<PAGE>
REGISTRATION NO. 333-1837
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5
TO
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)
<TABLE>
<S> <C> <C>
UNITED STATES 6021 46-0168855
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code No.) Identification No.)
</TABLE>
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:
<TABLE>
<S> <C>
CHARLES F. SAWYER, ESQ. SUSAN M. CURTIS, ESQ.
DORSEY & WHITNEY LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
220 SOUTH SIXTH STREET 919 THIRD AVENUE
MINNEAPOLIS, MINNESOTA 55402 NEW YORK, NEW YORK 10022
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
Class A Asset Backed Certificates.......... $394,800,000 100% $394,800,000 $119,657.26
Class B Asset Backed Certificates.......... $6,300,000 100% $6,300,000 $1,929.99
TOTAL...................................... $401,100,000 100% $401,100,000 $121,587.25
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Prospectus
First Bank Corporate Card Master Trust
$394,800,000 CLASS A 6.40% ASSET BACKED CERTIFICATES, SERIES 1997-1
$6,300,000 CLASS B 6.55% ASSET BACKED CERTIFICATES, SERIES 1997-1
First Bank of South Dakota (National Association)
TRANSFEROR
FBS Card Services, Inc.
SERVICER
Each Class A 6.40% Asset Backed Certificate, Series 1997-1 (collectively, the
"Class A Certificates") and each Class B 6.55% Asset Backed Certificate, Series
1997-1 (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") governed by 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 balance of $18,900,000 will be issued as part of Series
1997-1, 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 24.
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.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Proceeds to
Price to Underwriting the Transferor
Public (1) Discount (1)(2)
- ------------------------------------------------------------------------------------------------------------------
Per Class A Certificate 99.87723% 0.325% 99.55223%
- ------------------------------------------------------------------------------------------------
Per Class B Certificate 99.87785% 0.375% 99.50285%
- ------------------------------------------------------------------------------------------------
Total $400,607,609 $1,306,725 $399,300,884
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, calculated from February 27, 1997.
(2) Before deducting expenses estimated to be $675,000.
The Certificates are offered by the Underwriters when, as, and if issued to 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 February 27, 1997
against payment therefor in immediately available funds.
Underwriters of the Class A Certificates
J.P. Morgan & Co.
Bear, Stearns & Co. Inc.
MorganStanley & Co.
Incorporated
Underwriter of the Class B Certificates
J.P. Morgan & Co.
February 20, 1997
<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 (as defined herein) 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 96. 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 1997-1 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 6.40% per
annum. Interest will accrue on the Class B Certificates at the rate of 6.55% per
annum. Interest will accrue on the Certificates from February 27, 1997 and is
payable semi-annually on February 15 and August 15 (or, if any such day is not a
business day, on the next succeeding business day) commencing August 15, 1997
and, with respect to each Class, on the Expected Final Payment Date for such
Class, 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
and the Class B Certificates is scheduled to be distributed on the February 2002
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.
Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
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),
which is 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.
In addition, the Commission maintains a public access site on the Internet
through the World Wide Web at which the Registration Statement (including any
amendments thereof and exhibits thereto) may be viewed. The Internet address of
such World Wide Web site is http://www.sec.gov.
2
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT 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 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 herein is correct as of any time subsequent to its date.
UNTIL MAY 21, 1997 (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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.......................... 2
Reports to Certificateholders.................. 3
Summary........................................ 5
Risk Factors................................... 24
The Trust...................................... 29
First Bank's Corporate Card and Purchasing Card
Programs..................................... 29
The Receivables................................ 36
Maturity Considerations........................ 42
Use of Proceeds................................ 43
First Bank of South Dakota (National
Association) and First Bank System, Inc...... 43
<CAPTION>
PAGE
----
<S> <C>
Description of the Certificates................ 43
Certain Legal Aspects of the Receivables....... 84
Federal Income Tax Consequences................ 87
State and Local Tax Consequences............... 92
ERISA Considerations........................... 93
Underwriting................................... 94
Legal Matters.................................. 95
Index of Terms................................. 96
Annex I: Global Clearance, Settlement and Tax
Documentation Procedures..................... A-1
</TABLE>
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 Securities Exchange
of 1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder so long as the Certificates are outstanding.
3
<PAGE>
[This Page is Intentionally Left Blank]
4
<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 96.
<TABLE>
<S> <C>
TYPE OF SECURITIES................ Class A 6.40% Asset Backed Certificates, Series 1997-1
(the "Class A Certificates") and Class B 6.55% Asset
Backed Certificates, Series 1997-1 (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")
was 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 amounts available from the Overconcentration
Account, 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 and amounts available from
the Overconcentration Account 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
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 Invested Amount.
For a discussion of other risk factors applicable to the
Certificates, see "Risk Factors."
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
TRUST............................. The Trust will be governed by a pooling and servicing
agreement (the "Agreement"), among First Bank of South
Dakota (National Association) ("First Bank" or the
"Bank"), as transferor, FBS Card Services, Inc., as
servicer, and Citibank, N.A., as trustee (the
"Trustee"). The Trust was 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 1997-1 Supplement") (the
term "Agreement," unless the context requires
otherwise, refers to the Agreement as supplemented by
the Series 1997-1 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 1997-1 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 1997-1" refers to the Series issued pursuant
to the Agreement, as supplemented by the Series 1997-1
Supplement. The Collateral Interest Holder will not be
an affiliate of First Bank.
Series 1997-1 is the first Series to be issued by the
Trust. Additional Series consisting of one or more
classes of certificates (each, a "Class") 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 follow-
ing 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
</TABLE>
- ---------
* VISA-Registered Trademark- is a federally registered servicemark of VISA USA,
Inc.
6
<PAGE>
<TABLE>
<S> <C>
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 certain amounts of Net
Interchange 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 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 1997-1, and the holders of
certificates of other Series will not be entitled to
the benefits of any Enhancement issued with respect to
Series 1997-1.
On February 27, 1997 (the "Closing Date"), 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 November 30, 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 Transferor 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 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 balance of the Transferor Interest will
fluctuate as the amount of Receivables in the Trust
changes from time to time.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
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
6.40% per annum (the "Class A Certificate Rate"),
accruing from the Closing Date and (ii) principal on
the February 2002 Distribution Date (the "Class 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
6.55% per annum (the "Class B Certificate Rate"),
accruing from the Closing Date and (ii) principal on
the February 2002 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 Invested Amount has 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 $394,800,000 (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
allocable 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 $6,300,000 (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, as Investor
Charge-Offs allocable to the Class B Certificates
occur or as certain Investor Default Amounts otherwise
allocable to the Class A Certificates are allocated to
the Class B Certificates when the Collateral Invested
Amount is zero.
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 $18,900,000 (the "Collateral
Initial Invested Amount" and, together with the Class
A Initial Invested Amount and the
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
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, as Investor
Charge-Offs allocable to the Collateral Investor
Interest occur or as certain Investor Default Amounts
otherwise allocable to the Class A Certificates and
the Class B Certificates are allocated to the
Collateral Investor Interest.
During the Accumulation Period, for the sole purpose of
allocating Yield Collections and the amount of
Defaulted Receivables with 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 February
2003 Distribution Date. Series 1997-1 will terminate
on the earliest to occur of (a) the Distribution Date
on which the Invested Amount is paid in full, (b) the
February 2003 Distribution Date or (c) the Trust
Termination Date (such earliest to occur, the "Series
1997-1 Termination Date"). After the Series 1997-1
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 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 Class A Investor Interest, the Class B Investor
Interest and the Collateral Investor Interest based on
the Class A Fixed Percentage, the Class B
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
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."
The aggregate amount of Receivables in the Accounts as
of the end of the day on the Cut-Off Date was
$555,691,966.42. 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. The "Yield Collections" for
any Collection Period will equal the
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
sum of (i) the aggregate amount of collections on the
Receivables during such Collection Period (other than
recoveries on charged-off Receivables and Net
Interchange, if any) multiplied by the Yield Factor,
(ii) certain amounts of Net Interchange attributed to
cardholder charges in the Accounts with respect to
such Collection Period and (iii) any earnings (net of
losses and investment expenses) on funds on deposit in
the Excess Funding Account during such Collection
Period. The remainder of the aggregate amount of
collections on the Receivables during any Collection
Period will be treated as "Principal Collections." The
"Yield Factor" of the Trust is equal to 2.00%, and is
a means of allocating collections on the Receivables
to the payment of interest and principal on the
Certificates which does not change the aggregate cash
flow available to the Trust. "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 "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 Transferor
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 Supple-
ments to the Agreement, the holder of the Exchangeable
Transferor Certificate may tender the Exchangeable
Transferor Certificate or, if provided in the relevant
Series Supplement, 100% of the 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
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 underwriters or placement agents,
in fixed-price offerings or in negotiated transactions
or otherwise. The Transferor's ability to make an
Exchange is subject to certain conditions precedent,
including the requirement that each Rating Agency that
has rated any outstanding Series confirm that the
Exchange will not result in the reduction or
withdrawal of its rating on any outstanding Series.
See "Description of the Certificates--Exchanges."
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
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 2.0% 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 FBS Card Services, Inc., Citibank,
N.A. or any of their respective affiliates is acting
as Servicer under the Agreement, a portion of the
Monthly Investor Servicing Fee equal to one-twelfth of
the product of 1.0% 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
February 15 and August 15 (or, if any such day is not
a business day, on the next succeeding 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. 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
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
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, amounts available from the Overconcentra-
tion Account 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, amounts available from the
Overconcentration Account and Reallocated Collateral
Principal Collections (to the extent available) and
(c) with respect to the Collateral Investor Interest,
from Excess Spread, Shared Excess Yield Collections
and amounts available from the Overconcentration
Account. See "Description of the
Certificates--Overconcentration Account,"
"--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 February 2002 Distribution Date (the "Class
A Expected Final Payment Date"). Principal on the
Class B Certificates is scheduled to be paid on the
February 2002 Distribution Date (the "Class B Expected
Final Payment Date"). No principal will be distributed
on the Class B Certificates until the Class A Invested
Amount has been paid in full. Distributions of princi-
pal 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 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
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Early Amortization Period. No principal will be
payable to the Class B Certificateholders until the
Class A Invested Amount has been paid in full. For the
period beginning on the Closing Date and ending with
the earlier of the commencement of the Accumulation
Period or the Early Amortization Period (the
"Revolving Period"), Principal Collections otherwise
allocable to the Certificateholders and the Collateral
Interest Holder (other than Principal Collections
allocated to the Class B Certificateholders and the
Collateral Interest Holder that are used to pay any
deficiency in the Class A Required Amount or the Class
B Required Amount ("Reallocated Principal Collec-
tions")) 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,
subject to certain limitations, paid to the Transferor
as holder of the Exchangeable Transferor Certificate
or deposited into the Excess Funding Account 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 com-
mencement 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 opening of
business on the first day of the December 2001
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 opening of
business on the first day of the January 2002
Collection Period. Unless an Early Amortization Event
has occurred, the Accumulation Period will commence at
the opening of business on the day following 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 Series 1997-1 Termination Date.
During the Accumulation Period, prior to the payment of
the Class A Invested Amount in full, amounts equal to
the least of (a) the Available Investor Principal
Collections with respect to the preceding Collection
Period plus the amount of any Reallocated Principal
Collections used to fund any Class A Investor Default
Amount or Class B Investor Default Amount 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
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
deposited monthly in a trust account established by
the Trustee (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, an amount
equal to the lesser of (a) the Available Investor
Principal Collections with respect to the preceding
Collection Period plus the amount of any Reallocated
Principal Collections used to fund any Class A
Investor Default Amount or Class B Investor Default
Amount 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
monthly into the Collection Account on each Transfer
Date for distribution to the Class B Certificate-
holders until the Class B Invested Amount has been
paid in full. If, for any Collection Period, the sum
of the Available Investor Principal Collections and
the amount of any Reallocated Principal Collections
used to fund any Class A Investor Default Amount or
Class B Investor Default Amount for such Collection
Period exceeds 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 or deposited into
the Excess Funding Account. If, for any Collection
Period, the sum of the Available Investor Principal
Collections and the amount of any Reallocated
Principal Collections used to fund any Class A
Investor Default Amount or Class B Investor Default
Amount for such Collection Period is 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 losses and
investment 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
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
Funding Investment Shortfall") will be funded from
Class A Available Funds (including a withdrawal from
the Reserve Account to the extent available), a
withdrawal from the Overconcentration 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 Amorti-
zation 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 com-
mence 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 Series 1997-1
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
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
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, in certain circumstances,
paid to the Collateral Interest Holder as principal on
the Collateral Investor Interest or distributed to the
Transferor as holder of the Exchangeable Transferor
Certificate or deposited into the Excess Funding
Account; provided that (a) Principal Collections
allocable to the Collateral Investor Interest may be
used to cover shortfalls in Yield 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
Deposit Amount, with any excess (a) in certain
circumstances, paid to the Collateral Interest Holder
as principal on the Collateral Investor Interest or
(b) treated as Shared Principal Collections or
distributed to the Transferor as holder of the
Exchangeable Transferor Certificate or deposited into
the Excess Funding Account; (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 Invested Amount has
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. 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 Class B Invested Amount and the Collateral
Invested Amount are each reduced to zero and amounts
on deposit in the Overconcentration Account are
exhausted, 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
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
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 and amounts on deposit in the
Overconcentration Account are exhausted, 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," "Description 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) 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 1997-1 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 Collec-
tion 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
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
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 to pay the Collateral
Servicing Fee and any overdue 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, the amount, if any, available from
the Overconcentration Account will be used to fund the
remaining Class A Required Amount. If the amount
available from the Overconcentration Account is
insufficient to fund the remaining 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 effect to
reductions for any Collateral Investor Charge-Offs and
any 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 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 (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. 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 (such reduction, a "Class A Investor
Charge-Off"). If the Collateral Invested Amount and
the Class B Invested Amount are reduced to zero and
amounts on deposit in the Overconcentration Account
are exhausted, 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 Charges; Investor Charge-Offs."
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
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, the amount, if any, available from the
Overconcentration Account not required to fund the
Class A Required Amount will be used to fund the
remaining Class B Required Amount. If the amount
available from the Overconcentration Account is
insufficient to fund the remaining 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 Real-
located 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
Investor Charge-Offs and any Reallocated Collateral
Principal Collections and any adjustments made thereto
for the benefit of the Class A Certificateholders on
such Transfer Date) 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 Collateral Invested Amount
would have been reduced below zero (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" means (a)
$18,900,000 on the initial Transfer Date and (b) on
any Transfer Date thereafter, an amount equal to the
sum of (i) 4.5% of the sum of (x) the Class A Adjusted
Invested Amount and the Class B Invested Amount (after
giving effect to any reductions thereof on such
Transfer Date and the related Distribution Date) and
(y) the Collateral Invested Amount on the prior
Transfer Date after any adjustments made thereto on
such Transfer Date and (ii) during the Accumulation
Period, the excess, if any, of the Required
Overconcentration Account Amount over the amount on
deposit in the Overconcentration Account (after giving
effect to any deposit to be made to, and
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
any withdrawal to be made from, the Overconcentration
Account 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
amounts of Excess Spread and Shared Excess Yield
Collections allocable to Series 1997-1 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, distributions in respect
of 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-- Enhancement; Required Collateral
Invested Amount."
OVERCONCENTRATION ACCOUNT......... An account (the "Overconcentration Account") will be
held in the name of the Trustee for the benefit of the
Certificateholders and the Collateral Interest Holder.
The Overconcentration Account will have an initial
balance of zero. On any Transfer Date on which the
aggregate amounts of Eligible Receivables due from
companies with specified credit ratings and their
employees and consolidated affiliates exceed speci-
fied percentages of the total amount of Eligible
Receivables as described herein, certain amounts of
Excess Spread and Shared Excess Yield Collections are
required to be deposited in the Overconcentration
Account. To the extent that on any Transfer Date the
sum of Excess Spread and Shared Excess Yield
Collections is less than the Class A Required Amount,
the Class B Required Amount and the Collateral
Required Amount, amounts, if any, available from the
Overconcentration Account will be applied to fund the
remaining Class A Required Amount, Class B Required
Amount and Collateral Required Amount, in that order
of priority. If, on any Transfer Date, amounts on
deposit in the Overconcentration Account (after giving
effect to any deposits therein or withdrawals
therefrom on such Transfer Date) exceed the Required
Overconcentration Account Amount, such excess shall be
paid to the Collateral Interest Holder in accordance
with the Loan Agreement or treated as Shared Excess
Yield Collections allocable to other Series, and will
not be available to the Certificateholders. See
"Description of the Certificates-- Overconcentration
Account."
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
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
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 Certificates and the Collateral Investor Interest.
See "Description of the Certificates--Shared Principal
Collections."
OPTIONAL REPURCHASE............... The Invested Amount will be subject to optional
repurchase by the Transferor on any Distribution Date on
or after the Distribution Date on which 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 through the day
preceding the Distribution Date on which the
repurchase occurs. 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 "Federal
Income Tax Consequences" for additional information
concerning the application of federal income tax laws.
ERISA CONSIDERATIONS.............. Under a regulation issued by the Department of Labor
(the "Plan Assets Regulation"), the Trust's assets would
not be deemed "plan assets" of any employee benefit
plan holding interests in the Class A Certificates if
the Class A Certificates qualify as "publicly-offered
securities" within the meaning of the Plan Assets
Regulation. To qualify as publicly-offered securities,
certain conditions must be met, including that
interests in the Class A Certificates be held by at
least 100 independent persons upon completion of the
public offering being made hereby. The Underwriters
expect, although no assurance can be given, that the
Class A Certificates will be held by at least 100 such
persons, and the Transferor anticipates that the other
conditions of the Plan Assets Regulation will be met.
No monitoring or other measures will be taken to
ensure that any such conditions will be met with
respect to the Class A Certificates. If the Trust's
assets were deemed to be
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
"plan assets" of such a plan, there is uncertainty
whether existing exemptions from the "prohibited
transaction" rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), would
apply to all transactions involving the Trust's
assets. Accordingly, benefit plan fiduciaries should
consult with counsel before making a purchase of Class
A Certificates. See "ERISA Considerations."
The Underwriters do not expect that the Class B
Certificates will be held by 100 or more independent
investors and, therefore, do not expect that the Class
B Certificates will qualify as publicly-offered
securities under the Plan Assets Regulation.
Accordingly, the Class B Certificates may not be
acquired by employee benefit plan investors, including
but not limited to insurance company general accounts.
Each Certificate Owner of a Class B Certificate, by
its acceptance thereof, will be deemed to have
represented that it is not an employee benefit plan
investor. 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 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."
</TABLE>
23
<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 and the Collateral Interest Holder 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 Receivables
come into existence may have priority over the Transferor's or the Trust's
interest in such Receivables, and, if the Federal Deposit Insurance Corporation
(the "FDIC") were appointed receiver of the Transferor, the receiver's
administrative expenses may also have priority over the Trust's interest in such
Receivables. In OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir.
1993), CERT. DENIED, 114 S. Ct. 554 (1993), the United States Court of Appeals
for the 10th Circuit suggested that even where a transfer of accounts from a
seller to a buyer constitutes a "true sale," the accounts would nevertheless
constitute property of the seller's estate in a bankruptcy of the seller. If the
Transferor were to be placed into receivership and a court were to follow the
OCTAGON court's reasoning, Certificateholders might experience delays in payment
or possibly losses in their investment in the Certificates. Counsel to the
Transferor has advised the Transferor that the facts of the OCTAGON case are
distinguishable from those in the sale transactions between the Transferor and
the Trust and the reasoning of the OCTAGON case appears to be inconsistent with
established precedent and the UCC. See "Certain Legal Aspects of the
Receivables--Transfer of Receivables" and "--Certain Matters Relating to
Receivership."
RECEIVERSHIP OF TRANSFEROR. If, upon the insolvency of the Transferor, the
Transferor were to be placed into conservatorship or receivership, the FDIC as
conservator or receiver would have the power to repudiate contracts of, and to
request a stay of up to 90 days of any judicial action or proceeding involving,
the Transferor. With respect to the appointment of a receiver or conservator for
the Transferor, subject to certain qualifications, a valid perfected security
interest of the Trustee in the Receivables should be enforceable (to the extent
of the Trust's "actual direct compensatory damages" as described below) and
payments to the Trust with respect to the Receivables (up to the amount of such
damages) should not be subject to an automatic stay of payment or to recovery by
such a conservator or receiver. If, however, the FDIC were to assert that the
security interest was unperfected or unenforceable, or were to require the
24
<PAGE>
Trustee to establish its right to those payments by submitting to and completing
the statutory administrative claims procedure, or the FDIC were to request a
stay of judicial proceedings with respect to the Transferor, delays in payments
on the Certificates and possible reductions in the amount of those payments
could occur. In the event of a repudiation of obligations by the FDIC, a claim
for the repudiated obligation is limited to "actual direct compensatory damages"
determined as of the date of the appointment of the FDIC as conservator or
receiver. The FDIC has not adopted a formal policy statement on "actual direct
compensatory damages" with respect to collateralized borrowings of banks that
are repudiated. The Transferor believes that the general practice of the FDIC in
such circumstances is to permit the collateral to be applied to pay the
outstanding principal owed plus interest accrued at the contract rate up to the
date of payment, together with the costs of liquidation of the collateral if
provided for in the contract. In one case, however, involving the repudiation by
the Resolution Trust Corporation (the "RTC") of certain secured zero-coupon
bonds issued by a savings association, a United States federal district court
held that "actual direct compensatory damages" in the case of a marketable
security meant the value of the repudiated bonds as of the date of repudiation.
If that court's view were applied to determine the Trust's "actual direct
compensatory damages" in the event the FDIC repudiated the Transferor's
obligations under the Agreement, the amount paid to Certificateholders could,
depending upon circumstances existing on the date of the repudiation, be less
than the principal of the Certificates and the interest accrued thereon to the
date of payment. See "Certain Legal Aspects of the Receivables--Certain Matters
Relating to Receivership." If the FDIC were appointed as conservator or receiver
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 the FDIC were appointed as conservator or receiver for the Transferor and no
Early Amortization Event other than such conservatorship, receivership or
insolvency of the Transferor exists, the FDIC 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, the FDIC as
conservator or receiver for the Transferor may have the power to cause the early
payment of the Certificates, which could result in Certificateholders receiving
principal payments earlier than expected. See "Maturity Considerations." 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.
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 (i) the change would not, in the reasonable belief of the
Transferor, cause an early amortization event to occur with respect to the Trust
or any outstanding Series and (ii) 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
25
<PAGE>
Transferor to take actions which would change Account terms in a manner adverse
to the interests of Certificateholders.
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 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--Covenants,
Representations and Warranties" and "--Servicer Covenants" and "Certain Legal
Aspects of the Receivables--Consumer Protection Laws."
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 when there are no funds available from any Enhancement or other
sources to cover any resulting shortfalls in amounts payable to
Certificateholders. 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 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. See "Maturity Considerations."
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. See "Maturity Considerations." 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
26
<PAGE>
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 payments
with respect to the Class A Certificates. In addition, the Collateral Investor
Interest will be subordinated to the extent necessary to fund 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 will be
reduced by the amount of such reallocated principal payments. 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 will be reduced by the
amount of such reallocated principal payments. In addition, to the extent that
such reallocated principal payments are insufficient to fund required payments
with respect to the Class A Certificates and the Class B Certificates, the
Collateral Invested Amount may be reduced and, if the Collateral Invested Amount
is zero, the Class B Invested Amount may be reduced. In the event the Collateral
Invested Amount or the Class B Invested Amount is reduced, the percentage of
Yield Collections allocated to the Collateral Investor Interest or the Class B
Certificates, as applicable, in subsequent Collection Periods will be reduced.
Moreover, in the event 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 each Class 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 Collateral Invested Amount is reduced
to zero and amounts on deposit in the Overconcentration Account are exhausted,
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 Collateral Invested Amount and the Class B
Invested Amount are each reduced to zero and amounts on deposit in the
Overconcentration Account are exhausted, 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--Enhancement; Required Collateral Invested
Amount."
27
<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 1997-1. 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 1997-1 Supplement. However, the
Agreement and Series 1997-1 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. Social factors include the prevalence and popularity of charge cards as
a means of payment for businesses. Legal factors include legislative and
judicial developments affecting the enforceability of various fees and charges
and the remedies available to lenders on credit and charge card receivables.
Economic factors include the rate of inflation, unemployment levels and relative
interest rates. Cardholders whose accounts are included in the Bank Portfolio
have addresses in all 50 states, the District of Columbia and other United
States territories and possessions. 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
28
<PAGE>
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."
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, among other things, that
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.
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
29
<PAGE>
legitimate charges will directly affect the cardholder's willingness and ability
to make payment on the account. 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. 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 a variety of factors including payment performance on other loans and credit
facilities, stability of employment, length of time at current address and
amount of recent usage of other credit sources. 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.
30
<PAGE>
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. 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.
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, Minnesota and Fargo,
North Dakota, 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
31
<PAGE>
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 allocable to the Trust
will be treated as Yield Collections for the purposes of allocating Yield
Collections to Certificateholders.
BANK PORTFOLIO EXPERIENCE
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)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
<S> <C> <C> <C> <C>
1996 1995 1994 1993
------------ ------------ ------------ ------------
Charge Volume and Fees(1)................................ $ 5,124,989 $ 4,057,496 $ 2,745,798 $ 1,583,650
Average Net Receivables(2)............................... $ 568,822 $ 461,162 $ 317,324 $ 193,169
Receivable Turnover Rate(3).............................. 9.01 8.80 8.65 8.20
</TABLE>
- ------------------------------
(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, net of the adjustments referred to in footnote (1)
above, for each period shown.
(3) Receivable Turnover Rate is calculated by dividing Charge Volume and Fees by
Average Net Receivables for each period shown.
32
<PAGE>
MONTHLY PAYMENT RATES FOR THE BANK PORTFOLIO(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C> <C>
1996 1995 1994 1993
--------- --------- --------- ---------
Monthly Average Rate.......................................... 74.67% 72.62% 70.67% 69.93%
Highest Month................................................. 79.22% 78.78% 75.13% 77.08%
Lowest Month.................................................. 68.67% 67.36% 61.49% 59.98%
</TABLE>
- ------------------------
(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.
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 recoveries on charged-off Receivables and excluding Net Interchange,
if any) and the Yield Factor. Such portion of collections, plus certain amounts
of Net Interchange attributed to cardholder charges in the Accounts and any
earnings on funds on deposit in the Excess Funding Account, 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 2.00% (which is the 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 2.00%.
PERIODIC YIELD COMPUTATION FOR THE BANK PORTFOLIO
ASSUMING A 2.00% YIELD FACTOR
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C> <C>
1996 1995 1994 1993
--------- --------- --------- ---------
Computed Yield(1)..................................................... $ 99,113 $ 77,364 $ 51,092 $ 29,672
Computed Yield as a Percentage of Charge Volume
and Fees (2)........................................................ 1.93% 1.91% 1.86% 1.87%
Net Interchange(3).................................................... $ 84,072 $ 65,574 $ 44,554 $ 25,588
Net Interchange as a Percentage of Charge Volume and Fees............. 1.64% 1.62% 1.62% 1.62%
Computed Yield and Net Interchange as a Percentage of Charge Volume
and Fees............................................................ 3.57% 3.52% 3.48% 3.49%
</TABLE>
- ------------------------
(1) Computed Yield is the dollar amount equal to the product of the 2.00%
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
2.00% 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.
33
<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. 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)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C> <C>
1996 1995 1994 1993
--------- --------- --------- ---------
Gross Losses(1)............................................................ $ 6,691 $ 6,633 $ 4,682 $ 3,589
Gross Losses as a Percentage of Charge Volume and Fees..................... 0.13% 0.16% 0.17% 0.23%
Recoveries................................................................. $ 2,411 $ 2,817 $ 1,404 $ 1,161
Recoveries as a Percentage of Charge Volume and Fees....................... 0.05% 0.07% 0.05% 0.07%
Net Losses(2).............................................................. $ 4,280 $ 3,816 $ 3,278 $ 2,428
Net Losses as a Percentage of Charge Volume and Fees....................... 0.08% 0.09% 0.12% 0.15%
</TABLE>
- ------------------------
(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.
(2) Gross Losses minus Recoveries may not equal Net Losses due to rounding.
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.
34
<PAGE>
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.
PERIODIC NET YIELD COMPUTATION FOR
THE BANK PORTFOLIO ASSUMING A 2.00% YIELD FACTOR
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
<S> <C> <C> <C> <C>
1996 1995 1994 1993
---------- ---------- --------- ---------
Computed Net Yield................................................. $ 94,833 $ 73,548 $ 47,814 $ 27,244
Computed Net Yield as a Percentage of Charge Volume
and Fees......................................................... 1.85% 1.81% 1.74% 1.72%
Computed Net Yield and Net Interchange............................. $ 178,905 $ 139,122 $ 92,368 $ 52,832
Computed Net Yield and Net Interchange as a Percentage of Charge
Volume and Fees.................................................. 3.49% 3.43% 3.36% 3.34%
</TABLE>
The ability of the Trust to generate sufficient yield to pay interest to
Certificateholders and to pay the Servicing Fee depends upon the Receivable
Turnover 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, 1996, the Computed Net Yield as a Percentage of Charge Volume and
Fees was 1.85% and the Receivable Turnover Rate (total Charge Volume and Fees
divided by Average Net Receivables) was 9.01. The product of these two variables
results in a net yield as a percentage of Average Net Receivables of 16.67% for
the year ended December 31, 1996. Adding Net Interchange for the period results
in a net yield and Net Interchange as a percentage of Average Net Receivables of
31.45% for the year ended December 31, 1996. 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
<TABLE>
<CAPTION>
AVERAGE OF TWELVE MONTHS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
------------------------------ ------------------------------ ------------------------------ -----------
NUMBER OF DAYS DELINQUENT DELINQUENT DELINQUENT DELINQUENT
DELINQUENT(1) AMOUNT(2) PERCENTAGE(3) AMOUNT(2) PERCENTAGE(3) AMOUNT(2) PERCENTAGE(3) AMOUNT(2)
- ---------------------- ----------- ----------------- ----------- ----------------- ----------- ----------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
30 to 59 days......... $ 20,623 3.61% $ 16,869 3.66% $ 12,898 4.04% $ 8,021
60 to 89 days......... 4,377 0.77 3,681 0.80 2,242 0.70 1,747
90 to 119 days........ 1,662 0.29 1,511 0.33 1,032 0.32 623
120 or more days...... 1,028 0.18 871 0.19 642 0.20 382
----------- --- ----------- --- ----------- --- -----------
Total(4).......... $ 27,690 4.85% $ 22,932 4.97% $ 16,814 5.26% $ 10,773
----------- --- ----------- --- ----------- --- -----------
----------- --- ----------- --- ----------- --- -----------
<CAPTION>
NUMBER OF DAYS
DELINQUENT(1) PERCENTAGE(3)
- ---------------------- -----------------
<S> <C>
30 to 59 days......... 4.28%
60 to 89 days......... 0.93
90 to 119 days........ 0.33
120 or more days...... 0.20
---
Total(4).......... 5.75%
---
---
</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.
35
<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 $555,691,966.42. The Accounts originated under the
Corporate Card program had an aggregate balance of $423,389,097.17, an average
balance of $1,023.01 and an average age of approximately 26.95 months. The
Accounts originated under the Purchasing Card program had an aggregate balance
of $132,302,869.25, an average balance of $52,899.99 and an average age of
approximately 23.70 months. As of the Cut-Off Date, cardholders whose Accounts
are included in the Trust Portfolio had billing addresses in all 50 States, the
District of Columbia and other United States territories and possessions.
As of the Cut-Off Date, no one company (including its employees and
consolidated affiliates) accounted for more than 4.0% of total Corporate Card
and Purchasing Card Account balances in the Trust Portfolio. The Transferor
estimates that, as of the Cut-Off Date, the aggregate balances of Corporate Card
Accounts issued under the Joint & Several liability plan constituted less than
5.0% of total Corporate Card and Purchasing Card Account balances in the Trust
Portfolio.
The Receivables included in the Trust Portfolio, as of the Cut-Off Date,
represent aggregate Trust principal (the "Trust Principal Component") of
$544,578,127.09. 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. (Percentage columns may not sum
to 100% due to rounding.)
36
<PAGE>
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------------------------------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Credit Balance................................................. 18,800 4.52% $ (10,400,071.02) (1.87)%
No Balance..................................................... 154,766 37.17 -- --
$0.01 to $999.99............................................... 156,834 37.67 53,296,143.38 9.59
$1,000.00 to $4,999.99......................................... 73,294 17.60 155,855,751.59 28.05
$5,000.00 to $99,999.99........................................ 12,187 2.93 134,813,119.13 24.26
$100,000.00 to $999,999.99..................................... 436 0.10 125,662,766.40 22.61
$1,000,000.00 or More.......................................... 50 0.01 96,464,256.94 17.36
----------- ----------- ----------------- -----------
Total........................................................ 416,367 100.00% $ 555,691,966.42 100.00%
----------- ----------- ----------------- -----------
----------- ----------- ----------------- -----------
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------------------------------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent................................................. 370,866 89.07% $ 497,746,152.61 89.57%
Up to 29 Days.................................................. 40,094 9.63 53,918,496.22 9.70
30 to 59 Days.................................................. 5,407 1.30 4,027,317.59 0.72
60 or More Days................................................ -- -- -- --
----------- ----------- ----------------- -----------
Total........................................................ 416,367 100.00% $ 555,691,966.42 100.00%
----------- ----------- ----------------- -----------
----------- ----------- ----------------- -----------
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------------------------------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Less than 6 Months............................................. 44,381 10.66% $ 34,589,902.69 6.22%
From 6 Months to Less than 12 Months........................... 55,189 13.25 64,513,699.76 11.61
From 12 Months to Less than 24 Months.......................... 106,046 25.47 144,840,038.41 26.06
From 24 Months to Less than 36 Months.......................... 102,493 24.62 145,259,316.85 26.14
From 36 Months to Less than 48 Months.......................... 43,073 10.34 85,795,694.12 15.44
From 48 Months to Less than 60 Months.......................... 48,228 11.58 64,460,150.29 11.60
From 60 Months to Less than 72 Months.......................... 11,229 2.70 11,132,682.92 2.00
72 Months or More.............................................. 5,728 1.38 5,100,481.38 0.92
----------- ----------- ----------------- -----------
Total........................................................ 416,367 100.00% $ 555,691,966.42 100.00%
----------- ----------- ----------------- -----------
----------- ----------- ----------------- -----------
</TABLE>
37
<PAGE>
GEOGRAPHIC DISTRIBUTION OF CORPORATE CARD ACCOUNTS ISSUED
UNDER THE INDIVIDUAL LIABILITY PLAN OR JOINT & SEVERAL LIABILITY PLAN IN TRUST
PORTFOLIO(1)
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES
SUCH SUCH RECEIVABLES IN IN
STATE(2) ACCOUNTS ACCOUNTS SUCH ACCOUNTS SUCH ACCOUNTS
- ------------------------------------------------------------ ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
Alabama..................................................... 4,638 1.12% $ 3,127,073.07 0.85%
Alaska...................................................... 1,143 0.28 1,148,374.16 0.31
Arizona..................................................... 6,808 1.65 4,574,204.66 1.24
Arkansas.................................................... 3,689 0.89 1,563,599.31 0.42
California.................................................. 46,382 11.24 39,612,697.16 10.73
Colorado.................................................... 10,427 2.53 11,000,719.98 2.98
Connecticut................................................. 3,698 0.90 6,797,005.08 1.84
Delaware.................................................... 885 0.21 571,701.90 0.15
District of Columbia........................................ 915 0.22 1,085,720.13 0.29
Florida..................................................... 10,595 2.57 8,215,971.90 2.23
Georgia..................................................... 17,369 4.21 14,735,955.95 3.99
Hawaii...................................................... 290 0.07 216,933.00 0.06
Idaho....................................................... 1,663 0.40 1,504,806.79 0.41
Illinois.................................................... 25,044 6.07 23,033,730.80 6.24
Indiana..................................................... 15,666 3.80 9,267,363.60 2.51
Iowa........................................................ 3,164 0.77 2,148,782.09 0.58
Kansas...................................................... 3,070 0.74 2,155,138.45 0.58
Kentucky.................................................... 2,237 0.54 1,278,476.36 0.35
Louisiana................................................... 4,146 1.00 2,665,927.26 0.72
Maine....................................................... 1,057 0.26 609,170.28 0.17
Maryland.................................................... 7,166 1.74 5,965,662.55 1.62
Massachusetts............................................... 15,070 3.65 13,620,334.63 3.69
Michigan.................................................... 11,250 2.73 9,995,165.13 2.71
Minnesota................................................... 23,991 5.81 14,193,959.08 3.85
Mississippi................................................. 2,463 0.60 1,345,585.92 0.36
Missouri.................................................... 5,314 1.29 5,161,950.13 1.40
Montana..................................................... 587 0.14 438,215.77 0.12
Nebraska.................................................... 1,696 0.41 838,958.61 0.23
Nevada...................................................... 1,034 0.25 543,213.47 0.15
New Hampshire............................................... 5,827 1.41 6,517,844.41 1.77
New Jersey.................................................. 16,671 4.04 21,190,050.25 5.74
New Mexico.................................................. 6,859 1.66 2,110,205.68 0.57
New York.................................................... 12,653 3.07 12,823,459.60 3.47
North Carolina.............................................. 7,723 1.87 6,934,130.94 1.88
North Dakota................................................ 932 0.23 559,963.05 0.15
Ohio........................................................ 16,586 4.02 14,066,753.90 3.81
Oklahoma.................................................... 5,916 1.43 5,843,566.42 1.58
Oregon...................................................... 8,578 2.08 10,558,692.34 2.86
Pennsylvania................................................ 21,586 5.23 21,463,442.25 5.81
Rhode Island................................................ 1,166 0.28 1,077,661.62 0.29
South Carolina.............................................. 4,212 1.02 2,875,365.87 0.78
South Dakota................................................ 672 0.16 356,553.60 0.10
Tennessee................................................... 6,162 1.49 7,467,027.61 2.02
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES
SUCH SUCH RECEIVABLES IN IN
STATE(2) ACCOUNTS ACCOUNTS SUCH ACCOUNTS SUCH ACCOUNTS
- ------------------------------------------------------------ ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
Texas....................................................... 38,503 9.33% $ 47,008,234.25 12.73%
Utah........................................................ 2,528 0.61 1,858,830.92 0.50
Vermont..................................................... 166 0.04 133,042.72 0.04
Virginia.................................................... 7,985 1.93 5,912,010.32 1.60
Washington.................................................. 5,185 1.26 4,168,120.71 1.13
West Virginia............................................... 931 0.23 452,807.97 0.12
Wisconsin................................................... 8,598 2.08 7,052,325.53 1.91
Wyoming..................................................... 1,163 0.28 773,647.48 0.21
Other U.S. territories and possessions...................... 702 0.17 530,681.93 0.14
----------- ----------- ----------------- ------
Total................................................... 412,761 100.00% $ 369,150,816.59 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
- ------------------------
(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 and Purchasing Card Programs--First Bank's
Corporate Card Program."
(2) Based on individual cardholders' current billing addresses.
39
<PAGE>
GEOGRAPHIC DISTRIBUTION OF PURCHASING CARD ACCOUNTS AND CORPORATE CARD ACCOUNTS
ISSUED
UNDER THE CORPORATE LIABILITY PLAN IN TRUST PORTFOLIO(1)
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES
SUCH SUCH RECEIVABLES IN IN
STATE(2) ACCOUNTS ACCOUNTS SUCH ACCOUNTS SUCH ACCOUNTS
- ------------------------------------------------------------ ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
Alabama..................................................... 19 0.53% $ 381,162.72 0.20%
Alaska...................................................... 11 0.31 347,997.44 0.19
Arizona..................................................... 27 0.75 1,483,166.90 0.80
Arkansas.................................................... 37 1.03 443,967.45 0.24
California.................................................. 387 10.73 27,602,396.70 14.80
Colorado.................................................... 119 3.30 5,399,938.88 2.89
Connecticut................................................. 49 1.36 1,770,014.57 0.95
Delaware.................................................... 12 0.33 3,138,102.70 1.68
District of Columbia........................................ 13 0.36 834,887.32 0.45
Florida..................................................... 92 2.55 1,963,800.18 1.05
Georgia..................................................... 146 4.05 3,855,982.72 2.07
Idaho....................................................... 24 0.67 894,323.94 0.48
Illinois.................................................... 154 4.27 11,890,645.43 6.37
Indiana..................................................... 73 2.02 4,610,521.19 2.47
Iowa........................................................ 49 1.36 536,173.19 0.29
Kansas...................................................... 67 1.86 5,580,699.30 2.99
Kentucky.................................................... 5 0.14 57,665.10 0.03
Louisiana................................................... 23 0.64 468,353.86 0.25
Maine....................................................... 12 0.33 399,911.16 0.21
Maryland.................................................... 35 0.97 3,883,988.19 2.08
Massachusetts............................................... 140 3.88 6,516,887.46 3.49
Michigan.................................................... 153 4.24 7,431,821.13 3.98
Minnesota................................................... 201 5.57 11,672,240.30 6.26
Mississippi................................................. 35 0.97 132,859.20 0.07
Missouri.................................................... 112 3.11 3,618,812.11 1.94
Montana..................................................... 1 0.03 -- --
Nebraska.................................................... 11 0.31 1,759,005.22 0.94
Nevada...................................................... 13 0.36 186,841.97 0.10
New Hampshire............................................... 16 0.44 311,555.97 0.17
New Jersey.................................................. 120 3.33 8,027,745.56 4.30
New Mexico.................................................. 10 0.28 417,631.75 0.22
New York.................................................... 294 8.15 15,739,803.79 8.44
North Carolina.............................................. 76 2.11 5,049,226.28 2.71
North Dakota................................................ 4 0.11 47,978.70 0.03
Ohio........................................................ 158 4.38 10,002,750.46 5.36
Oklahoma.................................................... 96 2.66 2,479,188.31 1.33
Oregon...................................................... 36 1.00 3,908,787.93 2.10
Pennsylvania................................................ 140 3.88 10,579,321.34 5.67
Rhode Island................................................ 10 0.28 183,811.07 0.10
South Carolina.............................................. 34 0.94 1,482,237.19 0.79
South Dakota................................................ 1 0.03 15,188.46 0.01
Tennessee................................................... 79 2.19 2,254,207.27 1.21
Texas....................................................... 323 8.96 6,877,950.18 3.69
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES
SUCH SUCH RECEIVABLES IN IN
STATE(2) ACCOUNTS ACCOUNTS SUCH ACCOUNTS SUCH ACCOUNTS
- ------------------------------------------------------------ ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
Utah........................................................ 22 0.61% $ 2,236,873.30 1.20%
Vermont..................................................... 1 0.03 6,232.63 0.00
Virginia.................................................... 43 1.19 4,117,979.47 2.21
Washington.................................................. 32 0.89 1,547,893.60 0.83
West Virginia............................................... 6 0.17 79,163.96 0.04
Wisconsin................................................... 52 1.44 3,807,930.24 2.04
Wyoming..................................................... 7 0.19 60,995.98 0.03
Other U.S. territories and possessions...................... 26 0.72 444,530.06 0.24
----- ----------- ----------------- ------
Total................................................... 3,606 100.00% $ 186,541,149.83 100.00%
----- ----------- ----------------- ------
----- ----------- ----------------- ------
</TABLE>
- ------------------------
(1) Includes only Purchasing Card Accounts and Corporate Card Accounts issued
under the Corporate liability plan in the Trust Portfolio. See "First Bank's
Corporate Card and Purchasing Card Programs--First Bank's Purchasing Card
Program" and "--First Bank's Corporate Card Program."
(2) Based on the current billing addresses of the relevant Corporate Card and
Purchasing Card Accounts.
41
<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 Series 1997-1 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 1997-1 on each Special Payment Date with respect to such
Early Amortization Period, until the Series 1997-1 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.
Certificateholders should consider, in the case of Certificates purchased at a
discount, the risk that a slower than anticipated rate of payment of principal
on the Certificates could result in an actual yield that is less than the
anticipated yield and, in the case of Certificates purchased at a premium, the
risk that a faster than anticipated rate of payment of principal on the
Certificates could result in an actual yield that is less than the anticipated
yield.
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 Class A Certificates and the Class B
Certificates will be paid in full on their respective Expected Final Payment
Dates. Any reinvestment risks resulting from the payment of principal on the
Certificates earlier or later than expected will be borne entirely by the
Certificateholders. Such reinvestment risks include the risk that interest rates
may be lower at the time such holders receive payments of principal on their
Certificates than
42
<PAGE>
interest rates would otherwise have been had such payments of principal not been
made or had such payments of principal been made at a different time.
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.
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, South Dakota. 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, 1996,
First Bank had assets of $1.94 billion and shareholder's equity of $188.2
million, determined in accordance with regulatory accounting principles (which
differ, in certain instances, from generally accepted accounting principles). As
of September 30, 1996, First Bank System had assets of $36.84 billion and
shareholders' equity of $3.18 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
1997-1 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
1997-1 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
43
<PAGE>
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 pursuant to the
Loan Agreement to one or more third-party investors which will not be affiliates
of the Transferor. The Collateral Investor Interest is not offered hereby. The
Class A Initial Invested Amount will equal $394,800,000, the Class B Initial
Invested Amount will equal $6,300,000 and the Collateral Initial Invested Amount
will equal $18,900,000.
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 providers of Enhancement, if any, applicable to any
Series. 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. The Transferor Percentage as of any date of
determination will equal 100% minus the sum of the applicable allocation
percentages for all Series outstanding as of the date on which such
determination is being made. See "--Allocation Percentages."
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
44
<PAGE>
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 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.
45
<PAGE>
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.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under the 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 in the Trust 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.
46
<PAGE>
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.
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 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
47
<PAGE>
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
Interest on the principal balance of the Class A Certificates and the
principal balance 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 on each Interest Payment Date, commencing August
15, 1997, 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 15th day of the calendar
month in which the preceding Interest Payment Date occurred or, in the case of
the first Interest Payment Date, from and including the Closing Date, to but
excluding the 15th day of the calendar month in which such Interest Payment Date
occurs. 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 1997-1, amounts available from the Overconcentration Account 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 (excluding the portion of Yield Collections
attributable to Net Interchange that is allocable to Servicer Interchange); (ii)
if such Collection Period relates to a Distribution Date that occurs on or prior
to the payment in full of the Class A Invested Amount, the Principal
48
<PAGE>
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 1997-1, amounts available from the Overconcentration Account 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 Class B Floating Percentage of Yield Collections
with respect to such Collection Period (excluding the portion of Yield
Collections attributable to Net Interchange that is allocable to Servicer
Interchange).
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 Class A
Invested Amount. 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 Class B Invested Amount. During the Early
Amortization Period, which will begin upon the occurrence of an Early
Amortization Event, and until the Series 1997-1 Termination Date occurs,
principal will be paid first to the Class A Certificateholders until the Class A
Invested Amount has been paid in full, and then to the Class B
Certificateholders until the Class B Invested Amount has been paid in full.
On each Transfer Date during the Accumulation Period, beginning with the
Transfer Date in the month following the commencement of the Accumulation
Period, the Trustee will deposit in the Principal Funding Account an amount
equal to the least of (a) the Available Investor Principal Collections on
deposit in the Collection Account with respect to the preceding Collection
Period plus the amount of any Reallocated Principal Collections used to fund any
Class A Investor Default Amount or Class B Investor Default Amount 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
(after giving effect to reductions for any Class A Investor Charge-Offs) 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 Class A
Invested Amount 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 Available Investor Principal Collections
on deposit in the Collection Account with respect to the preceding Collection
Period plus the amount of any Reallocated Principal Collections used to fund any
Class A Investor Default Amount or Class B Investor Default Amount for such
Collection Period MINUS the portion of all such amounts applied to Class A
Monthly Principal on such Transfer Date and (b) the Class B Invested Amount
(after giving effect to reductions for any Class B Investor Charge-Offs and any
Reallocated Class B Principal Collections) 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.
49
<PAGE>
"Available Investor Principal Collections" means, with respect to any
Collection Period, an amount equal to the sum of (a) the Principal Collections
received during such Collection Period and certain other amounts, in each case
to the extent allocable to the Investor Interest, minus (b) the amount of
Reallocated Principal Collections for such Collection Period, plus (c) the
amount of any Shared Principal Collections with respect to other Series that are
allocated to Series 1997-1 in accordance with the Agreement.
On each Special Payment Date during the Early Amortization Period until the
Class A Invested Amount has been paid in full or the Series 1997-1 Termination
Date occurs, the Class A Certificateholders will be entitled to receive Class A
Monthly Principal in an amount up to the Class A Invested Amount. After payment
in full of the Class A Invested Amount, 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
Series 1997-1 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
length of the Accumulation Period will not be less than one month. On the
September 2001 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 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
two months, the Transferor may, at its option, postpone the commencement of the
Accumulation Period such that the number of months included in the Accumulation
Period will equal one. 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, if any, in the payment rate occurring
after the Closing Date.
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 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 will be reduced by the
amount of such reallocated principal payments. 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 will be reduced by the amount
of such reallocated principal payments. In addition, to the extent that such
reallocated principal payments are insufficient to fund required payments with
respect to the Class A Certificates and the Class B Certificates, the Collateral
Invested Amount may be reduced and, if the Collateral Invested Amount is zero,
the Class B Invested Amount may be reduced. In the event the Collateral Invested
Amount or the Class B Invested Amount is reduced, the percentage of Yield
Collections allocated to the Collateral Investor Holder or the Class B
Certificateholders, as applicable, in subsequent Collection Periods will be
reduced. Moreover, in the event the amount of such reduction in the Class B
Invested
50
<PAGE>
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 the 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
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 100% of 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 balance (or
method for calculating such balance), (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 periods during which or dates
on which principal will be paid or accrued, (vi) the method for allocating
collections to certificateholders, (vii) the names of any accounts to be used by
such Series and the terms governing the operation of any such accounts, (viii)
the percentage used to calculate servicing fees, (ix) the Minimum Transferor
Percentage applicable to such Series, (x) the applicable Minimum Trust Principal
Component required to be maintained through the designation by the Transferor of
Additional Accounts, (xi) the issuer and terms of any Enhancement with respect
thereto, (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) whether Net Interchange or other fees will be included in the funds
available to be paid for such Series, (xvii) the priority of any Series with
respect to any other Series, if applicable, (xviii) the rights of the holder of
the
51
<PAGE>
Exchangeable Transferor Certificate that have been transferred to
certificateholders of such Series and (xix) 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 balance 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.
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 income 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.
52
<PAGE>
COVENANTS, 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 Addition 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 the applicable Addition Date. 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, the Trust's rights in, to or under the
Receivables or their proceeds are impaired or the proceeds of such Receivables
are not available for any reason to the Trust free and clear of any lien, 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." Additionally, the
Transferor will covenant in the Agreement to accept, under certain conditions,
the designation as an Ineligible Receivable of each Receivable which is subject
to certain specified liens immediately upon the earlier to occur of the
discovery of any such lien by the Transferor or the Servicer, or receipt by the
Transferor of written notice of any such lien given by the Trustee. Each
Ineligible Receivable 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 Amount, the Transferor shall
make a deposit into the Excess Funding Account in an amount equal to the amount
required to cause the Transferor Amount to equal the Minimum Transferor Amount.
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 1997-1 Supplement and to
execute and deliver to the Trustee the Certificates pursuant to the Agreement,
(ii) the Agreement and the Series 1997-1 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 the proceeds
thereof (except for liens for local taxes and government charges not due and
payable or being contested in good faith by the Transferor), 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
53
<PAGE>
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 of all Series (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, 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
54
<PAGE>
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, 1998, 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 "Addition 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 business day (or, if First Bank or First Bank System maintains a certificate
of deposit rating or meets other criteria required by the applicable Rating
Agency, as of the end of any Collection Period), the Trust Principal Component
plus the principal amount, if any, on deposit in the Excess Funding Account
minus the sum of the invested amounts (or adjusted invested amounts for Series
with a principal funding account) and any Receivables allocated to Enhancement
providers for all Series (the "Transferor Amount") is less than the Minimum
Transferor Amount or if, as of the end of any business day (or, if First Bank or
First Bank System maintains a certificate of deposit rating or meets other
criteria required by the applicable Rating Agency, as of the end of any
Collection Period), the Trust Principal Component plus the principal amount, if
any, on deposit in the Excess Funding Account is less than the aggregate of the
minimum amounts of the Trust Principal Component (the "Minimum Trust Principal
Component") specified in the Series Supplement for each outstanding Series.
Failure to make any such required designation will result in an Early
Amortization Event with respect to the related Series. The "Minimum Transferor
Amount" is equal to, on any date of determination, the product of (a) the
Minimum Transferor Percentage and (b) the sum of (i) the Trust Principal
Component and (ii) the principal amount, if any, on deposit in the Excess
Funding Account, in each case as of the close of business on such date;
PROVIDED, HOWEVER, that the Transferor may reduce the Minimum Transferor Amount
upon receiving written confirmation from each Rating Agency that has rated any
outstanding Series that such reduction will not result in the reduction or
withdrawal of its rating on any outstanding Series and upon satisfaction of
certain other conditions to be set forth in the Agreement. The "Minimum
Transferor Percentage" is the highest percentage specified as the Minimum
Transferor Percentage in any Series Supplement for any outstanding Series. 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) the
Transferor shall give the Trustee, the applicable Rating Agency and the Servicer
written notice that such Additional Accounts will be included, which notice
shall specify the approximate aggregate amount of the Receivables or interests
therein to be transferred; (ii) the Transferor shall have delivered to the
Trustee a written assignment (including an acceptance by the Trustee on behalf
of the Trust for the benefit of the certificateholders) as provided in the
Agreement relating to such Additional Accounts (the "Assignment"), and the
Transferor shall have delivered to the Trustee a computer file or microfiche
list, dated the date of such Assignment, containing a true and complete list of
such Additional Accounts; (iii) the Transferor shall represent and
55
<PAGE>
warrant that (x) each Additional Account is, as of the Addition Date, an
Eligible Account, and each Receivable in such Additional Account is, as of the
Addition Date, an Eligible Receivable, (y) no selection procedures believed by
the Transferor to be materially adverse to the interests of certificateholders
were utilized in selecting the Additional Accounts from the available Eligible
Accounts from the Bank Portfolio, and (z) as of the Addition Date, the
Transferor is not insolvent; and (iv) the Transferor shall deliver certain
opinions of counsel with respect to the transfer of the Receivables in the
Additional Accounts to the Trust. 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.
The Minimum Transferor Percentage specified in the Series 1997-1 Supplement
is equal to, on any date of determination, the result obtained by rounding
upward to the nearest integer percentage which is evenly divisible by two (which
percentage shall never be less than 10% or more than 100%), the percentage
equivalent of the product of (A) 1.6 times (B) the highest result obtained for
any Collection Period within the twelve Collection Periods preceding the date of
determination by computing for each such Collection Period a fraction, the
numerator of which is the aggregate amount of Adjustments for such Collection
Period and the denominator of which is the aggregate gross amount of cardholder
charges and fees in the Accounts with respect to such Collection Period times
(C) a fraction, the numerator of which is the aggregate gross amount of
cardholder charges and fees in the Accounts with respect to the Collection
Period immediately preceding the date of determination and the denominator of
which is the Receivables balance net of Adjustments as of the close of business
on the last day of such Collection Period; provided that if such calculations
would require reference to one or more Collection Periods that occur prior to
the Closing Date, the amount of Adjustments, cardholder charges and fees, and
the Receivables balance net of Adjustments referred to above will be determined
with respect to all the receivables in the accounts in the Bank Portfolio. The
Minimum Trust Principal Component specified in the Series 1997-1 Supplement is
the Initial Invested Amount.
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 (a) the Transferor Amount exceeds the Minimum Transferor Amount
at the end of the related Collection Period and (b) the Trust Principal
Component plus the principal amount, if any, on deposit in the Excess Funding
Account exceeds the Minimum Trust Principal Component 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 of any Series. The
Transferor may, at its sole discretion, accept such offer in an aggregate amount
equal to an amount not greater than the lesser of (x) the excess of the
Transferor Amount over the Minimum Transferor Amount as of the end of the
related Collection Period and (y) the excess of the Trust Principal Component
plus the principal amount, if any, on deposit in the Excess Funding Account over
the Minimum Trust Principal Component at 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, among others: (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
56
<PAGE>
number and aggregate amount of Receivables; (ii) the Transferor shall represent
and warrant that no selection procedures adverse to the interests of the
certificateholders or any provider of Enhancement were utilized by the
Transferor 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 which 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; (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; and (vi) the Transferor shall have
delivered to the Trustee a Tax Opinion.
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 of all Series issued by the Trust, with the Transferor (so
long as the Transferor is not insolvent and the Transferor or First Bank System
maintains a certificate of deposit rating or meets other criteria required by
the applicable Rating Agency) or 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),
the deposits in which are insured by the FDIC and which at all times has a
short-term unsecured debt or certificate of deposit rating of at least A-1+ or
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, provided that such institution at all times has a long-term
unsecured debt rating of at least Baa3 so long as Moody's Investors Service,
Inc. is a Rating Agency. 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) 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 FDIC or any broker-dealer with "retail customers"
that is under the jurisdiction of the Securities Investors Protection Corp., (v)
money market funds which have a rating in the highest rating category from the
applicable Rating Agency 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 Servicer. 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.
ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT
On the date of processing, the Servicer will, subject to certain exceptions,
deposit collections on the 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 (i) the Servicer provides
to the Trustee a letter of credit or other credit support acceptable to the
applicable Rating Agency or (ii) First Bank or First Bank System
57
<PAGE>
maintains a certificate of deposit rating or meets other criteria required by
the applicable Rating Agency, the Servicer need not deposit collections
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 until the business day
preceding the Distribution Date (the "Transfer 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 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 is permitted to use such collections 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 such funds.
Notwithstanding anything in the Agreement to the contrary, whether the
Servicer is required to make monthly or daily deposits into the Collection
Account with respect to any Collection Period, (i) the Servicer will only be
required to deposit collections from the Collection Account into the Principal
Funding Account, Interest Funding Account, Overconcentration Account or Excess
Funding Account up to the required amount to be deposited into any such account
or, without duplication, distributed on or prior to the related Distribution
Date to Certificateholders or to the Collateral Interest Holder and (ii) if at
any time prior to such Distribution Date the amount of collections deposited in
the Collection Account exceeds the amount required to be deposited pursuant to
clause (i) above, the Servicer will be permitted to withdraw the excess from the
Collection Account. Collections on Receivables allocable to the Transferor
Interest will be remitted by the Servicer on each business 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 1997-1 based on the Floating Allocation
Percentage. The "Floating Allocation Percentage" means, 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 (which percentage shall never exceed 100%) of
a fraction the numerator of which is equal to the Class A Adjusted Invested
Amount as of the close of business on the last day of the immediately preceding
Collection Period (or the Class A Initial Invested Amount, in the case of the
first Collection Period applicable to Series 1997-1) and the denominator of
which is equal to the greater of (i) the sum of (A) the Trust Principal
Component as of the close of business on the last day of the immediately
preceding Collection Period and (B) the principal amount on deposit in the
Excess Funding Account as of the close of business on such day 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 (which percentage shall never exceed 100%) of
a fraction the numerator of which is equal to the Class B Invested Amount as of
the close of business on 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 1997-1) and the denominator of which is
equal to the greater of (i) the sum of (A) the Trust Principal Component as of
the close of business on the last day of the immediately preceding Collection
Period and (B) the principal amount on deposit in the Excess Funding Account as
of the close
58
<PAGE>
of business on such day 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 (which percentage shall never exceed 100%) of
a fraction the numerator of which is equal to the Collateral Invested Amount as
of the close of business on the last day of the immediately preceding Collection
Period (or the Collateral Initial Invested Amount, in the case of the first
Collection Period applicable to Series 1997-1) and the denominator of which is
equal to the greater of (i) the sum of (A) the Trust Principal Component as of
the close of business on the last day of the immediately preceding Collection
Period and (B) the principal amount on deposit in the Excess Funding Account as
of the close of business on such day 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 1997-1 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 1997-1 based on the Fixed Allocation 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 (which percentage shall never exceed 100%) of a fraction
the numerator of which is equal to the Class A Invested Amount as of the close
of business on the last day of the Revolving Period and the denominator of which
is equal to the greater of (i) the sum of (A) the Trust Principal Component as
of the close of business on the last day of the immediately preceding Collection
Period and (B) the principal amount on deposit in the Excess Funding Account as
of the close of business on such day 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 (which percentage shall never exceed 100%) of a fraction
the numerator of which is equal to the Class B Invested Amount as of the close
of business on the last day of the Revolving Period and the denominator of which
is equal to the greater of (i) the sum of (A) the Trust Principal Component as
of the close of business on the last day of the immediately preceding Collection
Period and (B) the principal amount on deposit in the Excess Funding Account as
of the close of business on such day 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 (which percentage shall never exceed 100%) of a
fraction the numerator of which is equal to the Collateral Invested Amount as of
the close of business on the last day of the Revolving Period and the
denominator of which is equal to the greater of (i) the sum of (A) the Trust
Principal Component as of the close of business on the last day of the
immediately preceding Collection Period and (B) the principal amount on deposit
in the Excess Funding Account as of the close of business on such day 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.
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
59
<PAGE>
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 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, 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 (c), (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 aggregate amount of Collateral Investor Charge-Offs for
all prior Transfer Dates, MINUS (d) the amount of Reallocated Collateral
Principal Collections used to make payments in respect of the Certificates on
all prior Transfer Dates, MINUS (e) an amount equal to the amount by which the
Collateral Invested Amount has been reduced on all prior Transfer Dates to fund
the Class A Investor Default Amount or the Class B 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 (c),
(d) and (e); 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 Trustee 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 and the Collateral Interest Holder. During the Accumulation
Period, on each Transfer Date beginning with the Transfer Date in the month
following the commencement of the Accumulation Period, the Servicer shall
transfer Principal Collections, Shared Principal Collections allocated to Series
1997-1 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.
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.
60
<PAGE>
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 losses and investment expenses) 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 (including a
withdrawal from the Reserve Account as described under "--Reserve Account") or
from Excess Spread and Shared Excess Yield Collections, the amount, if any,
available from the Overconcentration Account or 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 1997-1 Supplement, the Trustee will establish and
maintain with an Eligible Institution a reserve account as a segregated trust
account held for the benefit of the Certificateholders and the Collateral
Interest Holder (the "Reserve Account"). The Reserve Account provides a source
of funds for the distribution of interest on the Class A Certificates during the
Accumulation Period to the extent the Principal Funding Investment Proceeds and
other Class A Available Funds are insufficient. The Reserve Account will have an
initial balance of zero. On each Transfer Date from and after the Reserve
Account Funding Date, but prior to the termination of the Reserve Account as
described below, 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 scheduled 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 or the
certificates of other Series 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 1997-1. On each
Transfer Date (after giving effect to any deposit to be made to, and any other
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 or
otherwise treat such excess as Shared Excess Yield Collections allocable to
other Series.
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
61
<PAGE>
Trustee at the direction of the Servicer in Eligible Investments. The interest
and other investment income (net of losses and investment expenses) earned on
such investments will be retained in the Reserve Account to the extent the
amount on deposit is less than the Required Reserve Account Amount and otherwise
will be deposited in the Collection Account and treated as Class A Available
Funds.
On or before each Transfer Date with respect to the Accumulation Period
prior to the payment in full of the Class A Invested Amount 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 (after taking into account any interest and other investment
income (net of losses and investment expenses) retained in the Reserve Account
on such Transfer Date, but 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 or
otherwise treated as Shared Excess Yield Collections allocable to other Series.
Any amounts withdrawn from the Reserve Account and distributed to the Collateral
Interest Holder or treated as Shared Excess Yield Collections allocable to other
Series as described above will not be available for distribution to the
Certificateholders.
OVERCONCENTRATION ACCOUNT
Pursuant to the Series 1997-1 Supplement, the Trustee will establish and
maintain with an Eligible Institution an overconcentration account as a
segregated trust account held for the benefit of the Certificateholders and the
Collateral Interest Holder (the "Overconcentration Account"). The
Overconcentration Account provides a source of funds for the payment of the
Class A Required Amount, the Class B Required Amount and the Collateral Required
Amount. The Overconcentration Account will have an initial balance of zero. On
each Transfer Date, 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 Overconcentration Account (to the extent such amount is
less than the Required Overconcentration Account Amount). The "Required
Overconcentration Account Amount" for any Transfer Date will be equal to the
product of (a) the Overconcentration Balances as of the close of business on the
last day of the immediately preceding Collection Period and (b) the Floating
Allocation Percentage applicable during such Collection Period.
The "Overconcentration Balance," on any date of determination and with
respect to any company, will be equal to the amount of Eligible Receivables due
from such company and (without duplication) its employees and consolidated
affiliates which, expressed as a percentage of the amount of all Eligible
Receivables, exceeds (a) 6.0% for companies rated A-1 by Standard and Poor's
Ratings Services ("S&P"), (b) 4.5% for companies rated A-2 by S&P, (c) 3.5% for
companies rated A-3 by S&P and (d) 2.45% for
62
<PAGE>
companies rated below A-3 or not rated by S&P and with no Implied Rating (as
defined below); provided that other percentages may be used to the extent that
the applicable Rating Agency has confirmed in writing that such use will not
result in the reduction or withdrawal of its ratings of the Certificates. In
addition to, but without duplication of, amounts computed in accordance with the
preceding sentence, the Overconcentration Balances will include: (x) with
respect to the A-2 rating category, an amount equal to the excess, if any, of
(i) the sum of the amount of Eligible Receivables due from the two companies in
that category that (together with their employees and consolidated affiliates)
represent the two highest percentages of Eligible Receivables in such category
over (ii) 7% of the amount of all Eligible Receivables; (y) with respect to the
A-3 rating category, an amount equal to the excess, if any, of (i) the sum of
the amount of Eligible Receivables due from the three companies in that category
that (together with their employees and consolidated affiliates) represent the
three highest percentages of Eligible Receivables in such category over (ii) 7%
of the amount of all Eligible Receivables; and (z) with respect to the below
A-3/not rated category, an amount equal to the excess, if any, of (i) the sum of
the amount of Eligible Receivables due from the four companies in that category
that (together with their employees and consolidated affiliates) represent the
four highest percentages of Eligible Receivables in such category over (ii) 7%
of the amount of all Eligible Receivables. Receivables due from companies
(including their employees and consolidated affiliates) rated A-1+ by S&P will
be excluded from the computation of the Overconcentration Balance.
The percentage applicable to any company will be the percentage associated
with S&P's short-term debt rating that is in effect for such company. If no S&P
short-term debt rating is in effect for a company, the percentage applicable to
such company will be the percentage associated with the company's Implied Rating
based on S&P's rating for long-term debt or claims paying ability that is in
effect for such company. If no S&P rating for short-term debt, long-term debt or
claims paying ability is in effect for a company, the percentage applicable to
such company will be the percentage associated with S&P's short-term debt rating
that is in effect for such company's corporate parent, if any, or if no such S&P
short-term debt rating is in effect for such corporate parent, the corporate
parent's Implied Rating based on S&P's rating for long-term debt or claims
paying ability that is in effect for such corporate parent. If there is no basis
to determine an actual or Implied Rating for a company or its corporate parent
in accordance with the foregoing, such company will be considered not rated. The
"Implied Rating" associated with each S&P rating category for long-term debt or
claims paying ability will be as follows: companies rated A+ to AAA will be
assigned an Implied Rating of A-1+; those rated A- to A will be assigned an
Implied Rating of A-1; those rated BBB to BBB+ will be assigned an Implied
Rating of A-2; those rated BBB- will be assigned an Implied Rating of A-3; and
those rated below BBB- will be assigned an Implied Rating of "below A-3." The
Servicer will determine and advise the Trustee of the company credit ratings in
effect on the Closing Date and thereafter will determine and advise the Trustee
of such ratings quarterly on or prior to the Transfer Dates occurring in the
months of February, May, August and November.
On each Transfer Date (after giving effect to any deposit to be made to, and
any other withdrawal to be made from, the Overconcentration Account on such
Transfer Date), the Trustee will withdraw from the Overconcentration Account an
amount equal to the excess, if any, of the amount on deposit in the
Overconcentration Account over the Required Overconcentration Account Amount and
shall distribute such excess to the Collateral Interest Holder for application
in accordance with the terms of the Loan Agreement or otherwise treat such
excess as Shared Excess Yield Collections allocable to other Series. Any amounts
withdrawn from the Overconcentration Account and distributed to the Collateral
Interest Holder or treated as Shared Excess Yield Collections allocable to other
Series as described above will not be available for distribution to the
Certificateholders.
All amounts on deposit in the Overconcentration Account on any Transfer Date
(after giving effect to any deposits to, or withdrawals from, the
Overconcentration 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 losses
and investment expenses) earned on
63
<PAGE>
such investments will be retained in the Overconcentration Account to the extent
the amount on deposit is less than the Required Overconcentration Account Amount
and otherwise will be paid to the Transferor.
On or before each Transfer Date, a withdrawal will be made from the
Overconcentration Account in an amount equal to the lesser of (a) the Available
Overconcentration Account Amount with respect to such Transfer Date and (b) the
sum of any Class A Required Amount, Class B Required Amount and Collateral
Required Amount remaining after application of Excess Spread and Shared Excess
Yield Collections to the payment thereof (as specified under "--Application of
Collections--Excess Spread; Shared Excess Yield Collections"). Amounts withdrawn
from the Overconcentration Account on any Transfer Date will be used to fund
FIRST any remaining Class A Required Amount, SECOND any remaining Class B
Required Amount and THIRD any remaining Collateral Required Amount, in each case
after application of Excess Spread and Shared Excess Yield Collections allocable
to the payment thereof. On each Transfer Date, the amount available to be
withdrawn from the Overconcentration Account (the "Available Overconcentration
Account Amount") will be equal to the lesser of the amount on deposit in the
Overconcentration Account (after taking into account any interest and other
investment income (net of losses and investment expenses) retained in the
Overconcentration Account on such Transfer Date, but before giving effect to any
deposit to be made to the Overconcentration Account on such Transfer Date) and
the Required Overconcentration Account Amount for such Transfer Date.
EXCESS FUNDING ACCOUNT
If on any date the Transferor Amount would be less than the Minimum
Transferor Amount (after giving effect to any addition of Additional Accounts to
the Trust on such date) as a result of the distribution to the holder of the
Exchangeable Transferor Certificate of any Available Investor Principal
Collections that otherwise would be distributed to the holder of the
Exchangeable Transferor Certificate, the Servicer will not distribute such
amounts, but will instead deposit such funds in a segregated account established
and maintained by the Trustee, in the name of the Trust, for the benefit of
certificateholders of all Series issued by the Trust, with an Eligible
Institution (the "Excess Funding Account"). Funds on deposit in the Excess
Funding Account will be withdrawn and paid to the holder of the Exchangeable
Transferor Certificate on any date to the extent that the Transferor Amount
exceeds the Minimum Transferor Amount on such date; PROVIDED, HOWEVER, that if
an accumulation period or amortization period commences with respect to any
Series other than Series 1997-1, any funds on deposit in the Excess Funding
Account not released to the holder of the Exchangeable Transferor Certificate
will be treated as Shared Principal Collections to the extent needed to cover
principal payments due to or for the benefit of such Series, if the Series
Supplement with respect to such Series so provides. This feature is intended to
avoid or forestall the occurrence of an early amortization event (and thus
certain unexpected prepayments of the certificates) at a time when adequate
Principal Collections are not being generated in the Accounts by retaining
Principal Collections in the Trust for the benefit of certificateholders.
Certificateholders will not incur any costs, direct or indirect, as a result of
the inclusion of this feature.
Funds on deposit in the Excess Funding Account generally will be invested in
certain Eligible Investments described under "--Collection Account." Any
earnings (net of losses and investment expenses) on funds on deposit in the
Excess Funding Account during any Collection Period will be withdrawn from the
Excess Funding Account and treated as Yield Collections with respect to such
Collection Period.
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
64
<PAGE>
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 1997-1 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, the amount, if
any, available from the Overconcentration Account will then be used to fund the
remaining Class A Required Amount. If the amount available from the
Overconcentration Account is insufficient to fund the remaining 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 (after
giving effect to reductions for any Collateral Investor Charge-Offs and any
Reallocated Collateral Principal Collections on the related Transfer Date) 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 (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. 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. 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 1997-1 available to cover the Class B Investor Default
Amount on such Transfer Date as specified under "--Application of
Collections--Excess Spread; Shared Excess Yield Collections" herein. If the
Class B Required Amount is greater than zero, Excess Spread and Shared Excess
Yield Collections allocable to Series 1997-1 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, the amount, if any, available from the Overconcentration
Account not required to fund the Class A Required Amount will then be used to
fund the remaining Class B Required Amount. If the amount available from the
Overconcentration Account is insufficient to fund the remaining 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
65
<PAGE>
Class B Required Amount, then the Collateral Invested Amount (after giving
effect to reductions for any Collateral Investor Charge-Offs and any Reallocated
Collateral Principal Collections on such Transfer Date and any adjustments made
thereto for the benefit of Class A Certificateholders on such Transfer Date)
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 will be reduced by the amount by which the Collateral Invested
Amount would have been reduced below zero, 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 (but not to an amount in excess of the unpaid principal balance
of the Class A Certificates or Class B Certificates, as applicable) to the
extent of Excess Spread and Shared Excess Yield Collections allocable to Series
1997-1 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 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
1997-1 available to cover the Collateral Default Amount on such Transfer Date as
specified under "--Application of Collections--Excess Spread; Shared Excess
Yield Collections" herein. If the Collateral Required Amount is greater than
zero, Excess Spread and Shared Excess Yield Collections allocable to Series
1997-1 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 to 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 Yield Collections are insufficient to fund the Collateral Required
Amount, the amount, if any, available from the Overconcentration Account not
required to fund the Class A Required Amount or the Class B Required Amount will
then be used to fund the remaining Collateral Required Amount. If the amount
available from the Overconcentration Account is insufficient to fund the
remaining 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;
66
<PAGE>
(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 Available Investor
Principal Collections 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 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:
(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 balance of the Class A Certificates as of the
immediately preceding 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 balance of the Class A Certificates as of
the Closing Date at the Class A Certificate Rate for the period from and
including the Closing Date through the day preceding such Distribution Date.
"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 balance of the Class B Certificates as of the
immediately preceding Record Date; PROVIDED, HOWEVER, with respect to the first
Distribution Date, Class B Monthly Interest will be equal to the interest
accrued on the outstanding principal balance of the Class B Certificates as of
the Closing Date at the Class B Certificate Rate for the period from and
including the Closing Date through the day preceding such Distribution Date.
"Collateral Available Funds" means, with respect to any Collection Period,
an amount equal to the Collateral Floating Percentage of Yield Collections with
respect to such Collection Period (excluding the portion of Yield Collections
attributable to Net Interchange that is allocable to Servicer Interchange).
"Distribution Date" means the 15th day of each month (or, if any such day is
not a business day, on the next succeeding business day), commencing March 17,
1997.
67
<PAGE>
"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 1997-1 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 Available Investor Principal Collections 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 Available Investor Principal
Collections 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 (c), (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
have not been previously reimbursed) will be treated as a portion of
Available Investor Principal Collections 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 the related
Distribution Date plus the amount of any Collateral Monthly Interest
previously due but not paid to the Collateral Interest Holder on a prior
Distribution Date will be paid to the Collateral Interest Holder in
accordance with the Loan Agreement;
(h) an amount equal to the Collateral Default Amount for such Transfer
Date will be treated as a portion of Available Investor Principal
Collections 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 Available Investor Principal Collections 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;
68
<PAGE>
(k) an amount up to the excess, if any, of the Required
Overcollateralization Account Amount over the Available
Overcollateralization Account Amount shall be deposited into the
Overconcentration Account;
(l) an amount equal to the aggregate of any other amounts then due to
the Collateral Interest Holder pursuant to the Loan Agreement shall be
applied in accordance with the Loan Agreement; and
(m) 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 holder of the Exchangeable Transferor
Certificate.
"Collateral Monthly Interest" means, with respect to any Distribution 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 Collateral Invested Amount. "Collateral Rate"
means a rate equal to 1% per annum above the London interbank offered rate for
one-month United States dollar deposits or such lesser rate designated pursuant
to the Loan Agreement.
PAYMENTS OF PRINCIPAL. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will distribute Available Investor Principal
Collections on deposit in the Collection Account plus the amount of any
Reallocated Principal Collections used to fund any Class A Investor Default
Amount or Class B Investor Default Amount for such Collection Period in the
following priority:
(a) On each Transfer Date with respect to the Revolving Period, all such
Available Investor Principal Collections and such amount of Reallocated
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 Investor Principal Collections
and such amount of Reallocated Principal Collections will be deposited or
distributed in the following priority:
(i) an amount equal to Class A Monthly Principal for such Transfer Date
will, during the Accumulation Period, beginning with the Transfer Date in
the month following the commencement of 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;
(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 least of (i) the
Available Investor Principal Collections on deposit in the Collection Account
with respect to the preceding Collection Period plus the amount of any
Reallocated Principal Collections used to fund any Class A Investor Default
Amount or Class B Investor Default Amount for such Collection Period, (ii) for
69
<PAGE>
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 (iii) the Class A Adjusted Invested Amount (after giving effect to
reductions for any Class A Investor Charge-Offs) on such Transfer Date 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
Invested Amount has 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 Investor Principal Collections on deposit in the Collection Account
with respect to the preceding Collection Period plus the amount of any
Reallocated Principal Collections used to fund any Class A Investor Default
Amount or Class B Investor Default Amount for such Collection Period MINUS the
portion of all such amounts applied to Class A Monthly Principal on such
Transfer Date and (ii) the Class B Invested Amount (after giving effect to
reductions for any Class B Investor Charge-Offs and any Reallocated Class B
Principal Collections and any adjustments made thereto for the benefit of the
Class A Certificateholders) on such Transfer Date.
"Collateral Monthly Principal" means (i) on any Transfer Date prior to the
payment in full of the Class B Invested Amount (after taking into account
payments to be made on the related Distribution Date), during the Revolving
Period or the Accumulation Period, the excess of the Collateral Invested Amount
(after giving effect to reductions for any Collateral Investor Charge-Offs and
any Reallocated Collateral Principal Collections and any adjustments made
thereto for the benefit of the Class A Certificateholders and the Class B
Certificateholders) 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 and (ii)
beginning with the Transfer Date on which the Class B Invested Amount has been
paid in full (after taking into account payments to be made on the related
Distribution Date), the sum of the Available Investor Principal Collections and
the amount of any Reallocated Principal Collections used to fund any Class A
Investor Default Amount or Class B Investor Default Amount for such Collection
Period, in each case to the extent not applied to Class A Monthly Principal or
Class B Monthly Principal; PROVIDED, HOWEVER, that the amount determined
pursuant to either clause (i) above shall not exceed the portion of the
Available Investor Principal Collections and the amount of any Reallocated
Principal Collections used to fund any Class A Investor Default Amount or Class
B Investor Default Amount remaining after the application thereof to pay Class A
Monthly Principal or Class B Monthly Principal; and PROVIDED, FURTHER, that
Collateral Monthly Principal may not exceed the Collateral Invested Amount
(after giving effect to reductions for any Collateral Investor Charge-Offs and
any Reallocated Collateral Principal Collections and any adjustments made
thereto for the benefit of the Class A Certificateholders and the Class B
Certificateholders) 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 prior to the payment in full of the Class A
Invested Amount, $197,400,000; 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 be $394,800,000,
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,
70
<PAGE>
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.
ENHANCEMENT; REQUIRED COLLATERAL INVESTED AMOUNT
The subordination of the Class B Certificates and the Collateral Investor
Interest to fund certain payments with respect to the Class A Certificates, and
the subordination of the Collateral Investor Interest to fund certain payments
with respect to the Class B Certificates will constitute "Enhancement" for the
Class A Certificates and the Class B Certificates, respectively. In addition,
the amounts, if any, available on deposit in the Overconcentration Account will
constitute "Enhancement" for the Class A Certificates, the Class B Certificates
and the Collateral Investor Interest. On each Transfer Date, the minimum amount
of the Collateral Investor Interest will be the Required Collateral Invested
Amount. The "Required Collateral Invested Amount" means (a) $18,900,000 on the
initial Transfer Date and (b) an amount equal to the sum of (i) 4.5% of the sum
of (x) the Class A Adjusted Invested Amount and the Class B Invested Amount
(after giving effect to deposits into the Principal Funding Account on such
Transfer Date and payments to be made on the related Distribution Date) and (y)
the Collateral Invested Amount on the prior Transfer Date after any adjustments
made thereto on such Transfer Date and (ii) during the Accumulation Period, the
excess, if any, of the Required Overconcentration Account Amount over the amount
on deposit in the Overconcentration Account (after giving effect to any deposit
to be made to, and any withdrawal to be made from, the Overconcentration Account
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 1997-1 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, distributions in respect
of 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 and the amounts, if any, available on deposit in the
Overconcentration Account are limited and will not provide protection against
all risks of loss. If losses occur which exceed the amount covered by the
Collateral Invested Amount and the amounts available on deposit in the
Overconcentration Account, 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
1997-1. Series 1997-1 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
71
<PAGE>
invested amount of the Series to which such collections were initially
allocated. To the extent that Shared Principal Collections exceed the amount
necessary to cover principal payments due to or for the benefit of
certificateholders of other Series, the balance will be paid to the holder of
the Exchangeable Transferor Certificate or, in certain limited circumstances,
deposited into the Excess Funding Account. Series 1997-1 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.
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 amount of Defaulted Receivables 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 amount of Defaulted
Receivables for such Collection Period. A portion of the Investor Default Amount
will be allocated to the Collateral Investor Interest (the "Collateral Default
Amount") on each Transfer Date in an amount equal to the Collateral Floating
Percentage applicable during the related Collection Period and the amount of
Defaulted Receivables 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 1997-1, amounts available from the
Overconcentration Account and Reallocated Principal Collections applied as
described above in "--Application of Collections--Payment of Interest, Fees and
Other Items," "--Overconcentration Account" 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 1997-1, amounts available from the
Overconcentration Account 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 1997-1, (b) amounts available from the Overconcentration
Account and (c) Reallocated Principal Collections, then the Collateral Invested
Amount (after giving effect to reductions for any Collateral Investor
Charge-Offs and any Reallocated Collateral Principal Collections on such
Transfer Date) 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 (after giving effect to
72
<PAGE>
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. 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 reimbursed (but not by an amount in excess of
the aggregate Class A Investor Charge-Offs) on any Transfer Date by the amount
of Excess Spread and Shared Excess Yield Collections allocable to Series 1997-1
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 1997-1 not required to pay the Class A Required Amount or
reimburse Class A Investor Charge-Offs, (b) amounts available from the
Overconcentration Account not required to pay the Class A Required Amount and
(c) Reallocated Collateral Principal Collections not required to pay the Class A
Required Amount, then the Collateral Invested Amount (after giving effect to
reductions for any Collateral Investor Charge-Offs and any Reallocated
Collateral Principal Collections on such Transfer Date and after giving effect
to any adjustments with respect thereto as described in the preceding paragraph)
will be reduced by the amount of such excess, but not by more than the Class B
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 (a "Class B Investor Charge-Off"). The Class
B Invested Amount will also be reduced by the amount of any Reallocated Class B
Principal Collections and the amount of any portion of the Class B Invested
Amount allocated to the Class A Certificates to avoid a reduction in the Class A
Invested Amount. The Class B Invested Amount will thereafter be reimbursed (but
not in excess of the unpaid principal balance of the Class B Certificates) on
any Transfer Date by the amount of Excess Spread and Shared Excess Yield
Collections allocable to Series 1997-1 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 (a) 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"
and (b) amounts available from the Overconcentration Account not required to pay
the Class A Required Amount or the Class B Required Amount, 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"). The Collateral Invested Amount will also be reduced by
the amount of any Reallocated Collateral Principal Collections and the amount of
any portion of the Collateral Invested Amount allocated to the Class A
Certificates to avoid a reduction in the Class A Invested Amount or to the Class
B Certificates to avoid a reduction in the Class B Invested Amount. The
Collateral Invested Amount will thereafter be reimbursed (but not in excess of
the unpaid principal balance of the Collateral Investor Interest) on any
Transfer Date by the amount of Excess Spread and Shared Excess Yield Collections
allocable to Series 1997-1 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 or refund, unauthorized charge, billing error or certain
other noncash items, or because such Receivable was created in respect of
merchandise which was refused or returned by a cardholder, or any Receivable is
discovered as having been created through a fraudulent or counterfeit charge
(each, an "Adjustment"), the
73
<PAGE>
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 Minimum Transferor
Amount, the Transferor shall deposit an amount sufficient to prevent the
Transferor Amount from being reduced below the Minimum Transferor Amount into
the Excess Funding Account.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
The Certificates will be subject to optional repurchase by the Transferor on
any Distribution Date on or after the Distribution Date on which 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 through the day preceding
the Distribution Date on which the repurchase occurs.
The Certificates will be retired on the day following the Distribution Date
on which the final payment of principal is 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 Series 1997-1 Termination Date. If the Invested Amount is greater
than zero on the Series 1997-1 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 Series 1997-1 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) unless a Trust extension shall have
occurred, the business day following the day on which the aggregate invested
amounts of all Series and any amounts payable to Enhancement providers is zero,
(b) if a Trust extension shall have occurred, the date specified in the
applicable notice, (c) December 1, 2036 or (d) if the Receivables are sold,
disposed of or liquidated following the occurrence of certain events of
insolvency, conservatorship or receivership relating to the Transferor,
immediately following such sale, disposition or liquidation (such date, the
"Trust 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 1997-1 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 or when delivered 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
74
<PAGE>
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 or any holder of an interest in the Exchangeable
Transferor Certificate (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 any holder of an interest in the
Exchangeable Transferor Certificate or all or substantially all of their
respective property; the Transferor or any holder of an interest in the
Exchangeable Transferor Certificate 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;
(h) on any Transfer Date the Collateral Invested Amount is less than the
Required Collateral Invested Amount;
(i) on any three consecutive Transfer Dates, the excess, if any, of the
Required Overconcentration Account Amount over the amount on deposit in the
Overconcentration Account (after giving effect to any deposit to be made to,
and any withdrawal to be made from, the Overconcentration Account on such
Transfer Dates) divided by the Trust Principal Component is greater than 1%
for such Transfer Dates; or
(j) the Portfolio Yields for any three consecutive Collection Periods
are less than the average of the Base Rates for such Collection Periods.
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 not less 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), (h), (i) or (j), 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
75
<PAGE>
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. The term "Base Rate" means, with respect to any Collection Period,
the annualized percentage equivalent of a fraction, the numerator of which is
the sum of the Class A Monthly Interest, the Class B Monthly Interest and the
Collateral Monthly Interest, each with respect to the Distribution Date
immediately following such Collection Period, and the Class A Servicing Fee, the
Class B Servicing Fee and the Collateral Servicing Fee, each with respect to the
Transfer Date immediately following such Collection Period, and the denominator
of which is the Invested Amount as of the close of business on the last day of
such Collection Period. The term "Portfolio Yield" means, with respect to any
Collection Period, the annualized percentage equivalent of a fraction, the
numerator of which is the sum of Yield Collections (excluding Net Interchange,
if any), Principal Funding Investment Proceeds and amounts withdrawn from the
Reserve Account and the Overconcentration Account, in each case to the extent
such amounts are available and allocable to the Certificateholders or the
Collateral Interest Holder with respect to such Collection Period, MINUS the
Investor Default Amount for such Collection Period, and the denominator of which
is the Invested Amount as of the close of business on the last day of such
Collection Period.
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 certain events of insolvency, conservatorship or receivership relating
to Transferor or any holder of an interest in the Exchangeable Transferor
Certificate occur, on the day of such occurrence the Transferor will immediately
cease to transfer Receivables to the Trust and the Transferor will promptly give
notice to the Trustee of such occurrence. Within 15 days, the Trustee will
publish a notice of the occurrence of such an event 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),
any holder of an interest in the Exchangeable Transferor Certificate with
respect to which such event of insolvency, conservatorship or receivership has
not occurred and each provider of Enhancement, if any, applicable to any Series,
the Trustee will sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms. If the
Trustee is instructed not to liquidate the Receivables as described in the
preceding sentence, the Trustee will retain the Receivables and apply
collections thereon in accordance with the Agreement; provided that the Trustee
shall nevertheless liquidate any remaining Receivables no later than three years
after the date the event of insolvency, conservatorship or receivership occurs.
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, and the
Trustee, including its officers, directors, employees and agents, 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 or the Trustee or its officers, directors or
76
<PAGE>
employees for any liabilities, costs or expenses with respect to (a) the Trustee
for liabilities imposed by reason of fraud, gross negligence, or willful
misconduct by the Trustee in the performance of its duties under the Agreement,
(b) the Trust, the Certificateholders or the Certificate Owners for liabilities
arising from actions taken by the Trustee at the request of Certificateholders,
(c) the Trust, the Certificateholders or the Certificate Owners for any losses,
claims, damages or liabilities incurred by any of them in their capacities as
investors, including without limitation, losses incurred as a result of
defaulted Receivables or Receivables which are written off as uncollectible, or
(d) the Trust, the Certificateholders or the Certificate Owners for any
liabilities, costs or expenses of the Trust, the Certificateholders or the
Certificate Owners arising under any tax law, including without limitation, any
federal, state or local income or franchise tax or any other tax imposed on or
measured by income (or any interest or penalties with respect thereto or arising
from a failure to comply therewith) required to be paid by the trust, the
Certificateholders or the Certificate Owners in connection with the Agreement to
any taxing authority.
Under the Agreement, the Transferor and any holder of an interest in the
Exchangeable Transferor Certificate 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 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 New York Partnership Law in
which the Transferor and any such holder of an interest in the Exchangeable
Transferor Certificate are general partners.
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.
77
<PAGE>
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 satisfy
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; (iii) it will do nothing to
impair the rights of the Certificateholders in the Receivables and will not
reschedule, revise, waive and/or defer payments due on the Receivables, except
in accordance with the Servicer's usual and customary servicing practices and
(iv) all approvals, authorizations, consents, orders or other actions of any
governmental authority required in connection with the execution, delivery and
performance by the Servicer of the Agreement have been obtained.
In the event that (i) any covenant of the Servicer set forth above has not
been complied with in respect of any Receivable and (ii) such noncompliance has
a material adverse effect on the Certificateholders' interest in such Receivable
(without regard to the amount of any Enhancement), the Servicer will be
obligated to accept the transfer of such Receivable (or, at the Transferor's
option, all the Receivables with respect to the related Account) within 60 days,
or such longer period as may be agreed to by the Trustee (not to exceed on
additional 60 days), of the earlier to occur of the discovery of such
noncompliance by the Servicer or receipt by the Servicer of written notice of
such noncompliance given by the Trustee. Such assignment and transfer will be
made when the Servicer deposits an amount equal to the amount of such Receivable
into the Collection Account prior to 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 any
such covenant 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) 2.0% (the
"Servicing Fee Rate") 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,
that with respect to the first Transfer Date, the Monthly Investor Servicing Fee
will be equal to the product of (x) the Servicing Fee Rate, (y) the Initial
Invested Amount and (z) a fraction, the numerator of which is equal to the
number of days in the period from and including the Closing Date through the day
preceding the initial Distribution Date 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, which
portion shall equal one-twelfth of the product of the Servicing Base Amount and
1.0%. The "Servicer Interchange" for any Collection Period or portion thereof
during which Card Services, Citibank, N.A. or any of their respective affiliates
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
78
<PAGE>
Interchange for a Collection Period shall not exceed one-twelfth of the product
of the Servicing Base Amount and 1.0%. In the event the Servicer Interchange on
deposit in the Collection Account on any Transfer Date is less than one-twelfth
of the product of the Servicing Base Amount and 1.0%, 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 Transfer 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
Transfer 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) 1.0%, or if Card Services, Citibank, N.A. or any of their
respective affiliates is not the Servicer, 2.0% (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 equal to the number of days in the period from and including the
Closing Date through the day preceding the initial Distribution Date 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 the
distribution of any 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 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 equal to
the number of days in the period from and including the Closing Date through the
day preceding the initial Distribution Date 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 of 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 Collateral Initial Invested Amount, (y) the Net Servicing Fee
Rate and (z) a fraction, the numerator of which is equal to the number of days
in the period from and including the Closing Date through the day preceding the
initial Distribution Date 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.
79
<PAGE>
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 and there is no reasonable action which the
Servicer could take to make the performance of its duties permissible. 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 balance 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 90 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 and subject to the consent of any provider of Enhancement. If the
Transferor does not nominate an entity to be successor Servicer, 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 may 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 or notice to the Trustee to make any withdrawal or
payment, 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
80
<PAGE>
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 shall have been
given to the Servicer by the Trustee or to the Servicer and the Trustee by
certificateholders of any Series representing undivided interests
aggregating not less than 50% of the invested amount thereof 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 shall have
been given to the Servicer by the Trustee or to the Servicer and the Trustee
by certificateholders of any Series representing undivided interests
aggregating not less than 50% of the invested amount thereof 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.
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 fourth 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
Defaulted Receivables and Principal Collections for such Collection Period; (c)
the total amount to be deposited in the Principal Funding Account and the
Interest Funding Account; (d) the aggregate outstanding balance of the Accounts
which were delinquent by 30 days, 60 days, 90 days and 120 days or
81
<PAGE>
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 balance 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, 1998, 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, 1998, 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 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, 1998, 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.
82
<PAGE>
The Agreement will provide for delivery to the Trustee on or before April 30
of each calendar year, beginning with April 30, 1998, 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 such statements, certificates and reports furnished to the
Trustee may be obtained by a request in writing delivered to the Trustee. See
"--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, 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, to enable the Trust or a portion thereof to elect
to qualify for federal income tax purposes as a "financial asset securitization
investment trust" or comparable tax entity for the securitization of financial
assets and to amend certain tax-related provisions therein should such
provisions become unnecessary as a result of state tax authorities adopting
provisions similar to certain Treasury Regulations with respect to entity
classification for federal income tax purposes, PROVIDED that (i) the Transferor
delivers to the Trustee a certificate of an authorized officer of the Transferor
to the effect that such amendment will not adversely affect in any material
respect the interest of such Certificateholders, (ii) the Transferor delivers a
Tax Opinion to the Trustee and (iii) such amendment will not result in a
withdrawal or reduction of the rating of any outstanding Series by any Rating
Agency. 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 invested amounts 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 investor
percentage 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).
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 provide such
certificateholders with 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.
83
<PAGE>
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. 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 Transferor 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 the proceeds thereof (except for liens for local taxes
and government charges not due and payable or being contested in good faith by
the Transferor), 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, 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. In addition, if the FDIC were appointed as receiver
of the Transferor, certain administrative expenses of the receiver may also have
priority over the interest of the Trust in such Receivables. Under the
Agreement, the Transferor will represent and warrant
84
<PAGE>
that it transferred the Receivables to the Trust free and clear of the lien of
any third party, except for liens for local taxes and government charges not due
and payable or being contested in good faith by the Transferor. 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, sets forth certain
powers that the FDIC could exercise if it were appointed as receiver or
conservator of the Transferor. Among other things, the FDIA grants such a
conservator or receiver the power to repudiate contracts of, and to request a
stay of up to 90 days of any judicial action or proceeding involving, the
Transferor.
To the extent that (i) the Transferor granted a security interest in the
Receivables to the Trust, (ii) the interest was validly perfected before the
Transferor's insolvency, (iii) the interest was not taken or granted in
contemplation of the Transferor's insolvency or with the intent to hinder, delay
or defraud the Transferor or its creditors, (iv) the Agreement is continuously a
record of the Bank, and (v) the Agreement represents a bona fide and arm's
length transaction undertaken for adequate consideration in the ordinary course
of business and that the Trustee is the secured party and is not an insider or
affiliate of the Transferor, such valid perfected security interest of the
Trustee should be enforceable (to the extent of the Trust's "actual direct
compensatory damages") notwithstanding the insolvency of, or the appointment of
a receiver or conservator for, the Transferor and payments to the Trust with
respect to the Receivables (up to the amount of such damages) should not be
subject to an automatic stay of payment or to recovery by the FDIC as
conservator or receiver of the Transferor. If, however, the FDIC were to assert
that the security interest was unperfected or unenforceable or were to require
the Trustee to establish its right to those payments by submitting to and
completing the statutory administrative claims procedure, or the FDIC were to
request a stay of proceedings with respect to the Transferor, delays in payments
on the Certificates and possible reductions in the amounts of those payments
could occur. In the event of a repudiation of obligations by the FDIC as
conservator or receiver, a claim for the repudiated obligation is limited to
"actual direct compensatory damages" determined as of the date of the
appointment of the FDIC as conservator or receiver. The FDIA does not define the
term "actual direct compensatory damages." On April 10, 1990, the RTC, formerly
a sister agency of the FDIC, adopted a statement of policy (the "RTC Policy
Statement") with respect to the payment of interest on collateralized
borrowings. The RTC Policy Statement states that interest on such borrowings
will be payable at the contract rate up to the date of the redemption or payment
by the conservator, receiver, or the trustee of an amount equal to the principal
owed plus the contract rate of interest up to the date of such payment or
redemption, plus any expenses of liquidation if provided for in the contract, to
the extent secured by the collateral. The FDIC has not adopted a formal policy
statement on payment of "actual direct compensatory damages" with respect to
collateralized borrowings of banks that are repudiated. The Transferor believes
that the general practice of the FDIC in such circumstances is to permit the
collateral to be applied to pay the outstanding principal owed plus interest
accrued at the contract rate up to the date of payment, together with the costs
of liquidation of the collateral if provided for in the contract. In one case,
however, involving the repudiation by the RTC of certain secured zero-coupon
bonds issued by a savings association, a United States federal district court
held that "actual direct compensatory damages" in the case of a marketable
security meant
85
<PAGE>
the market value of the repudiated bonds as of the date of repudiation. If that
court's view were applied to determine the Trust's "actual direct compensatory
damages" in the event the FDIC repudiated the Transferor's obligations under the
Agreement, the amount paid to Certificateholders could, depending upon
circumstances existing on the date of the repudiation, be less than the
principal of the Certificates and the interest accrued thereon to the date of
payment.
The Agreement will provide that, upon the appointment of a receiver or
conservator for the Transferor or upon a voluntary liquidation with respect to
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 would 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 balance of each Class of each Series, any holder of an interest in the
Exchangeable Transferor Certificate (other than the Transferor) and each
provider of Enhancement, if any, applicable to any Series, or unless otherwise
required by the FDIC as receiver or conservator for the Transferor, the Trustee
would 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, the FDIC as receiver or conservator may have the
power 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.
In OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir. 1993), CERT.
DENIED, 114 S. Ct. 554 (1993), the United States Court of Appeals for the 10th
Circuit suggested that even where a transfer of accounts from a seller to a
buyer constitutes a "true sale," the accounts would nevertheless constitute
property of the seller's estate in a bankruptcy of the seller. If the Transferor
were to be placed into receivership and a court were to follow the OCTAGON
court's reasoning, Certificateholders might experience delays in payment or
possibly losses in their investment in the Certificates. Counsel has advised the
Transferor that the facts of the OCTAGON case are distinguishable from those in
the sale transactions between the Transferor and the Trust and that the
reasoning of the OCTAGON case appears to be inconsistent with established
precedent and the UCC. In addition, because the Transferor, the Trust and the
transactions governed by the Agreement do not have any particular link to the
10th Circuit, it is unlikely that the Transferor would be subject to a
receivership proceeding in the 10th Circuit. Accordingly, the OCTAGON case
should not be binding precedent on a court in a receivership proceeding.
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
86
<PAGE>
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--Covenants,
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."
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 specific to such investor of
owning and disposing of the Certificates, as well as the tax consequences
specific to such investor 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 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.
87
<PAGE>
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 balance 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 at a
greater than DE MINIMIS OID, under applicable Treasury regulations (the
"Regulations") the Certificates may nevertheless be deemed to have been issued
with OID. This could be the case, for example, if interest payments on the
Certificates are not treated as "qualified stated interest" because the IRS
determines that (i) no reasonable legal remedies exist to compel timely payment
and (ii) the Certificates do not have terms and conditions that make the
likelihood of late payment (other than a late payment that occurs within a
reasonable grace period) or nonpayment a remote contingency. Applicable
regulations provide that, for purposes of the foregoing test, the possibility of
nonpayment due to default, insolvency, or similar circumstances, is ignored.
Although this provision does not directly apply to the Certificates (because
they have no actual default provisions), the Transferor intends to take the
position that, because nonpayment can occur only as a result of events beyond
its control (principally, loss rates and payment delays on the Receivables
substantially in excess of those anticipated), nonpayment is a remote
contingency. Based on the foregoing, the Transferor intends to take the position
that interest payments on the Certificates constitute qualified stated interest.
If, however, interest payments on the Certificates were not classified as
qualified stated interest, all of the taxable income to be recognized with
respect to the Certificates would be includible in income as OID but would not
be includible again when the interest 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 in respect to the Certificates in advance of the
receipt of cash attributable to such income.
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
88
<PAGE>
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
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 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 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
89
<PAGE>
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 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 and the arrangement created by
the Agreement.
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 the United States
or any political subdivision thereof, (iii) an estate the income of which is
includible in gross income for U.S. federal income tax purposes, regardless of
its source or (iv) a trust if (A) a court within the United States is able to
exercise primary supervision over the administration of the trust and (B) one or
more United States trustees have authority to control all substantial decisions
of the trust, except that the term does not include certain former citizens of
the United States whose income and gain on the Certificates will be subject to
United States taxation.
90
<PAGE>
(A) Interest paid or accrued to a Foreign Person would be exempt 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 own 10% or more of the voting stock of
First Bank or, upon the issuance of an interest in the Trust that is treated
as a partnership interest, does not actually or constructively own such
interest, and is not a controlled foreign corporation with respect to First
Bank or the holder of such interest). 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 (or
other appropriate successor form thereto) signed by the beneficial owner of
a Certificate or the owner's agent, claiming exemption from withholding
under an applicable tax treaty, (iii) IRS Form 4224 (or other appropriate
successor form thereto) 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 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 paragraph (A)
above 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 (which characterization could occur
if the interests of owners of certificates of a Series are reclassified as
interests in a partnership (not taxable as a corporation)), 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 and, additionally, will be required to file a federal
income tax return. 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 States 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 a publicly traded partnership taxable as
a corporation, a Certificate 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).
91
<PAGE>
Recently proposed Treasury regulations (the "Proposed Regulations") could
affect the procedures to be followed by a Foreign Person in complying with
United States Federal backup withholding and information reporting rules. The
Proposed Regulations are not currently effective but, if finalized in their
current form, would be effective for payments made after December 31, 1997.
Prospective investors are urged to consult their tax advisors regarding the
effect, if any, of the Proposed Regulations on the purchase, ownership, and
disposition of the Certificates.
FASIT PROVISIONS
Recently enacted provisions of the Code provide for the creation of a new
type of entity for federal income tax purposes, the "financial asset
securitization investment trust" ("FASIT"). However, these provisions are not
effective until September 1, 1997, and many technical issues concerning FASITs
must be addressed by Treasury regulations that have yet to be drafted. Although
transition rules permit an entity in existence on August 31, 1997, such as the
Trust, to elect FASIT status, at the present time it is not clear how
outstanding interests of such an entity would be treated subsequent to such an
election. In particular, it is not clear whether certificates of any Series
outstanding on August 31, 1997, would be treated as "regular interests" in a
FASIT if the Transferor were to elect FASIT status for the Trust after that
date.
STATE AND LOCAL TAX CONSEQUENCES
This discussion is based upon present provisions of the North Dakota
statutes and the regulations promulgated thereunder, and applicable judicial or
ruling authority, all of which are subject to change, which change may be
retroactive. No ruling on any of the issues discussed below will be sought from
the North Dakota Department of Revenue.
The activities to be undertaken by the Servicer in servicing and collecting
the Receivables will take place in North Dakota. The State of North Dakota has
financial institution taxes measured by net income which apply to banking
associations, trust companies and thrift institutions. North Dakota also has a
state individual income tax and a state corporate income tax.
If the Certificates are characterized as debt for federal income tax
purposes, as described above, it is the opinion of Counsel that the Certificates
also will be treated as debt for North Dakota tax purposes. In such case,
Certificate Owners not otherwise subject to North Dakota tax would not become
subject to tax in North Dakota solely because of their ownership of
Certificates. If any Class of Certificates were treated as equity interests in a
partnership for federal income tax purposes, the Certificate Owners holding such
Class of Certificates may become subject to taxation in North Dakota.
If the Trust were treated as a partnership not subject to federal income
tax, the same treatment also would apply for North Dakota tax purposes and the
Trust would not be subject to entity-level corporate income tax in North Dakota
or to the North Dakota financial institutions taxes. It should be noted,
however, that a bill currently pending in the North Dakota Legislature would
replace the existing North Dakota financial institutions taxes with a new
financial institutions tax under which the Trust may be taxable if the Trust is
treated as a partnership for federal income tax purposes. In such case, such tax
could result in reduced distributions to Certificateholders.
If the Trust were treated as an association taxable as a corporation or as a
publicly traded partnership taxable as a corporation for federal income tax
purposes, then the Trust would likely be subject to North Dakota corporate
income tax. Such tax could result in reduced distributions to
Certificateholders.
In addition to the federal and North Dakota income tax consequences
described above, potential investors should consider other applicable state and
local tax consequences of the acquisition, ownership, and disposition of the
Certificates. State and local tax law applicable to a potential investor may
differ substantially from the corresponding federal law, and the discussion
above does not purport to described any aspect of the tax laws of any state
other than North Dakota or any locality. Therefore, potential
92
<PAGE>
investors should consult their own tax advisers with respect to the various
state and local tax consequences of an investment in the Certificates.
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
"Plan Assets 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 Plan Assets Regulation contains an exception to the plan asset rules
that provides that if a 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 Plan Assets
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.
The Underwriters expect, although no assurance can be given, that the Class
A Certificates will be held by at least 100 independent investors at the
conclusion of the offering, and the Transferor anticipates that the other
conditions of the Plan Assets Regulation will be met. No monitoring or other
measures will be taken to ensure that any such conditions will be met with
respect to the Class A Certificates. If the Trust's assets were deemed to be
"plan assets" of a Plan investor, there is uncertainty whether existing
exemptions from the "prohibited transaction" rules of ERISA, would apply to all
transactions involving the
93
<PAGE>
Trust's assets. Accordingly, Plan fiduciaries should consult with counsel before
making a purchase of Class A Certificates.
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
be purchased by Plans.
EACH CERTIFICATE OWNER OF A CLASS B CERTIFICATE (INCLUDING BUT NOT LIMITED
TO ANY INSURANCE COMPANY GENERAL ACCOUNT) WILL BE DEEMED 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.
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") among the Transferor, the Servicer 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 balance of the Class A Certificates and Class B
Certificates set forth opposite its name.
<TABLE>
<CAPTION>
PRINCIPAL BALANCE PRINCIPAL BALANCE
OF CLASS A OF CLASS B
UNDERWRITERS CERTIFICATES CERTIFICATES
- ---------------------------------------------- -------------------- --------------------
<S> <C> <C> <C>
J.P. Morgan Securities Inc.................... $ 131,600,000 $ 6,300,000
Bear, Stearns & Co. Inc....................... 131,600,000 --
Morgan Stanley & Co. Incorporated ............ 131,600,000 --
-
-------------------- --------------------
Total...................................... $ 394,800,000 $ 6,300,000
-
-
-------------------- --------------------
-------------------- --------------------
</TABLE>
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 of the Class A Certificates propose initially to offer the
Class A Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in excess of
0.200% of the principal balance of the Class A Certificates. The Underwriters
may allow, and such dealers may reallow, concessions not in excess of 0.125% of
the principal balance of the Class A Certificates to certain brokers and
dealers. The Underwriter of the Class B Certificates proposes initially to offer
the Class B Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in excess of
0.225% of the principal balance of the Class B Certificates. The Underwriter of
the Class B Certificates may allow, and such dealers may reallow, concessions
not in excess of 0.150% of the principal balance 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.
94
<PAGE>
Each Underwriter has represented and agreed that (a) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or who is a person to whom
the document may otherwise lawfully be issued or passed on, (b) it has complied
and will comply with all applicable provisions of the Financial Services Act
1986 and other applicable laws and regulations with respect to anything done by
it in relation to the Certificates in, from or otherwise involving the United
Kingdom and (c) if that Underwriter is an authorized person under the Financial
Services Act 1986, it has only promoted and will only promote (as that term is
defined in Regulation 1.02 of the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991) to any person in the United Kingdom the scheme
described herein if that person is of a kind described either in Section 76(2)
of the Financial Services Act 1986 or in Regulation 1.04 of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991.
The Transferor and the Servicer 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. In addition, the
Underwriters may from time to time take positions in the Certificates and other
certificates issued by the Trust.
LEGAL MATTERS
Certain legal matters and federal income tax matters relating to the
issuance of the Certificates will be passed upon for First Bank by Dorsey &
Whitney LLP. Certain legal matters relating to the issuance of the Certificates
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom
LLP.
95
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Accounts.............................................................................................. 2, 6
Accumulation Period................................................................................... 14
Accumulation Period Length............................................................................ 50
Additional Accounts................................................................................... 10, 55
Addition Date......................................................................................... 55
Adjusted Invested Amount.............................................................................. 9, 60
Adjustment............................................................................................ 73
Agreement............................................................................................. 6
Assignment............................................................................................ 55
Available Investor Principal Collections.............................................................. 50
Available Overconcentration Account Amount............................................................ 64
Available Reserve Account Amount...................................................................... 62
Bank.................................................................................................. 6
Bank Portfolio........................................................................................ 7
Base Rate............................................................................................. 76
Card Services......................................................................................... 31
Cede.................................................................................................. 3
Cedel................................................................................................. 46
Cedel Participants.................................................................................... 46
Certificateholders.................................................................................... 6
Certificate Owners.................................................................................... 3
Certificates.......................................................................................... 1, 5
Class................................................................................................. 6
Class A Additional Interest........................................................................... 66
Class A Adjusted Invested Amount...................................................................... 9, 60
Class A Available Funds............................................................................... 48
Class A Certificateholders............................................................................ 6
Class A Certificate Rate.............................................................................. 8
Class A Certificates.................................................................................. 1, 5
Class A Expected Final Payment Date................................................................... 8, 13
Class A Fixed Percentage.............................................................................. 59
Class A Floating Percentage........................................................................... 58
Class A Initial Invested Amount....................................................................... 8
Class A Invested Amount............................................................................... 8, 59
Class A Investor Charge-Off........................................................................... 19, 73
Class A Investor Default Amount....................................................................... 72
Class A Investor Interest............................................................................. 7
Class A Monthly Interest.............................................................................. 67
Class A Monthly Principal............................................................................. 69
Class A Required Amount............................................................................... 18, 64
Class A Servicing Fee................................................................................. 79
Class B Additional Interest........................................................................... 67
Class B Available Funds............................................................................... 49
Class B Certificateholders............................................................................ 6
Class B Certificate Rate.............................................................................. 8
Class B Certificates.................................................................................. 1, 5
Class B Expected Final Payment Date................................................................... 8, 13
</TABLE>
96
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Class B Fixed Percentage.............................................................................. 59
Class B Floating Percentage........................................................................... 58
Class B Initial Invested Amount....................................................................... 8
Class B Invested Amount............................................................................... 8, 60
Class B Investor Charge-Off........................................................................... 20, 73
Class B Investor Default Amount....................................................................... 72
Class B Investor Interest............................................................................. 7
Class B Monthly Interest.............................................................................. 67
Class B Monthly Principal............................................................................. 70
Class B Required Amount............................................................................... 18, 65
Class B Servicing Fee................................................................................. 79
Closing Date.......................................................................................... 7
Code.................................................................................................. 87
Collateral Available Funds............................................................................ 67
Collateral Default Amount............................................................................. 72
Collateral Fixed Percentage........................................................................... 59
Collateral Floating Percentage........................................................................ 59
Collateral Initial Invested Amount.................................................................... 8
Collateral Interest Holder............................................................................ 6
Collateral Invested Amount............................................................................ 8, 60
Collateral Investor Charge-Off........................................................................ 73
Collateral Investor Interest.......................................................................... 7
Collateral Monthly Interest........................................................................... 69
Collateral Monthly Principal.......................................................................... 70
Collateral Rate....................................................................................... 69
Collateral Required Amount............................................................................ 66
Collateral Servicing Fee.............................................................................. 79
Collection Account.................................................................................... 57
Collection Period..................................................................................... 9
Commission............................................................................................ 2
Controlled Accumulation Amount........................................................................ 70
Controlled Deposit Amount............................................................................. 70
Cooperative........................................................................................... 46
Corporate Card........................................................................................ 30
Counsel............................................................................................... 87
Covered Amount........................................................................................ 16, 61
Cut-Off Date.......................................................................................... 7
Defaulted Receivables................................................................................. 72
Deficit Controlled Accumulation Amount................................................................ 15, 70
Definitive Certificates............................................................................... 47
Depositaries.......................................................................................... 45
Depository............................................................................................ 44
Determination Date.................................................................................... 81
Disclosure Document................................................................................... 11
Disqualified Persons.................................................................................. 93
Distribution Date..................................................................................... 67
DOL................................................................................................... 93
DTC................................................................................................... 3, A-1
Early Amortization Event.............................................................................. 74
Early Amortization Period............................................................................. 16
</TABLE>
97
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Eligible Account...................................................................................... 54
Eligible Institution.................................................................................. 57
Eligible Investments.................................................................................. 57
Eligible Receivable................................................................................... 54
Enhancement........................................................................................... 71
Enhancement Surplus................................................................................... 70
ERISA................................................................................................. 23, 93
Euroclear............................................................................................. 46
Euroclear Operator.................................................................................... 46
Euroclear Participants................................................................................ 46
Euroclear System...................................................................................... 46
Excess Funding Account................................................................................ 64
Excess Spread......................................................................................... 18, 68
Exchange.............................................................................................. 11
Exchange Act.......................................................................................... 3
Exchangeable Transferor Certificate................................................................... 11
FASIT................................................................................................. 92
FDIA.................................................................................................. 85
FDIC.................................................................................................. 24
First Bank............................................................................................ 6
First Bank System..................................................................................... 43
Fixed Allocation Percentage........................................................................... 59
Floating Allocation Percentage........................................................................ 58
Foreign Person........................................................................................ 90
Global Securities..................................................................................... A-1
Holders............................................................................................... 47
Implied Rating........................................................................................ 63
Indirect Participants................................................................................. 45
Ineligible Receivable................................................................................. 53
Initial Invested Amount............................................................................... 9
Interest Funding Account.............................................................................. 48
Interest Payment Date................................................................................. 12
Invested Amount....................................................................................... 8, 60
Investor Charge-Offs.................................................................................. 73
Investor Default Amount............................................................................... 72
Investor Interest..................................................................................... 7
IRS................................................................................................... 87
Loan Agreement........................................................................................ 21
Minimum Transferor Amount............................................................................. 55
Minimum Transferor Percentage......................................................................... 55
Minimum Trust Principal Component..................................................................... 55
Monthly Investor Servicing Fee........................................................................ 12, 78
Monthly Servicer Report............................................................................... 81
Net Interchange....................................................................................... 11
Net Servicing Fee Rate................................................................................ 79
OID................................................................................................... 88
Overconcentration Account............................................................................. 21, 62
Overconcentration Balance............................................................................. 62
Participants.......................................................................................... 45
Parties in Interest................................................................................... 93
</TABLE>
98
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Payment Date Statement................................................................................ 82
Plan.................................................................................................. 93
Plan Assets Regulation................................................................................ 22, 93
Portfolio Yield....................................................................................... 76
Principal Collections................................................................................. 11
Principal Funding Account............................................................................. 15
Principal Funding Account Balance..................................................................... 60
Principal Funding Investment Proceeds................................................................. 15, 61
Principal Funding Investment Shortfall................................................................ 15, 61
Principal Terms....................................................................................... 28, 52
Proposed Regulations.................................................................................. 92
Prospectus............................................................................................ 2
Purchasing Cards...................................................................................... 30
Rating Agency......................................................................................... 23
Reallocated Class B Principal Collections............................................................. 65
Reallocated Collateral Principal Collections.......................................................... 65
Reallocated Principal Collections..................................................................... 14, 65
Receivables........................................................................................... 2, 6
Record Date........................................................................................... 48
Regulations........................................................................................... 88
Removed Accounts...................................................................................... 10, 56
Required Collateral Invested Amount................................................................... 20, 71
Required Overconcentration Account Amount............................................................. 62
Required Reserve Account Amount....................................................................... 61
Reserve Account....................................................................................... 61
Reserve Account Funding Date.......................................................................... 61
Revolving Period...................................................................................... 14
RTC................................................................................................... 25
RTC Policy Statement.................................................................................. 85
S&P................................................................................................... 62
Securities Act........................................................................................ 11
Series................................................................................................ 6, A-1
Series 1997-1......................................................................................... 6
Series 1997-1 Supplement.............................................................................. 6
Series 1997-1 Termination Date........................................................................ 9
Series Supplement..................................................................................... 6
Servicer.............................................................................................. 6
Servicer Default...................................................................................... 80
Servicer Interchange.................................................................................. 78
Service Transfer...................................................................................... 80
Servicing Base Amount................................................................................. 78
Servicing Fee......................................................................................... 78
Servicing Fee Rate.................................................................................... 78
Shared Excess Yield Collections....................................................................... 19, 69
Shared Principal Collections.......................................................................... 71
Special Payment Date.................................................................................. 68
Tax Opinion........................................................................................... 52
Terms and Conditions.................................................................................. 47
Transfer Date......................................................................................... 58
Transferor............................................................................................ 6
</TABLE>
99
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Transferor Amount..................................................................................... 55
Transferor Interest................................................................................... 7
Transferor Percentage................................................................................. 44
Trust................................................................................................. 1, 5
Trustee............................................................................................... 6
Trust Portfolio....................................................................................... 36
Trust Principal Component............................................................................. 36
Trust Termination Date................................................................................ 74
UCC................................................................................................... 24
Underwriters.......................................................................................... 94
Underwriting Agreement................................................................................ 94
U.S. Person........................................................................................... A-4
VISA.................................................................................................. 29
Yield Collections..................................................................................... 10
Yield Factor.......................................................................................... 11
</TABLE>
100
<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.
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.
A-1
<PAGE>
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
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.
A-2
<PAGE>
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 agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
A-3
<PAGE>
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, (iii) an estate the income of which
is includible in gross income for U.S. federal income tax purposes, regardless
of its source or (iv) a trust if (A) a court within the United States is able to
exercise primary supervision over the administration of the trust and (B) one or
more United States trustees have authority to control all substantial decisions
of the trust, except that the term does not include certain former citizens of
the United States whose income and gain on the Global Securities will be subject
to United States taxation. 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
<TABLE>
<S> <C>
Registration Fee.................................................. $ 121,587
Printing and Engraving............................................ 35,000
Trustee's Fee..................................................... 15,000
Legal Fees and Expenses........................................... 225,000
Accountants' Fees and Expenses.................................... 35,000
Rating Agency Fees................................................ 240,000
Miscellaneous Fees and Expenses................................... 3,413
---------
Total Expenses.................................................. $ 675,000
---------
---------
</TABLE>
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
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.
II-1
<PAGE>
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.
[End of Article Twelve]
The effect of any such insurance described above would be to reduce the risk
to shareholders and depositors of First Bank that any such indemnification
payments might have a material adverse effect on the financial condition of
First Bank. First Bank System, Inc., the holding company of First Bank, has
purchased directors' and officers' liability insurance, which policy extends to
directors and officers of First Bank.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -----------
<C> <C> <S>
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 1997-1 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 LLP re Legality*
8.1 -- Opinion of Dorsey & Whitney LLP re Tax Matters*
23.1 -- Consent of Dorsey & Whitney LLP (contained in Exhibit 5.1)*
23.2 -- Consent of Dorsey & Whitney LLP (contained in Exhibit 8.1)*
24 -- Powers of Attorney*
</TABLE>
- ------------------------
* Previously filed.
(b) Financial Statement Schedules
Not applicable.
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.
II-2
<PAGE>
(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 con trolling 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 5 to the 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 February 21, 1997.
FIRST BANK CORPORATE CARD MASTER TRUST
By FIRST BANK OF SOUTH DAKOTA
(NATIONAL ASSOCIATION)
By /s/ DANIEL P. MURPHY*
-----------------------------------------
Daniel P. Murphy
Director and President
*By: /s/ DAVID J. PARRIN
------------------------
(David J. Parrin,
Attorney in Fact)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 5 to the 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 February 21, 1997.
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 Amendment
No. 5 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DANIEL P. MURPHY* Director and President
- ------------------------------ (principal executive February 21, 1997
Daniel P. Murphy* officer)
Executive Vice President
/s/ SUSAN E. LESTER* and Chief Financial
- ------------------------------ Officer (principal February 21, 1997
Susan E. Lester* financial officer)
/s/ DAVID J. PARRIN* Senior Vice President and
- ------------------------------ Controller (principal February 21, 1997
David J. Parrin* accounting officer)
/s/ THOMAS J. FLYNN* Director
- ------------------------------ February 21, 1997
Thomas J. Flynn*
/s/ BARRY L. MARTIN* Director
- ------------------------------ February 21, 1997
Barry L. Martin*
/s/ CRAIG A. JOHNSON* Director
- ------------------------------ February 21, 1997
Craig A. Johnson*
/s/ PHILIP G. HEASLEY* Director
- ------------------------------ February 21, 1997
Philip G. Heasley*
*By: /s/ DAVID J. PARRIN
------------------------
(David J. Parrin,
Attorney in Fact)
