<PAGE>
As filed with the Securities and Exchange Commission on July 11, 1997
Registration No. 333-24023
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
FIRST NBC CREDIT CARD MASTER TRUST
(Issuer of the Certificates)
FIRST NATIONAL BANK OF COMMERCE
(Originator of the Trust described herein and registrant)
(Exact name as specified in registrant's charter)
United States 72-0269760
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
210 Baronne Street
New Orleans, Louisiana 70112
(504) 623-1371
(Address, including zip code, and
telephone number, including area
code, of registrant's principal
executive offices)
Michael A. Flick
Chief Administrative Officer
First Commerce Corporation
201 Saint Charles Avenue, 29th Floor
New Orleans, Louisiana 70170
(504) 623-1492
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Robert F. Hugi, Esq. Edward M. DeSear, Esq.
MAYER, BROWN & PLATT ORRICK, HERRINGTON & SUTCLIFFE LLP
190 South LaSalle Street 666 Fifth Avenue
Chicago, Illinois 60603 New York, New York 10103
(312) 782-0600 (212) 506-5000
Approximate date of commencement of proposed sale to the public: From
time to time after this registration statement becomes effective as
determined by market conditions.
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, please check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed maximum Proposed maximum
Title of securities to Amount to be offering price per aggregate offering Amount of
be registered registered certificate(1) price(1) registration fee(2)
<S> <C> <C> <C> <C>
Asset Backed
Certificates(3) $750,000,000 100% $750,000,000 $227,272.73
========================= ======================= ======================= ======================= =======================
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes amount previously paid.
(3) Also registered hereby are secondary market sales in Asset Backed
Certificates to be effected by First National Bank of Commerce,
the volume of which cannot be determined.
</TABLE>
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>
INTRODUCTORY STATEMENT
This Registration Statement contains (i) the form of Prospectus
relating to the offering of a series of Asset Backed Certificates issued by
First NBC Credit Card Master Trust, and (ii) a form of Prospectus
Supplement relating to offerings of particular series of Asset Backed
Certificates. Each Prospectus Supplement relates only to the securities
described therein and is a form which may be used by First National Bank of
Commerce ("First NBC"), among others, to offer Asset Backed Certificates
under this Registration Statement.
Because First NBC or an affiliate of First NBC intends to make a
market in the Certificates for which it acts as an underwriter and may
prepare a separate market-making prospectus and prospectus supplement in
connection therewith, immediately following the form of Prospectus
Supplement, there follow (i) alternate pages of the Prospectus and (ii)
alternate pages of the form of Prospectus Supplement, which may be used by
First NBC or such affiliate in connection with any offers and sales
relating to market-making transactions in the Certificates. All other pages
of the Prospectus and the form of Prospectus Supplement are also to be used
for the market-making Prospectus and Prospectus Supplements.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 11, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED __________ ___, 199_
$
FIRST NBC CREDIT CARD MASTER TRUST
$ Class A [Floating Rate] [__%] Asset
Backed Certificates, Series 199_-_
$ Class B [Floating Rate] [__%] Asset
Backed Certificates, Series 199_-_
First National Bank of Commerce
Transferor and Servicer
Each Class A [Floating Rate] [__%] Asset Backed Certificate, Series
199_-___ (collectively, the "Class A Certificates") and each Class B
[Floating Rate] [__%] Asset Backed Certificate, Series 199_-___
(collectively, the "Class B Certificates" and, together with the Class A
Certificates, the "Certificates") will represent the right to receive
certain payments from the First NBC Credit Card Master Trust, created
pursuant to a Pooling and Servicing Agreement between First National Bank
of Commerce ("First NBC" or the "Bank"), as transferor and servicer, and
The First National Bank of Chicago, as trustee. Certain capitalized terms
used in this Prospectus Supplement are defined elsewhere in this Prospectus
Supplement and the accompanying Prospectus. Please refer to the "Index of
Defined Terms for Prospectus Supplement" on page S-52 and the "Index of
Defined Terms for Prospectus" on page 78 for a listing of the pages on
which such terms are defined.
The property of the Trust includes receivables (the "Receivables")
generated from time to time in a portfolio of MasterCard(R), VISA(R) and
private label revolving credit card accounts (the "Accounts"), all monies
due or to become due in payment of the Receivables, all proceeds of the
Receivables and proceeds of credit insurance policies relating to the
Receivables, all monies in certain bank accounts of the Trust and certain
other property as described herein. In addition, the Collateral Interest
will be issued in the initial amount of $____________ and will be
subordinated to the Certificates as described herein. First NBC will
initially own the remaining undivided interest in the Trust not represented
S-1
<PAGE>
by the Certificates, the Collateral Interest and other interests issued by
the Trust from time to time and will initially service the Receivables.
First NBC may from time to time offer other Series of certificates that
evidence undivided interests in certain assets of the Trust, which may have
terms significantly different from the Certificates.
(continued on next page)
There currently is no secondary market for the Certificates, and there is
no assurance that one will develop or, if one does, that it will continue
until the Certificates are paid in full. Potential investors should
consider, among other things, the information set forth in "Risk Factors"
commencing on page S-18 herein and page 23 in the Prospectus.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF FIRST NBC 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 (EXCEPT FOR RECEIVABLES ARISING IN PRIVATE
LABEL ACCOUNTS, WHICH REPRESENTED LESS THAN __% OF THE RECEIVABLES AS OF
THE CUT-OFF DATE) 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
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
S-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price to Underwriting Proceeds to
Public(l) Discount Transferor(l)(2)
Per Class A Certificate........ % % %
Per Class B Certificate........ % % %
Total.............................. $ $ $
(1) Plus accrued interest, if any, at the Class A Rate or the Class B Rate, as applicable, from
________________, 199____.
(2) Before deduction of expenses estimated to be $______________.
</TABLE>
The Certificates are offered by the Underwriters and First NBC
when, as and if issued by the Trust and accepted by the Underwriters and
First NBC and subject to the Underwriters' right to reject orders in whole
or in part. It is expected that the Certificates will be delivered in
book-entry form on or about ___________________ ___, 199___, through the
facilities of The Depository Trust Company[, Cedel Bank, societe anonyme,
and the Euroclear System].
Underwriters of the Class A Certificates
[ ] [ ]
Underwriters of the Class B Certificates
[ ] [ ]
The Date of this Prospectus Supplement is _______________ _____, 199_
<PAGE>
Interest will accrue on the Class A Certificates from
_____________ ___, 199_ (the "Closing Date") through ______________ ___,
199_ and from ______________ ___, 199_ through _____________ ___, 199_ and
with respect to each Interest Period thereafter, at the rate of _____% per
annum [above the London interbank offered rate for ___-month United States
dollar deposits ("LIBOR"), determined as described herein, prevailing on
the related LIBOR Determination Date (as defined herein) with respect to
such period] (the "Class A Rate"). Interest will accrue on the Class B
Certificates from the Closing Date through ____________ ___, 199_ and from
______________ ___, 199_ through ______________ ___, 199_ and with respect
to each Interest Period thereafter, at the rate of ____% per annum [above
LIBOR prevailing on the related LIBOR Determination Date with respect to
each such period] (the "Class B Rate"). [The initial LIBOR Determination
Date is ____________ ___, 199_.] Interest with respect to the Certificates
will be distributed on ______________ ___, 199_ and on the [15th] day of
each month thereafter (or, if such [15th] day is not a business day, the
next succeeding business day) (each, a "Distribution Date"). Principal on
the Class A Certificates is scheduled to be distributed on the
_____________ Distribution Date (the "Class A Scheduled Payment Date"), but
may be paid earlier or later under the circumstances described herein.
Principal on the Class B Certificates is scheduled to be distributed on the
_____________ Distribution Date (the "Class B Scheduled Payment Date"), but
may be paid earlier or later under the circumstances described herein. See
"Maturity Assumptions."
The Class B Certificates will be subordinated to the Class A
Certificates, and the Collateral Interest will be subordinated to the Class
A Certificates and the Class B Certificates, as described herein.
[First NBC does not intend to list the Certificates on any securities exchange.]
[Application will be made to list the Certificates
on the Luxembourg Stock Exchange.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
CERTIFICATES, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING
TRANSACTIONS, SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The Certificates offered hereby constitute a separate Series of
certificates being offered by the Trust from time to time pursuant to its
Prospectus dated _______________ ___, 199__. This Prospectus Supplement
does not contain complete information about the offering of the
Certificates. Additional information is contained in the Prospectus and
purchasers are urged to read both this Prospectus Supplement and the
Prospectus in full. Sales of the Certificates may not be consummated unless
the purchaser has received both this Prospectus Supplement and the
Prospectus.
<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and
the accompanying Prospectus. Certain capitalized terms used in this summary
are defined elsewhere in this Prospectus Supplement and the accompanying
Prospectus. A listing of the pages on which all such terms are defined is
found in the "Index of Defined Terms for Prospectus Supplement" on page
S-51 and the "Index of Defined Terms for Prospectus" on page 78.
The Trust............................. The First NBC Credit Card Master
Trust.
Title of Securities................... $________ Class A [Floating Rate]
[__%] Asset Backed Certificates,
Series 199_-_ (the "Class A
Certificates") and $________ Class
B [Floating Rate] [__%] Asset
Backed Certificates, Series 199_-_
(the "Class B Certificates," and
together with the Class A
Certificates, the "Certificates").
Class A Rate.......................... [____% per annum.] [For each Interest
Period, a rate per annum equal to
___-month LIBOR for United States
dollar deposits, plus ---%.]
Class B Rate......................... [____% per annum.] [For each Interest
Period, a rate per annum equal to
___-month LIBOR for United States
dollar deposits, plus ---%.]
Distribution Dates.................... The ___ day of each _________ (or, if
any such day is not a business day,
the next succeeding business day),
commencing on ______________, 1997.
Class A Scheduled Payment Date......... The __________, 200_ Distribution Date.
Class B Scheduled Payment Date......... The __________, 200_ Distribution Date.
Closing Date........................... _______________, 1997.
Credit Enhancement.................... For the Class A Certificates, the
subordination of the Collateral
Interest (in an initial amount of
$______________, ___% of the
initial Investor Interest) and the
Class B Certificates, as described
herein. For the Class B
Certificates, the subordination of
the Collateral Interest, as
described herein.
Class Structure...................... The Class A and Class B Certificates
differ in terms of priorities and
are expected to differ in terms of
ratings. The Class B Certificates
are subordinated to the Class A
Certificates to the extent
described herein in order to
provide credit enhancement for the
Class A Certificates. The
Collateral Interest (which is not
offered hereby) is subordinated to
both the Class A and the Class B
Certificates to the extent
described herein in order to
provide credit enhancement. (See
"Description of Certificates--
Subordination" and "--Application
of Collections.") See "Risk
Factors-- Effect of Subordination"
in the Prospectus for a discussion
of the risks associated with
purchasing certificates of a
subordinated class. Also see "Class
A Certificate Rating" and "Class B
Certificate Rating" below in this
Summary of Terms.
<PAGE>
Certificate 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 Holders (the "Class A
Investor Interest"), the Class B
Holders (the "Class B Investor
Interest"), the Collateral Interest
Holder (the "Collateral Interest,"
and together with the Class A
Investor Interest and the Class B
Investor Interest, the "Investor
Interest"), the interest of the
holders of other undivided
interests in the Trust issued
pursuant to the Agreement and
applicable Series Supplements and
the Transferor (the "Transferor
Interest"), as described below. As
used in this Prospectus Supplement,
the term "Holders" refers to
holders of the Certificates, the
term "Class A Holders" refers to
holders of the Class A
Certificates, the term "Class B
Holders" refers to holders of the
Class B Certificates, the term
"Collateral Interest Holder" refers
to the holder of the Collateral
Interest and the term "Agreement"
(unless the context requires
otherwise) refers to the Agreement
as supplemented by the Series
199_-_ Supplement pursuant to which
the Certificates are issued (the
"Series 199_-_ Supplement").
The Class A Certificates will
represent the right to receive from
the assets of the Trust allocated
to the Class A Certificates funds
up to (but not in excess of) the
amounts required to make (a)
payments of interest accruing from
the Closing Date through _________
__, 199_, and from __________ __,
199_ through __________ __, 199_
and with respect to each Interest
Period thereafter, at the Class A
Rate and (b) payments of principal
on the Class A Scheduled Payment
Date or, under certain limited
circumstances, during the Rapid
Amortization Period, to the extent
of the Class A Investor Interest,
which may be less than the unpaid
principal balance of the Class A
Certificates in certain
circumstances described herein.
The Class B Certificates will
represent the right to receive,
from the assets of the Trust
allocated to the Class B
Certificates, funds up to (but not
in excess of) the amounts required
to make (a) payments of interest
accruing from the Closing Date
through _________ __, 199_ and from
________ __, 199_ through
___________ __, 199_ and with
respect to each Interest Period
thereafter, at the Class B Rate and
(b) payments of principal on the
Class B Scheduled Payment Date or,
under certain limited
circumstances, during the Rapid
Amortization Period, to the extent
of the Class B Investor Interest,
which may be less than the unpaid
principal balance of the Class B
Certificates in certain
circumstances described herein. No
principal will be paid to the Class
B Holders until the Class A
Investor Interest is paid in full.
The aggregate principal amount of the
Class A Investor Interest and the
Class B Investor Interest will,
except as otherwise provided
herein, remain fixed at $ _________
and $_________, respectively. The
Class A Investor Interest will
decline in certain circumstances if
the Investor Default Amounts
allocated to the Class A
Certificates exceed funds allocable
thereto as described herein and the
Class B Investor Interest and the
Collateral Interest are zero. The
Class B Investor Interest will
decline in certain circumstances as
<PAGE>
a result of (a) the reallocation of
collections of Principal
Receivables otherwise allocable to
the Class B Investor Interest to
fund certain payments in respect of
the Class A Certificates and (b)
the allocation to the Class B
Investor Interest of certain
Investor Default Amounts, including
such amounts otherwise allocable to
the Class A Investor Interest when
the Collateral Interest is zero.
During the Controlled Accumulation
Period, for the sole purpose of
allocating collections of Finance
Charge Receivables, Net Default
Amounts and Net Recoveries with
respect to each Monthly Period, the
Class A Investor Interest will be
further reduced by the amount on
deposit in the Principal Funding
Account from time to time (as so
reduced, the "Class A Adjusted
Investor Interest" and together
with the Class B Investor Interest
and the Collateral Interest, the
"Adjusted Investor Interest").
The Class A Certificates, the Class B
Certificates and the Collateral
Interest will each include the
right to receive (but only to the
extent needed to make required
payments under the Agreement and
subject to any reallocation of such
amounts as described herein)
varying percentages of collections
of Finance Charge Receivables
(subject to reallocation of Group
Investor Finance Charge Collections
to other Series in Group I, as
described under "Description of the
Certificates -- Reallocations Among
Certificates in Different Series
within a Reallocation Group" in the
Prospectus), Principal Receivables
and will be allocated varying
percentages of Net Default Amounts
and Net Recoveries during each
calendar month (a "Monthly
Period"). Collections of Finance
Charge Receivables, Net Default
Amounts and Net Recoveries at all
times, and collections of Principal
Receivables during the Revolving
Period, will be allocated to the
Investor Interest based on the
Floating Investor Percentage and
will be further allocated among the
Class A Investor Interest, the
Class B Investor Interest and the
Collateral Interest based on the
Class A Floating Allocation, the
Class B Floating Allocation and the
Collateral Floating Allocation,
respectively, applicable during the
related Monthly Period. Collections
of Principal Receivables during the
Controlled Accumulation Period and
the Rapid Amortization Period will
be allocated to the Investor
Interest based on the Fixed
Investor Percentage and will be
further allocated among the Class A
Investor Interest, the Class B
Investor Interest and the
Collateral Interest based on the
Class A Fixed Allocation, the Class
B Fixed Allocation and the
Collateral Fixed Allocation,
respectively. See "Description of
the Certificates -- Allocation
Percentages" and "-- Pay Out
Events" herein and "Description of
the Certificates -- Pay Out Events"
in the Prospectus.
The final distribution of principal
and interest on the Certificates
will be made no later than the
______________ Distribution Date in
the manner provided in "Description
of the Certificates -- Final
Payment of Principal; Termination"
in the Prospectus. Series 199_- _
will terminate on the earliest to
occur of (a) the Distribution Date
on which the Investor Interest is
paid in full, (b) the
______________ Distribution Date or
(c) the Trust Termination Date
(such earliest to occur, the
"Series 199_-_ Termination Date").
After the Series 199_-_ Termination
Date, no further principal or
interest payments will be made on
the Certificates (except as
<PAGE>
described in "Description of the
Certificates -- Final Payment of
Principal; Termination" in the
Prospectus).
[Other Series........................ The Certificates will be the
_____________ Series of investor
certificates issued by the Trust,
all of which will be outstanding on
the Closing Date. See "Annex I--
Other Series" for a summary of the
principal terms of the __________
outstanding Series of investor
certificates. Additional Series are
expected to be issued from time to
time by the Trust. See "The Pooling
and Servicing Agreement Generally--
New Issuances" and "--Reallocations
Among Certificates of Different
Series within a Reallocation Group"
in the Prospectus and "Maturity
Considerations" herein.]
Receivables........................... The Receivables arise in Accounts in
the Bank Portfolio that satisfy the
eligibility criteria set forth in
the Agreement as of the Cut-Off
Date. The Receivables consist of
Principal Receivables and Finance
Charge Receivables. In addition,
certain amounts of Interchange and
Other Account Revenues attributed
to the Accounts will be allocated
to the Certificates and treated as
Finance Charge Receivables. See
"First NBC's Credit Card
Activities-- Interchange and Other
Account Revenues" in the
Prospectus.
The aggregate amount of Receivables
in the Accounts as of the end of
the day on the day after the
Cut-Off Date was $__________,
comprised of $___________ of
Principal Receivables and
$__________ of Finance Charge
Receivables. The amount of Finance
Charge Receivables will not affect
the amount of the Investor Interest
represented by the Certificates and
the Collateral Interest or the
amount of the Transferor Interest,
all of which are determined on the
basis of the amount of Principal
Receivables in the Trust. The
aggregate amount of Principal
Receivables in the Trust evidenced
by the Certificates and the
Collateral Interest will never
exceed the amount of the Investor
Interest regardless of the total
amount of Principal Receivables in
the Trust at any time.
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. Holders 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" in the Prospectus.
Servicing Fee......................... The Servicer will receive a monthly
fee as servicing compensation from
the Trust on each Transfer Date.
The Servicing Fee Rate for the
Certificates will be ___% (the
"Servicing Fee Rate"). On each
Transfer Date, Servicer Interchange
with respect to the related Monthly
Period that is on deposit in the
Finance Charge Account will be
withdrawn from the Finance Charge
<PAGE>
Account and paid to the Servicer in
respect of the Monthly Investor
Servicing Fee. In addition, the
Class A Servicing Fee, the Class B
Servicing Fee and the Collateral
Interest Servicing Fee will be paid
on each Transfer Date as described
under "Description of the
Certificates -- Servicing
Compensation and Payment of
Expenses." See also "Description of
the Certificates -- Servicing
Compensation and Payment of
Expenses" in the Prospectus.
Revolving Period..................... The "Revolving Period" for the
Certificates means the period from
and including the Closing Date to,
but not including, the commencement
of the earlier of (a) the
Controlled Accumulation Period and
(b) the Rapid Amortization Period.
During the Revolving Period,
Available Investor Principal
Collections otherwise allocable to
the Investor Interest will, subject
to certain limitations and unless a
reduction in the Required
Collateral Interest has occurred,
be treated as Shared Principal
Collections and allocated to the
holders of certificates of other
Principal Sharing Series issued and
outstanding or, subject to certain
limitations, paid to the Transferor
or deposited into the Excess Funding
Account. See "Description of the
Certificates-- Principal Payments."
See "Description of the Certificates
-- Pay Out Events" for a discussion
of the events which might lead to the
termination of the Revolving Period
prior to the commencement of the
Controlled Accumulation Period.
Controlled Accumulation
Period.............................. Unless a Pay Out Event occurs, the
controlled accumulation period for
the Certificates (the "Controlled
Accumulation Period") is scheduled
to begin at the close of business
on ____________ __, _____. Subject
to the conditions set forth under
"Description of the Certificates--
Postponement of Controlled
Accumulation Period," the day on
which the Revolving Period ends and
the Controlled Accumulation Period
begins may be delayed to not later
than the close of business on
__________ ____. The Controlled
Accumulation Period will end on the
earliest of (i) the commencement of
the Rapid Amortization Period, (ii)
payment of the Investor Interest in
full and (iii) the Series 199_-_
Termination Date. During the
Controlled Accumulation Period,
prior to the payment of the Class A
Investor Interest in full, amounts
equal to the least of (a) Available
Investor Principal Collections for
the related Monthly Period, (b) the
sum of the Controlled Accumulation
Amount for such Monthly Period and
any portion of the Controlled
Accumulation Amount for any prior
Monthly Period that has not yet
been deposited (such sum, the
"Controlled Deposit Amount" for
such Monthly Period) and (c) the
Class A Adjusted Investor Interest
on such Transfer Date will be
deposited monthly in a trust
account established by the Servicer
(the "Principal Funding Account")
on each Transfer Date beginning
with the Transfer Date in the month
following the month in which the
Controlled Accumulation Period
begins until the Principal Funding
Account Balance is equal to the
Class A Investor Interest. On each
Transfer Date during the Controlled
Accumulation Period beginning with
the Transfer Date after the one on
which the Class A Investor Interest
has been provided for, an amount
equal to the lesser of (a)
Available Investor Principal
Collections for the related Monthly
<PAGE>
Period (less any amount allocated to
the Class A Investor Interest as
described in the prior sentence)
and (b) the Class B Investor
Interest on such Transfer Date will
be deposited into the Distribution
Account for distribution to the
Class B Holders until the Class B
Investor Interest has been paid in
full. If, for any Monthly Period,
the Available Investor Principal
Collections for such Monthly Period
exceed the sum of the Class A
Monthly Principal and the Class B
Monthly Principal for the related
Transfer Date, the amount of such
excess will be first paid to the
Collateral Interest Holder to the
extent that the Collateral Interest
exceeds the Required Collateral
Interest and then will be treated
as Shared Principal Collections and
allocated to the holders of
certificates of other Principal
Sharing Series or, subject to
certain limitations, paid to the
Transferor or deposited into the
Excess Funding Account. See
"Description of the Certificates --
Application of Collections." Also
see "Prospectus Summary --
Controlled Accumulation Period" in
the Prospectus for a general
description of the purpose of this
feature and its effect on
Certificateholders.
Unless a Pay Out Event occurs, prior
to the payment of the Class A
Investor Interest 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 Permitted
Investments. Investment earnings
(net of investment losses and
expenses) on funds on deposit in
the Principal Funding Account (the
"Principal Funding Investment
Proceeds") during the Controlled
Accumulation Period will be used to
pay interest on the Class A
Certificates in an amount up to,
for each Transfer Date, the product
of (a) [a fraction, the numerator
of which is the actual number of
days in the related Interest Period
and the denominator of which is
360] [one-twelfth], (b) the Class A
Rate [in effect with respect to the
related Interest Period] and (c)
the Principal Funding Account
Balance as of the Record Date
preceding such Transfer Date (the
"Class A Covered Amount"). If, for
any Transfer Date, the Principal
Funding Investment Proceeds are
less than the Class A Covered
Amount, the amount of such
deficiency (the "Class A Principal
Funding Investment Shortfall")
shall be paid, to the extent
available, from the Reserve Account
and, if necessary, from Excess
Spread and Reallocated Principal
Collections.
Funds on deposit in the Principal
Funding Account will be available
to pay the Class A Holders in
respect of the Class A Investor
Interest on the Class A Scheduled
Payment Date. If the aggregate
principal amount of deposits made
to the Principal Funding Account is
insufficient to pay the Class A
Investor Interest in full on the
Class A Scheduled Payment Date, the
Rapid Amortization Period will
commence. Although it is
anticipated that during the
Controlled Accumulation Period
prior to the payment of the Class A
Investor Interest 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 Holders on the Class
A Scheduled Payment Date, no
assurance can be given in that
regard. See "Maturity Assumptions"
in the Prospectus and herein.
<PAGE>
On the Class B Scheduled Payment
Date, provided that the Class A
Investor Interest is paid in full
on the Class A Scheduled Payment
Date and the Rapid Amortization
Period has not commenced, Available
Investor Principal Collections will
be used to pay the Class B Holders
in respect of the Class B Investor
Interest as described herein. If
the Available Investor Principal
Collections are insufficient to pay
the Class B Investor Interest in
full on the Class B Scheduled
Payment Date, the Rapid
Amortization Period will commence.
Although it is anticipated that
scheduled principal will be
available for distribution to the
Class B Holders on the Class B
Scheduled Payment Date, no
assurance can be given in that
regard. See "Maturity Assumptions"
in the Prospectus and "Maturity
Assumptions" herein.
If a Pay Out Event occurs during the
Controlled Accumulation Period, the
Rapid Amortization Period will
commence, and any amounts on
deposit in the Principal Funding
Account will be paid to the Class A
Holders on the Distribution Date in
the month following the
commencement of the Rapid
Amortization Period.
Other Series offered by the Trust may
or may not have amortization or
accumulation periods like the
Controlled Accumulation Period for
the Certificates, and such periods
may have different lengths and
begin on different dates than such
Controlled Accumulation Period.
Thus, certain Series may be in
their revolving periods while
others are in periods during which
collections of Principal
Receivables are distributed to or
held for the benefit of
certificateholders of such other
Series. In addition, other Series
may allocate Principal Receivables
based upon different investor
percentages. See "Description of
the Certificates -- Exchanges" in
the Prospectus for a discussion of
the potential terms of any other
Series.
Rapid Amortization Period............ During the period from the day on
which a Pay Out Event has occurred
and ending on the earlier of (a)
the payment of the Investor
Interest in full, (b) the Series
199_-_ Termination Date and (c) the
Trust Termination Date (the "Rapid
Amortization Period"), Available
Investor Principal Collections will
be distributed monthly on each
Distribution Date to the Class A
Holders and, following payment of
the Class A Investor Interest in
full, to the Class B Holders and,
following payment of the Class B
Investor Interest in full, to the
Collateral Interest Holder
beginning with the Distribution
Date in the month following the
commencement of the Rapid
Amortization Period. See
"Description of the Certificates--
Pay Out Events" for a discussion of
the events which might lead to the
commencement of the Rapid
Amortization Period and "Prospectus
Summary-- Rapid Amortization
Period" in the Prospectus for a
general discussion of the purpose
and effect on Certificateholders of
this feature.
Subordination of the Class B
Certificates and the Collateral
Interest............................. The Class B Certificates and the
Collateral Interest will be
subordinated, as described herein,
to the extent necessary to fund
certain payments with respect to
the Class A Certificates as
described herein. In addition, the
Collateral Interest will be
<PAGE>
subordinated to the extent necessary
to fund certain payments with
respect to the Class B
Certificates. If the Class B
Investor Interest and the
Collateral Interest are reduced to
zero, the Class A Holders will bear
directly the credit and other risks
associated with their interest in
the Trust. If the Collateral
Interest is reduced to zero, the
Class B Holders will bear directly
the credit and other risks
associated with their interest in
the Trust. To the extent the Class
B Investor Interest is reduced, the
percentage of collections of
Finance Charge Receivables
allocable to the Class B Holders in
subsequent Monthly Periods will be
reduced. Such reductions of the
Class B Investor Interest will
thereafter be reimbursed and the
Class B Investor Interest increased
on each Transfer Date by the
amount, if any, of Excess Spread
for such Transfer Date available
for that purpose. To the extent the
amount of such reduction in the
Class B Investor Interest is not
reimbursed, the amount of principal
and interest distributable to the
Class B Holders will be reduced.
See "Description of the
Certificates -- Subordination."
Additional Amounts Available to
Holders ............................. With respect to any Transfer Date,
Excess Spread will be applied to
fund the Class A Required Amount
and the Class B Required Amount, if
any. The "Class A Required Amount"
means the amount, if any, by which
the sum of (a) the Class A Monthly
Interest due on the related
Distribution Date and any overdue
Class A Monthly Interest and Class
A Additional Interest thereon, (b)
the Class A Servicing Fee for the
related Monthly Period and any
overdue Class A Servicing Fee and
(c) the Class A Investor Default
Amount, if any, for the related
Monthly Period exceeds the Class A
Available Funds for the related
Monthly Period. The "Class B
Required Amount" means the amount,
if any, by which 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
Monthly Period and any overdue
Class B Servicing Fee exceeds the
Class B Available Funds for the
related Monthly Period and (b) the
Class B Investor Default Amount, if
any, for the related Monthly
Period. The "Required Amount" for
any Monthly Period means the sum of
the Class A Required Amount and the
Class B Required Amount for such
Monthly Period. "Excess Spread" for
any Transfer Date will equal the
sum of (1) the excess of (A) Class
A Available Funds for the related
Monthly Period over (B) the sum of
the amounts referred to in clauses
(a), (b) and (c) in the definition
of "Class A Required Amount" above,
(2) the excess of (A) Class B
Available Funds for the related
Monthly Period over (B) the sum of
the amounts referred to in clauses
(a)(i) and (a)(ii) in the
definition of "Class B Required
Amount" above, (3) Collateral
Available Funds for the related
Monthly Period not used under
certain circumstances to pay the
Collateral Interest Servicing Fee,
as described herein and (4) Excess
Finance Charge Collections
allocated to the Investor Interest.
If, on any Transfer Date, Excess
Spread is less than the Class A
Required Amount, then Reallocated
Principal Collections allocable
first to the Collateral Interest
and then to the Class B Investor
<PAGE>
Interest with respect to the related
Monthly Period will be used to fund
the remaining Class A Required
Amount. If Reallocated Principal
Collections with respect to such
Monthly Period are insufficient to
fund the remaining Class A Required
Amount for the related Transfer
Date, then the Collateral Interest
(after giving effect to reductions
for any Collateral Charge-Offs and
Reallocated 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 Monthly Period). In the
event that such reduction would
cause the Collateral Interest to be
a negative number, the Collateral
Interest will be reduced to zero,
and the Class B Investor Interest
(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 Interest would have been
reduced below zero (but not by more
than the excess of the Class A
Investor Default Amount, if any,
for such Monthly Period over the
amount of such reduction, if any,
of the Collateral Interest with
respect to such Monthly Period). In
the event that such reduction would
cause the Class B Investor Interest
to be a negative number, the Class
B Investor Interest will be reduced
to zero and the Class A Investor
Interest will be reduced by the
amount by which the Class B
Investor Interest would have been
reduced below zero (but not by more
than the excess, if any, of the
Class A Investor Default Amount for
such Monthly Period over such
reductions in the Collateral
Interest and the Class B Investor
Interest with respect to such
Monthly Period) (such reduction, a
"Class A Investor Charge-Off"). If
the Collateral Interest and the
Class B Investor Interest are
reduced to zero, the Class A
Holders 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; Investor Charge-Offs."
If, on any Transfer Date, Excess
Spread 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, then Reallocated
Principal Collections allocable to
the Collateral Interest for the
related Monthly Period not required
to pay the Class A Required Amount
will be allocated to fund the
remaining Class B Required Amount.
If such remaining Reallocated
Principal Collections allocable to
the Collateral Interest with
respect to such Monthly Period are
insufficient to fund the remaining
Class B Required Amount for the
related Transfer Date, then the
Collateral Interest (after giving
effect to reductions for any
Collateral Charge-Offs,
Reallocated Principal Collections
and any adjustments made thereto
for the benefit of the Class A
Holders) will be reduced by the
amount of such deficiency (but not
by more than the Class B Investor
Default Amount for such Monthly
Period). If such reduction would
cause the Collateral Interest to be
a negative number, the Collateral
Interest will be reduced to zero,
and the Class B Investor Interest
will be reduced by the amount by
which the Collateral Interest would
have been reduced below zero (but
not by more than the excess, if
any, of the Class B Investor
Default Amount for such Monthly
Period over such reduction in the
Collateral Interest with respect to
<PAGE>
such Monthly Period) (such reduction,
a "Class B Investor Charge-Off").
In the event of a reduction of the
Class A Investor Interest, the
Class B Investor Interest or the
Collateral Interest, the amount of
principal and interest available to
fund payments with respect to the
Class A Certificates and the Class
B Certificates will be decreased.
See "Description of the
Certificates -- Reallocation of
Cash Flows" and "-- Defaulted
Receivables; Investor Charge-Offs."
Required Collateral
Interest.............................. The "Required Collateral Interest"
with respect to any Transfer Date
means (a) initially, $___________
(the "Initial Collateral Interest")
and (b) on any Transfer Date
thereafter, an amount equal to __%
of the sum of the Class A Adjusted
Investor Interest and the Class B
Investor Interest on such Transfer
Date, after taking into account
deposits into the Principal Funding
Account on such Transfer Date and
payments to be made on the related
Distribution Date, and the
Collateral Interest on the prior
Transfer Date after any adjustments
made on such Transfer Date, but not
less than $__________; provided,
however, (i) that if certain
reductions in the Collateral
Interest occur or if a Pay Out
Event occurs, the Required
Collateral Interest for such
Transfer Date shall equal the
Required Collateral Interest for
the Transfer Date immediately
preceding the occurrence of such
reduction or Pay Out Event; (ii) in
no event shall the Required
Collateral Interest exceed the
unpaid principal amount of the
Certificates as of the last day of
the Monthly Period preceding such
Transfer Date after taking into
account payments to be made on the
related Distribution Date; and
(iii) the Required Collateral
Interest may be reduced at any time
to a lesser amount if the Rating
Agency Condition is satisfied. See
"Description of the Certificates--
Required Collateral Interest."
If on any Transfer Date, the
Collateral Interest is less than
the Required Collateral Interest,
certain Excess Spread amounts, if
available, will be used to increase
the Collateral Interest to the
extent of such shortfall. If on any
Transfer Date the Collateral
Interest equals or exceeds the
Required Collateral Interest, any
such Excess Spread amounts will
first be deposited into the Reserve
Account as described herein and
second, to the extent available, be
applied in accordance with the Loan
Agreement among the Trustee, the
Transferor, the Servicer and the
Collateral Interest Holder (the
"Loan Agreement") and will not be
available to the Holders.
Reallocated Investor
Finance Charge Collections............. Series 199_-_ will be the first
Series issued by the Trust in a
Group ("Group I") constituting a
Reallocation Group. Collections of
Finance Charge Receivables
allocable to the investor
certificates of each Series in
Group I will be aggregated and made
available for certain required
distributions to all Series in
Group I pro rata based upon the
relative amount of such required
distributions for each Series in
Group I as described under
"Description of the Certificates --
Reallocations Among Certificates of
Different Series within a
Reallocation Group" in the
Prospectus. Consequently, any
issuance of a new Series in Group I
may have the effect of reducing or
increasing the amount of
collections of Finance Charge
Receivables allocable to the Series
199_-_ Certificates. See "Risk
<PAGE>
Factors--Issuance of New Series" in
the Prospectus. In addition, it has
not been determined whether any
Series issued by the Trust in the
future will be included in Group I.
Shared Excess Finance
Charge Collections................... Each Series in Group I, including
Series 199_-_, will be an Excess
Allocation Series. See "Description
of the Certificates -- Shared
Excess Finance Charge Collections."
Paired Series........................ Series 199_-_ may be paired with one
or more other Series (each a
"Paired Series"). If a Paired
Series is issued with respect to
Series 199_-_, following the
issuance of such Paired Series, as
the Adjusted Invested Amount is
reduced, the investor interest of
the Paired Series may increase by
an equal amount. This will have the
effect of increasing the investor
interest of the Paired Series by an
amount that otherwise would have
increased the Transferor Interest.
If a Pay Out Event occurs with
respect to any such Paired Series
prior to the payment in full of the
Certificates, the percentages used
to determine the share of
collections of Principal
Receivables allocable to the
Certificates may be reduced, which
may delay the final payment of
principal to the Holders. See
"Maturity Assumptions-- Paired
Series," "Description of the
Certificates-- Paired Series" and
"Description of the Certificates--
Allocation Percentages" herein.
Shared Principal
Collections.......................... Series 199_-_ is a Principal Sharing
Series. To the extent that
collections of Principal
Receivables allocated to the
Investor Interest are not needed to
make payments on the Investor
Interest or to be deposited in the
Principal Funding Account, such
collections ("Shared Principal
Collections") will be allocated to
cover certain principal payments
due to or for the benefit of
certificateholders of other
Principal Sharing Series or, under
certain circumstances, paid to the
Transferor or deposited into the
Excess Funding Account. Any such
reallocation or deposit will not
result in a reduction in the
Investor Interest with respect to
Series 199_-_. In addition,
collections of Principal
Receivables and certain other
amounts otherwise allocable to
other Principal Sharing 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, may be applied to cover
principal payments due to or for
the benefit of the holders of the
Class A Certificates and the Class
B Certificates or the Collateral
Interest Holder. See "Description
of the Certificates -- Shared
Principal Collections." Also see
"Prospectus Summary-- Shared
Principal Collections" in the
Prospectus for a general discussion
of the purpose and effect on
Certificateholders of this feature.
Optional Repurchase.................. The Investor Interest will be subject
to optional repurchase by the
Transferor on any Distribution Date
on or after the Distribution Date
on which the Investor Interest is
reduced to an amount less than or
equal to $__________ (5% of the
initial Investor Interest), if
certain conditions set forth in the
Agreement are met. The repurchase
price will be equal to the sum of
the Investor Interest and all
accrued and unpaid interest on the
<PAGE>
Certificates and the Collateral
Interest through the day preceding
the Distribution Date on which the
repurchase occurs. See "Description
of the Certificates -- Final
Payment of Principal; Termination"
in the Prospectus.
[Defeasance........................... The Transferor may, at its option and
subject to the conditions specified
in "Description of the
Certificates-- Defeasance," be
discharged from its substantive
obligations in respect of the
Certificates or in respect of all
Series issued by the Trust by
irrevocably depositing with the
Trustee, under the terms of an
irrevocable trust agreement, as
trust funds in trust, any of (i)
dollars in an amount, (ii)
Permitted Investments, or (iii) a
combination of the two, in each
case sufficient to pay and
discharge, and which will be
applied by the Trustee to pay and
discharge, all remaining scheduled
interest and principal payments on
all outstanding Certificates or on
all outstanding certificates of all
Series issued by the Trust, as the
case may be, on the dates scheduled
for such payments and all amounts
owing to the Collateral Interest
Holder, and if applicable, all
other Credit Enhancement Providers
with respect to the Trust. See
"Description of the Certificates--
Defeasance."]
Tax Status........................... Special Tax Counsel to the Transferor
will opine on the Closing Date that
under existing law the Certificates
will be characterized as debt for
Federal income tax purposes and the
Trust will not be an association
(or publicly traded partnership)
taxable as a corporation. Under the
Agreement, the Transferor, the
Servicer, the Holders and the
Certificate Owners will agree to
treat the Certificates as debt for
Federal, state, local and foreign
income and franchise tax purposes.
See "U.S. Federal Income Tax
Consequences" in the Prospectus for
additional information concerning
the application of Federal income
tax laws.
ERISA Considerations.................. Subject to considerations described
below, the Class A Certificates are
eligible for purchase by employee
benefit plan investors. Under a
regulation issued by the Department
of Labor, the Trust's assets would
not be deemed "plan assets" of an
employee benefit plan holding the
Class A Certificates if certain
conditions are met, including that
the Class A Certificates must be
held, upon completion of the public
offering made hereby, by at least
100 investors who are independent
of the Transferor and of one
another. At or before the
conclusion of the offering, the
Underwriters will notify the
Transferor and the Trustee as to
whether or not the Class A
Certificates will be expected to be
held by at least 100 separately
named persons at the conclusion of
the offering, although no
assurances can be made and no
monitoring or other measures will
be taken to assure that this
condition has been satisfied. The
Transferor anticipates that the
other conditions of the regulation
will be met. If the Trust's assets
were deemed to be "plan assets" of
an employee benefit plan investor
(e.g., if the 100 independent
investor criterion is not
satisfied), violations of the
"prohibited transaction" rules of
the Employee Retirement Income
Security Act of 1974, as
<PAGE>
amended ("ERISA"), could result and
generate excise tax and other
liabilities under ERISA and section
4975 of the Internal Revenue Code
of 1986, as amended (the "Code"),
unless a statutory, regulatory or
administrative exemption is
available. It is uncertain whether
existing exemptions from the
"prohibited transaction" rules of
ERISA would apply to all
transactions involving the Trust's
assets. Accordingly, fiduciaries or
other persons contemplating
purchasing the Certificates on
behalf or with "plan assets" of any
employee benefit plan should
consult their counsel before making
a purchase. See "ERISA
Considerations" in the Prospectus.
The Underwriters currently do not
expect that the Class B
Certificates will be held by at
least 100 such persons and,
therefore, do not expect that such
Class B Certificates will qualify
as publicly-offered securities
under the regulation referred to in
the preceding paragraph.
Accordingly, the Class B
Certificates may not be acquired
with plan assets of (a) any
employee benefit plan that is
subject to ERISA, or (b) any plan
or other arrangement (including an
individual retirement account or
Keogh plan) that is subject to
section 4975 of the Code. By its
acceptance of a Class B Certificate
or an interest therein, each Class
B Holder and Certificate Owner will
be deemed to have represented and
warranted that it is not subject to
the foregoing limitation.
Class A Certificate Rating............. It is a condition to the issuance of
the Class A Certificates that they
be rated in the highest rating
category by at least one Rating
Agency. The rating of the Class A
Certificates is based primarily on
the value of the Receivables and
the terms of the Class B
Certificates and the benefits of
the Collateral Interest.
Class B Certificate Rating............ It is a condition to the issuance of
the Class B Certificates that they
be rated in one of the three
highest rating categories by at
least one Rating Agency. The rating
of the Class B Certificates is
based primarily on the value of the
Receivables and the benefits of the
Collateral Interest.
[Listing............................. Application will be made to list the
Certificates on the Luxembourg
Stock Exchange.]
<PAGE>
RISK FACTORS
Potential investors should consider among other things, the risk
factors discussed under "Risk Factors" in the Prospectus and the following
risk factors in connection with the purchase of the Certificates.
Possible Losses as a Result of Limited Amounts of Credit
Enhancement. Although Credit Enhancement with respect to the Class A
Certificates will be provided by the subordination of the Class B
Certificates to the extent described herein and by the Collateral Interest,
and with respect to the Class B Certificates, will be provided by the
Collateral Interest, the amount available thereunder is limited, may
decline during the Controlled Accumulation Period and will be reduced by
payments made pursuant thereto. If the Collateral Interest has been reduced
to zero, Class B Certificateholders will bear directly the credit and other
risks associated with their undivided interests in the Trust, and the Class
B Investor Interest may be reduced. If the Class B Investor Interest is
reduced to zero, Class A Certificateholders will bear directly the credit
and other risks associated with their undivided interest in the Trust, and
the Class A Investor Interest may be reduced. Further, in the event of a
reduction of the Class B Investor Interest or the Collateral Invested, the
amount of principal and interest available to make distributions with
respect to the Class A Certificates and the Class B Certificates may be
reduced.
Possible Losses on Class B Certificates as a Result of
Subordination. The Class B Certificates are subordinated in right of
payment of principal to the Class A Certificates. Payments of principal in
respect of the Class B Certificates will not commence until after the final
principal payment with respect to the Class A Certificates has been made as
described herein. Moreover, the Class B Investor Interest is subject to
reduction if the Class A Required Amount for any Monthly Period is greater
than zero and is not funded from Excess Spread and Excess Financial Charge
Collections allocated to Series 199__-_, Reallocated Principal Collections
with respect to the Collateral Interest and reductions in the Collateral
Interest, if any. To the extent the Class B Investor Interest is reduced,
the percentage of collections of Finance Charge Receivables allocable to
the Class B Investor Interest in future Monthly Periods will be reduced.
Moreover, to the extent the amount of such reduction in the Class B
Investor Interest is not reimbursed, the amount of principal and interest
distributable to the Class B Certificateholders will be reduced. See
"Description of the Certificates -- Allocation Percentages" and "--
Subordination" herein.
Possible Prepayment or Losses as a Result of Increasing Credit
Card Losses. As set forth under "First NBC's Credit Card Portfolio --
Delinquency and Loss Experience" herein, losses and delinquencies in the
Bank Portfolio have increased in recent years. For instance, net
charge-offs of receivables in the Bank Portfolio for the years ended
December 13, 1993, 1994, 1995 and 1996 were __%, __%, __% and __% of the
average receivables outstanding during the applicable year, and total
delinquent receivables at December 31, 1993, 1994, 1995 and 1996 were __%,
__%, __% and __% of the total receivables outstanding in the Bank
Portfolio. Based upon published reports such as the Moody's Investors
Service Credit Card Credit Indexes, First NBC understands that most
domestic credit card issuers have experienced increases in charge-offs and
delinquencies. Increasing losses and delinquencies in the Bank Portfolio
may result in the occurrence of a Pay Out Event and the commencement of the
Rapid Amortization Period. If losses reached a high enough level relative
to the yield on the Receivables, a Pay Out Event could occur, resulting in
payments to Certificateholders prior to the expected dates. In addition, if
any applicable Credit Enhancement is exhausted, Certificateholders will
bear a share of the losses on Receivables in Trust, which could result in
losses to Certificateholders
<PAGE>
FIRST NBC'S CREDIT CARD PORTFOLIO
General
The Receivables to be conveyed to the Trust by First NBC pursuant
to the Agreement have been or will be generated from transactions made by
holders of selected VISA, MasterCard and private label credit card
accounts, including premium accounts and standard accounts, in the Bank
Portfolio. A description of the Bank's credit card business is contained in
the Prospectus under the heading "First NBC's Credit Card Activities."
Billing and Payments
First NBC generates and mails to cardholders monthly statements
summarizing account activity and processes cardholder monthly payments at
the end of each Billing Cycle, generally within 3 business days after the
cycle date assigned to such account by the Servicer. Currently, the
Servicer has ten Billing Cycles within each calendar month. The monthly
billing statement reflects all purchases, cash advances, administrative
charges, if applicable (such as currency conversion charges, late charges,
and returned payment charges), annual fees, if any, credit life insurance
charges and finance charges incurred by the account during the Billing
Cycle or a prior Billing Cycle and reported to the Servicer, all payments
or credits applicable to the account and the outstanding balance of the
account as of the cycle date, including the available credit thereunder.
Customers receive a 25-day grace period on purchases. Currently,
cardholders in the programs included in the Trust Portfolio must make a
monthly minimum payment at least equal to the greater of (i) 2.5% or 10%
(depending upon the program) of the statement balance (excluding any
disputed amounts) plus past due amounts and (ii) a stated minimum payment
(generally $10) plus past due amounts.
The finance charges on purchases are assessed monthly and are
calculated by multiplying the account's average daily purchase balance
times the applicable annual periodic rate times the actual number of days
in the applicable Billing Cycle divided by 365. Finance charges are
calculated on purchases from the date of the purchase or the first day of
the Billing Cycle in which the purchase is posted to the account, whichever
is later. Monthly periodic finance charges are not assessed on purchases if
all balances shown in the billing statement are paid by the due date, which
is 25 days after the billing date. Finance charges are calculated on cash
advances (including balance transfers) from the date of the transaction.
Currently, First NBC generally treats the date before posting as the
transaction date for cash advance checks.
The Trust Portfolio includes fixed rate and variable rate credit
card accounts. Generally, fixed annual percentage rates range from 5.9% to
21.0%, and variable rates range from prime plus 4.0% per annum to prime
plus 8.4% per annum. First NBC imposes no minimum finance charge. Certain
accounts in the Trust Portfolio may include a structure by which a portion
of finance charges, annual fees, cash advance fees or purchase volume are
rebated to agent banks or affinity groups.
A portion of the accounts require payment of annual fees
(generally ranging from $5.00 to $40.00), although under various marketing
programs these fees may be waived or rebated. First NBC also assesses late
fees (generally $10.00 to $20.00), overlimit fees (generally $10.00 to
$15.00) and returned check charges (generally $15.00). First NBC assesses a
cash advance fee, generally 2.5% of the cash advance amount, with a minimum
fee of $2.50 and a maximum fee of $20.00.
Payments in respect of the Accounts are processed by the FCSC (on
behalf of the Servicer) and are generally allocated at the end of the
applicable Billing Cycle to the outstanding balance of such Accounts in the
following order: (i) to fees assessed on the account, (ii) to finance
charges, and (iii) to the unpaid principal balance of purchases.
<PAGE>
Delinquency and Loss Experience
An account is contractually delinquent if the minimum payment is
not received by the due date indicated on the customer's statement. An
account may be restricted for subsequent activity until the customer makes
all past due payments. Account restrictions may be instituted within a
range of one to 40 days delinquency, based upon the customer's internal
"behavioral score" and credit bureau score. Generally, once a customer is
four payments delinquent, the account is permanently closed.
Efforts to collect contractually delinquent credit card
receivables include statement messages, telephone calls and formal
collection letters. First NBC updates monthly an internal "behavioral
score", developed with Fair, Isaac and Company, Inc., for each cardholder
based upon payment and transaction history. Each cardholder's credit bureau
score, under a credit scoring model developed with Fair, Isaac and Company,
Inc., is also updated quarterly. The behavioral score and the credit bureau
score are used to prioritize accounts for initial contact with the
objective of contacting the highest risk and balance accounts first.
Accounts are worked continually at each stage of delinquency. Accounts are
charged off at 179 days delinquent, except for bankruptcy and deceased
losses, which are charged off within 45 days of notification. Charged off
accounts are placed with collection personnel at First NBC, outside
collection agencies or outside attorneys.
In First NBC's historical experience, delinquency and loss ratios
for a group of accounts opened at around the same time have peaked during
the second and third years after the accounts were opened and then dropped
off significantly thereafter. Although there can be no assurance that the
delinquency and loss experience for the Receivables in the future will be
similar to First NBC's historical experience, addition of a large number of
newly created Additional Accounts to the Trust Portfolio might be expected
to increase delinquency and loss ratios for the Trust Portfolio during the
second and third years after such addition of accounts.
The following tables set forth the delinquency and loss experience
for each of the periods shown for the Bank Portfolio of credit card
accounts. The Bank Portfolio's delinquency and loss experience is comprised
of segments which may, when taken individually, have delinquency and loss
characteristics different from those of the overall Bank Portfolio of
credit card accounts. As of the beginning of the day on ___________ __,
1997, the Receivables in the Trust Portfolio represented approximately ___%
of the Bank Portfolio. Because the Trust Portfolio is only a portion of the
Bank Portfolio, actual delinquency and loss experience with respect to the
Receivables may be different from that set forth below for the Bank
Portfolio. There can be no assurance that the delinquency and loss
experience for the Receivables in the future will be similar to the
historical experience of the Bank Portfolio set forth below.
6190782.16 61897 1113c S-20
<PAGE>
<TABLE>
<CAPTION>
Delinquency Experience Bank Portfolio(1)(2)
(Dollars in thousands)
as of December 31
--------------------------------------------------------------
1996 1995 1994 1993
-------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage Percentage Percentage Percentage
of Total of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Receivables
Outstanding(3)$ $ $ $
Receivables
Delinquent...
31 - 60 Days $ % $ % $ % $ %
61 - 90 Days % % % %
91-120 Days % % % %
121 Days Or
More......... % % % %
------- ------- ------- -------
Total. $ % $ % $ % $ %
======== ======== ======== ========
- -------------------
(1) The above information is for First NBC's First BankCard Division
only. Amounts have not been restated for acquisitions of
portfolios from the Corporation's acquired banks which were
accounted for as poolings-of-interests.
(2) The above information includes the private label portfolio
guaranteed by USAF Services ("USAF"). These balances are charged
back to USAF at 90 days past due. The balances in such accounts
and the related delinquencies at December 31, 1996, 1995, 1994 and
1993, respectively, were: $______ outstanding, ____% delinquent;
$_________ outstanding, ____% delinquent; $_______ outstanding,
_____% delinquent; and $_________ outstanding, ____% delinquent.
(3) The Receivables Outstanding on the accounts consist of all amounts
due from cardholders as posted to the accounts as of the end of
the period shown.
<CAPTION>
Loss Experience(1)(2)
Bank Portfolio
(Dollars in Thousands)
Year Ended December 31
1996 1995 1994 1993
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage Percentage Percentage Percentage
of Total of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables Receivables Receivables
Average Receivables Outstanding(3) $ $ $ $
Gross Charge-Offs(4)........ $ % $ % $ % $ %
Recoveries.................. % % % %
--- --
Net Charge-Offs............... $ % $ % $ % $ %
= = = =
- --------------------
(1) The above information is for First NBC's First BankCard Division
only. Amounts have not been restated for acquisitions of
portfolios from the Corporation's acquired banks which were
accounted for as poolings-of-interests.
(2) Interest and fees on charged off accounts are reversed from
finance charge revenues and fee income accounts, respectively, and
are not included in charge-offs.
(3) Average Receivables Outstanding is the average of the daily
receivable balance during the period indicated.
(4) Gross Charge-Offs are total principal charge-offs before
recoveries and do not include the amount of any reductions in
Average Receivables Outstanding due to fraud, returned goods,
customer disputes or other miscellaneous credit adjustments.
S-21
<PAGE>
</TABLE>
Interchange and Other Account Revenues
The Transferor will be required, pursuant to the terms of the
Agreement, to transfer to the Trust a percentage of the Interchange
attributed to cardholder charges for goods and services in the Accounts.
For administrative convenience, the Transferor may exclude from the
calculation of Interchange certain interchange received from merchants for
whom First NBC acts as the MasterCard or VISA clearing bank. Interchange
arising under the Accounts will be allocated to the Certificates on the
basis of the percentage equivalent of the ratio of (i) the Floating
Investor Percentage of cardholder charges for goods and services in the
Accounts to (ii) the total amount of cardholder charges for goods and
services in the MasterCard and VISA credit card accounts owned by First
NBC, as reasonably estimated by the Transferor. MasterCard and VISA may
from time to time change the amount of Interchange reimbursed to banks
issuing their credit cards. Interchange will be treated as collections of
Finance Charge Receivables for the purposes of determining the amount of
Finance Charge Receivables, allocating collections of Finance Charge
Receivables, making required monthly payments, and calculating the
Portfolio Yield. Under the circumstances described herein, Interchange will
be used to pay a portion of the Monthly Investor Servicing Fee required to
be paid on each Transfer Date. See "Description of the Certificates --
Servicing Compensation and Payment of Expenses" herein and "First NBC's
Credit Card Activities -- Interchange" in the Prospectus.
The Transferor will also be required, pursuant to the terms of the
Agreement, to transfer to the Trust, for the benefit of the Certificates, a
percentage of the Other Account Revenues (which presently consist of
advertising revenues and experience-based rebates of credit insurance
premiums). The amount of Other Account Revenues to be so included shall be
equal to the portion of the revenues in each applicable category for the
entire Bank Portfolio that is allocable to the Accounts, as determined by
Transferor using any reasonable method, multiplied by the Floating Investor
Percentage.
THE RECEIVABLES
The Receivables in the Trust Portfolio, as of the beginning of the
day on _________, 199_, included $______ of Principal Receivables and
$______ of Finance Charge Receivables. The Accounts had an average
Principal Receivable balance of $_______ and an average credit limit of
$_______. The percentage of the aggregate total Receivable balance to the
aggregate total credit limit was __%. The average age of the Accounts was
approximately ___ months. As of the beginning of the day on ___________
____, 199_, Receivables arising in Accounts in agent bank, affinity or
military relationship programs made up approximately __% in the aggregate
of the total Receivables in the Trust Portfolio, of which approximately __%
arose in the single largest program of this type. See "Risk Factors --
Affinity Programs" in the Prospectus. As of such date, __% of the Accounts
were standard accounts and __% were premium accounts, and the aggregate
Principal Receivable balances of standard accounts and Premium accounts, as
a percentage of the total aggregate Principal Receivables, were __% and __%,
respectively. Because approximately __%, __%, __%, __% and __% of the
cardholders whose Accounts are included in the Trust Portfolio had a
billing address in Louisiana, Alabama, Mississippi, Texas and Florida, the
Trust Portfolio as a whole may be adversely affected by material adverse
legal, economic and social changes in such states. First NBC is not aware
of any material trends in such states that would likely adversely impact
the Trust Portfolio. See "Risk Factors -- Effect of Social, Legal and
Economic Factors on Credit Card Usage" in the Prospectus. As of the
beginning of the day on _________ ____, 199_, Receivables arising in
accounts in First NBC's military programs made up approximately __% in the
aggregate of the total Receivables in the Trust Portfolio. See "Risk
Factors -- Effects of Applicable Law -- Limitations Imposed by Consumer
Protection Laws" in the Prospectus.
<PAGE>
Credit applications for the Accounts under which the Receivables
in the Trust Portfolio arise are processed through an automated application
processing system using a credit scoring system based on models developed
by Fair, Isaac and Company, Inc. Those applications that are flagged for
further review (i.e., those that are neither accepted nor rejected) by the
automated application processing system are reviewed by a First BankCard
credit analyst who makes a credit and limit assignment decision based on a
review of (i) the score generated by the credit scorecard, (ii) information
contained in the application, (iii) an independent credit report and (iv)
an analysis of the applicant's capacity to repay. First BankCard also uses
a prescreening process as a method of acquiring new accounts. First
BankCard primarily identifies potential prospects for pre-approved
solicitations through lists obtained from (i) First NBC and its affiliated
banks, (ii) agent banks and (iii) affinity groups. First BankCard submits
to the credit bureaus its credit criteria and cutoff scores for those
criteria to screen prospects. Lists of individuals who meet the criteria
are returned to the mailing list vendor, and a pre-approved offer for a
credit card is made to those individuals. An offeree's response to the
solicitation is reviewed and confirmed, and a credit card is issued. [Where
an individual's creditworthiness undergoes rapid and substantial change
following the initial prescreening, First BankCard may refuse to extend any
credit to that individual despite the pre-approved offer.]
The primary factors considered in the non-military credit scoring
model include (a) the presence or absence of existing credit references and
checking and savings account references, (b) the number of recently
reported installment loans reflected in the credit file, (c) revolving
utilization reflected in the credit file and (d) the number of inquiries by
other credit providers. The primary factors considered in the military
credit scoring model include (a) occupation, (b) high credit card
utilization reflected in the credit file, (c) the number of major
derogatory ratings reflected in the credit file and (d) the number of
inquiries by other credit providers.
The Trust Portfolio will initially consist of all Receivables in
the Bank Portfolio, with the exception of Receivables arising under
Accounts identified as lost, stolen, fraudulent, voluntarily canceled,
deceased, bankrupt, internal expense accounts or foreign accounts. The
following tables summarize the Trust Portfolio by various criteria as of
the [end of the day on __________ __, 199_] [dates indicated]. Because the
future composition of the Trust Portfolio may change over time, these
tables are not necessarily indicative of the composition of the Trust
Portfolio at any subsequent time.
<TABLE>
<CAPTION>
Composition by Account Balance
the Trust Portfolio
<S> <C> <C> <C> <C>
Percentage
of Total Percentage of
Number of Number of Total
Account Balance Range Accounts Accounts Receivables Receivables
- --------------------- --------- --------- ------------- -----------
Credit Balance...........................
No Balance...............................
$.01 - $5,000.00.........................
$5,000.01 - $10,000.00...................
$10,000.01 - $15,000.00..................
$15,000.01 - $20,000.00..................
$20,000.01 - $25,000.00..................
$25,000.01 or More.......................
TOTAL........................... 100.0% 100.0%
===== =====
S-23
<PAGE>
<CAPTION>
Composition by Credit Limit
the Trust Portfolio
<S> <C> <C> <C> <C>
Percentage
of Total Percentage of
Number of Number of Total
Accounts Accounts Receivables Receivables
--------- ---------- ------------- -------------
Credit Limit Range
- ------------------
Less than or equal to $5,000.00..........
$5,000.01 - $10,000.00...................
$10,000.01 - $15,000.00..................
$15,000.01 - $20,000.00..................
$20,000.01 - $25,000.00..................
$25,000.01 or More.......................
TOTAL........................... 100.0% 100.0%
===== =====
S-24
<PAGE>
<CAPTION>
Composition by Period of Delinquency
the Trust Portfolio
<S> <C> <C> <C> <C>
Percentage
of Total Percentage of
Period of Delinquency Number of Number of Total
(Days Contractually Delinquent) Accounts Accounts Receivables Receivables
- ------------------------------- --------- --------- ------------- -----------
Not Delinquent............................
Up to 30 Days.............................
31 to 60 Days.............................
61 to 90 Days.............................
91 or More Days...........................
TOTAL............................ 100.0% 100.0%
===== =====
<CAPTION>
Composition by Account Age
the Trust Portfolio
<S> <C> <C> <C> <C>
Percentage
of Total Percentage of
Number of Number of Total
Account Balance Range Accounts Accounts Receivables Receivables
- --------------------- --------- --------- ------------- -----------
Not More than 6 Months.................
Over 6 Months to 12 Months.............
Over 12 Months to 24 Months............
Over 24 Months to 36 Months............
Over 36 Months to 48 Months............
Over 48 Months to 60 Months............
Over 60 Months to 72 Months............
Over 72 Months.........................
TOTAL......................... 100.0% 100.0%
===== =====
<CAPTION>
Geographic Distribution of Accounts
the Trust Portfolio
<S> <C> <C> <C> <C>
Percentage
of Total Percentage of
Number of Number of Total
State(1) Accounts Accounts Receivables Receivables
- ----- --------- --------- ------------- -----------
Alabama..................
Louisiana................
[List other material
states]
- ---------------------------
(1) No more than __% of the aggregate principal balance of the
Receivables as of the Cut-Off Date were represented by Receivables
owed by obligors located in any state other than those listed in
this table.
</TABLE>
S-25
<PAGE>
MATURITY ASSUMPTIONS
The Agreement provides that Class A Holders will not receive
payments of principal until the Class A Scheduled Payment Date, or earlier
in the event of a Pay Out Event which results in the commencement of the
Rapid Amortization Period. The Class B Holders will not begin to receive
payments of principal until the final principal payment on the Class A
Certificates has been made.
Controlled Accumulation Period. On each Transfer Date during the
Controlled Accumulation Period prior to the payment of the Class A Investor
Interest in full, an amount equal to, for each Monthly Period, the least of
(a) the Available Investor Principal Collections, (b) the "Controlled
Deposit Amount" for such Monthly Period (which equals the sum of the
Controlled Accumulation Amount for such Monthly Period and any portion of
the Controlled Accumulation Amount for any prior Monthly Period that was
not deposited in the Principal Funding Account) and (c) the Class A
Adjusted Investor Interest prior to any deposits on such day, will be
deposited in the Principal Funding Account (the "Principal Funding
Account") established by the Servicer until the principal amount on deposit
in the Principal Funding Account (the "Principal Funding Account Balance")
equals the Class A Investor Interest. After the Class A Investor Interest
has been paid in full, Available Investor Principal Collections, to the
extent required, will be distributed to the Class B Holders on each
Distribution Date until the earlier of the date the Class B Investor
Interest has been paid in full and the Series 199_-_ Termination Date.
After the Class A Investor Interest and the Class B Investor Interest have
each been paid in full, Available Investor Principal Collections, to the
extent required, will be distributed to the Collateral Interest Holder on
each Transfer Date until the earlier of the date the Collateral Interest
has been paid in full and the Series 199_-_ Termination Date. Amounts in
the Principal Funding Account are expected to be available to pay the Class
A Investor Interest on the Class A Scheduled Payment Date. After the
payment of the Class A Investor Interest in full, Available Investor
Principal Collections are expected to be available to pay the Class B
Investor Interest on the Class B Scheduled Payment Date. Although it is
anticipated that collections of Principal Receivables will be available on
each Transfer Date during the Controlled Accumulation Period to make a
deposit of the applicable Controlled Deposit Amount and that the Class A
Investor Interest will be paid to the Class A Holders on the Class A
Scheduled Payment Date and the Class B Investor Interest will be paid to
the Class B Holders on the Class B Scheduled Payment Date, respectively, no
assurance can be given in this regard. If the amount required to pay the
Class A Investor Interest or the Class B Investor Interest in full is not
available on the Class A Scheduled Payment Date or the Class B Scheduled
Payment Date, respectively, a Pay Out Event will occur and the Rapid
Amortization Period will commence.
Rapid Amortization Period. If a Pay Out Event occurs, the Rapid
Amortization Period will commence and any amount on deposit in the
Principal Funding Account will be paid to the Class A Holders on the
Distribution Date in the month following the commencement of the Rapid
Amortization Period. In addition, to the extent that the Class A Investor
Interest has not been paid in full, the Class A Holders will be entitled to
monthly payments of principal equal to the Available Investor Principal
Collections until the earlier of the date on which the Class A Certificates
have been paid in full and the Series 199_-_ Termination Date. After the
Class A Certificates have been paid in full and if the Series 199_-_
Termination Date has not occurred, Available Investor Principal Collections
will be paid to the Class B Certificates on each Distribution Date until
the earlier of the date on which the Class B Certificates have been paid in
full and the Series 199_-_ Termination Date.
Pay Out Events. A Pay Out Event occurs, either automatically or
after specified notice, upon (a) the failure of the Transferor to make
certain payments or transfers of funds for the benefit of the Holders
within the time periods stated in the Agreement, (b) material breaches of
certain representations, warranties or covenants of the Transferor, (c)
certain insolvency events involving the Transferor, (d) a reduction in the
average of the Portfolio Yields for any three consecutive Monthly Periods
to a rate that is less than the average of the Base Rates for such period,
(e) the Trust becoming an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, (f) the failure of the
Transferor to convey Receivables arising under
<PAGE>
Additional Accounts or Participations to the Trust when required by the
Agreement, (g) the occurrence of a Servicer Default which would have a
material adverse effect on the Holders, (h) insufficient monies in the
Distribution Account to pay the Class A Investor Interest or the Class B
Investor Interest in full on the Class A Scheduled Payment Date or the
Class B Scheduled Payment Date, respectively, or (i) the Transferor becomes
unable for any reason to transfer Receivables to the Trust in accordance
with the provisions of the Agreement. See "Description of the Certificates
- -- Pay Out Events." The term "Base Rate" means, with respect to any Monthly
Period, the sum of (a) the weighted average of the Class A Certificate
Rate, the Class B Certificate Rate, and the Collateral Rate (each for the
related Interest Period) plus (b) the Servicing Fee Percentage. The term
"Portfolio Yield" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is the sum of
Reallocated Investor Finance Charge Collections, Principal Funding
Investment Proceeds and amounts withdrawn from the Reserve Account
deposited into the Finance Charge Account and allocable to the Certificates
and the Collateral Interest for such Monthly Period, calculated on a cash
basis after subtracting the Investor Default Amount for such Monthly
Period, and the denominator of which is the Investor Interest as of the
close of business on the last day of such Monthly Period.
Paired Series. The Transferor may cause the Trust to issue another
Series as a Paired Series with respect to Series 199_-_. Although no
assurance can be given as to whether such other Series will be issued and,
if issued, the specific terms thereof, the outstanding principal amount of
such Series may vary from time to time whether or not a Pay Out Event
occurs with respect to Series 199_-_, and the interest rate with respect to
certificates of such Series will be established on the date of issuance of
such Series and may be reset periodically. Further, the Pay Out Events with
respect to such other Series may vary from the Pay Out Events with respect
to Series 199_-_ and may include Pay Out Events which are unrelated to the
status of the Transferor, the Servicer or the Receivables, such as events
related to the continued availability and rating of certain providers of
Enhancement to such other Series. If a Pay Out Event does occur with
respect to any such Paired Series prior to the payment in full of the
Certificates, the final payment of principal to the Holders may be delayed.
In particular, the numerator of the Fixed Allocation Percentage may be
changed upon the occurrence of a Pay Out Event with respect to a Paired
Series resulting in a possible reduction of the percentage of collections
of Principal Receivables allocated to the Holders and a possible slowdown
in the repayment of principal to such Holders because of such reduction in
allocation of collections. See "Description of the Certificates --
Allocation Percentages" and "-- Paired Series" herein.
Payment Rates and Creation of Additional Receivables. The
following table sets forth the highest and lowest cardholder monthly
payment rates for the Bank Portfolio during any month in the period shown
and the average cardholder monthly payment rates for all months during the
periods shown, in each case calculated as a percentage of total opening
monthly account balances during the periods shown. Payment rates shown in
the table are based on amounts which would be deemed payments of Principal
Receivables and Finance Charge Receivables with respect to the Accounts.
<TABLE>
<CAPTION>
Cardholder Monthly Payment Rates
Bank Portfolio
Year Ended December 31
-----------------------
<S> <C> <C> <C> <C>
1996 1995 1994 1993
----------- ----------- ----------- --------
Lowest Month......................... % % % %
Highest Month........................ % % % %
Monthly Average...................... % % % %
</TABLE>
<PAGE>
Currently, cardholders must make a monthly minimum payment at
least equal to the greater of (i) [2.5% or 10% (depending upon the
program)] of the statement balance (excluding any disputed amounts) plus
past due amounts and (ii) a stated minimum payment (generally $10) plus
past due amounts. There can be no assurance that the cardholder monthly
payment rates in the future will be similar to the historical experience
set forth above. In addition, any election by the Transferor to designate
(or increase) a Discount Percentage may, by causing certain collections of
Principal Receivables to be treated as collections of Finance Charge
Receivables, reduce the effective principal payment rate with respect to
the Receivables. (See "Description of the Certificates -- Discount Option"
in the Prospectus.) The Receivables may be paid at any time and there is no
assurance that there will be additional Receivables created in the
Accounts.
A significant decline in the amount of Receivables generated
during the Controlled Accumulation Period could result in the occurrence of
a Pay Out Event. In addition, a significant decline in the amount of
Receivables generated during the Rapid Amortization Period could
significantly extend the average life to maturity of the Certificates. The
amount of collections of Receivables and the creation of additional
Receivables in the Accounts may vary from month to month due to seasonal
variations, general economic conditions and payment habits of individual
cardholders. There can be no assurance that collections of Principal
Receivables with respect to the Trust Portfolio will be similar to the
historical experience set forth above or that deposits into the Principal
Funding Account or the Distribution Account, as applicable, will be made in
accordance with the applicable Controlled Accumulation Amount. If a Pay Out
Event occurs, the average life of the Certificates could be significantly
reduced or increased.
Because there may be a decline in the creation of new Receivables
in the Accounts or a slowdown in the payment rate below the payment rates
used to determine the Controlled Accumulation Amounts, or a Pay Out Event
may occur which would initiate the Rapid Amortization Period, there can be
no assurance that the actual number of months elapsed from the date of
issuance of the Class A Certificates and the Class B Certificates to their
respective final Distribution Dates will equal the expected number of
months. As described under "Description of the Certificates--Postponement
of Controlled Accumulation Period," the Servicer may shorten the Controlled
Accumulation Period and, in such event, there can be no assurance that
there will be sufficient time to accumulate all amounts necessary to pay
the Class A Investor Interest and the Class B Investor Interest on the
Class A Scheduled Payment Date and the Class B Scheduled Payment Date,
respectively. See "Maturity Assumptions" and "Risk Factors -- Payments
Other than at Expected Maturity" in the Prospectus.
Any factors which effectively slow the principal payment rate with
respect to the Receivables, and hence slow the accumulation of principal
for distribution to the Certificateholders, may have the additional effect
of extending the period of time during which the Certificateholders are
exposed to losses on the Receivables.
RECEIVABLE YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to
accounts in the Bank Portfolio for each of the four calendar years
contained in the period ended December 31, 1996 are set forth in the
following table.
The historical yield figures in the following table are calculated
on an accrual basis. Collections of Receivables included in the Trust will
be on a cash basis and may not reflect the historical yield experience in
the table. During periods of increasing delinquencies or periodic payment
deferral programs, accrual yields may exceed cash amounts accrued and
billed to cardholders. Conversely, cash yields may exceed accrual yields as
amounts collected in a current period may include amounts accrued during
prior periods. However, the Transferor believes that during the four
calendar years contained in the period ended December 31, 1996, the yield
on an accrual basis closely approximated the yield on a cash basis. The
yield on both an accrual and a cash basis will be affected by numerous
factors, including the monthly periodic finance charges on the Receivables,
the amount of any annual membership fees and other fees, changes
<PAGE>
in the delinquency rate on the Receivables and the percentage of
cardholders who pay their balances in full each month and do not incur
monthly periodic finance charges. See "Risk Factors" in the Prospectus.
<TABLE>
<CAPTION>
Bank Portfolio Yield(1)(2)
(Dollars in Thousands)
Year Ended December 31
-----------------------
<S> <C> <C> <C> <C>
1996 1995 1994 1993
-------------- ------------ ------------ -------------
Average Receivables Outstanding (3)................ $ $ $ $
Total Finance Charges and Fees (3)(4).............. $ $ $ $
Total Finance Charges and Fees
as a percentage of Average
Receivables Outstanding................... % % % %
(1) Amounts have not been restated for acquisitions of portfolios from
the Corporation's acquired banks which were accounted for as
poolings-of-interests.
(2) Interest and fees on charged off accounts are reversed from
finance charge revenues and fee income accounts, respectively, and
are not included in charge-offs.
(3) Fees include Annual Fees, Interchange, Cash Advance Fees, Late Fees,
Overlimit Fees and Other Fees as allocated to the Bank Portfolio.
(4) Finance Charges and Fees are presented net of adjustments pursuant
to First NBC's normal servicing procedures, including removal of
incorrect or disputed monthly periodic finance charges.
</TABLE>
The revenue for the Bank Portfolio of credit card accounts shown
in the above table is comprised of monthly periodic finance charges, credit
card fees and Interchange. These revenues vary for each account based on
the type and volume of activity for each account. Because the Trust
Portfolio is only a portion of the Bank Portfolio, actual yield with
respect to Receivables may be different from that set forth above for the
Bank Portfolio. See "First NBC's Credit Card Portfolio" herein and "First
NBC Credit Card Activities" in the Prospectus.
FIRST NBC AND FIRST COMMERCE CORPORATION
First NBC is a national banking association and a wholly owned
subsidiary of First Commerce Corporation (the "Corporation"). The Bank's
main office is located at 210 Baronne Street, New Orleans, Louisiana 70112,
telephone (504) 623-1371. The Corporation is a Louisiana corporation and a
bank holding company under the Bank Holding Company Act of 1956, as amended
(the "BHC Act"), and maintains its headquarters in New Orleans, Louisiana.
As of December 31, 1996, First NBC had assets of $5.9 billion and
stockholder's equity of $374 million. As of December 31, 1996, the
Corporation had assets of $9.2 billion and stockholders' equity of $724
million. The Corporation has six wholly owned bank subsidiaries, each in
Louisiana: the Bank, City National Bank of Baton Rouge, Central Bank
(Monroe), The First National Bank of Lafayette, Rapides Bank & Trust
Company in Alexandria and The First National Bank of Lake Charles, which
offer a full range of banking and related financial services to commercial
and consumer customers, including numerous types of interest-bearing and
noninterest-bearing deposit accounts, commercial and consumer loans
(including credit card loans), credit card merchant services, trust
services, correspondent banking services and safe deposit facilities.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement and the
Series 199_-__ Supplement. Pursuant to the Agreement, the Transferor and
the Trustee may execute further series supplements in order to issue
<PAGE>
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
199_-__ Supplement. See "Description of the Certificates" in the Prospectus
for additional information concerning the Certificates and the Agreement.
General
The Certificates will represent the right to receive certain
payments from the assets of the Trust, including the right to the
applicable allocation percentage of all cardholder payments on the
Receivables in the Trust. Each Class A Certificate represents the right to
receive payments of interest at the Class A Rate for the related Interest
Period funded from collections of Finance Charge Receivables and payments
of principal on the Class A Scheduled Payment Date or, to the extent of the
Class A Investor Interest, on each Distribution Date during the Rapid
Amortization Period, funded from collections of Principal Receivables
allocated to the Class A Investor Interest and certain other available
amounts. Each Class B Certificate represents the right to receive payments
of interest at the applicable Class B Rate for the related Interest Period,
and payments of principal on the Class B Scheduled Payment Date or, to the
extent of the Class B Investor Interest, on each Distribution Date during
the Rapid Amortization Period after the Class A Certificates have been paid
in full, funded from collections of Finance Charge Receivables and
Principal Receivables, respectively, allocated to the Class B Investor
Interest and certain other available amounts. In addition to representing
the right to payment from collections of Finance Charge Receivables and
Principal Receivables, each Class A Certificate also represents the right
to receive payments from Excess Spread, funds on deposit in the Principal
Funding Account and the Reserve Account and certain investment earnings
thereon, Reallocated Principal Collections and Shared Principal Collections
and certain other available amounts (including, under certain
circumstances, amounts on deposit in the Excess Funding Account). In
addition to representing the right to payment from collections of Finance
Charge Receivables and Principal Receivables, each Class B Certificate also
represents the right to receive payments from Excess Spread, Reallocated
Collateral Principal Collections and Shared Principal Collections and
certain other available amounts (including, under certain circumstances,
amounts on deposit in the Excess Funding Account). Payments of interest and
principal will be made, to the extent of funds available therefor, on each
Distribution Date on which such amounts are due to Holders in whose names
the Certificates were registered on the last business day of the calendar
month preceding such Distribution Date (each, a "Record Date").
[First NBC does not intend to list the Certificates on any
securities exchange.] [Application will be made to list the Certificates on
the Luxembourg Stock Exchange.]
The Class A Certificates and the Class B Certificates initially
will be represented by certificates registered in the name of Cede, as
nominee of DTC. Unless and until Definitive Certificates are issued, all
references herein to actions by Class A Holders and/or Class B Holders
shall refer to actions taken by DTC upon instructions from DTC Participants
and all references herein to distributions, notices, reports and statements
to Class A Holders and/or Class B Holders shall refer to distributions,
notices, reports and statements to DTC or Cedel, as the registered holder
of the Class A Certificates and the Class B Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC
procedures. Holders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations that are participants in such
systems. Cede, as nominee for DTC, will hold the global Certificates. Cede
and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the
books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on
the books of DTC. See "Description of the Certificates -- General,"
"--Book-Entry Registration" and "-- Definitive Certificates" in the
Prospectus.
Interest Payments
Interest will accrue on the Class A Certificates at the Class A
Rate and on the Class B Certificates at the Class B Rate from the Closing
Date. Interest will be distributed to Holders on ______ 15, 199_ and on
each Distribution Date thereafter. Interest payments on the Class A
Certificates and the Class B Certificates on any Distribution Date will be
<PAGE>
calculated on the outstanding principal balance of the Class A Certificates
and the outstanding principal balance of the Class B Certificates, as
applicable, as of the preceding Record Date, except that interest for the
first Distribution Date will accrue at the applicable Certificate Rate on
the initial outstanding principal balance of the Class A Certificates and
the initial outstanding principal balance of the Class B Certificates, as
applicable, from the Closing Date. Interest due on the Certificates but not
paid on any Distribution Date will be payable on the next succeeding
Distribution Date together with additional interest on such amount at the
applicable Certificate Rate plus 2% per annum (such amount with respect to
the Class A Certificates, the "Class A Additional Interest," and such
amount with respect to the Class B Certificates, the "Class B Additional
Interest," and collectively, the "Additional Interest"). Additional
Interest shall accrue on the same basis as interest on the Certificates,
and shall accrue from the Distribution Date on which such overdue interest
first became due, to but excluding the Distribution Date on which such
Additional Interest is paid. Interest payments on the Class A Certificates
on any Distribution Date will be paid from Class A Available Funds for the
related Monthly Period, and to the extent such Class A Available Funds are
insufficient to pay such interest, from Excess Spread and Reallocated
Principal Collections (to the extent available) for such Monthly Period.
Interest payments on the Class B Certificates on any Distribution Date will
be paid from Class B Available Funds for the related Monthly Period, and to
the extent such Class B Available Funds are insufficient to pay such
interest, from Excess Spread and Reallocated Collateral Principal
Collections (to the extent available) remaining after certain other
payments have been made with respect to the Class A Certificates.
"Class A Available Funds" means, with respect to any Monthly
Period, an amount equal to the sum of (a) the Class A Floating Allocation
of Reallocated Investor Finance Charge Collections allocated to the
Investor Interest with respect to such Monthly Period (excluding the
portion of collections of Finance Charge Receivables attributable to
Interchange that is allocable to Servicer Interchange), (b) Principal
Funding Investment Proceeds, if any, with respect to the related Transfer
Date (up to the Class A Covered Amount for such Transfer Date) and (c)
amounts, if any, to be withdrawn from the Reserve Account which are
required to be included in Class A Available Funds pursuant to the Series
199_-__ Supplement with respect to such Transfer Date. "Class B Available
Funds" means, with respect to any Monthly Period, an amount equal to the
Class B Floating Allocation of Reallocated Investor Finance Charge
Collections allocated to the Investor Interest with respect to such Monthly
Period (excluding the portion of collections of Finance Charge Receivables
attributable to Interchange that is allocable to Servicer Interchange).
The Class A Certificates will bear interest from the Closing Date
through ________ _, 199_, and from ________ _, 199_ through ________ _,
199_ and with respect to each Interest Period thereafter, at a rate of ___%
per annum [above LIBOR prevailing on the related LIBOR Determination Date
with respect to each such period] (the "Class A Rate"). The Class B
Certificates will bear interest from the Closing Date through ________ _,
199_, and from ________ _, 199_ through ________ _, 199_ and with respect
to each Interest Period thereafter, at a rate of ___% per annum [above
LIBOR prevailing on the related LIBOR Determination Date with respect to
each such period] (the "Class B Rate").
[The Trustee will determine LIBOR on ________ _, 199_ for the
period from the Closing Date through ________ _, 199_, on ________ _, 199_,
for the period from ________ _, 199_ through ________ _, 199_, and for each
Interest Period thereafter, on the second business day prior to the
Distribution Date on which such Interest Period commences (each, a "LIBOR
Determination Date"). For purposes of calculating LIBOR, a business day is
any business day on which dealings in deposits in United States dollars are
transacted in the London interbank market.
"Interest Period" means, with respect to any Distribution Date,
the period from and including the previous Distribution Date through the
day preceding such Distribution Date, except the initial Interest Period
will be the period from and including the Closing Date through the day
preceding the initial Distribution Date.
"LIBOR" means, as of any LIBOR Determination Date, the rate for
deposits in United States dollars for a period equal to the relevant
Interest Period (commencing on the first day of such Interest Period) which
appears on Telerate Page 3750 (as defined below) as of 11:00 a.m., London
Time, on such date. If such rate does not appear on Telerate Page 3750, the
rate for that day will be determined on the basis of the rates at which
<PAGE>
deposits in United States dollars are offered by the Reference Banks (as
defined below) at approximately 11:00 a.m., London Time, on that day to
prime banks in the London interbank market for a period equal to the
relevant Interest Period (commencing on the first day of such Interest
Period). The Trustee will request the principal London office of each of
the Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate for the day will be the arithmetic
mean of the quotations. If fewer than two quotations are provided as
requested, the rate for that day will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Trustee, at
approximately 11:00 a.m., New York City time, on that day for loans in
United States dollars to leading international banks for a period equal to
the relevant Interest Period (commencing on the first day of such Interest
Period). If the banks selected by the Trustee are not quoting rates as
provided in the immediately preceding sentence, LIBOR for such Interest
Period will be LIBOR in effect for the immediately preceding Interest
Period.
"Reference Banks" means three major banks in the London interbank
market selected by the Trustee.
The Class A Rate and the Class B Rate applicable to the current
and immediately preceding Interest Period may be obtained by telephoning
the Trustee at its Corporate Trust Office at (__) ____- ____.
Interest on the Certificates will be calculated on the basis of
[the actual number of days in the Interest Period] [twelve 30-day months]
and a 360-day year.
Principal Payments
On each Transfer Date relating to the Revolving Period (which
begins on the Closing Date and ends at the commencement of the Controlled
Accumulation Period or, if earlier, the Rapid Amortization Period), unless
a reduction in the Required Collateral Interest has occurred, collections
of Principal Receivables allocable to the Investor Interest will, subject
to certain limitations, including the allocation of any Reallocated
Principal Collections with respect to the related Monthly Period to pay the
Class A Required Amount and the Class B Required Amount, be treated as
Shared Principal Collections or, under certain circumstances, deposited
into the Excess Funding Account.
On each Transfer Date relating to the Controlled Accumulation
Period, the Trustee will deposit in the Principal Funding Account an amount
equal to the least of (a) Available Investor Principal Collections with
respect to such Transfer Date, (b) the applicable Controlled Deposit Amount
and (c) the Class A Adjusted Investor Interest prior to any deposits on
such date. Amounts in the Principal Funding Account will be paid to the
Class A Holders on the Class A Scheduled Payment Date. After the Class A
Investor Interest has been paid or provided for in full, on each Transfer
Date during the Controlled Accumulation Period, amounts equal to the lesser
of (a) Available Investor Principal Collections with respect to such
Transfer Date and (b) the Class B Investor Interest will be deposited in
the Distribution Account for distribution to the Class B Holders until the
Class B Investor Interest has been paid in full. Such amounts in the
Distribution Account will be paid to the Class B Holders on the Class B
Scheduled Payment Date. On each Transfer Date, if a reduction in the
Required Collateral Interest has occurred, a portion of collections of
Principal Receivables allocable to the Investor Interest will be applied in
accordance with the Loan Agreement to reduce the Collateral Interest to the
Required Collateral Interest. During the Controlled Accumulation Period
until the final principal payment to the Class B Holders, the portion of
Available Investor Principal Collections not applied to Class A Monthly
Principal, Class B Monthly Principal or Collateral Monthly Principal on a
Transfer Date will generally be treated as Shared Principal Collections or,
under certain circumstances, deposited into the Excess Funding Account.
"Available Investor Principal Collections" means, with respect to
any Monthly Period, an amount equal to the sum of (a) (i) collections of
Principal Receivables received during such Monthly Period and certain other
amounts, in each case which are allocable to the Investor Interest, minus
(ii) the amount of Reallocated Principal Collections with respect to such
Monthly Period used to fund interest on the Certificates or the Class A
Servicing Fee or Class B Servicing Fee, plus (b) any Shared Principal
Collections with respect to other Principal Sharing Series that are
allocated to Series [199_-_].
<PAGE>
On each Distribution Date commencing with the first Distribution
Date following the date the Rapid Amortization Period begins, the Class A
Holders will be entitled to receive Available Investor Principal
Collections for the related Monthly Period in an amount up to the Class A
Investor Interest until the earlier of the date the Class A Certificates
are paid in full and the Series 199_-__ Termination Date. After payment in
full of the Class A Investor Interest, the Class B Holders will be entitled
to receive on each Distribution Date during the Rapid Amortization Period
Available Investor Principal Collections until the earlier of the date the
Class B Certificates are paid in full and the Series 199_-__ Termination
Date. After payment in full of the Class B Investor Interest, the
Collateral Interest Holder will be entitled to receive on each Transfer
Date (other than the Transfer Date prior to the Series 199_-__ Termination
Date) and on the Series 199_-_ Termination Date, Available Investor
Principal Collections until the earlier of the date the Collateral Interest
is paid in full and the Series 199_-__ Termination Date. See "-- Pay Out
Events" below for a discussion of events which might lead to the
commencement of the Rapid Amortization Period.
Postponement of Controlled Accumulation Period
Upon written notice to the Trustee, the Transferor and each Rating
Agency, the Servicer may elect to postpone the commencement of the
Controlled Accumulation Period, and extend the length of the Revolving
Period, subject to certain conditions including those set forth below. The
Servicer may make such election only if the Accumulation Period Length
(determined as described below) is less than _____ months. On each
Determination Date on or after the ________ Determination Date, until the
Controlled Accumulation Period begins, the Servicer will determine the
"Accumulation Period Length," which is a number of months such that the
amount available for distribution of principal on the Class A Certificates
on the Class A Scheduled Payment Date is expected to equal or exceed the
Class A Investor Interest, assuming (a) the expected monthly collections of
Principal Receivables expected to be distributable to the Holders of all
Series have a principal payment rate no greater than the lowest monthly
principal payment rate on the Receivables for the preceding twelve months,
(b) the amount of principal expected to be distributable to Holders of all
Series remains constant at the level on such date of determination, (c) no
Pay Out Event with respect to any Series will subsequently occur and (d) no
additional Series will be subsequently issued. If the Accumulation Period
Length is less than ______ months, the Servicer may, at its option,
postpone the commencement of the Controlled Accumulation Period such that
the number of months included in the Controlled Accumulation Period will be
equal to or exceed the Accumulation Period Length. The effect of the
foregoing calculation is to permit the reduction of the length of the
Controlled Accumulation Period based on the investor interest of certain
other Series which are scheduled to be in their revolving periods during
the Controlled Accumulation Period and on increases in the principal
payment rate occurring after the Closing Date. The length of the Controlled
Accumulation Period will not be determined to be less than one month.
Subordination
The Class B Certificates and the Collateral Interest will be
subordinated to the extent necessary to fund certain payments with respect
to the Class A Certificates. In addition, the Collateral Interest will be
subordinated to the extent necessary to fund certain payments with respect
to the Class B Certificates. Certain principal payments otherwise allocable
to the Class B Holders may be reallocated to cover amounts in respect of
the Class A Certificates and the Class B Investor Interest may be reduced
if the Collateral Interest is equal to zero. Similarly, certain principal
payments allocable to the Collateral Interest may be reallocated to cover
amounts in respect of the Class A Certificates and the Class B Certificates
and the Collateral Interest may be reduced. To the extent the Class B
Investor Interest is reduced, the percentage of collections of Finance
Charge Receivables allocated to the Class B Certificates in subsequent
Monthly Periods will be reduced. Moreover, to the extent the amount of such
reduction in the Class B Investor Interest is not reimbursed, the amount of
principal and interest distributable to the Class B Holders will be
reduced. See "-- Allocation Percentages," "-- Reallocation of Cash Flows"
and "-- Application of Collections -- Excess Spread."
<PAGE>
Allocation Percentages
Pursuant to the Agreement, with respect to each Monthly Period the
Servicer will allocate among the Investor Interest, the investor interest
for all other Series issued and outstanding and the Transferor Interest,
all amounts collected on Finance Charge Receivables, all amounts collected
on Principal Receivables and all Net Default Amounts and Net Recoveries
with respect to such Monthly Period.
Collections of Finance Charge Receivables, Net Default Amounts and
Net Recoveries at all times, and collections of Principal Receivables
during the Revolving Period, will be allocated to the Investor Interest
based on the Floating Investor Percentage. Collections of Finance Charge
Receivables that are so allocated will then be reallocated among all Series
in Group I as described in the "Description of the Certificates --
Reallocations Among Certificates of Different Series within a Reallocation
Group" in the Prospectus.
The "Floating Investor Percentage" means, with respect to any
Monthly Period, the percentage equivalent of a fraction, the numerator of
which is the Adjusted Investor Interest as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first
Monthly Period, the initial Investor Interest) and the denominator of which
is the greater of (a) the Aggregate Principal Receivables as of the close
of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Aggregate Principal Receivables as
of the close of business on the day immediately preceding the Closing Date)
and (b) the sum of the numerators used to calculate the Investor
Percentages for allocations with respect to Finance Charge Receivables, Net
Default Amounts, Net Recoveries or Principal Receivables, as applicable,
for all outstanding Series on such date of determination; provided,
however, that if one or more Reset Dates occur in a Monthly Period, the
Floating Investor Percentage for the portion of the Monthly Period falling
after each such Reset Date (the "subject Reset Date") and prior to the
earlier of the last day of the current Monthly Period and any subsequent
Reset Date shall be determined using a denominator equal to the greater of
the amounts specified in clause (a) and (b) above determined as of the
subject Reset Date.
The amounts so allocated (or reallocated) will be further
allocated between the Class A Holders, Class B Holders and the Collateral
Interest Holder based on the Class A Floating Allocation, the Class B
Floating Allocation and the Collateral Floating Allocation, respectively.
The "Class A Floating Allocation" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is equal to the Class A
Adjusted Investor Interest as of the close of business on the last day of
the preceding Monthly Period (or with respect to the first Monthly Period,
as of the Closing Date) and the denominator of which is equal to the
Adjusted Investor Interest as of the close of business on such day. The
"Class B Floating Allocation" means, with respect to any Monthly Period,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class B Investor Interest
as of the close of business on the last day of the preceding Monthly Period
(or with respect to the first Monthly Period, as of the Closing Date) and
the denominator of which is equal to the Adjusted Investor Interest as of
the close of business on such day. The "Collateral Floating Allocation"
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Collateral Interest as of the close of business on the last
day of the preceding Monthly Period (or with respect to the first Monthly
Period, as of the Closing Date) and the denominator of which is equal to
the Adjusted Investor Interest as of the close of business on such day.
Collections of Principal Receivables during the Controlled
Accumulation Period and Rapid Amortization Period will be allocated to the
Investor Interest based on the Fixed Investor Percentage. The "Fixed
Investor Percentage" means, with respect to any Monthly Period, the
percentage equivalent of a fraction, the numerator of which is the Investor
Interest as of the close of business on the last day of the Revolving
Period and the denominator of which is the greater of (a) the Aggregate
Principal Receivables as of the close of business on the last day of the
prior Monthly Period (or with respect to the first Monthly Period, the
Aggregate Principal Receivables as of the close of business on the day
immediately preceding the Closing Date) and (b) the sum of the numerators
used to calculate the Investor Percentages for allocations with respect to
Principal Receivables for all outstanding Series for such Monthly Period;
provided, that (x) if Series 199_-_ is paired with a Paired Series and a
Pay Out Event occurs with respect to such Paired Series during
<PAGE>
the Controlled Accumulation Period, the Transferor may, by written notice
delivered to the Trustee and the Servicer, designate a different numerator
(provided that such numerator is not less than the Adjusted Investor
Interest (less the balance on deposit in the Principal Account) as of the
last day of the revolving period for such Paired Series); and (y) if one or
more Reset Dates occur in a Monthly Period, the Fixed Investor Percentage
for the portion of the Monthly Period falling after each such Reset Date
(the "subject Reset Date") and prior to the earlier of the last day of the
current Monthly Period and any subsequent Reset Date shall be determined
using a denominator equal to the greater of the amounts specified in clause
(a) and (b) above determined as of the subject Reset Date.
The amounts so allocated will be further allocated between the
Class A Holders, the Class B Holders and the Collateral Interest Holder
based on the Class A Fixed Allocation, the Class B Fixed Allocation and the
Collateral Fixed Allocation, respectively. The "Class A Fixed Allocation"
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Class A Investor Interest as of the close of business on
the last day of the Revolving Period, and the denominator of which is equal
to the numerator used in determining the related Fixed Investor Percentage;
provided, that if Series 199_-_ is paired with a Paired Series and a Pay
Out Event occurs with respect to such Paired Series during the Controlled
Accumulation Period, the Transferor may, by written notice delivered to the
Trustee and the Servicer, designate a different numerator (provided that
such numerator is not less than the Class A Adjusted Investor Interest
(less the balance on deposit in the Principal Account) as of the last day
of the revolving period for such Paired Series. The "Class B Fixed
Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Collateral Interest as of the close of
business on the last day of the Revolving Period, and the denominator of
which is equal to the Investor Interest as of the close of business on the
last day of the Revolving Period. The "Collateral Fixed Allocation" means,
with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Collateral Interest as of the close of business on the last
day of the Revolving Period, and the denominator of which is equal to the
numerator used in determining the related Fixed Investor Percentage;
provided, that if Series 199_-_ is paired with a Paired Series and a Pay
Out Event occurs with respect to such Paired Series during the Controlled
Accumulation Period, the Transferor may, by written notice delivered to the
Trustee and the Servicer, designated a different numerator (provided that
such numerator is not less than the Class B Investor Interest (less, if the
Class A Fixed Allocation is zero, the balance on deposit in the Principal
Account and the Principal Funding Account, in each case to the extent not
subtracted in reducing the Class A Fixed Allocation to zero) as of the last
day of the revolving period for such Paired Series.
"Class A Adjusted Investor Interest," for any date of
determination, means an amount equal to then current Class A Investor
Interest, minus the Principal Funding Account Balance (up to the Class A
Invested Amount) on such date.
"Class A Investor Interest" for any date means an amount equal to
(a) the aggregate initial principal amount of the Class A Certificates,
minus (b) the aggregate amount of principal payments made to Class A
Holders prior to such date, minus (c) the excess, if any, of the aggregate
amount of Class A Investor Charge-Offs for all Transfer Dates preceding
such date over the aggregate amount of any reimbursements of Class A
Investor Charge-Offs for all Transfer Dates preceding such date; provided,
however, that the Class A Investor Interest may not be reduced below zero.
"Class B Investor Interest" for any date means an amount equal to
(a) the aggregate initial principal amount of the Class B Certificates,
minus (b) the aggregate amount of principal payments made to Class B
Holders prior to such date, minus (c) the aggregate amount of Class B
Investor Charge-Offs for all prior Transfer Dates, minus (d) the aggregate
amount of Reallocated Class B Principal Collections for all prior Transfer
Dates for which the Collateral Interest has not been reduced, minus (e) an
amount equal to the aggregate amount by which the Class B Investor Interest
has been reduced to fund the Class A Investor Default Amount on all prior
Transfer Dates as described under "-- Defaulted Receivables; Investor
Charge-Offs," plus (f) the aggregate amount of Excess Spread allocated to
the Certificates 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 Investor Interest may not be
reduced below zero.
<PAGE>
"Collateral Interest" for any date means an amount equal to (a)
the Initial Collateral Interest, 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 Charge-Offs for all
prior Transfer Dates, minus (d) the aggregate amount of Reallocated
Principal Collections for all prior Transfer Dates, minus (e) an amount
equal to the aggregate amount by which the Collateral Interest has been
reduced to fund the Class A Investor Default Amount and the Class B
Investor Default Amount on all prior Transfer Dates as described under "--
Defaulted Receivables; Investor Charge-Offs," plus (f) the aggregate amount
of Excess Spread allocated to the Certificates 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 Interest may not be reduced below zero.
"Reset Date" means each of (a) any date on which Receivables in
Additional Accounts are conveyed to the Trust, (b) any date on which
Accounts are removed from the Trust and on which, if any Series has been
paid in full, Principal Receivables in an aggregate amount approximately
equal to the initial investor interest of such Series are removed from the
Trust and (c) a date on which there is an increase in the Investor Interest
under any Variable Interest issued by the Trust.
"Variable Interest" means either of (a) any certificate that is
designated as a variable funding certificate in the related Series
Supplement and (b) any Purchased Interest sold as permitted by an
Agreement.
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 (a)
Class A Monthly Interest due on the related Distribution Date and overdue
Class A Monthly Interest and Class A Additional Interest thereon, if any,
(b) the Class A Servicing Fee for the related Monthly Period and overdue
Class A Servicing Fee, if any, and (c) the Class A Investor Default Amount,
if any, for the related Monthly Period exceeds the Class A Available Funds
for the related Monthly Period. If the Class A Required Amount is greater
than zero, Excess Spread allocated to Series 199_-__ 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 is insufficient to fund the Class
A Required Amount, first, Reallocated Collateral Principal Collections and,
then, Reallocated Class B Principal Collections will be used to fund the
remaining Class A Required Amount. If Reallocated Principal Collections
with respect to the related Monthly Period, together with Excess Spread,
are insufficient to fund the remaining Class A Required Amount for such
related Monthly Period, then the Collateral Interest (after giving effect
to reductions for any Collateral Charge-Offs and Reallocated 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
Monthly Period). In the event that such reduction would cause the
Collateral Interest to be a negative number, the Collateral Interest will
be reduced to zero, and the Class B Investor Interest (after giving effect
to reductions for any Class B Investor Charge-Offs and any Reallocated
Class B Principal Collections for which the Collateral Interest was not
reduced on such Transfer Date) will be reduced by the amount by which the
Collateral Interest would have been reduced below zero (but not by more
than the excess of the Class A Investor Default Amount, if any, for such
Monthly Period over the amount of such reduction, if any, of the Collateral
Interest with respect to such Monthly Period). In the event that such
reduction would cause the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced to zero and the Class
A Investor Interest will be reduced by the amount by which the Class B
Investor Interest would have been reduced below zero (but not by more than
the excess, if any, of the Class A Investor Default Amount for such Monthly
Period over the amount of the reductions, if any, of the Collateral
Interest and the Class B Investor Interest with respect to such Monthly
Period). Any such reduction in the Class A Investor Interest will have the
effect of slowing or reducing the return of principal and interest to the
Class A Holders. In such case, the Class A Holders will bear directly the
credit and other risks associated with their interests in the Trust. See
"-- Defaulted Receivables; Investor Charge-Offs."
With respect to each Transfer Date, the Servicer will determine
the amount (the "Class B Required Amount"), which will be equal to the sum
of (a) the amount, if any, by which the sum of (i) Class B Monthly Interest
due on the related Distribution Date and overdue Class B Monthly Interest
and Class B Additional Interest thereon, if any, and (ii)
<PAGE>
the Class B Servicing Fee for the related Monthly Period and overdue Class
B Servicing Fee, if any, exceeds the Class B Available Funds for the
related Monthly Period and (b) the Class B Investor Default Amount, if any,
for the related Monthly Period. If the Class B Required Amount is greater
than zero, Excess Spread allocated to Series 199_-__ not required to pay
the Class A Required Amount or reimburse Class A Investor Charge-Offs will
be used to fund the Class B Required Amount with respect to such Transfer
Date. If such Excess Spread is insufficient to fund the Class B Required
Amount, Reallocated Collateral Principal Collections not required to fund
the Class A Required Amount for the related Monthly Period will be used to
fund the remaining Class B Required Amount. If such Reallocated Collateral
Principal Collections with respect to the related Monthly Period are
insufficient to fund the remaining Class B Required Amount, then the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after any adjustments made thereto for the benefit of the Class A Holders)
will be reduced by the amount of such deficiency (but not by more than the
Class B Investor Default Amount for such Monthly Period). In the event that
such a reduction would cause the Collateral Interest to be a negative
number, the Collateral Interest will be reduced to zero, and the Class B
Investor Interest will be reduced by the amount by which the Collateral
Interest would have been reduced below zero (but not by more than the
excess of the Class B Investor Default Amount for such Monthly Period over
the amount of such reduction of the Collateral Interest), and the Class B
Holders will bear directly the credit and other risks associated with their
interests in the Trust. See "-- Defaulted Receivables; Investor
Charge-Offs."
Reductions of the Class A Investor Interest or Class B Investor
Interest described above will be reimbursed by, and the Class A Investor
Interest or Class B Investor Interest increased to the extent of, Excess
Spread available for such purposes on each Transfer Date. See "--
Application of Collections -- Excess Spread." When such reductions of the
Class A Investor Interest and Class B Investor Interest have been fully
reimbursed, reductions of the Collateral Interest shall be reimbursed until
reimbursed in full in a similar manner.
"Reallocated Class B Principal Collections" for any Monthly Period
means collections of Principal Receivables allocable to the Class B
Investor Interest for the related Monthly Period in an amount not to exceed
the amount applied to fund the Class A Required Amount, if any; provided,
however, that such amount will not exceed the Class B Investor Interest
after giving effect to any Class B Investor Charge-Offs for the related
Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly
Period means collections of Principal Receivables allocable to the
Collateral Interest for the related Monthly Period in an amount not to
exceed the amount applied to fund the Class A Required Amount and the Class
B Required Amount, if any; provided, however, that such amount will not
exceed the Collateral Interest after giving effect to any Collateral
Charge-Offs for the related Transfer Date.
"Reallocated Principal Collections" for any Monthly Period means
the sum of (a) the Reallocated Class B Principal Collections for such
Monthly Period, if any, and (b) the Reallocated Collateral Principal
Collections such Monthly Period, if any.
Application of Collections
Allocations. Except as otherwise provided below, the Servicer will
deposit into the Collection Account, no later than the second business day
following the date of processing, any payment collected by the Servicer on
the Receivables. On the same day as any such deposit is made, the Servicer
will make the deposits and payments to the accounts and parties as
indicated below; provided, however, that for as long as First NBC remains
the Servicer under the Agreement and (a) (i) the Servicer provides to the
Trustee a letter of credit or other credit enhancement covering the risk of
collection of the Servicer acceptable to the Rating Agencies and (ii) the
Rating Agency Condition shall have been satisfied with respect to reliance
on such letter of credit or other credit enhancement or (b) the certificate
of deposit or unsecured short-term debt obligations of the Transferor are
rated P-1 by Moody's and at least A-1 by Standard & Poor's (and, if rated
by Fitch Investors Service, L.P. ("Fitch"), at least F-1 by Fitch) and
insured by either BIF or SAIF or (c) the Transferor makes other
arrangements satisfactory to each Rating Agency rating any Series then
outstanding, then the
<PAGE>
Servicer may make such deposits and payments on the business day
immediately prior to the Distribution Date (the "Transfer Date") in an
amount equal to the net amount of such deposits and payments which would
have been made had the conditions of this proviso not applied. The Pooling
and Servicing Agreement provides, that before the Conversion Date, the
Servicer will make such deposits and payments based on the assumption that
all collections received by the Servicer with respect to the Receivables in
each Billing Cycle are collections of Finance Charge Receivables up to the
amount of Finance Charge Receivables billed with respect to Receivables in
such Billing Cycle (with respect to each Billing Cycle, the "Billed Finance
Charge Receivables") and collections in excess of the Billed Finance Charge
Receivables are collections of Principal Receivables. The term "Aggregate
Principal Receivables" means in the case of any date of determination which
occurs before the Conversion Date, the aggregate amount of Principal
Receivables as of the end of the Billing Cycles during the Monthly Period
immediately preceding such date of determination or, in the case of any
date of determination which occurs on or after the Conversion Date, the
aggregate amount of Principal Receivables as of the end of the last day of
the Monthly Period immediately preceding such date of determination.
Whether the Servicer is required to make monthly or daily deposits
into the Collection Account, (i) the Servicer will only be required to
deposit Collections into the Collection Account or from the Collection
Account into the Finance Charge Account or the Principal Account up to the
required amount to be deposited into any such deposit account or, without
duplication, distributed on or prior to the related Distribution Date to
Holders or to the Collateral Interest Holder and (ii) if at any time prior
to such Distribution Date the amount of Collections deposited in any such
deposit account exceeds the amount required to be deposited pursuant to
clause (i) above, the Servicer will be permitted to withdraw the excess
from such an account.
Payment of Interest, Fees and Other Items. On each Transfer Date,
the Trustee, acting pursuant to Servicer's instructions, will apply the
Class A Available Funds, Class B Available Funds and Collateral Available
Funds in the Finance Charge Account in the following manner:
(a) On each Transfer Date, an amount equal to the Class A
Available Funds 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
overdue Class A Monthly Interest and Class A Additional
Interest thereon, if any, will be deposited into the
Distribution Account for distribution to Class A Holders
on such Distribution Date;
(ii) an amount equal to the Class A Servicing
Fee for the related Monthly Period, plus the amount of
any overdue Class A Servicing Fee, will be paid to the
Servicer;
(iii) an amount equal to the Class A Investor
Default Amount, if any, for the related Monthly Period
will be treated as a portion of Available Investor
Principal Collections and deposited into the Principal
Account for such Transfer Date; and
(iv) the balance, if any, will constitute a
portion of Excess Spread and will be allocated and
distributed as described under "-- Excess Spread."
(b) On each Transfer Date, an amount equal to the Class B
Available Funds 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
overdue Class B Monthly Interest and Class B Additional
Interest thereon, if any, will be deposited into the
Distribution Account for distribution to Class B Holders
on such Distribution Date;
<PAGE>
(ii) an amount equal to the Class B Servicing
Fee for the related Monthly Period, plus the amount of
any overdue Class B Servicing Fee, will be paid to the
Servicer; and
(iii) the balance, if any, will constitute a
portion of Excess Spread and will be allocated and
distributed as described under "-- Excess Spread."
(c) On each Transfer Date, an amount equal to the
Collateral Available Funds will be distributed in the following
priority:
(i) if First NBC is no longer the Servicer, an
amount equal to the Collateral Interest Servicing Fee for
the related Monthly Period, plus the amount of any
overdue Collateral Interest Servicing Fee, will be paid
to the Servicer; and
(ii) the balance, if any, will constitute a
portion of Excess Spread and will be allocated and
distributed as described under "-- Excess Spread."
"Class A Monthly Interest" with respect to any Distribution Date
will equal the product of (i) the Class A Rate for the related Interest
Period, (ii) [the actual number of days in such Interest Period divided by
360] [one-twelfth, or in the case of the initial Distribution Date,
_______] and (iii) the outstanding principal balance of the Class A
Certificates as of the related Record Date; provided, however, with respect
to the first Distribution Date, Class A Monthly Interest will be equal to
the interest accrued on the initial outstanding principal balance of the
Class A Certificates at the applicable Class A Rate for the period from the
Closing Date through ________ __, 199_.
"Class B Monthly Interest" with respect to any Distribution Date
will equal the product of (i) the Class B Rate for the related Interest
Period, (ii) [the actual number of days in such Interest Period divided by
360] [one-twelfth, or in the case of the initial Distribution Date,
_______] and (iii) the outstanding principal balance of the Class B
Certificates as of the related Record Date; provided, however, with respect
to the first Distribution Date, Class B Monthly Interest will be equal to
the interest accrued on the initial outstanding principal balance of the
Class B Certificates at the applicable Class B Rate for the period from the
Closing Date through ________ __, 199_.
"Collateral Available Funds" means, with respect to any Monthly
Period, an amount equal to the Collateral Floating Allocation of
Reallocated Investor Finance Charge Collections allocated to the Investor
Interest with respect to such Monthly Period (excluding the portion of
collections of Finance Charge Receivables attributable to Interchange that
is allocable to Servicer Interchange).
"Excess Spread" means, with respect to any Transfer Date, an
amount equal to the sum of the amounts described in clause (a) (iv), clause
(b) (iii) and clause (c) (ii) above. To the extent such amounts are
insufficient to make the distributions required by subparagraphs (a)
through (i) below under "-- Excess Spread," Excess Spread shall also be
deemed to include any Excess Finance Charge Collections allocable to other
Series available to Series 199_-_ in accordance with the Agreement.
Excess Spread. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will apply Excess Spread with respect to
the related Monthly 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 the
Class A Required Amount; provided, that in the event the Class A
Required Amount for such Transfer Date exceeds the amount of
Excess Spread, such Excess Spread shall be applied first to pay
amounts due with respect to such Transfer Date pursuant to clause
(a)(i) above under "-- Payment of Interest, Fees and Other Items,"
second to pay amounts due with respect to such Transfer Date
pursuant to clause (a) (ii) above under "-- Payment of Interest,
Fees and Other Items" and third to pay amounts due with respect to
such Transfer Date pursuant to clause (a) (iii) above under "--
Payment of Interest, Fees and Other Items";
<PAGE>
(b) an amount equal to the aggregate amount of Class A
Investor Charge-Offs which have not been previously reimbursed
(after giving effect to the allocation on such Transfer Date of
certain other amounts applied for that purpose) will be deposited
into the Principal Account and treated as a portion of Available
Investor Principal Collections for such Transfer Date as described
under "-- Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if
any, with respect to such Transfer Date will be used to fund the
Class B Required Amount and will be applied first to pay amounts
due with respect to such Transfer Date pursuant to clause (b) (i)
above under "-- Payment of Interest, Fees and Other Items," second
to pay amounts due with respect to such Transfer Date pursuant to
clause (b) (ii) above under "-- Payment of Interest, Fees and
Other Items" and third, the amount remaining, up to the Class B
Investor Default Amount, will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "-- Payments
of Principal" below;
(d) an amount equal to the aggregate amount by which the
Class B Investor Interest has been reduced below the initial Class
B Investor Interest for reasons other than the payment of
principal to the Class B Holders (but not in excess of the
aggregate amount of such reductions which have not been previously
reimbursed) will be deposited into the Principal Account and
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 Collateral Monthly Interest
for such Transfer Date, plus the amount of any Collateral Monthly
Interest previously due but not distributed to the Collateral
Interest Holder on a prior Transfer Date, will be distributed to
the Collateral Interest Holder for distribution in accordance with
the Loan Agreement;
(f) if First NBC or the Trustee is the Servicer, an
amount equal to the Collateral Interest Servicing Fee for the
related Monthly Period, plus the amount of any overdue Collateral
Interest Servicing Fee, will be paid to the Servicer;
(g) an amount equal to the aggregate Collateral Investor
Default Amount, if any, for such Transfer Date will be deposited
into the Principal Account and treated as a portion of Available
Investor Principal Collections for such Transfer Date as described
under "-- Payments of Principal" below;
(h) an amount equal to the aggregate amount by which the
Collateral Interest has been reduced below the Required Collateral
Interest 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 deposited into the Principal Account and
treated as a portion of Available Investor Principal Collections
for such Transfer Date as described under "-- Payments of
Principal" below;
(i) 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 will be deposited
into the Reserve Account;
(j) an amount equal to all other amounts due under the
Loan Agreement (to the extent payable out of Excess Spread or
Excess Finance Charge Collections) shall be distributed in
accordance with the Loan Agreement; and
(k) the balance, if any, after giving effect to the
payments made pursuant to subparagraphs (a) through (j) above,
will constitute "Excess Finance Charge Collections" to be applied
with respect to other Series in accordance with the Agreement.
<PAGE>
"Collateral Monthly Interest" with respect to any Transfer Date
will equal the product of (a) an amount equal to LIBOR plus 1.0% per annum,
or such lesser amount as may be designated in the Loan Agreement (the
"Collateral Rate"), (b) the actual number of days in the related Interest
Period divided by 360 and (c) the Collateral Interest as of the related
Record Date; provided, however, with respect to the first Distribution
Date, Collateral Monthly Interest will be equal to the sum of (A) the
product of (x) the Collateral Rate, determined as described herein using
a[n] ____________ __, 1997 LIBOR Determination Date, (y) the actual number
of days during the period from the Closing Date through ___________ __,
1997 divided by 360 and (z) the Collateral Interest as of the Closing Date,
plus (B) the product of (x) the Collateral Rate, determined as described
herein using a[n] __________ __, 1997 LIBOR Determination Date, (y) the
actual number of days during the period from __________ __, 1997 through
__________ __, 1997 divided by 360 and (z) the Collateral Interest as of
the Closing Date.
Payments of Principal. On each Transfer Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Investor
Principal Collections (see "-- Principal Payments" above) on deposit in the
Principal Account in the following manner:
(a) on each Transfer Date with respect to the Revolving
Period, all such Available Investor Principal Collections will be
distributed or deposited in the following priority:
(i) an amount equal to the Collateral Monthly
Principal will be paid to the Collateral Interest Holder
in accordance with the Loan Agreement; and
(ii) the balance will be treated as Shared
Principal Collections and applied as described under
"Description of the Certificates -- Shared Principal
Collections" herein and in the Prospectus;
(b) on each Transfer Date with respect to the Controlled
Accumulation Period or the Rapid Amortization Period, all such
Available Investor Principal Collections will be distributed or
deposited in the following priority:
(i) an amount equal to Class A Monthly Principal
will be deposited in the Principal Funding Account
(during the Controlled Accumulation Period) or
distributed to the Class A Holders (during the Rapid
Amortization Period); and
(ii) for each Transfer Date after the Class A
Investor Interest 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 Holders;
(c) on each Transfer Date with respect to the Controlled
Accumulation Period and the Rapid Amortization Period in which a
reduction in the Required Collateral Interest has occurred,
Available Investor Principal Collections not applied to Class A
Monthly Principal or Class B Monthly Principal will be applied to
reduce the Collateral Interest to the Required Collateral
Interest; and
(d) on each Transfer Date with respect to the Controlled
Accumulation Period and Rapid Amortization Period, the balance of
Available Investor Principal Collections not applied pursuant to
(b) and (c) above, if any, will be treated as Shared Principal
Collections and applied as described under "Description of the
Certificates -- Shared Principal Collections" herein and in the
Prospectus.
"Class A Monthly Principal" with respect to any Transfer Date
relating to the Controlled Accumulation Period or the Rapid Amortization
Period, prior to the payment in full of the Class A Investor Interest, will
equal the least of (i) the Available Investor Principal Collections on
deposit in the Principal Account with respect to such Transfer Date, (ii)
for each Transfer Date with respect to the Controlled Accumulation Period,
<PAGE>
prior to the payment in full of the Class A Investor Interest, and on or
prior to the Class A Scheduled Payment Date, the applicable Controlled
Deposit Amount for such Transfer Date and (iii) the Class A Adjusted
Investor Interest prior to any deposits on such Transfer Date.
"Class B Monthly Principal" with respect to any Transfer Date
relating to the Controlled Accumulation Period or the Rapid Amortization
Period, after the Class A Certificates have been paid in full (after taking
into account payments to be made on the related Distribution Date), will
equal the lesser of (i) the Available Investor Principal Collections on
deposit in the Principal Account with respect to such Transfer Date (minus
the portion of such Available Investor Principal Collections applied to
Class A Monthly Principal on such Transfer Date) and (ii) the Class B
Investor Interest for such Transfer Date.
"Collateral Monthly Principal" means (a) with respect to any
Transfer Date relating to the Revolving Period following any reduction of
the Required Collateral Interest pursuant to clause (3) of the proviso in
the definition thereof an amount equal to the lesser of (i) the excess, if
any, of the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and Reallocated Principal Collections on such
Transfer Date and after giving effect to any adjustments thereto for the
benefit of the Class A Holders and the Class B Holders on such Transfer
Date) over the Required Collateral Interest on such Transfer Date, and (ii)
the Available Investor Principal Collections on such Transfer Date or (b)
with respect to any Transfer Date relating to the Controlled Accumulation
Period or Rapid Amortization Period an amount equal to the lesser of (i)
the excess, if any, of the Collateral Interest (after giving effect to
reductions for any Collateral Charge-Offs and Reallocated Principal
Collections on such Transfer Date and after giving effect to any
adjustments thereto for the benefit of the Class A Holders and the Class B
Holders on such Transfer Date) over the Required Collateral Interest on
such Transfer Date, and (ii) the excess, if any, of (A) the Available
Investor Principal Collections on such Transfer Date over (B) the sum of
the Class A Monthly Principal and the Class B Monthly Principal for such
Transfer Date.
"Controlled Accumulation Amount" means for any Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full
of the Class A Investor Interest, $ ; provided, however, that if the
commencement of the Controlled Accumulation Period is modified as described
above under "-- Postponement of Controlled Accumulation Period," (i) the
Controlled Accumulation Amount for each Transfer Date with respect to the
Controlled Accumulation Period shall mean the amount determined in
accordance with the Agreement on the date on which the Controlled
Accumulation Period has most recently been modified and (ii) the sum of the
Controlled Accumulation Amounts for all Transfer Dates with respect to the
modified Controlled Accumulation Period shall not be less than the Class A
Investor Interest.
Shared Excess Finance Charge Collections
Each Series in Group I, including Series 199_-_, will be an Excess
Allocation Series. To the extent that collections of Finance Charge
Receivables allocated to the Investor Interest (and any other amounts that
are to be treated as collections of Finance Charge Receivables allocated to
the Investor Interest) are not needed to make payment in respect of the
Investor Interest as described above under "-- Application of Collections
- -- Payment of Interest, Fees and Other Items" and "-- Excess Spread," such
Excess Finance Charge Collections will be applied to make payments in
respect of other Series in Group I entitled to share therein in accordance
with the Agreement. In addition, Excess Finance Charge Collections with
respect to certain other Series in Group I, to the extent not required to
make payments in respect of such Series, may be applied to cover shortfalls
in amounts payable from Excess Spread as described above under "--
Application of Collections -- Excess Spread" (as well as shortfalls
experienced by other Series).
Shared Principal Collections
Series 1996_-_ is a Principal Sharing Series. Collections of
Principal Receivables for any Monthly Period allocated to the Investor
Interest (and not allocated as Reallocated Principal Collections) will
first be used to cover, with respect to any Monthly Period during the
Controlled Accumulation Period, deposits of the applicable Controlled
Deposit Amount to the Principal Funding Account or the Distribution
<PAGE>
Account, and during the Rapid Amortization Period, payments to the Holders
and then under certain circumstances payments to the Collateral Interest
Holder. The Servicer will determine the amount of collections of Principal
Receivables for any Monthly Period allocated to the Investor Interest
remaining after covering required payments to the Holders and any similar
amount remaining for any other Series ("Shared Principal Collections"). The
Servicer will allocate the Shared Principal Collections to cover any
scheduled or permitted principal distributions to certificateholders and
deposits to principal funding accounts, if any, for any Principal Sharing
Series entitled thereto which have not been covered out of the Collections
of Principal Receivables allocable to such Principal Sharing Series and
certain other amounts for such Series ("Principal Shortfalls"). Shared
Principal Collections will not be used to cover investor charge-offs for
any Series. If Principal Shortfalls exceed Shared Principal Collections for
any Monthly Period, Shared Principal Collections will be allocated pro rata
among the applicable Principal Sharing Series based on the relative amounts
of Principal Shortfalls. To the extent that Shared Principal Collections
exceed Principal Shortfalls, the balance will be paid to the Transferor or,
under certain circumstances, deposited into the Excess Funding Account.
Defeasance
Pursuant to the Agreement, the Transferor may be discharged from
its substantive obligations in respect of the Certificates or in respect of
any or all Series issued by the Trust (in any case, the "Defeased Series")
by depositing with the Trustee, under the terms of an irrevocable trust
agreement satisfactory to the Trustee, from amounts representing or
acquired with collections on the Receivables (allocable to the Defeased
Series and available to purchase additional Receivables) monies or
Permitted Investments sufficient to make all remaining scheduled interest
and principal payments on the Defeased Series on the dates scheduled for
such payments and to pay all amounts owing to the Collateral Interest
Holder or any Credit Enhancement Provider, as the case may be, for the
Defeased Series. To achieve that end, the Transferor has the right to use
collections on Receivables to purchase Permitted Investments rather than
additional Receivables. Prior to its first exercise of its right to
substitute monies or Permitted Investments for Receivables, the Transferor
shall deliver to the Trustee an opinion of counsel that such deposit and
discharge of obligations will not be treated for United States federal
income tax purposes as a sale or exchange by the holders of the Defeased
Series and the Rating Agency Condition shall have been satisfied. In
addition, the Transferor must comply with certain other requirements set
forth in the Agreement, including requirements that the Transferor deliver
to the Trustee an opinion of counsel to the effect that the deposit and
termination of obligations will not require the Trust to register as an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, and that the Transferor deliver to the Trustee and
certain Credit Enhancement Providers a certificate of an authorized officer
stating that, based on the facts known to such officer at the time, in the
reasonable opinion of the Transferor, such deposit and discharge of
obligations will not at the time of its occurrence cause a Pay-Out Event or
an event that, after the giving of notice or the lapse of time, would
constitute a Pay-Out Event, to occur with respect to any Series issued by
the Trust. If the Transferor discharges its substantive obligations in
respect of a Defeased Series, any Enhancement for the affected Series might
no longer be available to make payments with respect thereto.
Required Collateral Interest
The "Required Collateral Interest" with respect to any Transfer
Date means (i) initially $____ and (ii) thereafter on each Transfer Date an
amount equal to ___% of the sum of the Class A Adjusted Investor Interest
and the Class B Investor Interest on such Transfer Date, after taking into
account deposits into the Principal Funding Account on such Transfer Date
and payments to be made on the related Distribution Date, plus the
Collateral Interest on the prior Transfer Date after any adjustments made
on such Transfer Date, but not less than $____ ; provided, however, (1) that
if certain reductions in the Collateral Interest are made or if a Pay Out
Event occurs, the Required Collateral Interest for such Transfer Date shall
equal the Required Collateral Interest for the Transfer Date immediately
preceding the occurrence of such reduction or Pay Out Event, (2) in no
event shall the Required Collateral Interest exceed the unpaid principal
amount of the Certificates as of the last day of the Monthly Period
preceding such Transfer Date after taking into account payments to be made
on the related Distribution Date and (3) the Required Collateral Interest
may be reduced to a lesser amount at any time if the Rating Agency
Condition is satisfied.
<PAGE>
"Rating Agency Condition" means the notification in writing by
each Rating Agency that a proposed action will not result in such Rating
Agency reducing or withdrawing its then existing rating of the investor
certificates of any outstanding Series or class with respect to which it is
a Rating Agency.
With respect to any Transfer Date, if the Collateral Interest is
less than the Required Collateral Interest, certain Excess Spread, if
available, will be allocated to increase the Collateral Interest to the
extent of such shortfall. Any of such Excess Spread not required to be so
allocated or deposited into the Reserve Account with respect to any
Transfer Date will be applied in accordance with the Loan Agreement or will
be applied as Excess Finance Charge Collections. See "-- Application of
Collections -- Excess Spread."
Defaulted Receivables; Investor Charge-Offs
On or before each Transfer Date, the Servicer will calculate the
Investor Default Amount for the preceding Monthly Period. The term
"Investor Default Amount" means, for any Monthly Period, the product of (a)
the Floating Investor Percentage with respect to such Monthly Period (which
shall be calculated on a weighted average basis if a Reset Date occurred
during that Monthly Period) and (b) the Net Default Amount for such Monthly
Period. A portion of the Investor Default Amount will be allocated to the
Class A Holders (the "Class A Investor Default Amount") on each Transfer
Date in an amount equal to the product of the Class A Floating Allocation
applicable during the related Monthly Period and the Investor Default
Amount for such Monthly Period. A portion of the Investor Default Amount
will be allocated to the Class B Holders (the "Class B Investor Default
Amount") on each Transfer Date in an amount equal to the product of the
Class B Floating Allocation applicable during the related Monthly Period
and the Investor Default Amount for such Monthly Period. A portion of the
Investor Default Amount will be allocated to the Collateral Interest Holder
(the "Collateral Investor Default Amount") on each Transfer Date in an
amount equal to the product of the Collateral Floating Allocation
applicable during the related Monthly Period and the Investor Default
Amount for such Monthly Period.
On each Transfer Date, if the Class A Investor Default Amount for
such Transfer Date exceeds the amount of Excess Spread and Reallocated
Principal Collections available to fund such amount with respect to the
Monthly Period immediately preceding such Transfer Date, the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs
and any Reallocated Principal Collections on such Transfer Date) will be
reduced by the amount of such excess, but not more than the lesser of the
Class A Investor Default Amount and the Collateral Interest (after giving
effect to reductions for any Collateral Charge-Offs and any Reallocated
Principal Collections on such Transfer Date) for such Transfer Date. In the
event that such reduction would cause the Collateral Interest to be a
negative number, the Collateral Interest will be reduced to zero, and the
Class B Investor Interest (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
Interest would have been reduced below zero. In the event that such
reduction would cause the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced to zero, and the
Class A Investor Interest will be reduced by the amount by which the Class
B Investor Interest would have been reduced below zero, but not more than
the Class A Investor Default Amount for such Transfer Date (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 Holders. If the Class A
Investor Interest has been reduced by the amount of any Class A Investor
Charge-Offs, it will be reimbursed on any Transfer Date (but not by an
amount in excess of the aggregate Class A Investor Charge-Offs) by the
amount of Excess Spread allocated and available for such purpose as
described under "-- Application of Collections -- Excess Spread."
On each Transfer Date, if the Class B Investor Default Amount for
such Transfer Date exceeds the amount of Excess Spread and Reallocated
Collateral Principal Collections which are allocated and available to fund
such amount with respect to the Monthly Period preceding such Transfer
Date, the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and any Reallocated 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 more than the lesser of the Class B Investor
Default Amount and the Collateral Interest (after giving effect
<PAGE>
to reductions for any Collateral Charge-Offs and any Reallocated Principal
Collections on such Transfer Date and after giving effect to any
adjustments with respect thereto as described in the preceding paragraph)
for such Transfer Date. In the event that such reduction would cause the
Collateral Interest to be a negative number, the Collateral Interest will
be reduced to zero and the Class B Investor Interest will be reduced by the
amount by which the Collateral Interest would have been reduced below zero,
but not more than the Class B Investor Default Amount for such Transfer
Date (a "Class B Investor Charge-Off"). The Class B Investor Interest will
also be reduced by the amount of Reallocated Class B Principal Collections
in excess of the Collateral Interest (after giving effect to reductions for
any Collateral Charge-Offs and any Reallocated Collateral Principal
Collections on such Transfer Date) and the amount of any portion of the
Class B Investor Interest allocated to the Class A Certificates to avoid a
reduction in the Class A Investor Interest. The Class B Investor Interest
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 allocated and available for that purpose as described under
"-- Application of Collections -- Excess Spread."
On each Transfer Date, if the Collateral Investor Default Amount
for such Transfer Date exceeds the amount of Excess Spread which is
allocated and available to fund such amount as described under "--
Application of Collections -- Excess Spread," the Collateral Interest will
be reduced by the amount of such excess but not more than the lesser of the
Collateral Investor Default Amount and the Collateral Interest for such
Transfer Date (a "Collateral Charge-Off"). The Collateral Interest will
also be reduced by the amount of Reallocated Principal Collections and the
amount of any portion of the Collateral Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest or to
the Class B Certificates to avoid a reduction in the Class B Investor
Interest. The Collateral Interest will thereafter be reimbursed on any
Transfer Date by the amount of Excess Spread allocated and available for
that purpose as described under "-- Application of Collections -- Excess
Spread."
Principal Funding Account
Pursuant to the Series 199_-_ Supplement, the Trustee will
establish and maintain with a Qualified Institution a segregated trust
account held for the benefit of the Holders (the "Principal Funding
Account"). During the Controlled Accumulation Period, the Trustee at the
direction of the Servicer will transfer collections in respect of Principal
Receivables (other than Reallocated Principal Collections) and Shared
Principal Collections from other Principal Sharing Series, if any,
allocated to Series 199_-_ from the Principal Account to the Principal
Funding Account as described under "-- Application of Collections."
Funds on deposit in the Principal Funding Account will be invested
to the following Transfer Date by the Trustee at the direction of the
Servicer in Permitted Investments. Investment earnings (net of investment
losses and expenses) on funds on deposit in the Principal Funding Account
(the "Principal Funding Investment Proceeds") will be used to pay interest
on the Class A Certificates in an amount up to, for each Transfer Date, the
product of (a) a fraction, the numerator of which is the actual number of
days in the related Interest Period and the denominator of which is 360,
(b) the Class A Rate in effect with respect to the related Interest Period
and (c) the Principal Funding Account Balance as of the Record Date
preceding such Transfer Date (the "Class A Covered Amount"). If, for any
Transfer Date, the Principal Funding Investment Proceeds are less than the
Class A Covered Amount, the amount of such deficiency (the "Class A
Principal Funding Investment Shortfall") shall be withdrawn, to the extent
available, from the Reserve Account and deposited in the Finance Charge
Account and included in collections of Finance Charge Receivables to be
applied to the payment of Class A Monthly Interest.
Reserve Account
Pursuant to the Series 199_-_ Supplement, the Trustee will
establish and maintain with a Qualified Institution a segregated trust
account held for the benefit of the Holders (the "Reserve Account"). The
Reserve Account is established to assist with the subsequent distribution
of interest on the Certificates during the Controlled Accumulation Period.
On each Transfer Date from and after the Reserve Account Funding Date, but
prior to the termination of the Reserve Account, the Trustee, acting
pursuant to the Servicer's instructions, will apply Excess Spread allocated
<PAGE>
to the Certificates (to the extent described above under "-- Application of
Collections -- Excess Spread") 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 Monthly Period which commences no later
than three months prior to the commencement of the Controlled Accumulation
Period, or such earlier date as the Agreement may require. The "Required
Reserve Account Amount" for any Transfer Date on or after the Reserve
Account Funding Date will be equal to (a) __% 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 evidence that the Rating Agency Condition has
been satisfied 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 a Pay Out Event or an event
that, after the giving of notice or the lapse of time, would cause a Pay
Out Event to occur with respect to Series 199_-_. On each Transfer Date,
after giving effect to any deposit to be made to, and any withdrawal to be
made from, the Reserve Account on such Transfer Date, the Trustee will
withdraw from the Reserve Account an amount equal to the excess, if any, of
the amount on deposit in the Reserve Account over the Required Reserve
Account Amount and distribute such excess to the Collateral Interest Holder
for application in accordance with the terms of the Loan Agreement.
Provided that the Reserve Account has not terminated as described
below, all amounts on deposit in the Reserve Account on any Transfer Date
(after giving effect to any deposits to, or withdrawals from, the Reserve
Account to be made on such Transfer Date) will be invested to the following
Transfer Date by the Trustee at the direction of the Servicer in Permitted
Investments. The interest and other investment income (net of investment
expenses and losses) earned on such investments will be retained in the
Reserve Account (to the extent the amount on deposit is less than the
Required Reserve Account Amount) or deposited in the Finance Charge Account
and treated as Class A Available Funds.
On or before each Transfer Date with respect to the Controlled
Accumulation Period and on the first Transfer Date with respect to the
Rapid Amortization Period, a withdrawal will be made from the Reserve
Account, and the amount of such withdrawal will be deposited in the Finance
Charge Account and included in collections of Finance Charge Receivables 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 Class A Principal
Funding Investment Shortfall with respect to such Transfer Date; provided,
that the amount of such withdrawal shall be reduced to the extent that
funds otherwise would be available to be deposited in the Reserve Account
on such Transfer Date. On each Transfer Date, the amount available to be
withdrawn from the Reserve Account (the "Available Reserve Account Amount")
will be equal to the lesser of the amount on deposit in the Reserve Account
(before giving effect to any deposit to be made to the Reserve Account on
such Transfer Date) and the Required Reserve Account Amount for such
Transfer Date.
The Reserve Account will be terminated upon the earlier to occur
of (a) the termination of the Trust pursuant to the Agreement and (b) if
the Controlled Accumulation Period has not commenced, the first Transfer
Date with respect to the Rapid Amortization Period or, if the Controlled
Accumulation Period has commenced, the earlier to occur of (i) the first
Transfer Date with respect to the Rapid Amortization Period and (ii) the
Transfer Date immediately preceding the Class A Scheduled Payment Date.
Upon the termination of the Reserve Account, all amounts on deposit therein
(after giving effect to any withdrawal from the Reserve Account on such
date as described above) will be distributed to the Collateral Interest
Holder for application in accordance with the terms of the Loan Agreement.
Any amounts withdrawn from the Reserve Account and distributed to the
Collateral Interest Holder as described above will not be available for
distribution to the Holders.
<PAGE>
Excess Funding Account
Pursuant to the Agreement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held
for the benefit of the Holders (the "Excess Funding Account"). If on any
date a Retention Condition exists, the Servicer will not distribute to the
Transferor any collections of Principal Receivables that otherwise would be
distributed to the Transferor, but shall instead deposit such funds in the
Excess Funding Account until the Retention Condition ceases. Funds on
deposit in the Excess Funding Account will be withdrawn and paid to the
Transferor on any date provided that a Retention Condition is not in
effect, or would result from such payment, on such date. In addition, if a
Controlled Accumulation Period or Rapid Amortization Period commences with
respect to the Certificates, then an amount of funds on deposit in the
Excess Funding Account (after giving effect to the release of funds to the
Transferor as described above) up to the amount, if any, by which the
Transferor Interest would be less than zero if there were no funds on
deposit in the Excess Funding Account on such date, will be treated as
Shared Principal Collections to the extent needed to cover principal
payments due to or for the benefit of such Series. "Retention Condition"
means (a) on any day on and after the Conversion Date, either (i) the
Transferor Interest is less than the Minimum Transferor Interest or (ii)
the sum of the Aggregate Principal Receivables and the principal amount on
deposit in the Excess Funding Account is less than the Minimum Aggregate
Principal Receivables (in each case determined after giving effect to any
transfer of Principal Receivables to the Trust on such day); or (b) on any
day prior to the Conversion Date, either (i)(A) the sum of the aggregate
amount of Receivables and the principal amount on deposit in the Excess
Funding Account at the end of the day immediately prior to such date of
determination, minus the Adjusted Aggregate Investor Interest at the end of
such preceding day is less than (B) [__]% of the aggregate amount of
Receivables at the end of the day immediately prior to such date of
determination, or (ii)(A) the sum of (1) the product of 0.___ times the
aggregate amount of Receivables plus (2) the principal amount on deposit in
the Excess Funding Account, in each case at the end of the day immediately
prior to such date of determination is less than (B) the Minimum Aggregate
Principal Receivables (in the case of both clauses (i) and (ii) determined
after giving effect to any transfer of Receivables to the Trust on such
day).
Paired Series
Series 199_-_ may be paired with one or more other Series (each a
"Paired Series"). Each Paired Series either will be prefunded with an
initial deposit to a Pre-Funding Account in an amount up to the initial
principal balance of such Paired Series and primarily from the proceeds of
the sale of such Paired Series or will be a Variable Interest. Any such
Pre-Funding Account will be held for the benefit of such Paired Series and
not for the benefit of the Holders. As principal is deposited into the
Principal Funding Account with respect to the Certificates, either (i) in
the case of a prefunded Paired Series, an equal amount of funds on deposit
in the Pre-Funding Account for such prefunded Paired Series will be
released (which funds will be distributed to the Transferor) or (ii) in the
case of a Paired Series which is a Variable Interest, an interest in such
variable Paired Series in an equal or lesser amount may be sold by the
Trust (and the proceeds thereof will be distributed to the Transferor) and,
in either case, the investor interest of such Paired Series will increase
by up to a corresponding amount. Upon payment in full of the Certificates,
assuming that there have been no unreimbursed charge-offs with respect to
any related Paired Series, the aggregate investor interest of such related
Paired Series will have been increased by an amount up to an aggregate
amount equal to the payments of principal of the Certificates since the
issuance of such Paired Series. The issuance of a Paired Series will be
subject to the conditions described under "Description of the Certificates
- -- Exchanges" in the Prospectus. There can be no assurance, however, that
the terms of any Paired Series might not have an impact on the timing or
amount of payments received by a Holder. In particular, the denominator of
the Fixed Allocation Percentage may be reduced upon the occurrence of a Pay
Out Event with respect to a Paired Series resulting in a possible reduction
of the percentage of collections of Principal Receivables allocated to the
Holders and a possible slowdown in the repayment of principal to such
Holders because of such reduction in allocation of collections. See
"Maturity Assumptions" herein.
<PAGE>
Pay Out Events
As described above, the Revolving Period will continue through
_______ (unless such date is postponed as described under "-- Postponement
of Controlled Accumulation Period"), unless a Pay Out Event occurs prior to
such date. A "Pay Out 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 which shall not exceed five
days) or (ii) to observe or perform in any material respect any
other covenants or agreements of the Transferor set forth in the
Agreement, which failure has a material adverse effect on the
Holders (which determination shall be made without regard to the
existence of the Collateral Interest) and which continues for a
period of 60 days after written notice and continues to materially
and adversely affect the interests of the Holders (which
determination shall be made without regard to the existence of the
Collateral Interest) for such period;
(b) any representation or warranty made by the Transferor
in the Agreement, or any information required to be given by the
Transferor to the Trustee to identify the Accounts proves to have
been incorrect in any material respect when made and which
continues to be incorrect in any material respect for a period of
60 days after written notice and as a result of which the
interests of the Holders are materially and adversely affected
(which determination shall be made without regard to the existence
of the Collateral Interest) and continue to be materially and
adversely affected for such period; provided, however, that a Pay
Out Event pursuant to this subparagraph (b) shall not be deemed to
occur thereunder if the Transferor has accepted reassignment of
the related Receivable or all such Receivables, if applicable,
during such period (or such longer period as the Trustee may
specify) in accordance with the provisions of the Agreement;
(c) any reduction of the average of the Portfolio Yields
for any three consecutive Monthly Periods to a rate which is less
than the average of the Base Rates for such period;
(d) a failure by the Transferor to convey Receivables
arising under Additional Accounts, or Participations, to the Trust
when required by the Agreement;
(e) any Servicer Default occurs which would have a material
adverse effect on the Holders;
(f) insufficient moneys in the Distribution Account to
pay the Class A Investor Interest on the Class A Scheduled Payment
Date or the Class B Investor Interest on the Class B Scheduled
Payment Date;
(g) certain events of insolvency, conservatorship or
receivership relating to the Transferor;
(h) the Transferor becomes unable for any reason to
transfer Receivables to the Trust in accordance with the provisions
of the Agreement; or
(i) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (e)
above, a Pay Out Event will be deemed to have occurred with respect to the
Certificates only if, after any applicable grace period, either the Trustee
or Holders and the Collateral Interest Holder evidencing undivided
interests aggregating more than 50% of the Investor Interest, by written
notice to the Transferor and the Servicer (and to the Trustee if given by
the Holders) declare that a Pay Out Event has occurred with respect to the
Certificates as of the date of such notice. In the case of any event
described in clause (g), (h) or (i), a Pay Out Event with respect to all
Series then outstanding, and in the case of any event described in clause
(c), (d) or (f), a Pay Out 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 Holders, the Collateral Interest Holder or all
certificateholders, as
<PAGE>
appropriate, immediately upon the occurrence of such event. On the date on
which a Pay Out Event is deemed to have occurred, the Rapid Amortization
Period will commence. In such event, distributions of principal to the
Holders will begin on the first Distribution Date following the month in
which such Pay Out Event occurred. If, because of the occurrence of a Pay
Out Event, the Rapid Amortization Period begins earlier than __________,
the scheduled commencement of the Controlled Accumulation Period, Holders
will be receiving distributions of principal earlier than they otherwise
would have, which may shorten the average life of the Certificates.
See "Description of the Certificates -- Pay Out Events" in the
Prospectus for an additional discussion of the consequences of an
insolvency, conservatorship or receivership of the Transferor.
Servicing Compensation and Payment of Expenses
The share of the Servicing Fee allocable to the Investor Interest
with respect to any Transfer Date (the "Monthly Investor Servicing Fee")
shall be equal to one-twelfth of the product of (a) 2.00% and (b) the
Adjusted Investor Interest as of the last day of the Monthly Period
preceding such Transfer Date; provided, however, with respect to the first
Transfer Date, the Monthly Investor Servicing Fee shall be equal to $____.
On each Transfer Date, but only if First NBC or the Trustee is the Servicer,
Servicer Interchange with respect to the related Monthly Period that is on
deposit in the Finance Charge Account will be withdrawn from the Finance
Charge Account and paid to the Servicer in payment of a portion of the
Monthly Investor Servicing Fee with respect to such Monthly Period. The
"Servicer Interchange" for any Monthly Period for which First NBC is the
Servicer will be an amount equal to the portion of collections of Finance
Charge Receivables allocated to the Investor Interest with respect to such
Monthly Period that is attributable to Interchange, provided, however, that
Servicer Interchange for a Monthly Period shall not exceed one-twelfth of
the product of (i) the Adjusted Investor Interest, as of the last day of
such Monthly Period and (ii) 1.0%. In the case of any insufficiency of
Servicer Interchange on deposit in the Finance Charge Account, a portion of
the Monthly Investor Servicing Fee with respect to such Monthly Period will
not be paid to the extent of such insufficiency and in no event shall the
Trust, the Trustee, the Holders 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 Holders with respect to any Transfer Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A
Floating Allocation, (b) the Net Servicing Fee Rate and (c) the Adjusted
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date; provided however, that with respect to the first Transfer
Date, the Class A Servicing Fee shall be equal to $____. The share of the
Monthly Investor Servicing Fee allocable to the Class B Holders with
respect to any Transfer Date (the "Class B Servicing Fee") shall be equal
to one-twelfth of the product of (a) the Class B Floating Allocation, (b)
the Net Servicing Fee Rate and (c) the Adjusted Investor Interest as of the
last day of the Monthly Period preceding such Transfer Date, provided
however, that with respect to the first Transfer Date, the Class B
Servicing Fee shall be equal to $____. The share of the Monthly Investor
Servicing Fee allocable to the Collateral Interest Holder with respect to
any Transfer Date (the "Collateral Interest Servicing Fee") shall be equal
to one-twelfth of the product of (a) the Collateral Floating Allocation,
(b) the Net Servicing Fee Rate and (c) the Adjusted Investor Interest as of
the last day of the Monthly Period preceding such Transfer Date; provided,
however, that with respect to the first Transfer Date, the Collateral
Interest Servicing Fee shall be equal to $____. The "Net Servicing Fee Rate"
shall mean (a) so long as First NBC or Trustee is the Servicer, 0.50% per
annum, and (b) so long as a Person other than First NBC or the Trustee is
the Servicer, 2.00% per annum. The remainder of the Servicing Fee shall be
paid by the Transferor or 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. In no event shall the Trust, the Trustee,
the Holders or the Collateral Interest Holder be liable for the share of
the Servicing Fee to be paid out of Servicer Interchange. The Class A
Servicing Fee and the Class B Servicing Fee shall be payable to the Servicer
solely to the extent amounts are available for distribution in respect
thereof as described under "-- Application of Collections."
The Servicer will pay from its servicing compensation certain
expenses incurred in connection with servicing the Receivables including,
without limitation, payment of the fees and disbursements of the Trustee
<PAGE>
and independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the Trust or the Holders
other than federal, state and local income and franchise taxes, if any, of
the Trust.
Reports to Holders
On each Transfer Date, the Trustee will forward to each Holder of
record, a statement prepared by the Servicer setting forth the items
described in "Description of the Certificates -- Reports to Holders" in the
Prospectus. In addition, such statement will include (a) the amount, if
any, withdrawn from the Principal Funding Account for such Transfer Date,
and (b) the Collateral Interest, if any, for such Transfer Date.
UNDERWRITING
Subject to the terms and conditions set forth in the Class A
Underwriting Agreement (the "Class A Underwriting Agreement") between the
Transferor and the Class A Underwriters named below (the "Class A
Underwriters"), and the terms and conditions set forth in the Class B
Underwriting Agreement (the "Class B Underwriting Agreement," and together
with the Class A Underwriting Agreement, the "Underwriting Agreement")
between the Transferor and the Class B Underwriters named below (the "Class
B Underwriters," and together with the Class A Underwriters, the
"Underwriters"), the Transferor has agreed to sell to the Underwriters, and
each of the Underwriters has severally agreed to purchase, the principal
amount of the Certificates set forth opposite its name:
Principal Amount of
Class A Underwriters Class A Certificates
.................................................... $
....................................................
Total......................................
Principal Amount of
Class B Underwriters Class B Certificates
.................................................... $
....................................................
Total......................................
In addition, _______________, as selling agent will directly offer
$____________ aggregate principal amount of the Class A Certificates and
$____________ aggregate principal amount of Class B Certificates.
The _____________ has an arrangement with _____________ under
which it may act as selling agent for the Certificates at the same prices,
concessions and discounts to dealers applicable to the Underwriters.
In the Class A Underwriting Agreement, the Class A Underwriters
have agreed, subject to the terms and conditions set forth therein, to
purchase all of the Class A Certificates offered hereby if any of the Class
A Certificates are purchased. In the Class B Underwriting Agreement, the
Class B Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all of the Class B Certificates offered hereby
if any of the Class B Certificates are purchased. The Underwriters have
agreed to reimburse the Transferor for certain expenses of the issuance and
distribution of the Certificates.
The Class A Underwriters propose initially to offer the Class A
Certificates to the public at the price set forth on the cover page hereof
and to certain dealers at such price less concessions not in excess of __% of
the principal amount of the Class A Certificates. The Class A Underwriters
may allow, and such dealers may reallow, concessions not in excess of __% of
the principal amount of the Class A Certificates to certain brokers and
dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Class A Underwriters.
<PAGE>
The Class B Underwriters propose initially to offer the Class B
Certificates to the public at the price set forth on the cover page hereof
and to certain dealers at such price less concessions not in excess of __% of
the principal amount of the Class B Certificates. The Class B Underwriters
may allow, and such dealers may reallow, concessions not in excess of __% of
the principal amount of the Class B Certificates to certain brokers and
dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Class B Underwriters.
Until the distribution of the Certificates is completed, rules of
the Commission may limit the ability of the Underwriters and certain
selling group members to bid for and purchase the Certificates. As an
exception to these rules, [the lead underwriter], on behalf of the
Underwriters, are permitted to engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids
with respect to the Certificates in accordance with Regulation M under the
Exchange Act.
Over-allotment transactions involve syndicate sales in excess of
the offering size, which create syndicate short positions. Stabilizing
transactions permit bids to purchase the Certificates so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Certificates in the open market after
the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit reclamation of a selling concession from a
syndicate member when the Certificates originally sold by such syndicate
member are purchased in a syndicate covering transaction.
Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of
the Certificates to be higher than they would otherwise be in the absence
of such transactions. Neither the Trust, the Transferor, nor any of the
Underwriters make any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on
the price of the Certificates. In addition, neither the Trust, the
Transferor nor any of the Underwriters represent that the Underwriters will
engage in any such transactions or that such transactions, once commenced,
will not be discontinued without notice.
Each Underwriter will represent and agree that:
(a) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 with respect to anything done by it in
relation to the Series 199_-_ Certificates in, from or otherwise involving
the United Kingdom;
(b) it has only issued, distributed or passed on and will only
issue, distribute or pass on in the United Kingdom any document received by
it in connection with the issue of the Series 199_-_ Certificates to a
person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is
a person to whom such document may otherwise lawfully be issued,
distributed or passed on;
(c) if it is an authorized person under Chapter III of Part I of
the Financial Services Act 1986, it has only promoted and will only promote
(as that term is defined in Regulation 1.02(2) of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described in this Prospectus Supplement and the
Prospectus if that person is a kind described either in Section 76(2) of
the Financial Services Act 1986 or in Regulation 1.04 of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991; and
(d) it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996.
The Transferor will indemnify the Underwriters against liabilities
relating to the adequacy of disclosure to investors, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.
<PAGE>
INDEX OF DEFINED TERMS FOR PROSPECTUS SUPPLEMENT
Page
Accounts ..........................................................S-1
Accumulation Period Length.................................................S-32
Additional Interest........................................................S-29
Adjusted Investor Interest..................................................S-6
Aggregate Principal Receivables............................................S-36
Agreement...................................................................S-5
Available Investor Principal Collections...................................S-31
Available Reserve Account Amount...........................................S-44
Bank........................................................................S-1
Base Rate .................................................................S-26
Billed Finance Charge Receivables..........................................S-36
Certificates ..........................................................S-1, S-4
Class A Additional Interest........ .......................................S-29
Class A Adjusted Investor Interest....................................S-6, S-34
Class A Available Funds....................................................S-30
Class A Certificates...................................................S-1, S-4
Class A Covered Amount................................................S-9, S-44
Class A Fixed Allocation...................................................S-33
Class A Floating Allocation................................................S-33
Class A Holders ............................................................S-5
Class A Investor Charge-Off..........................................S-12, S-43
Class A Investor Default Amount............................................S-42
Class A Investor Interest.............................................S-5, S-34
Class A Monthly Interest...................................................S-37
Class A Monthly Principal..................................................S-40
Class A Principal Funding Investment Shortfall........................S-9, S-44
Class A Rate ....................................................S-3, S-4, S-30
Class A Required Amount..............................................S-11, S-35
Class A Scheduled Payment Date.........................................S-3, S-4
Class A Servicing Fee......................................................S-47
Class A Underwriters.......................................................S-48
Class A Underwriting Agreement.............................................S-48
Class B Additional Interest................................................S-29
Class B Available Funds....................................................S-30
Class B Certificates...................................................S-1, S-4
Class B Fixed Allocation...................................................S-34
Class B Floating Allocation................................................S-33
Class B Holders ............................................................S-5
Class B Investor Charge-Off..........................................S-12, S-43
Class B Investor Default Amount............................................S-42
Class B Investor Interest.............................................S-5, S-34
Class B Monthly Interest...................................................S-37
Class B Monthly Principal..................................................S-40
Class B Rate ....................................................S-3, S-4, S-30
Class B Required Amount..............................................S-11, S-35
Class B Scheduled Payment Date.........................................S-3, S-4
Class B Servicing Fee......................................................S-47
Class B Underwriters.......................................................S-48
Class B Underwriting Agreement.............................................S-47
Closing Date .....................................................S-3, S-4
Code .........................................................S-15
Collateral Available Funds.................................................S-38
Collateral Charge-Off......................................................S-43
Collateral Fixed Allocation................................................S-34
Collateral Floating Allocation.............................................S-33
Collateral Interest...................................................S-5, S-34
Collateral Interest Holder..................................................S-5
Collateral Interest Servicing Fee..........................................S-47
Collateral Investor Default Amount.........................................S-42
Collateral Monthly Interest................................................S-39
Collateral Monthly Principal...............................................S-40
Collateral Rate .........................................................S-39
Controlled Accumulation Amount.............................................S-40
Controlled Accumulation Period..............................................S-8
Controlled Deposit Amount.............................................S-8, S-25
Credit Enhancement..........................................................S-5
Defeased Series .........................................................S-41
Distribution Date ..........................................................S-3
Distribution Dates..........................................................S-4
ERISA .........................................................S-15
Excess Finance Charge Collections..........................................S-39
Excess Spread ...................................................S-12, S-38
First NBC ..........................................................S-1
Fitch .........................................................S-36
Fixed Investor Percentage..................................................S-33
Floating Investor Percentage...............................................S-32
Group I .........................................................S-13
Holders ..........................................................S-5
Initial Collateral Interest................................................S-12
Interest Period .........................................................S-30
Investor Default Amount....................................................S-42
Investor Interest ..........................................................S-5
LIBOR ....................................................S-3, S-30
LIBOR Determination Date...................................................S-30
Loan Agreement .........................................................S-13
Monthly Investor Servicing Fee.............................................S-47
Monthly Period ..........................................................S-6
Net Servicing Fee Rate.....................................................S-47
Paired Series ...................................................S-13, S-45
Pay Out Event .........................................................S-46
Portfolio Yield .........................................................S-26
Principal Funding Account.......................................S-8, S-25, S-43
Principal Funding Account Balance..........................................S-25
Principal Funding Investment Proceeds.................................S-9, S-44
Principal Shortfalls.......................................................S-41
Rapid Amortization Period..................................................S-10
Rating Agency Condition....................................................S-42
Reallocated Class B Principal Collections..................................S-36
Reallocated Collateral Principal Collections...............................S-36
<PAGE>
Reallocated Principal Collections..........................................S-36
Receivables ..........................................................S-1
Record Date .........................................................S-29
Reference Banks .........................................................S-31
Required Amount .........................................................S-11
Required Collateral Interest.........................................S-12, S-42
Required Reserve Account Amount............................................S-44
Reserve Account .........................................................S-44
Reserve Account Funding Date...............................................S-44
Reset Date .........................................................S-34
Retention Condition........................................................S-45
Revolving Period ..........................................................S-8
Series 199_-_ Supplement....................................................S-5
Series 199_-_ Termination Date..............................................S-6
Servicer Interchange.......................................................S-47
Shared Principal Collections.........................................S-14, S-41
Subject Reset Date.........................................................S-33
Transfer Date .........................................................S-36
Transferor Interest.........................................................S-5
Trust ..........................................................S-1
Underwriters .........................................................S-48
Underwriting Agreement.....................................................S-48
Variable Interest .........................................................S-34
<PAGE>
ANNEX I
[OTHER SERIES ISSUED
The table below sets forth the principal characteristics of the
other Series previously issued by the the Trust. For more specific
information with respect to any Series, any prospective investor should
contact First NBC at ( ) ______________. First NBC will provide, without
charge, to any prospective purchaser of the Certificates, a copy of the
Disclosure Documents for any previous publicly-issued Series.]
A-1
<PAGE>
========================================
No dealer, salesman or other
person has been authorized to give
any information or to make any
representation not contained or
incorporated by reference in this
Prospectus Supplement or the
accompanying 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.
Neither this Prospectus Supplement
nor the accompanying Prospectus
constitutes 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
Supplement or the accompanying
Prospectus, nor any sale made here-
under or thereunder 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 thereof or that the
information contained or incorporated by
reference herein or therein is correct
as of any time subsequent to its date.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
Page
----
SUMMARY OF TERMS...................S-5
RISK FACTORS......................S-18
FIRST NBC'S CREDIT CARD
PORTFOLIO.....................S-18
THE RECEIVABLES...................S-22
MATURITY ASSUMPTIONS..............S-25
RECEIVABLE YIELD CONSIDERATIONS...S-28
FIRST NBC AND FIRST COMMERCE
CORPORATION..................S-29
DESCRIPTION OF THE CERTIFICATES...S-29
UNDERWRITING......................S-49
INDEX OF DEFINED TERMS FOR
PROSPECTUS SUPPLEMENT.......S-52
Prospectus
Prospectus Supplement................3
Reports to Certificateholders........3
Available Information................4
Incorporation of Certain Documents
by Reference......................4
Prospectus Summary...................5
Risk Factors........................23
The Trust...........................31
First NBC's Credit Card Activities..31
The Receivables.....................34
Maturity Assumptions................34
Use of Proceeds.....................35
First NBC and First Commerce
Corporation......................35
Description of the Certificates.....35
Credit Enhancement..................65
Certain Legal Aspects of the
Receivables......................67
U.S. Federal Income Tax
Consequences.....................70
State and Local Taxation............75
ERISA Considerations................75
Plan of Distribution................77
Legal Matters.......................77
Index of Terms for Prospectus.......78
Annex 1: Global Clearance,
Settlement and Tax
Documentation Prospectus..A-1
Until ____________ __, 199_, all dealers
effecting transactions in the
Certificates, whether or not
participating in this distribution, may
be required to deliver a Prospectus
Supplement and a Prospectus. This
delivery requirement is in addition to
the obligation of dealers to deliver a
Prospectus Supplement and a Prospectus
when acting as underwriters and with
respect to their unsold allotments or
subscriptions.
========================================
<PAGE>
========================================
First NBC
Credit Card Master Trust
$____________ Class A
[Floating Rate] [___%]
Asset Backed
Certificates, Series 199_-_
$____________ Class B
[Floating Rate] [___%]
Asset Backed
Certificates, Series 199_-_
First National Bank
of Commerce
Transferor and Servicer
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
Underwriters of the Class A Certificates
[ ]
[ ]
Underwriters of the Class B Certificates
[ ]
[ ]
========================================
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 11, 1997
PROSPECTUS
First NBC Credit Card Master Trust
Asset Backed Certificates
First National Bank of Commerce
Transferor and Servicer
------------------
The Asset Backed Certificates (collectively, the "Certificates")
described herein may be sold from time to time in one or more series (each,
a "Series"), in amounts, at prices and on terms to be determined at the
time of sale and to be set forth in a supplement to this Prospectus (a
"Prospectus Supplement"). The Certificates in each Series will represent an
undivided interest in the First NBC Credit Card Master Trust (the "Trust").
The Trust will be formed pursuant to a pooling and servicing agreement
between First National Bank of Commerce ("First NBC" or the "Bank"), as
transferor and servicer, and The First National Bank of Chicago, as
trustee. Certain capitalized terms used in this Prospectus are defined
elsewhere in this Prospectus and in the accompanying Prospectus Supplement.
Please refer to the "Index of Defined Terms for Prospectus" on page 78 for
a listing of the pages on which such terms are defined.
The property of the Trust will include receivables (the "Receivables")
generated from time to time in a portfolio of revolving credit accounts,
all monies due or to become due in payment of the Receivables, any
collateral securing the Receivables, all proceeds of the foregoing and
proceeds of credit life insurance policies relating to the Receivables and
all monies on deposit in certain bank accounts of the Trust, as more fully
described herein. Additionally, with respect to any Series or Class offered
hereby, the Trust assets also may include (i) the right to receive
Interchange and Other Account Revenues and/or (ii) credit enhancement and
interest rate protection arrangements for such Series or Class, as
described in the related Prospectus Supplement. The Bank will initially own
the remaining undivided interest in the Trust not represented by the
Certificates issued by the Trust and will initially service the related
Receivables.
Each Series will consist of one or more classes of Certificates (each,
a "Class"), one or more of which may be fixed rate Certificates, floating
rate Certificates or other types of Certificates, as specified in the
related Prospectus Supplement. Each Certificate will represent an undivided
interest in the Trust, and the interest of the holders of each Class or
Series of Certificates will include the right to receive a varying
percentage of each month's collections with respect to the Receivables at
the times, in the manner and to the extent described herein and, with
respect to any Series offered hereby, in the related Prospectus Supplement.
Interest and principal payments with respect to each Series offered hereby
will be made as specified in the related Prospectus Supplement. One or more
Classes of a Series offered hereby may be entitled to the benefits of a
cash collateral account or guaranty, a collateral interest, a letter of
credit, a surety bond, an insurance policy or other form of enhancement as
specified in the Prospectus Supplement relating to that Series. In
addition, any Series offered hereby may include one or more Classes which
are subordinated in right and priority to payment of principal of, and/or
interest on, one or more other Classes of that Series or another Series, in
each case to the extent described in the related Prospectus Supplement.
Each Series of Certificates or Class offered hereby will be rated in one of
the four highest rating categories by at least one nationally recognized
rating organization.
While the specific terms of any Series in respect of which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such Series will not be subject to prior review
by, or consent of, the Certificateholders of any previously issued Series.
Potential investors should consider, among other things, the information
set forth in "Risk Factors" commencing on page 22 of this Prospectus.
------------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST NBC 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 (EXCEPT FOR RECEIVABLES ARISING IN PRIVATE
LABEL ACCOUNTS, WHICH REPRESENTED LESS THAN __% OF THE RECEIVABLES AS OF
________, 1997) ANY OTHER GOVERNMENTAL AGENCY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
Certificates may be sold by the Bank or the Trust directly to
purchasers, through agents designated from time to time, through
underwriting syndicates led by one or more managing underwriters or through
one or more underwriters acting alone. If underwriters or agents are
involved in the offering of the Certificates of any Series offered hereby,
the name of the managing underwriter or underwriters or agents will be set
forth in the related Prospectus Supplement. If an underwriter, agent or
dealer is involved in the offering of the Certificates of any Series
offered hereby, the underwriter's discount, agent's commission or dealer's
purchase price will be set forth in, or may be calculated from, the related
Prospectus Supplement, and the net proceeds to the Bank from such offering
will be the public offering price of such Certificates less such discount
in the case of an underwriter, the purchase price of such Certificates less
such commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other
expenses of the Bank associated with the issuance and distribution of such
Certificates. See "Plan of Distribution."
1
<PAGE>
This Prospectus may not be used to consummate sales of any Series of
Certificates unless accompanied by the related Prospectus Supplement.
------------------
The date of this Prospectus is July __, 1997.
2
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby
and hereby will, among other things, set forth with respect to that Series:
(a) the initial aggregate principal amount of each Class of that Series;
(b) the certificate interest rate (or method for determining it) of each
Class of that Series; (c) certain information concerning the Receivables
allocated to that Series; (d) the expected date or dates on which the
principal amount of the Certificates will be paid to holders of each Class
of Certificates (the "Certificateholders"); (e) the extent to which any
Class within a Series is subordinated to any other Class of that Series or
any other Series; (f) the identity of each Class of floating rate
Certificates and fixed rate Certificates included in that Series, if any,
or such other type of Class of Certificates; (g) the Distribution Dates for
the respective Classes; (h) relevant financial information with respect to
the Receivables; (i) additional information with respect to any Enhancement
relating to that Series; and (j) the plan of distribution of that Series.
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 the registered
holder(s) of the related Certificates. Cede & Co. ("Cede"), as nominee of
The Depository Trust Company ("DTC") is generally expected to be the only
registered holder of the Certificates. The availability of copies of such
reports to DTC participants and ultimately to the owners of beneficial
interests in the Certificates ("Certificate Owners") will be governed by
arrangements among DTC and such parties, subject to any statutory or
regulatory requirements as may be in effect from time to time. 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
Certificate Owners. The Servicer will file with the Commission such
periodic reports with respect to the Trust as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations of the Commission thereunder.
3
<PAGE>
AVAILABLE INFORMATION
This 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 Commission. For further information,
reference is made to the Registration Statement (including any amendments
thereof and exhibits thereto) and any reports and other documents
incorporated herein by reference as described below under "Incorporation of
Certain Documents by Reference," which are available for inspection without
charge at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549; and the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New
York, New York 10048. 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. Such information may also be
accessed electronically by means of the Commission's home page on the World
Wide Web located at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of
the Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination
of the offering of the Certificates shall be deemed to be incorporated by
reference into this Prospectus and to be part hereof. Any statement
contained herein or in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy
of this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for
such copies should be directed to: Thomas L. Callicutt, Jr., Executive Vice
President, Controller and Principal Accounting Officer, First Commerce
Corporation, 201 Saint Charles Avenue, 19th Floor, New Orleans, Louisiana
70170, telephone number (504) 623-2913.
4
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
accompanying Prospectus Supplement. Certain capitalized terms used in this
summary are defined elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. A listing of the pages on which all such terms are
defined is found in the "Index of Defined Terms for Prospectus" on page 78.
Unless the context requires otherwise, capitalized terms used in this
Prospectus and in the accompanying Prospectus Supplement refer only to the
particular Series being offered by that Prospectus Supplement.
Risk Factors.......................... Potential investors should note that
there are material risks associated
with an investment in the
Certificates and should consider,
among other things, the information
set forth in "Risk Factors" on page
[22].
Type of Securities Asset Backed Certificates (the
"Certificates") evidencing an
undivided interest in the assets of
the First NBC Credit Card Master
Trust (the "Trust") may be issued
from time to time in one or more
series (each, a "Series") which
will consist of one or more classes
of Certificates (each, a "Class").
The Trust............................ The Trust will be formed pursuant to
a pooling and servicing agreement
(the "Agreement") between First
National Bank of Commerce ("First
NBC" or the "Bank"), as transferor
and servicer, and The First
National Bank of Chicago, as
trustee (the "Trustee"). Each
Series issued by the Trust will be
issued pursuant to a series
supplement to the Agreement (a
"Series Supplement"; references in
this Prospectus to the Agreement,
as it relates to any Series, shall
include the Series Supplement
entered into in connection with
such Series). Any Series (or class
thereof) may or may not be offered
pursuant to this Prospectus. Each
Prospectus Supplement will identify
all outstanding Series previously
issued by the Trust. Certificate
Owners with respect to any Series
are not required to be notified of
the issuance of any subsequent
Series. However, it is a condition
precedent to the issuance of any
additional Series that each Rating
Agency that has rated any
outstanding Series deliver written
confirmation to the Trustee that
such issuance will not result in
the reduction or withdrawal of its
rating on any such outstanding
Series.
Trust Assets......................... The assets of the Trust will include
receivables (the "Receivables")
arising under certain revolving
credit accounts (the "Accounts"),
initially comprised of a portion of
the MasterCard(R), VISA(R)*<F1> and
private label credit card accounts
included in the portfolio of
MasterCard, VISA and private label
accounts owned by the Bank (the
"Bank Portfolio"), and all monies
due or to become due in payment of
the Receivables, including certain
fees charged on the Accounts and
included as Finance Charge
Receivables, all proceeds of the
Receivables and proceeds of credit
life insurance policies relating to
the Receivables, and any collateral
securing the Receivables and
proceeds of such collateral and may
include the right to receive
Interchange and Other Account
Revenues, if any, allocable to the
Certificates and all monies on
deposit in certain bank accounts of
the Trust (including any permitted
investments made with such monies
and related investment earnings),
and any Enhancement with respect to
any particular
5
<PAGE>
<F1>* MasterCard(R) and VISA(R) are Federally registered servicemarks of
MasterCard International Inc. and Visa U.S.A., Inc., respectively.</F1>
6
<PAGE>
Series or Class, as described in the
related Prospectus Supplement. The
private label accounts included in
the Bank Portfolio (the "Private
Label Accounts") relate to credit
cards issued to military personnel
who are eligible to participate in
one of the Bank's military affinity
programs but do not meet the credit
standards for issuance of standard
credit cards. Payments due under
Private Label Accounts are charged
back to a non-appropriated funds
instrumentality associated with the
United States Air Force Services at
65-90 days past due. The
non-appropriated funds
instrumentality does not represent
a full faith and credit obligation
of the United States. "Interchange"
consists of certain fees received
by the Bank from VISA and
MasterCard as partial compensation
for taking credit risk, absorbing
fraud losses and funding
receivables for a limited period
prior to initial billing. "Other
Account Revenues" consist of
amounts received by the Transferor
(a) from any third party in
consideration of the inclusion of
advertising inserts with monthly
statements relating to accounts in
the Bank Portfolio, (b) from
issuers of credit insurance
policies on account of experience
rebates or similar amounts related
to obligors on accounts included in
the Bank Portfolio and (c) from any
other Person on account of revenues
related to the Accounts, to the
extent (in the case of this clause
(c)) that Transferor in the future
designates such amounts to be
treated as "Other Account
Revenues." The term "Enhancement"
means, with respect to any Series
or Class, any Credit Enhancement or
any derivative product such as a
guaranteed rate agreement, maturity
liquidity facility, interest rate
cap agreement, interest rate swap
agreement or other similar
arrangement for the benefit of the
Certificateholders of that Series
or Class. The term "Credit
Enhancement" means, with respect to
any Series or Class, any cash
collateral guaranty or account,
collateral interest, letter of
credit, surety bond, insurance
policy, spread account, reserve
account or other similar
arrangement for the benefit of the
Certificateholders of that Series
or Class. Credit Enhancement may
also take the form of subordination
of one or more Classes of a Series
to any other Class or Classes of a
Series or a cross-support feature
which requires collections on
Receivables of one Series to be
paid as principal and/or interest
with respect to another Series.
At the time of formation of the
Trust, the Bank, as transferor (in
such capacity, the "Transferor"),
will convey to the Trustee, in
trust for the benefit of the
Certificateholders, all Receivables
existing under certain Accounts
selected from the Bank Portfolio
based on criteria provided in the
Agreement and all Receivables
arising under such Accounts from
time to time thereafter until
termination of the Trust. In
addition, the Agreement will
provide that the Bank may, from
time to time (subject to certain
limitations and conditions), and in
some circumstances will be
obligated to, designate additional
eligible revolving credit accounts
to be included as Accounts (the
"Additional Accounts"), the
Receivables of which will be
included in the Trust and that in
lieu of Additional Accounts or in
addition thereto, the Bank may
include in the Trust participations
or trust certificates representing
undivided interests in a pool of
assets primarily consisting of
receivables arising under revolving
credit accounts and collections
thereon ("Participations").
7
<PAGE>
Any Participation included in the
Trust will represent an undivided
interest in the same types of
assets that may be added as
Receivables arising in "Additional
Accounts," but in the case of a
Participation the Trust would have
a less direct interest in the
specific assets. See "Description
of the Certificates -- Addition of
Trust Assets" for a discussion of
possible features of the indirect
ownership arrangement involved in a
Participation. Any Participation
added to the Trust will either have
been registered under the
Securities Act or be eligible for
sale under Rule 144(k) and, in
either case, will (except as
otherwise permitted by the
Securities Act and applicable rules
thereunder) have been acquired by
the Transferor in a bona fide
secondary market transaction and
not from the issuer of the
Participation or any of its
affiliates.
In addition to the periodic reports
otherwise required to be filed by
the Servicer with the Commission
pursuant to the Exchange Act, the
Servicer intends to file, on behalf
of the Trust, a Report on Form 8-K
with respect to any addition to the
Trust of Receivables in Additional
Accounts or Participations that
would have a material effect on the
composition of the assets of the
Trust, including statistical data,
on a discrete basis, describing the
additional assets. Any conveyance
by the Transferor to the Trust of
Receivables in Additional Accounts
or Participations is subject to the
satisfaction of several conditions.
See "The Receivables," "Risk
Factors--Addition of Trust Assets
-- Effect on Credit Quality" and
"Description of the Certificates --
Addition of Trust Assets."
To the extent provided in any Series
Supplement, or in an amendment to
the Agreement, all or a portion of
the Receivables or Participations
conveyed to the Trust and all
collections received with respect
thereto may be allocated to one or
more Series as long as each Rating
Agency confirms that such
allocation will not result in the
reduction or withdrawal of its
rating on any outstanding Class of
Certificates, and the Servicer has
delivered an officer's certificate
to the Trustee to the effect that
the Servicer reasonably believes
such allocation will not adversely
affect in any material respect the
interests of the Certificateholders
of any Series issued and
outstanding.
Certificate Interest and Principal.... Each Series of Certificates will
represent an undivided interest in
the assets of the Trust. Each
Certificate of a Series will
represent the right to receive
payments of (i) interest at the
specified rate or rates per annum
(each, a "Certificate Rate"), which
may be a fixed, floating or other
type of rate and (ii) principal at
the times and in the circumstances
(if any) described in the related
Prospectus Supplement. Payments of
principal may be made during a
Controlled Amortization Period,
Principal Amortization Period, or,
under certain limited
circumstances, Rapid Amortization
Period (each, an "Amortization
Period") or, under certain limited
circumstances, in connection with a
Partial Amortization; or principal
may be payable on Scheduled Payment
Dates, in which case such Series
will have a Controlled Accumulation
Period and,
8
<PAGE>
under certain limited circumstances
if so specified in the related
Prospectus Supplement, a Rapid
Accumulation Period (each, an
"Accumulation Period"), as well as,
under certain limited
circumstances, a Rapid Amortization
Period, all as specified in the
related Prospectus Supplement.
Each Series of Certificates will
consist of one or more Classes, one
or more of which may be senior
("Senior Certificates") or
subordinated ("Subordinated
Certificates") to one or more other
Classes. Each Class of a Series may
evidence the right to receive a
specified portion of each
distribution of principal, interest
or both. The Certificates of a
Class may also differ from
Certificates of other Classes of
the same Series in, among other
things, the amounts allocated to
principal payments, priority of
payments, payment dates, maturity,
interest rates, interest rate
computation and availability and
form of Enhancement.
The assets of the Trust will be
allocated among the
Certificateholders of each Series
and the Transferor. A portion of the
assets of the Trust also will be
allocated to a related Credit
Enhancement Provider which provides
Credit Enhancement in the form of a
Collateral Interest and may be
allocated to a provider of Credit
Enhancement in another form to the
extent draws are made on the Credit
Enhancement to pay the principal of
the Certificates of the related
Series. See "Credit
Enhancement--General" and "--
Collateral Interest." The aggregate
principal amount of the interest of
the Certificateholders of a Series
is called the "Investor Interest"
and is based on the portion of the
Aggregate Principal Receivables
allocated to that Series. If
specified in any Prospectus
Supplement, the term "Investor
Interest" with respect to the
related Series will include the
Collateral Interest with respect to
that Series. The aggregate
principal amount of the interest of
the Transferor is called the
"Transferor Interest," and is based
on the sum of the portion of the
Aggregate Principal Receivables in
the Trust not allocated to the
Certificateholders or any provider
of Credit Enhancement (each a
"Credit Enhancement Provider"),
with respect to the Trust and the
principal amount, if any, on
deposit in the Excess Funding
Account. See "Description of the
Certificates -- General."
The Certificateholders of each Series
will have the right to receive (but
only to the extent needed to make
required payments under the
Agreement and the related Series
Supplement and subject, in the case
of any Series in a Reallocation
Group, to reallocation as described
in "Description of the Certificates
-- Reallocations Among Different
Series within a Reallocation
Group") varying percentages of the
collections of Finance Charge
Receivables and Principal
Receivables for each month and will
be allocated a varying percentage
of the Net Default Amount or any
Net Recoveries for that month (each
such percentage, an "Investor
Percentage"). The "Net Default
Amount" for any month means the
excess (if any) of the amount of
Receivables in Accounts that were
written off as uncollectible by the
Servicer ("Defaulted Accounts") for
that month over the amounts
received by the Servicer with
respect to Receivables in all
Defaulted Accounts (net of related
expenses and allocated in
accordance with the Servicer's
customary procedures)
(collectively, "Recoveries"). If
the amount of
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<PAGE>
Recoveries received by the Servicer
for a month exceeds the amount of
Receivables in Accounts that become
Defaulted Accounts in that month,
the excess Recoveries are referred
to as "Net Recoveries."
The related Prospectus Supplement
will specify the Investor
Percentages with respect to the
allocation of collections of
Principal Receivables, Finance
Charge Receivables and Receivables
in Defaulted Accounts during the
Revolving Period, any Amortization
Period and any Accumulation Period,
as applicable. If the Certificates
of a Series offered hereby include
more than one Class of
Certificates, the assets of the
Trust allocable to the Certificates
of that Series may be further
allocated among each Class in that
Series as described in the related
Prospectus Supplement. See
"Description of the Certificates --
Allocations."
The Certificates of each Series will
represent interests in the Trust
only and will not represent
interests in or recourse
obligations of the Transferor 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 (the "FDIC") or (except
for Receivables arising in Private
Label Accounts) any other
governmental agency.
Receivables.......................... The Receivables held in the Trust
will arise in Accounts selected
from the Bank Portfolio based on
criteria provided in the Agreement
and described in the related
Prospectus Supplement as applied
initially on _____________ __, 1997
(the "Cut-Off Date"), and, with
respect to certain Additional
Accounts, if any, on subsequent
dates.
The Receivables will consist of
amounts charged by accountholders
for goods and services, cash
advances and balances transferred
from other credit accounts (the
"Principal Receivables"), plus the
related periodic finance charges
and amounts charged to the Accounts
in respect of certain annual
account fees, cash advance fees,
late fees, overlimit fees, closed
account maintenance charges and
similar fees and charges (including
fees which are not now but from
time to time may be assessed on the
Accounts) (the "Finance Charge
Receivables"). Net Recoveries also
will be treated as collections of
Finance Charge Receivables unless
the related Prospectus Supplement
provides that Net Recoveries shall
not be treated as Finance Charge
Receivables for purposes of the
related Series. In addition, at the
option of the Transferor, an amount
equal to the product of the
Discount Percentage and the amount
of Receivables arising in the
related Accounts on and after the
date such option is exercised (and,
if the Transferor so elects,
Receivables arising in the related
Accounts before the date such
option is exercised) that otherwise
would be Principal Receivables will
be treated as Finance Charge
Receivables. See "Description of
the Certificates -- Discount
Option." Finally, if so specified
in the related Prospectus
Supplement, certain amounts of
Interchange and Other Account
Revenues may be allocated to the
Certificates of a Series or any of
its Classes and treated as
collections of Finance Charge
Receivables for purposes of that
Series or Class or may be applied
in some other manner as described
in the related Prospectus
Supplement. See "First NBC's Credit
Card Activities -- Interchange and
Other Account Revenues."
10
<PAGE>
During the term of the Trust, the
Transferor will automatically
transfer all new Receivables
arising in the Accounts to the
Trust. 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.
Pursuant to the Agreement, the
Transferor will have the right
(subject to certain limitations and
conditions), and, to the extent
necessary to maintain the
Transferor Interest at or above a
specified level (the "Minimum
Transferor Interest") and in
certain other circumstances, will
be obligated, to designate
additional eligible revolving
credit accounts to be included as
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 or designate
Participations to be included in
the Trust in lieu thereof or in
addition thereto. See "Risk
Factors--Addition of Trust Assets
-- Effect on Credit Quality" and
"Description of the Certificates --
Addition of Trust Assets."
Pursuant to the Agreement, the
Transferor will have the right
(subject to certain limitations and
conditions) to designate certain
Accounts as "Removed Accounts" and
stop transferring new Receivables
arising in the Removed Accounts to
the Trust. Pre-existing Receivables
in Removed Accounts may either be
conveyed to the Transferor or its
designee or retained by the Trust.
If such pre-existing Receivables
are retained in the Trust, the
Servicer and the Transferor will
agree to allocate principal
collections on the Removed Accounts
on a first-in, first-out basis, so
that such collections will be
allocated to outstanding advances
in the order in which such advances
arose (beginning with the oldest
outstanding advance). Principal
collections allocable to
Receivables retained by the Trust
will be applied as Collections in
accordance with the Agreement. Upon
payment of all amounts owing in
respect of such Receivables, the
Trust will transfer the related
Account to the Transferor. See
"Description of the Certificates --
Removal of Accounts."
New Issuances....................... The Agreement will authorize 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) one or more supplemental
certificates ("Supplemental
Certificates"), evidencing partial
interests in the Transferor Interest.
The Supplemental Certificates are not
offered hereby and will be
transferable only as provided in the
Agreement. Any Series of Certificates
may be offered to the public or other
investors under a prospectus or
other disclosure document (a
"Disclosure Document") in offerings
pursuant to this Prospectus or in
transactions either registered
under the Securities Act of 1933,
as amended (the "Securities Act")
or exempt from registration
thereunder, directly or through one
or more other underwriters or
placement agents, in fixed-price
offerings or in negotiated
transactions or otherwise. To the
extent provided in the related
Supplement (and subject to any
11
<PAGE>
applicable requirements under the
Exchange Act and the rules and
regulations thereunder, including
Rule 13e-4), a new Series may be
issued fully or partially in
exchange for certificates of one or
more existing Series.
A new issuance of a Series of
Certificates (a "New Issuance") may
occur only upon delivery to the
Trustee of the following: (i) a
Series Supplement specifying the
terms of the new Series, (ii) (a)
an opinion of counsel to the effect
that the certificates of that
Series will be characterized as
indebtedness for Federal income tax
purposes, unless the related Series
Supplement indicates that such
opinion will not be provided and
(b) an opinion of counsel to the
effect that, for Federal income tax
purposes, (1) such issuance will
not adversely affect the tax
characterization as debt of
Certificates of any outstanding
Series or Class that were
characterized as debt at the time
of their issuance, (2) such
issuance will not cause the Trust
to 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 (an opinion of
counsel to this effect with respect
to any action being a "Tax
Opinion"), (iii) if required by the
related Series Supplement, the form
of Credit Enhancement, (iv) if
Credit Enhancement is required by
the Series Supplement, an
appropriate Credit Enhancement
agreement with respect thereto, (v)
written confirmation from each
Rating Agency that the New Issuance
will not result in that Rating
Agency reducing or withdrawing its
rating on any then outstanding
Series rated by it, (vi) an
officer's certificate of the
Transferor to the effect that after
giving effect to the New Issuance
the Transferor would not be
required to add the Receivables of
any Additional Accounts pursuant to
the Agreement and the Transferor
Interest would be at least equal to
the Minimum Transferor Interest and
(vii) if applicable, the
Certificates representing the
Series to be exchanged. See
"Description of the Certificates --
New Issuances." The Certificates
resulting from a New Issuance may
either be delivered by the Trustee
to the Bank for sale by the Bank or
sold directly by the Trust.
The Transferor also may from time to
time cause the Trustee to sell
interests (each, a "Purchased
Interest") in the Receivables and
other assets of the Trust to one or
more purchasers. Any Purchased
Interest will represent an interest
in the Trust's assets similar to
the interest of a Series of
Certificates. No Series will be
subordinated to any Purchased
Interest, and no Purchased Interest
will have any interest in the
Series Accounts or Enhancement for
any Series, unless the Prospectus
Supplement relating to that Series
so provides. Any such sale will
take place pursuant to one or more
agreements which will specify terms
for the applicable Purchased
Interests and may grant the
purchasers of such interests notice
and consultation rights with
respect to rights or actions of the
Trustee. Any sale of Purchased
Interests in the assets of the
Trust will be subject to the
satisfaction of the same conditions
(including Rating Agency
confirmations) as for a New
Issuance, as appropriately adjusted
to apply to the relevant Purchased
Interest rather than a New
Issuance. No Purchased Interest is
offered hereby.
12
<PAGE>
Denominations.......................... Beneficial interests in the
Certificates will be offered for
purchase in the denominations
specified in the related Prospectus
Supplement.
Registration of Certificates.......... The Certificates of each Series
offered hereby may or may not be
represented by Certificates
registered in the name of Cede, as
the nominee of DTC, as specified in
the related Prospectus Supplement.
If the Certificates of a Series are
so registered, then no Certificate
Owner will be entitled to receive a
definitive certificate representing
its interest, except in the event
that Certificates in fully
registered, certificated form
("Definitive Certificates") are
issued under the limited
circumstances described herein. See
"Description of the Certificates --
Definitive Certificates."
Clearance and Settlement............. Certificate Owners of each Series
offered hereby may or may not be
permitted to make an election to
hold their Certificates through any
of DTC (in the United States) or
Cedel or Euroclear (in Europe), as
specified in the related Prospectus
Supplement. If such election is
available, then transfers within
DTC, Cedel or Euroclear, as the
case may be, will be made in
accordance with the usual rules and
operating procedures of the
relevant system. Cross- market
transfers between persons holding
directly or indirectly through DTC,
on the one hand, and counterparties
holding directly or indirectly
through Cedel or Euroclear, on the
other, will be effected in DTC
through the relevant Depositaries
of Cedel or Euroclear. See
"Description of the Certificates --
Book-Entry Registration."
Transferor and Servicer............... First National Bank of Commerce
("First NBC" or the "Bank"). The
principal executive offices of the
Bank are located at New Orleans,
Louisiana, telephone number (504)
623-1371. The Servicer will receive
a fee as servicing compensation
from the Trust in respect of each
Series in the amounts and at the
times specified in the related
Prospectus Supplement (the
"Servicing Fee"). The Servicing Fee
may be payable from Finance Charge
Receivables, Interchange or other
amounts as specified in the related
Prospectus Supplement. In certain
limited circumstances, the Bank may
resign or be removed as servicer,
in which event the Trustee or a
third party servicer may be
appointed as successor servicer
(the Bank, in this capacity, or any
successor servicer, is called the
"Servicer"). The Bank is a wholly
owned subsidiary of First Commerce
Corporation (the "Corporation").
See "First NBC and First Commerce
Corporation." In addition, if the
Bank elects to sell or otherwise
dispose of the Accounts, then the
new owner of the Accounts may be
substituted for the Bank as
Transferor and Servicer upon the
satisfaction of certain conditions,
including the delivery of a Tax
Opinion and receipt of written
confirmation from each Rating
Agency that such substitution will
not result in such Rating Agency's
reducing or withdrawing its rating
on any then outstanding Series
rated by it.
Collections.......................... The Servicer will deposit all
collections of Receivables in an
account required to be established
for such purpose by the Agreement
(the "Collection Account"). All
amounts deposited in the Collection
Account will be allocated by the
Servicer between amounts collected
on Principal Receivables and
amounts collected on Finance Charge
Receivables. If so specified in the
related Prospectus Supplement,
Principal Receivables and/or
Finance Charge Receivables may be
otherwise characterized. See
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<PAGE>
"Description of the Certificates --
Discount Option." All such amounts
will then be further allocated in
accordance with the respective
interests of the Certificateholders
of each Series or Class of
Certificates and the holder of the
Transferor Certificate and, in
certain circumstances, certain
providers of Enhancement. See
"Description of the Certificates --
Allocations."
Interest Payments..................... Interest on each Series of
Certificates or Class for each
applicable period (each, an
"Interest Period") specified in the
related Prospectus Supplement will
be distributed in the amounts and
on the dates (which may be monthly,
quarterly, semiannually or
otherwise as specified in the
related Prospectus Supplement)
(each, a "Distribution Date")
specified in the related Prospectus
Supplement. Interest payments on
each Distribution Date will be
funded from collections of Finance
Charge Receivables allocated to the
Investor Interest during the
preceding calender month or months
(each, a "Monthly Period"), as
described in the related Prospectus
Supplement, and may be funded from
certain investment earnings on
funds in certain accounts of the
Trust and from any applicable
Enhancement, if necessary, or
certain other amounts as specified
in the related Prospectus
Supplement. If the Distribution
Dates for payment of interest for a
Series or Class occur less
frequently than monthly, such
collections or other amounts
allocable to such Series or Class
may be deposited in one or more
trust accounts pending distribution
to the Certificateholders of such
Series or Class, all as described
in the related Prospectus
Supplement. See "Description of the
Certificates -- Application of
Collections," "-- Shared Excess
Finance Charge Collections,"
"Credit Enhancement" and "Risk
Factors -- Limited Credit
Enhancement."
Revolving Period...................... Generally, no principal will be
payable to Certificateholders of
any Series or Class until the
Principal Commencement Date or the
Scheduled Payment Date with respect
to that Series or Class, as
described below. However, if
specified in the related Prospectus
Supplement for a Series or Class,
principal may be payable to
Certificateholders of such Series
or Class prior to either such date,
in connection with a Partial
Amortization or otherwise. For the
period beginning on the date of
issuance of a Series (a "Closing
Date") and ending with the
commencement of an Amortization
Period or an Accumulation Period
(the "Revolving Period"),
collections of Principal
Receivables otherwise allocable to
that Series' Investor Interest
will, subject to certain limitations,
be paid to the Transferor or
deposited in the Excess Funding
Account for the Trust or, under
certain circumstances and if so
specified in the related Prospectus
Supplement, treated as Shared
Principal Collections and paid to
the holders of certificates of
other Principal Sharing Series, as
described herein and in the related
Prospectus Supplement. See
"Description of the Certificates --
Pay Out Events" for a discussion of
the events which might lead to
early termination of the Revolving
Period.
Principal Payments.................... The principal of the Certificates of
each Series offered hereby will be
scheduled to be paid either in
installments commencing on a date
specified in the related Prospectus
Supplement (the "Principal
Commencement Date"), in which case
such Series will have either a
Controlled Amortization Period or a
Principal Amortization
14
<PAGE>
Period, as described below, or on an
expected date specified in, or
determined in the manner specified
in, the related Prospectus
Supplement (the "Scheduled Payment
Date"), in which case such Series
will have an Accumulation Period,
as described below. If a Series has
more than one Class of
Certificates, a different method of
paying principal, Principal
Commencement Date or Scheduled
Payment Date may be assigned to
each Class. The payment of
principal with respect to the
Certificates of a Series or Class
may commence earlier than the
applicable Principal Commencement
Date or Scheduled Payment Date, and
the final principal payment with
respect to the Certificates of a
Series or Class may be made earlier
or later than the applicable
expected payment date, Scheduled
Payment Date or other expected
date, if a Pay Out Event occurs and
the Rapid Amortization Period
commences with respect to such
Series or Class or under certain
other circumstances described
herein or in the related Prospectus
Supplement. See "Description of the
Certificates -- Principal
Payments."
Controlled Amortization Period........ A Series or any Class thereof may
have a "Controlled Amortization
Period," as specified in the
related Prospectus Supplement, in
order to permit payment of the
principal balance of the applicable
Certificates in fixed installments
over a specified amortization
period. Unless a Rapid Amortization
Period with respect to a Series
that has a Controlled Amortization
Period commences, collections of
Principal Receivables allocable to
that Series' Investor Interest
during each Monthly Period falling
in its Controlled Amortization
Period (and certain other amounts
if so specified in the related
Prospectus Supplement) will be used
on the related Distribution Date to
make principal distributions in
scheduled amounts to the
Certificateholders of such Series
or any Class of such Series then
scheduled to receive such
distributions. The amount to be
distributed on any Distribution
Date during the Controlled
Amortization Period will be limited
to an amount (the "Controlled
Distribution Amount") equal to an
amount specified in the related
Prospectus Supplement (the
"Controlled Amortization Amount"),
plus any Controlled Amortization
Amount not paid on prior
Distribution Dates. If a Series has
more than one Class of
Certificates, each Class may have a
separate Controlled Amortization
Amount. In addition, the related
Prospectus Supplement may describe
priorities among such Classes with
respect to such distributions. The
Controlled Amortization Period will
commence at the close of business
on a date specified in the related
Prospectus Supplement and continue
until the earliest of (a) the
commencement of the Rapid
Amortization Period, (b) payment in
full of the Investor Interest of
the Certificates of such Series or
Class and, if so specified in the
related Prospectus Supplement, of
any related Collateral Interest or
Enhancement Invested Amount and (c)
the related Series Termination
Date.
Principal Amortization Period........ A Series or any Class thereof may
have a "Principal Amortization
Period" as specified in the related
Prospectus Supplement, in order to
permit payment of the principal
balance of the applicable
Certificates in installments over a
specified amortization period. Such
installment payments are not
limited by any Controlled
Amortization Amount during a
Principal Amortization Period.
Unless a Rapid Amortization Period
with respect to a Series that has a
Principal Amortization Period
commences, collections of Principal
15
<PAGE>
Receivables allocable to that Series'
Investor Interest during each
Monthly Period falling in its
Principal Amortization Period (and
certain other amounts if so
specified in the related Prospectus
Supplement) will be used on the
related Distribution Date to make
principal distributions to the
Certificateholders of that Series
or any Class of that Series then
scheduled to receive such
distributions. If a Series has more
than one Class of Certificates, the
related Prospectus Supplement may
describe certain priorities among
those Classes with respect to such
distributions. The Principal
Amortization Period will commence
at the close of business on a date
specified in the related Prospectus
Supplement and continue until the
earlier of (a) the commencement of
the Rapid Amortization Period, (b)
payment in full of the Investor
Interest of the Certificates of
such Series or Class and, if so
specified in the related Prospectus
Supplement, of any related
Collateral Interest or Enhancement
Invested Amount and (c) the related
Series Termination Date.
Controlled Accumulation
Period............................... A Series or any Class thereof may
have a "Controlled Accumulation
Period," as specified in the
related Prospectus Supplement, in
order to allow for the accumulation
of principal collections in a trust
account established for the benefit
of the Certificateholders of that
Series or Class (a "Principal
Funding Account") in anticipation
of a balloon payment on the
Scheduled Payment Date. During the
Controlled Accumulation Period,
principal collections in excess of
a fixed amount will not be so set
aside in the Principal Funding
Account, which permits the
Transferor to continue to have
access to collections which are not
then required to be set aside for
payment of the Certificates. Unless
a Rapid Amortization Period or, if
so specified in the related
Prospectus Supplement, a Rapid
Accumulation Period with respect to
a Series that has a Controlled
Accumulation Period commences,
collections of Principal
Receivables allocable to that
Series' Investor Interest during
each Monthly Period falling in its
Controlled Accumulation Period (and
certain other amounts if so
specified in the related Prospectus
Supplement) will be deposited on
the business day immediately prior
to the related Distribution Date or
other business day specified in the
related Prospectus Supplement (each
a "Transfer Date") in the Principal
Funding Account for that Series or
Class and used to make
distributions of principal to the
Certificateholders of that Series
or Class on the Scheduled Payment
Date. The amount to be deposited in
the Principal Funding Account on
any Transfer Date will be limited
to an amount (the "Controlled
Deposit Amount") equal to an amount
specified in the related Prospectus
Supplement (the "Controlled
Accumulation Amount"), plus any
Controlled Accumulation Amount not
deposited on prior Transfer Dates.
If a Series has more than one Class
of Certificates, each Class may
have a separate Principal Funding
Account and Controlled Accumulation
Amount. In addition, the related
Prospectus Supplement may describe
certain priorities among such
Classes with respect to deposits of
principal into such Principal
Funding Accounts. The Controlled
Accumulation Period will commence
at the close of business on a date
specified in or determined in the
manner specified in the related
Prospectus Supplement and continue
until the earliest of (a) the
commencement of the Rapid
Amortization Period or, if so
specified in the related Prospectus
Supplement, the Rapid Accumulation
16
<PAGE>
Period, (b) payment in full of the
Investor Interest of the
Certificates of that Series or
Class and, if so specified in the
related Prospectus Supplement, any
related Collateral Interest or
Enhancement Invested Amount and (c)
the related Series Termination
Date.
Funds on deposit in any Principal
Funding Account may be invested in
permitted investments or subject to
a guaranteed rate or investment
contract or other arrangement
intended to assure a minimum return
on the investment of such funds.
Investment earnings on such funds
may be applied to pay interest on
the related Series of Certificates.
In order to enhance the likelihood
of payment in full of principal at
the end of an Accumulation Period
with respect to a Series of
Certificates, that Series or any of
its Classes may be subject to a
principal payment guaranty or other
similar arrangement.
Rapid Accumulation Period............. A Series or any Class thereof having
a Controlled Accumulation Period
may require the commencement of a
"Rapid Accumulation Period" upon
the occurrence of a Pay Out Event
in order to halt the Transferor's
access to principal collections
allocable to the Investor Interest
of such Series and require that all
such principal collections be set
aside pending the balloon payment
on the related Scheduled Payment
Date. A Rapid Accumulation Period,
if used, would commence on the day
on which a Pay Out Event has
occurred and end on the earliest of
(a) the commencement of the Rapid
Amortization Period, (b) payment in
full of the Investor Interest of
the Certificates of such Series
and, if so specified in the related
Prospectus Supplement, of the
Collateral Interest or the
Enhancement Invested Amount, if
any, with respect to such Series
and (c) the related Series
Termination Date. During the Rapid
Accumulation Period for a Series,
collections of Principal
Receivables allocable to the
Investor Interest of the specified
Series during each Monthly Period
(and certain other amounts if so
specified in the related Prospectus
Supplement) will be deposited on
the related Transfer Date in the
Principal Funding Account and used
to make distributions of principal
to the Certificateholders of such
Series or any Class thereof on the
Scheduled Payment Date. The amount
to be deposited in the Principal
Funding Account during the Rapid
Accumulation Period will not be
limited to the Controlled Deposit
Amount.
The term "Pay Out Event" with respect
to a Series of Certificates means
any of the events identified as
such in the related Prospectus
Supplement and any of the
following: (a) certain events of
insolvency or receivership relating
to the Transferor, (b) the
Transferor being unable for any
reason to transfer Receivables to
the Trust in accordance with the
provisions of the Agreement or (c)
the Trust becoming an "investment
company" within the meaning of the
Investment Company Act of 1940, as
amended. See "Description of the
Certificates -- Pay Out Events."
Providing for a Rapid Accumulation
Period instead of a Rapid
Amortization Period in certain
circumstances would reduce the
number of events that could cause
Certificateholders to be repaid
their principal investment prior to
their Scheduled Payment Date.
17
<PAGE>
During the Rapid Accumulation Period,
funds on deposit in any Principal
Funding Account may be invested in
permitted investments or subject to
a guaranteed rate or investment
contract or other arrangement
intended to assure a minimum return
on the investment of such funds.
Investment earnings on such funds
may be applied to pay interest on
the related Series of Certificates
or make other payments as specified
in the related Prospectus
Supplement. In order to enhance the
likelihood of payment in full of
principal at the end of the Rapid
Accumulation Period with respect to
a Series of Certificates, such
Series or any Class thereof may be
subject to a principal payment
guaranty or other similar
arrangement.
Rapid Amortization
Period................................ Each Series will be subject to early
payment following the occurrence of
a Pay Out Event (or a date
following the occurrence of a Pay
Out Event in the case of a Series
subject to a Rapid Accumulation
Period, as specified in the related
Prospectus Supplement) through the
monthly application of such Series'
allocable share of principal
collections. During the period from
the day on which a Pay Out Event
has occurred with respect to a
Series or, if so specified in the
Prospectus Supplement relating to a
Series with a Controlled
Accumulation Period, from such time
specified in the related Prospectus
Supplement after a Pay Out Event
has occurred and the Rapid
Accumulation Period has commenced,
to the earlier of (a) the date on
which the Investor Interest of the
Certificates of such Series and the
Collateral Interest or the
Enhancement Invested Amount, if
any, with respect to such Series
have been paid in full and (b) the
related Series Termination Date
(the "Rapid Amortization Period"),
collections of Principal
Receivables allocable to the
Investor Interest of such Series
(and certain other amounts if so
specified in the related Prospectus
Supplement) will be distributed as
principal payments to the
Certificateholders of such Series
and, in certain circumstances, to
the Credit Enhancement Provider,
monthly on each Distribution Date
with respect to such Series in the
manner and order of priority set
forth in the related Prospectus
Supplement. If a Rapid Amortization
Period commences, then such of the
Revolving Period, Controlled
Amortization Period, Principal
Amortization Period, Controlled
Accumulation Period or Rapid
Accumulation Period which is then
in effect with respect to the
applicable Series will terminate,
and no portion of such Series'
allocable share of principal
collections will be paid to the
Transferor or the Holders of any
other outstanding Series or
retained in the Excess Funding
Account. Rather, the entire amount
of such Series' share of principal
collections will be distributed to
the Certificateholders of such
Series on each Distribution Date
during the Rapid Amortization
Period.
During the Rapid Amortization Period
with respect to a Series,
distributions of principal will not
be limited by any Controlled
Deposit Amount or Controlled
Distribution Amount. In addition,
upon the commencement of the Rapid
Amortization Period with respect to
a Series, any funds on deposit in a
Principal Funding Account with
respect to such Series or any Class
thereof will be paid to the
Certificateholders of such Series
or Class on the first Distribution
Date in the Rapid Amortization
Period.
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<PAGE>
Partial Amortization................. If so specified in the Prospectus
Supplement relating to a Series,
one or more Classes of Certificates
in that Series may be subject to a
partial early amortization (a
"Partial Amortization") in the
circumstances described below. In
the event that the Transferor is
required to add the Receivables of
Additional Accounts pursuant to the
Agreement and the Transferor is
unable to designate sufficient
Eligible Accounts for such purpose,
then the Transferor may elect to
avoid a Pay Out Event based on such
inability by commencing a Partial
Amortization for the applicable
Series. During a Partial
Amortization for any Series or
Class, a portion (as specified in
the related Prospectus Supplement)
of collections of Principal
Receivables which otherwise would
be treated as Shared Principal
Collections will be payable to the
Certificateholders of such Series
or Class, commencing on a specified
Distribution Date following the
commencement of such Partial
Amortization until the Transferor
is no longer required to add
Receivables of Additional Accounts
to the Trust.
Allocations Among Series............. Pursuant to the Agreement, during
each Monthly Period, the Servicer
is required to first allocate to
each Series collections of
Principal Receivables and Finance
Charge Receivables and the Net
Default Amount or Net Recoveries
with respect to such Monthly Period
based on the Investor Percentage
for such Series. See "Description
of the Certificates --
Allocations." Subject to
reallocation among Series in a
Reallocation Group, such amounts
allocated to each Series are then
further allocated within each
Series to the Certificateholders,
any Series Enhancement and the
Transferor pursuant to the terms
of the related Series Supplement.
Shared Excess Finance Charge
Collections........................ If so specified in the related
Prospectus Supplement, any Series
offered hereby may be designated as
a Series that shares with other
Series similarly designated
collections of Finance Charge
Receivables which are in excess of
the amounts then required by such
Series (an "Excess Allocation
Series"). The receiving Series may
then use such excess to cover any
shortfalls with respect to amounts
payable from collections of Finance
Charge Receivables allocable to
such Series. By so sharing such
excess collections of Finance
Charge Receivables, the Transferor
can more efficiently use available
investor funds to cover required
payments on all Series. The sharing
of excess collections of Finance
Charge Receivables will, however,
be discontinued if at any time the
Transferor delivers to the Trustee
an officer's certificate to the
effect that, in the reasonable
belief of the Transferor, the
continuation of such sharing would
have adverse regulatory
implications for Transferor. See
"Description of the Certificates --
Application of Collections," "--
Shared Excess Finance Charge
Collections," "-- Defaulted
Receivables; Incentive Payments and
Fraudulent Charges; Investor
Charge-Offs" and "Credit
Enhancement."
Shared Principal Collections.......... If any Series is designated as a
"Principal Sharing Series" in the
related Prospectus Supplement, to
the extent that collections of
Principal Receivables that are
allocated to the Investor Interest
of such 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 other
Principal Sharing
19
<PAGE>
Series and, if not needed for that
purpose, will generally be
distributed to the Transferor. Any
such reallocation will not result
in a reduction in the Investor
Interest of the Series to which
such collections were initially
allocated.
Reallocations Among Series in
a Reallocation Group................. If so specified in the related
Prospectus Supplement, the
Certificates of a Series may be
included in a group of Series that
will be subject to reallocations of
collections of Finance Charge
Receivables and other amounts among
the Series in such group (a
"Reallocation Group"). Collections
of Finance Charge Receivables
allocable to each Series in a
Reallocation Group will be
aggregated and made available for
certain required payments for all
Series in such Reallocation Group.
By including a Series in a
Reallocation Group, the Transferor
may enable that Series to obtain
the benefit of excess collections
of Finance Charge Receivables
allocated on the basis of the
amounts required for payments with
respect to such Series relative to
the aggregate amount of such
required amounts for all Series in
the Reallocation Group.
Consequently, the issuance of new
Series in such Reallocation Group
may have the effect of reducing or
increasing the amount of
collections of Finance Charge
Receivables allocable to the
Certificates of other Series in
such Reallocation Group. See "Risk
Factors -- Issuance of New Series;
Groups."
Paired Series........................ If so specified in the Prospectus
Supplement relating to a Series,
such Series may be paired with all
or a portion of one or more Series
(each, a "Paired Series"), such
that a reduction in the Investor
Interest or the Adjusted Investor
Interest of one such Series results
in an increase in the Investor
Interest of the other such Series.
The effect of a Paired Series is to
provide for continuous investment
in the Receivables by
Certificateholders, thereby
reducing the potential increase in
the Transferor Interest as the
first of the Paired Series'
interest in the Trust is reduced
through the amortization or
accumulation of principal. If a Pay
Out Event occurs with respect to a
Series having a Paired Series or
with respect to the Paired Series
when such Series is in a Controlled
Amortization Period or Controlled
Accumulation Period, the Investor
Percentage for collections of
Principal Receivables for the
Series and for its Paired Series
may be reset as specified in the
related Prospectus Supplements. See
"Description of the Certificates --
Paired Series."
Excess Funding Account................ If on any date a Retention Condition
exists, the Servicer will not
distribute to the Transferor any
Shared Principal Collections that
otherwise would be so distributed,
but will instead deposit such funds
in an account required to be
established for such purpose by the
Agreement (the "Excess Funding
Account"), until the Retention
Condition ceases. Funds on deposit
in the Excess Funding Account will
be withdrawn and paid to the
Transferor on any date provided that
no Retention Condition is in effect,
or would result from such payment, on
such date. As more fully described
herein, a Retention Condition
exists if certain tests concerning
the minimum level of Receivables in
the Trust are not met. In addition,
if a Controlled Accumulation
Period, Controlled Amortization
Period, Principal Amortization
Period, Rapid Amortization Period
or Rapid
20
<PAGE>
Accumulation Period commences with
respect to any Series entitled to
the benefits of Shared Principal
Collections, an amount of funds on
deposit in the Excess Funding
Account (after giving effect to the
release of funds to the Transferor
as described above) up to the amount,
if any, by which the Transferor
Interest would be less than zero if
there were no funds on deposit in
the Excess Funding Account on such
date, 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 so provided by the
related Series Supplement. See
"Description of the Certificates --
Excess Funding Account."
Funding Period....................... The Prospectus Supplement relating to
a Series of Certificates may
specify that for a period beginning
on the Closing Date and ending on a
specified date before the
commencement of an Amortization
Period or Accumulation Period with
respect to such Series (the
"Funding Period"), which period
will be less than a year, the
Aggregate Principal Receivables in
the Trust allocable to such Series
may be less than the aggregate
principal amount of the
Certificates of such Series and
that the amount of such deficiency
(the "Pre-Funding Amount") will be
held in a trust account established
with the Trustee for the benefit of
Certificateholders of such Series
(the "Pre-Funding Account") pending
the transfer of additional
Principal Receivables to the Trust
or pending the reduction of the
Investor Interests of other Series
issued by the Trust. The
Pre-Funding Amount may be up to
100% of the principal amount of the
Certificates of a Series. The
related Prospectus Supplement will
specify the initial Investor
Interest on the Closing Date with
respect to such Series, the
aggregate principal amount of the
Certificates of such Series (the
"Full Investor Interest") and the
date by which the Investor Interest
is expected to equal the Full
Investor Interest. The Investor
Interest will increase as Principal
Receivables are added to the Trust
or as the Investor Interests of
other Series of the Trust are
reduced.
During the Funding Period, funds on
deposit in the Pre-Funding Account
for a Series of Certificates will
be withdrawn and paid to the
Transferor or its assigns to the
extent of any increases in the
Investor Interest. In the event that
the Investor Interest does not for
any reason equal the Full Investor
Interest by the end of the Funding
Period, any amount remaining in the
Pre-Funding Account and any additional
amounts specified in the related
Prospectus Supplement will be payable
to the Certificateholders of such
Series in the manner and at such time
as set forth in the related
Prospectus Supplement.
`
If so specified in the related
Prospectus Supplement, funds on
deposit in the Pre-Funding Account
may be invested in Permitted
Investments or subject to a
guaranteed rate or investment
agreement or other similar
arrangement, and investment
earnings and any applicable payment
under any such investment
arrangement will be applied to pay
interest on the Certificates of
such Series.
Credit Enhancement................... Credit Enhancement with respect to a
Series or any Class thereof may be
provided in the form or forms of
subordination, a cash collateral
account or guaranty, a collateral
interest, a letter of
21
<PAGE>
credit, a surety bond, an insurance
policy, a spread account, a reserve
account or other form of support as
specified in the related Prospectus
Supplement. Credit Enhancement may
also be provided to a Class or
Classes of different Series by a
cross-support feature which
requires that distributions of
principal and/or interest be made
with respect to Certificates of one
or more Classes of a particular
Series before distributions are
made to one or more Classes of
another Series.
The type, characteristics and amount
of the Credit Enhancement will be
determined based on several
factors, including the
characteristics of the Receivables
and Accounts included in the Trust
Portfolio as of the Closing Date
with respect to any Series, and
will be established on the basis of
requirements of each Rating Agency
rating the Certificates of such
Series. If so specified in the
related Prospectus Supplement, any
such Credit Enhancement will apply
only in the event of certain types
of losses and the protection
against losses provided by such
Credit Enhancement will be limited.
The terms of the Credit Enhancement
with respect to a Series, and the
conditions under which the Credit
Enhancement may be increased,
reduced or replaced, will be
described in the related Prospectus
Supplement. See "Credit
Enhancement" and "Risk Factors --
Limitations of Certificate Rating."
Optional Repurchase................... With respect to each Series of
Certificates offered hereby, the
Investor Interest will be subject
to optional repurchase by the
Transferor on any Distribution Date
after the Investor Interest and the
Enhancement Invested Amount, if
any, with respect to such Series is
reduced to an amount less than or
equal to 5% of the initial Investor
Interest, if any, or such lesser
amount specified in the related
Prospectus Supplement, if certain
conditions set forth in the
Agreement are met. The repurchase
price will be as specified in the
related Prospectus Supplement. See
"Description of the Certificates --
Final Payment of Principal;
Termination."
Tax Status............................. Mayer, Brown & Platt, or such other
counsel specified in the related
Prospectus Supplement, will act as
special tax counsel to the Bank
("Special Tax Counsel ") and will,
upon issuance of a Series of
Certificates, render an opinion
that the Offered Certificates of
such Series will be characterized
as indebtedness for Federal income
tax purposes and that the issuance
of the Offered Certificates will
not cause the Trust to be treated
as an association (or publicly
traded partnership) taxable as a
corporation. A copy of such opinion
will be filed with the Commission
with a Report on Form 8-K following
the issuance of a Series of
Certificates. The Certificate
Owners will agree to treat the
Offered Certificates as debt for
Federal income tax purposes. See
"U.S. Federal Income Tax
Consequences" for additional
information concerning the
application of Federal income tax
laws.
ERISA Considerations.................. Under regulations issued by the
Department of Labor, the Trust's
assets would not be deemed "plan
assets" of any employee benefit
plan holding interests in the
Certificates of a Series if certain
conditions are met. If the Trust's
assets were deemed to be "plan
assets" of an employee benefit
plan, there is uncertainty as to
whether existing exemptions from
the "prohibited transaction" rules
of the Employee Retirement Income
Security Act of 1974, as
22
<PAGE>
amended ("ERISA"), would apply to all
transactions involving the Trust's
assets. No assurance can be made
with respect to any offering of the
Certificates of any Series that the
conditions which would allow the
Trust assets not to be deemed "plan
assets" will be met, although the
intention of the underwriters (but
not their assurance) as to whether
the Certificates of a particular
Series will be "publicly-offered
securities", and therefore eligible
for an ERISA exemption, will be set
forth in the related Prospectus
Supplement. Accordingly, employee
benefit plans contemplating
purchasing interests in
Certificates should consult their
counsel before making a purchase.
See "ERISA Considerations."
Certificate Rating.................... It will be a condition to the
issuance of the Certificates of
each Series or Class thereof
offered pursuant to this Prospectus
and the related Prospectus
Supplement that they be rated in
one of the four highest rating
categories by at least one
nationally recognized rating
organization (each such rating
organization selected by the
Transferor to rate any Series, a
"Rating Agency"). The rating or
ratings applicable to the
Certificates of each Series or
Class thereof offered hereby will
be set forth in the related
Prospectus Supplement.
A rating is not a recommendation to
buy, sell or hold securities and
may be subject to revision or
withdrawal at any time by the
assigning Rating Agency. Each
rating should be evaluated
independently of any other rating.
See "Risk Factors -- Limitations of
Certificate Rating."
Listing.............................. If so specified in the Prospectus
Supplement relating to a Series,
application will be made to list
the Certificates of such Series, or
all or a portion of any Class
thereof, on the Luxembourg Stock
Exchange or any other specified
exchange.
23
<PAGE>
RISK FACTORS
Potential investors should consider, among other things, the following
considerations in connection with the purchase of the Certificates.
Possible Impact of Limited Liquidity on Market Value. It is
anticipated that, to the extent permitted, the underwriters of any Series
of Certificates offered hereby will make a market in such Certificates, but
in no event will any such underwriter be under an obligation to do so.
There is no assurance that a secondary market will develop with respect to
the Certificates of any Series, or if it does develop, that it will provide
Certificateholders with liquidity of investment or that it will continue
for the life of such Certificates. Consistent with general practice for
asset-backed securities like the Certificates, it is not generally expected
that any Series of Certificates will be listed on any securities exchange,
except that certain Series may be listed on the Luxembourg Stock Exchange
(in which case such expected listing will be disclosed in the related
Prospectus Supplement). Limitations on the liquidity of the Certificates
may have a negative impact on their market value.
Possible Delays or Losses as a Result of Potential Priority of Certain
Liens. The Transferor will transfer interests in Receivables to the Trust.
A court could treat any such transaction as an assignment of collateral as
security for the benefit of holders of Certificates issued by the Trust.
The Transferor will represent and warrant in the Agreement that the
transfer of the Receivables to the Trust is either a valid transfer and
assignment of the related Receivables to the Trust or the grant to the
Trustee of a security interest in such Receivables. The Transferor will
take actions required to perfect the Trust's security interest in the
Receivables and will warrant that if the transfer to the Trust is deemed to
be a grant of a security interest in the related Receivables, the Trustee
will have a first priority perfected security interest therein, except for
any liens for local taxes that are not yet due and payable or are being
contested. Nevertheless, if the transfer of Receivables to the Trust is
deemed to create a security interest therein, certain nonconsensual liens
on property of the Transferor arising before Receivables come into
existence (including Federal or local tax liens and liens arising under
ERISA) may have priority over the Trust's interest in such Receivables, and
if the FDIC were appointed receiver or conservator of the Transferor, the
FDIC's administrative expenses may also have priority over the Trust's
interest in such Receivables. The existence of such liens or rights of the
receiver of the Transferor could result in possible delay in the amount of
payments on the Certificates or in losses to Certificateholders. See
"Certain Legal Aspects of the Receivables -- Transfer of Receivables."
Possible Losses as a Result of Commingling. In addition, while the
Transferor is the Servicer, cash collections held by the Transferor may,
subject to certain conditions described below in "Description of
Certificates -- Application of Collections," be commingled and used for the
benefit of the Transferor prior to the date on which such collections are
required to be deposited in the Finance Charge Account and Principal
Account. As a result of any such commingling, the Trust may not have a
perfected interest in such collections, which could, in the event of a
conservatorship or receivership of the Transferor, cause the Trust to
suffer a loss of all or part of such collections, which may result in a
loss to Certificateholders.
Possible Delays, Prepayment or Losses as a Result of Receivership of
Transferor. To the extent that the Transferor has granted or will grant a
security interest in Receivables to the Trust and that security interest is
validly perfected before the Transferor's insolvency (and was not or will
not be taken in contemplation of insolvency of the Transferor, or with the
intent to hinder, delay or defraud the Transferor or the creditors of the
Transferor), the Federal Deposit Insurance Act ("FDIA"), as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, as
amended ("FIRREA"), provides that such security interest should not be
subject to avoidance by the FDIC, as receiver for the Transferor. Positions
taken by the FDIC staff prior to the passage of
24
<PAGE>
FIRREA suggest that the FDIC, as receiver for the Transferor, would not
interfere with the timely transfer to the Trust of payments collected on
the related Receivables. If, however, the FDIC were to assert a contrary
position, such as requiring the Trustee to establish its right to those
payments by submitting to and completing the administrative claims
procedure under the FDIA, or the conservator or receiver were to request a
stay of proceedings with respect to the Transferor as provided under the
FDIA, delays in payments on the related Series of Certificates and possible
losses to Certificateholders could occur.
In addition, the FDIC, if appointed as the conservator or receiver for
the Transferor has the power under the FDIA to repudiate contracts,
including secured contracts of the Transferor. The FDIA provides that a
claim for damages arising from the repudiation of a contract is limited to
"actual direct compensatory damages." In the event the FDIC were to be
appointed as conservator or receiver of the Transferor and were to
repudiate the Agreement, then the amount payable out of available
collections to the Certificateholders could be lower than the outstanding
principal and accrued interest on the Certificates.
If a conservator or receiver were appointed for the Transferor, then a
Pay Out Event could occur with respect to all Series then outstanding and,
pursuant to the Agreement, new Principal Receivables would not be
transferred to the Trust. If a Pay Out Event occurs involving either the
insolvency of the Transferor or the appointment of a conservator or
receiver for the Transferor, the conservator or receiver may have the power
to prevent the commencement of the Rapid Amortization Period or, if
applicable with respect to a Series as specified in the related Prospectus
Supplement, the Rapid Accumulation Period, and may be able to require that
new Principal Receivables be transferred to the Trust. Such action could
cause delays in payments to Certificateholders or in losses to
Certificateholders. A conservator or receiver may also have the power to
cause the early sale of the Receivables and the early retirement of the
Certificates of each Series or to prohibit the continued transfer of
Principal Receivables to the Trust. In addition, in the event of a Servicer
Default relating to the conservatorship or receivership of the Servicer, if
no Servicer Default other than such conservatorship or receivership exists,
the conservator or receiver for the Servicer may have the power to prevent
either the Trustee or the Certificateholders from appointing a successor
Servicer under the Agreement. See "Certain Legal Aspects of the Receivables
- -- Certain Matters Relating to Receivership."
Effects of Applicable Law
Possible Prepayment or Losses as a Result of Limitations Imposed by
Consumer Protection Laws. Federal and state consumer protection laws, such
as the Louisiana Consumer Credit Law, Louisiana Collection Agency
Regulation Act and Louisiana Equal Credit Opportunity Law impose
requirements on the making and enforcement of consumer loans and extensions
of credit to consumers. In addition, the Soldiers' and Sailors' Civil
Relief Act of 1940 (the "SSCRA") provides for a stay of court proceedings
against military personnel (including Air Force personnel) on active duty
if the ability of such person to defend against a suit would be materially
affected by reason of military service and limits to 6% per year the
interest chargeable to military personnel (including Air Force personnel)
on active duty on obligations incurred by such person prior to entrance
into such service unless the obligee obtains a court order allowing a
higher rate to be charged. The SSCRA could adversely affect the Servicer's
ability to collect on Receivables generated under First NBC's USAF Club
Card program and other military programs, which make up a significant
portion of the Trust Portfolio. See "First NBC's Credit Card Activities --
General." In its experience to date with the military programs, First NBC
does not believe that the SSCRA has had a material impact on its collection
efforts, but there can be no assurance that the SSCRA would not have an
adverse effect in the future.
Congress and the states may enact new laws and amendments to existing laws
to regulate further the credit card and consumer credit industry or to
reduce finance charges or other fees or charges applicable to credit card
accounts.
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 monthly periodic finance charges and other
credit card
25
<PAGE>
fees. One effect of any existing or new legislation which regulates the
amount of interest and other charges that may be assessed on credit card
account balances could be to reduce the Portfolio Yield on the Accounts. If
such legislation were to result in a significant reduction in the Portfolio
Yield, a Pay Out Event could occur, in which case the Rapid Amortization
Period or, if so specified in the related Prospectus Supplement, the Rapid
Accumulation Period would commence. Certificateholders of an affected
Series might then receive principal payments earlier than expected. See
"Description of the Certificates -- Pay Out Events." If the resulting
reduction in the Portfolio Yield were significant enough,
Certificateholders could suffer losses.
Pursuant to the Agreement, the Transferor will covenant to accept
reassignment, subject to certain conditions described under "Description of
the Certificates -- Representations and Warranties," of each Receivable
that does not comply in all material respects with all requirements of
applicable law. The Transferor will make certain other representations and
warranties relating to the validity and enforceability of the Receivables.
However, it is not anticipated that the Trustee will make any examination
of the related Receivables or the records relating thereto for the purpose
of establishing the presence or absence of defects, compliance with such
representations and warranties, or for any other purpose. The sole remedy
if any such representation or warranty is breached and such breach
continues beyond the applicable cure period is that the Transferor will be
obligated to accept reassignment, subject to certain conditions described
under "Description of the Certificates -- Representations and Warranties,"
of the Receivables affected thereby. See "Description of the Certificates
- -- Representations and Warranties" and "Certain Legal Aspects of the
Receivables -- Consumer Protection Laws."
Possible Losses as a Result of Application of Bankruptcy Law.
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 Credit Enhancement or other sources
to cover any resulting shortfalls in amounts payable to Certificateholders.
See "Description of the Certificates -- Defaulted Receivables; Incentive
Payments and Fraudulent Charges; Investor Charge-Offs." If any applicable
Credit Enhancement is exhausted, Certificateholders will bear a share of
the losses on Receivables in the Trust, including losses resulting from
write offs described above, which could result in losses to
Certificateholders.
Possible Prepayment or Losses as a Result of Increasing Credit Card
Losses. Losses and delinquencies in the Bank Portfolio have increased in
recent years. Based upon published reports such as the Moody's Investors
Service Credit Card Credit Indexes, First NBC understands that this has
been the case for most domestic credit card issuers. Increasing losses and
delinquencies in the Bank Portfolio may result in the occurrence of a Pay
Out Event and the commencement of the Rapid Amortization Period. Further
information about the level of losses and delinquencies in the Bank
Portfolio will be provided under "First NBC's Credit Card Portfolio --
Delinquency and Loss Experience" in the applicable Prospectus Supplement.
If losses reached a high enough level relative to the yield on the
Receivables, a Pay Out Event could occur, resulting in payments to
Certificateholders prior to the expected dates. In addition, if any
applicable Credit Enhancement is exhausted, Certificateholders will bear a
share of the losses on Receivables in Trust, which could result in losses
to Certificateholders.
Possible Prepayment as a Result of Competition in the Credit Card
Industry. The credit card industry is highly competitive. As new credit
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, a Partial Amortization for one or
more Series could occur or a Pay Out Event could occur with respect to each
Series, in which case the Rapid Amortization Period or, if so specified in
the related Prospectus Supplement, the Rapid Accumulation Period with
respect to each such Series would commence. Certificateholders of an
affected Series might then receive principal payments earlier than
expected.
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Payments Other than at Expected 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 a
Controlled Amortization Period, a Principal Amortization Period, or a
Controlled Accumulation Period for a Series or Class thereof will be
dependent upon the continued generation of new Receivables to be conveyed
to the Trust. A significant decline in the amount of Receivables generated
could result in the occurrence of a Partial Amortization for one or more
Series or a Pay Out Event for one or more Series and the commencement of
the Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period for each such Series. If a Pay
Out Event occurs and the Rapid Amortization Period commences, or if a
Partial Amortization occurs, the average life to maturity of the affected
Series of Certificates could be significantly reduced.
In addition, the Transferor can give no assurance that the payment
rate assumptions for any Series will prove to be correct. The related
Prospectus Supplement will provide certain historical data relating to
payments by cardholders, total charge-offs and other related information
relating to the Trust Portfolio. There can be no assurance that future
events will be consistent with such historical data. In particular,
Certificateholders should be aware that the Transferor's ability to
continue to compete in the current industry environment will affect the
Transferor's ability to generate new Receivables to be conveyed to the
Trust and may also affect payment patterns.
Further, the amount of collections of Receivables may vary from month
to month due to seasonal variations, general economic conditions, changes
in periodic finance charges and payment habits of individual cardholders. A
significant decrease in such monthly payment rate could slow the return or
accumulation of principal during an Amortization Period or Accumulation
Period. No assurance can be given that payments of principal will be made
as expected during the Controlled Amortization Period or the Principal
Amortization Period, or with respect to an Accumulation Period, or on the
Scheduled Payment Date, as applicable. Further, there can be no assurance
that collections of Principal Receivables, and thus the rate at which the
related Certificateholders could expect to receive or accumulate payments
of principal on their Certificates during an Amortization Period or
Accumulation Period, or on any Scheduled Payment Date, as applicable, will
be similar to any historical experience set forth in a related Prospectus
Supplement. Also, any decision by the Transferor to designate (or increase)
a Discount Percentage will result in an increase in the amount of
collections of Finance Charge Receivables and a reduction in the balance of
Principal Receivables outstanding and a reduction in the Transferor Amount.
See "Description of the Certificates -- Discount Option."
Possible Delays or Prepayment as a Result of Effect of Social, Legal
and Economic Factors on Credit Card Usage. Changes in use of credit and
payment patterns by customers may result from a variety of social, legal
and economic factors. Economic factors include the rate of inflation,
seasonal buying patterns, unemployment levels and relative interest rates.
Social factors also include unemployment rates as well as changes in
consumer confidence levels and attitudes toward incurring debt. Legal
factors include the application of usury and consumer protection laws.
Social, legal and economic factors in the State of Louisiana and
surrounding states may have a disproportionate effect on the Trust because
of the relatively large percentage of Accounts in such States. See "The
Receivables" in the related Prospectus Supplement. 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 future use of credit
or repayment patterns. Any changes in credit or repayment patterns could
have effects like those described in "Payments Other than at Expected
Maturity" above.
Possible Delays or Prepayment as a Result of Affinity Programs. Some
of the Accounts, the Receivables of which will be conveyed to the Trust,
were originated by First NBC under various affinity agreements, including
the agreements relating to First NBC's United States Air Force Club program
and other military programs. In the future, Additional Accounts originated
under these or other affinity programs may be designated to the Trust (as
may other Additional Accounts not originated under affinity programs).
Changes in the terms of such programs or in First NBC's participation in
the programs may affect the rate at which new Receivables are generated in
the
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related Accounts, which could have effects like those described in
"Payments Other than at Expected Maturity" above.
Prepayment Resulting from Pre-Funding Account. With respect to any
Series having a Pre-Funding Account, in the event that there is an
insufficient amount of Principal Receivables in the Trust at the end of the
applicable Funding Period, the Certificateholders of such Series will be
repaid principal from amounts on deposit in the Pre-Funding Account (to
the extent of such insufficiency) following the end of such Funding Period,
as described more fully in the Prospectus Supplement. Such repayment of
principal would be prior to the scheduled date of such repayment. As a
result of such repayment, Certificateholders would receive a principal
payment earlier than they expected. In addition, Certificateholders would
not receive the benefit of the applicable Certificate Rate for the period
of time originally expected on the amount of such early repayment. There
can be no assurance that a Certificateholder would be able to reinvest such
early repayment amount at a similar rate of return. If a Certificateholder
is not able to reinvest such early repayment amount at the same rate of
return or better, the Certificateholder's anticipated yield would be
adversely affected. However, a Series with a Pre-Funding Account feature
may also require the payment of a prepayment premium in such a
circumstance, which would mitigate the adverse effect to the
Certificateholder's anticipated yield.
Possible Prepayment or Losses as a Result of Transferor's Ability to
Adversely 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 monthly periodic finance
charges and other fees which will be applicable from time to time to the
Accounts, to alter the minimum monthly payment required on the Accounts and
to change various other terms with respect to the Accounts, including
changing the annual percentage rate from a fixed rate to a variable rate or
vice versa. A decrease in the periodic finance charge or a reduction in
credit card or other fees would decrease the effective yield on the
Accounts and could result in the occurrence of a Pay Out Event with respect
to each Series and the commencement of the Rapid Amortization Period or, if
so specified in the related Prospectus Supplement, the Rapid Accumulation
Period with respect to each such Series. Certificateholders of an affected
Series might then receive principal payments earlier than expected. If the
resulting reduction reduced the Portfolio Yield significantly, there could
be reductions in amounts available to cover the portions of defaulted
Receivables allocated to a Series, and in amounts available to make
required deposits to various Trust Accounts, all of which may (if any
available Credit Enhancement is exhausted) result in losses to
Certificateholders.
Under the Agreement, the Transferor will agree that, except as
otherwise required by law or as is deemed by the Transferor to be necessary
in order to maintain its revolving credit business, based upon a good faith
assessment by it, in its sole discretion, of the nature of the competition
in that business, the Transferor will not reduce the annual percentage rate
or the periodic finance charges assessed on the related Receivables or
other fees on the related Accounts if, as a result of such reduction, the
Portfolio Yield for any Series as of such date would be less than the Base
Rate for such Series. The Transferor from time to time may offer special
rates (generally of limited duration) which may be less than the annual
percentage rates applicable to other Receivables. The terms "Portfolio
Yield" and "Base Rate" for each Series will have the meanings set forth in
the Prospectus Supplement relating to each such Series. In addition, the
Agreement will provide that the Transferor may change the terms of the
contracts relating to the related Accounts or its servicing policies and
procedures (including changes that could reduce the required minimum
monthly payment and change the calculation of the amount or the timing of
finance charges, credit card fees and charge offs), if such change (i)
would not, in the reasonable belief of the Transferor, cause a Pay Out
Event for any related Series to occur, and (ii) is made applicable to the
comparable segment of revolving credit accounts owned and serviced by the
Transferor which have characteristics the same as or substantially similar
to the related Accounts which are subject to such change. 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
comparable accounts. Except as specified above or in any Prospectus
Supplement, there will be no restrictions on the Transferor's ability to
change the terms of the Accounts. There can be no assurance that changes in
applicable law, changes in the marketplace or prudent business practice
might not result in a
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determination by the Transferor to take actions which would change this or
other Account terms or that such changes would not be adverse to the
interests of Certificateholders. See "Receivable Yield Considerations" in
the Prospectus Supplement.
Possible Losses as a Result of Incentive Programs. First NBC has
established incentive programs applicable to certain accounts in the Bank
Portfolio. These programs permit a qualifying cardholder participating in
the program to earn rights to obtain airline tickets paid for by First NBC
based upon use of the account. The Trust will not assume the obligation to
purchase airline tickets or provide other benefits earned under this or any
other incentive program that may be adopted in the future. However, if
accounts subject to this or any similar incentive program are included in
the Trust Portfolio, a cardholder entitled to receive an incentive payment
from First NBC might assert that he or she could reduce the amount he or
she was required to pay on a Receivable if First NBC failed to provide a
ticket or other benefit that had been earned under the program. As
described in "Description of the Certificates -- Defaulted Receivables;
Incentive Payments and Fraudulent Charges; Investor Charge-Offs,"
any adjustments to Receivables as a result of such an event will be
allocated to the Transferor Interest. However, if the Transferor's Interest
is reduced to zero, and the Transferor fails to make required payments
relating to these events, then Certificateholders could suffer a loss.
Possible Prepayment or Losses as a Result of Basis Risk. If so
specified in the related Prospectus Supplement, a portion of the Accounts
will have finance charges set at a variable rate above a designated prime
rate or other designated index. A Series of Certificates may bear interest
at a fixed rate or at a floating rate based on an index other than such
prime rate or other designated index. If there is a decline in such prime
rate or other designated index, the amount of collections of Finance Charge
Receivables on such Accounts may be reduced, whereas the amounts payable as
interest on such Series of Certificates and other amounts required to be
funded out of collections of Finance Charge Receivables with respect to
such Series may not be similarly reduced. Conversely, to the extent that
Accounts bear interest at a fixed rate and there is an increase in such
prime rate or other designated index, amounts payable as interest on such
Series of Certificates and other amounts required to be funded out of
collections of Finance Charge Receivables with respect to such Series may
be increased, whereas the amount of collections of Finance Charge
Receivables on such Accounts may not be similarly increased. In either
case, if the amount of collections of Finance Charge Receivables allocated
to a Series is less than the aggregate amount of interest, servicing fees
and other amounts required to be paid from such collections and this
situation continued for a period of time specified in the applicable
Prospectus Supplement, then a Pay Out Event could occur, resulting in
principal payments to the Certificateholders prior to the expected dates,
and if any applicable Credit Enhancement was exhausted losses to
Certificateholders could result.
Possible Prepayment or Losses as a Result of Issuance of New Series;
Groups. The Trust, as a master trust, may issue Series and sell Purchased
Interests from time to time. While the terms of any Series 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. Similarly, the terms of any Purchased Interest
will not be subject to the prior review by, or consent of, holders of the
Certificates of any previously issued Series. The terms of any Series may
include methods for determining applicable investor percentages and
allocating collections, provisions creating different or additional
security, 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 Agreement which
is made applicable only to such Series. The terms of any Purchased Interest
may also cover all of the above-mentioned matters. It is a condition
precedent to the issuance of any additional Series, or sale of a Purchased
Interest, that each Rating Agency that has rated any outstanding Series
deliver written confirmation to the Trustee that such issuance or sale will
not result in such Rating Agency reducing or withdrawing its rating on any
such outstanding Series. See "Description of the Certificates -- New
Issuances." There can be no assurance, however, that the terms of any other
Series, including any Series issued from time to time hereafter, or the
terms of any Purchased Interest might not have an impact on the timing and
amount of payments received by a Certificateholder of any other Series.
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In addition, the Series Supplements relating to Series which are part
of a Reallocation Group as described herein may provide that collections of
Receivables allocable to such Series will be reallocated among all Series
in the Reallocation Group. Consequently, the issuance of new Series in a
Reallocation Group may have the effect of reducing the amount of
collections of Receivables which are reallocated to the Certificates of
existing Series in such Reallocation Group. For example, an additional
Series which is issued with a larger claim with respect to monthly interest
than that of previously issued Series in such Reallocation Group (due to a
higher certificate rate) will receive a proportionately larger reallocation
of collections of Finance Charge Receivables. Such issuance will reduce the
amount of collections of Finance Charge Receivables which are reallocated
to the existing Series in such Reallocation Group. Furthermore, there can
be no assurance that, for any Series in a Reallocation Group, the Trust
will issue any other Series in such Reallocation Group. Accordingly, the
anticipated benefits of reallocation of collections of Receivables may not
be realized. See "Description of the Certificates -- Allocations" and
"Reallocations Among Certificates of Different Series within a Reallocation
Group."
Possible Prepayments or Losses as a Result of Addition of Trust Assets
- -- Effect 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. In addition, the Agreement provides that the
Transferor may add Participations to the Trust. The designation of
Additional Accounts and Participations will be subject to the satisfaction
of certain conditions described herein under "Description of the
Certificates--Addition of Trust Assets." Additional Accounts may include
accounts originated using criteria different from those which were applied
to the Accounts designated on the Cut-Off Date or to previously-designated
Additional Accounts, because such accounts were originated at a different
date or were acquired from another institution. 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 varying
quality of Trust assets could affect the payment patterns and default
experience of such portfolio. If such effect on payment patterns is
significant, a Partial Amortization for one or more Series could occur or a
Pay Out Event could occur with respect to each Series, in which case the
Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period, with respect to each such Series
would commence. Certificateholders of an affected Series might then receive
principal payments earlier than expected. In addition, if a decline in the
credit quality of the portfolio were significant enough, it could result in
reductions in payments to Certificateholders in an affected Series.
Limited Certificateholder Control of Action under Agreement. The
Certificateholders will generally have limited control over the
administration of the Trust. Subject to certain exceptions, the
Certificateholders of each Series may take certain actions, or direct
certain actions to be taken, under the Agreement or Series Supplement.
However, the Agreement or Series Supplement may provide that under certain
circumstances the consent or approval of a specified percentage of the
aggregate Investor Interest of other Series or of the Investor Interest of
a specified Class of such other Series will be required to direct certain
actions, including requiring the appointment of a successor Servicer
following a Servicer Default, amending the Agreement in certain
circumstances and directing a repurchase of all outstanding Series upon the
breach of certain representations and warranties by the Transferor.
Certificateholders of other Series may have interests which do not coincide
in any way with the interests of Certificateholders of the subject Series.
In addition, Certificateholders of different Classes of the same Series may
have interests which do not coincide. In such instances, it may be
difficult for the Certificateholders of such Series to achieve the results
from the vote that they desire.
Limitations of Certificate Rating. Any rating assigned to the
Certificates of a Series or a Class by a Rating Agency will reflect such
Rating Agency's assessment of the likelihood that Certificateholders of
such Series or Class will receive the payments of interest and principal
required to be made under the Agreement and will be based primarily on the
value of the Receivables in the Trust and the availability of any
Enhancement with respect to such Series or Class. However, any such rating
will not, unless specifically so provided in the related Prospectus
Supplement with respect to any Class or Series offered hereby, address the
likelihood that the principal of any Certificates of such Class or Series
will be paid on a scheduled date. In addition, any such rating will not
address the possibility of the occurrence of a Pay Out Event with respect
to such Class or Series, the financial condition or
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creditworthiness of the Transferor 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
Certificates of such Series or Class, and such rating will not comment as
to the marketability of such Certificates, any market price or suitability
for a particular investor. There is no assurance that any rating will
remain for any given period of time or that any rating will not be lowered
or withdrawn entirely by a Rating Agency if in such Rating Agency's
judgment circumstances so warrant. The Transferor will request a rating of
the Certificates of each Series offered hereby 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 any Series of Certificates or Class thereof. A rating assigned
to any Series of Certificates or 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.
Possible Losses as a Result of Limited Credit Enhancement. Although
Credit Enhancement may be provided with respect to a Series of Certificates
or any of its Classes, the amount available will generally be limited and
subject to certain reductions. If the amount available under any Credit
Enhancement is reduced to zero, Certificateholders of the Series or Class
covered by such Credit Enhancement will bear directly the credit and other
risks associated with their undivided interest in the Trust and will be
more likely to suffer a loss on their investment in the Certificates. See
"Credit Enhancement."
Certificateholders' Direct Exercise of Rights Limited by Book-Entry
Registration. The Certificates of Series offered hereby initially will, if
so specified in the related Prospectus Supplement, be represented by one or
more Certificates registered in the name of Cede, the 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 for such a
Series, Certificate Owners relating to such Series will not be recognized
by the Trustee as Certificateholders, as that term will be 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. See "Description of the
Certificates--Book-Entry Registration" and "-- Definitive Certificates."
Risks of Swaps. The Trustee, on behalf of the Trust, may enter into
interest rate swaps and related caps, floors and collars to reduce the risk
to Certificateholders from adverse changes in interest rates. However, such
transactions will not eliminate fluctuations in the value of the
Receivables or prevent such losses if the value of the Receivables declines.
The Trust's ability to hedge all or a portion of its portfolio of
Receivables through transactions in Swaps depends on the degree to which
interest rate movements in the market generally correlate with interest
rate movements in the Receivables.
The Trust's ability to engage in transactions involving Swaps will
depend on the degree to which the Trust can identify acceptable
Counterparties. There can be no assurance that acceptable Counterparties
will be available for a specific Swap at any specific time.
The costs to the Trust of hedging transactions vary among the various
hedging techniques and also depend on such factors as market conditions and
the length of the contract. Furthermore the Trust's ability to engage in
hedging transactions may be limited by tax considerations.
Swaps are not traded on markets regulated by the Commission or the
Commodity Futures Trading Commission, but are arranged through financial
institutions acting as principals or agents. In an over-the-counter
environment, many of the protections afforded to exchange participants are
not available. For example, there are no daily fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent
over a period of time. Because the performance of over-the-counter Swaps is
not guaranteed by any settlement agency, there is a risk of Counterparty
default.
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The Trust may consider taking advantage of investment opportunities in
Swaps that are not presently contemplated for use by the Trust or that are
not currently available but that may be developed, to the extent such
opportunities are both consistent with the Trust's objectives and legally
permissible investments for the Trust. Such opportunities, if they arise,
may involve risks that differ from or exceed those involved in the
activities described above and will be more fully described in the
applicable Prospectus Supplement.
Possible Prepayment or Losses as a Result of Allocations. To the
extent provided in any Series Supplement, or any amendment to the
Agreement, portions of the Receivables or Participations conveyed to the
Trust and all collections received with respect thereto may be allocated to
one or more Series as long as the Rating Agency Condition shall have been
satisfied with respect to such allocation and the Servicer shall have
delivered an officer's certificate to the Trustee to the effect that the
Servicer reasonably believes such allocation will not adversely affect in
any material respect the interests of the Certificateholders of any Series
issued and outstanding. There can be no assurance, however, that any such
allocation of Trust assets might not have an impact on the timing and
amount of payments received by a Certificateholder of any Series.
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 be permitted to
engage in any business activity other than acquiring and holding
Receivables, issuing Series of Certificates, making payments thereon and
engaging in related activities (including, with respect to any Series,
obtaining any Enhancement and entering into a related Enhancement agreement).
FIRST NBC'S CREDIT CARD ACTIVITIES
General
First Bankcard Center ("First Bankcard"), a division of First NBC, was
one of the earliest BankAmericard issuers, entering the credit card
business in 1968. From that time through the early 1990's, First Bankcard
relied primarily on the branch networks of First NBC and its affiliated
banks, a network of correspondent banks ("agent banks"), affinity groups
and portfolio acquisitions to generate new accounts. In 1989 First Bankcard
began its relationship with the military sector and was awarded the
management contract for the Air Force Logistics Command's Club Card
Program. Beginning in 1994, First Bankcard's new account strategy has also
included pre-approved campaigns focused on the cross-selling of bankcard
products to customers and prospects of First NBC and its affiliated banks,
agent banks and affinity groups. In addition, these campaigns have been
augmented with a few regionally specific pre-approved prospect campaigns.
In December, 1994, the Club Card Program was expanded with United States
Air Force Services ("USAF") to include Club Card Program services at all
United States Air Force bases in the United States, including Alaska and
Hawaii. The USAF Club Card Program was again expanded in 1996 to provide
U.S. dollar-denominated Club Card Program services to military personnel in
bases outside the United States.
First Bankcard provides cardholder and/or merchant services to its
network of 202 agent banks, which have not chosen to become Class A members
of the VISA or MasterCard Associations. First Bankcard's 30 affinity groups
benefit from the value-added services provided by First Bankcard, as well
as from sharing in the on-going earnings generated by group members through
use of their cards. The USAF Club Card Program includes centralized dues
and account billing for both officers and enlisted clubs, providing a
diverse population for new account and account balance growth. Certain data
processing and administrative functions associated with the servicing of
the Bank Portfolio are performed by First Commerce Service Corporation. See
"The Trust -- Description of First Commerce Service Corporation."
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With respect to each Series of Certificates, the Receivables conveyed
or to be conveyed to the Trust by the Bank pursuant to the Agreement have
been or will be generated from transactions made by holders of selected
MasterCard, VISA and private label credit accounts, including premium
accounts and standard accounts, within the Bank Portfolio. Generally, both
premium and standard accounts undergo the same credit analysis, but premium
accounts carry higher credit limits and offer a wider variety of services
to the cardholders. The private label accounts included in the Bank
Portfolio (the "Private Label Accounts") relate to credit cards issued to
military personnel who do not meet the credit standards for issuance of
standard credit cards. Payments due under Private Label Accounts are
charged back to a non-appropriated funds instrumentality associated with
the United States Air Force Services at 65-90 days past due. The
non-appropriated funds instrumentality does not represent a full faith and
credit obligation of the United States. The Bank currently services the
Bank Portfolio in the manner described in the related Prospectus
Supplement. Other than the Private Label Accounts, all of the credit card
accounts currently owned by the Bank (including accounts in the Bank's
affinity programs) are MasterCard or VISA accounts. See "Risk Factors --
Transferor's Ability to Adversely Change Terms of the Receivables" for a
discussion of the effect of the Bank's ability to modify terms of the
Receivables after the initial issuance of any Series.
The VISA and MasterCard credit accounts may be used for four types of
transactions: credit card purchases, cash advances, balance transfers and
convenience checks. Purchases occur when cardholders use credit cards to
buy goods and/or services. A cash advance is made when a credit card is
used to obtain cash from a financial institution, an automated teller
machine or in a cash equivalent transaction. Cardholders (or
accountholders) may also use convenience checks to (i) transfer balances
from other credit card accounts to their First Bankcard accounts and (ii)
draw against their VISA and MasterCard credit card accounts at any time.
Amounts due with respect to purchases, cash advances and convenience checks
are included in the Receivables. Private Label Accounts may be used only
for purchases at officer and enlisted clubs.
In addition, MasterCard and VISA cardholders (or accountholders) in
certain states are able to purchase insurance against the inability to
repay all or a portion of their account balances for reasons such as
involuntary unemployment, death, disability or accidental
death/dismemberment. Premiums for this insurance are charged to the account
for each monthly billing cycle (each a "Billing Cycle"). Such insurance
premiums are included in the Receivables transferred to the Trust and are
treated as Principal Receivables.
Each cardholder (or accountholder) is subject to an agreement with
First Bankcard governing the terms and conditions of the related
MasterCard, VISA or private label credit card account. Pursuant to each
such agreement, except as described herein or in any related Prospectus
Supplement, First Bankcard reserves the right, subject to notice as may be
required by law or such agreement, to add to, change or terminate any
terms, conditions, services or features of its MasterCard, VISA or private
label credit card accounts at any time, including increasing or decreasing
the periodic finance charges, other charges or the minimum monthly payment
requirements. The agreement with each cardholder (or accountholder)
provides that First Bankcard may apply such changes, when applicable, to
current outstanding balances as well as to future transactions. The
foregoing notwithstanding, certain affinity agreements provide that the
terms and conditions of the agreement between First Bankcard and the
cardholder (or accountholder) may be changed only at the end of the
contract period of such affinity agreement.
Acquisition and Use of Credit Card Accounts
New credit card account marketing and solicitation is handled by the
First Bankcard Marketing Department. New credit card accounts are
originated through both customer inquiry and direct mail solicitation
programs. Customer inquiry originations are generally initiated by
applicants who pick up applications at a branch of the Bank, a First NBC
affiliated bank or an agent bank, from an affinity group or at any Club
Card Program location, or call First Bankcard and ask that an application
be sent to them. Direct mail solicitations are generally followed up by
telemarketing efforts.
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First Bankcard believes that its network of affiliated banks, agent
banks, affinity groups and military relationships, for which First Bankcard
has the exclusive right to market credit cards bearing the name of the
related financial institution or organization, represents significant
opportunities for growth in the cardholder base. First Bankcard believes
that these relationships generally provide better credit quality and lower
attrition than non-relationship-based accounts. These relationships are
generally governed by agency or affinity agreements between First Bankcard
and an agent bank, affiliate bank or sponsoring institution, which are
periodically subject to renewal, renegotiation or cancellation by one or
both parties (in some cases as often as annually). Any changes in the terms
of one of these programs or in First NBC's participation in such program
could affect the rate at which new Receivables are generated in the related
Accounts.
Credit applications are processed through an automated application
processing system that uses credit scorecards. A "score" is calculated for
each applicant, using information from the application and a credit bureau
report obtained through an independent credit reporting agency. The credit
scorecards are based upon credit scoring models developed with Fair, Isaac
and Company, Inc. Those applications that are flagged for further review
(i.e., those that are neither accepted nor rejected) by the automated
application processing system are reviewed by a First Bankcard credit
analyst who makes a credit and limit assignment decision based on a review
of (i) the score generated by the credit scorecard, (ii) information
contained in the application, (iii) the independent credit report referred
to above and (iv) an analysis of the applicant's capacity to repay. The
primary factors considered in the non-military credit scoring model include
(a) the presence or absence of existing credit references and checking and
savings account references, (b) the number of recently reported installment
loans reflected in the credit file, (c) revolving utilization reflected in
the credit file and (d) the number of inquiries. The primary factors
considered in the military credit scoring model include (a) occupation, (b)
high credit card utilization reflected in the credit file, (c) the number
of major derogatory ratings reflected in the credit file and (d) the number
of inquiries by other credit providers.
First Bankcard also uses a prescreening process as a method of
acquiring new accounts. First Bankcard primarily identifies potential
prospects for pre-approved solicitations through lists obtained from (i)
First NBC and its affiliated banks, (ii) agent banks and (iii) affinity
groups. First Bankcard submits to the credit bureaus its credit criteria
and cutoff scores for those criteria to screen prospects. Lists of
individuals who meet the criteria are returned to the mailing list vendor,
and a pre-approved offer for a credit card is made to those individuals. An
offeree's response to the solicitation is reviewed and confirmed, and a
credit card is issued. Where an individual's creditworthiness undergoes
rapid and substantial change following the initial prescreening, First
Bankcard may refuse to extend any credit to that individual despite the
pre-approved offer. The primary factors considered in First Bankcard's
credit criteria are (a) the length and depth of the individual's credit
experience, (b) recency and severity of the delinquencies reflected in the
file, (c) the presence of derogatory public record information and (d) the
use of a generic credit bureau score model developed by Fair, Isaac and
Company, Inc.
If First Bankcard acquires credit card accounts originally opened by
another institution, those accounts may have been opened using criteria
different from those used by First Bankcard and may not have been subject
to the same level of credit review as accounts originally established by
First Bankcard. Portfolios of revolving credit accounts purchased by First
Bankcard from other credit card issuers may be added to the Trust from time
to time.
Description of First Commerce Service Corporation
Credit card processing services performed by First Commerce Service
Corporation ("FCSC"), a wholly owned subsidiary of the Corporation, include
statement rendering, payment processing, data processing, embossing,
research, accounting, purchasing, legal, audit, human resources and network
services and systems development. FCSC's data network provides an interface
to MasterCard International Incorporated and VISA USA, Inc. for performing
authorizations and funds transfers. Data processing and network functions
are performed in FCSC's facility in Harahan, Louisiana.
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Interchange and Other Account Revenues
Creditors participating in the VISA and MasterCard associations
receive Interchange as partial compensation for taking credit risk,
absorbing fraud losses and funding receivables for a limited period prior
to initial billing. Under the VISA and MasterCard systems, a portion of
this Interchange in connection with cardholder charges for goods and
services is passed from banks which clear the transactions for merchants to
credit card issuing banks. Interchange fees are set annually by MasterCard
and VISA and are based on the number of credit card transactions and the
amount charged per transaction. Each Prospectus Supplement will specify
whether or not the Transferor will be required to transfer to the Trust for
the benefit of the related Series a percentage of Interchange and the basis
on which any such percentage will be determined.
First NBC also currently earns additional revenues in connection with
the Bank Portfolio in the form of payments from advertisers for the
inclusion of advertising inserts with monthly statements relating to
accounts in the Bank Portfolio, and rebates or similar payments from
issuers of credit insurance policies on account of claims experience
related to the Bank Portfolio. Each Prospectus Supplement will also specify
whether or not the Transferor will be required to transfer to the Trust for
the benefit of the related Series a percentage of these "Other Account
Revenues" reasonably determined by the Transferor to be attributable to
that Series interest in the Receivables.
If so required to be transferred, Interchange and Other Account
Revenues arising under the Accounts will be allocated to the related
Certificates of any Series in the manner provided in the related Prospectus
Supplement, and, in each case, will be (a) treated as collections of
Finance Charge Receivables and used to pay required monthly payments
including interest on the related Series of Certificates, (b) used to pay
all or a portion of the Servicing Fee to the Servicer, or (c) both, as
specified in the related Prospectus Supplement.
THE RECEIVABLES
The Receivables conveyed to the Trust will arise in Accounts selected
from the Bank Portfolio 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 in such Additional Accounts, whether such Receivables
are then existing or thereafter created, or to transfer Participations in
lieu of such Receivables or in addition thereto. Any Additional Accounts
designated pursuant to the Agreement must be Eligible Accounts as of the
date the Transferor designates such accounts as Additional Accounts.
Furthermore, pursuant to the Agreement, the Transferor has 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, whether such
Receivables are then existing or thereafter created. 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. With respect to each Series
of Certificates, the Transferor will represent and warrant to the Trust
that, as of the Closing Date and the date Receivables are conveyed to the
Trust, such Receivables meet certain eligibility requirements. See
"Description of the Certificates -- Representations and Warranties."
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the Trust Portfolio as of the date
specified. Such information will include, but not be limited to, the amount
of Principal Receivables, the amount of Finance Charge Receivables, the
range of balances of the Accounts and the average thereof, the range of
credit limits of the Accounts and the average thereof, the range of ages of
the Accounts and
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the average thereof, the geographic distribution of the Accounts, the types
of Accounts and delinquency statistics relating to the Accounts.
MATURITY ASSUMPTIONS
Following the Revolving Period for each Series, collections of
Principal Receivables are expected to be distributed to the
Certificateholders of that Series or any specified Class thereof on each
specified Distribution Date during the Controlled Amortization Period or
the Principal Amortization Period, or are expected to be accumulated for
payment to Certificateholders of that Series or any specified Class thereof
during an Accumulation Period and distributed on a Scheduled Payment Date.
However, if the Rapid Amortization Period commences, collections of
Principal Receivables will be paid to Certificateholders in the manner
described herein and in the related Prospectus Supplement. Further, if a
Partial Amortization occurs, certain funds available in the Excess Funding
Account may be paid to Certificateholders in the manner described herein
and in the related Prospectus Supplement. The related Prospectus Supplement
will specify when the Controlled Amortization Period, the Principal
Amortization Period or an Accumulation Period, as applicable, will
commence, the principal payments expected or available to be received or
accumulated during such Controlled Amortization Period, Principal
Amortization Period or Accumulation Period, or on the Scheduled Payment
Date, as applicable, the manner and priority of principal accumulations and
payments among the Classes of a Series of Certificates, the payment rate
assumptions on which such expected principal accumulations and payments are
based and the Pay Out Events which, if any were to occur, would lead to the
commencement of a Rapid Amortization Period or, if so specified in the
related Prospectus Supplement, a Rapid Accumulation Period.
No assurance can be given, however, that collections on Principal
Receivables allocated to be paid to Certificateholders or the holders of
any specified Class thereof will be available for distribution or
accumulation for payment to Certificateholders on each Distribution Date
during the Controlled Amortization Period, the Principal Amortization
Period or an Accumulation Period, or on the Scheduled Payment Date, as
applicable. See "Risk Factors -- Payment Other than at Expected Maturity."
USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates offered
hereby will be paid to the Transferor as consideration for the transfer of
the Receivables to the Trust. The Transferor will use such proceeds for its
general corporate purposes.
FIRST NBC AND FIRST COMMERCE CORPORATION
First NBC is a national banking association and a wholly owned
subsidiary of First Commerce Corporation (the "Corporation"). The Bank's
main office is located at 210 Baronne Street, New Orleans, Louisiana 70112,
telephone (504) 623-1371. The New Orleans metropolitan area is the primary
market served by the Bank. The Bank and its subsidiaries offer a full range
of banking and related financial services to commercial and consumer
customers. First NBC issues credit cards both directly and as agent for
other banks.
The Corporation is a Louisiana corporation and a bank holding company
under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), and
maintains its headquarters in New Orleans, Louisiana. The Corporation has
six wholly owned bank subsidiaries, each in Louisiana: the Bank, City
National Bank of Baton Rouge, Central Bank (Monroe), The First National
Bank of Lafayette, Rapides Bank & Trust Company in Alexandria and The First
National Bank of Lake Charles. The Prospectus Supplement for each Series of
Certificates will provide additional information, including limited
financial information, relating to the Bank's credit card activities and
the Corporation.
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DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent
an interest in the Trust other than the interests represented by any other
Series of Certificates issued by the Trust (which may include Series
offered pursuant to this Prospectus) and the Transferor Interest. Each
Series will be issued pursuant to a Series Supplement. The Prospectus
Supplement for each Series will describe any provisions of the Agreement
relating to such Series which may differ materially from the Agreement
filed as an exhibit to the Registration Statement. The following summaries
describe certain provisions common to each Series of Certificates. The
summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Agreement and Series Supplement.
General
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable Investor
Percentage of all payments on the Receivables in the Trust. The Investor
Interest for each Series of Certificates on any date will generally be
equal to the initial Investor Interest as of the related Closing Date for
such Series (increased by the principal balance of any Certificates of such
Series issued after the Closing Date for such Series) minus the amount of
principal paid to the related Certificateholders prior to such date and
minus the amount of unreimbursed Investor Charge-Offs with respect to such
Certificates prior to such date, except that the Invested Amount of any
pre-funded Series may increase upon the transfer of additional Principal
Receivables to the Trust or the reduction of the Investor Interest or the
Adjusted Investor Interest of another Series. If so specified in the
Prospectus Supplement relating to any Series of Certificates, under certain
circumstances the Investor Interest may be further adjusted by the amount
of principal allocated to Certificateholders, the funds on deposit in any
specified account, and any other amount specified in the related Prospectus
Supplement.
Each Series of Certificates may consist of one or more Classes, one or
more of which may be Senior Certificates or Subordinated Certificates. Each
Class of a Series will evidence the right to receive a specified portion of
each distribution of principal or interest or both. The Investor Interest
with respect to a Series with more than one Class will be allocated among
the Classes as described in the related Prospectus Supplement. The
Certificates of a Class may differ from Certificates of other Classes of
the same Series in, among other things, the amounts allocated to principal
payments, maturity date, Certificate Rate and the availability of
Enhancement.
For each Series of Certificates, payments of interest and principal
will be made on Distribution Dates specified in the related Prospectus
Supplement to Certificateholders in whose names the Certificates were
registered on the record dates (each, a "Record Date") specified in the
related Prospectus Supplement. Interest will be distributed to
Certificateholders in the amounts, for the periods and on the dates
specified in the related Prospectus Supplement.
The Transferor Interest will represent the undivided interest in the
Trust not represented by the Certificates issued and outstanding under the
Trust or the rights, if any, of any Credit Enhancement Providers to receive
payments from the Trust. As holder of the Transferor Interest, the Transferor
will have the right to a percentage (the "Transferor Percentage") of payments
from the Receivables in the Trust. The Transferor Interest may be
transferred in whole or in part subject to the limitations and conditions
described therein. See "-- Certain Matters Regarding the Transferor and the
Servicer."
During the Revolving Period with respect to each Series of
Certificates offered hereby, the amount of the Investor Interest for that
Series will remain constant except as described in "-- Defaulted
Receivables; Incentive Payments and Fraudulent Charges; Investor
Charge-Offs" (which describes circumstances in which the Investor Interest
will be reduced during the Revolving Period) and "-- Funding Period" (which
describes circumstances in which the Investor Interest will be increased
during a Funding Period which would coincide with the Revolving Period for
the affected Series). The amount of Principal Receivables in the Trust,
however, will vary each day as
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new Principal Receivables are created and others are paid. The amount of
the Transferor Interest will fluctuate each day, to reflect the changes in
the amount of the Principal Receivables in the Trust (and amounts, if any,
on deposit in the Excess Funding Account). When a Series is amortizing, the
Investor Interest of such Series will decline as customer payments of
Principal Receivables are collected and distributed to or accumulated for
distribution to the Certificateholders. As a result, the Transferor
Interest will generally increase to reflect reductions in the Investor
Interest for such Series and will also change to reflect the variations in
the amount of Principal Receivables in the Trust. The Transferor Interest
in the Trust may also be reduced as the result of a New Issuance. See "--
New Issuances."
Certificates of each Series 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. See "--Definitive Certificates." With respect to
each Series of Certificates, beneficial interests in the Certificates will
be available for purchase in minimum denominations as specified in the
related Prospectus Supplement (or, if not so specified, in minimum
denominations of $1,000 and integral multiples thereof). As to any Series
of Certificates issued in book-entry form, 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 each such Series of Certificates. No Certificate
Owner acquiring an interest in such Certificates will be entitled to
receive a certificate representing such person's interest in the
Certificates. Unless and until Definitive Certificates are issued for any
Series under the limited circumstances described herein, all references
herein to actions by Certificateholders shall refer to actions taken by DTC
upon instructions from DTC Participants, 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."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or
a portion of any Class thereof, on the Luxembourg Stock Exchange or any
other specified exchange.
Book-Entry Registration
With respect to each Series of Certificates issued in book-entry form,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants
and the Euroclear Participants, respectively, through customers' securities
accounts in Cedel's and Euroclear's names on the books of their respective
depositories (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 New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities for its Participants ("DTC
Participants") and facilitates the clearance and settlement among DTC
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic book-entry changes in DTC
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to the DTC system is also available to
others such as securities brokers and dealers, banks, and trust companies
that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and DTC Participants are on file with the
Commission.
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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, 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 of 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.
Purchases of Certificates under the DTC system must be made by or
through DTC Participants, which will receive a credit for the Certificates
on DTC's records. The ownership interest of each actual Certificate Owner
is in turn to be recorded on the DTC Participants' and Indirect
Participants' records. Certificate Owners will not receive written
confirmation from DTC of their purchase, but Certificate Owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the DTC
Participant or Indirect Participant through which the Certificate Owner
entered into the transaction. Transfers of ownership interests in the
Certificates are to be accomplished by entries made on the books of DTC
Participants acting on behalf of Certificate Owners. Certificate Owners
will not receive certificates representing their ownership interest in
Certificates, except in the event that use of the book-entry system for the
Certificates is discontinued.
To facilitate subsequent transfers, all Certificates deposited by DTC
Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Certificates with DTC and their registration in the name
of Cede & Co. effects no change in beneficial ownership. DTC has no
knowledge of the actual Certificate Owners of the Certificates; DTC's
records reflect only the identity of the DTC Participants to whose accounts
such Certificates are credited, which may or may not be the Certificate
Owners. The DTC Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC
Participants, by DTC Participants to Indirect Participants, and by DTC
Participants and Indirect Participants to Certificate Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to
Certificates. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date, which assigns Cede &
Co.'s consenting or voting rights to those DTC Participants to whose
accounts the Certificates are credited on the record date (identified in a
listing attached thereto).
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Principal and interest payments on the Certificates will be made to
DTC. DTC's practice is to credit Participants' accounts on the applicable
Distribution Date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payment on such Distribution Date. Payments by DTC Participants to
Certificate Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and will be the
responsibility of such DTC Participant and not of DTC, the Trustee or the
Transferor, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal and interest to DTC is
the responsibility of the Trustee, disbursement of such payments to DTC
Participants shall be the responsibility of DTC, and disbursement of such
payments to Certificate Owners shall be the responsibility of DTC
Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository
with respect to the Certificates at any time by giving reasonable notice to
the Transferor or the Trustee. Under such circumstances, in the event that
a successor securities depository is not obtained, Definitive Certificates
are required to be printed and delivered. The Transferor may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, Definitive Certificates
will be delivered to Certificateholders. See "-- Definitive Certificates."
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Transferor believes to be
reliable, but the Transferor takes no responsibility for the accuracy
thereof.
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 in Cedel in any of 32 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 regulation by the Luxembourg
Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the underwriters of any Series of
Certificates. 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 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 32 currencies, including United States
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in 25
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, Societe Cooperative, 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 Board establishes policy for the Euroclear
System. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial
intermediaries and may include the underwriters of any Series of
Certificates. Indirect access to the Euroclear System is also available to
other firms that maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
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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
(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. See "U.S. Federal Income Tax Consequences." 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 Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Certificates
If so specified in the related Prospectus Supplement, the Certificates
of each Series will be initially issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees
rather than to DTC or its nominee. If the related Prospectus Supplement
states that a Series will be issued in book-entry form, then Definitive
Certificates will be issued to Certificate Owners or their nominees only if
(i) the Transferor advises the Trustee for such Series in writing that DTC
is no longer willing or able to discharge properly its responsibilities as
Depository with respect to such Series of Certificates, and the Trustee or
the Transferor is unable to locate a qualified successor, (ii) the
Transferor, at its option, 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%
(or such other percentage specified in the related Prospectus Supplement)
of the Investor Interest advise the Trustee and DTC through DTC
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 DTC Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC
of the definitive certificate representing the Certificates and
instructions for reregistration, the Trustee will issue the Certificates as
Definitive Certificates, and thereafter the Trustee will recognize the
holders of such Definitive Certificates as Certificateholders under the
Agreement.
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 and any principal payments on each Distribution Date will
be made to Holders in whose names the Definitive Certificates were
registered at the close of business on the related Record Date. The final
payment on any Certificate (whether Definitive Certificates or the
Certificates registered in the name of Cede representing the Certificates),
will be made only upon presentation and surrender of such Certificate at
the office or agency specified in the notice of
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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. The Transfer Agent and Registrar shall not be
required to register the transfer or exchange of Definitive Certificates
for a period of fifteen days preceding the due date for any payment with
respect to such Definitive Certificates.
Interest Payments
For each Series of Certificates and Class thereof, interest will
accrue from the date specified in the applicable Prospectus Supplement on
the applicable Investor Interest at the applicable Certificate Rate, which
may be a fixed, floating or other type of rate as specified in the related
Prospectus Supplement. Interest will be distributed to Certificateholders
on the Distribution Dates specified in the related Prospectus Supplement.
Interest payments on any Distribution Date will be funded from collections
of Finance Charge Receivables allocated to the Investor Interest during the
preceding Monthly Period or Periods and may be funded from certain
investment earnings on funds held in accounts of the Trust and from any
applicable Credit Enhancement, if necessary, or certain other amounts as
specified in the related Prospectus Supplement. If the Distribution Dates
for payment of interest for a Series or Class occur less frequently than
monthly, such collections or other amounts (or the portion thereof
allocable to such Class) may be deposited in one or more trust accounts
(each, an "Interest Funding Account") pending distribution to the
Certificateholders of such Series or Class, as described in the related
Prospectus Supplement. If a Series has more than one Class of Certificates,
each such Class may have a separate Interest Funding Account. The
Prospectus Supplement relating to each Series of Certificates will describe
the amounts and sources of interest payments to be made; the Certificate
Rate for each Class thereof; for a Series or Class thereof bearing interest
at a floating Certificate Rate, the initial Certificate Rate, the dates and
the manner for determining subsequent Certificate Rates, and the formula,
index or other method by which such Certificate Rates are determined; and
any limitations on any such Certificate Rate.
Principal Payments
Generally, during the Revolving Period for each Series of Certificates
(which begins on the related Closing Date and ends on the day before an
Amortization Period or Accumulation Period begins), no principal payments
will be made to the Certificateholders of such Series, although principal
payments may be made to Certificateholders of a Series during the Revolving
Period, in connection with a Partial Amortization or otherwise, if so
specified in the related Prospectus Supplement. During the Controlled
Amortization Period or Principal Amortization Period, as applicable, which
will be scheduled to begin on the date specified in, or determined in the
manner specified in, the related Prospectus Supplement, and during the
Rapid Amortization Period, which will begin upon the occurrence of a Pay
Out Event or, if so specified in the Prospectus Supplement, following the
Rapid Accumulation Period, principal will be paid to the Certificateholders
in the amounts and on Distribution Dates specified in the related
Prospectus Supplement. During an Accumulation Period, principal will be
accumulated in a Principal Funding Account for later distribution to
Certificateholders on the Scheduled Payment Date in the amounts specified
in the related Prospectus Supplement. Principal payments for any Series or
Class thereof will be funded from collections of Principal Receivables
received during the related Monthly Period or Periods as specified in the
related Prospectus Supplement and allocated to such Series or Class, in
certain circumstances from amounts on deposit in the Excess Funding Account
and from certain other sources specified in the related Prospectus
Supplement. In the case of a Series with more than one Class of
Certificates, the Certificateholders of one or more Classes may receive
payments of principal at different times. The related Prospectus Supplement
will describe the manner, timing and priority of payments of principal to
Certificateholders of each Class.
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Funds on deposit in any Principal Funding Account applicable to a
Series may be subject to a guaranteed rate agreement or guaranteed
investment contract or other arrangement specified in the related
Prospectus Supplement intended to assure a minimum rate of return on the
investment of such funds. In order to enhance the likelihood of the payment
in full of the principal amount of a Series of Certificates or Class
thereof at the end of an Accumulation Period, such Series of Certificates
or Class thereof may be subject to a principal payment guaranty or other
similar arrangement specified in the related Prospectus Supplement.
Transfer and Assignment of Receivables
The Transferor will transfer and assign at the time of formation of
the Trust all of its right, title and interest in and to the Receivables in
the related Accounts and all Receivables thereafter created in such
Accounts.
In connection with each transfer of Receivables to the Trust, the
Transferor will indicate in its computer files that the related Receivables
have been conveyed to the Trust. In addition, the Transferor will provide
to the Trustee computer files or microfiche lists containing a true and
complete list of the related Accounts, identified by account number and by
total outstanding balance on the date of transfer. The Transferor will not
deliver to the Trustee any other records or agreements relating to the
Accounts or the Receivables, except in connection with additions or
removals of Accounts. Except as stated above, the records and agreements
relating to the Accounts and the Receivables maintained by the Transferor
or the Servicer are not and will not be segregated by the Transferor or the
Servicer from other documents and agreements relating to other credit card
accounts and receivables and are not and will not be stamped or marked to
reflect the transfer of the Receivables to the Trust, but the computer
records of the Transferor are and will be required to be marked to evidence
such transfer. The Transferor will file with respect to the Trust Uniform
Commercial Code financing statements with respect to the Receivables
meeting the requirements of applicable state law. See "Risk Factors --
Transfer of Receivables" and "Certain Legal Aspects of the Receivables --
Transfer of Receivables."
New Issuances
The Agreement will authorize 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) one or more
Supplemental Certificates, evidencing partial interests in the Transferor
Interest, which are not offered hereby and which will be transferable only
as provided in the Agreement. Pursuant to the Agreement, the Transferor may
define, with respect to any newly issued Series, the terms of such new
Series. Upon the issuance of an additional Series of Certificates, none of
the Transferor, the Servicer, the Trustee or the Trust will be required
(nor do they intend) to obtain the consent of any Certificateholder of any
other Series previously issued by the Trust. However, as a condition of a New
Issuance, the Transferor will deliver to the Trustee written confirmation
that the New Issuance will not result in the reduction or withdrawal by any
Rating Agency of its rating of any outstanding Series. The Transferor may
offer any Series under a Disclosure Document in offerings pursuant to this
Prospectus or in transactions either registered under the Securities Act or
exempt from registration thereunder directly, through one or more other
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise. To the extent provided in the related Supplement
(and subject to any applicable requirements under the Exchange Act and the
rules and regulations thereunder, including Rule 13e-4), a new Series may
be issued fully or partially in exchange for certificates of one or more
existing Series.
The Transferor may execute New Issuances such that each Series has a
period during which amortization or accumulation of the principal amount
thereof is intended to occur which may have a different length and begin on
a different date than such period for any other Series. Further, one or more
Series may be in their amortization or accumulation periods while other Series
are not. Moreover, each Series may have the benefit of a Credit Enhancement
which is available only to such Series. Under the Agreement, the Trustee shall
hold any
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such form of Credit Enhancement only on behalf of the Series to which it
relates. The Transferor may deliver a different form of Credit Enhancement
agreement with respect to any Series. The Transferor may specify different
certificate rates and monthly servicing fees with respect to each Series
(or a particular Class within such Series). The Transferor will also
have the option under the Agreement to vary between Series the terms upon
which a Series (or a particular Class within such Series) may be
repurchased by the Transferor or remarketed to other investors. There will
be no limit to the number of New Issuances that may be performed under the
Agreement.
A New Issuance may only occur upon the satisfaction of certain
conditions provided in the Agreement. Under the Agreement, the Transferor
may execute a New Issuance by notifying the Trustee at least three days
in advance of the date upon which the New Issuance is to occur stating
the Series to be issued on the date of the New Issuance and, with respect
to each such Series (and, if applicable, each Class thereof): (1) its
initial principal amount (or method for calculating such amount), (2) its
certificate rate (or method of calculating such rate) and (3) the provider
of Credit Enhancement, if any, which is expected to provide support with
respect to it. The Agreement will provide that on the date of the New
Issuance the Trustee will authenticate any such Series only upon delivery
to it of at least the following: (i) a Series Supplement specifying the
terms of such Series; (ii) (a) an opinion of counsel to the effect that
the certificates of such Series will be characterized as indebtedness for
Federal income tax purposes, unless the related Series Supplement indicates
that such opinion will not be provided, and (b) a Tax Opinion; (iii) if
required by the related Series Supplement, the form of Credit Enhancement;
(iv) if Credit Enhancement is required by the Series Supplement, an
appropriate Credit Enhancement agreement executed by the Transferor and
the Credit Enhancement Provider; (v) written confirmation from each Rating
Agency that the New Issuance will not result in such Rating Agency's
reducing or withdrawing its rating on any then outstanding Series rated by
it; (vi) an officer's certificate of the Transferor to the effect that after
giving effect to the New Issuance the Transferor would not be required to
add Additional Accounts pursuant to the Agreement and the Transferor
Interest would be at least equal to the Minimum Transferor Interest; and
(vii) if applicable, the certificates representing the Series to be exchanged.
Upon satisfaction of such conditions, the Trustee will cancel the
certificates of the exchanged Series, if applicable, and authenticate the
new Series. The Certificates resulting from a New Issuance may either be
delivered by the Trustee to the Bank for sale by the Bank or sold directly
by the Trust.
The Transferor also may from time to time cause the Trustee to sell
Purchased Interests to one or more purchasers. Any Purchased Interest will
represent an interest in the Trust's assets similar to the interest of a
Series of Certificates. No Series will be subordinated to any Purchased
Interest, and no Purchased Interest will have any interest in the
Enhancement or series accounts specified for any Series, except as
specified in the Prospectus Supplement relating to that Series. Any such
sale will take place pursuant to one or more agreements which will specify
terms for the applicable Purchased Interests and may grant the purchasers
of such interests notice and consultation rights with respect to rights or
actions of the Trustee. Any sale of Purchased Interests in the assets of
the Trust will be subject to the satisfaction of the same conditions
(including Rating Agency confirmations) as for a New Issuance as
appropriately adjusted to apply to the relevant Purchased Interest rather
than a New Issuance.
Additional Transferors
The Transferor may designate other persons to be included as a
"Transferor" ("Additional Transferors") under the Agreement (by means of an
amendment to the Agreement that will not require the consent of any
Certificateholder, see "-- Amendments" but will be subject to satisfaction
of certain conditions, including confirmation that such designation will
not result in the withdrawal or downgrade of the credit rating of any
outstanding Series. Following the inclusion of an Additional Transferor, the
Additional Transferor will be treated in the same manner as the initial
Transferor and each Additional Transferor generally will have the same
obligations and rights as a Transferor described herein.
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Representations and Warranties
In connection with the issuance of any Series of Certificates, the
Transferor will represent and warrant in the Agreement to the effect that
(a) as of the Closing Date, the Transferor was duly incorporated and in
good standing and that it has the authority to consummate the transactions
contemplated by the Agreement and (b) as of the Cut-Off Date (or as of the
date of the designation of Additional Accounts), each Account was an
Eligible Account. If (i) any of these representations and warranties proves
to have been incorrect in any material respect when made, and continues to
be incorrect for 60 days after notice to the Transferor by the Trustee or
to the Transferor and the Trustee by the Certificateholders holding more
than 50% of the Investor Interest of the related Series, and (ii) as a
result the interests of the Certificateholders are materially and adversely
affected, and continue to be materially and adversely affected during such
period, then the Trustee or Certificateholders holding more than 50% of the
Investor Interest may give notice to the Transferor (and to the Trustee in
the latter instance) declaring that a Pay Out Event has occurred, thereby
commencing the Rapid Amortization Period or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period.
The Transferor will also represent and warrant in the Agreement to the
effect that (a) as of the Closing Date of the initial Series of
Certificates, each of the related Receivables then existing is an Eligible
Receivable (as defined below) and (b) as of the date of creation of any new
Receivable, such Receivable is an Eligible Receivable and the
representation and warranty set forth in clause (b) in the immediately
following paragraph is true and correct with respect to such Receivable. In
the event (i) of a breach of any representation and warranty described in
this paragraph, within 60 days, or such longer period as may be agreed to
by the Trustee, of the earlier to occur of the discovery of such breach by
the Transferor or Servicer or receipt by the Transferor of written notice
of such breach given by the Trustee, or, with respect to certain breaches
relating to prior liens, immediately upon the earlier to occur of such
discovery or notice and (ii) that as a result of such breach, the
Receivables in the related Accounts are charged off as uncollectible, the
Trust's rights in, to or under the Receivables or its proceeds are impaired
or the proceeds of such Receivables are not available for any reason to the
Trust free and clear of any lien, the Transferor will accept reassignment
of each Principal Receivable as to which such breach relates (an
"Ineligible Receivable") on the terms and conditions set forth below. No
such reassignment will be required to be made with respect to an Ineligible
Receivable if, on any day within the applicable period (or such longer
period as may be agreed to by the Trustee), the representations and
warranties with respect to that Ineligible Receivable are true and correct
in all material respects. The Transferor will accept reassignment of
Ineligible Receivables by directing the Servicer to deduct the amount of
each Ineligible Receivable from the Aggregate Principal Receivables used to
calculate the Transferor Interest. If the exclusion of an Ineligible
Receivable from the calculation of the Transferor Interest would cause the
Transferor Interest to be less than the Minimum Transferor Interest, on the
date of reassignment of such Ineligible Receivable the Transferor will make
a deposit in the Excess Funding Account in immediately available funds in
an amount equal to the amount by which the Transferor Interest would be
reduced below the Minimum Transferor Interest. Any such deduction or
deposit shall be considered a repayment in full of the Ineligible
Receivable. The obligation of the Transferor to accept reassignment of any
Ineligible Receivable is the sole remedy respecting any breach of the
representations and warranties set forth in this paragraph with respect to
such Receivable available to the Certificateholders or the Trustee on
behalf of Certificateholders.
The Transferor will also represent and warrant in the Agreement to the
effect that as of the Closing Date of the initial Series of Certificates
(a) the Agreement will constitute a legal, valid and binding obligation of
the Transferor and (b) the transfer of Receivables by it to the Trust under
the Agreement will constitute either a valid transfer and assignment to the
Trust of all right, title and interest of the Transferor in and to the
Receivables (other than Receivables in Additional Accounts), whether then
existing or thereafter created and the proceeds thereof (including amounts
in any of the accounts established for the benefit of Certificateholders)
or the grant of a first priority perfected security interest in such
Receivables (except for certain tax and other governmental liens) and the
proceeds thereof (including amounts in any of the accounts established for
the benefit of Certificateholders), which is effective as to each such
Receivable upon the creation thereof. In the event of a breach of any of
the representations and warranties described in this paragraph which has a
material adverse effect on the interest of the Certificateholders
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in the Receivables, either the Trustee or the Holders of Certificates
evidencing undivided interests in the Trust aggregating more than 50% of
the aggregate Investor Interest of all Series outstanding may direct the
Transferor to accept reassignment of the Trust Portfolio within 60 days of
such notice, or within such longer period specified in such notice. The
Transferor will be obligated to accept reassignment of such Receivables on
a Distribution Date occurring within such applicable period. Such
reassignment will not be required to be made, however, if at any time
during such applicable period, or such longer period, the representations
and warranties are true and correct in all material respects. The deposit
amount for such reassignment will equal the Investor Interest and
Enhancement Invested Amount, if any, plus accrued and unpaid interest for
each Series outstanding on the last day of the Monthly Period preceding the
Distribution Date on which the reassignment is scheduled to be made less
the amount, if any, previously allocated for payment of principal and
interest to such Certificateholders or such holders of the Enhancement
Invested Amount or the Collateral Interest, if any, on such Distribution
Date. The payment of the reassignment deposit amount and the transfer of
all other amounts deposited for the preceding month in the Distribution
Account will be considered a payment in full of the Investor Interest and
the Enhancement Invested Amount, if any, for each such Series required to
be repurchased and will be distributed upon presentation and surrender of
the Certificates for each such Series. The obligation of the Transferor to
make any such deposit will constitute the sole remedy respecting a breach
of the representations and warranties available to the Trustee or
Certificateholders.
With respect to each Series of Certificates, an "Eligible Account"
means, as of the Cut-Off Date (or, with respect to Additional Accounts, as
of their date of designation for inclusion in the Trust), each Account
owned by the Transferor (a) which was in existence and maintained with the
Transferor, (b) which is payable in United States dollars, (c) the customer
of which has provided, as his most recent billing address, an address
located in the United States or its territories or possessions or a
military address (except that up to 3% of the aggregate number of all
Accounts as of the Cut-Off Date or any date on which Additional Accounts
are designated for inclusion in the Trust may have customers with billing
addresses that do not satisfy this requirement), (d) which has not been
classified by the Transferor as canceled, counterfeit, fraudulent, stolen
or lost (except that Eligible Accounts may include Accounts identified by
the applicable customers as having balances incurred as a result of
fraudulent use or as to which the credit cards have been identified as lost
or stolen if (1) the Transferor appropriately reflects the balance of the
applicable Receivables on its books and records in accordance with its
customary practices and (2) charging privileges have been canceled and are
not reinstated), (e) which has either been originated by the Transferor or
acquired by the Transferor from other institutions, (f) which has not been
charged off by the Transferor in its customary and usual manner for
charging off such Account as of the Cut-Off Date and, with respect to
Additional Accounts, as of their date of designation for inclusion in the
Trust and (g) which satisfies any additional requirements specified in the
related Prospectus Supplement. Under the Agreement, the definition of
Eligible Account may be changed by amendment to the Agreement without the
consent of the related Certificateholders if (i) the Transferor delivers to
the Trustee a certificate of an authorized officer to the effect that, in
the reasonable belief of the Transferor, such amendment will not as of the
date of such amendment adversely affect in any material respect the
interest of such Certificateholders, and (ii) such amendment will not
result in a withdrawal or reduction of the rating of any outstanding Series
under the Trust.
With respect to each Series of Certificates, an "Eligible Receivable"
means each Receivable (a) which has arisen under an Eligible Account, (b)
which was created in compliance, in all material respects, with all
requirements of law applicable to the Transferor, and pursuant to an
account agreement which complied in all material respects with all
requirements of law applicable to the Transferor, (c) with respect to which
all consents, licenses or authorizations of, or registrations with, any
governmental authority required to be obtained or given by the Transferor
in connection with the creation of such Receivable, or the execution,
delivery, creation and performance by the Transferor of the related account
agreement, have been duly obtained or given and are in full force and
effect as of the date of the creation of such Receivable, (d) as to which,
at the time of its creation, the Transferor or the Trust had good and
marketable title free and clear of all liens and security interests arising
under or through the Transferor (other than certain tax liens for taxes not
then due or which the Transferor is contesting and any other lien that is
released or terminated at or before the time that the receivable is
transferred to the Trust), (e) which is
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the legal, valid and binding payment obligation of the obligor thereon,
legally enforceable against such obligor in accordance with its terms (with
certain bankruptcy-related exceptions), (f) which constitutes an "account,"
"chattel paper" or a "general intangible" under Article 9 of the Uniform
Commercial Code as then in effect in the State of Louisiana and (g) which
satisfies any additional requirements specified in the related Prospectus
Supplement.
The Trustee will not 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.
The Servicer, however, will deliver to the Trustee on or before March 31 of
each year (or such other date specified in the related Prospectus
Supplement) an opinion of counsel with respect to the validity of the
security interest of the Trust in and to the Receivables and certain other
components of the Trust.
Addition of Trust Assets
As described above under "The Receivables," the Transferor will have
the right to designate for the Trust, from time to time, Additional
Accounts to be included as Accounts with respect to the Trust. In addition,
the Transferor will be required to designate Additional Accounts (a) to
maintain the Transferor Interest so that during any period of 30
consecutive days, the Transferor Interest averaged over that period equals
or exceeds the Minimum Transferor Interest for the same period and (b) to
maintain the sum of (i) the Aggregate Principal Receivables and (ii) the
principal amount on deposit in the Excess Funding Account equal to or
greater than the Minimum Aggregate Principal Receivables. "Minimum
Transferor Interest" means __% of the aggregate Principal Receivables at
the end of the day immediately prior to the date of determination. "Minimum
Aggregate Principal Receivables" means an amount equal to the sum of the
numerators used to calculate the Investor Percentages with respect to the
allocation of collections of Principal Receivables for each Series issued
by the Trust then outstanding. However, the percentage used to calculate
the Minimum Transfer Interest, the Minimum Aggregate Principal Receivables
or both may be increased or reduced at any time if each Rating Agency
confirms that such action will not result in a withdrawal or downgrade of
its rating of any outstanding Series as to which it is a Rating Agency. The
Transferor's designation of Additional Accounts generally will be subject
to the satisfaction of the conditions described below.
However, the Transferor may from time to time designate to the Trust
certain accounts ("Automatic Additional Accounts") generated in the
ordinary course of business of the Transferor, subject to fewer conditions
(but the remaining conditions include limitations on the amount of
Automatic Additional Accounts that may be designated for the Trust during a
period of time). The Transferor will convey to the Trust its interest in
all Receivables in Additional Accounts, whether such Receivables are then
existing or thereafter created.
Each Additional Account (including Automatic Additional Accounts) must
be an Eligible Account at the time of its designation. However, Additional
Accounts may not be of the same credit quality as the initial Accounts.
Additional Accounts may have been originated by the Transferor using credit
criteria different from those which were applied by the Transferor to the
initial Accounts or may have been acquired by the Transferor from an
institution which may have had different credit criteria.
In addition to or in lieu of Additional Accounts, the Transferor under
the Agreement will be permitted (subject to compliance with applicable
securities laws) to add to the Trust participations or trust certificates
representing undivided interests in a pool of assets primarily consisting
of receivables arising under revolving credit accounts and collections
thereon ("Participations"). Any Participation included in the Trust will
represent an undivided interest in the same types of assets that may be
added as Receivables arising in "Additional Accounts," but in the case of a
Participation the Trust would have a less direct interest in the specific
assets. Participations may be evidenced by one or more certificates of
ownership issued under a separate pooling and servicing agreement or
similar agreement (a "Participation Agreement") entered into by the
Transferor which entitles the Certificateholder to receive percentages of
collections generated by the pool of assets subject to such Participation
Agreement from time to time and to certain other rights and remedies
specified therein. Participations may have their own credit
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enhancement, pay out events, servicing obligations and servicer defaults,
all of which are likely to be enforceable by a separate trustee under the
Participation Agreement and may be different from those specified herein.
The rights and remedies of the Trust as the holder of a Participation (and
therefore the Certificateholders) will be subject to all the terms and
provisions of the related Participation Agreement. The Agreement may be
amended to permit the addition of a Participation in the Trust without the
consent of the related Certificateholders if (i) the Transferor delivers to
the Trustee a certificate of an authorized officer to the effect that, in
the reasonable belief of the Transferor, such amendment will not as of the
date of such amendment adversely affect in any material respect the
interest of such Certificateholders, and (ii) such amendment will not
result in a withdrawal or reduction of the rating of any outstanding Series
under the Trust.
A conveyance by the Transferor to the Trust of Receivables in
Additional Accounts or Participations is subject to the following
conditions, among others: (i) except in the case of Automatic Additional
Accounts, the Transferor shall give the Trustee, each Rating Agency and the
Servicer written notice that such Additional Accounts or Participations
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 or Participations (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 or Participations; (iii) the
Transferor shall represent and warrant that (a) 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, (b)
no selection procedures believed by the Transferor to be materially adverse
to the interests of the Certificateholders were utilized in selecting the
Additional Accounts from the available Eligible Accounts from the Bank
Portfolio and (c) as of the Addition Date, the Transferor is not insolvent;
(iv) the Transferor shall deliver certain opinions of counsel with respect
to the transfer of the Receivables in the Additional Accounts or the
Participations to the Trust; and (v) under certain circumstances with
respect to Additional Accounts (but not in the case of Automatic Additional
Accounts), and in all cases with respect to Participations, the addition of
such Additional Accounts or Participations will not result in a withdrawal
or reduction of the rating of any outstanding Series under the Trust.
In addition to the periodic reports otherwise required to be filed by
the Servicer with the Commission pursuant to the Exchange Act, the Servicer
intends to file, on behalf of the Trust, a Report on Form 8-K with respect
to any addition to the Trust of Receivables in Additional Accounts or
Participations that would have a material effect on the composition of the
assets of the Trust, including statistical data, on a discrete basis,
describing the additional assets.
Removal of Accounts
The Transferor may, but shall not be obligated to, designate from time
to time certain Accounts to be Removed Accounts and stop transferring new
Receivables arising in the Removed Accounts to the Trust. Pre-existing
Receivables in Removed Accounts may either be conveyed to the Transferor or
its designee or retained by the Trust. If such pre-existing Receivables are
retained in the Trust, the Servicer and the Transferor will agree to
allocate principal collections on the Removed Accounts on a first-in,
first-out basis, so that such collections will be allocated to outstanding
advances in the order in which such advances arose (beginning with the
oldest outstanding advance). Principal collections allocable to Receivables
retained by the Trust will be applied as Collections in accordance with the
Agreement. Upon payment of all amounts owing in respect of such
Receivables, the Trust will transfer the related Account to the Transferor.
The Transferor will, however, be permitted to designate Removed
Accounts only if: (i) such designation will not, in the reasonable belief
of the Transferor, cause a Pay Out Event to occur; (ii) the Transferor
shall have delivered to the Trustee for execution a written assignment and
a computer file or microfiche list containing a true and complete list of
all Removed Accounts identified by account number and the aggregate amount
of the
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Receivables in such Removed Accounts as of the end of the Billing Cycle
immediately preceding the date of removal; (iii) the Transferor represents
and warrants that no selection procedures believed by the Transferor to be
materially adverse to the interests of the holders of any Series of
Certificates outstanding were used in selecting the Removed Accounts to be
removed from the Trust; (iv) the Transferor shall have received notice from
each such Rating Agency that such proposed removal will not result in a
downgrade of its then-current rating for any such Series; (v) such other
conditions as are specified in any Prospectus Supplement or adopted by the
Transferor to enable the Transferor to derecognize Receivables transferred
to the Trust in accordance with applicable accounting principles; and (vi)
the Transferor shall have delivered to the Trustee an officer's certificate
confirming the items set forth in clauses (i) through (v) above.
Notwithstanding the above, the Transferor will be permitted to designate as
a Removed Account without the consent of the Trustee, Certificateholders or
Rating Agencies any Account that has a zero balance and which the
Transferor will remove from its computer file.
Collection and Other Servicing Procedures
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the
Servicer's policies and procedures for servicing credit card receivables
comparable to the Receivables. The Servicer will be required to maintain
fidelity bond coverage insuring against losses through wrongdoing of its
officers and employees who are involved in the servicing of credit card
receivables covering such actions and in such amounts as the Servicer
believes to be reasonable from time to time.
Discount Option
The Transferor may at any time designate a specified fixed or variable
percentage as specified in the related Prospectus Supplement (the "Discount
Percentage") of the amount of Receivables arising in the Accounts on and
after the date such option is exercised (and if the Transferor so elects,
Receivables arising in the Accounts before the date such option is
exercised) that otherwise would have been treated as Principal Receivables
to be treated as Finance Charge Receivables. Such designation will become
effective upon satisfaction of the requirements set forth in the Agreement,
including, if the Discount Percentage would be greater than 3% after such
designation, confirmation by each Rating Agency that such designation will
not result in a withdrawal or downgrade of its rating of any outstanding
Series of the Trust. On the date of processing of any collections, the
product of the Discount Percentage and collections of Receivables that
arise in the Accounts on such day on or after the date such option is
exercised (and if the Transferor so elects, Receivables arising in the
related Accounts before the date such option is exercised) that otherwise
would be Principal Receivables will be deemed collections of Finance Charge
Receivables and will be applied accordingly. The Transferor may also elect
to increase, decrease or terminate the Discount Percentage.
By designating (or increasing) a Discount Percentage, the Transferor
would in effect increase the amount of collections of Finance Charge
Receivables that are allocated to outstanding Series and available to cover
interest on the Certificates in that Series, defaults allocated to that
Series and other amounts, but conversely may reduce the effective principal
payment rate with respect to the Receivables (which could slow the payment
of principal to Certificateholders). The Transferor is not obligated under
any circumstances to designate (or increase) a Discount Percentage.
Trust Accounts
With respect to the Trust, the Trustee will establish and maintain in
the name of the Trust, a "Finance Charge Account" and an "Excess Funding
Account," as segregated trust accounts or with a Qualified Institution, for
the benefit of the Certificateholders of all related Series, including any
Series offered pursuant to this Prospectus. The Agreement will also permit
the Trustee to establish accounts for particular Series, including an
Interest Funding Account, a Principal Funding Account, a Pre-Funding
Account or any other account specified in the related Series
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<PAGE>
Supplement. Each series account will be an asset of the Trust held for the
benefit of the Certificateholders of the related Series and for the
purposes set forth in the related Prospectus Supplement. The other accounts
referred to in this paragraph will be assets of the Trust held for the
benefit of all Certificateholders. The Trustee will also establish a
segregated demand deposit account to serve as the "Distribution Account"
for the Trust. The Servicer will establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of Certificateholders of
all Series issued thereby, a non-interest bearing segregated account to
serve as the Collection Account for the Trust. The Distribution Account and
Collection Account will each be established as a segregated trust account
or with a "Qualified Institution," defined as a depository institution or
trust company, which may include the Trustee, organized under the laws of
the United States or any one of the states thereof, which at all times has
a certificate of deposit, short-term deposit or commercial paper rating of
P-1 by Moody's Investors Service, Inc. ("Moody's") and of at least A-1 by
Standard & Poor's Ratings Services, a division of The McGraw Hill
Companies, Inc. ("Standard & Poor's") or long-term unsecured debt
obligation (other than such obligation the rating of which is based on
collateral or on the credit of a person other than such institution or
trust company) rating of at least Aa3 by Moody's and AA- by Standard &
Poor's and deposit insurance provided by either the Bank Insurance Fund
("BIF") or the Savings Association Insurance Fund ("SAIF"), each
administered by the FDIC, or a depository institution, which may include
the Trustee, which is acceptable to each Rating Agency. Funds in the Excess
Funding Account, the Finance Charge Account, the Principal Funding Account,
the Distribution Account and any series account for the Trust will be
invested, at the direction of the Servicer, in (i) obligations fully
guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies, the certificates of deposit of which have the highest rating
from Moody's and Standard & Poor's, (iii) commercial paper having, at the
time of the Trust's investment, a rating in the highest rating category
from Moody's and Standard & Poor's, (iv) bankers' acceptances issued by any
depository institution or trust company described in clause (ii) above, (v)
money market funds which have the highest rating from, or have otherwise
been approved in writing by, Moody's and Standard & Poor's (so long as such
investment will not require the Trust to register as an investment company
under the Investment Company Act of 1940, as amended), (vi) repurchase
obligations with respect to any security described in clause (i) above or
with respect to any other security issued or guaranteed by an agency or
instrumentality of the United States of America, in either case entered
into with a depository institution or trust company described in clause
(ii) above and (vii) any other investment if each Rating Agency confirms in
writing that such investment will not adversely affect its then current
rating or ratings of the Investor Certificates and making such investment
will not require the Trust to register as an investment company under the
Investment Company Act of 1940, as amended (such investments, "Permitted
Investments"). Any earnings (net of losses and investment expenses) on
funds in the Finance Charge Account, the Excess Funding Account or the
Distribution Account will be treated as collections of Finance Charge
Receivables. 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 Finance Charge Account and the Excess Funding Account
for the purpose of carrying out the Servicer's duties under the Agreement.
Each Prospectus Supplement will identify a paying agent which will have the
revocable power to withdraw funds from the Distribution Account for the
purpose of making distributions to the Certificateholders (or, if no such
entity is designated, the Trustee shall act as paying agent).
Funding Period
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, all or a portion of the principal
amount of such Series (the "Pre-Funding Amount") will be held in a
Pre-Funding Account pending the transfer of additional Receivables to the
Trust or pending the reduction of the Investor Interests of other Series
issued by the Trust. The related Prospectus Supplement will specify the
initial Investor Interest with respect to such Series, the Full Investor
Interest and the date by which the Investor Interest is expected to equal
the Full Investor Interest. The Investor Interest will increase as
Receivables are added to the Trust or as the Investor Interests of other
Series of the Trust are reduced. See "-- Addition of Trust Assets." This
feature is intended to permit the Transferor to issue a new Series of
Certificates at an opportune time, if the Investor Interest of existing
Series are expected to be reduced or additional Receivables are expected to
be included in the Trust at a subsequent time. Certificateholders will not
incur any costs, direct or indirect, as a result of the exercise of this
feature. If
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<PAGE>
the Investor Interest does not equal the Full Investor Interest by the end
of the Funding Period, Certificateholders of the affected Series will
receive principal repayments prior to the expected date of receipt. See
"Risk Factors -- Pre-Funding Account." Any designation of Additional
Accounts (or Participations) during the Funding Period will be subject to
the same conditions and protections applicable at any other time. It is not
expected or required that the Trustee or any other Person (except for the
Transferor) will make any initial examination of Receivables added to the
Trust during a Funding Period for the purpose of establishing the presence
or absence of defects, compliance with the Transferor's representations and
warranties or for any other purpose.
During the Funding Period, funds on deposit in the Pre-Funding Account
for a Series of Certificates will be withdrawn and paid to Transferor to
the extent of any increases in the Investor Interest. In the event that
the Investor Interest does not for any reason equal the Full Investor
Interest by the end of the Funding Period, any amount remaining in the
Pre-Funding Account and any additional amounts specified in the related
Prospectus Supplement will be payable to the Certificateholders of such
Series in the manner and at such time as set forth in the related Prospectus
Supplement. Such payment will reduce the aggregate principal amount of such
Certificates.
Monies in the Pre-Funding Account will be invested by the Trustee in
Permitted Investments and, if so specified in the related Prospectus
Supplement, will be subject to a guaranteed rate or investment agreement or
other similar arrangement, and, in connection with each Distribution Date
during the Funding Period, investment earnings on funds in the Pre-Funding
Account during the related Monthly Period will be withdrawn from the
Pre-Funding Account and deposited, together with any applicable payment
under a guaranteed rate or investment agreement or other similar
arrangement, into the Finance Charge Account for distribution in respect of
interest on the Certificates of the related Series in the manner specified
in the related Prospectus Supplement.
Allocations
The Servicer will allocate between the Investor Interest of each
Series issued by the Trust (and between each Class of each Series) and the
Transferor Interest, and, in certain circumstances, the interest of certain
Credit Enhancement Providers, all amounts collected on Finance Charge
Receivables, all amounts collected on Principal Receivables and all Net
Default Amounts and Net Recoveries. The Servicer will make each allocation
by reference to the applicable Investor Percentage of each Series and the
Transferor Percentage, and, in certain circumstances, the percentage
interest of certain providers of Enhancement (the "Credit Enhancement
Percentage") with respect to such Series. The Prospectus Supplement
relating to a Series will specify the Investor Percentage and, if
applicable, the Credit Enhancement Percentage (or the method of calculating
such percentages) with respect to the allocations of collections of
Principal Receivables, Finance Charge Receivables and Net Default Amounts
and Net Recoveries during the Revolving Period, any Amortization Period and
any Accumulation Period, as applicable. In addition, for each Series of
Certificates having more than one Class, the related Prospectus Supplement
will specify the method of allocation between each Class.
The Transferor Percentage will, in all cases, be equal to 100% minus
the aggregate Investor Percentages and, if applicable, the Credit
Enhancement Percentages, for all Series then outstanding.
Application of Collections
Except as otherwise provided below, the Servicer will deposit into the
Collection Account for the Trust, no later than the second business day (or
such other day specified in the related Prospectus Supplement) following
the date of processing, any payment collected by the Servicer on the
Receivables. On the same day as any such deposit is made, the Servicer will
make the deposits and payments to the accounts and parties as indicated
below; provided, however, that for as long as First NBC remains the
Servicer under the Agreement and (a) (i) the Servicer provides to the
Trustee a letter of credit or other credit enhancement covering the risk of
collection of the Servicer acceptable to the Rating Agencies and (ii) the
Rating Agency Condition shall have been satisfied with respect to reliance
on
51
<PAGE>
such letter of credit or other credit enhancement or (b) the certificate of
deposit or unsecured short-term debt obligations of the Transferor are
rated P-1 by Moody's and at least A-1 by Standard & Poor's and insured by
either BIF or SAIF or (c) the Transferor makes other arrangements
satisfactory to each Rating Agency rating any Series then outstanding, then
the Servicer may make deposits to the Collection Account and such other
deposits and payments on the business day immediately prior to the
Distribution Date (the "Transfer Date") in an amount equal to the net
amount of such deposits and payments which would have been made had the
conditions of this proviso not applied.
The Pooling and Servicing Agreement provides, that until the date on
which First NBC notifies the Trustee that First NBC is able, and elects, to
calculate the aggregate amount of Finance Charge Receivables and Principal
Receivables on a daily basis rather than on a Billing Cycle basis (the
"Conversion Date") references herein to deposits and payments of
collections received during a particular month shall instead refer to
collections received during Billing Cycles ending during such month. See
"Description of Certificates -- Application of Collections." The Servicer
will make such deposits and payments based on the assumption that all
collections received by the Servicer with respect to the Receivables in
each Billing Cycle are collections of Finance Charge Receivables up to the
amount of Finance Charge Receivables billed with respect to Receivables in
such Billing Cycle (with respect to each Billing Cycle, the "Billed Finance
Charge Receivables") and collections in excess of the Billed Finance Charge
Receivables are collections of Principal Receivables, subject to a monthly
reconciliation procedure. The term "Aggregate Principal Receivables" means
in the case of any date of determination which occurs before the Conversion
Date, the aggregate amount of Principal Receivables as of the end of the
Billing Cycles during the Monthly Period immediately preceding such date of
determination or, in the case of any date of determination which occurs on
or after the Conversion Date, the aggregate amount of Principal Receivables
as of the end of the day on such date of determination.
Whether the Servicer is required to make monthly or daily deposits to
the Collection Account with respect to any Monthly Period, (i) the Servicer
will only be required to deposit Collections from the Collection Account
into the Finance Charge Account, the Excess Funding Account or such related
series 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 provider of Enhancement
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.
The Servicer will withdraw the following amounts from the Collection
Account for application as indicated:
(a) an amount equal to the Transferor Percentage of the aggregate
amount of such deposits in respect of Principal Receivables and
Finance Charge Receivables, respectively, will be paid or held for
payment to the Transferor (or, in certain limited circumstances,
deposited in the Excess Funding Account);
(b) subject to reallocations among a Reallocation Group (see "--
Reallocations Among Certificates of Different Series within a
Reallocation Group"), an amount equal to the applicable Investor
Percentage of the aggregate amount of such deposits in respect of
Finance Charge Receivables will be deposited into the Finance Charge
Account for allocation and distribution as described in the related
Prospectus Supplement;
(c) during the Revolving Period, an amount equal to the applicable
Investor Percentage of the aggregate amount of such deposits in
respect of Principal Receivables will, in the case of a Principal
Sharing Series, be made available for principal payments or
accumulation on other Series of Certificates and otherwise (or to the
extent not needed for such principal payments or accumulation), will
be paid or held for payment to the Transferor, provided that if after
giving effect to the inclusion in the Trust of all Receivables on or
prior to such date of processing and the application of payments
referred to in paragraph (a) above the
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<PAGE>
Transferor Interest is reduced to less than the Minimum Transferor
Interest, the excess will be deposited in the Excess Funding Account
and will be used as described in the related Prospectus Supplement;
(d) during the Controlled Amortization Period, Controlled
Accumulation Period or Rapid Accumulation Period, as applicable, an
amount equal to the applicable Investor Percentage of such deposits in
respect of Principal Receivables up to the amount, if any, specified
in the related Prospectus Supplement will be deposited in the
Principal Funding Account or related series account identified for
such purpose, as applicable, for allocation and distribution to
Certificateholders as described in the related Prospectus Supplement,
except that, if collections of Principal Receivables exceed the
principal payments which may be allocated or distributed to
Certificateholders, then the amount of such excess will be paid to the
Transferor until the Transferor Interest is reduced to the Minimum
Transferor Interest, and thereafter will be deposited in the Excess
Funding Account or other specified account and will be used as
described in the related Prospectus Supplement, including for payment
to other Series of Certificates issued by the Trust; and
(e) during the Principal Amortization Period, if applicable, and
the Rapid Amortization Period, an amount equal to the applicable
Investor Percentage of such deposits in respect of Principal
Receivables will be deposited into the related series account
identified for such purpose for application and distribution as
provided in the related Prospectus Supplement.
In the case of a Series of Certificates having more than one Class,
the amounts in the Collection Account will be allocated and applied to each
Class in the manner and order of priority described in the related
Prospectus Supplement.
Reallocations Among Different Series within a Reallocation Group
Group Investor Finance Charge Collections. Any Series offered hereby
may, if so specified in the related Prospectus Supplement, be included in a
Reallocation Group. Other Series issued in the future may also be included
in such Group.
The Servicer will calculate for each Monthly Period the Group Investor
Finance Charge Collections for a particular Reallocation Group, and on the
following Distribution Date will allocate such amount among the Investor
Interests (including any Enhancement Invested Amounts) for all Series in
such Reallocation Group in the following priority:
(i) Group Investor Monthly Interest;
(ii) Group Investor Monthly Fees;
(iii) Group Investor Default Amounts;
(iv) Group Investor Charge-Offs; and
(v) the balance pro rata among each Series in such Reallocation
Group based on the current Investor Interest (including any
Enhancement Invested Amount) of each such Series.
In the case of clauses (i), (ii), (iii) and (iv), if the amount of
Group Investor Finance Charge Collections is not sufficient to cover each
such amount in full, the amount available will be allocated among the
Series in such Reallocation Group pro rata, based on the claim that each
Series has under the applicable clause. This means, for example, that if
the amount of Group Investor Finance Charge Collections is not sufficient
to cover Group Investor Monthly Interest, each Series in such Reallocation
Group will share such amount pro rata, and any Series in such
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<PAGE>
Reallocation Group with a claim with respect to monthly interest, overdue
monthly interest and interest on such overdue monthly interest, if
applicable, which is larger than the claim for such amounts for any other
Series in such Reallocation Group (due to a higher certificate rate) will
receive a proportionately larger allocation than such other Series.
The amount of Group Investor Finance Charge Collections allocated to
the Investor Interest (including any Enhancement Invested Amount) for a
particular Series offered hereby as described above is referred to herein
as "Reallocated Investor Finance Charge Collections."
"Group Investor Charge-Offs" means, for any Reallocation Group on any
Distribution Date, the sum of the Investor Charge-Offs for all Series in
such Reallocation Group for the related Monthly Period.
"Group Investor Default Amounts" means, for any Reallocation Group on
any Distribution Date, the sum of the Investor Default Amounts for all
Series in such Reallocation Group for the related Monthly Period.
"Group Investor Finance Charge Collections" means, for any
Reallocation Group on any Distribution Date, the sum of the Investor
Finance Charge Collections for all Series in such Reallocation Group for
such Monthly Period.
"Group Investor Monthly Fees" means, for any Reallocation Group on any
Distribution Date, the aggregate amount of Investor Monthly Fees for all
Series in such Reallocation Group for such Distribution Date.
"Group Investor Monthly Interest" means, for any Reallocation Group on
any Distribution Date, the aggregate amount of monthly interest, overdue
monthly interest and interest on such overdue monthly interest, if
applicable, for all Series in such Reallocation Group for such Distribution
Date.
"Investor Finance Charge Collections" means, for any Series, the
amount of collections of Finance Charge Receivables allocable to the
Investor Interest (including any Enhancement Invested Amount) of that
Series for the related Monthly Period, which is determined by multiplying
by the applicable Investor Percentage the aggregate amount of such
collections for that Monthly Period.
"Investor Monthly Fees" means, for any Series on any Distribution
Date, the sum of the Servicing Fee for that Series for the related Monthly
Period, and any fees in respect of Credit Enhancement or similar fees which
are paid out of Reallocated Investor Finance Charge Collections for such
Series pursuant to the applicable Series Supplement.
The chart below demonstrates the manner in which collections of
Finance Charge Receivables are allocated and reallocated among Series in a
Reallocation Group. The chart assumes that the Trust has issued three
Series (Series 1, 2 and 3), and that each such Series is in its Revolving
Period.
In Step 1, total collections of Finance Charge Receivables are
allocated among the three Series and the Transferor Interest based on the
Investor Percentage for each Series and the Transferor Percentage. The
amounts allocated to each Series pursuant to Step 1 are referred to as
"Investor Finance Charge Collections."
Group Investor Finance Charge Collections for all Series in a
particular Reallocation Group are pooled as shown above in Step 2 for
reallocation to each such Series as shown in Step 3. In Step 3 Group
Investor Finance Charge Collections are reallocated to each Series in such
Reallocation Group as described above based on the Series' respective claim
with respect to interest payable on the Certificates or Enhancement
Invested Amount (if any) of such Series, the Servicing Fee and the Investor
Default Amount allocable to such Series and certain other amounts in
respect to such Series. The excess is allocated pro rata among the Series
in such Group based on their respective Investor Interests (including any
Enhancement Invested Amounts).
54
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FIRST NBC CREDIT CARD MASTER TRUST FINANCE CHARGE COLLECTIONS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------- --------------------- --------------------- ----------------------
Step 1 Series 1 Series 2 Series 3 Transferor's Finance
Investor Finance Investor Finance Investor Finance Charge Collections
Charge Collections Charge Collections Charge Collections (based upon the
(based upon the (based upon the (based upon the Transferor
Investor Percentage) Investor Percentage) Investor Percentage) Percentage)
------|------------- -----------|---------- -----------|--------- ----------------------
| | |
------|----------------------------|-----------------------------|---------
<CAPTION>
Step 2 Group
Investor Finance Collections
-----------------------------------|---------------------------------------
|
-----------------------------------|---------------------------------------
<S> <C> <C> <C>
Step 3 Series 1 Series 2 Series 3
Monthly Interest Monthly Interest Monthly Interest
-----------------------------------|---------------------------------------
|
-----------------------------------|---------------------------------------
Series 1 Series 2 Series 3
Investor Monthly Fees Investor Monthly Fees Investor Monthly Fees
-----------------------------------|---------------------------------------
|
-----------------------------------|---------------------------------------
Series 1 Series 2 Series 3
Investor Default Amount Investor Default Amount Investor Default Amount
-----------------------------------|---------------------------------------
Series 1 Series 2 Series 3
Investor Charge-Offs Investor Charge-Offs Investor Charge-Offs
-----------------------------------|---------------------------------------
|
-----------------------------------|---------------------------------------
Series 1 Series 2 Series 3
Balance based upon Balance based upon Balance based upon
Investor Interest Investor Interest Investor Interest
(including any (including any (including any
Enhancement Enhancement Enhancement
Invested Amount) Invested Amount) Invested Amount)
--------------------------------------------------------------------------
</TABLE>
55
<PAGE>
Shared Excess Finance Charge Collections
The Prospectus Supplement relating to a Series will specify whether
such Series will be an Excess Allocation Series and will identify any
previously issued Excess Allocation Series. The Certificateholders of an
Excess Allocation Series may be entitled to receive all or a portion of
Excess Finance Charge Collections with respect to other Excess Allocation
Series to cover any shortfalls with respect to amounts payable from
collections of Finance Charge Receivables allocable to such Series. While
any Series offered hereby may be designated as an Excess Allocation Series,
there can be no assurance that (a) any other Series will be designated as
an Excess Allocation Series, (b) there will be any Excess Finance Charge
Collections with respect to any such other Series for any Monthly Period,
or (c) any agreement relating to any Credit Enhancement will not be amended
in such a manner as to increase payments to the providers of Credit
Enhancement and thereby decrease the amount of Excess Finance Charge
Collections available from such Series. See "-- Application of Collections"
and "-- Defaulted Receivables; Incentive Payments and Fraudulent Charges;
Investor Charge-Offs."
Excess Funding Account
If on any date a Retention Condition exists, the Servicer will not
distribute to the Transferor any collections of Principal Receivables
that otherwise would be distributed to the Transferor, but shall 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, as a trust account or with the Servicer or with a Qualified
Institution (the "Excess Funding Account") until the Retention Condition
ceases. Funds on deposit in the Excess Funding Account will be withdrawn
and paid to the Transferor on any date provided that a Retention Condition
is not in effect, or would result from such payment, on such date.
In addition, if a Controlled Accumulation Period, Controlled Amortization
Period, Principal Amortization Period, Rapid Amortization Period or Rapid
Accumulation Period commences with respect to any Series entitled to the
benefits of Shared Principal Collections, then an amount of funds on
deposit in the Excess Funding Account (after giving effect to the release
of funds to the Transferor as described above) up to the amount, if any,
by which the Transferor Interest would be less than zero if there were no
funds on deposit in the Excess Funding Account on such date, 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. "Retention Condition" means (a) on
any day on and after the Conversion Date, either (i) the Transferor Interest
is less than the Minimum Transferor Interest or (ii) the sum of the Aggregate
Principal Receivables and the principal amount on deposit in the Excess
Funding Account is less than the Minimum Aggregate Principal Receivables
(in each case determined after giving effect to any transfer of Principal
Receivables to the Trust on such day); or (b) on any day prior to the
Conversion Date, Retention Condition shall have the meaning specified in
the applicable Prospectus Supplement.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Permitted Investments. Any
earnings (net of losses and investment expenses) earned on amounts on
deposit in the Excess Funding Account during any Monthly Period will be
withdrawn from the Excess Funding Account and turned over to or at the
direction of the Servicer.
Shared Principal Collections
If a Series is designated a "Principal Sharing Series" in the related
Prospectus Supplement, to the extent that collections of Principal
Receivables and certain other amounts that are allocated to the Investor
Interest of such Series are not needed to make payments or deposits with
respect to such Series, such collections will constitute Shared Principal
Collections and will be applied to cover principal payments due to or for
the benefit of Certificateholders of other Principal Sharing Series. Any
such reallocation will not result in a reduction in the Investor Interest
of the Series to which such collections were initially allocated.
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<PAGE>
Paired Series
If specified in the Prospectus Supplement relating to a Series, such
Series may be paired with another Series (each, a "Paired Series"), such
that a reduction in the Investor Interest or Adjusted Investor Interest of
one such Series results in an increase in the Investor Interest of the
other such Series. A Paired Series would provide financing for a portion of
the Trust's assets, from which the Collections of Principal Receivables are
dedicated to a pre-existing Series if that pre-existing Series has, in
part, been paid or effectively defeased with Collections that have been set
aside for an eventual payment. The effect of a Paired Series is to provide
for continuous investment in the Receivables by Certificateholders, thereby
reducing the potential increase in the Transferor Interest as the first of
the Paired Series' interest in the Trust is reduced through the
amortization or accumulation of principal. If a Pay Out Event occurs with
respect to a Series having a Paired Series or with respect to the Paired
Series when such Series is in a Controlled Amortization Period or
Controlled Accumulation Period, the Investor Percentage for collections of
Principal Receivables for the Series and for its Paired Series may be reset
as specified in the related Prospectus Supplements. The "Adjusted Investor
Interest" for any Series means the Investor Interest of that Series,
adjusted in any manner described in the related Prospectus Supplement.
Defaulted Receivables; Incentive Payments and Fraudulent Charges;
Investor Charge-Offs
For each Series of Certificates, on the business day preceding each
Transfer Date (the "Determination Date"), the Servicer will calculate the
amount (for each Series, the "Investor Default Amount") equal to the
applicable Investor Percentage of the Net Default Amount for the related
Monthly Period. In the case of a Series of Certificates having more than
one Class, the Investor Default Amount will be allocated among the Classes
in the manner described in the related Prospectus Supplement. If so
provided in the related Prospectus Supplement, an amount equal to the
Investor Default Amount for any Monthly Period may be paid from other
amounts, including collections in the Finance Charge Account or from Credit
Enhancement, and applied to pay principal to Certificateholders or the
Transferor, as appropriate. In the case of a Series of Certificates
having one or more Classes of Subordinated Certificates, the related
Prospectus Supplement may provide that all or a portion of amounts otherwise
allocable to such Subordinated Certificates may be paid to the Senior
Certificateholders to make up any Investor Default Amount allocable to
such Senior Certificateholders.
The Investor Interest of each Series will be reduced (an "Investor
Charge-Off") to the extent that the related Investor Default Amount for any
Monthly Period exceeds the amount of collections in the Finance Charge
Account available to cover the Investor Default Amount and any amounts
available under applicable Credit Enhancement for such purpose. Investor
Charge-Offs will be reimbursed on any Distribution Date to the extent
amounts on deposit in the Finance Charge Account and otherwise available
therefor exceed interest, fees and any aggregate Investor Default Amount
payable on such date, resulting in an increase in the Series' Investor
Interest. In the case of a Series of Certificates having more than one
Class, the related Prospectus Supplement will describe the manner and
priority of allocating Investor Charge-Offs and reimbursements thereof
among the Investor Interests of the several Classes.
If the Servicer adjusts the amount of any Principal Receivable because
of transactions or set-offs occurring in respect of an incentive payment to
or for the benefit of a cardholder or because such Principal Receivable was
created in respect of merchandise which was refused or returned by a
cardholder, then the amount of the Transferor Interest in the Trust will be
reduced by the aggregate amount of the adjustment. In addition, the
Transferor Interest in the Trust will be reduced, on a net basis, as a
result of transactions in respect of any Principal Receivable which was
discovered to have been created through a fraudulent or counterfeit charge.
Furthermore, in the event that the exclusion of such Receivables from the
calculation of the Transferor Interest at such time would cause the
Transferor Interest to be less than the Minimum Transferor Interest, the
Transferor will be required to pay an amount equal to such deficiency into
the Excess Funding Account.
57
<PAGE>
Defeasance
If so specified in the Prospectus Supplement relating to a Series, the
Transferor may terminate its substantive obligations in respect of such
Series or the Trust by depositing with the Trustee, from amounts
representing, or acquired with, collections of Receivables, money or
Permitted Investments sufficient to make all remaining scheduled interest
and principal payments on such Series or all outstanding Series of
Certificates, as the case may be, on the dates scheduled for such payments
and to pay all amounts owing to any Credit Enhancement Provider with
respect to such Series or all outstanding Series, as the case may be, if
such action would not result in a Pay Out Event for any Series. Prior to
its first exercise of its right to substitute money or Permitted
Investments for Receivables, the Transferor will deliver to the Trustee (i)
an opinion of counsel to the effect that such deposit and termination of
obligations will not result in the Trust being required to register as an
"investment company" within the meaning of the Investment Company Act of
1940, as amended and (ii) a Tax Opinion.
Final Payment of Principal; Termination
The Certificates of each Series offered hereby will be subject to
optional repurchase by the Transferor on any Distribution Date after that
Series' Investor Interest and any related Enhancement Invested Amount is
reduced to an amount less than or equal to 5% of the initial Investor
Interest (or such lesser amount as may be specified in the related
Prospectus Supplement), if certain conditions set forth in the Agreement
are met. The repurchase price will be specified in the related Prospectus
Supplement.
The Certificates of each Series will be retired on the day following
the Distribution Date on which the final payment of principal is scheduled
to be made to the Certificateholders, whether as a result of optional
reassignment to the Transferor or otherwise. Each Prospectus Supplement
will specify the final date on which principal and interest with respect to
the related Series of Certificates will be scheduled to be distributed (the
"Series Termination Date"). Certificates may, however, be subject to prior
termination as provided above. If the Investor Interest is greater than
zero on the Series Termination Date, the Trustee or Servicer may be
required to sell or cause to be sold certain Receivables in the manner
provided in the Agreement and Series Supplement and to pay the net proceeds
of such sale and any collections on the Receivables, in an amount at least
equal to the sum of the Investor Interest and the Enhancement Invested
Amount, if any, with respect to such Series plus accrued interest due
thereon.
Unless the Servicer and the Transferor instruct the Trustee otherwise,
the Trust will terminate on the earlier of (a) the day after the
Distribution Date on which the aggregate Investor Interest and, if specified
in the Prospectus Supplement for any Series, the Enhancement Invested Amount
or Collateral Interest, if any, with respect to each Series is zero,
(b) the Specified Trust Termination Date or (c) if the Receivables are sold
or disposed of, immediately following such sale or disposition (such date,
the "Trust Termination Date"). Upon the termination of the Trust, 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. For purposes
hereof, the "Specified Trust Termination Date" means the day which is 21
years less one day after the death of the officers and the last survivor
of all the lineal descendants of every officer of the Trustee of the Trust
who are living on the date of the Agreement, or such later date which would
not render the rights, privileges or options under the Trust invalid under
applicable law.
Pay Out Events
The Revolving Period will terminate prior to the date specified in the
related Prospectus Supplement if a Pay Out Event occurs prior to such date.
A Pay Out Event occurs with respect to all Series upon the occurrence of
any of the following events:
(a) certain events of insolvency or receivership relating to
the Transferor;
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(b) the Transferor is unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the
Agreement; or
(c) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
In addition, a Pay Out Event may occur with respect to any Series upon
the occurrence of any other event specified in the related Prospectus
Supplement. On the date on which a Pay Out Event is deemed to have
occurred, the Rapid Amortization Period or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period will commence. If,
because of the occurrence of a Pay Out Event, the Rapid Amortization Period
begins earlier than the scheduled commencement of an Amortization Period or
prior to a Scheduled Payment Date, Certificateholders will begin receiving
distributions of principal earlier than they otherwise would have, which
may shorten the average life of the Certificates.
In addition to the consequences of a Pay Out Event discussed above, if
pursuant to certain provisions of Federal law, the Transferor voluntarily
enters liquidation or a receiver is appointed for the Transferor, on the
day of such event the Transferor will immediately cease to transfer
Principal Receivables to the Trust and promptly give notice to the Trustee
of such event.
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the
Transferor, the conservator or receiver may have the power to prevent the
early sale, liquidation or disposition of the Receivables and the
commencement of a Rapid Amortization Period or, if applicable with respect
to a Series as specified in the related Prospectus Supplement, a Rapid
Accumulation Period. In addition, a conservator or receiver may have the
power to cause the early sale of the Receivables and the early retirement
of the Certificates. See "Risk Factors -- Certain Matters Relating to
Receivership" and "Certain Legal Aspects of the Receivables -- Certain
Matters Relating to Receivership."
Servicing Compensation and Payment of Expenses
For each Series of Certificates, the Servicer will be compensated for
its servicing activities and reimbursed for its expenses by payment to it
of the Servicing Fee at the times and in the amounts specified in the
related Prospectus Supplement. The Servicing Fee will be funded from
collections of Finance Charge Receivables allocated to the Investor
Interest and will be paid each month (or on any other specified basis) from
amounts so allocated and on deposit in the Finance Charge Account (which,
if so specified in the related Prospectus Supplement, may include all or a
portion of the Interchange arising from the Accounts) or, in certain
limited circumstances, from amounts available from Enhancement and other
sources, if any. The remainder of the servicing fee for the Trust will be
allocable to the Transferor Interest, the Investor Interests of any other
Series issued by the Trust and the interest represented by the Collateral
Interest or the Enhancement Invested Amount, if any, with respect to such
Series, as described in the related Prospectus Supplement. Neither the
Trust nor the Certificateholders will have any obligation to pay the
portion of the servicing fee allocable to the Transferor Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables, including payment of
the fees and disbursements of the Trustee and independent certified public
accountants and other fees that are not expressly stated in the Agreement
to be payable by the Trust or the Certificateholders (but excluding
Federal, state and local income and franchise taxes, if any, of the Trust).
Certain Matters Regarding the Transferor and the Servicer
With respect to each Series of Certificates, the Servicer may not
resign except upon determination that performance of its duties is no
longer permissible under applicable law. No such resignation will become
effective
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until the Trustee or another successor to the Servicer has assumed the
Servicer's responsibilities and obligations under the Agreement.
The Agreement will provide that the Servicer will indemnify the Trust
and Trustee from and against any reasonable loss, liability, expense,
damage or injury suffered or sustained by reason of any acts or omissions
or alleged acts or omissions of the Servicer with respect to the activities
of the Trust or the Trustee. The Servicer will not, however, indemnify (a)
the Trustee for liabilities imposed by reason of fraud, 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 liability 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 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 any Federal, state, local or foreign 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.
The Agreement will provide that neither the Transferor nor the
Servicer nor any of their respective directors, officers, employees or
agents will be under any other liability to the Trust, Trustee,
Certificateholders or any other person for any action taken, or for
refraining from taking any action, in good faith pursuant to the Agreement.
Neither the Transferor, the Servicer, nor any of their respective
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 the Transferor, the Servicer
or any such person in the performance of its duties or by reason of
reckless disregard of obligations and duties thereunder. In addition, the
Agreement will provide 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 and which in its opinion
may expose it to any expense or liability.
The Agreement will provide that, in addition to New Issuances, the
Transferor may transfer all or a portion of the Transferor Interest,
provided that prior to any such transfer (a) the Trustee receives written
notification from each Rating Agency that such transfer will not result
in a lowering of its then-existing rating of the Certificates of each
outstanding Series rated by it and (b) the Trustee receives a
Tax Opinion.
Any person into which, in accordance with the Agreement, the
Transferor or the Servicer may be merged or consolidated or any person
resulting from any merger or consolidation to which the Transferor or the
Servicer is a party, or any person succeeding to the business of the
Transferor or the Servicer, upon execution of a supplement to the Agreement
and delivery of an opinion of counsel with respect to the compliance of the
transaction with the applicable provisions of the Agreement, will be the
successor to the Transferor or the Servicer, as the case may be, under the
Agreement.
In addition, if the Bank elects to sell or otherwise dispose of the
Accounts, then the new owner of the Accounts may be substituted for the
Bank as Transferor and Servicer upon the satisfaction of certain
conditions, including the delivery of a Tax Opinion and receipt of written
confirmation from each Rating Agency that such substitution will not result
in such Rating Agency's reducing or withdrawing its rating on any then
outstanding Series rated by it.
Servicer Default
In the event of any Servicer Default (as defined below), either the
Trustee or Certificateholders representing undivided interests aggregating
more than 50% of the Investor Interests for all Series of Certificates of
the Trust, 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 as servicer under the Agreement and in and to the
Receivables and the
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proceeds thereof and the Trustee may appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Transferor under the Agreement
and in the Transferor Interest will not be affected by such termination.
The Trustee will as promptly as possible appoint a successor Servicer. If
no such Servicer has been appointed 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. If the Trustee is unable to legally act as Servicer, the
Trustee shall petition a court to appoint a financial institution with
risk-based capital or a net worth of at least $50,000,000 whose regular
business includes servicing VISA or MasterCard credit card receivables to
act as successor Servicer.
"Servicer Default" under the Agreement refers to any of the following
events:
(a) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make certain
payments, transfers or deposits, on the date the Servicer is required
to do so under the Agreement or any Series Supplement (or within the
applicable grace period, which shall not exceed 15 business days);
(b) failure on the part of the Servicer duly to observe or
perform in any respect any other covenants or agreements of the
Servicer which has a material adverse effect on the Certificateholders
of any Series issued and outstanding and which continues unremedied
for a period of 60 days after written notice and continues to have a
material adverse effect on such Certificateholders; or the delegation
by the Servicer of its duties under the Agreement, except as
specifically permitted thereunder;
(c) any representation, warranty or certification made by the
Servicer in the Agreement, or in any certificate delivered pursuant to
the Agreement, proves to have been incorrect when made which has a
material adverse effect on the Certificateholders of any Series issued
and outstanding, and which continues to be incorrect in any material
respect for a period of 60 days after written notice and continues to
have a material adverse effect on such Certificateholders; or
(d) the occurrence of certain insolvency events with respect
to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in clause (a) above for a period of 10 business days (or, in
either case, such longer or shorter period as may be specified in the
related Prospectus Supplement), or referred to under clause (b) or (c) for
a period of 30 business days, will not constitute a Servicer Default if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Servicer and such delay or failure was caused by an act of
God or other similar occurrence. Upon the occurrence of any such event, the
Servicer will not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the
Agreement, and the Servicer will provide the Trustee, any provider of
Enhancement, the Transferor and the holders of Certificates of each Series
issued and outstanding under the Trust prompt notice of such failure or
delay by it, together with a description of the cause of such failure or
delay and its efforts to perform its obligations.
If a conservator or receiver is appointed for the Servicer, and no
Servicer Default other than such conservatorship or receivership or the
insolvency of the Servicer exists, the conservator or receiver may have the
power to prevent either the Trustee or the majority of the
certificateholders from effecting a Service Transfer.
Reports to Certificateholders
For each Series of Certificates, on each Distribution Date, or as soon
thereafter as is practicable, as specified in the related Prospectus
Supplement, the Trustee will forward to each Certificateholder of record a
statement prepared by the Servicer setting forth, among other things: (a)
the total amount distributed, (b) the amount of the distribution on such
Distribution Date allocable to principal on the Certificates, (c) the
amount of such distribution
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allocable to interest on the Certificates, (d) the amount of collections of
Principal Receivables processed during the preceding month or months since
the last Distribution Date and allocated in respect of the Certificates,
(e) the Aggregate Principal Receivables, the Investor Interest and the
Investor Interest as a percentage of the aggregate amount of the Principal
Receivables in the Trust as of the end of the last day of the preceding
Monthly Period or Periods since the last Distribution Date, (f) the
aggregate outstanding balance of Accounts which are 30-59, 60-89 and 90 or
more days delinquent (or a similar classification of delinquency) as of the
end of the last day of the preceding Monthly Period or Periods since the
last Distribution Date, (g) the aggregate Investor Default Amount for the
preceding Monthly Period or Periods since the last Distribution Date, (h)
the amount of Investor Charge-Offs for the preceding Monthly Period or
Periods since the last Distribution Date and the amount of reimbursements
of previous Investor Charge-Offs for the preceding Monthly Period or
Periods since the last Distribution Date, (i) the amount of the Servicing
Fee for the preceding Monthly Period or Periods since the last Distribution
Date, (j) the amount available under any Enhancement and Credit
Enhancement, if any, as of the close of business on such Distribution Date,
(k) the aggregate amount of collections on Finance Charge Receivables
processed during the preceding Monthly Period or Periods since the last
Distribution Date, (l) the Portfolio Yield for the preceding Monthly Period
or Periods since the last Distribution Date, (m) information as to any
Shared Excess Finance Charge Collections, Reallocated Investor Finance
Charge Collections and funds in the Excess Funding Account, and (n) certain
information relating to the floating or variable Certificate Rates, if
applicable, for the Monthly Period or Periods ending on such Distribution
Date. If a Series of Certificates has more than one Class, the statements
forwarded to Certificateholders will provide information as to each Class
of Certificates.
On or before January 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Trustee will furnish to
each person who at any time during the preceding calendar year was a
Certificateholder of record, a statement prepared by the Servicer
containing the information required to be contained in the regular monthly
report to Certificateholders, as set forth in clauses (a), (b) and (c)
above aggregated for such calendar year or the applicable portion thereof
during which such person was a Certificateholder, together with such other
customary information (consistent with the treatment of the Certificates as
debt) as the Trustee or the Servicer deems necessary or desirable to enable
the Certificateholders to prepare their United States tax returns.
Evidence as to Compliance
The Agreement will provide that on or before March 31 of each calendar
year commencing after the calendar year during which it becomes effective
(or another date specified in the related Prospectus Supplement) the
Servicer will cause a firm of independent certified public accountants to
furnish a report to the effect that such accounting firm has made a study
and evaluation of the Servicer's internal accounting controls relative to
the servicing of the Accounts and that, on the basis of such examination,
such firm is of the opinion that such servicing was conducted in compliance
with the sections of the Agreement during the period covered by such report
(which shall be the prior calendar year), except for such exceptions or
errors as such firm shall believe to be immaterial and such other
exceptions as shall be set forth in such statement. On the same time
frames, the Servicer will also be required to cause a firm of independent
certified public accountants to furnish a report to the effect that they
have compared the mathematical calculations of each amount set forth in the
monthly Servicer reports referred to above during the prior calendar year,
or the portion thereof falling after the initial Closing Date, with
Servicer's computer reports which were the source of such amounts and that
on the basis of such comparison, such firm is of the opinion that such
amounts are in agreement, except for such exceptions as it believes to be
immaterial to the financial statements of Servicer and such other
exceptions as shall be set forth in such report. The foregoing procedures
do not constitute an audit under generally accepted accounting principles.
The Agreement will provide for delivery to the Trustee on or before
March 31 of each calendar year commencing after the calendar year during
which it becomes effective, or such other date as is specified in the
related Prospectus Supplement, of an annual statement signed by an officer
of the Servicer to the effect that the Servicer has fully performed its
obligations 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.
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Amendments
The Agreement and any Series Supplement may be amended by the
Transferor, the Servicer and the Trustee, without the consent of
Certificateholders of any Series then outstanding, provided that the
Transferor has delivered to the Trustee an officer's certificate to the
effect that the Transferor reasonably believes that such amendment will not
adversely affect in any material respect the interest of such
Certificateholders and that the Rating Agency Condition has been satisfied.
Amendments may be made as described in the foregoing sentence in order
(among other things) to (i) provide additional Credit Enhancement for the
benefit of the Holders of any Series or substitute such Credit Enhancement,
(ii) add one or more Participations to the Trust, (iii) designate one or
more Additional Transferors or substitute Transferors, (iv) cure any
ambiguity or correct or supplement any provision contained in the Agreement
or Series Supplement which may be defective or inconsistent with any other
provisions thereof, (v) enable all or a portion of the Trust to qualify as,
and to permit an election to be made to cause the Trust to be treated as, a
"financial asset securitization investment trust," as described in the
provisions of the SBJP Act (and, in connection with any such election, to
modify or eliminate existing provisions of relating to the intended Federal
income tax treatment of the Certificates and the Trust), (vi) enable the
Trust to qualify as a partnership for purposes of any state tax laws and
(vii) enable Receivables transferred to the Trust to be derecognized by the
Transferor (or applicable Additional Transferor) under applicable
accounting principles (including provisions relating to the removal of
Accounts) and the Trust to not be treated as a member of the Transferor's
(or such related Additional Transferor's) consolidated group under
applicable accounting principles.
Among other amendments that may be made as described under clause (vi)
in the preceding paragraph, the Agreement may be amended to provide that if
pursuant to certain provisions of Federal law, the Transferor voluntarily
enters liquidation or a receiver is appointed for the Transferor, within 15
days, the Trustee will publish a notice of the liquidation or the
appointment stating that the Trustee intends to sell, dispose of, or
otherwise liquidate the Receivables in a commercially reasonable manner.
Any such amendment will provide that, unless otherwise instructed within a
specified period by Certificateholders representing undivided interests
aggregating more than 50% of the Investor Interest of each Series (or if
any Series has more than one Class, of each Class, and any other Person
specified in the Agreement or a Series Supplement) issued and outstanding,
the Trustee will sell, dispose of, or otherwise liquidate the Receivables
in a commercially reasonable manner and on commercially reasonable terms.
The proceeds from the sale, disposition or liquidation of the Receivables
will be treated as collections of the Receivables and applied as specified
above in "-- Application of Collections" and in the various Prospectus
Supplements.
The Agreement and the related Series Supplement 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% (or such other percentage specified in the related Prospectus
Supplement) of the Investor Interests for all Series of the Trust, for the
purpose of adding any provisions to, changing in any manner or eliminating
any of the provisions of, the Agreement or the related Series Supplement or
of modifying in any manner the rights of Certificateholders of any
outstanding Series of the Trust. No such amendment, however, may (a) reduce
in any manner the amount of, or delay the timing of, distributions required
to be made on any Series, (b) change the definition of or the manner of
calculating the interest of any Certificateholder of any Series issued by
the Trust or (c) 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 the related Series
and 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. Any Series
Supplement and any amendments regarding the addition or removal of
Receivables or Participations from the Trust will not be considered an
amendment requiring Certificateholder consent under the provisions of the
Agreement and any Series Supplement.
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List of Certificateholders
Upon written request of Certificateholders of record representing
undivided interests in the Trust aggregating not less than 10% (or such
other percentage specified in the related Prospectus Supplement) of a
Series' Investor Interest, the Trustee will afford such Certificateholders
access during business hours to the current list of Certificateholders of
the Trust for purposes of communicating with other Certificateholders with
respect to their rights under the Agreement. The Trustee may, however,
refuse to supply such list until it has been adequately indemnified by such
Certificateholders for its costs and expenses, and will give the Servicer
notice that such request has been made. See "-- Book-Entry Registration"
and "-- Definitive Certificates" above.
The Trustee
The Prospectus Supplement for each Series will specify the 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 (except that the Trustee may not hold a
Certificate issued by the Trust for its own account). In addition, for
purposes of meeting the legal requirements of certain local jurisdictions,
the Trustee shall have the power to appoint a co-trustee or separate
trustees of all or any part of the Trust. In the event of such appointment,
all rights, powers, duties and obligations conferred or imposed upon the
Trustee by the Agreement shall be conferred or imposed upon the Trustee and
such separate trustee or co-trustee jointly, or, in any jurisdiction in
which the Trustee shall be incompetent or unqualified to perform certain
acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will
be obligated to appoint a successor Trustee. 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,
the Transferor will be obligated to appoint a successor Trustee. 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.
Interest Rate Swaps and Related Caps, Floors and Collars
The Trustee on behalf of the Trust may enter into interest rate swaps
and related caps, floors and collars to minimize the risk to
Certificateholders from adverse changes in interest rates (collectively,
"Swaps").
An interest rate Swap is an agreement between two parties
("Counterparties") to exchange a stream of interest payments on an agreed
hypothetical or "notional" principal amount. No principal amount is
exchanged between the Counterparties to an interest rate Swap. In the
typical Swap, one party agrees to pay a fixed rate on a notional principal
amount, while the Counterparty pays a floating rate based on one or more
reference interest rates such as the London Interbank Offered Rate
("LIBOR"), a specified bank's prime rate, or U.S. Treasury Bill rates.
Interest rate Swaps also permit Counterparties to exchange a floating rate
obligation based upon one reference interest rate (such as LIBOR) for a
floating rate obligation based upon another referenced interest rate (such
as U.S. Treasury Bill rates).
The Swap market has grown substantially in recent years with a
significant number of banks and financial service firms acting both as
principals and as agents utilizing standardized Swap documentation. Caps,
floors and collars are more recent innovations, and they are less liquid
than other Swaps. There can be no assurance that the Trust will be able to
enter into or offset Swaps at any specific time or at prices or on other
terms that are advantageous. In addition, although the terms of Swaps may
provide for termination under certain circumstances, there can be no
assurance that the Trust will be able to terminate or offset a Swap on
favorable terms.
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CREDIT ENHANCEMENT
General
Credit Enhancement may be provided with respect to one or more Classes
or any Series. Credit Enhancement may be in the form of the subordination
of one or more Classes of the Certificates of such Series, the
establishment of a cash collateral guaranty or account, a collateral
interest, a letter of credit, a surety bond, an insurance policy, a spread
account, a reserve account, the use of cross-support features or any
combination of the foregoing. Each Prospectus Supplement will specify the
Class or Classes entitled to the benefit of any applicable Credit
Enhancement.
Credit Enhancement generally will not provide protection against all
risks of loss and will not guarantee repayment of the entire principal
balance of the Certificates and interest thereon, although Credit
Enhancement for a particular Class or Series may provide such protection
and guarantee if so specified in the related Prospectus Supplement. If
losses occur which exceed the amount covered by the Credit Enhancement or
which are not covered by the Credit Enhancement, Certificateholders will
bear their allocable share of deficiencies.
If Credit Enhancement is provided with respect to a Series, the
related Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment
thereunder not otherwise described herein, (c) the conditions (if any)
under which the amount payable under such Credit Enhancement may be reduced
and under which such Credit Enhancement may be terminated or replaced and
(d) any material provision of any agreement relating to such Credit
Enhancement. Additionally, the related Prospectus Supplement may set forth
certain information with respect to any Credit Enhancement Provider,
including (i) a brief description of its principal business activities,
(ii) its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business, (iii)
if applicable, the identity of regulatory agencies which exercise primary
jurisdiction over the conduct of its business and (iv) its total assets,
and its stockholders' or policy holders' surplus, if applicable, and other
appropriate financial information as of the date specified in the
Prospectus Supplement. If so specified in the related Prospectus
Supplement, Credit Enhancement with respect to a Series may be available to
pay principal of the Certificates of such Series following the occurrence
of certain Pay Out Events with respect to such Series, and the Credit
Enhancement Provider may have an interest in certain cash flows in respect
of the Receivables to the extent described in such Prospectus Supplement
(the "Enhancement Invested Amount").
Subordination
If specified in the related Prospectus Supplement, one or more Classes
of any Series will be subordinated as described in the related Prospectus
Supplement to the extent necessary to fund payments with respect to the
related Senior Certificates. The rights of the holders of any such
Subordinated Certificates to receive distributions of principal and/or
interest on any Distribution Date will be subordinate in right and priority
to the rights of the holders of Senior Certificates to the extent set forth
in the related Prospectus Supplement. If specified in the related
Prospectus Supplement, subordination may apply only in the event of certain
types of losses not covered by another Credit Enhancement. The related
Prospectus Supplement will also set forth information concerning the amount
of subordination of a Class or Classes of Subordinated Certificates in a
Series, the circumstances in which such subordination will be applicable,
the manner, if any, in which the amount of subordination will decrease over
time and the conditions under which amounts available from payments that
would otherwise be made to holders of such Subordinated Certificates will
be distributed to holders of Senior Certificates. If collections of
Receivables otherwise distributable to holders of a Subordinated Class of a
Series will be used as support for a Class of another Series, the related
Prospectus Supplement will specify the manner and conditions for applying
such a cross-support feature.
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Cash Collateral Guaranty or Account
If specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by a guaranty (the
"Cash Collateral Guaranty") secured by the deposit of cash or certain
permitted investments in an account (the "Cash Collateral Account")
reserved for the beneficiaries of the Cash Collateral Guaranty or by a Cash
Collateral Account alone. The amount available pursuant to the Cash
Collateral Guaranty or the Cash Collateral Account will be the lesser of
amounts on deposit in the Cash Collateral Account and an amount specified
in the related Prospectus Supplement. The related Prospectus Supplement
will set forth the circumstances under which payments are made to
beneficiaries of the Cash Collateral Guaranty from the Cash Collateral
Account or from the Cash Collateral Account directly.
Collateral Interest
If specified in the related Prospectus Supplement, support for a
Series or one or more of its Classes will be provided initially by an
undivided interest in the Trust (the "Collateral Interest") in an amount
initially equal to a percentage of the Certificates of such Series as
specified in the Prospectus Supplement. Such Series may also have the
benefit of a Cash Collateral Guaranty or Cash Collateral Account with an
initial amount on deposit therein, if any, as specified in the Prospectus
Supplement which will be increased (i) to the extent the Transferor elects,
subject to certain conditions specified in the related Prospectus
Supplement, to apply collections of Principal Receivables allocable to the
Collateral Interest to decrease the Collateral Interest, (ii) to the extent
collections of Principal Receivables allocable to the Collateral Interest
are required to be deposited into the Cash Collateral Account as specified
in the related Prospectus Supplement and (iii) to the extent excess
collections of Finance Charge Receivables are required to be deposited into
the Cash Collateral Account as specified in the related Prospectus
Supplement. The total amount of the Credit Enhancement available pursuant
to the Collateral Interest and, if applicable, the Cash Collateral Guaranty
or Cash Collateral Account will be the lesser of the sum of the Collateral
Interest and the amount on deposit in the Cash Collateral Account and an
amount specified in the related Prospectus Supplement. The related
Prospectus Supplement will set forth the circumstances under which payments
which otherwise would be made to holders of the Collateral Interest will be
distributed to holders of Certificates and, if applicable, the
circumstances under which payment will be made under the Cash Collateral
Guaranty or under the Cash Collateral Account.
Letter of Credit
If specified in the related Prospectus Supplement, support for a
Series or one or more of its Classes will be provided by one or more
letters of credit. A letter of credit may provide limited protection
against certain losses in addition to or in lieu of other Credit
Enhancement. The issuer of the letter of credit will be obligated to honor
demands with respect to such letter of credit, to the extent of the amount
available thereunder, to provide funds under the circumstances and subject
to such conditions as are specified in the related Prospectus Supplement.
The maximum liability of the issuer of the letter of credit under a
letter of credit will generally be an amount equal to a percentage
specified in the related Prospectus Supplement of the Initial Investor
Interest of a Series or a Class of such Series. The maximum amount
available at any time to be paid under a letter of credit will be
determined in the manner specified therein and in the related Prospectus
Supplement.
Surety Bond or Insurance Policy
If specified in the related Prospectus Supplement, insurance with
respect to a Series or one or more of its Classes will be provided by one
or more insurance companies. Such insurance will guarantee, with respect to
one or more Classes of the related Series, distributions of interest or
principal in the manner and amount specified in the related Prospectus
Supplement.
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If specified in the related Prospectus Supplement, a surety bond will
be purchased for the benefit of the holders of any Series or Class or such
Series to assure distributions of interest or principal with respect to
such Series or Class of Certificates in the manner and amount specified in
the related Prospectus Supplement.
Spread Account
If specified in the related Prospectus Supplement, support for a
Series or one or more of its Classes will be provided by the periodic
deposit of certain available excess cash flow from the Trust assets into an
account (the "Spread Account") intended to assist with subsequent
distribution of interest and principal on the Certificates of such Class or
Series in the manner specified in the related Prospectus Supplement.
Reserve Account
If specified in the related Prospectus Supplement, support for a
Series or one or more of its Classes or any related Enhancement will be
provided by a reserve account (the "Reserve Account"). The Reserve Account
may be funded, to the extent provided in the related Prospectus Supplement,
by an initial cash deposit, the retention of certain periodic distributions
of principal, interest or both otherwise payable to one or more Classes of
Certificates, including the Subordinated Certificates, or the provision of
a letter of credit, guarantee, insurance policy or other form of credit or
any combination thereof. The Reserve Account will be established to assist
with the subsequent distribution of principal or interest on the
Certificates of such Series or Class or amounts owing on any related
Enhancement as provided in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Transferor will represent and warrant in the Agreement that the
transfer of Receivables by it to the Trust is either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor
in and to the related Receivables, except for the Transferor Interest,
or the grant to the Trustee of a security interest in such Receivables.
The Transferor also will represent and warrant in the Agreement that, if the
transfer of Receivables by the Transferor to the Trust is deemed to create a
security interest under Chapter 9 of the Louisiana Commercial Laws, as in
effect in the State of Louisiana (the "UCC"), there will exist a valid,
subsisting and enforceable first priority perfected security interest in such
Receivables created thereafter in favor of the Trustee on and after their
creation, except for certain tax and other governmental liens. For a
discussion of the Trust's rights arising from a breach of these warranties,
see "Description of the Certificates -- Representations and Warranties."
The Transferor will represent as to Receivables to be conveyed that
the Receivables are "accounts", "chattel paper" or "general intangibles"
for purposes of the UCC. Both the absolute transfer and assignment of
accounts and the transfer of accounts as security for an obligation are
treated for certain purposes under Article 9 of the UCC as creating a
security interest therein and are subject to its provisions, and the filing
of an appropriate financing statement is required to perfect the interest
of the Trust. Financing statements covering the Receivables have been and
will be filed with the appropriate governmental authority to protect the
interests of the Trust in the Receivables.
There are certain limited circumstances under the UCC in which a prior
or subsequent transferee of Receivables coming into existence after a
Closing Date could have an interest in such Receivables with priority over
the Trust's interest. Under the Agreement, however, the Transferor will
represent and warrant that it transferred the Receivables to the Trust free
and clear of the lien of any third party. 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. A tax
or government lien or other nonconsensual lien on property of the
Transferor arising prior to the
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time a Receivable comes into existence may also have priority over the
interest of the Trust in such Receivable. In addition, if the FDIC were
appointed as conservator or receiver of the Transferor, certain
administrative expenses of the receiver may also have priority over the
interest of the Trust in such Receivable. If a conservatorship or
receivership proceeding were to be commenced involving the Transferor and
the conservator or receiver of the Transferor were to take the position
that the transfer of the Receivables from the Transferor to the Trust
should be characterized as the grant of a security interest in such
Receivables, then delays in distributions on the Certificates and
reductions in such distributions could result. In addition, while the
Transferor is the Servicer, cash collections held by the Transferor may,
subject to certain conditions, be commingled and used for the benefit of
the Transferor prior to the date on which such collections are required to
be deposited in the Finance Charge Account and Principal Account as
described under "Description of Certificates -- Application of
Collections." In the event of the conservatorship or receivership of the
Transferor or, in certain circumstances, the lapse of certain time periods,
the Trust may not have a perfected interest in such collections and, in
such event, the Trust may suffer a loss of all or part of such collections
which may result in a loss to Certificateholders.
Certain Matters Relating to Receivership
The Transferor is chartered as a national banking association and is
subject to regulation and supervision by the Office of the Comptroller of
the Currency, which is authorized to appoint the FDIC as conservator or
receiver of the Transferor upon the occurrence of certain events relating
to the Transferor's financial condition.
The FDIA, as amended by FIRREA, sets forth certain powers that the
FDIC in its capacity as conservator or receiver for the Transferor could
exercise. Positions taken by the FDIC prior to the passage of FIRREA
suggest that the FDIC, if appointed as conservator or receiver for the
Transferor, would not interfere with the timely transfer to the Trust of
payments collected on the Receivables or interfere with the timely
liquidation of related Receivables, as described below. To the extent that
the Transferor has granted a security interest in Receivables to the Trust,
and that interest was validly perfected before the Transferor's insolvency
and was not taken in contemplation of the insolvency of the Transferor, or
with the intent to hinder, delay or defraud the Transferor or the creditors
of the Transferor, the FDIA provides that such security interest should not
be subject to avoidance by the FDIC. However, such positions are not
binding on the FDIC and if the FDIC were to assert a contrary position,
such as by requiring the Trustee to establish its right to those payments
by submitting to and completing the administrative claims procedure under
the FDIA, or were the conservator or receiver to request a stay of
proceedings with respect to the Transferor as provided under the FDIA,
delays in payments on the related Series of Certificates and possible
reductions in the amount of those payments, resulting in losses to the
Certificateholders, could occur. In addition, the FDIC, if appointed as the
conservator or receiver for the Transferor has the power under the FDIA to
repudiate contracts, including secured contracts of the Transferor. The
FDIA provides that a claim for damages arising from the repudiation of a
contract is limited to "actual direct compensatory damages." In the event
the FDIC were to be appointed as conservator or receiver of the Transferor
and were to repudiate the Agreement, then the amount payable out of
available collections to the Certificateholders could be lower than the
outstanding principal and accrued interest on the Certificates.
Upon the appointment of a conservator or receiver or upon a voluntary
liquidation with respect to the Transferor, the Transferor will promptly
give notice thereof to the Trustee and a Pay Out Event will occur with
respect to all Series then outstanding under the Trust. Pursuant to the
Agreement, newly created Principal Receivables will not be transferred to
the Trust on and after any such appointment or voluntary liquidation. Under
the Agreement, the proceeds from the sale of the Receivables would be
treated as collections of the Receivables and the Investor Percentage of
such proceeds would be distributed to the Certificateholders or, if so
specified in the related Prospectus Supplement, collected and held for the
benefit of Certificateholders. This procedure could be delayed, as
described above. If the only Pay Out Event to occur is either the
insolvency of the Transferor or the appointment of a conservator or
receiver for the Transferor, the conservator or receiver may have the power
to prevent the commencement of a Rapid Amortization Period or, if
applicable with respect to a Series as specified in the related Prospectus
Supplement, a Rapid Accumulation Period. In addition, a conservator or
receiver may have
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the power to cause the early sale of the Receivables and the early
retirement of the Certificates, which could reduce the effective yield to
Certificateholders. See "Description of the Certificates -- Pay Out
Events."
Upon the Transferor becoming insolvent, the Transferor also may be
unable (or not required) to perform its obligations with respect to the
repurchase of Ineligible Receivables and dilution of Receivables resulting
from various adjustments to Receivables or fraudulently created
Receivables.
Consumer Protection Laws
The relationships of cardholders, credit card issuers and lenders are
extensively regulated by Federal and state consumer protection laws. With
respect to credit cards issued by the Transferor, the most significant laws
include the Federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting, Fair Debt Collection Practice and Electronic Funds Transfer
Acts, at the Federal level, and the Louisiana Consumer Credit Law,
Louisiana Collection Agency Regulation Act and Louisiana Equal Credit
Opportunity Law. Certain of these statutes impose disclosure requirements
when a credit card account is advertised, when it is opened, at the end of
Billing Cycles and at year end. In addition, certain of these statutes
limit customer liability for unauthorized use, prohibit certain
discriminatory practices in extending credit, and impose certain
limitations on the type of account-related charges that may be assessed.
Cardholders are entitled under these laws to have payments and credits
applied to the credit card accounts promptly, to receive prescribed notices
and to require billing errors to be resolved promptly. The Trust may be
liable for certain violations of consumer protection laws that apply to the
related Receivables, either as assignee from the Transferor with respect to
obligations arising before transfer of the Receivables to the Trust or as a
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 his obligation to pay the amount of Receivables owing. The
Transferor will warrant in the Agreement that all related Receivables have
been and will be created in compliance with the requirements of such laws.
The Servicer will also agree in the Agreement to indemnify the Trust, among
other things, for any liability arising from such violations caused by the
Servicer. For a discussion of the Trust's rights arising from the breach of
these warranties, see "Description of the Certificates -- Representations
and Warranties."
In addition, the SSCRA provides for a stay of court proceedings
against military personnel (including Air Force personnel) on active duty
if the ability of such person to defend against a suit would be materially
affected by reason of military service and limits to 6% per year the
interest chargeable to military personnel (including Air Force personnel)
on active duty on obligations incurred by such person prior to entrance
into such service unless the obligee obtains a court order allowing a
higher rate to be charged. The SSCRA could adversely affect the Servicer's
ability to collect on Receivables generated under First NBC's USAF Club
Card program and other military programs, which make up a significant
portion of the Trust Portfolio. See "First NBC's Credit Card Activities --
General." In its experience to date with the military programs, First NBC
does not believe that the SSCRA has had a material impact on its collection
efforts, but there can be no assurance that the SSCRA would not have an
adverse effect in the future.
Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdiction's consumer protection laws
(including laws limiting the charges imposed by such credit card issuers)
in connection with their operations in such jurisdictions. A successful
challenge by such a jurisdiction could have an adverse impact on the
Transferor's credit card operations or the yield on the Receivables in the
Trust.
Application of Federal and state bankruptcy and debtor relief laws
would affect the interests of the Certificateholders if such laws result in
any related Receivables being written off as uncollectible when the amount
available under any Credit Enhancement is equal to zero. See "Description
of the Certificates -- Defaulted Receivables; Rebates and Fraudulent
Charges; Investor Charge-Offs."
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U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion, summarizing the material anticipated Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates of a Series, is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), proposed, temporary and
final Treasury regulations thereunder, and published rulings and court
decisions in effect as of the date hereof, all of which are subject to
change, possibly retroactively. To the extent that the following summary
relates to matters of law or legal conclusions with respect thereto, such
summary represents the opinion of Mayer, Brown & Platt, special federal tax
counsel for the Bank subject to the qualifications set forth herein. Mayer,
Brown & Platt have prepared or reviewed the statements in this Prospectus
under the heading "U.S. Federal Income Tax Consequences," and are of the
opinion that such statements are correct in all material respects. This
discussion does not address every aspect of the Federal income tax laws
that may be relevant to Certificate Owners of a Series in light of their
personal investment circumstances or to certain types of Certificate Owners
of a Series subject to special treatment under the Federal income tax laws
(for example, banks and life insurance companies). Accordingly, investors
should consult their own tax advisors regarding Federal, state, local,
foreign and any other tax consequences to them of any investment in the
Certificates of a Series. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN CERTIFICATES, AS WELL
AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN
COUNTRY, OR OTHER TAXING JURISDICTION.
Characterization of the Certificates as Indebtedness
Mayer, Brown & Platt, or such other counsel specified in the related
Prospectus Supplement, will act as special tax counsel to the Bank
("Special Tax Counsel") and will, upon issuance of a Series of
Certificates, render an opinion to the Bank based on the assumptions and
qualifications set forth therein that the Certificates of such Series that
are offered pursuant to a Prospectus Supplement (the "Offered
Certificates") will be treated as indebtedness for Federal income tax
purposes. A copy of such opinion will be filed with the Commission with a
Report on Form 8-K following the issuance of a Series of Certificates.
However, opinions of counsel are not binding on the Internal Revenue
Service (the "IRS"), and there can be no assurance that the IRS could not
successfully challenge this conclusion.
The Transferor expresses in the Agreement its intent that for Federal,
state, local and foreign income or franchise tax purposes, the Offered
Certificates of each Series will be indebtedness secured by the
Receivables. The Transferor agrees and each Certificateholder and
Certificate Owner, by acquiring an interest in an Offered Certificate,
agrees or will be deemed to agree to treat the Offered Certificates of such
Series as indebtedness for Federal, state and local income or franchise tax
purposes. However, because different criteria are used to determine the
non-tax accounting characterization of the transactions contemplated by the
Agreement, the Transferor expects to treat such transaction, for regulatory
and financial accounting purposes, as a sale of an ownership interest in
the Receivables and not as a debt obligation.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured
by the property, is a question of fact, the resolution of which is based
upon the economic substance of the transaction rather than its form or the
manner in which it is labeled. While the IRS and the courts have set forth
several factors to be taken into account in determining whether the
substance of a transaction is a sale of property or a secured indebtedness
for Federal income tax purposes, the primary factor in making this
determination is whether the transferee has assumed the risk of loss or
other economic burdens relating to the property and has obtained the
benefits of ownership thereof. Special Tax Counsel may analyze and rely on
several factors in reaching its opinion that the weight of the benefits and
burdens of ownership of the Receivables has not been transferred to the
Certificate Owners.
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In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of
the transaction does not accord with its form. It is expected that Special
Tax Counsel may advise that the rationale of those cases will not apply to
the transaction evidenced by a Series of Certificates because the form of
the transaction, as reflected in the operative provisions of the documents,
either is not inconsistent with the characterization of the Offered
Certificates of such Series as debt for Federal income tax purposes or
otherwise makes the rationale of those cases inapplicable to this
situation.
Taxation of Interest Income of Certificateholders
As set forth above, Special Tax Counsel will render an opinion to the
Bank that the Offered Certificates will constitute indebtedness for Federal
income tax purposes, and accordingly, interest thereon generally will be
includible in income by Certificate Owners as ordinary income when received
(in the case of a cash basis taxpayer) or accrued (in the case of an
accrual basis taxpayer) in accordance with their respective methods of tax
accounting. Interest received on the Offered Certificates may also
constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be
issued at a greater than de minimis discount, under Treasury regulations
(the "Regulations") the Offered Certificates may nevertheless be deemed to
have been issued with original issue discount ("OID"). This could be the
case, for example, if interest payments for a Series are not deemed to be
payments of "qualified stated interest" because (i) Certificate Owners of a
Series do not have default remedies ordinarily available to holders of debt
instruments and (ii) no penalties are imposed on the Bank or the Trust as a
result of any failure to make interest payments. As a result, if such
Regulations were to apply, all of the taxable income to be recognized with
respect to the Offered Certificates would be includible in income as OID
but would not be includible again when the interest is actually received.
If the Offered Certificates are in fact issued at a greater than de
minimis discount or are treated as having been issued with OID under the
Regulations, the following rules will apply. The excess of the "stated
redemption price at maturity" of an Offered Certificate over the original
issue price (in this case, the initial offering price at which a
substantial amount of the Offered Certificates are sold to the public) will
constitute OID. A Certificate Owner must include OID in income as interest
over the term of the Offered Certificate under a constant yield method. In
general, OID must be included in income in advance of the receipt of cash
representing that income. Accordingly, cash basis taxpayers would
effectively be treated as being on the accrual method and therefore be
required to include interest into income prior to the receipt of cash
representing that income. In the case of a debt instrument as to which the
repayment of principal may be accelerated as a result of the prepayment of
other obligations securing the debt instrument, the periodic accrual of OID
is determined by taking into account both the prepayment assumptions used
in pricing the debt instrument and the prepayment experience. If this
provision applies to a Class of Certificates (which is not clear), the
amount of OID which will accrue in any given "accrual period" may either
increase or decrease depending upon the actual prepayment rate.
Accordingly, each Certificate Owner should consult its own tax adviser
regarding the impact to it of the OID rules if the Offered Certificates are
issued with OID. Under the Regulations, a holder of a Certificate issued
with de minimis OID must include such OID in income proportionately as
principal payments are made on a Class of Certificates.
A holder who purchases an Offered Certificate at a discount from its
adjusted issue price may be subject to the "market discount" rules of the
Code. These rules provide, in part, for the treatment of gain attributable
to accrued market discount as ordinary income upon the receipt of partial
principal payments or on the sale or other disposition of the Offered
Certificate, and for the deferral of interest deductions with respect to
debt incurred to acquire or carry the market discount Offered Certificate.
A subsequent holder who purchases an Offered Certificate at a premium
may elect to amortize and deduct this premium over the remaining term of
the Offered Certificate in accordance with rules set forth in Section 171
of the Code.
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Sale of a Certificate
In general, a Certificate Owner will recognize gain or loss upon the
sale, exchange, redemption, or other taxable disposition of an Offered
Certificate measured by the difference between (i) the amount of cash and
the fair market value of any property received (other than amounts
attributable to, and taxable as, accrued interest) and (ii) the Certificate
Owner's tax basis in the Offered Certificate (as increased by any OID or
market discount previously included in income by the holder and decreased
by any deductions previously allowed for amortizable bond premium and by
any payments reflecting principal or OID received with respect to such
Certificate). Subject to the market discount rules discussed above and to
the one-year holding requirement for long-term capital gain treatment, any
such gain or loss generally will be long-term capital gain or loss,
provided that the Offered Certificate was held as a capital asset. The
maximum ordinary income rate for individuals, estates, and trusts exceeds
the maximum long-term capital gains rate for such taxpayers. In addition,
any capital losses realized generally may be used by a corporate taxpayer
only to offset capital gains and by an individual taxpayer only to the
extent of capital gains plus $3,000 of other income.
Tax Classification of Trust
The Agreement permits the issuance of Classes of Certificates that are
treated for Federal income tax purposes either as indebtedness or as an
interest in a partnership. Accordingly, the Trust could be characterized
either as (i) a security device to hold Receivables securing the repayment
of the Certificates of all Series or (ii) a partnership in which the
Transferor and certain classes of Certificateholders are partners, and
which has issued debt represented by other classes of Certificates of the
Trust (including the Offered Certificates). In connection with the issuance
of Certificates of any Series, Special Tax Counsel will render an opinion
to the Bank, based on the assumptions and qualifications set forth therein,
that under then current law, the issuance of the Certificates of such
Series will not cause the Trust to be classified for Federal income tax
purposes as an association (or publicly traded partnership) taxable as a
corporation. A copy of such opinion will be filed with the Commission with
a Report on Form 8-K following the issuance of a Series of Certificates.
FASIT Legislation
In August, 1996, the United States Congress passed and President
Clinton signed into law the "Small Business Job Protection Act of 1996,"
H.R. 3448 (the "SBJP Act"). The SBJP Act creates a new type of entity for
federal income tax purposes called a "financial asset securitization
investment trust" or "FASIT." The effective date of the FASIT provisions of
the SBJP Act is September 1, 1997. The SBJP Act enables certain
arrangements similar to the Trust to elect to be treated as a FASIT. Under
the FASIT provisions of the SBJP Act a FASIT generally would avoid federal
income taxation and could issue securities substantially similar to the
Certificates, and those securities would be treated as debt for federal
income tax purposes. If so specified in the related Prospectus Supplement,
the Trust may make an election to be treated as a FASIT. The Agreement may
contain any such terms and provide for the issuance of Certificates on such
terms and conditions as are permitted to a FASIT and described in the
related Prospectus Supplement. In addition, upon satisfying certain
conditions set forth in the Agreement, the Transferor, Servicer and the
Trustee will be permitted to amend the Agreement in order to enable all or
a portion of the Trust to qualify as a FASIT and to permit a FASIT election
to be made with respect thereto, and to make such modifications to the
Agreement as may be permitted by reason of the making of such an election.
See "Description of Certificates -- Amendments." However, there can be no
assurance that the Transferor will or will not cause any permissible FASIT
election to be made with respect to the Trust or amend the Agreement in
connection with any election. In addition, if such an election is made, it
may cause a Certificateholder to recognize gain (but not loss) with respect
to any Certificates held by it, even though Special Tax Counsel will
deliver its opinion that a Certificate will be treated as debt for federal
income tax purposes without regard to the election and the Certificate
would be treated as debt following the election. Additionally, any such
election and any related amendments to the Agreement may have other tax and
non-tax consequences to Certificateholders. Accordingly,
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prospective Certificateholders should consult their tax advisors with
regard to the effects of any such election and any permitted related
amendments on them in their particular circumstances.
Possible Classification of the Transaction as a Partnership or as an
Association Taxable as a Corporation
The opinion of Special Tax Counsel with respect to Offered
Certificates will not be binding on the courts or the IRS. It is possible
that the IRS could assert that, for purposes of the Code, the transaction
contemplated by this Prospectus and a related Prospectus Supplement
constitutes a sale of the Receivables (or an interest therein) to the
Certificate Owners of one or more Series or Classes and that the proper
classification of the legal relationship between the Bank and some or all
of the Certificate Owners or Certificateholders of one or more Series
resulting from the transaction is that of a partnership (including a
publicly traded partnership), a publicly traded partnership taxable as a
corporation, or an association taxable as a corporation. The Transferor
currently does not intend to comply with the Federal income tax reporting
requirements that would apply if any Classes of Certificates were treated
as interests in a partnership or corporation (unless, as is permitted by
the Agreement, an interest in a Trust is issued or sold that is intended to
be classified as an interest in a partnership).
If a transaction were treated as creating a partnership between the
Transferor and the Certificate Owners or Certificateholders of one or more
Series, the partnership itself would not be subject to Federal income tax
(unless it were to be characterized as a publicly traded partnership
taxable as a corporation); rather, the partners of such partnership,
including the Certificate Owners or Certificateholders of such Series,
would be taxed individually on their respective distributive shares of the
partnership's income, gain, loss, deductions and credits. The amount and
timing of items of income and deductions of a Certificate Owner could
differ if the Offered Certificates were held to constitute partnership
interests, rather than indebtedness. Moreover, unless the partnership were
treated as engaged in a trade or business, an individual's share of
expenses of the partnership would be miscellaneous itemized deductions
that, in the aggregate, are allowed as deductions only to the extent they
exceed two percent of the individual's adjusted gross income, and would be
subject to reduction under Section 68 of the Code if the individual's
adjusted gross income exceeded certain limits. As a result, the individual
might be taxed on a greater amount of income than the stated rate on the
Offered Certificates. Finally, assuming a transaction were treated as
creating a partnership, all or a portion of any taxable income allocated to
a Certificate Owner that is a pension, profit-sharing or employee benefit
plan or other tax-exempt entity (including an individual retirement
account) may, under certain circumstances, constitute "unrelated business
taxable income" which generally would be taxable to the holder under the
Code.
If it were determined that a transaction created an entity classified
as an association or as a publicly traded partnership taxable as a
corporation, the Trust would be subject to Federal income tax at corporate
income tax rates on the income it derives from the Receivables, which would
reduce the amounts available for distribution to the Certificate Owners,
possibly including Certificate Owners of a Class that is treated as
indebtedness. Such classification may also have adverse state and local tax
consequences that would reduce amounts available for distribution to
Certificate Owners. Cash distributions to the Certificate Owners (except
any Class not recharacterized as an equity interest in an association)
generally would be treated as dividends for tax purposes to the extent of
such deemed corporation's earnings and profits.
Foreign Investors
As set forth above, Special Tax Counsel will render an opinion, upon
issuance, that the Offered Certificates will be treated as debt for U.S.
Federal income tax purposes. The following information describes the U.S.
Federal income tax treatment of investors that are not U.S. persons
("Foreign Investors") if the Offered Certificates are treated as debt. The
term "Foreign Investor" 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
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political subdivision thereof or (iii) an estate or trust the income of
which is includible in gross income for U.S. Federal income tax purposes,
regardless of its source.
Interest, including OID, paid to a Foreign Investor will be subject to
U.S. withholding taxes at a rate of 30% unless (i) the income is
"effectively connected" with the conduct by such Foreign Investor of a
trade or business in the United States or (ii) the Foreign Investor and
each securities clearing organization, bank, or other financial institution
that holds the Offered Certificates on behalf of the customer in the
ordinary course of its trade or business, in the chain between the
Certificate Owner and the U.S. person otherwise required to withhold the
U.S. tax, complies with applicable identification requirements and the
Certificate Owner does not actually or constructively own 10% or more of
the voting stock of the Bank (or, upon the issuance of an interest in the
Trust that is treated as a partnership interest, any holder of such
interest) and is not a controlled foreign corporation with respect to the
Bank (or the holder of such an interest). Applicable identification
requirements generally will be satisfied if there is delivered to a
securities clearing organization (i) IRS Form W-8 signed under penalties of
perjury by the Certificate Owner, stating that the Certificate Owner is not
a U.S. person and providing such Certificate Owner's name and address, (ii)
IRS Form 1001, signed by the Certificate Owner or such Certificate Owner's
agent, claiming exemption from withholding under an applicable tax treaty,
or (iii) IRS Form 4224 signed by the Certificate Owner or such owner's
agent, claiming exemption from withholding of tax on income effectively
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 Certificate Owner
is a U.S. person.
A Certificate Owner that is a nonresident alien or foreign corporation
will not be subject to U.S. Federal income tax on gain realized upon the
sale, exchange, or redemption of an Offered Certificate, provided that (i)
such gain is not effectively connected with the conduct of a trade or
business in the United States, (ii) in the case of a Certificate Owner that
is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such sale,
exchange, or redemption occurs, and (iii) in the case of gain representing
accrued interest, the conditions described in the immediately preceding
paragraph are satisfied.
If the interests of the Certificate Owners of a Series were
reclassified as interests in a partnership (not taxable as a corporation),
such recharacterization could cause a Foreign Investor to be treated as
engaged in a trade or business in the United States. In such event the
Certificate Owner of such Series would be required to file a Federal income
tax return and, in general, would be subject to Federal income tax,
including branch profits tax in the case of a Certificateholder that is a
corporation, on its net income from the partnership. Further, the
partnership would be required, on a quarterly basis, to pay withholding tax
equal to the sum, for each foreign partner, of such foreign partner's
distributive share of "effectively connected" income of the partnership
multiplied by the highest rate of tax applicable to that foreign partner.
The tax withheld from each foreign partner would be credited against such
foreign partner's U.S. income tax liability.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an
applicable tax treaty.
STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of the Trust,
the Certificates of any Series, or the Certificate Owners of any Series
under state and local tax laws. Prospective investors are urged to consult
their own tax advisors regarding state and local tax treatment of the Trust
and the Certificates of any Series, and the consequences of purchase,
ownership or disposition of the Certificates of any Series under any state
or local tax law.
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ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect
to the plan. ERISA also imposes certain duties on persons who are
fiduciaries of plans subject to ERISA and prohibits certain transactions
between a plan and parties in interest with respect to such plans. Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a plan is considered to be a
fiduciary of such plan (subject to certain exceptions not here relevant). A
violation of these "prohibited transaction" rules may generate excise tax
and other liabilities under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding of
the Certificates of a Series and the operations of the Trust would result
in direct or indirect prohibited transactions under ERISA and the Code. The
operations of the Trust could result in prohibited transactions if Benefit
Plans (as defined below) that purchase the Certificates of a Series are
deemed to own an interest in the underlying assets of the Trust. There may
also be an improper delegation of the responsibility to manage Benefit Plan
assets if Benefit Plans that purchase the Certificates are deemed to own an
interest in the underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes
the "plan assets" of an employee benefit plan subject to ERISA or the Code,
or an individual retirement account ("IRA") (collectively referred to as
"Benefit Plans"), the assets and properties of certain entities in which a
Benefit Plan makes an equity investment could be deemed to be assets of the
Benefit Plan in certain circumstances. Accordingly, if Benefit Plans
purchase Certificates of a Series, the Trust could be deemed to hold plan
assets unless one of the exceptions under the Final Regulation is
applicable to the Trust.
The Final Regulation only applies to the purchase by a Benefit Plan of
an "equity interest" in an entity. Assuming that interests in Certificates
of a Series are equity interests, the Final Regulation contains an
exception that provides that if a Benefit Plan acquires a "publicly-offered
security," the issuer of the security is not deemed to hold plan assets. A
publicly-offered security is a security that is (i) freely transferable,
(ii) part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another and (iii) either is (A) part
of a class of securities registered under Section 12(b) or 12(g) of the
Exchange Act or (B) sold to the plan as part of an offering of securities
to the public pursuant to an effective registration statement under the 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. In
addition, the Final Regulation provides that if at all times more than 75%
of the value of all classes of equity interests in Certificates of a Series
are held by investors other than benefit plan investors (which is defined
as including plans subject to ERISA, government plans and IRAs), the
investing plan's assets will not include any of the underlying assets of
the Trust.
There are no restrictions imposed on the transfer of the Certificates
offered hereby, and the Certificates offered hereby will be sold as part of
an offering pursuant to an effective registration statement under the
Securities Act. At or before the conclusion of the offering, the
underwriters will notify the Transferor and the Trustee as to whether or
not the Certificates of any Series (or if there is more than one Class in a
Series each Class) will be expected to be held by at least 100 separately
named persons at the conclusion of the offering. The Transferor will not,
however, determine whether there will, in fact, be at least 100 separately
named persons or whether the 100-investor requirement of the exception for
publicly offered securities is satisfied as to the Certificates of such
Series (or Class). If the Certificates of any Series (or if there is more
than one Class in a Series in any Class) are expected to be held by at
least 100 separately named persons at the conclusion of the offering, those
Certificates will be timely registered under the Exchange Act.
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If interests in the Certificates of a Series fail to meet the criteria
of publicly-offered securities and the Trust's assets are deemed to include
assets of Benefit Plans that are Certificateholders, transactions involving
the Trust and "parties in interest" or "disqualified persons" with respect
to such plans might be prohibited under Section 406 of ERISA and Section
4975 of the Code unless an exemption is applicable. Thus, for example, if a
participant in any Benefit Plan is a cardholder of one of the Accounts,
under DOL interpretations the purchase of interests in Certificates by such
plan could constitute a prohibited transaction. In addition, the
Transferor, Servicer, Trustee or any underwriter of such Series may be
considered to be a party in interest, disqualified person or fiduciary with
respect to an investing Benefit Plan. Accordingly, an investment by a
Benefit Plan in Certificates may be a prohibited transaction under ERISA
and the Code unless such investment is subject to a statutory or
administrative exemption. Four class exemptions issued by the DOL that
could apply in such event are DOL Prohibited Transaction Exemption ("PTE")
84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers), PTE 91-38 (Class
Exemption for Certain Transactions Involving Bank Collective Investment
Funds), PTE 90-1 (Class Exemption for Certain Transactions Involving
Insurance Company Pooled Separate Accounts) and PTE 95-60 (Class Exemption
for Certain Transactions Involving Insurance Company General Accounts).
There is no assurance that these exemptions, even if all of the conditions
specified therein are satisfied, or any other exemption will apply to all
transactions involving the Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN CONSIDERING
THE PURCHASE OF INTERESTS IN CERTIFICATES OF ANY SERIES SHOULD CONSULT
THEIR OWN COUNSEL AS TO WHETHER THE ASSETS OF THE TRUST WHICH ARE
REPRESENTED BY SUCH INTERESTS WOULD BE CONSIDERED PLAN ASSETS, AND WHETHER,
UNDER THE GENERAL FIDUCIARY STANDARDS OF INVESTMENT PRUDENCE AND
DIVERSIFICATION, AN INVESTMENT IN CERTIFICATES OF ANY SERIES IS APPROPRIATE
FOR THE BENEFIT PLAN TAKING INTO ACCOUNT THE OVERALL INVESTMENT POLICY OF
THE BENEFIT PLAN AND THE COMPOSITION OF THE BENEFIT PLAN'S INVESTMENT
PORTFOLIO. In addition, fiduciaries should consider the
consequences that would apply if the Trust's assets were considered plan
assets, the applicability of exemptive relief from the prohibited
transaction rules, and, whether all conditions for such exemptive relief
would be satisfied.
In particular, insurance companies considering the purchase of
Certificates of any Series should consult their own benefits or other
appropriate counsel with respect to the United States Supreme Court's
decision in John Hancock Mutual Life Insurance Co. v. Harris Trust &
Savings Bank, 114 S. Ct. 517 (1993) ("John Hancock") and the applicability
of PTE 95-60. In John Hancock, the Supreme Court held that assets held in
an insurance company's general account may be deemed to be "plan assets"
under certain circumstances; however, PTE 95-60 may exempt some or all of
the transactions that could occur as the result of the acquisition and
holding of the Certificates of a Series by an insurance company general
account from the penalties normally associated with prohibited
transactions. Accordingly, investors should analyze whether John Hancock
and PTE 95-60 or any other exemption may have an impact with respect to
their purchase of the Certificates of any Series.
PLAN OF DISTRIBUTION
The Transferor may sell or cause Certificates to be sold (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. In addition, the Transferor or its affiliates may act as
selling agent for the Certificates, if so specified in the related
Prospectus Supplement. The related Prospectus Supplement in respect of a
Series offered hereby will set forth the terms of the offering of such
Certificates, including the name or names of any underwriters, the purchase
price of such Certificates and the proceeds to the Transferor from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial offering price and any discounts or concessions
allowed or reallowed or paid to dealers and the extent, if any, to which
any or all of such underwriters may engage in stabilizing transactions and
syndicate covering transactions with respect to the related Certificates.
Only underwriters so named in such Prospectus Supplement shall be deemed to
be underwriters in connection with the Certificates offered thereby.
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Subject to the terms and conditions set forth in an underwriting
agreement (an "Underwriting Agreement") to be entered into with respect to
each series of Certificates, the Transferor will agree to sell or cause the
Trust to sell to each of the underwriters named therein and in the related
Prospectus Supplement, and each of such underwriters will severally agree
to purchase from the Transferor or Trust, as applicable, the principal
amount of Certificates set forth therein and in the related Prospectus
Supplement (subject to proportional adjustment on the terms and conditions
set forth in the related Underwriting Agreement in the event of an increase
or decrease in the aggregate amount of Certificates offered hereby and by
the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any
of such Certificates are purchased. In the event of a default by any
underwriter, each Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting underwriters may
be increased or the Underwriting Agreement may be terminated.
Each Underwriting Agreement will provide that the Transferor will
indemnify the related underwriters against liabilities relating to the
adequacy of disclosure to investors, including under the Securities Act of
1933, as amended.
The place and time of delivery for any Series of Certificates in
respect of which this Prospectus is delivered will be set forth in the
accompanying Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates
will be passed upon for the Transferor by Mayer, Brown & Platt, Chicago,
Illinois. Certain legal matters relating to the Federal tax consequences of
the issuance of the Certificates will be passed upon for the Transferor by
Mayer, Brown & Platt. Certain legal matters relating to the issuance of the
Certificates will be passed upon for the Underwriters by Orrick, Herrington
& Sutcliffe LLP, New York, New York.
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INDEX OF DEFINED TERMS FOR PROSPECTUS
Term Page
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 6
Accumulation Period. . . . . . . . . . . . . . . . . . . . . . .7
Additional Accounts. . . . . . . . . . . . . . . . . . . . . . .6
Additional Transferors . . . . . . . . . . . . . . . . . . . . 41
Adjusted Investor Interest . . . . . . . . . . . . . . . . . . 54
Agent banks. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Aggregate Principal Receivables. . . . . . . . . . . . . . . . 49
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Amortization Period. . . . . . . . . . . . . . . . . . . . . . .7
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Automatic Additional Accounts. . . . . . . . . . . . . . . . . 44
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5, 11
Bank Portfolio . . . . . . . . . . . . . . . . . . . . . . . . .5
Base Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . 72
BHC Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
BIF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Billed Finance Charge Receivables. . . . . . . . . . . . . . . 49
Billing Cycle. . . . . . . . . . . . . . . . . . . . . . . . . 30
Cash Collateral Account. . . . . . . . . . . . . . . . . . . . 63
Cash Collateral Guaranty . . . . . . . . . . . . . . . . . . . 63
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Cedel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Cedel Participants . . . . . . . . . . . . . . . . . . . . . . 37
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . .3
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . .7
Certificateholders . . . . . . . . . . . . . . . . . . . . . . .3
Certificates . . . . . . . . . . . . . . . . . . . . . . . . 1, 5
Class. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 13
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Collateral Interest. . . . . . . . . . . . . . . . . . . . . . 63
Collection Account . . . . . . . . . . . . . . . . . . . . . . 12
COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Controlled Accumulation Amount . . . . . . . . . . . . . . . . 15
Controlled Accumulation Period . . . . . . . . . . . . . . . . 14
Controlled Amortization Amount . . . . . . . . . . . . . . . . 13
Controlled Amortization Period . . . . . . . . . . . . . . . . 13
Controlled Deposit Amount. . . . . . . . . . . . . . . . . . . 15
Controlled Distribution Amount . . . . . . . . . . . . . . . . 13
Conversion Date. . . . . . . . . . . . . . . . . . . . . . . . 48
Cooperative. . . . . . . . . . . . . . . . . . . . . . . . . . 37
Corporation. . . . . . . . . . . . . . . . . . . . . . . . 12, 33
Counterparties . . . . . . . . . . . . . . . . . . . . . . . . 61
Credit Enhancement . . . . . . . . . . . . . . . . . . . . . . .6
Credit Enhancement Percentage. . . . . . . . . . . . . . . . . 48
Credit Enhancement Provider. . . . . . . . . . . . . . . . . . .8
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . .8
Defaulted Accounts . . . . . . . . . . . . . . . . . . . . . . .8
Definitive Certificates. . . . . . . . . . . . . . . . . . . . 11
Depositaries . . . . . . . . . . . . . . . . . . . . . . . . . 35
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Determination Date . . . . . . . . . . . . . . . . . . . . . . 54
Disclosure Document. . . . . . . . . . . . . . . . . . . . . . 10
Discount Percentage. . . . . . . . . . . . . . . . . . . . . . 46
<PAGE>
Distribution Account . . . . . . . . . . . . . . . . . . . . . 46
Distribution Date. . . . . . . . . . . . . . . . . . . . . . . 12
DOL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, A-1
DTC Participants . . . . . . . . . . . . . . . . . . . . . . . 35
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . 43
Eligible Receivable. . . . . . . . . . . . . . . . . . . . . . 43
Enhancement. . . . . . . . . . . . . . . . . . . . . . . . . . .6
Enhancement Invested Amount. . . . . . . . . . . . . . . . . . 62
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Euroclear. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . 37
Euroclear Participants . . . . . . . . . . . . . . . . . . . . 37
Excess Allocation Series . . . . . . . . . . . . . . . . . . . 17
Excess Funding Account . . . . . . . . . . . . . . . . 19, 46, 53
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . .3
FASIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
FCSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FDIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Final Regulation . . . . . . . . . . . . . . . . . . . . . . . 72
Finance Charge Account . . . . . . . . . . . . . . . . . . . . 46
Finance Charge Receivables . . . . . . . . . . . . . . . . . . .9
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
First Bankcard . . . . . . . . . . . . . . . . . . . . . . . . 29
First NBC. . . . . . . . . . . . . . . . . . . . . . . . 1, 5, 11
Foreign Investor . . . . . . . . . . . . . . . . . . . . . . . 70
Foreign Investors. . . . . . . . . . . . . . . . . . . . . . . 70
Full Investor Interest . . . . . . . . . . . . . . . . . . . . 19
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . 19
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Global Securities. . . . . . . . . . . . . . . . . . . . . . .A-1
Group Investor Charge-Offs . . . . . . . . . . . . . . . . . . 50
Group Investor Default Amounts . . . . . . . . . . . . . . . . 50
Group Investor Finance Charge Collections. . . . . . . . . . . 50
Group Investor Monthly Interest. . . . . . . . . . . . . . . . 51
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Indirect Participants. . . . . . . . . . . . . . . . . . . . . 35
Ineligible Receivable. . . . . . . . . . . . . . . . . . . . . 42
Interchange. . . . . . . . . . . . . . . . . . . . . . . . . . .6
Interest Funding Account . . . . . . . . . . . . . . . . . . . 39
Interest Period. . . . . . . . . . . . . . . . . . . . . . . . 12
Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . . 54
Investor Default Amount. . . . . . . . . . . . . . . . . . . . 54
Investor Finance Charge Collections. . . . . . . . . . . . . . 51
Investor Interest. . . . . . . . . . . . . . . . . . . . . . . .7
Investor Monthly Fees. . . . . . . . . . . . . . . . . . . . . 51
Investor Percentage. . . . . . . . . . . . . . . . . . . . . . .8
IRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
John Hancock . . . . . . . . . . . . . . . . . . . . . . . . . 73
LIBOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Minimum Aggregate Principal Receivables. . . . . . . . . . . . 44
Minimum Transferor Interest. . . . . . . . . . . . . . . . .9, 44
Monthly Period . . . . . . . . . . . . . . . . . . . . . . . . 12
Moody's. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Net Default Amount . . . . . . . . . . . . . . . . . . . . . . .8
Net Recoveries . . . . . . . . . . . . . . . . . . . . . . . . .8
New Issuance . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Offered Certificates . . . . . . . . . . . . . . . . . . . . . 67
OID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Other Account Revenues . . . . . . . . . . . . . . . . . . . . .6
Paired Series. . . . . . . . . . . . . . . . . . . . . . . 18, 54
Partial Amortization . . . . . . . . . . . . . . . . . . . . . 17
Participation Agreement. . . . . . . . . . . . . . . . . . . . 44
Participations . . . . . . . . . . . . . . . . . . . . . . .6, 44
Pay Out Event. . . . . . . . . . . . . . . . . . . . . . . . . 16
Permitted Investments. . . . . . . . . . . . . . . . . . . . . 47
Portfolio Yield. . . . . . . . . . . . . . . . . . . . . . . . 26
Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . . 19
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . . 19, 47
Principal Amortization Period. . . . . . . . . . . . . . . . . 14
Principal Commencement Date. . . . . . . . . . . . . . . . . . 13
Principal Funding Account. . . . . . . . . . . . . . . . . 14, 15
Principal Receivables. . . . . . . . . . . . . . . . . . . . . .9
Principal Sharing Series . . . . . . . . . . . . . . . . . 18, 54
Private Label Accounts . . . . . . . . . . . . . . . . . . . . .6
Prospectus Supplement. . . . . . . . . . . . . . . . . . . . . .1
PTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Purchased Interest . . . . . . . . . . . . . . . . . . . . . . 11
Qualified Institution. . . . . . . . . . . . . . . . . . . . . 46
Rapid Accumulation Period. . . . . . . . . . . . . . . . . . . 15
Rapid Amortization Period. . . . . . . . . . . . . . . . . . . 16
Rating Agency. . . . . . . . . . . . . . . . . . . . . . . . . 21
Reallocated Investor Finance Charge Collections. . . . . . . . 50
Reallocation Group . . . . . . . . . . . . . . . . . . . . . . 18
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . 1, 5
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . 68
Removed Accounts . . . . . . . . . . . . . . . . . . . . . . . .9
Reserve Account. . . . . . . . . . . . . . . . . . . . . . . . 64
Retention Condition. . . . . . . . . . . . . . . . . . . . . . 53
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . 13
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SBJP Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Scheduled Payment Date . . . . . . . . . . . . . . . . . . . . 13
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . 10
Senior Certificates. . . . . . . . . . . . . . . . . . . . . . .7
Series . . . . . . . . . . . . . . . . . . . . . . . . .1, 5, A-1
Series Supplement. . . . . . . . . . . . . . . . . . . . . . . .5
Series Termination Date. . . . . . . . . . . . . . . . . . . . 55
Service Transfer . . . . . . . . . . . . . . . . . . . . . . . 58
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Servicer Default . . . . . . . . . . . . . . . . . . . . . . . 58
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . 11
Shared Principal Collections . . . . . . . . . . . . . . . . . 18
Special Tax Counsel. . . . . . . . . . . . . . . . . . . . . . 67
Specified Trust Termination Date . . . . . . . . . . . . . . . 55
Spread Account . . . . . . . . . . . . . . . . . . . . . . . . 64
SSCRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Standard & Poor's. . . . . . . . . . . . . . . . . . . . . . . 46
Subordinated Certificates. . . . . . . . . . . . . . . . . . . .7
Supplemental Certificates. . . . . . . . . . . . . . . . . . . 10
Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . 38
Transfer Date. . . . . . . . . . . . . . . . . . . . . . . 15, 48
<PAGE>
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Transferor Certificate . . . . . . . . . . . . . . . . . . . . 10
Transferor Interest. . . . . . . . . . . . . . . . . . . . . . .8
Transferor Percentage. . . . . . . . . . . . . . . . . . . . . 34
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5
Trust Portfolio. . . . . . . . . . . . . . . . . . . . . . . . 32
Trust Termination Date . . . . . . . . . . . . . . . . . . . . 55
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
U.S. Person. . . . . . . . . . . . . . . . . . . . . . . . . .A-3
UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . 73
USAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered First
NBC Credit 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.
A-1
<PAGE>
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.
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
A-2
<PAGE>
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. 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 form
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).
A-3
<PAGE>
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.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof or (iii) an estate
or trust the income of which is includible in gross income for United
States tax purposes, regardless of its source. This summary does not deal
with all aspects of U.S. Federal income tax withholding that may be
relevant to foreign holders of the Global Securities. Investors are advised
to consult their own tax advisers for specific tax advice concerning their
holding and disposing of the Global Securities.
A-4
[Alternate Pages - Prospectus]
SUBJECT TO COMPLETION, DATED MAY ___, 1997
PROSPECTUS
First NBC Credit Card Master Trust
Asset Backed Certificates
First National Bank of Commerce
Transferor and Servicer
-----------------
The Asset Backed Certificates (collectively, the "Certificates")
described herein may be sold from time to time in one or more series (each,
a "Series"), in amounts, at prices and on terms to be determined at the
time of sale and to be set forth in a supplement to this Prospectus (a
"Prospectus Supplement"). The Certificates in each Series will represent an
undivided interest in the First NBC Credit Card Master Trust (the "Trust").
The Trust will be formed pursuant to a pooling and servicing agreement
between First National Bank of Commerce ("First NBC" or the "Bank"), as
transferor and servicer, and The First National Bank of Chicago, as
trustee. Certain capitalized terms used in this Prospectus are defined
elsewhere in this Prospectus and in the accompanying Prospectus Supplement.
Please refer to the "Index of Defined Terms for Prospectus" on page 78 for
a listing of the pages on which all such terms are defined.
The property of the Trust will include receivables (the "Receivables")
generated from time to time in a portfolio of revolving credit accounts,
all monies due or to become due in payment of the Receivables, any
collateral securing the Receivables, all proceeds of the foregoing and
proceeds of credit life insurance policies relating to the Receivables and
all monies on deposit in certain bank accounts of the Trust, as more fully
described herein. Additionally, with respect to any Series or Class offered
hereby, the Trust assets also may include (i) the right to receive other
revenues and/or (ii) credit enhancement and interest rate protection
arrangements for such Series or Class, as described in the related
Prospectus Supplement. The Bank will initially own the remaining undivided
interest in the Trust not represented by the Certificates issued by the
Trust and will initially service the related Receivables.
Each Series will consist of one or more classes of Certificates (each,
a "Class"), one or more of which may be fixed rate Certificates, floating
rate Certificates or other types of Certificates, as specified in the
related Prospectus Supplement. Each Certificate will represent an undivided
interest in the Trust, and the interest of the holders of each Class or
Series of Certificates will include the right to receive a varying
percentage of each month's collections with respect to the Receivables at
the times, in the manner and to the extent described herein and, with
respect to any Series offered hereby, in the related Prospectus Supplement.
Interest and principal payments with respect to each Series offered hereby
will be made as specified in the related Prospectus Supplement. One or more
Classes of a Series offered hereby may be entitled to the benefits of a
cash collateral account or guaranty, a collateral interest, a letter of
credit, a surety bond, an insurance policy or other form of enhancement as
<PAGE>
specified in the Prospectus Supplement relating to that Series. In
addition, any Series offered hereby may include one or more Classes which
are subordinated in right and priority to payment of principal of, and/or
interest on, one or more other Classes of that Series or another Series, in
each case to the extent described in the related Prospectus Supplement.
Each Series of Certificates or Class offered hereby will be rated in one of
the four highest rating categories by at least one nationally recognized
rating organization.
While the specific terms of any Series in respect of which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such Series will not be subject to prior review
by, or consent of, the Certificateholders of any previously issued Series.
Potential investors should consider, among other
things, the information set forth in "Risk
Factors" commencing on page 23 of this
Prospectus.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST NBC 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 (EXCEPT FOR RECEIVABLES ARISING IN PRIVATE
LABEL ACCOUNTS, WHICH REPRESENTED LESS THAN __% OF THE RECEIVABLES AS OF
__________, 1997) ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Certificates may be sold by the Bank or the Trust directly to
purchasers, through agents designated from time to time, through
underwriting syndicates led by one or more managing underwriters or through
one or more underwriters acting alone. If underwriters or agents are
involved in the offering of the Certificates of any Series offered hereby,
the name of the managing underwriter or underwriters or agents will be set
forth in the related Prospectus Supplement. If an underwriter, agent or
dealer is involved in the offering of the Certificates of any Series
offered hereby, the underwriter's discount, agent's commission or dealer's
purchase price will be set forth in, or may be calculated from, the related
Prospectus Supplement, and the net proceeds to the Bank from such offering
will be the public offering price of such Certificates less such discount
in the case of an underwriter, the purchase price of such Certificates less
such commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other
<PAGE>
<PAGE>
the applicability of PTE 95-60. In John Hancock, the Supreme Court
held that assets held in an insurance company's general account may be
deemed to be "plan assets" under certain circumstances; however, PTE 95-60
may exempt some or all of the transactions that could occur as the result
of the acquisition and holding of the Certificates of a Series by an
insurance company general account from the penalties normally associated
with prohibited transactions. Accordingly, investors should analyze whether
John Hancock and PTE 95-60 or any other exemption may have an impact with
respect to their purchase of the Certificates of any Series.
PLAN OF DISTRIBUTION
This Prospectus is to be used by First NBC in connection with offers
and sales related to market-making transactions in the Certificates in
which it acts as principal. First NBC may also act as agent in such
transactions. Sales will be made at prices related to the prevailing prices
at the time of sale. The net proceeds of such sales will be used by First
NBC for its general corporate purposes.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates
will be passed upon for the Transferor by Mayer, Brown & Platt, Chicago,
Illinois. Certain legal matters relating to the Federal tax consequences of
the issuance of the Certificates will be passed upon for the Transferor by
Mayer, Brown & Platt. Certain legal matters relating to the issuance of the
Certificates will be passed upon for the Underwriters by Orrick, Herrington
& Sutcliffe LLP, New York, New York.
<PAGE>
<PAGE>
[Alternate Pages - form of Prospectus Supplement]
SUBJECT TO COMPLETION, DATED _________, 199_
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED __________ ___, 199_
$
FIRST NBC CREDIT CARD MASTER TRUST
$ Class A [Floating Rate] [__%] Asset
Backed Certificates, Series 199_-_
$ Class B [Floating Rate] [__%] Asset
Backed Certificates, Series 199_-_
First National Bank of Commerce
Transferor and Servicer
-----------------
Each Class A [Floating Rate] [__%] Asset Backed Certificate, Series
199_-___ (collectively, the "Class A Certificates") and each Class B
[Floating Rate] [__%] Asset Backed Certificate, Series 199_-___
(collectively, the "Class B Certificates" and, together with the Class A
Certificates, the "Certificates") will represent the right to receive
certain payments from the First NBC Credit Card Master Trust, created
pursuant to a Pooling and Servicing Agreement between First National Bank
of Commerce ("First NBC" or the "Bank"), as transferor and servicer, and
The First National Bank of Chicago, as trustee. Certain capitalized terms
used in this Prospectus Supplement are defined elsewhere in this Prospectus
Supplement and the accompanying Prospectus. Please refer to the "Index of
Defined Terms for Prospectus Supplement" on page S-51 and the "Index of
Defined Terms for Prospectus" on page 78 for a listing of the pages on
which such terms are defined.
The property of the Trust includes receivables (the "Receivables")
generated from time to time in a portfolio of MasterCard(R), VISA(R) and
private label revolving credit card accounts (the "Accounts"), all monies
due or to become due in payment of the Receivables, all proceeds of the
Receivables and proceeds of credit insurance policies relating to the
Receivables, all monies in certain bank accounts of the Trust and certain
other property as described herein. In addition, the Collateral Interest
will be issued in the initial amount of $____________ and will be
subordinated to the Certificates as described herein. First NBC will
initially own the remaining undivided interest in the Trust not represented
by the Certificates, the Collateral Interest and other interests issued by
the Trust from time to time and will initially service the Receivables.
First NBC may from time to time offer other Series of certificates that
evidence undivided interests in certain assets of the Trust, which may have
terms significantly different from the Certificates.
(continued on next page)
<PAGE>
There currently is no secondary market for the Certificates, and there
is no assurance that one will develop or, if one does, that it will
continue until the Certificates are paid in full. Potential investors
should consider, among other things, the information set forth in "Risk
Factors" commencing on page S-17 herein and page 23 in the Prospectus.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF FIRST NBC 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 (EXCEPT FOR RECEIVABLES ARISING
IN PRIVATE LABEL ACCOUNTS, WHICH REPRESENTED LESS THAN __% OF THE
RECEIVABLES AS OF THE CUT-OFF DATE) ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<PAGE>
This Prospectus Supplement and the Prospectus Supplement may be used
by First NBC in connection with market-making transactions in the
Certificates. First NBC may act as principal or agent in such transactions.
Such transactions will be at prices related to prevailing market prices at
the time of sale.
FIRST NATIONAL BANK OF COMMERCE
The Date of this Prospectus Supplement is _______________ _____, 199_
<PAGE>
<PAGE>
not be paid. In no event shall the Trust, the Trustee, the Holders or the
Collateral Interest Holder be liable for the share of the Servicing Fee to
be paid out of Servicer Interchange. The Class A Servicing Fee and the
Class B Servicing Fee shall be payable to the Servicer solely to the extent
amounts are available for distribution in respect thereof as described
under "-- Application of Collections."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the Trust or the Holders
other than federal, state and local income and franchise taxes, if any, of
the Trust.
Reports to Holders
On each Transfer Date, the Trustee will forward to each Holder of
record, a statement prepared by the Servicer setting forth the items
described in "Description of the Certificates -- Reports to Holders" in the
Prospectus. In addition, such statement will include (a) the amount, if
any, withdrawn from the Principal Funding Account for such Transfer Date,
and (b) the Collateral Interest, if any, for such Transfer Date.
UNDERWRITING
This Prospectus Supplement and the related Prospectus may be used by
First NBC in connection with offers and sales related to market-making
transactions in the Certificates in which it acts as principal. Sales will
be made at prices related to the prevailing prices at the time of sale.
First NBC does not have an obligation to make a market in the Certificates,
and it may discontinue any such market-making activities at any time
without notice, in its sole discretion.
S-48
<PAGE>
<PAGE>
==========================================
No dealer, salesman or other person
has been authorized to give any
information or to make any
representation not contained or
incorporated by reference in this
Prospectus Supplement or the
accompanying 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. Neither this
Prospectus Supplement nor the
accompanying Prospectus constitutes 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
Supplement or the accompanying
Prospectus, nor any sale made hereunder
or thereunder 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 thereof or that the
information contained or incorporated by
reference herein or therein is correct
as of any time subsequent to its date.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
Page
SUMMARY OF TERMS......................S-4
RISK FACTORS.........................S-17
FIRST NBC'S CREDIT CARD
PORTFOLIO.................. ......S-17
THE RECEIVABLES......................S-21
MATURITY ASSUMPTIONS.................S-25
RECEIVABLE YIELD CONSIDERATIONS......S-27
FIRST NBC AND FIRST COMMERCE
CORPORATION..........................S-28
DESCRIPTION OF THE CERTIFICATES......S-28
UNDERWRITING.........................S-48
INDEX OF DEFINED TERMS FOR
PROSPECTUS SUPPLEMENT............S-51
Prospectus
Prospectus Supplement.... ..............3
Reports to Certificateholders...........3
Available Information...................4
Incorporation of Certain
Documents by Reference...............4
Prospectus Summary .....................5
Risk Factors...........................22
The Trust..............................29
First NBC's Credit Card
Activities..........................29
The Receivables........................32
Maturity Assumptions...................33
Use of Proceeds........................33
First NBC and First Commerce
Corporation.........................33
Description of the Certificates........34
Credit Enhancement.....................61
Certain Legal Aspects of
the Receivables.....................64
U.S. Federal Income Tax
Consequences........................66
State and Local Taxation....... .......71
ERISA Considerations...................71
Plan of Distribution...................73
Legal Matters..........................73
Index of Terms for Prospectus..........74
Annex 1: Global Clearance, Settlement
and Tax Documentation Procedures..A-1
<PAGE>
Until _______ __, 199_, all dealers
effecting transactions in the
Certificates, whether or not
participating in this distribution,
may be required to deliver a
Prospectus Supplement and a
Prospectus. This delivery
requirement is in addition to
the obligation of dealers to
deliver a Prospectus
Supplement and a Prospectus when
acting as underwriters and with
respect to their unsold
allotments or subscriptions.
=========================================
<PAGE>
=========================================
First NBC
Credit Card Master Trust
$____________ Class A
[Floating Rate] [___%]
Asset Backed
Certificates, Series 199_-_
$____________ Class B
[Floating Rate] [___%]
Asset Backed
Certificates, Series 199_-_
First National Bank
of Commerce
Transferor and Servicer
---------------------
Prospectus Supplement
---------------------
First National Bank of Commerce
=========================================
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee.................................................. $227,272.73
Printing and Engraving............................................ 40,000.00
Trustee's Fees.................................................... 10,000.00
Legal Fees and Expenses........................................... 250,000.00
Blue Sky Fees and Expenses........................................ 8,000.00
Accountants' Fees and Expenses.................................... 50,000.00
Rating Agency Fees................................................ 170,000.00
Miscellaneous Fees................................................
Total ......................................................... $755,272.73
===========
--------------
ITEM 15. Indemnification of Directors and Officers
The Registrant maintains directors' and officers' liability
insurance. Articles V and VI of the Registrant's Articles of Association
provide as follows:
ARTICLE V
Limitation of Liability of Directors and Officers
A. No director or officer of the Association shall be liable to
the Association or to its shareholder for monetary damages for breach of
his fiduciary duty as a director or officer, provided that the foregoing
provision shall not eliminate or limit the liability of a director or
officer for (a) any breach of his duty of loyalty to the Association or its
shareholder; (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (c) liability for
unlawful distributions of the association's assets to, or redemption or
repurchase of the Association's shares from, the shareholder of the
Association; or (d) any transaction from which he derived an improper
personal benefit.
B. The Board of Directors may, with the approval of the
shareholder, (a) cause the Association to enter into contracts with
directors and officers providing for the limitation of liability set forth
in this Article V and for indemnification to the fullest extent permitted
by law.
C. Any amendment or repeal of this Article V shall not adversely
affect any elimination or limitation of liability of a director or officer
of the Association under this Article V with respect to any action or
inaction occurring prior to the time of such amendment or repeal.
II-1
<PAGE>
ARTICLE VI
Indemnification
Section 1. Definitions. As used in this Article the following terms
shall have the meanings set out below:
a. "Board" - the Board of Directors of the Association.
b. "Claim" - any threatened or pending or completed
claim, action, suit, or proceeding, whether civil, criminal, administrative
or investigative and whether made judicially or extra-judicially, or any
separate issue or matter therein, as the context requires.
c. "Determining Body" - (i) the shareholder, or (ii) if a
majority of the members of the board of directors of the shareholder are
parties to the Claim, or the shareholder so directs, independent legal
counsel, which may be the regular outside counsel of the Association.
d. "Disbursing Officer" - the Chief Executive Officer of
the Association or, if the Chief Executive Officer is a party to the Claim
for which indemnification is being sought, any officer not a party to such
Claim who is designated by the shareholder to be the Disbursing Officer
with respect to indemnification requests related to the Claim, which
designation shall be made promptly after receipt of the initial request for
indemnification with respect to such Claim.
e. "Expenses" - any expenses or costs (including, without
limitation, attorney's fees, judgments, punitive or exemplary damages, fines
and amounts paid in settlement).
f. "Indemnitee" - each person who is or was a director or
officer of the Association, but such term shall not include any person who
was a director or officer of any institution absorbed by the Association by
way of merger, consolidation, transfer of assets or otherwise, provided
that nothing herein shall prevent the Association from providing
indemnification to such persons under circumstances which the Association
determines in its discretion to be appropriate and in accordance with law.
Section 2. Indemnity.
a. To the extent such Expenses exceed the sum of amounts
paid or due under or pursuant to (i) policies of liability insurance
maintained by the Association, (ii) policies of liability insurance
maintained by or on behalf of Indemnitee and (iii) provisions for
indemnification in the by-laws, resolutions or other instruments of any
entity other than the Association or its shareholder, the Association shall
indemnify Indemnitee against any Expenses actually and reasonably incurred
by him (as they are incurred) in connection with any Claim either against
him or as to which he is involved solely as a witness or person required to
give evidence, by reason of his position.
(1) as a director or officer of the Association,
(2) as a director or officer of any subsidiary of the
Association or as fiduciary with respect to any employee benefit plan of
the Association, or
(3) as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other for profit or not
for profit entity or enterprise, if such position is or was held at the
request of the Association,
whether relating to service in such position, before or after the effective
date of this Article, if he (i) is successful in his defense of the Claim
on the merits or otherwise or (ii) has been found by the Determining Body
(acting in good faith) to have met the Standard of Conduct; provided that
(A) the amount otherwise payable by the Association may be reduced by the
Determining Body to such amount as it deems proper if it determines that
the Claim involved the receipt of a personal benefit by Indemnitee, and (B)
no indemnification shall be made (i) in respect of any Claim as to which
Indemnitee shall have been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals
II-2
<PAGE>
therefrom, to be liable for willful or intentional misconduct in the
performance of his duty to the Association or to have obtained an improper
personal benefit, or (ii) for expenses, penalties or other payments
incurred in an administrative proceeding or action instituted by a bank
regulatory agency, which action results in a final order assessing civil
monetary penalties or payments to the Association, unless in each such
case, and only to the extent that, a court shall determine upon application
that, in view of all the circumstances of the case, Indemnitee is fairly
and reasonably entitled to indemnity for such Expenses as the court deems
proper.
b. The Standard of Conduct is met when the conduct by an
Indemnitee with respect to which a Claim is asserted was conduct that he
reasonably believed to be in, or not opposed to, the best interest of the
Association, and, in the case of a criminal action or proceeding, that he
had no reasonable cause to believe was unlawful. The termination of any
Claim by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that Indemnitee did not meet the Standard of Conduct.
c. Promptly upon becoming aware of the existence of any
Claim as to which he may be indemnified hereunder, Indemnitee shall notify
the Chief Executive Officer of the Association of the Claim and whether he
intends to seek indemnification hereunder. If such notice indicates that
Indemnitee does so intend, the Chief Executive Officer shall promptly
notify the shareholder, which shall promptly establish the Determining
Body. After the Determining Body has been established the Chief Executive
Officer shall inform Indemnitee thereof and Indemnitee shall immediately
provide the Determining Body with all facts relevant to the Claim known to
him. Within 60 days of the receipt of such information, together with such
additional information as the Determining Body may request of Indemnitee,
the Determining Body shall determine, and shall advise Indemnitee of its
determination, whether Indemnitee has met the Standard of Conduct. The
Determining Body may extend such sixty-day period by no more than an
additional sixty days.
d. Indemnitee shall promptly inform the Determining Body
upon his becoming aware of any relevant facts not therefore provided by him
to the Determining Body, unless the Determining Body has obtained such
facts by other means. If, after determining that the Standard of Conduct
has been met, the Determining Body obtains facts of which it was not aware
at the time it made such determination, the Determining Body on its own
motion, after notifying Indemnitee and providing him an opportunity to be
heard, may, on the basis of such facts, revoke such determination, provided
that in the absence of actual fraud by Indemnitee no such revocation may be
made later than thirty days after final disposition of the Claim.
e. In the case of any Claim not involving a proposed,
threatened or pending criminal proceeding,
(1) If Indemnitee has, in the good faith judgment of the
Determining Body, met the Standard of Conduct, the Association may, in its
sole discretion after notice to Indemnitee, assume all responsibility for
the defense of the Claim, and, in any event, the Association and Indemnitee
each shall keep the other informed as to the progress of the defense,
including prompt disclosure of any proposals for settlement; provided that
if the Association or the shareholder is a party to the Claim and
Indemnitee reasonably determines that there is a conflict between the
positions of the Association or the shareholder and Indemnitee with respect
to the Claim, then Indemnitee shall be entitled to conduct his defense,
with counsel of his choice; and provided further that Indemnitee shall in
any event be entitled at his expense to employ counsel chosen by him to
participate in the defense of the Claim; and
(2) The Association shall fairly consider any proposals
by Indemnitee for settlement of the Claim. If the Association (A) proposes
a settlement acceptable to the person asserting the Claim, or (B) believes
a settlement proposed by the person asserting the Claim should be accepted,
it shall inform Indemnitee of the terms thereof and shall fix a reasonable
date by which Indemnitee shall respond. If Indemnitee agrees to such terms,
he shall execute such documents as shall be necessary to effect the
settlement. If he does not agree he may proceed with the defense of the
Claim in any manner he chooses, but if he is not successful on the merits
or otherwise, the
II-3
<PAGE>
Association's obligation to indemnify him for any Expenses incurred
following his disagreement shall be limited to the lesser of (A) the total
Expenses incurred by him following his decision not to agree to such
proposed settlement or (B) the amount the Association would have paid
pursuant to the terms of the proposed settlement. If, however, the proposed
settlement would impose upon Indemnitee any requirement to act or refrain
from acting that would materially interfere with the conduct of his
affairs, Indemnitee may refuse such settlement and proceed with the defense
of the Claim, if he so desires, at the Association's expense without regard
to the limitations imposed by the preceding sentence. In no event, however,
shall the Association be obligated to indemnify Indemnitee for any amount
paid in a settlement that the Association has not approved.
f. In the case of a Claim involving a proposed,
threatened or pending criminal proceeding, Indemnitee shall be entitled to
conduct the defense of the Claim, and to make all decisions with respect
thereto, with counsel of his choice; provided that the Association shall
not be obligated to indemnify Indemnitee for an amount paid in settlement
that the Association has not approved.
g. After notifying the Association of the existence of a
Claim, Indemnitee may from time to time request the Association to pay the
Expenses (other than judgments, fines, penalties or amounts paid in
settlement) that he incurs in pursuing a defense of the Claim prior to the
time that the Determining Body determines whether the Standard of Conduct
has been met. If the Disbursing Officer believes the amount requested to be
reasonable, he shall pay to Indemnitee the amount requested (regardless of
Indemnitee's apparent ability to repay such amount) upon receipt of an
undertaking by or on behalf of Indemnitee to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Association under the circumstances. If the Disbursing Officer does not
believe such amount to be reasonable, the Association shall pay the amount
deemed by him to be reasonable, and Indemnitee may apply directly to the
Determining Body for the remainder of the amount requested.
h. After it has been determined that the Standard of
Conduct was met, for so long as and to the extent that the Association is
required to indemnify Indemnitee under this Article, the provisions of
Paragraph (g) shall continue to apply with respect to Expenses incurred
after such time except that (i) no undertaking shall be required of
Indemnitee and (ii) the Disbursing Officer shall pay to Indemnitee such
amount of any fines, penalties or judgments against him which have become
final and as to which the Association is obligated to indemnify him.
i. Any determination by the Association with respect to
settlements of a Claim shall be made by the Determining Body.
j. The Association and Indemnitee shall keep
confidential, to the extent permitted by law and their fiduciary
obligations, all facts and determinations provided or made pursuant to or
arising out of the operation of this Agreement, and the Association and
Indemnitee shall instruct it or his agents and employees to do likewise.
Section 3. Enforcement.
a. The rights provided by this Article shall be enforceable
by Indemnitee in any court of competent jurisdiction.
b. If Indemnitee seeks a judicial adjudication of his
rights under this Article Indemnitee shall be entitled to recover from the
Association, and shall be indemnified by the Association against, any and
all Expenses actually and reasonably incurred by him in connection with
such proceeding but only if he prevails therein. If it shall be determined
that Indemnitee is entitled to receive part but not all of the relief
sought, then Indemnitee shall be entitled to be reimbursed for all Expenses
incurred by him in connection with such judicial adjudication if the amount
to which he is determined to be entitled exceeds 50% of the amount of his
claim. Otherwise, the Expenses incurred by Indemnitee in connection with
such judicial adjudication shall be appropriately prorated.
II-4
<PAGE>
c. In any judicial proceeding described in this
subsection, the Association shall bear the burden of proving that
Indemnitee is not entitled to any Expenses sought with respect to any
Claim.
Section 4. Saving Clause. If any provision of this Article is
determined by a court having jurisdiction over the matter to require the
Association to do or refrain from doing any act that is in violation of
applicable law, the court shall be empowered to modify or reform such
provision so that, as modified or reformed, such provision provides the
maximum indemnification permitted by law, and such provision, as so
modified or reformed, and the balance of this Article, shall be applied in
accordance with their terms. Without limiting the generality of the
foregoing, if any portion of this Article shall be invalidated on any
ground, the Association shall nevertheless indemnify an Indemnitee to the
full extent permitted by any applicable portion of this Article that shall
not have been invalidated and to the full extent permitted by law with
respect to that portion that has been invalidated.
Section 5. Non-Exclusivity.
a. The indemnification and advancement of Expenses
provided by or granted pursuant to this Article shall not be deemed
exclusive of any other rights to which Indemnitee is or may become entitled
under any statute, article of association or incorporation, by-law,
authorization of shareholders or directors, agreement, or otherwise,
provided that unless required by law any indemnification payment made
otherwise than pursuant to this Article must be approved by the
shareholder.
b. It is the intent of the Association by this Article to
indemnify and hold harmless Indemnitee to the fullest extent permitted by
law, so that if applicable law would permit the Association to provide
broader indemnification rights than are currently permitted, the
Association shall indemnify and hold harmless Indemnitee to the fullest
extent permitted by applicable law notwithstanding that the other terms of
this Article would provide for lesser indemnification, provided that unless
otherwise required by law or the express terms of this Article, no
indemnification payment may be made unless it is approved by the
shareholder.
Section 6. Successors and Assigns. This Article shall inure to the
benefit of Indemnitee's heirs, personal representatives, and assigns and to
the benefit of the Association, its successors and assigns.
Section 7. Indemnification of Other Persons.
The Association may indemnify any person not covered by
Sections 1 through 6 of this Article to the extent provided in a resolution
of the shareholder or a separate provision of these Articles.
Section 8. Restrictions on Indemnification By Law and Regulation.
Notwithstanding any provision of this Article to the contrary, no
indemnification or advancement of expenses may be made if, in the good
faith opinion of the shareholder, such indemnification or advancement of
expenses could violate any applicable law or regulation, unless the
Association has received evidence satisfactory to it that no such violation
would occur.
ITEM 16. Exhibits and Financial Statements
(a) Exhibits
1.1 Form of Underwriting Agreement. *
3.1 Articles of Association.*
3.2 By-Laws.*
4.1 Form of Pooling and Servicing Agreement.*
4.2 Form of Series Supplement (including form of Certificate).*
II-5
<PAGE>
5.1 Opinion of Mayer, Brown & Platt with respect to legality.*
8.1 Opinion of Mayer, Brown & Platt with respect to tax matters.*
23.1 Consent of Mayer, Brown & Platt (to be included in opinion
filed as Exhibit 5.1).*
24.1 Powers of Attorney.*
- -----------------------------------
* Previously filed.
(b) Financial Statements
All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
ITEM 17. Undertakings
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering rate may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
provided, however, that (a)(i) and (a)(ii) will not apply if the
information required to be included in a post-effective amendment thereby
is contained in periodic reports filed pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new
II-6
<PAGE>
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.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(f) That 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 provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, 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)(i) 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.
(h) That, 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-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Amendment No. 1 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New Orleans,
State of Louisiana, on July 11, 1997.
FIRST NATIONAL BANK OF COMMERCE
as originator of the Trust and registrant
By: /s/ Michael J. Fowler
--------------------------
Name: Michael J. Fowler
Title: Executive Vice President
Senior ALCO Officer
Pursuant to the requirements of the Securities Act of 1933,
Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
</TABLE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* President and Chief Executive Officer July 11, 1997
- ------------------------ =======
Ashton J. Ryan, Jr. and Director (Principal Executive
Officer)
* Chairman of the Board July 11, 1997
- ------------------------ =======
Howard C. Gaines
* Secretary (Principal Financial July 11, 1997
- ------------------------ =======
Michael A. Flick Officer)
* Controller (Principal Accounting July 11, 1997
- ------------------------ =======
Jane B. Truett Officer)
* Director July 11, 1997
- ------------------------ =======
Margaret Moss Allums
* Director July 11, 1997
- ------------------------ =======
Ian Arnof
* Director July 11, 1997
- ------------------------ =======
William G. Barry
* Director July 11, 1997
- ------------------------ =======
Sydney J. Besthoff III
* Director July 11, 1997
- ------------------------ =======
John D. Charbonnet
* Director July 11, 1997
- ------------------------ =======
Laurance Eustis, Jr.
II-8
<PAGE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Director July 11, 1997
- ------------------------ =======
Norman C. Francis
* Director July 11, 1997
- ------------------------ =======
John J. Gelpi, Jr.
* Director July 11, 1997
- ------------------------ =======
Erik F. Johnsen
* Director July 11, 1997
- ------------------------ =======
J. Merrick Jones, Jr.
* Director July 11, 1997
- ------------------------ =======
Harry Merritt Lane III
* Director July 11, 1997
- ------------------------ =======
Edwin Lupberger
* Director July 11, 1997
- ------------------ =======
Robert W. Merrick
* Director July 11, 1997
- ------------------------ =======
G. Frank Purvis, Jr.
* Director July 11, 1997
- ------------------------ =======
Edward M. Simmons
* Director July 11, 1997
- ------------------------ =======
Charles C. Teamer
</TABLE>
* Signature by Thomas L. Callicutt, Jr., as Attorney-in-Fact under
Power of Attorney
/s/ Thomas L. Callicutt, Jr.
- -----------------------------
II-9
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS INDEX
<S> <C> <C>
Exhibit No. Description of Exhibit Sequential
Page Number
1.1 Form of Underwriting Agreement. *
3.1 Articles of Association.*
3.2 By-Laws.*
4.1 Form of Pooling and Servicing Agreement. *
4.2 Form of Series Supplement (including form of Certificate). *
5.1 Opinion of Mayer, Brown & Platt with respect to legality. *
8.1 Opinion of Mayer, Brown & Platt with respect to tax matters. *
23.1 Consent of Mayer, Brown & Platt (to be included in opinion
filed as Exhibit 5.1).*
24.1 Powers of Attorney.*
- -----------------------------------------
* Previously filed.
</TABLE>
II-10
