such other Series may have interests which do not coincide
in any way with the interests of the Certificateholders. In addition, Class A
Certificateholders and Class B Certificateholders may have interests which do
not coincide. In such instances, it may be difficult for the Certificateholders
of either Class to achieve the results from the vote that they desire.
SOCIAL, LEGAL AND ECONOMIC FACTORS. Changes in use of credit and payment
patterns by customers may result from a variety of social, legal and economic
factors. Economic factors include the rate of inflation, unemployment levels and
relative interest rates. Cardholders whose accounts are included in the Bank
Portfolio have addresses in __ states and the District of Columbia. The
Transferor, however, is unable to determine and has no basis to predict whether,
or to what extent, social, legal or economic factors will affect use of credit
or repayment patterns.
EFFECTS OF BOOK-ENTRY REGISTRATION. The Class A Certificates and the Class
B Certificates initially will each be represented by one or more Certificates
registered in the name of Cede, as nominee for DTC, and will not be registered
in the names of the Certificate Owners or their nominees. Unless and until
Definitive Certificates are issued, Certificate Owners will not be recognized by
the Trustee as Certificateholders, as that term is used in the Agreement. Hence,
until such time, Certificate Owners will only be able to exercise the rights of
Certificateholders indirectly through DTC, CEDEL or Euroclear and their
participating organizations. Because DTC can only act on behalf of individuals
who are Participants in DTC's system (or participate indirectly through a
Participant), the ability of a Certificate Owner to pledge its Certificates to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such Certificates, may be limited due to the lack of a
physical certificate representing such Certificates. See "Description of the
Certificates--Book-Entry Registration" and "--Definitive Certificates."
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THE TRUST
The Trust will be formed in accordance with the laws of the State of New
York pursuant to the Agreement. The Trust will not engage in any activity other
than acquiring and holding Receivables, issuing Series of Certificates and the
related Exchangeable Transferor Certificate, making payments thereon and
engaging in related activities (including, with respect to any Series, obtaining
any Enhancement and entering into an Enhancement agreement relating thereto). As
a consequence, the Trust is not expected to have any need for additional
capital resources other than the assets of the Trust.
FIRST BANK'S CORPORATE CARD AND PURCHASING CARD PROGRAMS
GENERAL
The Receivables conveyed or to be conveyed by First Bank to the Trust
arise under certain charge card accounts originated under First Bank's Corporate
Card or Purchasing Card programs. These accounts were generated under the VISA
USA, Inc. ("VISA") program and are owned by First Bank.
First Bank's Corporate Card and Purchasing Card programs differ
significantly from revolving credit plan products. The Corporate Card program
is designed as a means of payment for company-related travel and entertainment
expenses incurred by employees. The Purchasing Card program is designed as a
means of reducing the administrative and processing costs associated with a
company's frequent small-dollar purchases. Accounts generated under either
program are not intended to be used as a method of financing purchases. Under
each program, an account's full balance is billed at least monthly and is due
within 30 days or less of the date the bill is printed. As a result of these
payment requirements, Corporate Card and Purchasing Card account balances turn
over rapidly relative to their charge volume when compared to revolving credit
plan products. Under each program, the account balance is not subject to
finance charge assessments.
FIRST BANK'S CORPORATE CARD PROGRAM
ORIGINATION OF ACCOUNTS. Corporate Card accounts are originated by
First Bank primarily through direct solicitation of managers who have
responsibility for and control over employee travel and entertainment expenses.
First Bank focuses its marketing effort on corporations with a large number of
employees, requiring a substantial number of corporate charge cards. First Bank
competes in this market primarily with American Express and Diners Club.
First Bank offers three liability plans for Corporate Card customers:
Individual, Joint & Several, or Corporate. Under the Individual liability plan,
the individual employee is responsible for payment of all charges while the
employer agrees to reimburse the cardholder for legitimate travel and
entertainment expenses. If the individual fails to pay, however, the company
does not have an obligation to pay First Bank provided the company notifies
First Bank promptly in the event the individual's employment is terminated.
Under the Joint & Several liability plan, the company is not liable for any
charges on the individual employee's account unless the account becomes 90 days
past due. Under the Corporate liability plan, the company is directly
responsible for payment of all charges and fees. As of ______ __, ___, the
percentage of Corporate Card account balances outstanding under each liability
plan was: Individual liability plan, __%; Joint & Several liability plan, __%;
and Corporate liability plan, __%.
Once the company submits an application for a Corporate Card account,
a First Bank credit analyst reviews financial statements and other credit
information regarding the company. Even if the company has chosen the
Individual liability plan, First Bank considers it essential to review the
company's credit because the company's ability to offer the cardholder stable
employment and to reimburse the cardholder for legitimate charges will directly
affect the cardholder's willingness and ability to make payment on the account.
The credit review of the company
26
<PAGE>
will focus on the company's current and expected financial condition, the
maximum receivables balance the company is expected to have outstanding at any
one time, and the aggregate exposure of First Bank and its affiliates to the
company and any related borrowers. An aggregate credit limit for all company-
related accounts is established based upon such credit review. If the company
has chosen the Individual liability plan, a review of each proposed cardholder
is performed based upon credit scores obtained from credit bureaus. Credit
scores are based on payment performance, stability of employment, length of time
at current address and other factors. The company also specifies certain
categories of card purchases that are deemed pre-approved (I.E., legitimate
travel and entertainment expenses). First Bank does not establish spending
limits for individual cardholders with respect to legitimate travel and
entertainment expenses, but does establish spending limits for other categories
of purchases, based on First Bank's review of the cardholder's credit history
and the anticipated level of usage by the cardholder.
First Bank monitors the performance of the company's accounts, and
periodically updates its analysis of the company's financial strength. The
frequency, scope and depth of these reviews depend on First Bank's assessment of
the company's financial strength, First Bank's aggregate credit exposure to the
company, and the performance of the company's accounts. Credit limits are
adjusted accordingly as a result of such reviews.
BILLING AND FEES. Statements are sent to each Cardholder if the
company chose the Individual or Joint & Several liability plan, while statements
are sent directly to the company if the company chose the Corporate liability
plan. Companies can also choose to have certain charges, such as annual fees or
airline tickets, centrally billed to the company. Unlike a revolving credit
card, the entire balance on a charge card issued under the Corporate Card
program (a "Corporate Card") is due 30 days after the statement is printed.
Payments may be made by check or, for centrally billed accounts, via electronic
funds transfer. Annual fees, late fees and cash advance fees vary among
Accounts, but are not expected to represent a significant portion of Yield
Collections on the Receivables.
FIRST BANK'S PURCHASING CARD PROGRAM
ORIGINATION OF ACCOUNTS. First Bank markets its Purchasing Card
program directly to large corporations. Charge cards under the Purchasing Card
program ("Purchasing Cards") are issued directly to individual corporate
employees whose job responsibilities require them to make small-dollar
purchases. The Purchasing Card can eliminate much of the administrative and
processing costs associated with processing a company's traditional purchase
orders.
Once the company submits an application for a Purchasing Card account,
the credit approval process is similar to that for a Corporate Card account
issued under the Corporate liability plan. A First Bank credit analyst reviews
financial statements and other credit information regarding the company. The
credit review of the company will focus on the company's current and expected
financial condition, the maximum receivables balance the company is expected to
have outstanding at any one time, and the aggregate exposure of First Bank and
its affiliates to the company and any related borrowers. First Bank monitors the
performance of the company's accounts, and periodically updates its analysis of
the company's financial strength. The frequency, scope and depth of these
reviews will depend on the company's perceived financial strength, First Bank's
aggregate credit exposure to the company, and the performance of the company's
accounts. Credit limits are adjusted accordingly as a result of such reviews.
BILLING AND FEES. Statements are sent to the company at least monthly
and balances are generally due 14 days after the statement is printed. The
company has the choice of making payments by check or via electronic funds
transfer. Annual fees, late fees and cash advance fees vary among Accounts, but
are not expected to represent a significant portion of Yield Collections on the
Receivables.
COLLECTION EFFORTS
CORPORATE CARDS WITH INDIVIDUAL OR JOINT & SEVERAL LIABILITY. First
Bank considers a Corporate Card account delinquent when a customer fails to make
a payment 30 days after the billing statement is printed.
27
<PAGE>
Efforts to collect account balances that are delinquent less than 60 days are
made by First Bank's Technical Collections Services group, through a combination
of mailed notices and telephone calls. First Bank generally suspends any
account that becomes 30 days delinquent, denying authorization of any further
purchases, and generally closes any account that becomes 60 days delinquent.
Once an account becomes 60 days delinquent, responsibility for collection is
transferred to First Bank's Corporate Card Collections Department, where a more
individualized effort at collection is made. If the account was registered
under the Joint & Several liability plan, First Bank charges the corporate
customer for amounts due when the account becomes 90 days delinquent. First Bank
generally charges off Corporate Card account balances at the end of the month in
which the account becomes 150 days delinquent (although charge-offs may be made
earlier in some circumstances), and transfers collection responsibility to a
separate unit of First Bank System responsible for collection of charged-off
accounts of all First Bank System consumer credit products. First Bank's
collection and charge-off practices may change over time in accordance with its
business judgment and applicable law.
PURCHASING CARDS AND CORPORATE CARDS WITH CORPORATE LIABILITY. The
collections process for Purchasing Cards and for Corporate Cards with corporate
liability is conducted by First Bank's Relationship Management Department.
First Bank generally considers a Purchasing Card account delinquent when the
company fails to make a payment 14 days after the billing statement is printed,
and generally considers a Corporate Card account with corporate liability
delinquent when the company fails to make a payment 30 days after the billing
statement is printed. Following the sending of notices, a National Account
Manager will contact the company when the account becomes 15 days past due and
will seek to determine the reason for the delinquency and work to resolve any
discrepancy. The account will generally be suspended when it becomes 30 days
past due, and the account will generally be closed when it becomes 60 days past
due. First Bank typically charges off corporate liability account balances at
the end of the month in which the account becomes 150 days past due. As of
______ __, ___, no one company accounted for more than __% of total Corporate
Card and Purchasing Card account balances.
THE SERVICER - FBS CARD SERVICES, INC.
First Bank retains FBS Card Services, Inc. ("Card Services"), a wholly
owned subsidiary of First Bank System, located in Minneapolis, to perform
various data processing and administrative functions associated with servicing
the Corporate Card and Purchasing Card accounts, as well as First Bank's retail
credit card accounts. Pursuant to the Agreement, Card Services will be retained
to service the Receivables on behalf of the Trust. In processing payments on
First Bank's credit and charge card accounts, Card Services utilizes both
proprietary systems and a variety of services provided by Total System Services,
Inc., a third-party provider of credit and charge card processing services to
numerous credit and charge card issuers.
INTERCHANGE
Creditors participating in the VISA association receive interchange as
partial compensation for taking credit risk, absorbing fraud losses and funding
receivables for a limited period of time prior to initial billing. Under the
VISA system, a portion of this interchange in connection with cardholder charges
for goods and services is conveyed through the VISA system from banks which
clear the transactions for merchants to card issuing banks. Interchange revenue
is based on the number of VISA card transactions and the amount charged per
transaction. The Transferor will be required, pursuant to the terms of the
Agreement, to transfer to the Trust a percentage of Net Interchange attributed
to cardholder charges for goods and services in the Accounts. Net Interchange
arising under the Accounts will be allocated to the Certificates on the basis of
the percentage equivalent of the ratio which the amount of the Floating
Allocation Percentage of cardholder charges for goods and services in the
Accounts bears to the total amount of cardholder charges for goods and services
in the accounts in the Bank Portfolio. VISA may from time to time change the
amount of interchange reimbursed to banks issuing VISA cards. Net Interchange
will be treated as Yield Collections for the purposes of allocating Yield
Collections to Certificateholders.
BANK PORTFOLIO EXPERIENCE
28
<PAGE>
The following tables set forth the historical receivable turnover rate,
monthly payment rate, periodic yield computation, loss experience, and
delinquency experience for each of the periods shown for the entire Bank
Portfolio.
Because the Accounts are only a portion of the Bank Portfolio, actual
experience with respect to the Accounts may have been different from that of the
Bank Portfolio. Because the Accounts have been selected from the Bank Portfolio
in a manner not adverse to Certificateholders and represent a sizable portion of
the Bank Portfolio, the Transferor believes that the performance of the Bank
Portfolio reflected in the following tables is indicative of the historical
performance of the Accounts. There can be no assurance that the future
performance of the Accounts will be similar to that of the Bank Portfolio in the
past or in the future.
RECEIVABLE TURNOVER RATE AND PAYMENT RATE EXPERIENCE. The accounts are
designed for use as a method of payment for the purchase of merchandise and
services and for cash advances. Account balances are due in full each billing
cycle. Therefore, accounts cannot be used by cardholders for the purpose of
financing these purchases or cash advances. In contrast to revolving credit
plan products which do not require payment in full each month, the requirement
that account balances be paid in full each month creates a high monthly payment
rate and Account balances which turn over rapidly relative to charge volume.
The following two tables illustrate this product characteristic based on the
historical Bank Portfolio experience.
RECEIVABLE TURNOVER RATES FOR THE BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
Charge Volume and Fees(1). . . $4,059,430 $2,745,795 $1,583,647
Average Net Receivables(2) . . $461,398 $317,783 $193,422
Receivable Turnover Rate(3). . 8.80 8.64 8.19
- ---------------
(1) Charge Volume and Fees is the sum of (a) amounts charged by cardholders for
merchandise, services and cash advances for each period shown and (b) all
annual, late and other fees billed to Accounts for each period shown.
Charge Volume and Fees is shown net of adjustments made to accounts due to
returned goods, customer disputes or certain other miscellaneous
adjustments.
(2) Average Net Receivables is the arithmetic average of the daily Bank
Portfolio balances for each period shown.
(3) Receivable Turnover Rate is calculated by dividing Charge Volume and Fees
by Average Net Receivables for each period shown.
MONTHLY PAYMENT RATES FOR THE BANK PORTFOLIO(1)
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
Monthly Average Rate . . . . . 72.65% 70.62% 69.58%
Highest Month. . . . . . . . . 78.78% 75.13% 77.06%
Lowest Month . . . . . . . . . 67.36% 61.49% 59.96%
- -----------------
(1) Monthly Payment Rate is calculated by dividing total collections received
(excluding recoveries on charged-off receivables and excluding Net
Interchange, if any) during each month by such month's opening balance.
29
<PAGE>
There can be no assurance that the Receivable Turnover Rate and the Monthly
Payment Rate for Receivables in the Accounts, and thus the rate at which
Certificateholders can expect principal to accumulate in the Principal Funding
Account or to be paid on the Class A Expected Final Payment Date or Class B
Expected Final Payment Date, as applicable, or during any Early Amortization
Period, will be similar to the historical Bank Portfolio experience set forth
above.
PERIODIC YIELD COMPUTATION. Receivables originated under the Accounts,
consisting of amounts charged by cardholders for goods and services, cash
advances, annual, late and other fees, are not subject to a monthly finance
charge. As a result, a portion of the collections on the Receivables received
during the preceding Collection Period will be treated as "yield" to the Trust.
Such yield will equal the product of the aggregate amount of such collections
(excluding Net Interchange, if any) and the Yield Factor. Such collections,
plus certain amounts of Net Interchange attributed to cardholder charges in the
Accounts, will be treated as Yield Collections. The remainder of such
collections will be treated as Principal Collections.
The dollar amounts representing Computed Yield in the table below have been
derived by applying a Yield Factor of __% (which is the initial Yield Factor
under the Agreement) to historical monthly collections of receivables (excluding
recoveries on charged-off receivables and excluding Net Interchange, if any) in
the accounts in the Bank Portfolio for each period shown. Each of those dollar
amounts is divided by Charge Volume and Fees for the appropriate period to
produce a Computed Yield for the Bank Portfolio. To the extent that Charge
Volume and Fees did not equal collections for any given period, there is a
difference between the Computed Yield as a Percentage of Charge Volume and Fees
and the assumed Yield Factor of __%.
PERIODIC YIELD COMPUTATION FOR THE BANK PORTFOLIO
ASSUMING A __% YIELD FACTOR
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
Computed Yield(1). . . . . . . . . . . $ $ $
Computed Yield
as a Percentage
of Charge Volume and Fees (2). . . . % % %
Net Interchange(3) . . . . . . . . . . $ $ $
Net Interchange
as a Percentage
of Charge Volume and Fees. . . . . . % % %
Computed Yield and Net Interchange
as a Percentage
of Charge Volume and Fees. . . . . . % % %
- ---------------
(1) Computed Yield is the dollar amount equal to the product of the __% assumed
Yield Factor and collections (excluding recoveries on charged-off
receivables and excluding Net Interchange, if any) for each period shown.
(2) Computed Yield as a Percentage of Charge Volume and Fees may not equal the
__% assumed Yield Factor because Charge Volume and Fees may not equal
collections (excluding recoveries on charged-off receivables and excluding
Net Interchange, if any) for the periods shown.
(3) The amount of Net Interchange for each of the periods indicated above has
been estimated. Net Interchange is equal to gross interchange reduced by
VISA dues and rebates to corporate customers and travel agencies.
30
<PAGE>
There can be no assurance that the yield experience for Receivables in the
Accounts will be similar to the periodic yield computation for the Bank
Portfolio set forth in the table. The actual yield experience will vary month
to month due to variations in Receivable Turnover Rates, Monthly Payment Rates
and cardholder charge activity. The actual yield experience will also be
affected by any changes to the Yield Factor. Pursuant to the Agreement, without
notice to or the consent of Certificateholders, the Transferor has the ability
to change the Yield Factor; the Transferor may not, however, reduce the Yield
Factor below __% or increase it above __%. Further, the Transferor may not
change the Yield Factor if an Early Amortization Event has occurred and is
continuing, or, as a result of such change, its reasonable expectation is that
an Early Amortization Event would occur. See "Risk Factors--Ability to Change
Yield Factor." Changes in the amount of Net Interchange will also affect actual
yield experience. VISA may from time to time change the amount of interchange
reimbursed to banks issuing VISA cards, including the Bank. Reductions in the
amount of Net Interchange would reduce the actual yield experience.
LOSS EXPERIENCE. The following table sets forth the Bank Portfolio's
historical gross loss, recovery and net loss experience for the periods shown.
Due to the Bank Portfolio's Receivable Turnover Rate and Monthly Payment Rate,
Gross Losses, Recoveries and Net Losses are expressed as a percentage of Charge
Volume and Fees.
LOSS EXPERIENCE FOR THE BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
Gross Losses(1). . . . . . . . $6,611 $4,819 $3,686
Gross Losses as a Percentage of
Charge Volume and Fees . . . 0.16% 0.18% 0.23%
Recoveries . . . . . . . . . . $2,854 $1,493 $1,249
Recoveries as a Percentage of
Charge Volume and Fees . . . 0.07% 0.06% 0.08%
Net Losses . . . . . . . . . . $3,757 $3,326 $2,437
Net Losses as a Percentage of
Charge Volume and Fees . . . 0.09% 0.12% 0.15%
- ----------------
(1) Gross Losses are charge-offs before recoveries and do not include the
amount of any reductions in receivables balances due to fraud, returned
goods, customer disputes or certain other miscellaneous adjustments.
There can be no assurance that the loss experience for the Accounts in the
future will be similar to the historical Bank Portfolio experience set forth
above.
PERIODIC NET YIELD COMPUTATION. Computed Net Yield is the dollar amount
equal to Computed Yield minus Net Losses. Computed Net Yield and Net
Interchange is the dollar amount equal to Computed Yield plus an estimate of the
amount of Net Interchange received during the period minus Net Losses. The
table below sets forth the Computed Net Yield and the Computed Net Yield and Net
Interchange for the periods shown.
31
<PAGE>
PERIODIC NET YIELD COMPUTATION FOR
THE BANK PORTFOLIO ASSUMING A __% YIELD FACTOR
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
Computed Net Yield . . . . . . . . . . $ $ $
Computed Net Yield as a Percentage
of Charge Volume and Fees. . . . . . % % %
Computed Net Yield
and Net Interchange. . . . . . . . . $ $ $
Computed Net Yield and Net Interchange
as a Percentage
of Charge Volume and Fees. . . . . . % % %
- -------------------
The ability of the Trust to generate sufficient yield to pay interest to
Certificateholders and to pay the Servicing Fee depends upon the Monthly Payment
Rate, the Yield Factor, Net Losses, the amount of Net Interchange and the
generation of new Receivables. Based on the Bank Portfolio experience described
in the foregoing tables, the following example illustrates how these variables
would interact to produce yield to the Trust. For the year ended December 31,
1995, the Computed Net Yield as a Percentage of Charge Volume and Fees was ____%
and the Receivable Turnover Rate (total Charge Volume and Fees divided by
Average Net Receivables) was ____. The product of these two variables results
in a net yield as a percentage of Average Net Receivables of ____% for the year
ended December 31, 1995. There can be no assurance that the experience for the
Accounts in the future will be similar to the historical Bank Portfolio
experience set forth above.
DELINQUENCY EXPERIENCE. The table below sets forth the Bank Portfolio's
delinquency experience for the periods shown.
DELINQUENCY EXPERIENCE FOR THE BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AVERAGE OF TWELVE MONTHS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993
---------------------------- ----------------------------- ----------------------------
NUMBER OF DAYS DELINQUENT DELINQUENT DELINQUENT
DELINQUENT(1) AMOUNT(2) PERCENTAGE(3) AMOUNT(2) PERCENTAGE(3) AMOUNT(2) PERCENTAGE(3)
- -------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
30 to 59 days . . . . . . . . $16,869 3.68% $12,937 4.06% $ 8,021 4.30%
60 to 89 days . . . . . . . . 3,681 0.80 2,244 0.70 1,747 0.93
90 to 119 days . . . . . . . 1,511 0.33 1,032 0.32 623 0.34
120 or more days . . . . . . 871 0.19 642 0.20 382 0.21
Total(4) . . . . . . . . $22,932 5.00% $16,855 5.29% $10,773 5.78%
</TABLE>
- -----------------------
(1) Delinquency is measured as the number of days after a charge is first
included within an unpaid "Previous Balance" on any monthly billing
statement.
(2) Delinquent amounts are the arithmetic average of the month-end billed
delinquencies by category for the appropriate period.
(3) Delinquency percentage is the arithmetic average of the month-end
percentages equal to ending net receivables by category divided by the
aggregate ending net receivables balance.
(4) Columns may not total due to rounding.
32
<PAGE>
THE RECEIVABLES
The Receivables conveyed to the Trust will arise in VISA accounts
originated under the Bank's Corporate Card or Purchasing Card programs and
selected from the portfolio of VISA accounts in such programs owned by the Bank
on the basis of criteria set forth in the Agreement as applied on the Cut-Off
Date and, with respect to Additional Accounts, as of the related date of their
designation (the "Trust Portfolio"). The Transferor will have the right (subject
to certain limitations and conditions set forth therein), and in some
circumstances will be obligated, to designate from time to time Additional
Accounts and to transfer to the Trust all Receivables of such Additional
Accounts, whether such Receivables are then existing or thereafter created. Any
Additional Accounts designated pursuant to the Agreement must be Eligible
Accounts as of the date the Transferor designates such accounts as Additional
Accounts. The Transferor will also have the right (subject to certain
limitations and conditions) to designate certain Accounts as Removed Accounts
and to require the Trustee to reconvey all Receivables in such Removed Accounts
to the Transferor. Throughout the term of the Trust, the Accounts from which the
Receivables arise will be the Accounts designated by the Transferor on the Cut-
Off Date plus any Additional Accounts minus any Removed Accounts. See
"Description of the Certificates--Addition of Accounts" and "--Removal of
Accounts."
The Receivables included in the Trust Portfolio, as of the Cut-Off
Date, had an aggregate balance of $______. The Accounts originated under the
Corporate Card program had an aggregate balance of $_____, an average balance
of $_____ and an average age of approximately __ months. The Accounts
originated under the Purchasing Card program had an an aggregate balance of
$_____, an average balance of $_____ and an average age of approximately __
months. As of ________, 1995, cardholders whose Accounts are to be included in
the Trust Portfolio had billing addresses in __ States, the District of Columbia
and certain U.S. territories.
The Receivables included in the Trust Portfolio, as of the Cut-Off
Date, represent aggregate Trust principal (the "Trust Principal Component") of
$______. The Trust Principal Component as of any date is an amount equal to the
product of the total amount of Receivables in the Trust as of such date and one
minus the Yield Factor.
The following tables summarize the Trust Portfolio by various criteria
as of the Cut-Off Date. Because the future composition of the Trust Portfolio
will change over time, these tables are not necessarily indicative of the
composition of the Trust Portfolio at any subsequent date.
33
<PAGE>
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------- -------- -------- ----------- -----------
Credit Balance . . . . . . . % $ %
No Balance . . . . . . . . .
$0.01 - $500.00. . . . . . .
$500.01 - $1,000.00. . . . .
$1,000.01 - $2,000.00. . . .
$2,000.01 - $3,000.00. . . .
$3,000.01 - $4,000.00. . . .
$4,000.01 - $5,000.00. . . .
$5,000.01 - $6,000.00. . . .
$6,000.01 - $7,000.00. . . .
$7,000.01 - $8,000.00. . . .
$8,000.01 - $9,000.00. . . .
$9,000.01 - $10,000.00 . . .
$10,000.01 or More . . . . .
TOTAL. . . . . . . . . .
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
PERCENTAGE
PERIOD OF DELINQUENCY OF TOTAL PERCENTAGE
(DAYS CONTRACTUALLY NUMBER OF NUMBER OF OF TOTAL
DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------- -------- -------- ----------- -----------
Not Delinquent . . . . . . . % $ %
Up to 30 Days. . . . . . . .
31 to 60 Days. . . . . . . .
61 to 90 Days. . . . . . . .
91 to 120 Days . . . . . . .
121 or more Days . . . . . .
TOTAL. . . . . . . . . .
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----------- -------- -------- ----------- -----------
Not More than 6 Months . . . % $ %
Over 6 Months to 12 Months .
Over 12 Months to 24 Months.
Over 24 Months to 36 Months.
Over 36 Months to 48 Months.
Over 48 Months to 60 Months.
Over 60 Months to 72 Months.
Over 72 Months . . . . . . .
TOTAL. . . . . . . . . .
34
<PAGE>
GEOGRAPHIC DISTRIBUTION OF CORPORATE CARD ACCOUNTS
ISSUED UNDER THE INDIVIDUAL LIABILITY PLAN OR JOINT & SEVERAL LIABILITY PLAN
IN TRUST PORTFOLIO(1)
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
STATE(2) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----- -------- -------- ----------- -----------
% $ %
TOTAL 100.00% $ 100.00%
------ ------
------ ------
- -----------------------
(1) Includes only Corporate Card accounts issued under either the Individual
liability plan or the Joint & Several liability plan in the Trust
Portfolio. See "--First Bank's Corporate Card Program."
(2) Based on individual cardholders' current billing addresses.
[GEOGRAPHIC] [STANDARD INDUSTRIAL CLASSIFICATION CODE]
DISTRIBUTION OF PURCHASING CARD ACCOUNTS AND
CORPORATE CARD ACCOUNTS ISSUED UNDER THE CORPORATE LIABILITY PLAN
IN TRUST PORTFOLIO(1)
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
[STATE(2)] [SIC CODE(2)] ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------------ -------- ---------- ----------- -----------
% $ %
TOTAL 100.00% $ 100.00%
------ ------
------ ------
- -----------------------
(1) Includes only Purchasing Card accounts and Corporate Card accounts issued
under the Corporate liability plan in the Trust Portfolio. See "--First
Bank's Purchasing Card Program" and "--First Bank's Corporate Card
Program."
[(2) Based on the [current billing addresses] [current addresses of the
principal executive offices] [or, state other criteria for determining
geographic location] of corporate cardholders.]
[(2) Based on the primary Standard Industrial Classification Codes of corporate
cardholders.]
35
<PAGE>
MATURITY CONSIDERATIONS
The Agreement provides that the Class A Certificateholders will not receive
payments of principal until the Class A Expected Final Payment Date, or earlier
in the event of an Early Amortization Event which results in the commencement of
the Early Amortization Period. Class A Certificateholders will receive payments
of principal on each Special Payment Date following the Collection Period in
which an Early Amortization Event occurs until the Class A Invested Amount has
been paid in full or the Stated Series Termination Date has occurred. The
Agreement provides that the Class B Certificateholders will not receive payments
of principal until the Class B Expected Final Payment Date, or earlier in the
event of an Early Amortization Event which results in the commencement of the
Early Amortization Period; PROVIDED, HOWEVER, that the Class B
Certificateholders will in no event begin to receive payments of principal until
the final principal payment on the Class A Certificates has been made.
Should an Early Amortization Event occur with respect to the Certificates
and the Early Amortization Period commence, any amount on deposit in the
Principal Funding Account will be paid to the Class A Certificateholders on the
first Special Payment Date with respect to the Early Amortization Period.
Thereafter, Certificateholders will be entitled to receive Principal Collections
allocable to Series 1996-1 on each Special Payment Date with respect to such
Early Amortization Period, until the Stated Series Termination Date occurs. See
"Description of the Certificates--Early Amortization Events."
The ability of Certificateholders to receive payments of principal on the
applicable Expected Final Payment Date depends, among other factors, on the rate
of repayment on the Receivables, the timing of the receipt of such repayments,
the amount of outstanding Receivables, the Yield Factor, delinquencies and
charge-offs on the Accounts, the potential issuance by the Trust of additional
Series and the availability of Shared Principal Collections. Monthly payment
rates on the Receivables may vary due to seasonal purchasing and payment habits
of cardholders and to changes in any terms of discount programs in which
cardholders participate. The Transferor cannot predict, and no assurance can be
given, as to the cardholder monthly payment rates that will actually occur in
any future period, as to the actual rate of payment of principal of the
Certificates or whether the terms of any subsequently issued Series might have
an impact on the amount or timing of any such payment of principal.
The amount of collections of Receivables may vary from month to month due
to seasonal variations, general economic conditions and payment habits of
cardholders. There can be no assurance that Principal Collections with respect
to the Trust Portfolio, and thus the rate at which Certificateholders could
expect to receive payments of principal on their Certificates during the Early
Amortization Period or the rate at which the Principal Funding Account could be
funded during the Accumulation Period, will be similar to the historical
experience set forth herein.
The Trust, as a master trust, may issue additional Series from time to
time, and there can be no assurance that the terms of any such Series might not
have an impact on the timing or amount of payments received by
Certificateholders. Further, if an Early Amortization Event occurs, the average
life and maturity of the Class A Certificates and Class B Certificates,
respectively, could be significantly reduced.
For the reasons set forth above, there can be no assurance that deposits in
the Principal Funding Account will be made in accordance with the applicable
Controlled Deposit Amount or that the actual number of months elapsed from the
date of issuance of the Class A Certificates and the Class B Certificates to
their respective Expected Final Payment Dates will equal the expected number of
months.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to the
Transferor. The Transferor will use such proceeds for its general corporate
purposes.
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FIRST BANK OF SOUTH DAKOTA (NATIONAL ASSOCIATION)
AND FIRST BANK SYSTEM, INC.
First Bank of South Dakota (National Association) is a national banking
association organized under the laws of the United States. First Bank provides
a broad range of products and services to its customers in the areas of credit,
treasury management, leasing, trust, mortgage, insurance, investment and other
financial services. First Bank markets these services through seventeen
branches located primarily in regional trade centers, including Sioux Falls and
Rapid City. First Bank is a wholly-owned subsidiary of First Bank System, Inc.
("First Bank System"). First Bank System is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended, with its principal
assets being the stock of its banking and non-banking subsidiaries. Through its
banking subsidiaries and various non-banking subsidiaries, First Bank System
provides domestic banking and banking related services primarily throughout the
Midwest and Rocky Mountain regions. As of December 31, 1995, First Bank had
assets of $1.78 billion and shareholder's equity of $170.1 million, determined
in accordance with regulatory accounting principles (which differ, in certain
instances, from generally accepted accounting principles). As of December 31,
1995, First Bank System had assets of $33.87 billion and shareholders' equity of
$2.72 billion, determined in accordance with generally accepted accounting
principles.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement and the Series
1996-1 Supplement, copies of the forms of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. Pursuant to the
Agreement, the Transferor and the Trustee may execute further Series Supplements
in order to issue additional Series. The following summary of the Certificates
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all of the provisions of the Agreement and the Series
1996-1 Supplement.
GENERAL
The Certificates will represent undivided interests in the Trust, including
the right to receive varying percentages of all collections received with
respect to the Receivables in the Trust up to (but not in excess of) amounts
required to make payments of, with respect to the Class A Certificates, interest
at the Class A Certificate Rate and the Class A Invested Amount on the Class A
Expected Final Payment Date and, with respect to the Class B Certificates,
interest at the Class B Certificate Rate and the Class B Invested Amount on the
Class B Expected Final Payment Date. See "--Allocation Percentages." The
property of the Trust consists of the Receivables generated under the Accounts
and any Additional Accounts subsequently designated to the Trust, all monies due
or to become due in payment of the Receivables (including recoveries on charged-
off Receivables and amounts, if any, paid by corporate clients as co-obligors
under the Corporate Card program), all proceeds of the Receivables, the right to
receive certain amounts of Net Interchange allocable to the Certificates and all
monies on deposit in certain bank accounts of the Trust (other than investment
earnings on such amounts, except as otherwise specified herein), and any
Enhancement with respect to any particular Series or Class as described herein.
Monies on deposit in bank accounts of the Trust that are established for the
benefit of any other Series and the drawing on or payment of Enhancements issued
with respect to any other Series will not be available to Certificateholders.
The Trust will not include the Receivables from any Removed Accounts. On the
Closing Date, the Trustee will authenticate the Class A Certificates and the
Class B Certificates and deliver such Certificates to the Transferor which will
in turn deliver them to the Underwriters against payment of the net proceeds of
the sale of the Certificates. The Trustee will also deliver the Collateral
Investor Interest and the Exchangeable Transferor Certificate to the Transferor.
The Transferor intends to sell the Collateral Investor Interest to one or more
third-party investors pursuant to the Loan Agreement. The Collateral Investor
Interest is not offered hereby. The Class A Initial Invested Amount will equal
$______,
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the Class B Initial Invested Amount will equal $______ and the Collateral
Initial Invested Amount will equal $______.
The Transferor initially will own the Exchangeable Transferor Certificate.
The Exchangeable Transferor Certificate will represent the undivided interest in
the Trust not represented by the Certificates, by the Collateral Investor
Interest, by other investor certificates issued by the Trust and by the
interests of Enhancement providers. The holder of the Exchangeable Transferor
Certificate will have the right to a percentage (the "Transferor Percentage") of
all collections on the Receivables in the Trust.
During the Revolving Period, the Invested Amount will remain constant
except under certain limited circumstances. See "--Defaulted Receivables;
Rebates and Fraudulent Charges; Investor Charge-Offs." The amount of Principal
Collections in the Trust, however, will vary each day as new Receivables are
created and others are paid. The amount of the Transferor Interest will
fluctuate each day, therefore, to reflect the changes in the amount of the
Receivables in the Trust. When a Series is amortizing, the invested amount of
such Series will generally decline as payments of principal are distributed to
the Certificateholders or accumulated in a principal funding account. As a
result, the Transferor Interest will generally increase each month during the
amortization period with respect to a Series to reflect the reductions in the
invested amount of such Series and will also change to reflect the variations in
the amount of Principal Collections. The Transferor Interest may also be reduced
as the result of an Exchange. See "--Exchanges."
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of the nominee of DTC
(together with any successor depository selected by the Transferor, the
"Depository") except as set forth below. Beneficial interests in the
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples thereof in book-entry form only. The Transferor has been
informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is expected
to be the holder of record of the Certificates. No Certificate Owner acquiring
an interest in the Certificates will be entitled to receive a certificate
representing such person's interest in the Certificates unless Definitive
Certificates are issued. Unless and until Definitive Certificates are issued
under the limited circumstances described herein, all references herein to
actions by Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references herein
to distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC procedures. See "--Book-Entry
Registration" and "--Definitive Certificates."
BOOK-ENTRY REGISTRATION
Certificateholders may hold their Certificates through DTC (in the United
States) or CEDEL or Euroclear (in Europe), which in turn hold through DTC, if
they are participants of such systems, or indirectly through organizations that
are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. CEDEL and
Euroclear will hold omnibus positions on behalf of the CEDEL Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in CEDEL's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("Participants") and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers (who may include the Underwriters), banks, trust companies
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and clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (the "Indirect
Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through CEDEL Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. CEDEL
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits or securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal of
and interest on the Certificates from the Trustee through the Participants who
in turn will receive them from DTC. Under a book-entry format, Certificate
Owners may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will
forward such payments to its Participants which thereafter will forward them to
Indirect Participants or Certificate Owners. It is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificate Owners will not
be recognized by the Trustee as Certificateholders, as such term is used in the
Agreement, and Certificate Owners will only be permitted to exercise the rights
of Certificateholders indirectly through the Participants who in turn will
exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess Certificates, Certificate Owners will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Certificates, may
be limited due to the lack of a physical certificate for such Certificates.
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DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under any related Agreement only at the direction
of one or more Participants to whose account with DTC the Certificates are
credited. Additionally, DTC has advised the Transferor that it will take such
actions with respect to specified percentages of the Invested Amount only at the
direction of and on behalf of Participants whose holdings include undivided
interests that satisfy such specified percentages. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Participants whose holdings include such
undivided interests.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled by CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL interfaces with domestic
markets in several countries. As a professional depository, CEDEL is subject to
regulations by the Luxembourg Monetary Institute. CEDEL Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the Underwriters. Indirect
access to CEDEL is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
CEDEL Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in any of 27 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriters. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
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Distributions with respect to Certificates held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
CEDEL or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Agreement on behalf of a
CEDEL Participant or a Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depositary's ability to effect
such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Transferor would seek an alternative depository (if available) or
cause the issuance of Definitive Certificates to Certificate Owners or their
nominees in the manner described under "--Definitive Certificates."
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form to
Certificate Owners or their nominees ("Definitive Certificates"), rather than to
DTC or its nominee, only if (i) the Transferor advises the Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as Depository with respect to the Certificates, and the Trustee or the
Transferor is unable to locate a qualified successor, (ii) the Transferor, at
its option, advises the Trustee in writing that it elects to terminate the book-
entry system through DTC or (iii) after the occurrence of a Servicer Default,
Certificate Owners representing not less than 50% of the Invested Amount advise
the Trustee and DTC through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
re-registration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments on each
Interest Payment Date and interest and principal payments on the Expected Final
Payment Date of each Class (or, if an Early Amortization Event occurs, on each
Special Payment Date) will be made to Holders in whose names the Definitive
Certificates were registered at the close of business on the related Record
Date. Distributions will be made by check mailed to the address of such Holder
as it appears on the register maintained by the Trustee. The final payment on
any Certificate (whether Definitive Certificates or the Certificates registered
in the name of Cede representing the Certificates), however, will be made only
upon presentation and surrender of such Certificate at the office or agency
specified in the notice of final distribution to Certificateholders. The Trustee
will provide such notice to registered Certificateholders not later than the
fifth day of the month of such final distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer or
exchange, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
INTEREST PAYMENTS
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Interest on the principal amount of the Class A Certificates and the
principal amount of the Class B Certificates will accrue from the Closing Date
at the Class A Certificate Rate and Class B Certificate Rate, respectively.
Interest will be distributed semi-annually on each Interest Payment Date,
commencing _______, 1996, to Certificateholders in whose names the Certificates
were registered at the close of business on the last day of the calendar month
preceding the date of such payment (a "Record Date"). Interest for any Interest
Payment Date will include interest at the Class A Certificate Rate or the Class
B Certificate Rate, as applicable, accrued from and including the preceding
Interest Payment Date or, in the case of the first Interest Payment Date, from
and including the Closing Date, to but excluding such Interest Payment Date.
Interest on the Certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
On each Transfer Date, Class A Monthly Interest and Class B Monthly
Interest will be deposited in a trust account in the name of the Trustee
maintained with an Eligible Institution which initially shall be the Trustee
(the "Interest Funding Account"). Funds on deposit in the Interest Funding
Account generally will be invested in certain Eligible Investments described
under "--Collection Account." Although such Eligible Investments are highly
rated, Certificateholders will bear the risk of losses on such Eligible
Investments to the extent that losses exceed any earnings thereon. Any earnings
(net of losses and investment expenses) on funds in the Interest Funding Account
will be paid monthly to the Transferor. If an Early Amortization Event occurs
and an Early Amortization Period commences, then thereafter Class A Monthly
Interest or Class B Monthly Interest, as the case may be, will be distributed to
the Class A Certificateholders or the Class B Certificateholders monthly on each
Special Payment Date and any amounts on deposit in the Interest Funding Account
will be distributed to the Class A Certificateholders and the Class B
Certificateholders on the first Special Payment Date.
Interest due but not paid on any Interest Payment Date or Special Payment
Date will be due on the next succeeding Interest Payment Date or Special Payment
Date with, to the extent permitted by applicable law, additional interest on
such amount at the Class A Certificate Rate or the Class B Certificate Rate, as
applicable.
Payments of interest in respect of the Class A Certificates on any
Distribution Date will be funded from Class A Available Funds for the related
Collection Period. To the extent Class A Available Funds are insufficient to pay
such interest, Excess Spread and Shared Excess Yield Collections allocated to
Series 1996-1 and Reallocated Principal Collections will be used to make such
payments. "Class A Available Funds" means, with respect to any Collection
Period, an amount equal to the sum of (i) the Class A Floating Percentage of
Yield Collections with respect to such Collection Period; (ii) if such
Collection Period relates to a Distribution Date that occurs on or prior to the
payment in full of the Class A Certificates, the Principal Funding Investment
Proceeds, if any, with respect to the related Transfer Date; and (iii) amounts,
if any, to be withdrawn from the Reserve Account which are required to be
included in Class A Available Funds with respect to the related Transfer Date as
described under "--Reserve Account."
Payments of interest in respect of the Class B Certificates on any
Distribution Date will be funded from Class B Available Funds for the related
Collection Period. To the extent Class B Available Funds are insufficient to
pay such interest, Excess Spread and Shared Excess Yield Collections allocated
to Series 1996-1 and Reallocated Collateral Principal Collections (in each case
after application of such amounts in respect of the Class A Certificates) will
be used to make such payments. "Class B Available Funds" means, with respect to
any Collection Period, an amount equal to the sum of (i) the Class B Floating
Percentage of Yield Collections with respect to such Collection Period; and
(ii) if such Collection Period relates to a Distribution Date that occurs on or
after the payment in full of the Class A Certificates, the Principal Funding
Investment Proceeds, if any, with respect to the related Transfer Date not
applied to make payments in respect of the Class A Certificates.
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PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the Accumulation Period or, if earlier, the
Early Amortization Period), no principal payments will be made to
Certificateholders. During the Accumulation Period (on or prior to the Class A
Expected Final Payment Date), principal will be deposited in the Principal
Funding Account as described below and on the Class A Expected Final Payment
Date will be distributed to Class A Certificateholders up to the outstanding
principal amount of the Class A Certificates. After the Class A Invested Amount
has been paid in full, principal will be deposited into the Collection Account
as described below and on the Class B Expected Final Payment Date will be
distributed to Class B Certificateholders up to the outstanding principal amount
of the Class B Certificates. During the Early Amortization Period, which will
begin upon the occurrence of an Early Amortization Event, and until the Stated
Series Termination Date occurs, principal will be paid first to the Class A
Certificateholders until the outstanding principal amount of the Class A
Certificates has been paid in full, and then to the Class B Certificateholders
until the outstanding principal amount of the Class B Certificates has been paid
in full.
On each Transfer Date during the Accumulation Period, the Trustee will
deposit in the Principal Funding Account an amount equal to the lesser of (a)
the Fixed Allocation Percentage of Principal Collections with respect to the
preceding Collection Period PLUS the amount of any Shared Principal Collections
with respect to other Series that are allocated to Series 1996-1 in accordance
with the Agreement MINUS the amount of Reallocated Principal Collections for
such Collection Period, (b) for each Transfer Date with respect to the
Accumulation Period prior to the Class A Expected Final Payment Date, the
Controlled Deposit Amount for such Transfer Date and (c) the Class A Adjusted
Invested Amount with respect to such Transfer Date prior to any deposits on such
date. Amounts on deposit in the Principal Funding Account will be paid to the
Class A Certificateholders on the Class A Expected Final Payment Date. After the
outstanding principal amount of the Class A Certificates has been paid in full,
on each Transfer Date during the Accumulation Period, the Trustee will deposit
in the Collection Account an amount equal to the lesser of (a) the Fixed
Allocation Percentage of Principal Collections with respect to the preceding
Collection Period PLUS the amount of any Shared Principal Collections with
respect to other Series that are allocated to Series 1996-1 in accordance with
the Agreement MINUS the portion of all such amounts applied to Class A Monthly
Principal on such Transfer Date MINUS the amount of Reallocated Principal
Collections for such Collection Period and (b) the Class B Invested Amount with
respect to such Transfer Date prior to any deposits on such date. Such amounts
in the Collection Account will be paid to the Class B Certificateholders on the
Class B Expected Final Payment Date. If an Early Amortization Event occurs with
respect to the Certificates during the Accumulation Period, the Early
Amortization Period will commence and any amount on deposit in the Principal
Funding Account will be paid to the Class A Certificateholders on the first
Special Payment Date with respect to the Early Amortization Period.
On each Special Payment Date during the Early Amortization Period until the
Class A Certificates have been paid in full or the Stated Series Termination
Date occurs, the Class A Certificateholders will be entitled to receive Class A
Monthly Principal in an amount up to the outstanding principal amount of the
Class A Certificates. After payment in full of Class A Certificates, the Class B
Certificateholders will be entitled to receive on each Special Payment Date
Class B Monthly Principal until the earlier of the date the Class B Invested
Amount is paid in full and the Stated Series Termination Date.
POSTPONEMENT OF ACCUMULATION PERIOD
Upon written notice to the Trustee, the Transferor may elect to postpone
the commencement of the Accumulation Period, and extend the length of the
Revolving Period, subject to certain conditions including those set forth below.
The Transferor may make such election only if the Accumulation Period Length
(determined as described below) is less than twelve months. On the
Determination Date and on each Determination Date thereafter, until the
Accumulation Period begins, the Servicer, on behalf of the Transferor, will
determine the "Accumulation Period Length," which is the number of months
expected to be required to
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fully fund the Principal Funding Account no later than the Class A Expected
Final Payment Date, based on (a) the expected monthly Principal Collections
expected to be distributable to the certificateholders of all Series (excluding
certain other Series), assuming a rate of payment on the Receivables no greater
than the lowest monthly rate of payment on the Receivables for the preceding
twelve months and (b) the amount of principal expected to be distributable to
certificateholders of all Series (excluding certain other Series) which are not
expected to be in their revolving periods during the Accumulation Period. If
the Accumulation Period Length is less than twelve months, the Servicer may, at
its option, postpone the commencement of the Accumulation Period such that the
number of months included in the Accumulation Period will be equal to or exceed
the Accumulation Period Length. The effect of the foregoing calculation is to
permit the reduction of the length of the Accumulation Period based on the
invested amounts of other Series, if any, scheduled to be in their revolving
periods during the Accumulation Period and on increases in the payment rate
occurring after the Closing Date. The length of the Accumulation Period will
not be less than one month.
SUBORDINATION OF THE CLASS B CERTIFICATES AND
THE COLLATERAL INVESTOR INTEREST
The Class B Certificates and the Collateral Investor Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Collateral Investor Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain principal payments otherwise allocable to the
Class B Certificateholders may be reallocated to the Class A Certificateholders
and the Class B Invested Amount may be reduced. Similarly, certain principal
payments allocable to the Collateral Investor Interest may be reallocated to the
Class A Certificateholders and the Class B Certificateholders and the Collateral
Invested Amount may be reduced. To the extent the Class B Invested Amount is
reduced, the percentage of Yield Collections allocated to the Class B
Certificateholders in subsequent Collection Periods will be reduced. Moreover,
to the extent the amount of such reduction in the Class B Invested Amount is not
reimbursed, the amount of principal and interest distributable to the Class B
Certificateholders will be reduced. No principal will be paid to the Class B
Certificateholders until the Class A Invested Amount is paid in full. See "--
Allocation Percentages," "--Reallocation of Cash Flows," and "--Application of
Collections--Excess Spread; Shared Excess Yield Collections."
TRANSFER AND ASSIGNMENT OF RECEIVABLES
On the Closing Date, the Transferor will transfer and assign to the Trust
all of its right, title and interest in and to Receivables in the Accounts
outstanding as of the Cut-Off Date, all of the Receivables thereafter created
under the Accounts and the proceeds of all of the foregoing.
In connection with the transfer of the Receivables by the Transferor to the
Trust, the Transferor will indicate in its records, including any computer
files, that the Receivables have been transferred from the Transferor to the
Trust. In addition, the Transferor will provide to the Trustee a computer file
or a microfiche list containing a true and complete list showing for each
Account, as of the Cut-Off Date and for each Additional Account as of the date
of its designation for inclusion in the Trust, (i) its account number and
(ii) the amount of Receivables in such Account. Card Services, as initial
Servicer, will retain and will not deliver to the Trustee any other records or
agreements relating to the Accounts or the Receivables. Except as set forth
above, the records and agreements relating to the Accounts and the Receivables
will not be segregated from those relating to other charge card accounts and
receivables and neither the computer files nor the physical documentation
relating to the Accounts or Receivables will be stamped or marked to reflect the
transfer of Receivables to the Trust. The Trustee will have reasonable access to
such records and agreements as required by applicable law or to enforce the
rights of the Certificateholders. The Transferor will file one or more UCC-1
financing statements in accordance with applicable law to perfect the Trust's
interest in the Receivables. See "Risk Factors--Potential Priority of Certain
Liens" and "Certain Legal Aspects of the Receivables."
EXCHANGES
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The Agreement will provide for the Trustee to issue two types of
certificates: (i) one or more Series of certificates which are transferable and
have the characteristics described below and (ii) the Exchangeable Transferor
Certificate, a certificate which evidences the Transferor Interest, which will
be held by the Transferor and generally will not be transferable. The Agreement
will also provide that, pursuant to any one or more Series Supplements, the
Transferor may tender the Exchangeable Transferor Certificate, or the
Exchangeable Transferor Certificate and the certificates evidencing any Series
of certificates, to the Trustee in exchange for one or more newly issued Series
and a reissued Exchangeable Transferor Certificate. This exchange feature
permits the creation of new Series to be issued from an already existing trust.
Under the Agreement, the Transferor may define, with respect to any newly issued
Series: (i) its name or designation, (ii) its initial principal amount (or
method for calculating such amount), (iii) its certificate rate (or formula for
the determination thereof), (iv) the interest payment date or dates and the date
or dates from which interest shall accrue, (v) the method for allocating
collections to certificateholders, (vi) the names of any accounts to be used by
such Series and the terms governing the operation of any such accounts,
(vii) the percentage used to calculate servicing fees, (viii) the minimum
Transferor percentage (the "Minimum Transferor Percentage") and minimum
Transferor amount (the "Minimum Transferor Amount") applicable to such Series,
(ix) the applicable Minimum Trust Principal Component required to be maintained
through the designation by the Transferor of Additional Accounts, (x) the issuer
and terms of any Enhancement with respect thereto, (xi) the base rate for such
Series, if applicable, (xii) the terms on which the certificates of such Series
may be repurchased at the Transferor's option or remarketed to other investors,
(xiii) the stated Series termination date, (xiv) any deposit into any account
maintained for the benefit of certificateholders, (xv) the number of Classes of
such Series, and if more than one Class, the rights and priorities of each such
Class, (xvi) the extent to which the certificates of such Series will be
issuable in temporary or permanent global form (and, in such case, the
depositary for such global certificate or certificates, the terms and
conditions, if any, upon which such global certificate may be exchanged, in
whole or in part, for definitive certificates, and the manner in which any
interest payable on a temporary or global certificate will be paid),
(xvii) whether the certificates of such Series may be issued in bearer form and
any limitations imposed thereon, (xviii) the priority of any Series with respect
to any other Series, if applicable, (xix) the rights of the holder of the
Exchangeable Transferor Certificate that have been transferred to
certificateholders of such Series and (xx) any other relevant terms (all such
terms, the "Principal Terms" of such Series). None of the Transferor, the
Servicer, the Trustee or the Trust is required or intends to obtain the consent
of any Certificateholder to issue any additional Series. However, as a condition
of an Exchange, the Transferor will deliver to the Trustee written confirmation
that the Exchange will not result in the applicable Rating Agency reducing or
withdrawing its rating of any outstanding Series. The Transferor may offer any
Series to the public under a Disclosure Document in transactions either
registered under the Act or exempt from registration thereunder directly,
through one or more underwriters or placement agents, in fixed-price offerings
or in negotiated transactions or otherwise. Any such Series may be issued in
fully registered or book-entry form in minimum denominations determined by the
Transferor.
The Agreement will provide that the Transferor may perform Exchanges and
define Principal Terms such that each Series has a period during which
amortization of the principal amount thereof is intended to occur which may have
a different length and begin on a different date than such period for any other
Series. Further, one or more Series may be in their revolving periods while
other Series are not. Thus, certain Series may not be amortizing, while other
Series are amortizing. Each Series may have the benefits of a form of
Enhancement issued by issuers different from the issuers of the form of
Enhancement with respect to any other Series. Under the Agreement, the Trustee
shall hold any such Enhancement only on behalf of the Series with respect to
which it relates. Likewise, with respect to each such Enhancement, the
Transferor may deliver a different form of Enhancement agreement. The Agreement
will also provide that the Transferor may specify different Certificate rates
and monthly investor servicing fees with respect to each Series. The Transferor
will also have the option under the Agreement to vary between Series the terms
upon which Series may be repurchased at the Transferor's option or remarketed to
other investors. Additionally, certain Series may be subordinated to other
Series, or Classes within a Series may have different priorities. There is no
limit to the number of Exchanges that the Transferor may perform under the
Agreement. The Trust will terminate only as provided in the Agreement.
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Under the Agreement and pursuant to a Series Supplement, an Exchange may
only occur upon the satisfaction of certain conditions provided in the
Agreement. Under the Agreement, the Transferor may perform an Exchange by
notifying the Trustee at least three business days in advance of the date upon
which the Exchange is to occur. Under the Agreement, the notice will state the
designation of any Series to be issued on the date of the Exchange and, with
respect to each such Series: (i) its initial invested amount (or method for
calculating such amount) and (ii) its certificate rate (or the method for
allocating interest payments or other cash flow to such Series). On the date of
the Exchange, the Trustee will issue any such Series only upon delivery to it of
the following: (i) a Series Supplement specifying the Principal Terms of such
Series, (ii) (a) an opinion of counsel to the effect that, unless otherwise
stated in the related Series Supplement, the certificates of such Series will be
characterized as indebtedness for federal income tax purposes and (b) an opinion
of counsel to the effect that, for federal income tax purposes, (1) such
issuance will not adversely affect the federal and applicable state tax
characterization as debt of certificates of any outstanding Series or Class that
were characterized as debt at the time of their issuance, (2) following such
issuance the Trust will not be classified as an association (or publicly traded
partnership) taxable as a corporation and (3) such issuance will not cause or
constitute an event in which gain or loss would be recognized by any
Certificateholder or the Trust (an opinion of counsel with respect to any matter
to the effect referred to in clause (b) with respect to any action is referred
to herein as a "Tax Opinion"), (iii) if required by the related Series
Supplement, the form of Enhancement and any related agreement, (iv) written
confirmation from each Rating Agency that the Exchange will not result in such
Rating Agency reducing or withdrawing its rating on any then outstanding Series
rated by it, and (v) the existing Exchangeable Transferor Certificate and, if
applicable, the certificates representing the Series to be exchanged. Upon
satisfaction of such conditions, the Trustee will cancel the existing
Exchangeable Transferor Certificate and the certificates of the exchanged
Series, if applicable, and issue the new Series and new Exchangeable Transferor
Certificate.
REPRESENTATIONS AND WARRANTIES
The Transferor will make representations and warranties to the Trustee for
the benefit of the Certificateholders relating to the Accounts and the
Receivables to the effect, among other things, that (i) each Receivable is an
Eligible Receivable, (ii) each Receivable has been conveyed to the Trust free
and clear of all liens (except such liens as may be permitted by the Agreement)
or in compliance in all material respects with all applicable requirements of
law, (iii) all material information with respect to the Receivables, and the
Accounts related thereto, in the list provided to the Trustee is true and
correct in all material respects, (iv) the Transferor has obtained all consents,
licenses, approvals or authorizations required in connection with the conveyance
of the Receivables to the Trust, or (v) as of the initial Closing Date, and as
of the applicable Additional Account Closing Date with respect to Additional
Accounts, the computer file or list of Accounts or Additional Accounts, as the
case may be, provided by the Transferor to the Trustee is an accurate and
complete listing of all such Accounts in all material respects or the
information contained therein with respect to the identity of such Accounts and
the Receivables existing thereunder is true and correct in all material respects
as of the Cut-Off Date or, with respect to Additional Accounts, as of their date
of designation for inclusion in the Trust. If any representation or warranty of
the Transferor described in this paragraph is not true and correct in any
material respect and, as a result, any Receivables are charged off as
uncollectible or the proceeds of such Receivables are not available to the
Trust, unless cured within 60 days or any longer period agreed upon by the
Trustee (not to exceed an additional 60 days) from the earlier to occur of the
discovery of any such event by the Transferor or the Servicer, or receipt by the
Transferor or the Servicer of written notice of any such event given by the
Trustee, then such Receivable shall be designated an "Ineligible Receivable" and
shall be assigned a balance of zero for the purpose of determining the Trust
Principal Component on any day.
On and after the date of its designation as an Ineligible Receivable, each
Ineligible Receivable shall not be given credit in determining the Trust
Principal Component used to calculate the Transferor Amount and the allocation
percentages with respect to collections on the Receivables. See "--Allocation
Percentages." In the event that the exclusion of an Ineligible Receivable from
the calculation of the Trust Principal Component would cause the Transferor
Amount to be reduced below the Minimum Transferor Percentage of the Trust
Principal Component, the Transferor shall make a deposit into the Collection
Account in an amount equal to
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the amount required to cause the Transferor Amount to equal the Minimum
Transferor Percentage of the Trust Principal Component. Any such deposits by
the Transferor shall be allocated in respect of Principal Collections and Yield
Collections as provided in the Agreement. The obligation of the Transferor to
make such deposits is the sole remedy with respect to Ineligible Receivables
available to Certificateholders or the Trustee on behalf of the
Certificateholders.
The Transferor will represent and warrant as of the Closing Date, to the
Trustee for the benefit of the Certificateholders, that (i) the Transferor is
duly organized and validly existing in good standing under the laws of the
United States of America, has the full power, authority and legal right to own
its properties and conduct its business as such properties are presently owned
and such business is presently conducted, and to execute, deliver and perform
its obligations under the Agreement and the Series 1996-1 Supplement and to
execute and deliver to the Trustee the Certificates pursuant to the Agreement,
(ii) the Agreement and the Series 1996-1 Supplement constitute legal, valid,
binding and enforceable obligations of the Transferor, and (iii) the Agreement
constitutes a valid transfer to the Trust of all right, title and interest of
the Transferor in and to the Receivables, whether then existing or thereafter
created in the Accounts, and the proceeds thereof, or the grant of a first
priority perfected security interest in such Receivables and, with certain
exceptions made for certain limited time periods, the proceeds thereof, which is
effective as to each Receivable upon the transfer thereof to the Trust or upon
its creation, as the case may be. In the event that (x) any of the
representations and warranties described in clauses (i) through (iii) above are
not true and correct or (y) a material amount of Receivables are not Eligible
Receivables, and in either case such event has a material adverse effect on the
interest of holders of the Certificates (without regard to the amount of any
Enhancement), either the Trustee or the holders of Certificates evidencing
undivided interests in the Trust aggregating more than 50% of the aggregate
invested amount of all Series, by written notice to the Transferor (and to the
Trustee and the Servicer, if given by the certificateholders), may direct the
Transferor to accept reassignment of all Receivables within 60 days of such
notice or any longer period agreed upon by the Trustee (not to exceed an
additional 60 days). The Transferor will be obligated to accept reassignment of
all such Receivables on a Distribution Date occurring within such applicable
period, unless the representations and warranties shall then be true and correct
in all material respects or there shall no longer be a material amount of such
Receivables which are not Eligible Receivables, as the case may be. The price
for such transfer of Receivables shall be equal to the sum of the aggregate
invested amounts of all Series on the Record Date related to the applicable
Distribution Date on which the transfer is scheduled to be made (less the
aggregate principal amount on deposit in any principal funding account) plus an
amount equal to all interest accrued but unpaid on all Series at the applicable
certificate rates through the end of the applicable interest periods of such
Series plus certain amounts payable to Enhancement providers, if applicable. The
payment of such amount into the collection account in immediately available
funds will be considered a prepayment in full of all such Receivables and will
be paid in full to the certificateholders and, if applicable, to Enhancement
providers. The obligations described above shall be the sole remedies respecting
the foregoing representations, warranties and events available to the Trustee or
the certificateholders. The certificateholders will not incur any costs, direct
or indirect, related to the reassignment of Receivables to the Transferor.
An "Eligible Receivable" is defined to mean each Receivable (i) which has
arisen under an Eligible Account, (ii) which was created in compliance with all
applicable requirements of law, and pursuant to a cardholder agreement which
complies with all applicable requirements of law in either case the failure to
comply with which would have a material adverse effect upon Certificateholders,
(iii) with respect to which all material consents, licenses, approvals or
authorizations of, or registrations with, any governmental authority required to
be obtained or given by the Transferor in connection with the creation of such
Receivable or the execution, delivery and performance by the Transferor of the
related cardholder agreement have been duly obtained or given and are in full
force and effect as of such date of creation, (iv) as to which at the time of
the transfer of such Receivable to the Trust, the Trust will have good and
marketable title, free and clear of all liens, encumbrances, charges and
security interests (except those permitted by the Agreement), (v) which has been
the subject of either a valid transfer and assignment from the Transferor to the
Trust of all of the Transferor's right, title and interest therein or the grant
of a first priority perfected security interest therein (and in the proceeds
thereof), effective until the termination of the Trust, (vi) which will at all
times be the legal,
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valid and binding payment obligation of the cardholder thereof enforceable
against such cardholder in accordance with its terms, subject to certain
bankruptcy and equity related exceptions, (vii) which constitutes an "account"
or a "general intangible" under and as defined in Article 9 of the applicable
UCC as then in effect, (viii) which, at the time of its transfer to the Trust,
has not been waived or modified except in accordance with the policies and
procedures of the Transferor relating to the operation of its Corporate Card
program or Purchasing Card program, as applicable, (ix) which is not subject to
any setoff, right of rescission, counterclaim or other defense (including the
defense of usury), other than certain bankruptcy and equity related defenses,
(x) as to which the Transferor has satisfied all obligations to be fulfilled at
the time it is transferred to the Trust and (xi) as to which the Transferor has
done nothing, at the time of its transfer to the Trust, to impair the rights of
the Trust or Certificateholders therein. In order to qualify as an "Eligible
Account," each such Account must, as of the date of its selection, (i) be in
existence and owned by the Transferor, (ii) be payable in United States dollars,
(iii) not have the related card reported lost or stolen or be designated as
fraudulent, (iv) not be identified in the Transferor's computer files as
cancelled due to the obligor's bankruptcy or insolvency, (v) not have the
receivables in such Account written off as uncollectible, (vi) not have the
receivables in such Account assigned, pledged or sold, (vii) have an obligor who
has provided a billing address in the United States or its territories or
possessions and (viii) not be an account with respect to which First Bank or any
affiliate of First Bank is the obligor.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of the Receivables or any records relating to the
Receivables for the purpose of establishing the presence or absence of defects,
compliance with the Transferor's representations and warranties or for any other
purpose. In addition, it is not anticipated or required that the Trustee will
make any initial or periodic general examination of the Servicer for the purpose
of establishing the compliance by the Servicer with its representations or
warranties or the performance by the Servicer of its obligations under the
Agreement for any other purpose. The Servicer, however, is required to deliver
to the Trustee on or before April 30 of each calendar year, beginning with
April 30, 1997, an opinion of counsel with respect to the validity of the
security interest of the Trust in and to the Receivables.
ADDITION OF ACCOUNTS
Subject to the conditions set forth below, the Transferor will have the
right to designate from time to time additional eligible VISA charge card
accounts originated under the Bank's Corporate Card or Purchasing Card programs
(the "Additional Accounts") to be included as Accounts and to convey to the
Trust on designated dates all Receivables in such Additional Accounts (each such
date, an "Additional Account Closing Date"), whether such Receivables are then
existing or thereafter created. In addition, the Transferor will be required to
designate the Receivables of Additional Accounts (to the extent available) and
to transfer the Receivables in such Additional Accounts to the Trust if, as of
the end of any Collection Period, the Trust Principal Component minus the sum of
the invested amounts (or adjusted invested amounts) and any Receivables
allocated to Enhancement providers for all Series (the "Transferor Amount"), as
a percentage of the Trust Principal Component, is less than the Minimum
Transferor Percentage specified in the Series Supplement for any Series or if,
as of the end of any Collection Period, the Trust Principal Component is less
than the minimum amount of the Trust Principal Component (the "Minimum Trust
Principal Component") specified in the Series Supplement for any Series.
Failure to make any such required designation will result in an Early
Amortization Event with respect to the related Series. The Minimum Transferor
Percentage and the Minimum Transferor Amount applicable to the Certificates are
% and $ , respectively. The Minimum Trust Principal Component
applicable to the Certificates is the sum of the Invested Amount, the invested
amounts (or other amounts, if applicable) of other Series outstanding from time
to time and the Minimum Transferor Amount. The Transferor will in each case
convey to the Trust its interest in all Receivables in such Additional Accounts,
whether such Receivables are then existing or thereafter created, subject to the
following conditions, among others: (i) each such Additional Account at the time
of its selection must be an Eligible Account; (ii) the selection of the
Additional Accounts by the Transferor will be made in a manner which it
reasonably believes will not materially adversely affect the certificateholders'
interest; and (iii) the Transferor shall have delivered prior written notice of
the addition to the applicable Rating Agency, the Trustee and the Servicer, and
if required by the Agreement,
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shall have been notified in writing that such addition will not result in a
reduction or withdrawal of the rating of any Series of certificates. The right
to designate Additional Accounts and to transfer Receivables in such Additional
Accounts to the Trust permits the Transferor to increase the Trust Principal
Component, thereby permitting the issuance of additional Series or avoiding the
occurrence of certain early amortization events with respect to existing Series.
Certificateholders will not incur any costs, direct or indirect, as a result of
the exercise of this feature.
Although each Additional Account must satisfy certain criteria set forth in
the Agreement at the time of its selection, Additional Accounts may not be of
the same credit quality as the initial Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth below, on each Determination Date with
respect to which the Transferor Amount as a percentage of the Trust Principal
Component exceeds the percentage required by the Agreement at the end of the
related Collection Period, the Transferor will have the right to accept removal
of Receivables in certain Accounts designated by the Transferor from the Trust
(the "Removed Accounts") and accept the conveyance of all the Receivables in the
Removed Accounts, without notice to the certificateholders. The Transferor may,
at its sole discretion, accept such offer in an aggregate amount equal to an
amount not greater than the excess of the Transferor Amount over the Minimum
Transferor Percentage of the Trust Principal Component as of the end of the
related Collection Period. This feature is intended to permit the Transferor to
obtain unencumbered ownership of Receivables not needed to support any Series of
certificates. Certificateholders will not incur any costs, direct or indirect,
as a result of the exercise of this feature. The Transferor will be permitted
to designate and require reassignment to it of the Receivables from Removed
Accounts only upon satisfaction of the following conditions: (i) the Transferor
shall have delivered to the Trustee for execution a written instrument of
reassignment and a computer file or microfiche list containing a true and
complete list of all Accounts in the Trust after such removal, the Accounts to
be identified by account number and aggregate amount of Receivables; (ii) the
Transferor shall represent and warrant that no selection procedure used by the
Transferor which is adverse to the interests of the certificateholders or any
provider of Enhancement was utilized in selecting the Removed Accounts;
(iii) the removal of any Receivables of any Removed Accounts shall not, in the
reasonable belief of the Transferor, cause an early amortization event to occur;
(iv) the Transferor shall have delivered prior written notice of the removal to
each Rating Agency which has rated any outstanding Series and prior to the date
on such Receivables are to be removed shall have received notice from each
Rating Agency that such removal will not cause the reduction or withdrawal of
its rating of any Series of certificates; and (v) the Transferor shall have
delivered to the Trustee and each Rating Agency an officer's certificate
confirming the items set forth in clauses (i) through (iv) above.
COLLECTION ACCOUNT
The Trustee will establish and maintain or cause to be established and
maintained, in the name of the Trustee, on behalf of the Trust, a segregated
trust account (the "Collection Account") for the benefit of the
Certificateholders with an Eligible Institution. An "Eligible Institution" means
a depositary institution, which may include the Trustee, organized under the
laws of the United States or any one of the States thereof including the
District of Columbia (or any domestic branches of foreign banks), which at all
times has a short-term unsecured debt or certificate of deposit rating of at
least A-1+ and P-1 by the applicable Rating Agency; PROVIDED, HOWEVER, that no
such rating shall be required of an institution which shall have corporate trust
powers and which maintains the Collection Account, any Principal Funding
Account, any Interest Funding Account or any other account maintained for the
benefit of Certificateholders as a fully segregated trust account with the trust
department of such institution. Funds in the Collection Account may be
invested, at the direction of the Servicer, in (i) obligations fully guaranteed
by the United States of America or its agencies, (ii) time deposits, demand
deposits, certificates of deposit or banker's acceptances of certain depository
institutions or trust companies having the highest rating from the applicable
Rating Agency, (iii) commercial paper having, at the time of the Trust's
investment, a rating in the highest rating category from the applicable Rating
Agency, (iv) Eurodollar time deposits having, at the time of the Trust's
investment or contractual commitment to invest
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therein, a rating in the highest rating category from the applicable Rating
Agency, (v) certain repurchase agreements transacted with either (a) an entity
subject to the United States federal bankruptcy code or (b) a financial
institution insured by the Federal Deposit Insurance Corporation (the "FDIC") or
any broker-dealer with "retail customers" that is under the jurisdiction of the
Securities Investors Protection Corp. and (vi) any other investments as may be
approved in writing by the applicable Rating Agency prior to the Trust's
investment therein, provided that such investment will not cause the Trust to be
treated as an Investment Company within the meaning of the Investment Company
Act of 1940, as amended (collectively, the "Eligible Investments"). Any such
investment shall be held to maturity. Any earnings (net of losses and investment
expenses) on funds in the Collection Account shall be paid monthly to the
Transferor unless an Early Amortization Event occurs, in which event such funds
will remain on deposit in the Collection Account. The Servicer will have the
revocable power to withdraw funds from the Collection Account and to instruct
the Trustee to make withdrawals and payments from the Collection Account for the
purpose of carrying out the Servicer's or the Trustee's duties under the
Agreement. So long as no Servicer Default has occurred and First Bank or an
affiliate of First Bank maintains certain short-term credit ratings, or obtains
written confirmation of the ratings on the Certificates from each Rating Agency,
the Servicer need not deposit funds into the Collection Account until the
business day preceding the following Distribution Date (the "Transfer Date") and
may use such funds for its own purposes. See "--Allocation of Collections;
Deposits in Collection Account."
ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT
On the date of processing, the Servicer will, subject to certain
exceptions, deposit collections on the Receivables and payments made by the
Transferor in respect of Ineligible Receivables allocable to the
Certificateholders' and Collateral Interest Holder's interests into the
Collection Account except as described below. So long as a Servicer Default has
not occurred, Card Services or another affiliate of First Bank is the Servicer
and First Bank (i) maintains a certificate of deposit rating or meets other
criteria required by the applicable Rating Agency, or (ii) obtains a written
notification from each Rating Agency to the effect that such Rating Agency does
not intend to downgrade or withdraw its then current rating of any outstanding
Series of certificates despite the Servicer's inability to satisfy the rating
requirement specified in clause (i), and for the two business day period
following any reduction of either such rating or failure to satisfy the
conditions of clause (ii), the Servicer need not deposit collections and
payments made by the Transferor allocable to the Certificateholders' and
Collateral Interest Holder's interests into the Collection Account on the date
indicated in the preceding sentence but may use for its own benefit all such
Collections and payments until the business day preceding the Distribution Date
at which time the Servicer must deposit such amounts (net of the Monthly
Investor Servicing Fee and net of any amounts to be distributed to the
Transferor) into the Collection Account. Until such collections and payments are
deposited in the Collection Account, such amounts will not be segregated from
the assets of the Servicer, and the proceeds of any short term investment of
such proceeds will accrue to the Servicer. While the Servicer holds collections
and payments made by the Transferor in respect of Ineligible Receivables and is
permitted to use such collections and payments for its own benefit, the
Certificateholders are subject to risk of loss, including risk resulting from
the insolvency of the Servicer. The Servicer will pay no fee to the Trust or the
Certificateholders for use of collections and payments made by the Transferor in
respect of Ineligible Receivables. Collections on Receivables allocable to the
Transferor Interest will be remitted by the Servicer on each day to the
Transferor.
ALLOCATION PERCENTAGES
Pursuant to the Agreement, the Servicer will allocate among the
Certificates, the certificateholders' interest for all other Series of
certificates issued and outstanding, the interest of any Enhancement providers,
if applicable, and the Transferor Interest all Yield Collections, Principal
Collections and Defaulted Receivables with respect to each Collection Period.
Yield Collections and Defaulted Receivables with respect to any Collection
Period will be allocated to Series 1996-1 based on the Floating Allocation
Percentage. The "Floating Allocation Percentage" means,
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with respect to any Collection Period, the sum of the Class A Floating
Percentage, the Class B Floating Percentage and the Collateral Floating
Percentage.
The "Class A Floating Percentage" means, with respect to any Collection
Period, the percentage equivalent of a fraction the numerator of which is equal
to the Class A Adjusted Invested Amount as of the last day of the immediately
preceding Collection Period (or the Class A Initial Invested Amount, in the case
of the first Collection Period applicable to Series 1996-1) and the denominator
of which is equal to the greater of (i) the Trust Principal Component as of the
last day of the immediately preceding Collection Period and (ii) the sum of the
numerators used to calculate the allocation percentages with respect to Yield
Collections and Defaulted Receivables for all Series outstanding as of the date
on which such determination is being made.
The "Class B Floating Percentage" means, with respect to any Collection
Period, the percentage equivalent of a fraction the numerator of which is equal
to the Class B Invested Amount as of the last day of the immediately preceding
Collection Period (or the Class B Initial Invested Amount, in the case of the
first Collection Period applicable to Series 1996-1) and the denominator of
which is equal to the greater of (i) the Trust Principal Component as of the
last day of the immediately preceding Collection Period and (ii) the sum of the
numerators used to calculate the allocation percentages with respect to Yield
Collections and Defaulted Receivables for all Series outstanding as of the date
on which such determination is being made.
"Collateral Floating Percentage" means, with respect to any Collection
Period, the percentage equivalent of a fraction the numerator of which is equal
to the Collateral Invested Amount as of the last day of the immediately
preceding Collection Period (or the Collateral Initial Invested Amount, in the
case of the first Collection Period applicable to Series 1996-1) and the
denominator of which is equal to the greater of (i) the Trust Principal
Component as of the last day of the immediately preceding Collection Period and
(ii) the sum of the numerators used to calculate the allocation percentages with
respect to Yield Collections and Defaulted Receivables for all Series
outstanding as of the date on which such determination is being made.
Principal Collections with respect to any Collection Period during the
Revolving Period will be allocated to Series 1996-1 based on the Floating
Allocation Percentage. Principal Collections with respect to any Collection
Period during the Accumulation Period or the Early Amortization Period will be
allocated to Series 1996-1 based on the Fixed Allocation Period Percentage. The
"Fixed Allocation Percentage" means, with respect to any Collection Period, the
sum of the Class A Fixed Percentage, the Class B Fixed Percentage and the
Collateral Fixed Percentage.
"Class A Fixed Percentage" means, with respect to any Collection Period,
the percentage equivalent of a fraction the numerator of which is equal to the
Class A Invested Amount as of the last day of the Revolving Period and the
denominator of which is equal to the greater of (i) the Trust Principal
Component as of the last day of the immediately preceding Collection Period and
(ii) the sum of the numerators used to calculate the allocation percentages with
respect to Principal Collections for all Series outstanding as of the date on
which such determination is being made.
"Class B Fixed Percentage" means, with respect to any Collection Period,
the percentage equivalent of a fraction the numerator of which is equal to the
Class B Invested Amount as of the last day of the Revolving Period and the
denominator of which is equal to the greater of (i) the Trust Principal
Component as of the last day of the immediately preceding Collection Period and
(ii) the sum of the numerators used to calculate the allocation percentages with
respect to Principal Collections for all Series outstanding as of the date on
which such determination is being made.
"Collateral Fixed Percentage" means, with respect to any Collection Period,
the percentage equivalent of a fraction the numerator of which is equal to the
Collateral Invested Amount as of the last day of the Revolving Period and the
denominator of which is equal to the greater of (i) the Trust Principal
Component as of the last day of the immediately preceding Collection Period and
(ii) the sum of the numerators used to
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calculate the allocation percentages with respect to Principal Collections for
all Series outstanding as of the date on which such determination is being made.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" means, on any date of determination, an amount
equal to (a) the Class A Initial Invested Amount, MINUS (b) the aggregate amount
of principal payments made to the Class A Certificateholders prior to such date,
MINUS (c) the aggregate amount of unreimbursed Class A Investor Charge-Offs for
all prior Transfer Dates; PROVIDED, HOWEVER, that the Class A Invested Amount
may not be reduced below zero.
"Class A Adjusted Invested Amount" means, on any date of determination, the
Class A Invested Amount on such date of determination minus the Principal
Funding Account Balance on such date.
"Class B Invested Amount" means, on any date of determination, an amount
equal to (a) the Class B Initial Invested Amount, MINUS (b) the aggregate amount
of principal payments made to the Class B Certificateholders prior to such date,
MINUS (c) the aggregate amount of unreimbursed Class B Investor Charge-Offs for
all prior Transfer Dates, MINUS (d) the amount of Reallocated Class B Principal
Collections used to make payments in respect of the Class A Certificates on all
prior Transfer Dates that have not resulted in a reduction of the Collateral
Invested Amount, MINUS (e) an amount equal to the amount by which the Class B
Invested Amount has been reduced on all prior Transfer Dates to fund the Class A
Investor Default Amount as described under "--Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs", PLUS (f) the amount of Excess Spread
and Shared Excess Yield Collections allocated and available on all prior
Transfer Dates for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (d) and (e); PROVIDED, HOWEVER, that the Class B Invested
Amount may not be reduced below zero.
"Collateral Invested Amount" means, on any date of determination, an amount
equal to (a) the Collateral Initial Invested Amount, MINUS (b) the aggregate
amount of principal payments made to the Collateral Interest Holder prior to
such date, MINUS (c) the amount of Reallocated Collateral Principal Collections
used to make payments in respect of the Certificates on all prior Transfer
Dates, MINUS (d) an amount equal to the amount by which the Collateral Invested
Amount has been reduced on all prior Transfer Dates in respect of the Class A
Investor Default Amount, the Class B Investor Default Amount and the Collateral
Default Amount, PLUS (e) the amount of Excess Spread and Shared Excess Yield
Collections allocated and available on all prior Transfer Dates for the purpose
of reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d);
PROVIDED, HOWEVER, that the Collateral Invested Amount may not be reduced below
zero.
"Invested Amount" means, on any date of determination, the sum of the Class
A Invested Amount, the Class B Invested Amount and the Collateral Invested
Amount.
"Adjusted Invested Amount" means, on any date of determination, the sum of
the Class A Adjusted Amount, the Class B Invested Amount and the Collateral
Invested Amount.
PRINCIPAL FUNDING ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, the Principal Funding Account, for the benefit of the
Certificateholders. During the Accumulation Period, the Servicer shall transfer
Principal Collections, Shared Principal Collections allocated to Series 1996-1
and other amounts described herein to be treated in the same manner as Principal
Collections from the Collection Account to the Principal Funding Account as
described under "--Application of Collections." Such collections and amounts
will be retained in the Principal Funding Account and ultimately used to pay
principal of the Class A Certificates on the Class A Expected Final Payment Date
or the first Special Payment Date with respect to the Early Amortization Period,
whichever occurs earlier.
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Unless an Early Amortization Event has occurred with respect to the
Certificates, all amounts on deposit in the Principal Funding Account (the
"Principal Funding Account Balance") on any Transfer Date (after giving effect
to any deposits to, or withdrawals from the Principal Funding Account to be made
on such Transfer Date) will be invested in Eligible Investments that mature on
or prior to the following Transfer Date.
On each Transfer Date with respect to the Accumulation Period (on or prior
to the Class A Expected Final Payment Date) the interest and other investment
income (net of investment expenses and losses) earned on such investments (the
"Principal Funding Investment Proceeds") will be withdrawn from the Principal
Funding Account and will be treated as a portion of Class A Available Funds. If
such investments with respect to any such Transfer Date yield less than the
Class A Certificate Rate, the Principal Funding Investment Proceeds with respect
to such Transfer Date will be less than the Covered Amount for the following
Transfer Date. It is intended that any such shortfall (the "Principal Funding
Investment Shortfall") will be funded from Class A Available Funds or a
withdrawal from the Reserve Account as described under "--Reserve Account" or
from Reallocated Principal Collections. The Available Reserve Account Amount at
any time will be limited (and could be zero) and there can be no assurance that
sufficient funds will be available to fund any such shortfall. The "Covered
Amount" shall mean for any Transfer Date with respect to the Accumulation Period
or the first Special Payment Date of the Early Amortization Period, an amount
equal to one-twelfth of the product of (i) the Class A Certificate Rate and
(ii) the Principal Funding Account Balance, if any, as of the Record Date
preceding such Transfer Date.
RESERVE ACCOUNT
Pursuant to the Series 1996-1 Supplement, the Trustee will establish and
maintain with an Eligible Institution the reserve account as a segregated trust
account held for the benefit of the Certificateholders (the "Reserve Account").
The Reserve Account is established to assist with the subsequent distribution of
interest on the Certificates during the Accumulation Period. On each Transfer
Date from and after the Reserve Account Funding Date, but prior to the
termination of the Reserve Account, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread and Shared Excess Yield
Collections allocated to the Certificates (to the extent described under "--
Application of Collections--Excess Spread; Shared Excess Yield Collections") to
increase the amount on deposit in the Reserve Account (to the extent such amount
is less than the Required Reserve Account Amount). The "Reserve Account Funding
Date" will be the Transfer Date with respect to the Collection Period which
commences no later than three months prior to the commencement of the
Accumulation Period, or such earlier date as the Servicer may determine. The
"Required Reserve Account Amount" for any Transfer Date on or after the Reserve
Account Funding Date will be equal to (a) 0.5% of the outstanding principal
balance of the Class A Certificates or (b) any other amount designated by the
Transferor, PROVIDED, that if such designation is of a lesser amount, the
Transferor shall have provided the Servicer, the Collateral Interest Holder and
the Trustee with written confirmation that such designation will not result in
the applicable Rating Agency reducing or withdrawing its ratings of the
Certificates and the Transferor shall have delivered to the Trustee a
certificate of an authorized officer to the effect that, based on the facts
known to such officer at such time, in the reasonable belief of the Transferor,
such designation will not cause an Early Amortization Event or an event that,
after the giving of notice or the lapse of time, would cause an Early
Amortization Event to occur with respect to Series 1996-1. On each Transfer
Date, after giving effect to any deposit to be made to, and any withdrawal to be
made from the Reserve Account on such Transfer Date, the Trustee will withdraw
from the Reserve Account an amount equal to the excess, if any, of the amount on
deposit in the Reserve Account over the Required Reserve Account Amount and
shall distribute such excess to the Collateral Interest Holder for application
in accordance with the terms of the Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Transfer Date (after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Transfer Date) will be invested to the following Transfer Date by the
Trustee at the direction of the Servicer in Eligible Investments. The interest
and other investment income (net of investment expenses and losses) earned on
such investments will be retained in the Reserve Account (to the
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extent the amount on deposit is less than the Required Reserve Account Amount)
or deposited in the Collection Account and treated as Class A Available Funds.
On or before each Transfer Date with respect to the Accumulation Period and
on the first Special Payment Date with respect to the Early Amortization Period,
a withdrawal will be made from the Reserve Account, and the amount of such
withdrawal will be deposited in the Collection Account and included in Yield
Collections to be applied to the payment of the Class A Monthly Interest for
such Transfer Date in an amount equal to the lesser of (a) the Available Reserve
Account Amount with respect to such Transfer Date and (b) the Principal Funding
Investment Shortfall with respect to such Transfer Date; PROVIDED, that the
amount of such withdrawal shall be reduced to the extent that funds otherwise
would be available to be deposited in the Reserve Account on such Transfer Date.
On each Transfer Date, the amount available to be withdrawn from the Reserve
Account (the "Available Reserve Account Amount") will be equal to the lesser of
the amount on deposit in the Reserve Account (before giving effect to any
deposit to be made to the Reserve Account on such Transfer Date) and the
Required Reserve Account Amount for such Transfer Date.
The Reserve Account will be terminated upon the earlier to occur of (a) the
termination of the Trust pursuant to the Agreement and (b) if the Accumulation
Period has not commenced, the first Transfer Date with respect to the Early
Amortization Period or, if the Accumulation Period has commenced, the earlier to
occur of (i) the first Transfer Date with respect to the Early Amortization
Period and (ii) the Transfer Date immediately preceding the Class A Expected
Final Payment Date. Upon the termination of the Reserve Account, all amounts on
deposit therein (after giving effect to any withdrawal from the Reserve Account
on such date as described above) will be distributed to the Collateral Interest
Holder for application in accordance with the terms of the Loan Agreement. Any
amounts withdrawn from the Reserve Account and distributed to the Collateral
Interest Holder as described above will not be available for distribution to the
Certificateholders.
REALLOCATION OF CASH FLOWS
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class A Required Amount"), if any, by which the sum of (i) Class A Monthly
Interest due on the related Distribution Date, (ii) any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders on a prior
Distribution Date, (iii) any Class A Additional Interest for the related
Distribution Date and any Class A Additional Interest previously due but not
paid to the Class A Certificateholders on a prior Distribution Date, (iv) the
Class A Servicing Fee for the related Collection Period and any unpaid Class A
Servicing Fee for a prior Collection Period and (v) the Class A Investor Default
Amount, if any, for the related Collection Period exceeds the Class A Available
Funds. If the Class A Required Amount is greater than zero, Excess Spread and
Shared Excess Yield Collections allocable to Series 1996-1 and available for
such purpose will be used to fund the Class A Required Amount with respect to
such Transfer Date. If such Excess Spread and Shared Excess Yield Collections
are insufficient to fund the Class A Required Amount, Principal Collections
allocable first to the Collateral Investor Interest ("Reallocated Collateral
Principal Collections") and then to the Class B Certificates ("Reallocated Class
B Principal Collections" and, together with the Reallocated Collateral Principal
Collections, the "Reallocated Principal Collections") for the related Collection
Period will then be used to fund the remaining Class A Required Amount. If such
Reallocated Principal Collections with respect to the related Collection Period
are insufficient to fund the remaining Class A Required Amount, then the
Collateral Invested Amount will be reduced by the amount of such insufficiency
(but not by more than the Class A Investor Default Amount for such Collection
Period). In the event that such reduction would cause the Collateral Invested
Amount to be a negative number, the Collateral Invested Amount will be reduced
to zero, and the Class B Invested Amount will be reduced by the amount by which
the Collateral Invested Amount would have been reduced below zero (but not by
more than the excess of the Class A Investor Default Amount, if any, for such
Collection Period over the amount of such reduction, if any, of the Collateral
Invested Amount with respect to such Collection Period). In the event that such
reduction would cause the Class B Invested Amount to be a negative number, the
Class B Invested Amount will be reduced to zero, and the Class A Invested Amount
will be reduced by the amount by which the Class B Invested Amount would have
been reduced below zero (but not by more than the excess, if any, of the Class A
Investor Default Amount for such Collection Period
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over such reductions in the Collateral Invested Amount and the Class B Invested
Amount with respect to such Collection Period). Any such reduction in the Class
A Invested Amount will have the effect of slowing or reducing the return of
principal and interest to the Class A Certificateholders. In such case, the
Class A Certificateholders will bear directly the credit and other risks
associated with their undivided interest in the Trust. See "--Defaulted
Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"), if any, equal to the sum of (a) the amount, if
any, by which the sum of (i) Class B Monthly Interest due on the related
Distribution Date, (ii) any Class B Monthly Interest previously due but not paid
to the Class B Certificateholders on a prior Distribution Date, (iii) any Class
B Additional Interest for the related Distribution Date and any Class B
Additional Interest previously due but not paid to the Class B
Certificateholders on a prior Distribution Date and (iv) the Class B Servicing
Fee for the related Collection Period and any unpaid Class B Servicing Fee for a
prior Collection Period exceeds the Class B Available Funds, and (b) the amount,
if any, by which the Class B Investor Default Amount for the related Collection
Period exceeds the amount of Excess Spread and Shared Excess Yield Collections
allocable to Series 1996-1 available to cover the Class B Investor Default
Amount on such Transfer Date as specified under "--Application of Collections"
herein. If the Class B Required Amount is greater than zero, Excess Spread and
Shared Excess Yield Collections allocable to Series 1996-1 not required to fund
the Class A Required Amount or reimburse Class A Investor Charge-Offs will be
used to fund the Class B Required Amount with respect to such Transfer Date. If
such Excess Spread and Shared Excess Yield Collections are insufficient to fund
the Class B Required Amount, Reallocated Collateral Principal Collections not
required to fund the Class A Required Amount will then be used to fund the
remaining Class B Required Amount. If such Reallocated Collateral Principal
Collections with respect to the related Collection Period are insufficient to
fund the remaining Class B Required Amount, then the Collateral Invested Amount
remaining after any adjustments made thereto for the benefit of Class A
Certificateholders will be reduced by the amount of such insufficiency (but not
by more than the Class B Investor Default Amount for such Collection Period).
In the event that such reduction would cause the Collateral Invested Amount to
be a negative number, the Collateral Invested Amount will be reduced to zero,
and the Class B Invested Amount remaining after any adjustments made thereto for
the benefit of Class A Certificateholders will be reduced by the amount by which
the Collateral Invested Amount would have been reduced below zero (but not by
more than the excess, if any, of the Class B Investor Default Amount for such
Collection Period over such reduction in the Collateral Invested Amount with
respect to such Collection Period), and the Class B Certificateholders will bear
directly the credit and other risks associated with their undivided interest in
the Trust. See "--Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."
Reductions of the Class A Invested Amount or Class B Invested Amount will
thereafter be reimbursed and the Class A Invested Amount or Class B Invested
Amount increased to the extent of Excess Spread and Shared Excess Yield
Collections allocable to Series 1996-1 and Reallocated Principal Collections
available for such purposes on each Distribution Date.
With respect to each Transfer Date, the Servicer will determine the amount
(the "Collateral Required Amount"), if any, equal to the sum of (a) the amount,
if any, by which the sum of (i) Collateral Monthly Interest due on the related
Distribution Date, (ii) any Collateral Monthly Interest previously due but not
paid to the Collateral Interest Holder on a prior Distribution Date, (iii) any
Collateral Additional Interest for the related Distribution Date and any
Collateral Additional Interest previously due but not paid to the Collateral
Interest Holder on a prior Distribution Date and (iv) the Collateral Servicing
Fee for the related Collection Period and any unpaid Collateral Servicing Fee
for a prior Collection Period exceeds the Collateral Available Funds, and (b)
the amount, if any, by which the Collateral Default Amount, if any, for the
related Collection Period exceeds the amount of Excess Spread and Shared Excess
Yield Collections allocable to Series 1996-1 available on such Transfer Date as
specified under "--Application of Collections" herein. If the Collateral
Required Amount is greater than zero, Excess Spread and Shared Excess Yield
Collections allocable to Series 1996-1 not required to fund the Class A Required
Amount or the Class B Required Amount or reimburse Class A Investor Charge-Offs
or Class B Investor Charge-Offs or pay certain other amounts will be used to
fund the Collateral Required Amount with respect to such Transfer Date. If such
Excess Spread and Shared Excess
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Yield Collections are insufficient to fund the Collateral Required Amount, the
Collateral Invested Amount will be reduced by the amount of such insufficiency
(but not by more than the Collateral Default Amount for such Collection Period).
APPLICATION OF COLLECTIONS
PAYMENT OF INTEREST, FEES AND OTHER ITEMS. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds in the
following priority:
(a) On each Transfer Date, an amount equal to the Class A Available
Funds with respect to such Transfer Date will be distributed in the
following priority:
(i) an amount equal to Class A Monthly Interest for the related
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders on a
prior Interest Payment Date or Special Payment Date, plus additional
interest at the Class A Certificate Rate with respect to amounts that
were due but not paid to Class A Certificateholders on a prior
Interest Payment Date or Special Payment Date ("Class A Additional
Interest"), will be deposited into the Interest Funding Account;
(ii) an amount equal to the Class A Servicing Fee for the
related Collection Period, plus the amount of any Class A Servicing
Fee previously due but not distributed to the Servicer for a prior
Collection Period, will be distributed to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount for
the related Collection Period will be treated as a portion of
Principal Collections allocable to Series 1996-1 for such Transfer
Date; and
(iv) the balance, if any, will constitute Excess Spread and
shall be allocated and distributed as described under "--Excess
Spread; Shared Excess Yield Collections" below.
(b) On each Transfer Date, an amount equal to the Class B Available
Funds with respect to such Transfer Date will be distributed in the
following priority:
(i) an amount equal to Class B Monthly Interest for the related
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a
prior Interest Payment Date or Special Payment Date, plus any
additional interest at the Class B Certificate Rate with respect to
amounts that were due but not paid to Class B Certificateholders on a
prior Interest Payment Date or Special Payment Date ("Class B
Additional Interest"), will be deposited into the Interest Funding
Account;
(ii) an amount equal to the Class B Servicing Fee for the
related Collection Period, plus the amount of any Class B Servicing
Fee previously due but not distributed to the Servicer for a prior
Collection Period, will be distributed to the Servicer; and
(iii) the balance, if any, will constitute Excess Spread and
shall be allocated and distributed as described under "--Excess
Spread; Shared Excess Yield Collections" below.
(c) On each Transfer Date, an amount equal to the Collateral
Available Funds with respect to such Transfer Date will be distributed in
the following priority:
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(i) an amount equal to the Collateral Servicing Fee for the
related Collection Period, plus the amount of any Collateral Servicing
Fee previously due but not distributed to the Servicer for a prior
Collection Period, will be distributed to the Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will
be allocated and distributed as described under "--Excess Spread;
Shared Excess Yield Collections" below.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to one-twelfth of the product of (i) the Class A Certificate Rate
and (ii) the outstanding principal amount of the Class A Certificates as of the
related Record Date; PROVIDED, HOWEVER, with respect to the first Distribution
Date, Class A Monthly Interest will be equal to the interest accrued on the
outstanding principal amount of the Class A Certificates at the Class A
Certificate Rate for the period from the Closing Date through________________,
1996.
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to one-twelfth of the product of (i) the Class B Certificate Rate
and (ii) the outstanding principal amount of the Class B Certificates as of the
related Record Date; PROVIDED, HOWEVER, with respect to the first Distribution
Date, Class B Monthly Interest shall be equal to the interest accrued on the
outstanding principal amount of the Class B Certificates at the Class B
Certificate Rate for the period from the Closing Date through ________________,
1996.
"Collateral Available Funds" means, with respect to any Collection Period,
an amount equal to the Collateral Floating Percentage of the Yield Collections
with respect to such Collection Period.
"Distribution Date" means the __ day of each month (or, if any such day is
not a business day, on the next succeeding business day), commencing
___________, 1996.
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clauses (a)(iv), (b)(iii) and
(c)(ii) above.
"Special Payment Date" means each Distribution Date with respect to any
Early Amortization Period.
EXCESS SPREAD; SHARED EXCESS YIELD COLLECTIONS. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply Excess
Spread and Shared Excess Yield Collections allocable to Series 1996-1 with
respect to the related Collection Period to make the following distributions in
the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Transfer Date will be used to fund any deficiency pursuant
to clauses (a)(i), (ii) and (iii) above under "--Payment of Interest, Fees
and Other Items," in that order of priority;
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Principal Collections allocable to Series 1996-1 for such
Transfer Date as described under "--Payments of Principal" below;
(c) an amount up to the Class B Required Amount, if any, with respect
to such Transfer Date will be used to fund any deficiency pursuant to
clauses (b)(i) and (ii) above under "--Payment of Interest, Fees and Other
Items," in that order of priority;
(d) an amount equal to the Class B Investor Default Amount for such
Transfer Date will be treated as a portion of Principal Collections
allocable to Series 1996-1 for such Transfer Date as described under "--
Payments of Principal" below;
(e) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (d) and (e) of the
definition of "Class B Invested Amount" under "--Allocation Percentages"
above (but not in excess of the aggregate amount of such reductions which
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have not been previously reimbursed) will be treated as a portion of
Principal Collections allocable to Series 1996-1 for such Transfer Date as
described under "--Payments of Principal" below;
(f) an amount up to the Collateral Required Amount, if any, with
respect to such Transfer Date will be used to fund any deficiency pursuant
to clause (c)(i) above under "--Payment of Interest, Fees and Other Items";
(g) an amount equal to the Collateral Monthly Interest for such
Transfer Date will be distributed to the Collateral Interest Holder;
(h) an amount equal to the Collateral Default Amount for such
Transfer Date will be treated as a portion of Principal Collections
allocable to Series 1996-1 for such Transfer Date as described under "--
Payments of Principal" below;
(i) an amount equal to the aggregate amount by which the Collateral
Invested Amount has been reduced below the Required Collateral Invested
Amount for reasons other than the payment of principal to the Collateral
Interest Holder (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be treated as a
portion of Principal Collections allocable to Series 1996-1 for such
Transfer Date as described under "--Payments of Principal" below;
(j) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "--Reserve Account," an amount up to the excess, if any, of
the Required Reserve Account Amount over the Available Reserve Account
Amount shall be deposited into the Reserve Account; and
(k) the balance, if any, will constitute "Shared Excess Yield
Collections" to be applied with respect to other Series in accordance with
the Agreement; PROVIDED that if no other Series exists, the balance, if
any, will be distributed to the Transferor.
"Collateral Monthly Interest" means, with respect to any Transfer Date, an
amount equal to the interest payable to the Collateral Interest Holder pursuant
to the Loan Agreement. Collateral Monthly Interest is generally payable at the
Collateral Rate on the outstanding principal amount of the Collateral Investor
Interest. "Collateral Rate" means a rate equal to ____, or such lesser rate
designated pursuant to the Loan Agreement.
"Collateral Default Amount" means, with respect to any Transfer Date, the
product of the Collateral Floating Percentage applicable during the related
Collection Period and the Investor Default Amount for such Collection Period.
PAYMENTS OF PRINCIPAL. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will distribute Principal Collections allocable
to Series 1996-1 available therefor ("Available Principal Collections") on
deposit in the Collection Account in the following priority:
(a) On each Transfer Date with respect to the Revolving Period, all
such Available Principal Collections, less any portion thereof relating to
Principal Collections allocated at the option of the Transferor as part of
Collateral Monthly Principal to make a payment with respect to the
Collateral Investor Interest (subject to maintaining the Required
Collateral Invested Amount), will be treated as Shared Principal
Collections with respect to other Series and applied as described under "--
Shared Principal Collections;" and
(b) On each Transfer Date with respect to the Accumulation Period or
the Early Amortization Period, all such Available Principal Collections
will be deposited or distributed in the following priority:
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(i) an amount equal to Class A Monthly Principal for such
Transfer Date will, during the Accumulation Period, be deposited in
the Principal Funding Account for payment to the Class A
Certificateholders on the earlier to occur of the Class A Expected
Final Payment Date and the first Special Payment Date with respect to
the Early Amortization Period or, during the Early Amortization
Period, be distributed to the Class A Certificateholders;
(ii) after the Class A Invested Amount has been paid in full
(after taking into account payments to be made on the related
Distribution Date), an amount equal to the Class B Monthly Principal
for such Transfer Date will be distributed to the Class B
Certificateholders on the earlier to occur of the Class B Expected
Final Payment Date and the first Special Payment Date with respect to
the Early Amortization Period or, during the Early Amortization
Period, be distributed to the Class B Certificateholders;
(iii) an amount equal to Collateral Monthly Principal for such
Transfer Date will be applied in accordance with the Loan Agreement;
and
(iv) the balance, if any, will be treated as Shared Principal
Collections with respect to other Series and applied as described
under "--Shared Principal Collections."
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Accumulation Period or the Early Amortization Period, prior to the payment
in full of the Class A Invested Amount, will equal the lesser of (i) the
Available Principal Collections on deposit in the Collection Account with
respect to such Transfer Date, (ii) for each Transfer Date with respect to the
Accumulation Period, prior to the payment in full of the Class A Invested
Amount, and on or prior to the Class A Expected Final Payment Date, the
applicable Controlled Deposit Amount for such Transfer Date and (iii) the Class
A Adjusted Invested Amount prior to any deposits on such Transfer Date.
"Class B Monthly Principal" with respect to any Transfer Date relating to
the Accumulation Period or the Early Amortization Period, after the Class A
Certificates have been paid in full (after taking into account payments to be
made on the related Distribution Date), will equal the lesser of (i) the
Available Principal Collections on deposit in the Collection Account with
respect to such Transfer Date (minus the portion of such Available Principal
Collections applied to Class A Monthly Principal on such Transfer Date) and (ii)
the Class B Invested Amount on such Transfer Date.
"Collateral Monthly Principal" means (i) on any Transfer Date prior to the
payment in full of the Class B Certificates, either (A) during the Revolving
Period, subject to certain limitations specified in the Loan Agreement, the
excess of the Collateral Invested Amount over the Required Collateral Invested
Amount (such excess, the "Enhancement Surplus") or any lesser amount (including
zero) as the Transferor may determine, at its option and in its sole discretion,
or (B) during the Accumulation Period, subject to certain limitations specified
in the Loan Agreement, an amount up to the Enhancement Surplus and (ii)
beginning with the Transfer Date on which the Class B Certificates have been
paid in full (after taking into account payments to be made on the related
Distribution Date), the Available Principal Collections not applied to Class A
Monthly Principal or Class B Monthly Principal; PROVIDED, HOWEVER, that
Collateral Monthly Principal may not exceed the Collateral Invested Amount with
respect to any Transfer Date.
"Controlled Deposit Amount" shall mean, for any Transfer Date with respect
to the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Transfer Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Transfer Date.
"Controlled Accumulation Amount" means (a) for any Transfer Date with
respect to the Accumulation Period, $_______; PROVIDED, HOWEVER, that if the
commencement of the Accumulation Period is delayed as described above under "--
Postponement of Accumulation Period," the Controlled Accumulation Amount will
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be higher, and (b) for any Transfer Date with respect to the Accumulation Period
after the payment in full of the Class A Invested Amount, an amount equal to the
Class B Invested Amount on such Transfer Date.
"Deficit Controlled Accumulation Amount" means (a) on the first Transfer
Date with respect to the Accumulation Period, the excess, if any, of the
Controlled Accumulation Amount for such Transfer Date over the amount
distributed from the Collection Account as Class A Monthly Principal for such
Transfer Date and (b) on each subsequent Transfer Date with respect to the
Accumulation Period, the excess, if any, of the Controlled Deposit Amount for
such subsequent Transfer Date over the amount distributed from the Collection
Account as Class A Monthly Principal for such subsequent Transfer Date.
REQUIRED COLLATERAL INVESTED AMOUNT
On each Transfer Date, the amount of enhancement ("Enhancement") available
to the Certificateholders will equal the Collateral Invested Amount. The
"Required Collateral Invested Amount" means, with respect to any Transfer Date,
subject to certain limitations more fully described herein, an amount equal to
__% of the sum of the Class A Adjusted Invested Amount and the Class B Invested
Amount (after taking into account deposits into the Principal Funding Account
on such Transfer Date and payments to be made on the related Distribution Date);
PROVIDED, HOWEVER, that if an Early Amortization Event occurs, then the Required
Collateral Invested Amount shall equal the Required Collateral Invested Amount
on the Transfer Date immediately preceding the occurrence of such Early
Amortization Event. With respect to any Transfer Date, if the Collateral
Invested Amount is less than the Required Collateral Invested Amount, certain
Excess Spread and Shared Excess Yield Collections allocable to Series 1996-1
will be used to increase the Collateral Invested Amount to the extent of such
shortfall. If on any Transfer Date, the Collateral Invested Amount exceeds the
Required Collateral Invested Amount, such excess may be applied in accordance
with the Loan Agreement and will not be available to the Certificateholders.
See "--Application of Collections." The Collateral Invested Amount is limited
and will not provide protection against all risks of loss. If losses occur
which exceed the amount covered by the Collateral Invested Amount,
Certificateholders will bear their allocable share of deficiencies.
Enhancement with respect to any other Series or Class thereof issued by the
Trust from time to time may include any letter of credit, guaranteed rate
agreement, maturity guaranty facility, liquidity facility, cash collateral
account, cash collateral guaranty, surety bond, insurance policy, interest rate
cap agreement, interest rate swap agreement, spread account, reserve account or
other similar arrangement for the benefit of the Certificateholders of such
Series or Class.
SHARED EXCESS YIELD COLLECTIONS
Certificateholders may be entitled to receive all or a portion of Shared
Excess Yield Collections with respect to another Series to cover any shortfalls
with respect to amounts payable from Yield Collections allocable to Series 1996-
1. Series 1996-1 is the first Series to be issued by the Trust. The Transferor
may cause the Trust to issue additional Series from time to time but there can
be no assurance that the Transferor will do so.
SHARED PRINCIPAL COLLECTIONS
To the extent that Principal Collections and certain other amounts that are
allocated to the invested amount of any Series are not needed to make payments
or deposits with respect to such Series, such collections ("Shared Principal
Collections") will be applied to cover principal payments due to or for the
benefit of Certificateholders of another Series. Any such reallocation will not
result in a reduction in the invested amount of the Series to which such
collections were initially allocated. Series 1996-1 is the first Series to be
issued by the Trust. The Transferor may cause the Trust to issue additional
Series from time to time but there can be no assurance that the Transferor will
do so.
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DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
On or before each Transfer Date, the Servicer will calculate the Investor
Default Amount for the preceding Collection Period. The term "Investor Default
Amount" means, for any Collection Period, the product of (i) the Floating
Allocation Percentage with respect to such Collection Period and (ii) the amount
of Defaulted Receivables for such Collection Period. A portion of the Investor
Default Amount will be allocated to the Class A Certificateholders (the "Class A
Investor Default Amount") on each Transfer Date in an amount equal to the
product of the Class A Floating Percentage applicable during the related
Collection Period and the Investor Default Amount for such Collection Period. A
portion of the Investor Default Amount will be allocated to the Class B
Certificateholders (the "Class B Investor Default Amount") on each Transfer Date
in an amount equal to the product of the Class B Floating Percentage applicable
during the related Collection Period and the Investor Default Amount for such
Collection Period. The amount of "Defaulted Receivables" for any Collection
Period will be an amount (not less than zero) equal to the result of (a) the
amount of the Receivables that were charged off in such Collection Period less
(b) the amount of recoveries received by the Servicer in such Collection Period
with respect to Receivables previously charged off as uncollectible and less
(c) the full amount of any Defaulted Receivables which were assigned a balance
of zero as a result of their designation as Ineligible Receivables or as to
which the Transferor or the Servicer becomes obligated to accept reassignment
for such Collection Period unless certain events of bankruptcy, insolvency or
receivership have occurred with respect to the Transferor or the Servicer.
Receivables in an Account will be considered charged off for the purposes of the
Agreement on the earlier of (i) the last day of the month in which such Account
becomes 150 days delinquent on a contractual basis and (ii) the date on which
such Account is charged off in accordance with the customary and usual servicing
procedures of the Servicer.
An amount equal to the Class A Investor Default Amount for each Collection
Period will be funded with Class A Available Funds, Excess Spread and Shared
Excess Yield Collections allocable to Series 1996-1 and Reallocated Principal
Collections applied as described above in "--Application of Collections--Payment
of Interest, Fees and Other Items" and "--Reallocation of Cash Flows." An
amount equal to the Class B Investor Default Amount for each Collection Period
will be funded with Class B Available Funds, Excess Spread and Shared Excess
Yield Collections allocable to Series 1996-1 and Reallocated Collateral
Principal Collections applied as described above in "--Application of
Collections--Payment of Interest, Fees and Other Items" and "--Reallocation of
Cash Flows."
On each Transfer Date, if the Class A Required Amount for such Transfer
Date exceeds the sum of (a) Excess Spread and Shared Excess Yield Collections
allocable to Series 1996-1 and (b) Reallocated Principal Collections, then the
Collateral Invested Amount will be reduced by the amount of such excess, but not
by more than the Class A Investor Default Amount for such Transfer Date. In the
event that such reduction would cause the Collateral Invested Amount to be a
negative number, the Collateral Invested Amount will be reduced to zero, and the
Class B Invested Amount will be reduced by the amount by which the Collateral
Invested Amount would have been reduced below zero. In the event that such
reduction would cause the Class B Invested Amount to be a negative number, the
Class B Invested Amount will be reduced to zero, and the Class A Invested Amount
will be reduced by the amount by which the Class B Invested Amount would have
been reduced below zero (a "Class A Investor Charge-Off"), which will have the
effect of slowing or reducing the return of principal and interest to the Class
A Certificateholders. If the Class A Invested Amount has been reduced by the
amount of any Class A Investor Charge-Offs, it will thereafter be increased on
any Transfer Date (but not by an amount in excess of the aggregate Class A
Investor Charge-Offs) by the amount of Excess Spread and Shared Excess Yield
Collections allocable to Series 1996-1 and available for such purpose as
described above in "--Application of Collections--Excess Spread; Shared Excess
Yield Collections."
On each Transfer Date, if the Class B Required Amount for such Transfer
Date exceeds the sum of (a) Excess Spread and Shared Excess Yield Collections
allocable to Series 1996-1 not required to pay the Class A Required Amount or
reimburse Class A Investor Charge-Offs and (b) Reallocated Collateral Principal
Collections not required to pay the Class A Required Amount, then the Collateral
Invested Amount remaining after any reduction for the benefit of Class A
Certificates will be reduced by the amount of such excess, but
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not by more than the Class B Investor Default Amount for such Distribution Date.
In the event that such reduction would cause the Collateral Invested Amount to
be a negative number, the Collateral Invested Amount will be reduced to zero,
and the Class B Invested Amount will be reduced by the amount by which the
Collateral Invested Amount would have been reduced below zero (a "Class B
Investor Charge-Off"). If the Class B Invested Amount has been reduced by the
amount of any Class B Investor Charge-Offs, it will thereafter be increased on
any Transfer Date (but not by an amount in excess of the aggregate Class B
Investor Charge-Offs) by the amount of Excess Spread and Shared Excess Yield
Collections allocable to Series 1996-1 and available for such purpose as
described above in "--Application of Collections--Excess Spread; Shared Excess
Yield Collections."
On each Transfer Date, if the Collateral Required Amount for such Transfer
Date exceeds the sum of Excess Spread and Shared Excess Yield Collections which
are allocated and available to fund such amount as described under "--
Application of Collections--Excess Spread; Shared Excess Yield Collections," the
Collateral Invested Amount will be reduced by the amount of such excess, but not
by more than the lesser of the Collateral Default Amount and the Collateral
Invested Amount for such Transfer Date (a "Collateral Investor Charge-Off" and,
together with the Class A Investor Charge-Offs and the Class B Investor Charge-
Offs, the "Investor Charge-Offs"). If the Collateral Invested Amount has been
reduced by the amount of any Collateral Investor Charge-Offs, it will thereafter
be increased on any Transfer Date (but not by an amount in excess of the
aggregate Collateral Investor Charge-Offs) by the amount of Excess Spread and
Shared Excess Yield Collections allocable to Series 1996-1 and available for
such purpose as described above in "--Application of Collections--Excess Spread;
Shared Excess Yield Collections."
If the Servicer makes a downward adjustment of the amount of any Receivable
because of a rebate, refund, unauthorized charge, billing error or certain other
noncash items, or if the Servicer otherwise adjusts downward the amount of any
Receivable without receiving collections therefor or charging off such amount as
uncollectible, or any Receivable is discovered as having been created through a
fraudulent or counterfeit action (each, an "Adjustment"), the aggregate balance
of the Receivables will be reduced by the amount of such Adjustments. To the
extent that such reduction in the aggregate balance of the Receivables would
cause the Transferor Amount to be less than zero, the Transferor shall deposit
an amount sufficient to prevent the Transferor Amount from being reduced below
zero. Any such deposit into the Collection Account shall be deemed a Principal
Collection.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
The Certificates will be subject to optional repurchase by the Transferor
on any Distribution Date after the Invested Amount is reduced to an amount less
than or equal to 5% of the Initial Invested Amount, if certain conditions set
forth in the Agreement are met. The repurchase price will be equal to the
Invested Amount plus accrued and unpaid interest on the Certificates and the
Collateral Investor Interest.
The Certificates will be retired on the day following the Distribution Date
on which the final payment of principal is scheduled to be made to the
Certificateholders, whether as a result of optional reassignment to the
Transferor or otherwise. The final distribution of principal and interest on the
Certificates will be made no later than the ______ ____ Distribution Date (the
"Stated Series Termination Date"); PROVIDED, HOWEVER, that the Certificates may
be subject to prior termination as provided above. If the Invested Amount is
greater than zero on the Stated Series Termination Date, the Trustee will sell
or cause to be sold certain Receivables (in an amount up to 110% of the Invested
Amount and any other amounts specified in the Agreement) in the manner provided
in the Agreement and pay the net proceeds of such sale and any collections on
the Receivables, up to an amount equal to the Invested Amount plus accrued
interest due on the Certificates and any other amounts specified in the
Agreement, to the Certificateholders on such Stated Series Termination Date as
final payment of the Certificates.
Unless the Transferor instructs the Trustee otherwise, the Trust will only
terminate on the earlier to occur of: (a) the day following the day on which the
aggregate Invested Amount of all Series and any amounts
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payable to Enhancement providers is zero or (b) ______ (the "Final Termination
Date"). Upon the termination of the Trust and the surrender of the Exchangeable
Transferor Certificate, the Trustee shall convey to the Transferor all right,
title and interest of the Trust in and to the Receivables and other funds of the
Trust (other than amounts in the accounts maintained by the Trust for the final
payment of principal and interest to Certificateholders).
EARLY AMORTIZATION EVENTS
An "Early Amortization Event" refers to any of the following events:
(a) failure on the part of the Transferor (i) to make any payment or
deposit on the date required under the Agreement (or within the applicable
grace period) or (ii) duly to observe or perform in any material respect
any other covenants or agreements of the Transferor set forth in the
Agreement or the Series 1996-1 Supplement, which failure in the case of
clause (ii) hereof continues unremedied for a period of 60 days after
written notice thereof and continues to materially and adversely affect the
interests of the Certificateholders for such period;
(b) any representation or warranty made by the Transferor in the
Agreement or any information required to be given by the Transferor to the
Trustee to identify the Accounts proves to have been incorrect in any
material respect when made and continues to be incorrect in any material
respect for a period of 60 days after written notice thereof and as a
result of which the interests of the Certificateholders are materially and
adversely affected and continue to be materially and adversely affected for
such period; PROVIDED, HOWEVER, that an Early Amortization Event pursuant
to this subparagraph (b) shall not be deemed to occur if during such 60-day
period (or such longer period as the Trustee may specify) the Transferor
has accepted designation of the related Receivable or all such Receivables,
if applicable, as Ineligible Receivables or reassignment of such
Receivables in accordance with the provisions of the Agreement;
(c) certain events of insolvency, conservatorship or receivership
relating to the Transferor (such events include the appointment (voluntary
or involuntary) of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings relating to the Transferor or all or substantially all of its
property; the Transferor admitting in writing its inability to pay its
debts as they become due, filing a petition to take advantage of an
insolvency or reorganization statute, making an assignment for the benefit
of its creditors or voluntarily suspending payment of its obligations; and
the Transferor being unable to transfer Receivables to the Trust in
accordance with the Agreement);
(d) failure by the Transferor to transfer Receivables in Additional
Accounts to the Trust when required pursuant to the Agreement;
(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders;
(f) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(g) insufficient moneys in the Principal Funding Account to pay the
Class A Invested Amount in full on the Class A Expected Final Payment Date
or in the Collection Account to pay the Class B Invested Amount in full on
the Class B Expected Final Payment Date; or
(h) on any Determination Date the Collateral Invested Amount is less
than the Required Collateral Invested Amount.
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In the case of any event described in clause (a), (b) or (e) above, an
Early Amortization Event will be deemed to have occurred with respect to the
Certificates only if, after any applicable grace period, either the Trustee or
Certificateholders (including, for this purpose, the Collateral Interest Holder)
evidencing undivided interests aggregating more than 50% of the Invested Amount,
by written notice to the Transferor and the Servicer (and to the Trustee if
given by the Certificateholders) declare that an Early Amortization Event has
occurred with respect to the Certificates as of the date of such notice. In the
case of any event described in clause (c) or (f), an Early Amortization Event
with respect to all Series then outstanding, and in the case of any event
described in clause (d), (g) or (h), an Early Amortization Event with respect to
only the Certificates, will be deemed to have occurred without any notice or
other action on the part of the Trustee or the Certificateholders or all
certificateholders, as appropriate, immediately upon the occurrence of such
event. On the date on which an Early Amortization Event is deemed to have
occurred, the Early Amortization Period will commence. If, because of the
occurrence of an Early Amortization Event, the Early Amortization Period begins
earlier than the Class A Expected Final Payment Date or the Class B Expected
Final Payment Date, Certificateholders will begin receiving distributions of
principal earlier than they otherwise would have, which may shorten the average
life of the Certificates.
If the only Early Amortization Event to occur is either the insolvency of
the Transferor or the appointment of a receiver or conservator for the
Transferor, the receiver or conservator for the Transferor may have the power to
delay or prevent commencement of the Early Amortization Period.
In addition to the consequences of an Early Amortization Event discussed
above, if the Transferor voluntarily enters liquidation or any person is
appointed a receiver or conservator of the Transferor, on the day of such
liquidation or appointment the Transferor will immediately cease to transfer
Receivables to the Trust and the Transferor will promptly give notice to the
Trustee of such appointment. Within 15 days, the Trustee will publish a notice
of the liquidation or the appointment stating that the Trustee intends to sell,
dispose of or otherwise liquidate the Receivables in a commercially reasonable
manner and to the best of its ability. Unless otherwise instructed within a
specified period by the Certificateholders representing undivided interests
aggregating more than 50% of the invested amount of each Series (or if any
Series has more than one Class, of each Class of such Series), the Trustee will
sell, dispose of or otherwise liquidate the portion of the Receivables allocated
to the Certificates and the Receivables allocable to any other Series that did
not vote to continue the Trust in accordance with the Agreement in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds from the sale, disposition or liquidation of the Receivables will be
treated as collections and will be applied as provided above in "--Application
of Collections." If the portion of such proceeds allocated to the Invested
Amount and the proceeds of any other amounts allocable to the Certificates under
the Agreement are not sufficient to pay in full the remaining amount due on the
Certificates, the Certificateholders will suffer a corresponding loss. See
"Certain Legal Aspects of the Receivables--Certain Matters Relating to
Receivership."
INDEMNIFICATION
The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of Certificateholders, and the Trustee, including its officers,
directors and employees, from and against any loss, liability, expense, damage
or injury arising out of or relating to any claims, actions or proceedings
brought or asserted by third parties which are suffered or sustained by reason
of any acts or omissions of the Servicer pursuant to the Agreement; PROVIDED,
HOWEVER, that the Servicer shall not indemnify the Trust for the benefit of
Certificateholders or the Trustee or its officers, directors or employees for
any liabilities, costs or expenses with respect to (i) any action taken by the
Trustee at the request of Certificateholders, (ii) any U.S. federal, state or
local income or franchise taxes required to be paid by the Trust, the Trustee or
the Certificateholders or (iii) with respect to the Trustee and its officers,
directors and employees, any wrongful actions taken by or omissions of the
Trustee.
Under the Agreement, the Transferor will be liable directly to an injured
party for the entire amount of any losses, claims, damages or liabilities (other
than those incurred by a Certificateholder in the capacity of
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an investor in the Certificates) arising out of or based on the arrangement
created by the Agreement or the actions of the Servicer taken pursuant to the
Agreement as though the Agreement created a partnership under the Uniform
Partnership Act. The Transferor will also pay, indemnify and hold harmless each
Certificateholder for any such losses, claims, damages or liabilities (other
than those incurred by a Certificateholder in the capacity of an investor in the
Certificates) except to the extent that they arise from any action by any
Certificateholder. In the event of a Service Transfer, the successor Servicer
will indemnify the Transferor for any losses, claims, damages and liabilities of
the Transferor as described in this paragraph arising from the actions or
omissions of such successor Servicer.
Except as provided in the preceding paragraph, the Agreement provides that
none of the Transferor, the Servicer or any of their directors, officers,
employees or agents will be under any other liability to the Trust, the Trustee,
the Certificateholders, any Enhancement provider or any other person for any
action taken, or for refraining from taking any action, in good faith pursuant
to the Agreement. However, none of the Transferor, the Servicer or any of their
directors, officers, employees or agents will be protected against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence of any such person in the performance of their duties.
In addition, the Agreement provides that the Servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Agreement. The Servicer
may, in its sole discretion, undertake any such legal action which it may deem
necessary or desirable for the benefit of Certificateholders with respect to the
Agreement and the rights and duties of the parties thereto and the interest of
the Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Agreement, the Servicer, whether acting itself or through
one or more subservicers, will be responsible for servicing, collecting,
enforcing and administering the Receivables in accordance with the policies and
procedures and the degree of skill and care applied or exercised with respect to
charge card receivables owned by the Servicer or any subservicer. The Servicer
and any subservicer will be required to maintain or cause to be maintained
fidelity bond coverage insuring against losses through wrongdoing of its
officers and employees who are involved in the servicing of receivables covering
such actions and in such amounts as the Servicer believes to be reasonable from
time to time.
Servicing activities performed by the Servicer with respect to the Accounts
include collecting and recording payments, communicating with cardholders,
investigating payment delinquencies, providing billing records to cardholders
and maintaining internal records. Managerial and custodial services performed by
the Servicer on behalf of the Trust include providing assistance in any
inspections of the documents and records relating to the Accounts and
Receivables by the Trustee pursuant to the Agreement, maintaining the
agreements, documents and files relating to the Accounts and Receivables as
custodian for the Trust and providing related data processing and reporting
services for Certificateholders and on behalf of the Trustee.
SERVICER COVENANTS
In the Agreement, the Servicer covenants to the Certificateholders and the
Trustee as to each Receivable and related Account that: (i) it will duly fulfill
all obligations on its part to be fulfilled under or in connection with the
Receivable or Account, and will maintain in effect all qualifications required
in order to service the Receivable or Account and will comply with all
applicable requirements of law in connection with servicing the Receivable and
the Account, the failure to comply with which would have a material adverse
effect on Certificateholders (without regard to the amount of any Enhancement);
(ii) it will not permit any rescission or cancellation of the Receivable, except
as ordered by a court of competent jurisdiction or except in accordance with the
Servicer's usual and customary servicing practices; and (iii) it will do nothing
to impair the rights of the Certificateholders in the Receivables and will not
reschedule, revise or defer payments due on the Receivables, except in
accordance with the Servicer's usual and customary servicing practices.
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Under the terms of the Agreement, the Servicer will be obligated to accept
the transfer of any Receivable if it discovers, or receives written notice from
the Trustee, that (i) any covenant of the Servicer set forth above has not been
complied with in respect of such Receivable or (ii) the Servicer has not
complied in all material respects with all applicable requirements of law
applicable to the Receivables or Accounts, and in either case such noncompliance
has not been cured within 60 days thereafter and the Receivable has been charged
off as uncollectible or the proceeds of the Receivables are not available to the
Trust. Such assignment and transfer will be made when the Servicer deposits an
amount equal to the amount of such Receivable into the Collection Account on the
business day preceding the Distribution Date following the Collection Period
during which such obligation arises. The amount of such deposit shall be deemed
a payment in respect of the related Receivable and will be treated under the
Agreement in the same manner as are payments received by the Servicer from
cardholders under the Accounts. Any amounts so paid by the Servicer shall be
allocated in respect of Principal Collections and Yield Collections as provided
in the Agreement. This transfer and assignment to the Servicer constitutes the
sole remedy available to the Certificateholders if such covenant or warranty of
the Servicer is not satisfied and the Trust's interest in any such reassigned
Receivables shall be automatically assigned to the Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities is a monthly
servicing fee (the "Servicing Fee"). The share of the Servicing Fee allocable
to the Certificateholders with respect to any Transfer Date (the "Monthly
Investor Servicing Fee") will be equal to one-twelfth of the product of (a) __%
(the "Servicing Fee Percentage") and (b) the Adjusted Invested Amount as of the
last day of the second preceding Collection Period (the amount calculated
pursuant to this clause (b) is referred to as the "Servicing Base Amount");
PROVIDED, HOWEVER, with respect to the first Transfer Date, the Monthly Investor
Servicing Fee will be equal to the product of (x) the Servicing Fee Percentage,
(y) the Initial Invested Amount and (z) a fraction, the numerator of which is
the number of days in the period from the Closing Date through ___________ __,
1996 and the denominator of which is 360. On each Transfer Date, Servicer
Interchange with respect to the related Collection Period that is on deposit in
the Collection Account shall be withdrawn from the Collection Account and paid
to the Servicer in payment of a portion of the Monthly Investor Servicing Fee
with respect to such Collection Period. The "Servicer Interchange" for any
Collection Period or portion thereof during which Card Services is acting as
Servicer under the Agreement will be equal to the product of (a) the Floating
Allocation Percentage for such Collection Period and (b) the portion of Yield
Collections with respect to such Collection Period that is attributable to Net
Interchange; PROVIDED, HOWEVER, that Servicer Interchange for a Collection
Period shall not exceed one-twelfth of the product of (i) the Servicing Base
Amount and (ii) __%. In the case of any insufficiency of Servicer Interchange on
deposit in the Collection Account, a portion of the Monthly Investor Servicing
Fee with respect to such Collection Period will not be paid to the extent of
such insufficiency until the Transfer Date or Dates with respect to which
Servicer Interchange is available in the Collection Account prior to giving
effect to the payment of the portion of the Monthly Investor Servicing Fee
constituting Servicer Interchange for such Transfer Date or Dates. In no event
shall the Trust, the Trustee, the Certificateholders or the Collateral Interest
Holder be liable for the share of the Servicing Fee to be paid out of Servicer
Interchange.
The share of the Monthly Investor Servicing Fee allocable to the Class A
Certificateholders (after giving effect to the distribution of any Servicer
Interchange to the Servicer) with respect to any Transfer Date (the "Class A
Servicing Fee") will be equal to one-twelfth of the product of (a) the Class A
Adjusted Invested Amount as of the last day of the second preceding Collection
Period and (b) __% (the "Net Servicing Fee Rate"); PROVIDED, HOWEVER, that with
respect to the first Transfer Date, the Class A Servicing Fee will be equal to
the product of (x) the Class A Initial Invested Amount, (y) the Net Servicing
Fee Rate and (z) a fraction, the numerator of which is the number of days in the
period from the Closing Date through _________ __, 1996 and the denominator of
which is 360. The share of the Monthly Investor Servicing Fee allocable to the
Class B Certificateholders (after giving effect to any distribution of Servicer
Interchange to the Servicer) with respect to any Transfer Date (the "Class B
Servicing Fee") will be equal to one-twelfth of the product of (a) the Class B
Invested Amount as of the last day of the second preceding Collection Period and
(b) the Net Servicing
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Fee Rate; PROVIDED, HOWEVER, that with respect to the first Transfer Date,
the Class B Servicing Fee will be equal to the product of (x) the Class B
Initial Invested Amount, (y) the Net Servicing Fee Rate and (z) a fraction,
the numerator of which is the number of days in the period from the Closing
Date through ___________ __, 1996 and the denominator of which is 360. The
share of the Monthly Investor Servicing Fee allocable to the Collateral
Interest Holder (after giving effect to the distribution of any Servicer
Interchange to the Servicer) with respect to any Transfer Date (the
"Collateral Servicing Fee") will be equal to one-twelfth the product of (a)
the Net Servicing Fee Rate and (b) the Collateral Invested Amount as of the
last day of the second preceding Collection Period; PROVIDED, HOWEVER, that
with respect to the first Transfer Date, the Collateral Servicing Fee will be
equal to the product of (x) the Net Servicing Fee Rate, (y) the Collateral
Initial Invested Amount and (z) a fraction the numerator of which is the
number of days in the period from the Closing Date through ___________ __,
1996 and the denominator of which is 360. The remainder of the Servicing Fee
shall be paid by First Bank or the certificateholders of other Series (as
provided in the related Series Supplements) or, to the extent of any
insufficiency of Servicer Interchange as described above, not be paid and in
no event shall the Trust, the Trustee, the Certificateholders or the
Collateral Interest Holder be liable for the share of the Servicing Fee to be
paid by First Bank or the certificateholders of any other Series or to be
paid out of Servicer Interchange. The Class A Servicing Fee, the Class B
Servicing Fee and the Collateral Servicing Fee shall be payable to the
Servicer solely to the extent amounts are available for distribution in
respect thereof as described under "--Payment of Interest, Fees and Other
Items" above.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Accounts and the Receivables
including, without limitation, expenses related to enforcement of the
Receivables, payment of fees and disbursements of the Trustee and independent
accountants and all other fees and expenses which are not expressly stated in
the Agreement to be payable by the Trust or the Certificateholders other than
federal, state and local income and franchise taxes, if any, of the Trust.
CERTAIN MATTERS REGARDING THE SERVICER AND THE TRANSFEROR
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that such duties are impermissible under
applicable law, regulation or order. No such resignation will become effective
until the Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Agreement.
Card Services, as Servicer, will be permitted under the Agreement to
delegate certain of its servicing obligations. Notwithstanding any such
delegation, Card Services, as Servicer, will continue to be liable for all of
its obligations as Servicer under the Agreement.
Any person into which, in accordance with the Agreement, any of the
Transferor or the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which any of the Transferor or the Servicer
is a party, or any person succeeding to the business of any of the Transferor or
the Servicer, will be the successor to the Transferor or the Servicer, as the
case may be, under the Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the Trustee
or Certificateholders evidencing undivided interests aggregating more than 50%
of the aggregate principal amount of all Series, by written notice to the
Servicer (and to the Trustee, if given by the Certificateholders), may terminate
all of the rights and obligations of the Servicer, in its capacity as servicer
under the Agreement, with respect to all of the Receivables held by the Trust
with respect to all Series, and the proceeds thereof, and the Trustee shall
thereafter appoint a new Servicer (a "Service Transfer"). The rights and
interests of the Transferor under the Agreement in the Transferor Interest will
not be affected by any Service Transfer. The Transferor shall have the right,
exercisable at any time within 60 days of the giving of the notice of
termination as described above, to nominate to the Trustee a potential successor
Servicer. The Trustee shall as promptly as possible appoint the entity nominated
by the Transferor if such entity meets certain eligibility criteria set forth in
the Agreement.
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If the Transferor does not nominate an entity to be successor Servicer within
such 60 day period, the Trustee shall as promptly as possible appoint a
successor Servicer, and if no successor Servicer has been appointed by the
Trustee and has accepted such appointment by the time the Servicer ceases to act
as Servicer, all authority, power and obligations of the Servicer under the
Agreement will pass to, and be vested in, the Trustee. Prior to any Service
Transfer, the Trustee will seek to obtain bids from potential Servicers meeting
certain eligibility requirements set forth in the Agreement to serve as a
successor Servicer for servicing compensation not in excess of the Servicing
Fee. If the Trustee is unable to obtain any bids from eligible Servicers and the
Servicer delivers an officer's certificate to the effect that it cannot in good
faith cure the related Servicer Default, then the Trustee will offer the
Transferor the right to accept the retransfer of all of the Receivables. The
deposit amount of such a retransfer for the Certificates shall be equal to the
sum of the Invested Amount plus accrued and unpaid interest on the Certificates
and Collateral Investor Interest.
A "Servicer Default" refers to any of the following events:
(i) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make any withdrawal, on
the date the Servicer is required to do so under the Agreement or any
Series Supplement (upon expiration of a five day grace period), PROVIDED,
HOWEVER, that any such failure caused by a nonwillful act of the Servicer
shall not constitute a Servicer Default if the Servicer promptly remedies
such failure within five business days after receiving notice thereof;
(ii) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Agreement or any
Series Supplement which has a material adverse effect on the
certificateholders of any Series issued and outstanding (without regard to
the amount of any Enhancement), which continues unremedied for a period of
60 days after written notice and which continues to materially adversely
affect the rights of such certificateholders, or the Servicer assigns its
duties under the Agreement, except as specifically permitted thereunder;
(iii) any representation, warranty or certification made by the
Servicer in the Agreement or any Series Supplement or in any certificate
delivered pursuant to the Agreement or any Series Supplement proves to have
been incorrect when made, which has a material adverse effect on the rights
of the certificateholders of any Series issued and outstanding (without
regard to the amount of any Enhancement), and continues to be incorrect in
any material respect for a period of 60 days after written notice and
continues to materially adversely affect the rights of such
certificateholders; or
(iv) the occurrence of certain events of bankruptcy or insolvency
relating to the Servicer (such events include the appointment (voluntary or
involuntary) of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings relating to the Servicer or all or substantially all of its
property and the Servicer admitting in writing its inability to pay its
debts as they become due, filing a petition to take advantage of an
insolvency or reorganization statute, making an assignment for the benefit
of its creditors or voluntarily suspending payment of its obligations).
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of 10 business days after the
applicable grace period or a delay in or failure of performance referred to
under clauses (ii) or (iii) for a period of 60 business days after the
applicable grace period shall not constitute a Servicer Default, if such delay
or failure could not have been prevented by the exercise or reasonable diligence
by the Servicer and such delay or failure was caused by an act of God or other
similar occurrence. Upon the occurrence of any such event, the Servicer shall
not be relieved from using its best reasonable efforts to perform its
obligations in a timely manner in accordance with the terms of the Agreement or
any Series Supplement and the Servicer shall provide the Trustee and the
provider of Enhancement, if any, applicable to any Series, the Transferor and
the certificateholders of each Series issued and outstanding prompt notice of
such failure or delay by it, together with a description of its efforts to so
perform its obligations. The Servicer will immediately notify the Trustee in
writing of any Servicer Default.
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REPORTS TO CERTIFICATEHOLDERS
Prior to each Distribution Date, the Servicer will forward to the Trustee a
statement (the "Monthly Servicer Report") prepared by the Servicer (as
determined on the fifth business day prior to such Distribution Date (the
"Determination Date")) setting forth certain information with respect to the
Trust and the Certificates, including: (a) the aggregate amount of collections,
the aggregate amount of Yield Collections and the aggregate amount of Principal
Collections processed during the immediately preceding Collection Period;
(b) the applicable allocation percentages with respect to Yield Collections and
Principal Collections for such Collection Period; (c) the total amount to be
deposited in the Principal Funding Account; (d) the aggregate outstanding
balance of the Accounts which were delinquent by 30 days, 60 days, 90 days and
120 days or more as of the billing date for each such Account occurring in the
Collection Period immediately preceding such Distribution Date; (e) the Investor
Default Amount for the Collection Period immediately preceding such Distribution
Date; (f) the amount of Investor Charge-Offs and the amount of reimbursements
thereof for the Collection Period immediately preceding such Distribution Date;
(g) the amount of the Monthly Investor Servicing Fee for the Collection Period
immediately preceding such Distribution Date; (h) the aggregate amount of
Receivables in the Trust at the close of business on the last day of the
Collection Period preceding such Distribution Date; (i) the Invested Amount at
the close of business on the last day of the Collection Period immediately
preceding such Distribution Date; and (j) whether an Early Amortization Event
shall have occurred. The Trustee will make such statement available to the
Certificateholders or Certificate Owners upon request.
On each Interest Payment Date (including the Class A Expected Final Payment
Date and the Class B Expected Final Payment Date) or Special Payment Date, as
the case may be, the Paying Agent, on behalf of the Trustee, will forward to
each Certificateholder of record a statement (the "Payment Date Statement")
prepared by the Servicer setting forth the information with respect to the
Certificates set forth in the Monthly Servicer Report supplied to the Trustee as
described in the preceding paragraph since the immediately preceding Interest
Payment Date or Special Payment Date, as the case may be, and the following
additional information (which, in the case of (a), (b) and (c) below, will be
stated on the basis of an original principal amount of $1,000 per Certificate):
(a) the total amount distributed; (b) the amount of such distribution allocable
to principal; (c) the amount of such distribution allocable to interest; (d) the
amount, if any, by which the principal balance of the Certificates exceeds the
Invested Amount as of the Record Date with respect to such Interest Payment Date
or Special Payment Date; and (e) the "series factor" as of the end of the Record
Date with respect to such Interest Payment Date or Special Payment Date
(consisting of an eight-digit decimal expressing the Invested Amount as of such
Record Date (determined after taking into account any increase or decrease in
the Invested Amount which will occur on the following Interest Payment Date or
Special Payment Date) as a proportion of the Initial Invested Amount).
The fiscal year of the Trust ends on December 31 in each year. On or before
January 31 of each calendar year, beginning with January 31, 1997, the Paying
Agent, on behalf of the Trustee, will furnish or cause to be furnished to each
person who at any time during the preceding calendar year was a
Certificateholder of record (or, if so provided in applicable Treasury
regulations, made available to Certificate Owners) a statement prepared by the
Servicer containing the information required to be provided by an issuer of
indebtedness under the Code for such calendar year or the applicable portion
thereof during which such person was a Certificateholder, together with such
other customary information as the Servicer deems necessary or desirable to
enable the Certificateholders to prepare their tax returns.
EVIDENCE AS TO COMPLIANCE
The Agreement will provide that on or before April 30 of each calendar
year, beginning on April 30, 1997, the Servicer will cause a firm of nationally
recognized independent accountants to furnish a report to the effect that such
firm has applied procedures, as agreed upon between such firm and the Servicer,
to certain documents and records relating to the servicing of the Receivables
and that, based upon such agreed-upon procedures, no matters came to their
attention that caused them to believe that such servicing was not conducted in
compliance with certain applicable terms and conditions set forth in the
Agreement except for such exceptions
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or errors as shall be set forth in such statement. In addition, on or before
April 30 of each calendar year, beginning with April 30, 1997, such accountants
will compare the mathematical calculations of the amounts contained in the
Monthly Servicer Reports and other certificates delivered during the preceding
calendar year with the computer reports of the Servicer and statements of any
agents engaged by the Servicer to perform servicing activities which were the
source of such amounts and deliver a certificate to the Trustee stating that
such amounts are in agreement except for such exceptions which shall be set
forth in such report.
The Agreement will provide for delivery to the Trustee on or before April
30 of each calendar year, beginning with April 30, 1997, of a statement signed
by an officer of the Servicer to the effect that the Servicer has, or has caused
to be, fully performed its obligations in all material respects under the
Agreement throughout the preceding year or, if there has been a default in the
performance of any such obligation, specifying the nature and status of the
default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Agreement may be amended by the Transferor, the Servicer and the
Trustee, without Certificateholder consent, to cure any ambiguity, to correct or
supplement any provision therein which may be inconsistent with any other
provision therein and to add any other provisions with respect to matters or
questions arising under the Agreement which are not inconsistent with the
provisions of the Agreement. In addition, the Agreement may be amended from time
to time by the Transferor, the Servicer and the Trustee, without
Certificateholder consent, for the purpose of adding any provisions to, changing
in any manner or eliminating any of the provisions of the Agreement or of
modifying in any manner the rights of certificateholders of any Series then
issued and outstanding provided that (i) the Servicer must provide an opinion of
counsel to the Trustee to the effect that such amendment will not materially and
adversely affect the interests of the certificateholders of any outstanding
Series, which opinion of counsel may rely as to any rated Series solely on the
rating confirmation referred to in clause (iii) below (or 100% of the Class of
certificateholders so affected shall have consented), (ii) such amendment shall
not, as evidenced by an opinion of counsel, cause the Trust to be characterized
for federal income tax purposes as an association taxable as a corporation or
otherwise have any material adverse impact on the federal income tax status of
any outstanding Series of certificates or the federal income taxation of any
certificate owner and (iii) the applicable Rating Agency shall confirm that such
amendment shall not cause a reduction or withdrawal of the rating of any
outstanding Series of certificates. Any Series Supplement and any amendments
regarding the addition or removal of Receivables from the Trust will not require
Certificateholder consent under the provisions of the Agreement.
The Agreement may also be amended by the Transferor, the Servicer and the
Trustee with the consent of the holders of certificates evidencing undivided
interests aggregating not less than 66-2/3% of the principal amount of all
Series adversely affected for the purpose of adding any provisions to, changing
in any manner or eliminating any of the provisions of the Agreement or of
modifying in any manner the rights of certificateholders of any Series then
issued and outstanding. Any such amendment shall require that the applicable
Rating Agency confirm that such amendment will not cause a reduction or
withdrawal of the rating of any outstanding Series of certificates. No such
amendment, however, may (i) reduce in any manner the amount of, or delay the
timing of, distributions required to be made on such Series, (ii) change the
definition or the manner of calculating the invested amount, the invested
percentage, the applicable available amount under any Enhancement or the
investor default amount of such Series, or (iii) reduce the aforesaid percentage
of undivided interests the holders of which are required to consent to any such
amendment, in each case without the consent of all certificateholders of all
Series adversely affected.
Promptly following the execution of any amendment to the Agreement, the
Trustee will furnish written notice of the substance of such amendment to each
certificateholder of all Series (or with respect to an amendment of a Series
Supplement, to the applicable Series).
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LIST OF CERTIFICATEHOLDERS
Upon written request of any certificateholder or group of
certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% of the invested amount of a Series, the Trustee
will afford such certificateholders access during business hours to the current
list of Certificateholders of the Trust for purposes of communicating with other
certificateholders with respect to their rights under the Agreement.
The Agreement generally does not provide for any annual or other meetings
of certificateholders.
THE TRUSTEE
Citibank, N.A. will be Trustee under the Agreement. The Transferor, the
Servicer and their respective affiliates may from time to time enter into normal
banking and trustee relationships with the Trustee and its affiliates. The
Trustee, the Transferor, the Servicer and any of their respective affiliates may
hold Certificates in their own names; however, any Certificates so held shall
not be entitled to participate in any decisions made or instructions given to
the Trustee by the Certificateholders as a group. The Trustee's Corporate Trust
Office is located at 120 Wall Street, New York, New York 10043.
For purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee will be conferred or imposed upon and exercised or performed by
the Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee will be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee, who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee may resign at any time, in which event a successor Trustee will
be appointed as provided in the Agreement. The Servicer may also remove the
Trustee, if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, a
successor Trustee will be appointed as provided in the Agreement. Any
resignation or removal of the Trustee and appointment of a successor Trustee
does not become effective until acceptance of the appointment by the successor
Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Transferor will covenant and warrant that the transfer of Receivables
by it to the Trust constitutes either a valid transfer and assignment to the
Trust of all right, title and interest of the Transferor in and to the
Receivables, except for the interest of the Transferor as holder of the
Exchangeable Transferor Certificate, or a grant of a security interest to the
Trust in and to the Receivables. The Transferor will also covenant and warrant
to the Trust in the Agreement that, in the event the transfer of Receivables by
the Transferor to the Trust is deemed to create a security interest under the
UCC and assuming that the Transferor is not at the time the subject of any
insolvency proceedings, there exists a valid, subsisting and enforceable first
priority perfected security interest in the Receivables in existence since the
time of the formation of the Trust in favor of the Trust and a valid, subsisting
and enforceable first priority perfected security interest in the Receivables
created thereafter and, with certain exceptions, and for certain limited time
periods, the proceeds thereof, in favor of the Trust on and after their
creation.
The Receivables are "accounts" or "general intangibles" as defined in
Article 9 of the UCC. The absolute transfer of accounts and the transfer of
accounts and general intangibles as security for an obligation are treated under
Article 9 of the UCC as creating a security interest therein and are subject to
its provisions,
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including the filing of financing statements to perfect the Trust's security
interest. Financing statements covering the Receivables will be filed under the
applicable UCC to protect the Trust. The absolute transfer of general
intangibles is not governed by Article 9 of the UCC but by applicable state law.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after the date on
which such Receivables are transferred to the Trust could have an interest in
such Receivables with priority over the Trust's interest. A tax or other
government lien on property of the Transferor arising prior to the time a
Receivable comes into existence may also have priority over the interest of the
Trust in such Receivables. Under the Agreement, the Transferor will represent
and warrant that it transferred the Receivables to the Trust free and clear of
the lien of any third party, except certain permitted tax liens. In addition,
the Transferor will covenant that it will not sell, pledge, assign, transfer or
grant any lien on any Receivable (or any interest therein) other than to the
Trust.
Unless continuation statements are filed within the time specified in the
UCC in respect of the security interest of the Trust in the Receivables, the
perfection of such interest will lapse.
As set forth under "Description of the Certificates--Allocation of
Collections; Deposits in Collection Account," cash collections of Receivables
will, except in certain circumstances, be available for use by the Servicer
until deposited into the Collection Account on the business day preceding each
Distribution Date. In the event of insolvency or receivership of the Servicer
or, in certain circumstances, the lapse of certain time periods, the Trust may
not have a perfected interest in such cash collections.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), which
became effective August 9, 1989, sets forth certain powers that the FDIC could
exercise if it were appointed as receiver or conservator of the Transferor.
Subject to clarification by FDIC regulations or interpretations, it would
appear from the positions taken by the FDIC before the passage of FIRREA that
the FDIC in its capacity as receiver or conservator for the Transferor would not
interfere with the timely transfer to the Trust of payments collected on the
Receivables or interfere with the timely liquidation of Receivables as described
below. To the extent that the Transferor has granted a security interest in the
Receivables to the Trust, and that interest is validly perfected before the
Transferor's insolvency and is not taken in contemplation of insolvency or with
the intent to hinder, delay or defraud the Transferor or its creditors, that
security interest should not be subject to avoidance, and payments to the Trust
with respect to the Receivables should not be subject to recovery by a receiver
or conservator of the Transferor. If, however, a receiver were to assert a
contrary position, or were to require the Trustee to establish its right to
those payments by submitting to and completing the administrative claims
procedure under the FDIA, as amended by FIRREA, delays in payments on the
Certificates and possible reductions in the amount of those payments could
occur.
The Agreement will provide that, upon the appointment of a receiver or
conservator for the Transferor, the Transferor will promptly give notice thereof
to the Trustee, and an Early Amortization Event with respect to all Series will
occur. Under the Agreement no new Receivables will be transferred to the Trust
and, unless otherwise instructed within a specified period by the holders of
certificates representing undivided interests aggregating more than 50% of the
aggregate principal amount of each Class of each Series and, if specified in the
related Prospectus Supplement, the Enhancement provider with respect to such
Series, or unless otherwise required by the receiver or conservator for the
Transferor, the Trustee will proceed to sell, dispose of or otherwise liquidate
the Receivables in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from the sale of the Receivables would then be
treated by the Trustee as collections on the Receivables. If the only Early
Amortization Event to occur is either the insolvency of the Transferor or the
appointment of a receiver or conservator for the Transferor, such receiver or
conservator may have the power
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to require the Transferor to continue to transfer new Receivables to the Trust,
and to prevent the early sale, liquidation or disposition of the Receivables and
the commencement of the Early Amortization Period.
CONSUMER PROTECTION LAWS
The relationship between the cardholder and charge card issuer is
extensively regulated by federal and state consumer protection statutes. With
respect to charge cards issued by the Transferor the most significant federal
laws include the federal Truth-In-Lending and Equal Credit Opportunity Acts.
These statutes and certain state laws impose disclosure requirements before and
when an Account is opened, at the end of monthly billing cycles and at year-end
and, in addition, limit cardholder liability for unauthorized use, prohibit
certain discriminatory practices in extending credit, impose certain limitations
on the type of account-related charges that may be issued and regulate
collection practices. In addition, cardholders are entitled under these laws to
have payments and credits applied to the charge card account promptly and to
require billing errors to be resolved promptly. The Trust may be liable for
certain violations of consumer protection laws that apply to the Receivables,
either as assignee from the Transferor with respect to obligations arising
before transfer of the Receivables to the Trust or as the party directly
responsible for obligations arising after the transfer. In addition, a
cardholder may be entitled to assert such violations by way of set off against
the obligation to pay the amount of Receivables owing. The Transferor has agreed
to accept the designation as Ineligible Receivables of all Receivables that have
been charged off and that were not created in compliance in all material
respects with the requirements of such laws. The Servicer has also agreed in the
Agreement to indemnify the Trust, among other things, for any liability arising
from such violations. For a discussion of the Trust's rights if the Receivables
were not created in compliance in all material respects with applicable laws,
see "Description of the Certificates--Representations and Warranties."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders, if such laws result in any
Receivables being charged off as uncollectible when there are not funds
available under any Enhancement. See "Description of the Certificates--Defaulted
Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a discussion of the material federal income tax
consequences to Certificate Owners. This discussion is based upon present
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder, and judicial or ruling authority, all of
which are subject to change (which may be retroactive). Dorsey & Whitney LLP,
counsel to First Bank ("Counsel"), is delivering its opinion regarding certain
federal income tax matters discussed below. The opinion of Counsel specifically
addresses only those issues specifically identified below as being covered by
such opinion; however, the opinion of Counsel also states that the additional
discussion set forth below accurately sets forth Counsel's advice with respect
to material tax issues. No ruling on any of the issues discussed below will be
sought from the Internal Revenue Service (the "IRS"). This discussion does not
deal with all aspects of federal income taxation that may be relevant to
Certificate Owners in light of their personal investment circumstances, nor to
certain types of owners subject to special treatment under the federal income
tax laws (E.G., banks, life insurance companies and tax-exempt organizations).
Prospective investors are encouraged to consult their own tax advisors with
regard to the federal income tax consequences of owning and disposing of the
Certificates, as well as the tax consequences arising under the laws of any
applicable state, foreign country or other jurisdiction.
TREATMENT OF THE CERTIFICATES AS INDEBTEDNESS OF THE TRANSFEROR
The Transferor and the holders of Certificates will express in the
Agreement the intent that, for federal, state and local income and franchise tax
purposes, the Certificates will be indebtedness secured by the
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Receivables and any other Trust assets allocable to the Certificates. The
Transferor, by entering into the Agreement, and each Certificate Owner, by the
acceptance of an interest in a Certificate, will agree to treat the Certificates
as indebtedness for federal, state and local income and franchise tax purposes.
The Agreement generally will refer to the transfer of the related Receivables as
a "sale," however, and since different criteria are used in determining the
nontax accounting treatment of the transaction, the Transferor will treat the
Agreement, for certain nontax purposes, as effecting a transfer of an ownership
interest in the Receivables and not as creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines the tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its economic
substance. In appropriate circumstances, the courts have allowed taxpayers, as
well as the IRS, to treat a transaction in accordance with its economic
substance, as determined under federal income tax law, even though the
participants in the transaction have characterized it differently for nontax
purposes.
The determination of whether the economic substance of a property transfer
is a sale or a loan secured by the transferred property has been made by the IRS
and the courts on the basis of numerous factors designed to determine whether
the transferor has relinquished (and the transferee has obtained) substantial
incidents of ownership in the property. Among those factors, the primary
factors examined are whether the transferee has the opportunity to gain if the
property increases in value and bears the risk of loss if the property decreases
in value. Based upon an analysis of such factors, Counsel's opinion provides
that for federal income tax purposes the Certificates will be characterized as
indebtedness secured by the Receivables and any other Trust assets, and the
Trust will not be characterized as an "association" or "publicly traded
partnership" taxable as a corporation.
INTEREST INCOME TO CERTIFICATE OWNERS
Assuming the Certificates are debt obligations for federal income tax
purposes, interest on the Certificates will be taxable as ordinary interest
income when received by Certificate Owners utilizing the cash-basis method of
accounting and when accrued by Certificate Owners utilizing the accrual method
of accounting. Under the applicable regulations, the Certificates would be
considered issued with original issue discount ("OID") if the "stated redemption
price at maturity" of a Certificate (generally equal to its principal amount as
of the date of issuance plus all interest other than "qualified stated interest"
payable prior to or at maturity) exceeds the original issue price (in this case,
the initial offering price at which a substantial amount of the Certificates are
sold to the public). Any OID would be considered DE MINIMIS under the
regulations if it does not exceed 1/4% of the stated redemption price at
maturity of a Certificate multiplied by the number of full years until its
maturity date. It is anticipated that the Certificates will not be considered
issued with more than DE MINIMIS OID. Under the OID regulations, an owner of a
Certificate issued with a DE MINIMIS amount of OID must include such OID in
income, on a PRO RATA basis, as principal payments are made on the Certificate.
While it is not anticipated that the Certificates will be issued with more
than DE MINIMIS OID, it is possible that they will be so issued or will be
deemed to be issued with OID. This deemed OID could arise, for example, if
interest payments on the Certificates are not deemed to be "qualified stated
interest" because the Certificates do not provide for default remedies
ordinarily available to holders of debt instruments or because no penalties are
imposed as a result of any failure to make interest payments on the
Certificates. In addition, under the OID regulations, certain variable interest
rates may not be treated as qualified stated interest. Based upon existing
authority, however, the Transferor and the Trustee will treat interest payments
on the Certificates as qualified stated interest under the OID regulations. If
the Certificates are issued or are deemed to be issued with OID, all or a
portion of the taxable income to be recognized with respect to the Certificates
would be includible in the income of Certificate Owners as OID. Any amount
treated as OID would not, however, be includible again when the amount is
actually received. If the yield on a Class of Certificates were not materially
different from its coupon, this treatment would have no significant effect on
Certificate Owners using the accrual method of accounting. However, cash method
Certificate Owners may be required to report income with respect to the
Certificates in advance of the receipt of cash attributable to such income.
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A Certificate Owner must include OID in income as interest over the term of
the Certificate under a constant yield method. In general, OID must be included
in income in advance of the receipt of cash representing that income. Each
Certificate Owner should consult its own tax advisor regarding the impact of the
OID rules if the Certificates are issued with OID.
A Certificate Owner who purchases a Certificate at a discount may be
subject to the "market discount" rules of the Code. These rules provide, in
part, for the treatment of gain attributable to accrued market discount as
ordinary income upon the receipt of partial principal payments or on the sale or
other disposition of the Certificate, and for the deferral of interest
deductions with respect to debt incurred to acquire or carry the market discount
Certificate. A Certificate Owner who purchases a Certificate at a premium may
elect to amortize and deduct this premium over the remaining term of the
Certificate in accordance with rules set forth in Section 171 of the Code.
As an alternative to the above treatments, accrual method Certificate
Owners may elect to include in gross income all interest with respect to a
Certificate, including stated interest, acquisition discount, OID, DE MINIMIS
OID, market discount, DE MINIMIS market discount, and unstated interest, as
adjusted by any amortizable bond premium or acquisition premium, using the
constant yield method.
DISPOSITION OF CERTIFICATES
Generally, gain or loss will be recognized on a sale or other taxable
disposition of Certificates in an amount equal to the difference between the
amount realized and the seller's tax basis in the Certificates. A Certificate
Owner's tax basis in a Certificate will generally equal the cost thereof
increased by any OID, market discount and gain previously included by such
Certificate Owner in income with respect to the Certificate and decreased by any
bond premium previously amortized and any principal payments previously received
by such Certificate Owner with respect to the Certificate. Any such gain or
loss will be capital gain or loss if the Certificate was held as a capital
asset, except for gain representing accrued interest and accrued market discount
not previously included in income. Capital gain or loss will be long-term if
the Certificate was held by the holder for more than one year and otherwise will
be short-term. Any capital losses realized generally may be used by a corporate
taxpayer only to offset capital gains, and by an individual taxpayer only to the
extent of capital gains plus $3,000 of other income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid on the Certificates
(and the amount of interest withheld for federal income taxes, if any) for each
calendar year, except as to exempt holders (generally, holders that are
corporations, tax-exempt organizations, qualified pension and profit-sharing
trusts, individual retirement accounts, or nonresident aliens who provide
certification of their status as nonresidents). As long as the only
"Certificateholder" of record is Cede, as nominee for DTC, Certificate Owners
and the IRS will receive tax and other information only from Participants and
Indirect Participants rather than from the Trustee. Each nonexempt Certificate
Owner will be required to provide, under penalties of perjury, a certificate on
IRS Form W-9 containing the Certificate Owner's name, address, federal taxpayer
identification number and a statement that such Certificate Owner is not subject
to backup withholding. Should a nonexempt Certificate Owner fail to provide the
required certification, the Trustee (or the Participants or Indirect
Participants) will be required to withhold (or cause to be withheld) 31% of the
interest (and principal) otherwise payable to the Certificate Owner, and remit
the withheld amounts to the IRS as a credit against the Certificate Owner's
federal income tax liability.
POSSIBLE CLASSIFICATION OF THE TRUST AS A PARTNERSHIP OR ASSOCIATION
As described above, it is the opinion of Counsel that for federal income
tax purposes the Certificates will be characterized as debt and the Trust will
not be characterized as an association or publicly traded
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partnership taxable as a corporation. However, this opinion is not binding on
the IRS and no assurance can be given that this characterization will be
sustained.
If the IRS were to contend successfully that any class of Certificates is
not debt for federal income tax purposes, the Trust might be classified for
federal income tax purposes as a partnership, an association taxable as a
corporation, or a publicly traded partnership taxable as a corporation. In the
opinion of Counsel, if the IRS were to contend successfully that the Collateral
Investor Interest were not debt for federal income tax purposes (assuming that
neither the Class A Certificates or Class B Certificates, nor certificates of
any other outstanding Series, were also recharacterized), the arrangement
between the Transferor and the Collateral Interest Holder would be classified as
a partnership for federal income tax purposes and would not be treated as a
publicly traded partnership because of an exception for (i) an entity whose
income is interest income that is not derived in the conduct of a financial
business or (ii) partnership interests that are privately placed. In such case,
the partnership would not be subject to federal income tax. If the Class A
Certificates or Class B Certificates are treated as equity interests in a
partnership, the partnership would in all likelihood be treated as a publicly
traded partnership. A publicly traded partnership is, in general, taxable as a
corporation. If the partnership were nevertheless not taxable as a corporation
because of an exception for an entity whose income is interest income that is
not derived in the conduct of a financial business, it would not be subject to
federal income tax. Rather, each item of income, gain, loss, deduction and
credit generated through the ownership of the Receivables by the partnership
would be passed through to the partners in the partnership (including the
Certificate Owners) according to their respective interests therein.
The income reportable by the Certificate Owners as partners in such a
partnership could differ from the income reportable by them as holders of debt.
However, except as provided below, it is not expected that such differences
would be material. If the Certificate Owners were treated as partners, a cash-
basis Certificate Owner might be required to report income when it accrues to
the partnership rather than when it is received by the Certificate Owner.
Moreover, if the Certificates are interests in a partnership, an individual
Certificate Owner's share of expenses of the partnership would be miscellaneous
itemized deductions that might not be deductible in whole or in part, causing
the Certificate Owner to be taxable on a greater amount of income than the
stated interest on the Certificates. Finally, if any Class of Certificates is
treated as equity in a partnership in which other Certificates are debt, all or
part of a tax-exempt Certificate Owner's share of income from Certificates
treated as equity would be treated as unrelated debt-financed income taxable to
the Certificate Owner.
Alternatively, if the Trust were treated as either an association taxable
as a corporation or a publicly traded partnership taxable as a corporation, the
resulting entity would be subject to federal income taxes at corporate tax rates
on its taxable income generated by ownership of the Receivables. Distributions
by the entity (other than interest distributions on Classes of Certificates
properly characterized as debt) would probably not be deductible in computing
the entity's taxable income. Such an entity-level tax could result in reduced
distributions to Certificate Owners, and the Certificate Owners could be liable
for a share of such a tax. Moreover, all or part of the distributions on
Certificates treated as equity would probably be treated as dividend income to
the recipients, although such dividends might, under certain circumstances, be
eligible for the dividends received deduction under the Code.
Since the Transferor will treat the Certificates as indebtedness for
federal income tax purposes, the Trustee (and Participants and Indirect
Participants) will not comply with the tax reporting requirements that would
apply under these alternative characterizations of the Certificates.
FOREIGN INVESTORS
If, in accordance with the opinion of counsel, the Certificates are
classified as debt for federal income tax purposes, the following information
describes the federal income tax treatment of investors that are not U.S.
persons (each a "Foreign Person"). The term "Foreign Person" means any person
other than (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity organized in or under the laws of
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the United States or any political subdivision thereof or (iii) an estate or
trust the income of which is includible in gross income for U.S. federal income
tax purposes, regardless of its source.
(A) Interest paid or accrued to a Foreign Person would be except from
U.S. withholding taxes (including backup withholding taxes); PROVIDED that
the Foreign Person complies with applicable identification requirements
(and does not actually or constructively owns 10% or more of the voting
stock of First Bank and is not a controlled foreign corporation with
respect to First Bank). Applicable identification requirements will be
satisfied if there is delivered to a securities clearing organization (or
bank or other financial institution that holds the Certificates on behalf
of the customer in the ordinary course of its trade or business) (i) IRS
Form W-8 signed under penalties of perjury by the beneficial owner of the
Certificates stating that the owner is not a U.S. person and providing the
owner's name and address, (ii) IRS Form 1001 signed by the beneficial owner
of the Certificates or the owner's agent claiming exemption from
withholding of tax on income connected with the conduct of a trade or
business in the United States; PROVIDED that in any such case (x) the
applicable form is delivered pursuant to applicable procedures and is
properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the owner is a U.S. person or that any certification on the
form is false.
(B) An owner of a Certificate who is a Foreign Person will not be
subject to United States federal income tax on gain realized on the sale,
exchange or redemption of the Certificate; PROVIDED that (i) the gain is
not effectively connected to a trade or business carried on by the owner in
the United States, (ii) in the case of an owner who is an individual, the
owner is not present in the United States for 183 days or more during the
taxable year in which the sale, exchange or redemption occurs, (iii) in the
case of gain representing accrued interest, the conditions described in
clause (a) are satisfied, and (iv) the Certificate was held as a capital
asset.
(C) If the interest, gain or income on a Certificate held by a
Foreign Person is effectively connected with the conduct of a trade or
business in the United States by the Foreign Person, the holder (although
exempt from the withholding tax previously discussed if an appropriate
statement is furnished) generally will be subject to United States federal
income tax on the interest, gain or income at regular federal income tax
rates. In addition, if the Foreign Person is a foreign corporation, it may
be subject to a branch profits tax equal to 30 percent of its "effectively
connected earnings and profits" within the meaning of the Code for the
taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable tax treaty.
(D) A Certificate owned by an individual who at the time of death is
a nonresident alien will not be subject to United Sates federal estate tax
as a result of the owner's death if, immediately before his death, (i) the
decedent did not actually or constructively own 10% or more of the voting
stock of First Bank and (ii) the ownership of the Certificate was not
effectively connected with the conduct by the decedent of a trade or
business in the United States.
If the IRS were to contend successfully that the Certificates are equity
interests in a partnership (not taxable as a corporation), a Certificate Owner
that is a Foreign Person might be required to file a U.S. income tax return and
pay tax on its share of partnership income at regular U.S. rates, including, in
the case of a corporation, the branch profits tax (and would be subject to
withholding tax on its share of partnership income). If the Certificates are
recharacterized as equity interests in an association taxable as a corporation
or a publicly traded partnership taxable as a corporation, an owner who is a
Foreign Person would generally be taxed (and be subject to withholding) on the
gross amount of the distributions on the Certificates, to the extent they are
treated as dividends, at the rate of 30% (unless the rate is reduced by
applicable treaty).
FUTURE LEGISLATION
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Recent legislation proposed in the U.S. Congress (the "Legislation") would
provide for a new type of entity for federal income tax purposes, the "financial
asset securitization investment trust" (a "FASIT"). If the Legislation were
enacted in its present form, it could enable trusts such as the Trust to be
treated by statute as a pass-through entity not subject to entity-level tax and
to issue securities that would be treated by statute as debt for federal income
tax purposes. It is unclear whether the Legislation will be enacted, to what
extent its provisions will be modified prior to enactment, and whether its
provisions, as enacted, would enable a FASIT election to be made for all or a
portion of the Trust or the securities issued thereby. The Agreement may
provide that the Transferor may cause a FASIT election to be made for all or a
portion of the Trust if the Transferor delivers to the Trustee a Tax Opinion.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in Section 4975(e)(1) of
the Code, including individual retirement accounts and Keogh Plans, (c) any
entities whose underlying assets include plan assets by reason of a plan's
investment in such entities (each of (a), (b) and (c) a "Plan") and (d) persons
who have certain specified relationships to such Plans ("Parties in Interest"
under ERISA and "Disqualified Persons" under the Code). Moreover, based on the
reasoning of the United States Supreme Court in JOHN HANCOCK LIFE INS. CO. V.
HARRIS TRUST AND SAV. BANK, 114 S. Ct. 517 (1993), an insurance company's
general account may be deemed to include assets of the Plans investing in the
general account (E.G., through the purchase of an annuity contract), and the
insurance company might be treated as a Party in Interest with respect to such
Plans by virtue of such investment. ERISA also imposes certain duties on
persons who are fiduciaries of Plans, and both ERISA and the Code prohibit
certain transactions involving "plan assets" between a Plan and Parties in
Interest or Disqualified Persons with respect to such Plans. Violation of these
rules may result in the imposition of an excise tax or penalty. Thus, a Plan
fiduciary considering an investment in Certificates should consider, among other
things, whether such an investment might constitute or give rise to a prohibited
transaction under ERISA or the Code.
Neither ERISA nor the Code defines the term "plan assets." Under Section
2510.3-101 of the United States Department of Labor ("DOL") regulations (the
"Regulation"), a Plan's assets may be deemed to include an interest in the
underlying assets of an entity (such as a trust) for certain purposes, including
the prohibited transaction provisions of ERISA and the Code, if the Plan
acquires an "equity interest" in such entity. Accordingly, an investment in
Certificates by a Plan might result in the assets of the Trust being deemed to
constitute Plan assets, which in turn could have the consequence that certain
aspects of such investment, including the operation of the Trust, might give
rise to or result in prohibited transactions under ERISA and the Code.
CLASS A CERTIFICATES
The Regulation contains an exception to the plan asset rules that provides
that if a Benefit Plan acquires a "publicly-offered security," the issuer of the
security is not deemed to hold plan assets, regardless of the fact that the
security might otherwise represent an equity interest in the issuer. A publicly-
offered security is a security that is (i) freely transferable, (ii) part of a
class of securities that is "widely-held," I.E., owned by 100 or more investors
independent of the issuer and of one another and (iii) either is (A) part of a
class of securities registered under Section 12(b) or 12(g) of the Exchange Act
or (B) sold to a Plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act and the
class of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the
Commission) after the end of the fiscal year of the issuer during which the
offering of such securities to the public occurred. Under the Regulation, a
class of securities will not fail to be widely-held solely because subsequent to
the initial offering the number of independent investors falls below 100 as a
result of events beyond the control of the issuer.
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The Underwriters expect that the Class A Certificates will be held by at
least 100 independent investors at the conclusion of the offering, although no
assurances can be given, and no monitoring or other measures will be taken, to
ensure that such condition will be met. The Transferor anticipates that the
other conditions of the Regulation will be met with respect to the Class A
Certificates. Accordingly, subject to the other considerations discussed
herein, the Class A Certificates may, in general, be purchased by Plans.
CLASS B CERTIFICATES
The Underwriters do not expect that the Class B Certificates will be held
by 100 or more independent investors. Accordingly, the Class B Certificates may
not, in general, be purchased by Plans.
However, in addition to the exemption for "publicly offered securities,"
the Regulation also contains an exemption with respect to classes of securities
(other than publicly offered securities) in which equity participation by
"benefit plan investors" in each class is "not significant." Under the
Regulation, equity participation in an entity by benefit plan investors is
"significant" on any date if, immediately after the most recent acquisition of
any equity interest in the entity, 25% or more of the value of any class of
equity interests in the entity is held by "benefit plan investors," which is
defined to encompass all Plans, including without limitation governmental plans
and other plans not subject to Title I of ERISA. Accordingly, although no
assurances can be given, and no monitoring or other measures will be taken to
ensure that participation in the Class B Certificates by benefit plan investors
will be less than 25%, the Class B Certificates may be purchased by any entity
(including without limitation insurance company general accounts) only if less
than 25% of the entity's assets consist of assets of benefit plan investors.
EACH CERTIFICATE OWNER OF A CLASS B CERTIFICATE (INCLUDING BUT NOT LIMITED
TO ANY INSURANCE COMPANY GENERAL ACCOUNT) WILL BE DEEMED EITHER (A) TO HAVE
REPRESENTED THAT IT IS NEITHER A PLAN NOR ACQUIRING THE CLASS B CERTIFICATES ON
BEHALF OF OR USING THE ASSETS OF ANY PLAN OR (B) TO HAVE REPRESENTED AND
COVENANTED THAT, AT THE TIME OF PURCHASE AND AT ALL TIMES THEREAFTER WHILE IT IS
HOLDING ANY CLASS B CERTIFICATES, LESS THAN 25% OF ITS ASSETS CONSIST OF ASSETS
OF BENEFIT PLAN INVESTORS.
GENERAL INVESTMENT CONSIDERATIONS
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code and the potential consequences of
making an investment in the Class A Certificates with respect to their specific
circumstances. Moreover, each Plan fiduciary should take into account, among
other considerations, whether the fiduciary has the authority to make the
investment; the composition of the Plan's portfolio with respect to
diversification by type of asset; the Plan's funding objectives; the tax effects
of the investment; and whether under the general fiduciary standards of
investment procedure and diversification an investment in the Class A
Certificates is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") between the Transferor and the underwriters named
below (the "Underwriters"), the Transferor has agreed to sell to the
Underwriters, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Class A Certificates and Class B Certificates set forth
opposite its name.
PRINCIPAL AMOUNT
UNDERWRITERS OF CLASS A CERTIFICATES
- ------------ -----------------------
J.P. Morgan Securities Inc.. . . . . . . $ __________
. . . . . . . . . . . . . . . . . . . . __________
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. . . . . . . . . . . . . . . . . . . . __________
. . . . . . . . . . . . . . . . . . . . __________
Total. . . . . . . . . . . . . . . . $
----------
----------
PRINCIPAL AMOUNT
OF CLASS B CERTIFICATES
-----------------------
J.P. Morgan Securities Inc.. . . . . . . $ __________
. . . . . . . . . . . . . . . . . . . . __________
. . . . . . . . . . . . . . . . . . . . __________
. . . . . . . . . . . . . . . . . . . . __________
Total. . . . . . . . . . . . . . . . $
----------
----------
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates
offered hereby if any of the Certificates are purchased.
The Underwriters propose initially to offer the Class A Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of ___% of the principal amount of the
Class A Certificates. The Underwriters may allow, and such dealers may reallow,
concessions not in excess of ___% of the principal amount of the Class A
Certificates to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the
Underwriters.
The Underwriters propose initially to offer the Class B Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of___% of the principal amount of the
Class B Certificates. The Underwriters may allow, and such dealers may reallow,
concessions not in excess of ___% of the principal amount of the Class B
Certificates to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the
Underwriters.
Each Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell any Certificates to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document in connection with the issue of the Certificates to a person who is
of a kind described in Article 8 of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) (No.2) Order 1995 of Great Britain or is a person
to whom the document may otherwise lawfully be issued or passed on.
The Transferor will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and/or commercial banking
transactions with First Bank, its affiliates and the Trust.
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LEGAL MATTERS
It is anticipated that certain legal matters and federal income tax
matters relating to the issuance of the Certificates will be passed uponfor
First Bank by Dorsey & Whitney LLP. Certain legal matters relating to the
issuance of the Certificates and ERISA matters will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom.
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INDEX OF TERMS
Term Page
- ---- ----
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 5
Accumulation Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Accumulation Period Length . . . . . . . . . . . . . . . . . . . . . . . . . .43
Additional Account Closing Date. . . . . . . . . . . . . . . . . . . . . . . .48
Additional Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 48
Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Adjusted Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . 8, 52
Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 5
Available Principal Collections. . . . . . . . . . . . . . . . . . . . . . . .58
Available Reserve Account Amount . . . . . . . . . . . . . . . . . . . . . . .54
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Bank Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Card Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CEDEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Class. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . . .56
Class A Adjusted Invested Amount . . . . . . . . . . . . . . . . . . . . . 8, 52
Class A Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Class A Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Class A Expected Final Payment Date. . . . . . . . . . . . . . . . . . . . 7, 11
Class A Fixed Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Class A Floating Percentage. . . . . . . . . . . . . . . . . . . . . . . . . .51
Class A Initial Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . 7
Class A Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . 7, 52
Class A Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . . . .17, 61
Class A Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . . .61
Class A Investor Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Class A Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Class A Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . . .59
Class A Required Amount. . . . . . . . . . . . . . . . . . . . . . . . . .16, 54
Class A Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Class B Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . . .56
Class B Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Class B Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class B Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Class B Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Class B Expected Final Payment Date. . . . . . . . . . . . . . . . . . . . 7, 11
Class B Fixed Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Class B Floating Percentage. . . . . . . . . . . . . . . . . . . . . . . . . .51
Class B Initial Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . 7
Class B Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . 7, 52
82
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Term Page
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Class B Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . . . .18, 62
Class B Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . . .61
Class B Investor Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Class B Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Class B Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . . .59
Class B Required Amount. . . . . . . . . . . . . . . . . . . . . . . . . .16, 55
Class B Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19, 73
Collateral Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . .57
Collateral Default Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .58
Collateral Fixed Percentage. . . . . . . . . . . . . . . . . . . . . . . . . .51
Collateral Floating Percentage . . . . . . . . . . . . . . . . . . . . . . . .51
Collateral Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . 7
Collateral Interest Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Collateral Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . 7, 52
Collateral Investor Charge-Off . . . . . . . . . . . . . . . . . . . . . . . .62
Collateral Investor Interest . . . . . . . . . . . . . . . . . . . . . . . . . 5
Collateral Monthly Interest. . . . . . . . . . . . . . . . . . . . . . . . . .58
Collateral Monthly Principal . . . . . . . . . . . . . . . . . . . . . . . . .59
Collateral Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Collateral Required Amount . . . . . . . . . . . . . . . . . . . . . . . . . .55
Collateral Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . .67
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Collection Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . . . . . . .59
Controlled Deposit Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .59
Cooperative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Corporate Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
Covered Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14, 53
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Defaulted Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Deficit Controlled Accumulation Amount . . . . . . . . . . . . . . . . . .13, 60
Definitive Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Depositaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
Disclosure Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
DDisqualified Persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Distribution Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
DOL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3, A-1
Early Amortization Event . . . . . . . . . . . . . . . . . . . . . . . . . . .63
Early Amortization Period. . . . . . . . . . . . . . . . . . . . . . . . . . .14
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Eligible Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Eligible Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Enhancement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
83
<PAGE>
Term Page
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Enhancement Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19, 78
Euroclear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Euroclear System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Excess Spread. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16, 57
Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchangeable Transferor Certificate. . . . . . . . . . . . . . . . . . . . . .10
FASIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
FDIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Final Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21, 72
First Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
First Bank System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Fixed Allocation Percentage. . . . . . . . . . . . . . . . . . . . . . . . . .50
Floating Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . . .50
Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
Global Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Indirect Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Ineligible Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Initial Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Interest Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Interest Payment Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 52
Investor Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Investor Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
Legislation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Minimum Transferor Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .45
Minimum Transferor Percentage. . . . . . . . . . . . . . . . . . . . . . . . .45
Minimum Trust Principal Component. . . . . . . . . . . . . . . . . . . . . . .48
Monthly Investor Servicing Fee . . . . . . . . . . . . . . . . . . . . . .10, 66
Monthly Servicer Report. . . . . . . . . . . . . . . . . . . . . . . . . . . .69
Net Interchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Net Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
OID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Payment Date Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Previous Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Principal Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Principal Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . . .13
Principal Funding Account Balance. . . . . . . . . . . . . . . . . . . . . . .53
Principal Funding Investment Proceeds. . . . . . . . . . . . . . . . . . .13, 53
84
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Term Page
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Principal Funding Investment Shortfall . . . . . . . . . . . . . . . . . .14, 53
Principal Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25, 45
Proposed Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Purchasing Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Rating Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Reallocated Class B Principal Collections. . . . . . . . . . . . . . . . .12, 54
Reallocated Collateral Principal Collections . . . . . . . . . . . . . . . . .54
Reallocated Principal Collections. . . . . . . . . . . . . . . . . . . . . . .54
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 5
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Removed Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 49
Required Collateral Invested Amount. . . . . . . . . . . . . . . . . . . .18, 60
Required Reserve Account Amount. . . . . . . . . . . . . . . . . . . . . . . .53
Reserve Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Reserve Account Funding Date . . . . . . . . . . . . . . . . . . . . . . . . .53
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5, A-1
Series 1996-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Series 1996-1 Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Series Supplement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Service Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Servicer Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
Servicer Interchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Servicing Base Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Servicing Fee Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Shared Excess Yield Collections. . . . . . . . . . . . . . . . . . . . . .16, 58
Shared Principal Collections . . . . . . . . . . . . . . . . . . . . . . . . .60
Special Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Stated Series Termination Date . . . . . . . . . . . . . . . . . . . . . . 8, 62
Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Transfer Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Transferor Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Transferor Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Transferor Percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Trust Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Trust Principal Component. . . . . . . . . . . . . . . . . . . . . . . . . . .33
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
VISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Yield Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
85
<PAGE>
Term Page
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Yield Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
86
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered First Bank
Corporate Card Master Trust Asset Backed Certificates (the "Global Securities")
to be issued in Series from time to time (each, a "Series") will be available
only in book-entry form. Investors in the Global Securities may hold such
Global Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments
in both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (I.E., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in same-
day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
A-1
<PAGE>
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. The payment will then be reflected in the
account of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
A-2
<PAGE>
charges incurred over that one-day period. If settlement is not completed on
the intended value date (i.e., the trade fails), receipt of the cash proceeds in
the Cedel Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date. Finally, day traders that use Cedel or
Euroclear and that purchase Global Securities from DTC Participants for delivery
to Cedel Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give the
Global Securities sufficient time to be reflected in their Cedel or
Euroclear account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC Participant is
at least one day prior to the value date for the sale to the Cedel
Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner
or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The Certificate Owner of a
Global Security or in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing
A-3
<PAGE>
agency). Form W-8 and Form 1001 are effective for three calendar years and Form
4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisers for specific tax advice concerning their holding and disposing of the
Global Securities.
A-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Registration Fee. . . . . . . . . . . . . . . $344.83
Printing and Engraving. . . . . . . . . . . . $ *
Trustee's Fee . . . . . . . . . . . . . . . . $ *
Legal Fees and Expenses . . . . . . . . . . . $ *
Blue Sky Fees and Expenses. . . . . . . . . . $ *
Accountant's Fees and Expenses. . . . . . . . $ *
Rating Agency Fees. . . . . . . . . . . . . . $ *
Miscellaneous Fees and Expenses . . . . . . . $ *
-------
Total Expenses . . . . . . . . . . . . . $ *
-------
-------
- --------------------
* To be supplied by amendment.
Item 14. Indemnification of Directors and Officers
Article Twelve of the Amended and Restated Articles of Association of
First Bank of South Dakota (National Association) provides as follows:
TWELFTH. Any person, such person's heirs, executors, or
administrators, may be indemnified or reimbursed by the Association for
reasonable expenses actually incurred in connection with any action, suit or
proceeding, whether civil, criminal, or administrative, to which such person or
such person's heirs, executors, or administrators shall be made a party by
reason of such person being or having been a director, advisory director,
officer, employee, or agent of the Association or of any firm, corporation, or
organization which such person served in any such capacity at the request of the
Association. Provided, however, that no such person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding: (1) as
to which such person shall finally be adjudged to have been guilty of or liable
for gross negligence, willful misconduct, or criminal acts in the performance of
such person's duties to the Association, or (2) which has been made the subject
of a compromise settlement except with the approval of a court of competent
jurisdiction, or the holders of record of a majority of outstanding shares of
the Association, or the board of directors acting by vote of directors not
parties to the same or substantially the same action, suit or proceeding
constituting a majority of the whole number of directors, or (3) against
expenses, penalties, or other payments incurred in an administrative proceeding
or action instituted by an appropriate bank regulatory agency, which proceeding
or action results in a final order assessing civil money penalties or requiring
affirmative action by such person in the form of payment to the Association.
The foregoing right of indemnification or reimbursement shall not be exclusive
of other rights to which such person, such person's heirs, executors, or
administrators, may be entitled as a matter of law.
Such expenses actually incurred by such person in connection with such
action, suit, or proceeding may be paid by the Association in advance of the
final disposition of such action, suit, or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Association. Prior to the advancement of any such expenses, the board of
directors shall determine in writing that all of the following conditions are
met: (1) such person has a substantial likelihood of prevailing on the merits,
(2) in the event such person does not prevail, such person will have the
financial capability to reimburse the Association, and (3) payment of such
expenses by the Association will not adversely affect the safety and soundness
of the Association. If at any time the board of directors believes, or should
reasonably believe, that any of the above conditions are not met, the
II-1
<PAGE>
Association shall cease paying such expenses. Further, the Association shall
enter into a written agreement with such person specifying the conditions under
which such person shall reimburse the Association.
The Association may, upon the affirmative vote of a majority of its
board of directors, purchase insurance for the purpose of indemnifying such
directors, advisory directors, officers, employees, or agents to the extent that
such indemnification is allowed in this Article Twelfth. Such insurance shall
not provide coverage of liability for any formal order issued by a regulatory
authority assessing civil money penalties against a director, advisory director,
officer, employee, or agent. Further, such insurance may, but need not be, for
the benefit of all such directors, advisory directors, officers, employees, or
agents.
Item 15. Recent Sales of Unregistered Securities
Not applicable.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Number Description
- ------ -----------
1.1 -- Form of Underwriting Agreement*
3.1 -- Amended and Restated Articles of Association of the Transferor
3.2 -- Bylaws of the Transferor
4.1 -- Form of Pooling and Servicing Agreement among the Transferor, the
Servicer and the Trustee*
4.2 -- Form of Series 1996-1 Supplement to the Pooling and Servicing
Agreement among the Transferor, the Servicer and the Trustee*
4.3 -- Form of Class A Certificate (contained in Exhibit 4.2)*
4.4 -- Form of Class B Certificate (contained in Exhibit 4.2)*
5.1 -- Opinion of Dorsey & Whitney re Legality*
8.1 -- Opinion of Dorsey & Whitney re Tax Matters*
23.1 -- Consent of Dorsey & Whitney (contained in Exhibit 5.1)*
23.2 -- Consent of Dorsey & Whitney (contained in Exhibit 8.1)*
24 -- Powers of Attorney (Included at page II-4)
- ------------------
* To be filed by amendment.
(b) Financial Statement Schedules
Not applicable.
II-2
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes as follows:
(a) To provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b) (1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.
(d) For the purpose of determining any liability under the Securities
Act of 1933, each post effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Lee R. Mitau, Susan E. Lester and David
J. Parrin, and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Sioux
Falls, State of South Dakota, on March 19, 1996.
FIRST BANK OF SOUTH DAKOTA
(NATIONAL ASSOCIATION)
By /s/ Daniel P Murphy
----------------------
Daniel P. Murphy
Director and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Daniel P Murphy Director and President March 19, 1996
--------------------- (principal executive officer)
Daniel P. Murphy
/s/ Susan E. Lester Executive Vice President March 19, 1996
--------------------- and Chief Financial Officer
Susan E. Lester (principal financial officer)
/s/ David J. Parrin Senior Vice President and March 19, 1996
--------------------- Controller (principal accounting
David J. Parrin officer)
/s/ Thomas J. Flynn Director March 19, 1996
---------------------
Thomas J. Flynn
/s/ Barry L. Martin Director March 19, 1996
---------------------
Barry L. Martin
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Craig A. Johnson Director March 19, 1996
---------------------
Craig A. Johnson
/s/ Philip G. Heasley Director March 19, 1996
---------------------
Philip G. Heasley
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Articles of
Association of the Transferor
3.2 Bylaws of the Transferor
4.1 Form of Pooling and Servicing
Agreement among the Transferor, the
Servicer and the Trustee*
4.2 Form of Series 1996-1 Supplement to
the Pooling and Servicing Agreement
among the Transferor, the Servicer
and the Trustee*
4.3 Form of Class A Certificate
(contained in Exhibit 4.2)*
4.4 Form of Class B Certificate
(contained in Exhibit 4.2)*
5.1 Opinion of Dorsey & Whitney re
Legality*
8.1 Opinion of Dorsey & Whitney re Tax
Matters*
23.1 Consent of Dorsey & Whitney
(contained in Exhibit 5.1)*
23.2 Consent of Dorsey & Whitney
(contained in Exhibit 8.1)*
24 Powers of Attorney (Included at page
II-4)
- -------------------------
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
FIRST BANK OF SOUTH DAKOTA (NATIONAL ASSOCIATION)
FIRST. The title of this Association, which shall carry on the
business of banking under the laws of the United States, shall be "First Bank of
South Dakota (National Association)."
SECOND. The main office of the Association shall be in the City of
Sioux City Fall, County of Minnehaha, State of South Dakota. The general
business of the Association shall be conducted at its main office and branches.
THIRD. The Board of Directors of this Association shall consist of
not less than five nor more than twenty-five members. At any meeting of the
shareholders held for the purpose of electing Directors, or changing the number
thereof, the number of Directors may be determined by a majority of the votes
cast by the shareholders in person or by proxy. Between meetings of the
shareholders held for the purpose of electing Directors, the Board of Directors
by a majority vote of the full Board may increase the size of the Board by not
more than four Directors in any one year, but not ot more than a total of
twenty-five Directors, and fill any vacancy so created in the Board. A majority
of the Board of Directors shall be necessary to constitute a quorum for the
transaction of the business at any Directors' meeting. Each Director, during
the full term of his directorship, shall own a minimum of $1,000 par value of
stock of this Association, or an equivalent interest in stock of First Bank
System, Inc.
FOURTH. The regular annual meeting of the shareholders of this
Association shall be held at its main banking house, or other convenient place
duly authorized by the Board of Directors, on such day of each year as is
specified therefor in the By-laws, but if no election is held on that day, it
may be held on any subsequent day according to such lawful rules as may be
prescribed by the Board of Directors.
FIFTH. The Authorized amount of capital stock of this Association
shall be divided into 250,000 shares of common stock at the par value of Fifty
Dollars ($50.00) each; but said capital stock may be increased or decreased from
time to time, in accordance with the provisions of the laws of the United
States.
No holder of shares of the capital stock of any class of the
Association shall have any preemptive or preferential right of subscription to
any shares of any class of stock of the Association, whether nor or hereafter
authorized, or to any obligations convertible into stock of the Association,
issued or sold, nor any right of subscription to any thereof other than such, if
any, as the Board, in its discretion may determine and at such price as the
Board may fix.
The Association, and at any time and from time to time, may authorize
and issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The Board of Directors shall appoint one of its members
President of this Association, who shall be Chairman of the Board, unless the
Board appoints another director to be the Chairman. The Board may also appoint
one or more of its members to serve as Vice Chairman. The Board shall have the
power to appoint such officers and employees as may be required to transact the
business of this Association; to fix the salaries to be paid to such officers
and employees of this Association; and to dismiss any of such officers or
employees and appoint others to take their place.
<PAGE>
The Board of Directors shall have the power to define the duties of
officers and employees of this Association and to require adequate bonds from
them for the faithful performance of their duties; to regulate the manner in
which any increase of the capital of the Association shall be made; to make all
By-laws that may be lawful for the general regulation of the business of this
Association and the management of its affairs; and generally to do and perform
all acts that may be lawful for a Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office of this Association to any other place within the
limits of the City of Sioux Falls, South Dakota, without the approval of the
shareholders of this Association but subject to the approval of the Comptroller
of the Currency; and shall have the power to change the location of any branch
or branches of this Association to any other location, without the approval of
the shareholders of this Association but subject to the approval of the
Comptroller of the Currency.
EIGHTH. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
NINTH. The board of directors of this Association, or any three of
more shareholders owning, in the aggregate, not less than ten per centum of the
stock of this Association, may call a special meeting of shareholders at any
time; provided, however, that unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place, and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this Association at their respective
addresses as shown upon the books of this Association.
TENTH. Any action required to be taken at a meeting of the
shareholders or directors of or any action which may be taken at a meeting of
shareholder or directors may be taken without a meeting if consent in writing,
setting forth the action as taken shall be signed by all the shareholders or
directors entitled to vote with respect to the matter thereof. Such action
shall be effective on the date on which the last signature is placed on the
writing, or such earlier date as is set forth therein.
ELEVENTH. Meetings of the board of directors or shareholders, regular
or special, may be held by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can simultaneously hear each other, and participation in such meeting by
such aforementioned means shall constitute presence in person at such meeting.
TWELFTH. Any person, such person's heirs, executors, or
administrators may be indemnified or reimbursed by the Association for
reasonable expenses actually incurred in connection with any action, suit or
proceeding, whether civil, criminal, or administrative, to which such person or
such person's heirs, executors, or administrators shall be made a party by
reason of such person being or having been a director, advisory director,
officer, employee, or agent of the Association of any firm, corporation, or
organization which such person served in any such capacity at th request of the
Association. Provided, however, that no such person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding: (1)
as to which such person shall finally be adjudged to have been guilty of or
liable for gross negligence, willful misconduct, or criminal acts in the
performance of such person's duties to the Association, or (2) which has been
made the subject of a compromise settlement except with the approval of a court
of competent jurisdiction, or the holders of record of a majority of outstanding
shares of the Association, or the board of directors acting by vote of directors
not parties to the same or substantially the same action, suit or proceeding
constituting a majority of the whole number of directors, or (3) against
expenses, penalties, or other payments incurred in an administrative proceeding
or action instituted by an appropriate bank regulatory agency, which proceeding
or actions results in a final order assessing civil money penalties or requiring
affirmative action by such person in the form of payment to the Association.
The foregoing right of
<PAGE>
indemnification or reimbursement shall not be exclusive of other rights to which
such person, such person's heirs, executors, or administrators, may be entitled
as a matter of law.
Such expenses actually incurred by such person in connection with such
action, suit, or proceeding may be paid by the Association in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Association. Prior to the advancement of any such expenses, the board of
directors shall determine in writing that all of the following conditions are
met: (1) such person has a substantial likelihood of prevailing on the merits,
(2) in the event such person does not prevail, such person will have the
financial capability to reimburse the Association, and (3) payment of such
expenses by the Association will not adversely affect the safety and soundness
of the Association. If at any time the board of directors believes, or should
reasonably believe, that any of the above conditions are not met, the
Association shall cease paying such expenses. Further, the Association shall
enter into a written agreement with such person specifying the conditions under
which such person shall reimburse the Association.
The Association may, upon the affirmative vote of a majority of its
board of directors, purchase insurance for the purpose of indemnifying such
directors, advisory directors, employees, or agents to the extent that such
indemnification is allowed in this Article Twelfth. Such insurance shall not
provide coverage of liability for any formal order issued by a regulatory
authority assessing civil money penalties against a director, advisory director,
officer, employee, or agent. Further, such insurance may, but need not be, for
the benefit of all such directors, advisory directors, officers, employees, or
agents.
THIRTEENTH. These Articles of Association may be amended at any
regular or special meeting of the shareholders by the affirmative vote of the
holders of a majority of the stock of this Association, unless the vote of the
holders of a greater amount of stock is required by law and in that case by the
vote of the holders of such greater amount. The notice of any shareholders'
meeting at which an amendment to the Articles of Association of this Association
is to be considered shall be given as hereinabove set forth.
<PAGE>
EXHIBIT 3.2
BYLAWS
FIRST BANK OF SOUTH DAKOTA (NATIONAL ASSOCIATION)
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1. ANNUAL MEETING. The annual meeting of the shareholders,
for the election of directors and the transaction of other business, shall be
held at a time and place as the President or Chairman may designate. Notice of
such meeting shall be given at least ten days prior to the date thereof, to
each shareholder of the Association. If, for any reason, an election of
directors is not made on the designated day, the election shall be held on some
subsequent day, as soon thereafter as practicable, with prior notice thereof.
Section 1.2. SPECIAL MEETINGS. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at any time by a majority of the Board of Directors or by any
shareholder or group of shareholders owning at least 10% of the outstanding
stock. Every such special meeting, unless otherwise provided by law, shall be
called upon not less than ten days prior notice stating the purpose of the
meeting.
Section 1.3. NOMINATIONS FOR DIRECTORS. Nominations for election to
the Board of Directors may be made by the Board of Directors or by any
stockholder.
Section 1.4. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing. Proxies shall be valid only
for one meeting and any adjournments of such meeting and shall be filed with the
records of the meeting.
Section 1.5. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law. A majority of the votes cast
shall decide every question or matter submitted to the shareholders at any
meeting, unless otherwise provided by law or by the Articles of Association.
ARTICLE II
DIRECTORS
Section 2.1. BOARD OF DIRECTORS. The Board of Directors (hereinafter
referred to as the "Board", shall have power to manage and administer the
business and affairs of the Association. Except as expressly limited by law,
all authorized corporate powers of the Association shall be vested in and may be
exercised by said Board.
Section 2.2. NUMBER. The Board of Directors shall consist of not
fewer than five nor more than twenty-five shareholders, the exact number to
be fixed and determined from time to time by resolution of the Board or the
shareholders at any meeting thereof.
Section 2.3. ORGANIZATION MEETING. The newly-elected Board shall
meet for the purpose of organizing the new Board and electing and appointing
such officers of the Association as may be appropriate.
<PAGE>
Such meeting shall be held on the day of the election or as soon thereafter as
practicable, and, in any event, within thirty days thereof. If, at the time
fixed for such meeting, there shall not be a quorum present, the directors
present may adjourn the meeting until a quorum is obtained.
Section 2.4. REGULAR MEETINGS. The Regular Meeting of the Board
shall be held, without notice, each quarter as the President or Chairman may
designate and deem suitable.
Section 2.5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President of the Association, or at the request
of two or more directors. Each member of the Board shall be given notice
stating the time and place, of each such meeting.
Section 2.6. QUORUM. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but fewer may
adjourn any meeting. Unless otherwise provided, once a quorum is established,
any act by a majority of those constituting the quorum shall be the act of the
Board.
Section 2.7. VACANCIES. When any vacancy occurs among the directors,
the remaining members of the Board may appoint a director to fill such vacancy
at any regular meeting of the Board, or at a special meeting called for that
purpose.
ARTICLE III
COMMITTEES OF THE BOARD
Section 3.1. COMMITTEE. The Board may appoint, from time to time,
committees of one or more persons who need not be Directors, for such purposes
and with such powers as the Board may determine and subject at all times to the
direction and control of the Board.
Section 3.2. ADVISORY BOARD OF DIRECTORS. The Board may appoint
persons, who need not be Directors, to serve as Advisory Directors on an
Advisory Board of Directors established with respect to the affairs of either
this Bank or a group of affiliated banks of which this Bank is one. An Advisory
Director, shall have such powers and duties as may be determined by the Board,
provided, that the Board's responsibility for the business and affairs of this
Association shall in no respect be delegated or diminished.
Section 3.3. EXECUTIVE COMMITTEE. The Board may appoint an Executive
Committee which shall consist of at least three Directors and which shall have,
and may exercise, all of the powers of the Board between meetings of the Board
or otherwise when the Board is not meeting.
Section 3.4. MEETINGS, MINUTES. Committees and Boards appointed by
the Board shall meet as may be appropriate in consideration of the purpose of
such Committee or Board. Minutes of such meetings shall be maintained in
sufficient detail to indicate actions taken or recommendations made; unless
required by the members, discussions, votes or other details of such meetings
need not be reported.
ARTICLE IV
OFFICERS AND EMPLOYEES
Section 4.1. CHAIRPERSON OF THE BOARD. The Board may appoint one of
its members to be Chairman of the Board to serve at the pleasure of the Board.
The Chairman shall supervise the carrying out of the policies adopted or
approved by the Board; shall have general executive powers, as well as the
specific powers conferred by these Bylaws; shall also have and may exercise such
powers and duties as from time to time may be conferred upon or assigned by the
Board.
<PAGE>
Section 4.2. PRESIDENT. The Board of Directors shall appoint one of
its members to be President of the Association. The President shall have
general executive powers, and shall have and may exercise any and all other
powers and duties pertaining by law, regulation or practice, to the Office of
President, or imposed by these Bylaws. The President shall also have and may
exercise such powers and duties as from time to time may be conferred or
assigned by the Board of Directors.
Section 4.3. COMMUNITY BANK PRESIDENTS. Community Bank Presidents
shall have general authority over and be responsible for the business of the
respective Community Banks to which they may be assigned and shall exercise such
powers and perform such duties with respect thereto as may from time to time be
prescribed by the Board of Directors.
Section 4.4. SENIOR VICE PRESIDENT AND VICE PRESIDENT. The Board of
Directors may appoint one or more Senior Vice Presidents and one or more Vice
Presidents who shall have such powers and duties as may be assigned by the
Board. A Senior Vice President or, if no Senior Vice President shall have been
appointed, one Vice President shall be designated by the Board to preside at any
meeting of the Board in the absence of both the Chairman and President.
Section 4.5. SECRETARY. The Board of Directors shall appoint a
Secretary, Cashier or other designated officer who shall be Secretary of the
Board of Directors and of the Association, and shall keep accurate minutes of
all meetings. The Secretary shall attend to the giving of all notices required
by these Bylaws to be given; shall be custodian of the corporate seal, records,
documents and papers of the Association; shall provide for the keeping of proper
records of all transactions of the Association; shall have and may exercise any
and all other powers and duties pertaining by law, regulation or practice, to
the Office of Cashier, or imposed by these Bylaws; and shall also perform such
other duties as may be assigned from time to time, by the Board.
Section 4.6. OTHER OFFICERS. The Board of Directors may appoint, and
may authorize the President to appoint, such other officers as from time to time
may appear to the Board or the President to be required or desirable to transact
the business of the Association. Such officers shall exercise such powers
and perform such duties as pertain to their several offices, or as may be
conferred upon or assigned to them by the Board or the President.
Section 4.7. TENURE OF OFFICE. The President and all other officers
shall hold office for the current year for which the Board was elected, unless
the officer shall resign, become disqualified, or be removed, and any vacancy
occurring in the office of President shall be filled promptly by the Board.
With the exception of the Senior Vice President, Vice President and
Secretary, any officer elected by the Board or appointed by the President may be
removed at any time, with or without cause, by the affirmative vote of the
majority of the Board or by the President.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Shares of stock shall be transferable on the books of the Association,
and a transfer book shall be kept in which all transfers of stock shall be
recorded. Every person becoming a shareholder by such transfer shall, in
proportion to his shares, succeed to all rights of the prior holder of such
shares. Each certificate of stock shall recite on its face that the stock
represented thereby is transferable only upon the books of the Association
properly endorsed.
ARTICLE VI
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CORPORATE SEAL
The President, the Cashier, the Secretary or any Assistant Cashier or
Assistant Secretary, or other officer thereunto designated by the Board, shall
have authority to affix the corporate seal to any document requiring such seal,
and to attest the same. Such seal shall be substantially in the following form:
(Impression)
(of)
(Seal)
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. EXECUTION OF INSTRUMENTS. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies, and other instruments or
documents may be signed, executed, acknowledged, verified, delivered, or
accepted on behalf of the Association by the President and such other officers
as the President may direct. Any such instruments may also be executed,
acknowledged, verified, delivered, or accepted on behalf of the Association in
such other manner and by such other officers as the Board may from time to time
direct. The provisions of this Section 7.1 are supplementary to any other
provision of these Bylaws.
Section 7.2. RECORDS. The Articles of Association, the Bylaws, and
the proceedings of all meetings of the shareholders, the Board, and standing
committees of the Board, shall be recorded in appropriate minute books provided
for the purpose. The minutes of each meeting shall be signed by the secretary
or other officer appointed to act as Secretary of the meeting.
Section 7.3. NOTICE. Whenever notice is required by the Articles of
Association, these Bylaws or law, such notice shall be by mail, postage prepaid,
telegram, in person, or by any other means by which such notice can reasonably
be expected to be received, using the address of the person to receive such
notice, or such other personal data, as may appear on the records of the
Association. Prior notice shall be proper if given not more than 30, nor less
than 10, days prior to the event for which notice is given.
ARTICLE VIII
AMENDMENTS
The Bylaws may be amended, altered, or repealed, at any regular
meeting of the Board, by a vote of a majority of the total number of the
Directors.
ARTICLE IX
TRUST DEPARTMENT
Section 9.1. TRUST DIVISION. There shall be a division of the
Association known as the Trust Division which shall perform the fiduciary
responsibilities of the Association.
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Section 9.2. TRUST DIVISION EXECUTIVE OFFICER. There shall be at
least one officer of this Association who shall carry such title as designated
by the Board of Directors. Such officer shall be responsible to the Chairman or
President for the management of the Trust Division and the discharge of the
executive duties relating to the Trust Division including, but not limited to,
the following:
(a) Responsibility for the overall supervision of the Division
including officers; assignment of duties within the division; supervision and
responsibility for the personnel of all detail operations in connection with the
handling of trust accounts, including the keeping of appropriate records and
ticklers to insure prompt distribution to beneficiaries of fiduciary accounts,
and payment of taxes, insurance and other debts of accounts under administration
in the Trust Division.
(b) General supervision of bookkeepers, clerks, stenographers,
typists, tellers and vault attendants, as well as the Trust Division files.
(c) General supervision over the overall administration of accounts
in the Trust Division.
(d) Submission to the Chairman or President of the Association, for
the determination of matters relating to policy of the Trust Division.
(e) Correlate with other trust administrative officers working under
this officer's general supervision plans for administering Trust Division
accounts.
(f) Responsibility for the submission of all accounts of Trust
Division activities, personnel problems and earnings to the Chairman or
President of the Association, and through him to its Board of Directors.
(g) As executive officer in charge of the Trust Division such officer
shall receive reports from other officers in the Trust Division for transmittal,
in appropriate cases, to the Chairman or President, and to the Board of
Directors.
(h) As chief supervising officer of the Trust Division, such officer
shall recommend changes, division promotions and compensation for the officers
and employees employed in the Trust Division, to the Chairman or President of
the Association. The services of no officer in the Trust Division shall be
terminated unless first approved by the Chairman or President of the
Association.
(i) Primary responsibility for the preparation of trust investment
reviews and analyses, and the execution of purchases and sales of securities,
and other assets.
(j) Power and authority, as well as the duty and responsibility, of
designating those employees and officers who shall handle and discharge specific
duties, and if absent or incapacitated, the Chairman or President of the
Association, shall designate a substitute to perform and discharge these duties
and responsibilities, with such limitations as may be prescribed.
Section 9.3. OTHER OFFICERS. The Board of Directors may appoint
other officers of the Trust Division as it may deem necessary, with such duties
as may be assigned. Such additional officers shall receive such titles as may
be from time to time designated by the Board of Directors.
The Executive Officer or any Trust Officer of the Trust Division shall
have the power to sell any and all real estate or interest therein, and personal
property, including but not limited to, notes, stocks, bonds and other
securities of every description at any time held by this Association as Trustee,
executor or in any other fiduciary capacity under any will, inter vivos trust or
other instrument of whatever character under which the Association is acting,
where the Association as Trustee is given the power sought to be exercised; and
shall have the power to make and execute deeds of conveyance, leases,
unitization
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agreements, transfer and division orders, releases, assignments, bills of sale
and other instruments in the name of the Association as Trustee, executor or in
the fiduciary capacity in which the Association is acting.
Any Trust Officer assigned to duties in the Trust Division may accept
fiduciary accounts on behalf of the Association, make discretionary
distributions of income or corpus and distribute corpus and income of trust
accounts to authorized beneficiaries upon the termination, closing or
relinquishment of fiduciary accounts. When any such Trust Officer takes action
under the aforesaid authority, such officer shall make proper notes and minutes
of such action or actions and include the minutes and notes of such action or
actions in the permanent record book of the Trust Committee of the Association,
which permanent record book is made available for perusal by the members of the
Trust Investment Committee at its regular meetings.
Section 9.4. TRUST AUDIT COMMITTEE. There shall be a Trust Audit
Committee comprised of three people. Two of the members will be Board directors
that do not have managerial authority over Trust and the third member will be a
First Bank System officer with experience in accounting and finance.
Section 9.5. TRUST INVESTMENT COMMITTEE. The Board of Directors
shall appoint a Trust Investment Committee consisting of not less than four
(4) Officers of the Association. The Trust Investment Committee: (1) shall
approve the investment, retention and disposal of trust assets in all trust
accounts; (2) shall at least once during each period of twelve months review the
assets held in or for each fiduciary account to determine their safety and
current value and the advisability of retaining or disposing of such assets; (3)
shall perform such other duties or functions as the Board may direct; (4) shall
meet at such time as it may designate, keep minutes of all its meetings
including reports of all accounts reviewed and the disposition made of all
matters considered; and, (5) shall make regular reports to the Board in such
form as the Board shall require.
