<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY , 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
FIRST NORTH AMERICAN NATIONAL BANK
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
---------------------
FNANB CREDIT CARD MASTER TRUST
<TABLE>
<S> <C>
UNITED STATES 58-1897792
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
</TABLE>
1800 PARKWAY PLACE
MARIETTA, GEORGIA 30067
(770) 423-7900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
MICHAEL T. CHALIFOUX
FIRST NORTH AMERICAN NATIONAL BANK
1800 PARKWAY PLACE
MARIETTA, GEORGIA 30067
(770) 423-7900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<TABLE>
<C> <C>
DAVID E. MELSON, ESQUIRE RICHARD S. FORTUNATO, ESQUIRE
MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
901 EAST CARY STREET 919 THIRD AVENUE
RICHMOND, VIRGINIA 23219 NEW YORK, NEW YORK 10022
(804) 775-1000 (212) 735-3000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable on or after the effective date of this Registration Statement.
If the only securities 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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER CERTIFICATE* OFFERING PRICE* FEE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Certificates.......... $1,000,000 100% $1,000,000 $303.03
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</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY , 1997
PROSPECTUS
FNANB CREDIT CARD MASTER TRUST
$[ ] CLASS A [FLOATING RATE] [ ]% ASSET BACKED CERTIFICATES,
SERIES 1997-2
$[ ] CLASS B [FLOATING RATE] [ ]% ASSET BACKED CERTIFICATES,
SERIES 1997-2
FIRST NORTH AMERICAN NATIONAL BANK
TRANSFEROR AND SERVICER
---------------------
Each Class A [Floating Rate] [ ]% Asset Backed Certificate
(collectively, the "Class A Certificates") and each Class B [Floating Rate]
[ ]% Asset Backed Certificate (collectively, the "Class B Certificates" and,
together with the Class A Certificates, the "Certificates") will represent an
undivided interest in the FNANB Credit Card Master Trust (the "Trust") created
pursuant to a Master Pooling and Servicing Agreement dated as of [August ],
1997 (the "Agreement") between First North American National Bank, as transferor
(in such capacity, the "Transferor") and servicer (in such capacity, the
"Servicer"), and [ ], as trustee (in such capacity, the "Trustee").
The property of the Trust includes receivables (the "Receivables") arising from
time to time in a portfolio of MasterCard(R) and VISA(R) credit card accounts
(the "Accounts"), all monies due or to become due in payment of the Receivables
and certain other property, as more fully described herein. The Class B
Certificates will be subordinated to the Class A Certificates as described
herein. In addition, a Collateral Indebtedness Interest having an initial
principal balance of $[ ] and Class D Certificates having an initial
aggregate principal balance of $[ ] (each as defined herein) will be
issued as part of Series 1997-2 and will be subordinated to the Certificates as
described herein. The Collateral Indebtedness Interest and the Class D
Certificates are not offered hereby. The Trust will offer and sell concurrently
with the issuance of Series 1997-2, and from time to time may offer and sell,
other Series that evidence undivided interests in certain assets of the Trust,
which Series may have terms significantly different from the terms of the
Certificates. The issuance of such other Series may affect the amount or timing
of payments on the Certificates. The Transferor will own the remaining undivided
interest in the Trust not represented by the Certificates, the Collateral
Indebtedness Interest or the Class D Certificates or by other outstanding Series
issued by the Trust.
(Continued on the following page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE CAN
BE NO ASSURANCE THAT ONE WILL DEVELOP OR, IF ONE DOES DEVELOP, 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"
BEGINNING ON PAGE [ ].
---------------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST NORTH AMERICAN NATIONAL
BANK OR ANY AFFILIATE THEREOF. THE CERTIFICATES ARE NOT DEPOSITS, AND NEITHER
THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<CAPTION>
=========================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT TRANSFEROR(1)(2)
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<S> <C> <C> <C>
Per Class A Certificate.......................... % % %
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Per Class B Certificate.......................... % % %
- -------------------------------------------------------------------------------------------------------------------------
Total............................................ $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) Before deducting expenses estimated at $ .
---------------------
The Certificates are offered by the Underwriters when, as and if issued by
the Trust and accepted by the Underwriters and subject to approval of certain
legal matters by counsel for the Underwriters . The Underwriters reserve the
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 [August ], 1997 through the
facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the
Euroclear System.
---------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
UNDERWRITER OF THE CLASS B CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
---------------------
The date of this Prospectus is [ ], 1997
<PAGE> 3
(Continued from the cover page)
Interest will accrue on the Class A Certificates from [August ], 1997
(the "Closing Date") through the day preceding the [September] 1997 Distribution
Date and with respect to each Interest Period (as defined herein) thereafter at
a rate of [[ ]% per annum above the London interbank offered rate for
one-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] [[ ]% per annum] (the "Class A Certificate
Rate"). Interest will accrue on the Class B Certificates from the Closing Date
through the day preceding the [September] 1997 Distribution Date and with
respect to each Interest Period thereafter at a rate of [[ ]% per annum
above LIBOR, determined as described herein, prevailing on the related LIBOR
Determination Date with respect to such period] [[ ]% per annum] (the "Class
B Certificate Rate"). [The Trustee will determine LIBOR for each Interest Period
on the second business day prior to the Distribution Date on which such Interest
Period commences (each, a "LIBOR Determination Date"). The initial LIBOR
Determination Date with respect to the Certificates is [August ], 1997.]
Interest with respect to the Certificates will be distributed on the 15th day of
each month (or, if such 15th day is not a business day, the next succeeding
business day) (each, a "Distribution Date"), commencing with the [September]
1997 Distribution Date. Principal on the Class A Certificates is scheduled to be
paid on the [ 200 ] Distribution Date (the "Class A Expected Final
Distribution Date"), but may be paid earlier or later under certain
circumstances described herein. Principal on the Class B Certificates is
scheduled to be paid on the [ 200 ] Distribution Date (the "Class B
Expected Final Distribution Date"), but may be paid earlier or later under
certain circumstances described herein. Principal on the Class B Certificates
will not be paid unless and until the Class A Certificates have been paid in
full. See "Maturity Considerations." The Certificates will also be entitled to
the benefits of the funds, if any, on deposit in a segregated trust account as
described herein. See "Description of the Certificates -- Cash Collateral
Account."
---------------------
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."
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF
SECURITIES IN THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL
SERVICES ACT 1986 AND OTHER APPLICABLE LAWS AND REGULATIONS WITH RESPECT TO
ANYTHING DONE BY ANY PERSON IN RELATION TO SECURITIES IN, FROM OR OTHERWISE
INVOLVING THE UNITED KINGDOM MUST BE COMPLIED WITH. SEE "UNDERWRITING."
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued
(which will occur only under the limited circumstances described herein),
monthly and annual reports, containing information concerning the Trust and
prepared by the Servicer pursuant to the Agreement, will be sent on behalf of
the Trust to Cede & Co., as nominee of The Depository Trust Company ("DTC") and
registered holder of the Certificates. See "Description of the
Agreement -- Evidence as to Compliance" and "Description of the
Certificates -- Book-Entry Registration" and "-- Reports to Certificateholders."
Such reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. The Transferor is not required
and does not intend to send any of its financial reports to the registered
holders of the Certificates (the "Certificateholders") or to the owners of
beneficial interests in the Certificates (the "Certificate Owners"). The
Transferor will file with the Securities and Exchange Commission (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 for so long as the
Certificates are outstanding.
2
<PAGE> 4
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with the Commission on behalf of the Trust with respect to the Certificates. For
further information, reference is made to the Registration Statement and
amendments thereof and exhibits thereto and any reports and other documents
incorporated herein by reference as described below under "Incorporation of
Certain Documents by Reference," which are available for inspection without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of the Registration Statement and
amendments thereof and exhibits thereto may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a Web site at
"http://www.sec.gov" that contains information regarding registrants that file
electronically with the Commission.
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 in any
document incorporated or deemed to be incorporated by reference into this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
subsequently filed document which also is or is deemed to be incorporated by
reference into this Prospectus 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 Transferor will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of 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 into such documents). Written requests for such copies should be
directed to First North American National Bank, 1800 Parkway Place, Marietta,
Georgia 30067. Telephone requests for such copies should be directed to First
North American National Bank at (770) 423-7900.
3
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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<S> <C>
REPORTS TO CERTIFICATEHOLDERS.......... 2
AVAILABLE INFORMATION.................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE............................ 3
PROSPECTUS SUMMARY..................... 5
RISK FACTORS........................... 18
FIRST NORTH AMERICAN NATIONAL BANK..... 24
FIRST NORTH AMERICAN NATIONAL BANK
CREDIT CARD OPERATIONS............... 24
THE RECEIVABLES........................ 29
MATURITY CONSIDERATIONS................ 33
YIELD CONSIDERATIONS................... 35
THE TRUST.............................. 35
USE OF PROCEEDS........................ 35
DESCRIPTION OF THE AGREEMENT........... 36
Investor Certificates; Exchangeable
Transferor Certificate............ 36
The Trust Property................... 36
Enhancement.......................... 37
Exchanges............................ 37
Representations and Warranties....... 38
Certain Covenants.................... 40
Automatic Additional Accounts........ 40
Supplemental Accounts................ 41
Removal of Accounts.................. 42
Collection Account................... 42
Discount Option...................... 43
Allocation of Collections; Deposits
in Collection Account............. 44
Shared Excess Finance Charge
Collections....................... 45
Shared Principal Collections......... 45
Excess Funding Account............... 46
Defaulted Accounts................... 46
Adjustments.......................... 46
Indemnification...................... 47
Servicing Duties..................... 47
Servicer Covenants................... 48
Servicing Compensation............... 48
Certain Matters Regarding the
Transferor and the Servicer....... 49
Servicer Default..................... 49
Monthly Servicer Report.............. 50
Evidence as to Compliance............ 51
Amendments........................... 51
List of Certificateholders........... 52
</TABLE>
<TABLE>
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PAGE
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<S> <C>
The Trustee.......................... 52
Termination of the Trust............. 53
DESCRIPTION OF THE CERTIFICATES........ 54
Book-Entry Registration.............. 54
Definitive Certificates.............. 56
Interest Payments.................... 57
[The Interest Rate Caps]............. 59
[The Interest Rate Cap Provider]..... 60
Principal Payments................... 60
Postponement of Accumulation
Period............................ 61
Subordination of the Class B
Certificates, the Collateral
Indebtedness Interest and the
Class D Certificates.............. 62
Allocation of Collections and Default
Amounts........................... 62
Principal Funding Account............ 65
Reserve Account...................... 66
Reallocation of Cash Flows........... 67
Application of Collections........... 68
Cash Collateral Account.............. 73
Allocation of Investor Default
Amount; Allocation of Series
Adjustment Amount; Investor
Charge-Offs....................... 74
Early Amortization Events............ 76
Servicing Compensation............... 79
Reports to Certificateholders........ 79
Optional Repurchase.................. 79
Final Payment of Principal........... 80
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES.......................... 80
Transfer of Receivables.............. 80
Certain Matters Relating to
Receivership...................... 80
Consumer and Debtor Protection
Laws.............................. 81
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES......................... 83
ERISA CONSIDERATIONS................... 87
UNDERWRITING........................... 90
LEGAL MATTERS.......................... 91
INDEX TO LOCATION OF DEFINED TERMS..... 92
ANNEX A (CONCURRENTLY ISSUED SERIES)... 97
ANNEX B (GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION PROCEDURES).... 98
</TABLE>
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain capitalized
terms used in this summary are defined elsewhere in this Prospectus. A listing
of the pages on which such terms are defined is found in the "Index to Location
of Defined Terms" beginning on page [ ].
The Certificates........... $[ ] aggregate principal amount of Class A
[Floating Rate] [ ]% Asset Backed
Certificates, Series 1997-2 (the "Class A
Certificates") and $[ ] aggregate
principal amount of Class B [Floating Rate]
[ ]% Asset Backed Certificates, Series
1997-2 (the "Class B Certificates" and, together
with the Class A Certificates, the
"Certificates"). The Certificates will represent
interests in the Trust only and will not
represent interests in or recourse obligations of
First North American National Bank or any
affiliate thereof. The Certificates are not
deposits, and neither the Certificates nor the
underlying Accounts or Receivables are insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
Overview of the
Transaction................ The Trust will be formed for the purpose of holding
the Trust Property and issuing one or more series
of asset backed certificates. The Certificates
will represent the right to receive a varying
percentage of the amounts collected in respect of
the Receivables during each month (each, a
"Collection Period") (but only to the extent
needed to make required payments under the
Agreement and subject to the reallocation of such
amounts as described herein) and will be
allocated a varying percentage of the amount of
Receivables charged off as uncollectible. See
"Description of the Certificates -- Allocation of
Collections and Default Amounts." The amounts
collected will be applied, to the extent
allocated to or otherwise available to the
Certificates, to pay interest and principal due
on the Certificates, to reimburse Investor
Charge-Offs and Series Adjustment Amounts
allocated to the Certificates and to pay certain
other amounts, in each case as described herein.
See "Description of the Certificates --
Application of Collections." The Class A
Certificates will also have the benefit of Shared
Excess Finance Charge Collections, amounts on
deposit in the Cash Collateral Account, if any,
[the Class A Interest Rate Cap] and the
subordination of the Class B Certificates, the
Collateral Indebtedness Interest and the Class D
Certificates. The Class B Certificates will also
have the benefit of Shared Excess Finance Charge
Collections not needed to cover shortfalls in
respect of the Class A Certificates, amounts on
deposit in the Cash Collateral Account, if any,
not needed to cover shortfalls in respect of the
Class A Certificates, [the Class B Interest Rate
Cap] and the subordination of the Collateral
Indebtedness Interest and the Class D
Certificates. See "Description of the
Certificates -- Subordination of the Class B
Certificates, the Collateral Indebtedness
Interest and the Class D Certificates,"
"-- Reallocation of Cash Flows," "-- Application
of Collections" and "-- Cash Collateral Account."
The Trust.................. The FNANB Credit Card Master Trust (the "Trust")
will be formed pursuant to a Master Pooling and
Servicing Agreement dated as of [August ], 1997
(the "Agreement") between First North American
National Bank, a limited purpose credit card
national bank, as trans-
5
<PAGE> 7
feror (in such capacity, the "Transferor") and
servicer (in such capacity, the "Servicer"), and
[ ], a [national banking association],
as trustee (in such capacity, the "Trustee"). The
Agreement will provide for the Trustee to issue
two types of certificates: (i) one or more series
of investor certificates which evidence an
undivided interest in the Trust Property and may
be transferable (collectively, the "Investor
Certificates") and (ii) a certificate which
evidences the undivided interest in the Trust
Property not evidenced by the Investor
Certificates or the interests of any Enhancement
Providers, if applicable, and which generally is
not transferable (the "Exchangeable Transferor
Certificate"). Each series of Investor
Certificates (each, a "Series") may consist of
one or more classes of Investor Certificates
(each, a "Class") and may be included in a
designated group of Series (each, a "Group"). The
Exchangeable Transferor Certificate will
initially be held by the Transferor.
The Trust will offer and sell one other Series
concurrently with the issuance of Series 1997-2
(the "Concurrently Issued Series") and may issue
additional Series from time to time, each
pursuant to a supplement to the Agreement (each,
a "Series Supplement"). See "Annex A
(Concurrently Issued Series)" for a description
of certain terms of the Concurrently Issued
Series.
The Certificates will be issued pursuant to the
Series 1997-2 Supplement to the Agreement (the
"Series 1997-2 Supplement") and will be part of
Series 1997-2 of the Trust ("Series 1997-2").
Series 1997-2 will be included in a Group
designated as Group One and will be the second
Series included in Group One. As used herein,
"Agreement" means the Agreement as supplemented
by the Series 1997-2 Supplement unless the
context requires otherwise.
An interest referred to as the collateral
indebtedness interest having an initial principal
balance of $[ ] and deemed to be a Class
of Investor Certificates (the "Collateral
Indebtedness Interest") and $[ ]
aggregate principal amount of Class D [Floating
Rate] [ ]% Asset Backed Certificates,
Series 1997-2 (the "Class D Certificates" and,
collectively with the Certificates and the
Collateral Indebtedness Interest, the "Series
1997-2 Certificates") will be issued pursuant to
the Agreement as part of Series 1997-2. The Class
D Certificates will be held by the Transferor and
will not be transferable without the delivery of
a tax opinion to the effect that such transfer
would not adversely affect the tax
characterization of the Trust. The Transferor
may, at its option during the Revolving Period,
and subject to the satisfaction of certain
conditions set forth in the Series 1997-2
Supplement, cause the issuance of additional
Class D Certificates. There can be no assurance
as to whether the Transferor will elect to issue
any such additional Class D Certificates.
Exchanges.................. The Agreement will provide that, pursuant to one or
more Series Supplements, the Transferor may
tender or cause to be tendered the Exchangeable
Transferor Certificate, or the Exchangeable
Transferor Certificate and the Investor
Certificates of any Series, to the Trustee in
exchange for one or more newly issued Series of
Investor Certificates and a reissued Exchangeable
Transferor Certificate. The issuance of such
newly issued Series may affect the amount or
timing of
6
<PAGE> 8
payments on the Certificates. See "Description of
the Agreement -- Exchanges."
The Trust Property......... The property of the Trust (the "Trust Property")
includes all right, title and interest of the
Transferor in, to and under (i) all receivables
(the "Receivables") arising from time to time in
a portfolio of MasterCard(R) and VISA(R)(1)
credit card accounts (the "Accounts"), including
any Supplemental Accounts following their
designation and any Automatic Additional Accounts
following their creation [but excluding any
Removed Accounts following their designation],
originated or acquired by the Transferor and
satisfying certain eligibility criteria described
herein, (ii) all monies due or to become due with
respect to the Receivables (including recoveries
of amounts previously charged-off
("Recoveries")), (iii) certain interchange fees
received by the Transferor in connection with the
Receivables ("Interchange"), (iv) all monies on
deposit in certain bank accounts of the Trust
(including, to the extent specified in the
related Series Supplement, investment earnings on
such amounts), (v) all proceeds of the foregoing
and (vi) any Enhancement with respect to any
particular Series or Class as provided in the
related Series Supplement. [The Trust Property
with respect to Series 1997-2 will include the
right to payment under an interest rate cap
agreement for the exclusive benefit of the Class
A Certificateholders (the "Class A Interest Rate
Cap") and the right to payment under an interest
rate cap agreement for the exclusive benefit of
the Class B Certificateholders (the "Class B
Interest Rate Cap" and, together with the Class A
Interest Rate Cap, the "Interest Rate Caps"),
each provided by [ ] (the "Interest Rate
Cap Provider").] Each of the Certificates will
represent an undivided interest in the Trust
Property. See "Description of the
Agreement -- The Trust Property" [and
"Description of the Certificates -- The Interest
Rate Caps" and "-- The Interest Rate Cap
Provider."]
The Receivables to be transferred to the Trust will
arise from time to time in MasterCard and VISA
credit card accounts selected by the Transferor
on the basis of criteria set forth in the
Agreement as applied on the Cut-Off Date or, in
the case of Supplemental Accounts, on the
Addition Cut-Off Date. The Receivables consist of
amounts charged by cardholders for goods and
services and cash advances and monthly premiums
charged to cardholders for insurance plans
offered with respect to the Accounts ("Principal
Receivables") and amounts charged to the Accounts
in respect of periodic finance charges, overlimit
fees, late charges, returned check fees, annual
membership fees, annual service charges,
transaction charges, cash advance fees and
similar fees and charges ("Finance Charge
Receivables"); [provided, however, that an amount
equal to the product of the Discount Percentage
and the amount of Receivables that would
otherwise be Principal Receivables will be
treated as Finance Charge Receivables]. In
addition, amounts collected in respect of
Interchange will be treated as Finance Charge
Collections. As of [June 30], 1997, the aggregate
amount owing in respect of the Receivables was
- ---------------
(1) MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Incorporated and VISA USA Incorporated, respectively.
7
<PAGE> 9
$[ ], comprised of $[ ] of
Principal Receivables and $[ ] of
Finance Charge Receivables [(which includes
$[ ] of Discount Receivables)]. See "The
Receivables" [and "Description of the
Agreement -- Discount Option."]
At the time of the formation of the Trust, the
Transferor will transfer to the Trust all
Receivables existing under certain Accounts owned
by the Transferor as of [July 31], 1997 (the
"Cut-Off Date") and satisfying certain
eligibility criteria described herein and all
Receivables arising from time to time thereafter
in such Accounts until termination of the Trust.
All new Receivables arising in the Accounts will
be automatically transferred to the Trust. The
Agreement will provide that, unless the
Transferor elects to suspend or discontinue such
feature and subject to certain limitations and
conditions set forth in the Agreement, all
MasterCard and VISA credit card accounts
satisfying certain eligibility criteria described
herein will be automatically included as Accounts
("Automatic Additional Accounts") upon their
creation and the Receivables in such Automatic
Additional Accounts, whether then existing or
thereafter created, will be automatically
transferred to the Trust. In addition, the
Agreement will permit or, under certain
circumstances, will require the Transferor to
designate from time to time, in each case subject
to certain limitations and conditions set forth
in the Agreement, additional MasterCard or VISA
credit card accounts as Accounts (the
"Supplemental Accounts") and to transfer the
Receivables in such Supplemental Accounts,
whether then existing or thereafter created, to
the Trust. See "The Receivables" and "Description
of the Agreement -- Automatic Additional
Accounts" and "-- Supplemental Accounts."
Servicing Fee.............. The Servicer is entitled to receive, as
compensation for its servicing activities under
the Agreement, a monthly servicing fee (the
"Servicing Fee"). The share of the Servicing Fee
allocable to Series 1997-2 with respect to any
Distribution Date (the "Investor Monthly
Servicing Fee") will be equal to one-twelfth of
the product of 2.00% and the Invested Amount as
of the last day of the immediately preceding
Collection Period. The share of the Investor
Monthly Servicing Fee allocable to the Class A
Certificates with respect to any Distribution
Date will be equal to one-twelfth of the product
of 2.00% and the Class A Invested Amount as of
the last day of the immediately preceding
Collection Period. The share of the Investor
Monthly Servicing Fee allocable to the Class B
Certificates with respect to any Distribution
Date will be equal to one-twelfth of the product
of 2.00% and the Class B Invested Amount as of
the last day of the immediately preceding
Collection Period. See "Description of the
Agreement -- Servicing Compensation" and
"Description of the Certificates -- Servicing
Compensation."
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
one or more certificates registered in the name
of Cede & Co., the nominee for DTC, and will not
be registered in the names of the Certificate
Owners or their nominees. The Certificate Owners
will only be entitled to receive Definitive
Certificates under the limited circumstances
described
8
<PAGE> 10
herein. See "Description of the
Certificates -- Book-Entry Registration" and
"-- Definitive Certificates."
Clearance and Settlement... The Certificate Owners may elect to hold the
Certificates through DTC (in the United States)
or Cedel or Euroclear (in Europe). 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 in the
United States, on the one hand, and 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" and
"Annex B (Global Clearance, Settlement and Tax
Documentation Procedures)."
Collections................ The Trustee will establish and maintain a
segregated trust account (the "Collection
Account") for the benefit of all then outstanding
Series. The Servicer will deposit all amounts
collected in respect of the Receivables (subject
to certain exceptions described herein) in the
Collection Account on a monthly basis or, under
certain limited circumstances described herein,
on a daily basis. All amounts deposited in the
Collection Account will be allocated by the
Servicer between (i) amounts collected in respect
of Finance Charge Receivables, [amounts collected
in respect of Discount Option Receivables, if
any] and amounts collected in respect of
Interchange (collectively, "Finance Charge
Collections") and (ii) amounts collected in
respect of Principal Receivables [(exclusive of
amounts collected in respect of Discount Option
Receivables, if any)] ("Principal Collections").
All such amounts will then be allocated by the
Servicer among Series 1997-2, the interests of
the Concurrently Issued Series, the interests of
all other then outstanding Series, the interests
of any Enhancement Providers, if applicable, and
the interest of the holder of the Exchangeable
Transferor Certificate (the "Transferor
Interest"). See "Description of the
Agreement -- Collection Account," "-- [Discount
Option" and "--] Allocation of Collections;
Deposits in Collection Account."
Interest and Principal..... Each Class A Certificate will represent the right
to receive (i) interest payments on each
Distribution Date at the Class A Certificate
Rate, accruing from the Closing Date, and (ii)
principal payments commencing on the Class A
Expected Final Distribution Date or during the
Early Amortization Period as described herein, in
each case funded from a percentage of the amounts
collected in respect of the Receivables and
certain other funds as described herein
(including, under the circumstances described
herein, any funds on deposit in the Excess
Funding Account, the Cash Collateral Account, the
Reserve Account or the Principal Funding
Account). See "Description of the
Certificates -- Interest Payments" and
"-- Principal Payments." Interest on the Class A
Certificates will be distributed on each
Distribution Date in an amount equal to [the
product of (i) the Class A Certificate Rate for
the related Interest Period, (ii) a fraction, the
numerator of which is the actual number of days
in such Interest Period and the denominator of
which is 360 and (iii) the outstanding principal
amount of the Class A Certificates as of the
preceding
9
<PAGE> 11
Record Date (or, in the case of the first
Distribution Date, as of the Closing Date)]
[one-twelfth of the product of the Class A
Certificate Rate and the outstanding principal
amount of the Class A Certificates as of the
preceding Record Date (or, in the case of the
first Distribution Date, as of the Closing Date),
except that interest for the first Distribution
Date will accrue from the Closing Date through
[September 14], 1997 and will be calculated on
the basis of a 360-day year consisting of twelve
30-day months]. The aggregate undivided interest
in the Aggregate Principal Receivables evidenced
by the Class A Certificates (the "Class A
Invested Amount") initially will equal
$[ ] (the "Class A Initial Invested
Amount") and will decline as principal with
respect to the Class A Certificates is deposited
in the Principal Funding Account (or, without
duplication, paid to the holders of the Class A
Certificates (the "Class A Certificateholders"))
or as Class A Investor Charge-Offs occur. See
"Description of the Certificates -- Principal
Payments" and "-- Allocation of Investor Default
Amount; Allocation of Series Adjustment Amount;
Investor Charge-Offs."
Each Class B Certificate will represent the right
to receive (i) interest payments on each
Distribution Date at the Class B Certificate
Rate, accruing from the Closing Date, and (ii)
principal payments commencing on the Class B
Expected Final Distribution Date or during the
Early Amortization Period as described herein, in
each case funded from a percentage of the amounts
collected in respect of the Receivables and
certain other funds as described herein
(including, under the circumstances described
herein, any funds on deposit in the Excess
Funding Account, the Cash Collateral Account, the
Reserve Account or the Principal Funding
Account); provided, however, that the holders of
the Class B Certificates (the "Class B
Certificateholders") will in no event begin to
receive principal payments until the Class A
Certificates have been paid in full. See
"Description of the Certificates -- Interest
Payments" and "-- Principal Payments." Interest
on the Class B Certificates will be distributed
on each Distribution Date in an amount equal to
[the product of (i) the Class B Certificate Rate
for the related Interest Period, (ii) a fraction,
the numerator of which is the actual number of
days in the related Interest Period and the
denominator of which is 360 and (iii) the
outstanding principal amount of the Class B
Certificates as of the preceding Record Date (or,
in the case of the first Distribution Date, as of
the Closing Date)] [one-twelfth of the product of
the Class B Certificate Rate and the outstanding
principal amount of the Class B Certificates as
of the preceding Record Date (or, in the case of
the first Distribution Date, as of the Closing
Date), except that interest for the first
Distribution Date will accrue from the Closing
Date through [September 14], 1997 and will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months]. The
aggregate undivided interest in the Aggregate
Principal Receivables evidenced by the Class B
Certificates (the "Class B Invested Amount")
initially will equal $[ ] (the "Class B
Initial Invested Amount") and will decline as
principal with respect to the Class B
Certificates is deposited in the Principal
Funding Account (or, without duplication, paid to
the Class B Certificateholders), as Principal
Collections allocated to
10
<PAGE> 12
the Class B Certificates are reallocated for the
benefit of the Class A Certificates, as Class A
Allocable Amounts are allocated to the Class B
Certificates or as Class B Investor Charge-Offs
occur. See "Description of the
Certificates -- Principal Payments" and
"-- Allocation of Investor Default Amount;
Allocation of Series Adjustment Amount; Investor
Charge-Offs."
Interest on the Class A Certificates or the Class B
Certificates due 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 Class A
Certificate Rate or the Class B Certificate Rate,
as applicable, plus 2.00% per annum. "Interest
Period" means, with respect to any Distribution
Date, the period from and including the previous
Distribution Date through and including the day
preceding such Distribution Date, except that the
initial Interest Period will be the period from
and including the Closing Date through and
including the day preceding the initial
Distribution Date. See "Description of the
Certificates -- Interest Payments."
It is expected that a single principal payment will
be made to the Class A Certificateholders on the
Class A Expected Final Distribution Date and that
a single principal payment will be made to the
Class B Certificateholders on the Class B
Expected Final Distribution Date. There can be no
assurance, however, that such payments will be
made. See "Maturity Considerations."
The final distribution of interest and principal on
the Certificates will be made no later than the
[ 200 ] Distribution Date (the "Stated
Series Termination Date"). After the Stated
Series Termination Date, the Trust will have no
further obligation to pay interest or principal
on the Certificates.
Revolving Period........... On each Distribution Date with respect to the
period (the "Revolving Period") commencing on the
Closing Date and ending on the earlier of the
commencement of the Accumulation Period and the
commencement of the Early Amortization Period,
all Principal Collections allocated to Series
1997-2 (other than Reallocated Principal
Collections) will, subject to certain limitations
described herein, be treated as Shared Principal
Collections and applied to cover principal
payments due to or for the benefit of other
Series included in Group One (to the extent
provided in the Series Supplement for such other
Series), be deposited in the Excess Funding
Account, be paid to the holder of the
Exchangeable Transferor Certificate or, under
certain limited circumstances described herein,
be paid to the holder of the Collateral
Indebtedness Interest (the "Collateral
Indebtedness Holder") or the holders of the Class
D Certificates (the "Class D
Certificateholders"). See "Description of the
Certificates -- Early Amortization Events" for a
discussion of the events that might lead to the
termination of the Revolving Period prior to the
commencement of the Accumulation Period. See
"Description of the Agreement -- Shared Principal
Collections" and "Description of the
Certificates -- Principal Payments."
Accumulation Period........ Unless an Early Amortization Event has occurred, on
each Distribution Date with respect to the period
(the "Accumulation Period") com-
11
<PAGE> 13
mencing at the close of business on the last day
of the [ 200 ] Collection Period (or
such later date to which commencement of the
Accumulation Period may be postponed in
accordance with the Agreement) and ending on the
earliest of (i) the commencement of the Early
Amortization Period, (ii) the date on which the
Certificates are paid in full and (iii) the
Stated Series Termination Date, all Principal
Collections allocated to Series 1997-2 (other
than Reallocated Principal Collections), plus
certain other amounts as described herein, will
be deposited in the Principal Funding Account (in
an amount not to exceed the applicable Controlled
Deposit Amount for such Distribution Date) and
used to make principal payments to the
Certificateholders on the Class A Expected Final
Distribution Date or the Class B Expected Final
Distribution Date, as applicable. The
Accumulation Period is designed to enable the
Certificateholders to receive a single payment
(rather than installment payments) with respect
to the principal balance of their Certificates.
The commencement of the Accumulation Period may,
subject to certain limitations and conditions set
forth in the Agreement, be postponed until a date
no later than the last day of the [
200 ] Collection Period. See "Description of the
Certificates -- Principal Payments,"
"-- Postponement of Accumulation Period,"
"-- Principal Funding Account" and
"-- Application of Collections."
The Accumulation Period includes a period during
which amounts will accumulate in the Principal
Funding Account for the benefit of the Class A
Certificateholders (the "Class A Accumulation
Period") and a period during which amounts will
accumulate in the Principal Funding Account for
the benefit of the Class B Certificateholders
(the "Class B Accumulation Period"). Unless an
Early Amortization Event has occurred, the Class
A Accumulation Period will commence at the close
of business on the last day of the [
200 ] Collection Period (or such later date to
which commencement of the Accumulation Period may
be postponed in accordance with the Agreement)
and end on the earliest of (i) the commencement
of the Early Amortization Period, (ii) the date
on which the Class A Certificates are paid in
full and (iii) the Stated Series Termination
Date. The Class B Accumulation Period will
commence on the Distribution Date on which the
Class A Certificates are paid in full (or, if the
Class A Certificates are paid in full on the
Class A Expected Final Distribution Date, at the
close of business on the Class A Expected Final
Distribution Date) and end on the earliest of (i)
the commencement of the Early Amortization
Period, (ii) the date on which the Class B
Certificates are paid in full and (iii) the
Stated Series Termination Date. See "Description
of the Certificates -- Principal Payments."
The principal amount on deposit in the Principal
Funding Account will be invested by the Trustee,
at the direction of the Servicer, in Eligible
Investments. On each Distribution Date with
respect to the Accumulation Period, all interest
and other investment earnings (net of losses and
investment expenses) on funds on deposit in the
Principal Funding Account will be withdrawn and
used to make interest payments with respect to
the Certificates. The Servicer will establish and
maintain, in the name of the Trustee, a
segregated trust account (the
12
<PAGE> 14
"Reserve Account") for the benefit of the
Certificateholders intended to help assure the
payment of interest with respect to the
Certificates. See "Description of the
Certificates -- Principal Funding Account" and
"-- Reserve Account."
If the Principal Collections allocated to Series
1997-2 for any Distribution Date with respect to
the Accumulation Period (other than Reallocated
Principal Collections), plus certain other
amounts as described herein, are less than the
sum of (i) the Controlled Accumulation Amount for
such Distribution Date plus (ii) the Deficit
Controlled Accumulation Amount, if any, for the
immediately preceding Distribution Date (such sum
for such Distribution Date, the "Controlled
Deposit Amount"), the available amount will be
deposited in the Principal Funding Account and
such deficiency plus the Controlled Accumulation
Amount for the following Distribution Date will
be deposited in the Principal Funding Account on
such following Distribution Date. If the
Principal Collections allocated to Series 1997-2
for any Distribution Date with respect to the
Accumulation Period (other than Reallocated
Principal Collections), plus certain other
amounts as described herein, exceed the
Controlled Deposit Amount for such Distribution
Date, the Controlled Deposit Amount will be
deposited in the Principal Funding Account and
such excess will be paid to the Collateral
Indebtedness Holder to the extent that the
Available Enhancement Amount exceeds the Required
Enhancement Amount (provided that the Transferor
shall have elected to make such payment) and any
remaining excess will be applied as Shared
Principal Collections. See "Description of the
Certificates -- Principal Payments" and
"-- Application of Collections."
Early Amortization
Period................... On each Distribution Date with respect to the
period (the "Early Amortization Period")
commencing on the date on which an Early
Amortization Event occurs and ending on the
earlier of (i) the date on which the Class A
Certificates, the Class B Certificates, the
Collateral Indebtedness Interest and the Class D
Certificates have been paid in full and (ii) the
Stated Series Termination Date, all amounts on
deposit in the Principal Funding Account, if any,
and all Principal Collections allocated to Series
1997-2 (other than Reallocated Principal
Collections), plus certain other amounts as
described herein, will be paid to the Class A
Certificateholders (without regard to the
Controlled Deposit Amount) until the Class A
Certificates have been paid in full and,
following payment in full of the Class A
Certificates, to the Class B Certificateholders
(without regard to the Controlled Deposit Amount)
until the Class B Certificates have been paid in
full. The Early Amortization Period is designed
to accelerate the distribution of principal to
the Certificateholders following an Early
Amortization Event. See "Description of the
Certificates -- Principal Payments" and "-- Early
Amortization Events."
Shared Excess Finance
Charge Collections....... The Certificates will be entitled to receive excess
Finance Charge Collections and certain other
amounts allocable to other Series in Group One in
the manner, and to the extent, provided in the
Series Supplements for such other Series. The
sharing of excess Finance
13
<PAGE> 15
Charge Collections may enable the Transferor to
avoid the occurrence of an Early Amortization
Event that would otherwise occur as a result of a
shortfall in Finance Charge Collections allocable
to Series 1997-2. There can be no assurance,
however, that excess Finance Charge Collections
will exist or be allocated to the Certificates
with respect to any Collection Period. See
"Description of the Agreement -- Shared Excess
Finance Charge Collections."
Shared Principal
Collections.............. The Certificates will be entitled to receive
Principal Collections allocated to other Series
in Group One but not needed to make payments or
deposits with respect to such other Series in the
manner, and to the extent, provided in the Series
Supplements for such other Series. The sharing of
Principal Collections may enable the Transferor
to avoid the occurrence of an Early Amortization
Event that would otherwise occur as a result of a
shortfall in Principal Collections allocated to
Series 1997-2. There can be no assurance,
however, that excess Principal Collections will
exist or be allocated to the Certificates with
respect to any Collection Period. See
"Description of the Agreement -- Shared Principal
Collections."
Subordination of the Class
B Certificates, the
Collateral Indebtedness
Interest and the Class D
Certificates............. The Class B Certificates, the Collateral
Indebtedness Interest and the Class D
Certificates will be subordinated as described
herein to the extent necessary to fund certain
payments with respect to the Class A
Certificates. In addition, the Collateral
Indebtedness Interest and the Class D
Certificates will be subordinated as described
herein to the extent necessary to fund certain
payments with respect to the Class B
Certificates. If the amount on deposit in the
Cash Collateral Account is zero and the
Collateral Indebtedness Amount and the Class D
Invested Amount are reduced to zero, the Class B
Certificateholders will bear directly the credit
and other risks associated with their undivided
interest in the Trust. If the Class B Invested
Amount is reduced, the percentage of Finance
Charge Collections allocated to the Class B
Certificateholders with respect to subsequent
Collection Periods will be reduced. If and to the
extent that the amount of such reduction in the
Class B Invested Amount is not reimbursed, the
amount of principal distributable to the Class B
Certificateholders will be reduced. If the amount
on deposit in the Cash Collateral Account is zero
and the Class B Invested Amount, the Collateral
Indebtedness Amount and the Class D Invested
Amount are reduced to zero, the Class A
Certificateholders will bear directly the credit
and other risks associated with their undivided
interest in the Trust. If the Class A Invested
Amount is reduced, the percentage of Finance
Charge Collections allocated to the Class A
Certificateholders with respect to subsequent
Collection Periods will be reduced. If and to the
extent that the amount of such reduction in the
Class A Invested Amount is not reimbursed, the
amount of principal distributable to the Class A
Certificateholders will be reduced. See
"Description of the Certificates -- Subordination
of the Class B Certificates, the Collateral
Indebtedness Interest and the Class D
Certificates," "-- Allocation of Collections and
Default Amounts" and "-- Allocation of Investor
14
<PAGE> 16
Default Amount; Allocation of Series Adjustment
Amount; Investor Charge-Offs."
Amounts Available as
Enhancement.............. On each Distribution Date, the amount of
Enhancement available to the Certificateholders
will equal the lesser of (i) the sum of the
Collateral Indebtedness Amount, the Class D
Invested Amount and the amount, if any, on
deposit in the Cash Collateral Account on such
Distribution Date (collectively, the "Available
Enhancement Amount") and (ii) the greater of (A)
the product of the Invested Amount on such
Distribution Date and [ ]% and (B)
$[ ] (the "Required Enhancement
Amount"); provided, however, that if an Early
Amortization Event occurs, then the Required
Enhancement Amount on any Distribution Date will
equal the Required Enhancement Amount on the
Distribution Date immediately preceding the
occurrence of such Early Amortization Event. If,
on any Distribution Date, the Available
Enhancement Amount (after giving effect to any
optional issuance of additional Class D
Certificates made on such Distribution Date in
accordance with the Agreement) is less than the
Required Enhancement Amount, certain Excess
Spread and Shared Excess Finance Charge
Collections allocable to Series 1997-2 will be
used to increase the Available Enhancement Amount
to the extent of such shortfall. If the
Enhancement Amount exceeds the Required
Enhancement Amount on any Distribution Date, such
excess will be applied in accordance with the
Loan Agreement and may not be available to the
Certificateholders. See "Description of the
Agreement -- Enhancement" and "Description of the
Certificates -- Application of Collections."
Cash Collateral Account.... The Trustee will establish and maintain a
segregated trust account (the "Cash Collateral
Account") for the benefit of the
Certificateholders, the Collateral Indebtedness
Holder and the Class D Certificateholders. The
Cash Collateral Account will have a beginning
balance of zero, which balance may be increased
to the extent collections of Excess Spread and
Shared Excess Finance Charge Collections
allocated to Series 1997-2 are required to be or
are otherwise deposited therein. At the
Transferor's election, any funding of the Cash
Collateral Account may result in a reduction of
the Collateral Indebtedness Amount or the Class D
Invested Amount; provided, however, that, after
giving effect to such reduction on any
Distribution Date, the Available Enhancement
Amount on such Distribution Date must equal or
exceed the Required Enhancement Amount on such
Distribution Date. Amounts on deposit in the Cash
Collateral Account will be available to make
payments to or for the benefit of the
Certificateholders to the extent described
herein. See "Description of the
Certificates -- Cash Collateral Account."
[Interest Rate Caps]....... [On or prior to the Closing Date, the Transferor
will enter into the Class A Interest Rate Cap and
the Class B Interest Rate Cap with the Interest
Rate Cap Provider for the exclusive benefit of
the Class A Certificateholders and the Class B
Certificateholders, respectively. The Transferor
will assign to the Trustee, for the benefit of
the Class A Certificateholders and the Class B
Certificateholders, all of the Transferor's
rights under the Class A Interest Rate Cap and
the Class B
15
<PAGE> 17
Interest Rate Cap, respectively. On each
Distribution Date on which the Class A
Certificate Rate or the Class B Certificate Rate
for the related Interest Period exceeds the Class
A Cap Rate or the Class B Cap Rate, respectively,
the Interest Rate Cap Provider will make a
payment to the Trustee, on behalf of the Trust,
based on the amount of such excess and the
notional amount of the applicable Interest Rate
Cap, and such payment will be included in Class A
Available Funds or Class B Available Funds,
respectively. The Class A Notional Amount will at
all times prior to the termination of the Class A
Interest Rate Cap equal or exceed the Class A
Invested Amount plus the Principal Funding
Account Balance, and the Class B Notional Amount
will at all times prior to the termination of the
Class B Interest Rate Cap equal or exceed the
Class B Invested Amount plus, after the Class A
Invested Amount has been paid in full, the
Principal Funding Account Balance. The Class A
Interest Rate Cap will terminate on the earlier
of the day the Class A Certificates are paid in
full and the day following the Stated Series
Termination Date. The Class B Interest Rate Cap
will terminate on the earlier of the day the
Class B Certificates are paid in full and the day
following the Stated Series Termination Date;
provided, however, that either of the Interest
Rate Caps may be terminated at an earlier date if
the Servicer has obtained a Replacement Interest
Rate Cap or a Qualified Substitute Arrangement
with respect thereto. See "Description of the
Certificates -- The Interest Rate Caps" and
"-- The Interest Rate Cap Provider."]
Optional Repurchase........ The Transferor may, at its sole option and subject
to certain conditions set forth in the Agreement,
repurchase the Series 1997-2 Certificates on any
Distribution Date on or after which the Invested
Amount is reduced to an amount less than or equal
to [10]% of the initial Invested Amount by
depositing into the Collection Account, on such
Distribution Date, an amount equal to the
Invested Amount plus interest on all outstanding
Series 1997-2 Certificates accrued through the
last day of the immediately preceding Interest
Period. See "Description of the
Certificates -- Optional Repurchase."
Tax Status................. McGuire, Woods, Battle & Boothe, L.L.P., special
tax counsel to the Transferor, is of the opinion
that under existing law the Certificates will be
characterized as indebtedness for federal income
tax purposes. Under the Agreement, the Transferor
will agree, and the Certificate Owners will be
deemed to agree, to treat the Certificates as
debt for federal, state and local income and
franchise tax purposes. See "Certain Federal
Income Tax Consequences" for additional
information concerning the application of federal
income tax laws.
ERISA Considerations....... Under a regulation issued by the U.S. Department of
Labor (the "Final Regulation"), the Trust
Property would not be deemed "plan assets" of an
employee benefit plan holding an interest in the
Certificates if the Certificates qualify as
"publicly-offered securities" within the meaning
of the Final Regulation. To qualify as
"publicly-offered securities" within the meaning
of the Final Regulation, certain conditions must
be met, including that, with respect to the Class
A Certificates, interests in the Class A
Certificates be held by at least 100 investors
independent of the Transferor and of one another
upon completion of the public offering being made
hereby. The Underwrit-
16
<PAGE> 18
ers of the Class A Certificates expect, although
no assurance can be given, that the Class A
Certificates will be held by at least 100 such
investors. The Transferor anticipates that the
other conditions of the "publicly-offered
security" exception contained in the Final
Regulation will be met with respect to the Class
A Certificates. No monitoring or other measures
will be taken to ensure that any such conditions
will be met with respect to the Class A
Certificates. The Underwriter of the Class B
Certificates expects that the Class B
Certificates will not qualify as
"publicly-offered securities." Accordingly, the
Class B Certificates may not be acquired by
Benefit Plans or entities whose underlying assets
include plan assets, including, without
limitation, an insurance company general account.
Each Certificate Owner of a Class B Certificate,
by its acceptance thereof, will be deemed to have
represented that it is not a Benefit Plan
investor. See "ERISA Considerations."
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 two nationally
recognized statistical rating organizations
selected by the Transferor (each, a "Rating
Agency"). The rating of the Class A Certificates
is based primarily on the value of the
Receivables as determined by each Rating Agency
and the terms of [the Interest Rate Caps], the
Class B Certificates, the Collateral Indebtedness
Interest and the Class D Certificates. See "Risk
Factors -- Certificate Rating" and "Description
of the Certificates -- [The Interest Rate Caps"
and "--] Subordination of the Class B
Certificates, the Collateral Indebtedness
Interest and the Class D Certificates."
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 two
Rating Agencies. The rating of the Class B
Certificates is based primarily on the value of
the Receivables as determined by each Rating
Agency and the terms of [the Interest Rate Caps],
the Collateral Indebtedness Interest and the
Class D Certificates. See "Risk
Factors -- Certificate Rating" and "Description
of the Certificates -- [The Interest Rate Caps"
and "--] Subordination of the Class B
Certificates, the Collateral Indebtedness
Interest and the Class D Certificates."
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RISK FACTORS
LIMITED LIQUIDITY
There is currently no market for the Certificates. Each Underwriter intends
to make a market in the Certificates purchased by it from the Transferor, but is
not obligated to do so. There can be no assurance that a secondary market will
develop with respect to the Certificates or, if a secondary market does develop,
that it will provide Certificate Owners with liquidity of investment or that it
will continue until the Certificates are paid in full.
NON-RECOURSE TO THE TRANSFEROR AND ITS AFFILIATES
The Certificates will represent interests in the Trust only and will not
represent interests in or recourse obligations of First North American National
Bank or any affiliate thereof. Consequently, the Certificateholders must rely
solely upon amounts collected in respect of the Receivables for the payment of
principal of and interest on the Certificates. Furthermore, under the Agreement,
the Certificateholders have an interest in the Receivables and amounts collected
in respect of the Receivables only to the extent that the Receivables or such
amounts are allocated to Series 1997-2 or, to the limited extent described
herein, the Transferor Interest. Should the Certificates not be paid in full on
a timely basis, the Certificateholders may not look to any assets of the
Transferor (other than the Exchangeable Transferor Certificate and the Class D
Certificates, to the extent described herein) or any affiliate thereof to
satisfy their claims. The Trust will have no substantial assets other than its
interests in the Receivables and the proceeds thereof as described herein.
POSSIBLE PRIORITY OF CERTAIN LIENS
Although the Agreement will provide that the Transferor will transfer all
of its right, title and interest in, to and under the Receivables to the Trust,
a court could treat such transfer as an assignment of collateral as security for
the benefit of the holders of the Investor Certificates of all then outstanding
Series. The risk of such treatment may be increased by the retention by the
Transferor of the Exchangeable Transferor Certificate, the Class D Certificates,
a Class of the Concurrently Issued Series and any other Class of Investor
Certificates that may be issued and retained by the Transferor. The Transferor
will represent and warrant in the Agreement that the transfer of the Receivables
to the Trust constitutes either a valid sale and assignment to the Trust of all
right, title and interest of the Transferor in, to and under the Receivables or
the grant to the Trust of a security interest in the Receivables. The Transferor
will take certain actions required to perfect the interest of the Trust in the
Receivables and will warrant that, if the transfer of the Receivables to the
Trust is deemed to be a grant to the Trust of a security interest in the
Receivables, the Trustee will have a first priority perfected security interest
in the Receivables, subject to certain tax or other governmental liens. If the
transfer of the Receivables to the Trust is deemed to create a security interest
in the Receivables under the Uniform Commercial Code as in effect in the
applicable jurisdiction (the "UCC"), a tax or other governmental lien relating
to the Transferor arising before a Receivable comes into existence may have
priority over the interest of the Trust in such Receivable. See "Certain Legal
Aspects of the Receivables -- Transfer of Receivables."
INSOLVENCY RISK CONSIDERATIONS
A conservator or receiver for the Transferor would have the power under the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
to repudiate contracts of, and to request a stay of up to 90 days of any
judicial action or proceeding involving, the Transferor. However,
notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, the Transferor, subject to certain qualifications, a valid
perfected security interest of the Trust in the Receivables should be
enforceable (to the extent of the Trust's "actual direct compensatory damages")
and payments to the Trust with respect to the Receivables (up to the amount of
such damages) should not be subject to an automatic stay of payment or to
recovery by such a conservator or receiver. If, however, the conservator or
receiver were to assert that the security interest was unperfected or
unenforceable, or were to require the Trust to establish its right to those
payments by submitting to and completing the administrative claims procedure
established under FIRREA, or the conservator or receiver were to request a stay
of proceedings with respect to the Transferor as provided
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under FIRREA, delays in payments to the Trust and on the Certificates and
possible reductions in the amount of those payments could occur. In the event of
a repudiation of obligations by a conservator or receiver, FIRREA provides that
a claim for the repudiated obligation is limited to "actual direct compensatory
damages" determined as of the date of the appointment of the conservator or
receiver. In the event a conservator or receiver of the Transferor repudiated
the Agreement, the amount paid to the Certificateholders could, depending upon
the method used to determine "actual direct compensatory damages" and the
circumstances existing on the date of the repudiation, be less than the
principal of the Certificates and the interest accrued thereon to the date of
payment. See "Certain Legal Aspects of the Receivables -- Certain Matters
Relating to Receivership." In addition, in the event of a Servicer Default, if a
conservator or receiver is appointed for the Servicer, and no Servicer Default
other than such conservatorship or receivership exists, the conservator or
receiver may have the power to prevent either the Trustee or the majority of the
Certificateholders from effecting a transfer of servicing to a successor
Servicer.
If a receiver were appointed for the Transferor, causing an early
amortization event with respect to all then outstanding Series, new Principal
Receivables would not be transferred to the Trust pursuant to the Agreement. If
a receiver were appointed for the Transferor, the Trustee would sell the portion
of the Receivables allocable in accordance with the Agreement to each Series
(unless the holders of more than 50% of the principal amount of each Class of
each Series, excluding any Class or portion thereof held by the Transferor, and
the holders of any other interest in the Exchangeable Transferor Certificate
other than the Transferor instruct otherwise), thereby causing early termination
of the Trust and a loss to the Certificateholders if the net proceeds allocable
to the Certificateholders from such sale, if any, were insufficient to pay the
Certificateholders in full. The net proceeds of any such sale of the portion of
the Receivables allocated in accordance with the Agreement to Series 1997-2
would first be used to pay amounts due to the Class A Certificateholders, would
thereafter be used to pay amounts due to the Class B Certificateholders, would
thereafter be used to pay amounts due to the Collateral Indebtedness Holder and
would thereafter be used to pay amounts due to the Class D Certificateholders.
If the only Early Amortization Event to occur were either the insolvency of the
Transferor or the appointment of a conservator or receiver for the Transferor,
the conservator or receiver might have the power to require the Transferor to
continue to transfer new Receivables to the Trust and to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the Early
Amortization Period. In addition, a conservator or receiver for the Transferor
might have the power to cause early payment of the Certificates. In the event of
an early payment of principal on the Certificates, the Certificateholders may
realize a lower yield on their reinvestment of such early payment and may be
required to incur costs associated with reinvesting such early payment. See
"Certain Legal Aspects of the Receivables -- Certain Matters Relating to
Receivership."
CONSUMER AND DEBTOR PROTECTION LAWS
The relationship between the cardholder and credit card issuer is
extensively regulated by federal and state consumer protection laws. In
addition, various proposed federal and state laws and amendments to existing
laws have from time to time been introduced in Congress and certain state and
local legislatures that, if enacted, would further regulate the credit card
industry, certain of which would, among other things, impose a ceiling on the
rate at which a financial institution may assess finance charges and fees on
credit card accounts that would be substantially below the rates of the finance
charges and fees the Transferor currently assesses on the Accounts. In
particular, on June 19, 1997, a proposal to amend the Federal Truth-in-Lending
Act was introduced to the House of Representatives and referred to the Committee
on Banking and Financial Services which would, among other things, prohibit the
imposition of certain minimum finance charges and other fees, prohibit certain
methods of calculating finance charges, require prior notice of any increase in
the interest rate assessed with respect to a credit card account and limit the
amount of certain fees. Although such proposed legislation has not been enacted,
there can be no assurance that such a bill will not become law in the future.
The potential effect of any legislation which limits the amount of finance
charges and fees that may be charged on credit cards could be to reduce the
portfolio yield on the Accounts. Any failure by the Transferor or the Servicer
to comply with such legal requirements also could adversely affect the Trust's
ability to collect the full amount of the Receivables. Although the Transferor
makes certain representations and warranties relating to the validity and
enforceability of the Receivables, it is not anticipated that the Trustee will
make
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<PAGE> 21
any initial or periodic general examination of the Accounts or the Receivables
or any records relating to the Accounts or the Receivables for the purpose of
establishing the presence or absence of defects or compliance with such
representations and warranties or for any other purpose. In the event of a
breach of certain representations and warranties, the Transferor may be
obligated to accept the reassignment and transfer of the entire Trust Portfolio.
See "Description of the Agreement -- Representations and Warranties" and
"Certain Legal Aspects of the Receivables -- Consumer and Debtor Protection
Laws."
The application of federal and state bankruptcy and debtor relief laws to
the obligations represented by the Receivables could adversely affect the
interests of the Certificateholders if such laws result in any Receivables being
charged off as uncollectible. See "Description of the Agreement -- Defaulted
Accounts," "Description of the Certificates -- Allocation of Investor Default
Amount; Allocation of Series Adjustment Amount; Investor Charge-Offs" and
"Certain Legal Aspects of the Receivables -- Consumer and Debtor Protection
Laws."
TIMING OF PAYMENTS AND MATURITY
The Receivables may be paid at any time, and there can be no assurance that
there will be additional Receivables created or that any particular pattern of
repayments will occur. The commencement and continuation of the Accumulation
Period will be dependent upon the continued creation of new Receivables to be
transferred to the Trust. A significant decline in the amount of Receivables
created could result in the occurrence of an Early Amortization Event and the
commencement of the Early Amortization Period. If the Early Amortization Period
commences, the average life and maturity of the Certificates may be
significantly reduced. In the event of an early payment of principal on the
Certificates, the Certificateholders may realize a lower yield on their
reinvestment of such early payment and may be required to incur costs associated
with reinvesting such early payment. See "Maturity Considerations" and
"Description of the Certificates -- Early Amortization Events."
EFFECT OF SUBORDINATION OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS
The Class B Certificates will be subordinated in right of payment of
principal to the Class A Certificates. The Class B Certificateholders will not
be entitled to receive principal payments until the Class A Certificates have
been paid in full. In addition, certain Principal Collections otherwise
allocable to the Class B Certificateholders may be reallocated to the Class A
Certificateholders and the Class B Invested Amount reduced accordingly. To the
extent the Class B Invested Amount is reduced, the percentage of Finance Charge
Collections allocated to the Class B Certificateholders in subsequent Collection
Periods will be reduced. Moreover, to the extent the amount of such reduction in
the Class B Invested Amount is not reimbursed, the amount of principal
distributable to the Class B Certificateholders will be reduced. If the amount
on deposit in the Cash Collateral Account is zero and the Class B Invested
Amount, the Collateral Indebtedness Amount and the Class D Invested Amount are
reduced to zero, the Class A Certificateholders will bear directly the credit
and other risks associated with their undivided interest in the Trust. See
"Description of the Certificates -- Allocation of Collections and Default
Amounts," "-- Allocation of Investor Default Amount; Allocation of Series
Adjustment Amount; Investor Charge-Offs" and "-- Subordination of the Class B
Certificates, the Collateral Indebtedness Interest and the Class D
Certificates."
EFFECT OF ADDITION OF TRUST ASSETS ON CREDIT QUALITY
The Agreement will provide that, unless the Transferor elects to suspend or
discontinue such feature and subject to certain limitations and conditions set
forth in the Agreement, all Automatic Additional Accounts will constitute
Accounts upon their creation and the Receivables in such Automatic Additional
Accounts, whether then existing or thereafter created, will be automatically
transferred to the Trust. In addition, the Agreement will permit or, under
certain circumstances, require the Transferor to designate from time to time, in
each case subject to certain limitations and conditions set forth in the
Agreement, Supplemental Accounts and to transfer the Receivables in such
Supplemental Accounts, whether then existing or thereafter created, to the
Trust. Such Automatic Additional Accounts and Supplemental Accounts may include
Accounts originated using criteria different from those which were applied to
the Accounts existing on the Closing Date
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<PAGE> 22
or to previously-designated Automatic Additional Accounts or Supplemental
Accounts. Consequently, there can be no assurance that Automatic Additional
Accounts or Supplemental Accounts designated in the future will be of the same
credit quality as previously-designated Accounts. In addition, such Automatic
Additional Accounts or Supplemental Accounts may have different terms or
characteristics than the initial Accounts or the Automatic Additional Accounts
or Supplemental Accounts previously included in the Trust, including lower
periodic rate finance charges and other fees and charges, different payment
rates and higher loss or delinquency experience, which may have the effect of
reducing the average yield on the Receivables. Each designation of Supplemental
Accounts is subject to certain conditions, including that the Rating Agency
Condition shall have been satisfied, but there is no mechanism to assure
consistent credit quality from time to time. See "The Receivables" and
"Description of the Agreement -- Automatic Additional Accounts" and
"-- Supplemental Accounts."
NEGATIVE CARRY
Any amounts deposited in the Excess Funding Account or the Principal
Funding Account may result in a reduction of Portfolio Yield to the extent that
the Eligible Investments in which such amounts are invested earn a rate which is
less than the effective yield from Finance Charge Collections. See "Description
of the Certificates -- Reserve Account."
SOCIAL, TECHNOLOGICAL AND ECONOMIC FACTORS
Changes in purchase and payment patterns by cardholders may result from a
variety of social, technological and economic factors. Social factors include
potential changes in consumers' attitudes toward financing purchases with debt.
Technological factors include new methods of payment, such as debit cards.
Economic factors include the rate of inflation, unemployment levels and relative
interest rates. Cardholders with respect to the Accounts generally have billing
addresses in 50 states, the District of Columbia and certain United States
territories and possessions. Adverse economic changes in certain states in which
the largest number of such cardholders have billing addresses [ ] could
have a direct impact on the creation of Receivables and the timing or amount of
payments on the Certificates. There is no basis to predict whether, or to what
extent, social, technological or economic factors will affect future use of
credit or repayment patterns.
COMPETITION IN THE CREDIT CARD INDUSTRY
The credit card industry is highly competitive and operates in a legal and
regulatory environment increasingly focused on the cost of services charged for
credit cards. As new credit card issuers and other credit providers enter the
market and all issuers and providers 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 continued ability of the Transferor to
create new Receivables. If the rate at which new Receivables are created
declines significantly and the Transferor is unable to designate Supplemental
Accounts, the Early Amortization Period could commence. In the event of an early
payment of principal on the Certificates, the Certificateholders may realize a
lower yield on their reinvestment of such early payment and may be required to
incur costs associated with reinvesting such early payment. See "Description of
the Agreement -- Supplemental Accounts" and "Description of the
Certificates -- Early Amortization Events."
BOOK-ENTRY REGISTRATION
The Certificates initially will be represented by one or more certificates
registered in the name of Cede & Co., 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, the Certificate Owners will not be
recognized by the Trustee as Certificateholders. Consequently, until such time,
the Certificate Owners will only be able to receive payments from, and exercise
the rights of Certificateholders indirectly through, DTC and its participating
organizations and, unless a Certificate Owner requests a copy of any such report
or other information from the Trustee, will receive reports and other
information provided for under the Agreement only if, when and to the extent
provided to the Certificate Owners by DTC and its participating organizations.
In addition, the ability of the Certificate Owners to pledge the Certificates to
persons or entities that do not
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participate in the DTC system, or otherwise take actions in respect of the
Certificates, may be limited due to the lack of physical certificates for the
Certificates. See "Description of the Certificates -- Book-Entry Registration"
and "-- Definitive Certificates."
ABILITY OF TRANSFEROR TO CHANGE PAYMENT TERMS
Pursuant to the Agreement, the Transferor will not transfer to the Trust
the Accounts but only the Receivables arising in the Accounts. As owner of the
Accounts, the Transferor will have the right to determine the annual percentage
rates and fees applicable from time to time to the Accounts, to alter the
minimum monthly payment required under the Accounts and to change various other
terms with respect to the Accounts. A decrease in such annual percentage rates
or a reduction in such fees would decrease the effective yield on the Accounts
and could result in the occurrence of an Early Amortization Event. An alteration
of payment terms may result in fewer payments on the Receivables being made in
any month. Under the Agreement, the Transferor will agree that, unless required
by law or unless it deems it necessary in its sole discretion to maintain on a
competitive basis its credit card business, it will not at any time reduce the
annual percentage rates or the periodic finance charges assessed on the
Receivables or the other fees applicable to the Accounts if, as a result of any
such reduction, either (i) the Transferor reasonably expects that such reduction
would cause an early amortization event to occur with respect to any Series or
(ii) such reduction is not also applied to any comparable segment of consumer
revolving credit card accounts owned by the Transferor that have characteristics
the same as, or substantially similar to, the Accounts. In addition, the
Transferor will have the right to change the terms of the Accounts or its
policies and procedures with respect to servicing the Accounts (including the
amount or timing of charge-offs and the periodic finance charges and other fees
to be assessed on the Accounts) if such change is made applicable to any
comparable segment of consumer revolving credit card accounts owned by the
Transferor that have characteristics the same as, or substantially similar to,
the Accounts. Except as specified above, there are no restrictions in the
Agreement on the ability of the Transferor to change the terms of the Accounts.
Although the Transferor has no current intention of taking actions which would
change the payment or other terms of the Accounts other than in accordance with
its customary and usual procedures, there can be no assurance that changes in
applicable law, changes in the marketplace or prudent business practice might
not result in a determination to do so.
CONTROL
Subject to certain exceptions, the holders of the Investor Certificates of
each Series may take certain actions, or direct certain actions to be taken,
under the Agreement or the related Series Supplement. In determining whether the
required percentage of the holders of Series 1997-2 have given their approval or
consent, except as otherwise specified, the Class A Certificateholders and the
Class B Certificateholders will be treated as a single Series. Accordingly, the
Class A Certificateholders will have the power to determine whether any such
action is taken without regard to the position or interests of the Class B
Certificateholders relating to such action. The Class B Certificateholders will
not have similar power. Under certain circumstances, however, the consent or
approval of the Collateral Indebtedness Holder or a specified percentage of the
Aggregate Invested Amount or of the invested amount of each Class of each Series
may be required to direct certain actions, including requiring the appointment
of a successor Servicer following a Servicer Default, amending the Agreement in
certain circumstances, directing the Servicer not to sell the Receivables upon
the occurrence of certain events of insolvency or bankruptcy and directing a
repurchase of all outstanding Series upon the breach of certain representations
and warranties by the Transferor.
MASTER TRUST CONSIDERATIONS
In addition to the Certificates, the Trust will issue the Concurrently
Issued Series and is expected to issue additional Series from time to time.
Although the Principal Terms of any Series will be specified in a Series
Supplement, the provisions of such Series Supplement and, therefore, the terms
of such additional Series will not be subject to the prior review or consent of
the Certificateholders. Such Principal Terms may include methods for determining
applicable allocation percentages and allocating amounts collected in respect of
the Receivables, provisions creating security or Enhancement, different Classes
of Investor Certificates (including
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subordinated Classes), provisions subordinating such Series to another Series
(if the Series Supplement relating to such Series so permits) or another Series
to such Series (if the Series Supplement for such other Series so permits) and
any other amendment or supplement to the Agreement which is made applicable only
to such Series. In addition, the provisions of any Series Supplement may give
the holders of the Investor Certificates issued pursuant thereto consent,
approval or other rights that could result in such holders having the power to
cause the Transferor, the Servicer or the Trustee to take or refrain from taking
certain actions, including, without limitation, actions with respect to the
exercise of certain rights and remedies under the Agreement, without regard to
the position or interest of the holders of the Investor Certificates of any
other Series. Similar rights may also be given to any Enhancement Provider for
any Series. It is a condition precedent to the issuance of any additional Series
that the Rating Agency Condition shall have been satisfied. There can be no
assurance, however, that the Principal Terms of any other Series, including any
Series issued from time to time hereafter, might not have an adverse impact on
the timing and amount of payments received by a Certificateholder or the value
of the Certificates, even if there is no change in the rating of any then
outstanding Series. See "Description of the Agreement -- Investor Certificates;
Exchangeable Transferor Certificate" and "-- Exchanges."
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 two Rating Agencies. 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 two Rating Agencies. The
ratings assigned to the Certificates by each Rating Agency will reflect such
Rating Agency's assessment of the likelihood that Certificateholders of such
Class will receive the payments of interest and principal required to be made
under the Agreement, in the case of interest as required under the Agreement and
in the case of principal on or prior to the Stated Series Termination Date. The
ratings will be based primarily on an assessment of the Receivables (including
the eligibility criteria for the designation of Supplemental Accounts), the
amounts held in any trust account for the benefit of the Certificates (including
the Excess Funding Account) and the subordination of the Class B Certificates,
the Collateral Indebtedness Interest and the Class D Certificates for the
benefit of the Class A Certificates and the subordination of the Collateral
Indebtedness Interest and the Class D Certificates for the benefit of the Class
B Certificates. Any such rating will not address the possibility of the
occurrence of an Early Amortization Event, the possibility of the imposition of
United States withholding tax with respect to non-U.S. Certificateholders, the
likelihood that principal of the Class A Certificates will be paid on the Class
A Expected Final Distribution Date or the likelihood that principal on the Class
B Certificates will be paid on the Class B Expected Final Distribution Date. The
ratings are not a recommendation to purchase, hold or sell the Certificates,
inasmuch as such ratings do not comment as to the market price or suitability
for a particular investor. There can be no assurance that the ratings will
remain in effect for any given period of time or that any rating will not be
lowered or withdrawn by any Rating Agency if in its judgment circumstances so
warrant.
The Transferor will request a rating of the Certificates by at least two
Rating Agencies. 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 either Class of the Certificates, and, if so, what such rating would be. A
rating assigned to either Class of the Certificates by a rating agency that has
not been requested by the Transferor to do so may be lower than the ratings
assigned by the Rating Agencies pursuant to the Transferor's request.
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FIRST NORTH AMERICAN NATIONAL BANK(R)
First North American National Bank(R) ("FNANB") is a limited purpose credit
card national bank headquartered in Marietta, Georgia. FNANB was chartered by
the Office of the Comptroller of the Currency in October 1990 and commenced
operations in November 1990. FNANB is a wholly-owned subsidiary of Circuit City
Stores, Inc., a Virginia corporation ("Circuit City"). As of May 31, 1997, FNANB
had assets of approximately $388 million and equity of approximately $177
million. The principal executive offices of FNANB are located at 1800 Parkway
Place, Marietta, Georgia 30067.
FIRST NORTH AMERICAN NATIONAL BANK CREDIT CARD OPERATIONS
GENERAL
The Receivables to be transferred to the Trust will arise from transactions
made by holders of MasterCard Regular and MasterCard BusinessCard credit cards
and holders of VISA Classic and VISA Gold credit cards issued by FNANB. FNANB is
a member of MasterCard International Incorporated and VISA USA Incorporated.
FNANB also offers several private label credit cards which can be used to
purchase merchandise, services and service contracts at Circuit City stores.
Each cardholder is subject to an agreement with FNANB governing the terms
and conditions of the related MasterCard or VISA credit card account. Pursuant
to each such agreement, FNANB reserves the right, subject to such notice to the
cardholder as may be required by law, to add to or change the terms, conditions,
services or features of its MasterCard of VISA credit card accounts at any time,
including increasing or decreasing periodic finance charges, other charges or
minimum payment terms. The agreement with each cardholder provides that new or
changed terms will become effective at the time stated in such notice and will
apply to all outstanding unpaid indebtedness as well as new transactions.
A cardholder may use the FNANB credit card to purchase or lease goods or
services wherever the card is honored or to obtain cash advances from any
financial institution that accepts the card. In addition, FNANB sends
convenience checks to select cardholders. A cardholder may use convenience
checks, which are completed and signed by the cardholder in the same way as
regular personal checks, to transfer balances from other credit cards, to repay
other debt or to purchase or lease goods or services.
NEW ACCOUNT UNDERWRITING AND ORIGINATION
Beginning in September 1992, FNANB made its initial offering of MasterCard
and VISA credit cards solely to certain existing holders of Circuit City private
label credit cards in order to manage its risk. The Circuit City private label
credit card portfolio provided a test group of applicants for whom FNANB had
already developed a detailed credit profile. This test group allowed FNANB to
develop its initial origination strategy using a group of accounts with known
credit characteristics.
Beginning in 1993, solicitations were distributed to people outside the
existing Circuit City retail customer base. At this time, FNANB began using
"HNC" brand modeling software for targeting specific consumer segments using
third party databases, such as those managed by credit bureaus and third party
vendors. As solicitations have moved away from existing private label
cardholders, account and charge originations have become less reliant on
existing Circuit City customers. During the twelve months ended June 1997,
purchases at Circuit City stores charged on FNANB MasterCard or VISA credit
cards as a percentage of total MasterCard or VISA purchases averaged less than
1%.
FNANB solicits new bank card applicants through telemarketing and mailings.
FNANB's direct mail solicitation process begins with a pre-screening review to
identify creditworthy consumers for a credit card account. As part of the
pre-screening process, FNANB provides credit history criteria to credit
reporting agencies, which in turn generate a list of prospective cardholders
with desired attributes. FNANB carefully targets consumers through front-end
modeling and aligns offerings with target customer segments to maximize
penetration, response rates and usage. FNANB further refines the prospective
cardholder list by applying its internal underwriting criteria. These additional
criteria are applied using risk analysis models designed to
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<PAGE> 26
predict the potential credit risk of prospective cardholders. FNANB sends mass
mailings to pre-approved consumers, who return a sign-up card to be eligible for
the program. FNANB does not provide applications for its MasterCard or VISA
credit card accounts in Circuit City stores.
Customers who do not respond to the direct mail campaign are processed
through a response model scorecard to evaluate their propensity to respond to a
telemarketing follow-up campaign. Customers scoring high in this model are then
solicited via a follow-up call. The telemarketing approach is initiated by a
phone call from either a third party representative contracted by FNANB or an
employee of FNANB's internal telemarketing department who takes an application
for credit over the phone. A back-end credit bureau report is reviewed for all
applicants who respond to the offer to insure that FNANB has the most updated
information on the applicant and to determine what credit line to assign. If an
applicant no longer meets the pre-approved criteria, FNANB is not required to
extend the applicant credit.
In April 1997, FNANB changed its underwriting criteria and began soliciting
fewer customers with lower credit scores. Since April 1997, the average credit
score for newly originated accounts has increased markedly from the prior twelve
months. This change in underwriting criteria, if continued, may cause a segment
of the MasterCard and VISA credit card portfolio to have lower finance charge
billings, lower defaults and higher payment rates than the remainder of the
portfolio originated under the previous underwriting criteria. In addition, this
change in underwriting criteria may result in lower new account origination
rates.
FNANB uses both a credit bureau risk model and a custom credit risk
monitoring system to develop and manage strategies for credit line adjustments,
overlimit charges and delinquent collection actions. These systems evaluate a
number of account and credit bureau characteristics including historical payment
history, delinquency, existing credit line utilization and credit bureau risk
score. Increases in credit lines are initiated primarily through the credit risk
monitoring system. The decision to increase a credit line is processed instantly
through an automated credit line increase system. An account's credit bureau
score, behavior score, credit utilization and cash utilization factor heavily
into the credit line increase decision. The credit line increase system ensures
consistency and enables back-end tracking of credit lines. Credit line decreases
are based on a combination of factors, including the length of time the account
has been opened, days/cycles delinquent, the behavior score and the risk score.
Each cardholder's credit bureau credit risk profile is sourced three times
a year to update the cardholder's scoring information. In addition, FNANB uses
computerized query programs, including scorecard analysis software, which
monitors portfolio performance by key demographic, account and credit variables.
FNANB management can make immediate adjustments to the credit scoring algorithms
based on identified relations between portfolio performance and applicant
attributes. Validation of FNANB's proprietary models is done periodically (not
less than every two years).
ASSESSMENT OF FINANCE AND OTHER CHARGES
FNANB currently offers multiple pricing structures with a range of annual
percentage rates and annual fees. The majority of FNANB's MasterCard and VISA
accounts have monthly periodic rate finance charges assessed at one twelfth of
the sum of the prime rate plus a specified margin. In addition, a select number
of MasterCard and VISA accounts have a fixed annual percentage rate. Most
accounts have an annual fee of $25, although annual fees may be waived if a
cardholder exceeds a specified dollar amount of purchases during the year. The
specific pricing for each credit card is determined prior to solicitation based
primarily on the prospective cardholder's risk profile.
All FNANB MasterCard and VISA credit cards have a 25 day grace period for
purchases but no grace period for cash advances or convenience checks. The
minimum payment for any period is equal to the greater of $15 or 3% of the new
account balance for Low APR accounts and $20 or 4% for Standard APR accounts (in
general, Low APR accounts have an annual percentage rate of less than 18% and
Standard APR accounts have an annual percentage rate of greater than or equal to
18%). All accounts are subject to certain additional fees and charges, including
a late payment fee of $25, a returned check fee of $20 and an overlimit fee of
$20. If a periodic finance charge is imposed on purchases or cash advances, the
minimum amount of such charge is
25
<PAGE> 27
$.50. In addition, a one time cash advance transaction fee is assessed for all
cash advances at a rate of $5.00 or 3% of the cash advance, whichever is
greater.
FNANB selectively offers interest free promotions whereby cardholders are
able to make specific purchases on an interest free basis during a specified
time period, usually 90 days. Regular monthly principal payments are still
required, and finance charges are reinstated cumulatively if the cardholder does
not meet the terms and conditions of the offering.
There can be no assurance that periodic rate finance charges, fees and
other charges assessed on the Accounts included in the Trust will remain at
current levels.
BILLING AND PAYMENTS
FNANB uses the "average daily balance" computation method to determine the
appropriate amount of finance charges to be assessed to an account. The "average
daily balance" is determined by summing the daily balances for the account for
each day in the billing cycle and by dividing such sum by the number of the days
in the billing cycle. The daily balance outstanding on an account for any day
during the monthly billing cycle is equal to the sum of the beginning balance of
the account during any day, increased by purchases and unpaid finance charges
posted to the account that day and decreased by any payments and credits posted
to the account that day.
DELINQUENCIES AND COLLECTIONS
An account is considered delinquent when the minimum payment due is not
received by the payment due date specified in the cardholder's billing
statement. FNANB's collections staff located in Richmond, Virginia, is
segregated into teams specializing by delinquency categories. Collection efforts
are initiated as early as the second day of delinquency, but no later than the
21st day of delinquency, when collectors attempt to establish telephone contact.
Behavioral risk scoring of all accounts enables the collection effort to be
timed and tailored to the potential risk of an account and the dollars at risk.
Collection efforts escalate in intensity as an account is cycled into a more
advanced category.
FNANB's collection strategies begin with an early delinquency calling
program using state-of-the-art technology that includes predictive dialing for
accounts in the delinquency levels of 1-30 and 31-60 days past due. Statement
messaging and automatic letter dunning are also employed during the first 60
days of delinquency. Delinquency levels are monitored daily by the respective
collectors, and aggregated delinquency information is reported to and reviewed
by senior management.
Accounts that are 61-90 days past due are assigned to specific collectors
for accelerated collection activities, including demands for payment in full,
correspondence from one or more national credit bureaus describing the impact
that the delinquent credit obligation has upon the cardholder's credit history,
and preparatory actions to place accounts with attorneys for legal action.
Accounts that are more than 90 days past due are pursued through collection
activities through the 180th day of delinquency. Other collection related
activities include bankruptcy placements with outside collection agencies,
attorney referrals and internal and external post-charge off recovery. An
accounts is written-off as uncollectible at 181 days past due or within 30 days
after FNANB receives notice of the death or bankruptcy of the related
cardholder.
FNANB has a policy of restoring or "reaging" a delinquent account to
current status when the cardholder has made three consecutive monthly minimum
payments or the equivalent of 9% of the outstanding balance (for LowAPR
accounts) or 12% of the outstanding balance (for Standard APR accounts). FNANB
policy requires that partial payment of less than the full monthly minimum
payment due on an account (plus or minus $0.99) will result in the forward aging
of the delinquency status.
26
<PAGE> 28
DELINQUENCY AND LOSS EXPERIENCE
The following table sets forth the delinquency experience for FNANB's
portfolio of MasterCard and VISA credit card accounts (the "Bank Portfolio") as
of each of the dates shown. Because delinquencies are affected by a number of
factors, including competitive and general economic conditions and consumer debt
levels, there can be no assurance that the future delinquency experience for the
Receivables, including, without limitation, the Receivables in the Automatic
Additional Accounts or any Supplemental Accounts, will be similar to the
historical experience set forth below.
HISTORICAL DELINQUENCIES
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
----------------------------------------------------- ---------------------------------------
1997 1996 1996 1995
------------------------- ------------------------- ------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
RECEIVABLES OF TOTAL RECEIVABLES OF TOTAL RECEIVABLES OF TOTAL RECEIVABLES
(2) RECEIVABLES (2) RECEIVABLES (2) RECEIVABLES (2)
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current(1)....................
31 to 60 days delinquent......
61 to 90 days delinquent......
Over 91 days delinquent.......
Total Delinquent......
Total Receivables.....
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------
1995 1994
----------- -------------------------
PERCENTAGE PERCENTAGE
OF TOTAL RECEIVABLES OF TOTAL
RECEIVABLES (2) RECEIVABLES
----------- ----------- -----------
<S> <C> <C> <C>
Current(1)....................
31 to 60 days delinquent......
61 to 90 days delinquent......
Over 91 days delinquent.......
Total Delinquent......
Total Receivables.....
</TABLE>
- ---------------
(1) Includes both current accounts and accounts that are fewer than 31 days past
due.
(2) The number of Accounts and Receivables outstanding are as of the end of the
specified date.
The following table sets forth the loss experience for the Bank Portfolio
for each of the periods shown. There can be no assurance that the future loss
experience for the Receivables will be similar to the historical experience set
forth below.
LOSS EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, DECEMBER 31,
------------------- ------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Principal Receivables(1)............
Total Principal Charge-Off(s)(2)..........
Recoveries................................
Net Principal Charge-Offs.................
Net Principal Charge-Offs as a percentage
of Average Principal Receivables.......
</TABLE>
- ---------------
(1) Average Principal Receivables for a particular period is the average of the
principal balances outstanding at the beginning and end of each month during
such period.
(2) Total Principal Charge Offs are charge offs before Recoveries and do not
include fraud losses.
(3) The percentages reflected for the six months ended June 30, 1997 and 1996
are annualized figures, which are not necessarily indicative of results for
the entire year.
FNANB's delinquencies and net principal charge-offs at any time reflect,
among other factors, the overall credit quality of the cardholders, the
seasoning of the accounts, the success of FNANB's collection efforts and general
economic conditions.
27
<PAGE> 29
CUSTOMER SERVICE AND ACCOUNT MANAGEMENT
FNANB's customer service department is located principally in Richmond,
Virginia, with an additional office in Marietta, Georgia. An automated voice
response unit handles a substantial percentage of in-coming calls, enabling
customers to receive information 24 hours a day, quickly and efficiently.
Customers can receive balance, payment and credit information, request documents
and even make payments over the phone without having to speak with a Customer
Service Representative.
Customer Service Representatives are authorized to release information to
customers in relation to their account, maintain accounts and correct mistakes
that may be made with regard to a customer's account. The ability to change data
on a customer's file is restricted by the establishment of certain system
security clearance requirements. Each Customer Service Representative is
assigned access to customer files by an independent systems security department.
An additional safeguard against internal fraud is provided by daily audits of at
least one percent of the dollar activities that each Customer Service
Representative transacts per day.
Overhead monitors in the customer service areas provide representatives
with real time information, such as the number of customers who are waiting to
speak to a representative, the number of calls that have been answered within
the time standards established, the number of representatives active in the
system to handle phone calls, and the number of representatives performing
follow-up administrative functions to address customer requests.
Several systems have been implemented to increase the efficiency of FNANB's
customer service areas, including Automated Number Identification which allows a
Customer Service Representative to identify the customer and, upon
identification, presents the customer's account number to the representative
with little or no input from the customer. Front end interfaces allow Customer
Service Representatives to increase customer credit lines or decrease customer
annual percentage rates within underwriting parameters with the push of a
keystroke, reducing call handling time and attrition while increasing customer
satisfaction.
DESCRIPTION OF TOTAL SYSTEM SERVICES, INC.
Certain data processing and ministerial functions associated with the
servicing of the credit card accounts are performed on behalf of FNANB by Total
System Services, Inc. ("TSYS") from its facilities in Columbus, Georgia. The
majority of TSYS's common stock is owned by Synovus, Financial, Inc. A minority
portion of TSYS's common stock is publicly traded on the New York Stock
Exchange. TSYS is a bankcard and bank data processing company. TSYS provides a
variety of data processing services to FNANB, including processing and
settlement of transactions, maintenance of individual cardholder accounts,
processing of cardholder statements and issuance of plastic cards. TSYS is the
second largest third-party bankcard processor behind First Data Resources, Inc.
INTERCHANGE
Creditors participating in the MasterCard and VISA associations receive
certain interchange fees ("Interchange") as partial compensation for taking
credit risk, absorbing fraud losses and funding receivables for a limited period
prior to initial billing. Under the MasterCard and VISA systems, a portion of
the 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. The
Transferor will transfer to the Trust a percentage of the Interchange
attributable to cardholder charges for goods and services in the Accounts.
Interchange received with respect to the Accounts will be treated as Finance
Charge Collections and will be allocated to the Certificates as described
herein.
28
<PAGE> 30
THE RECEIVABLES
The Receivables to be transferred to the Trust (the "Trust Portfolio") will
arise from time to time in MasterCard and VISA credit card accounts selected by
the Transferor on the basis of criteria set forth in the Agreement as applied on
the Cut-Off Date or, in the case of Supplemental Accounts, on the cut-off date
related to such Supplemental Accounts (the "Addition Cut-Off Date"). The
Receivables consist of amounts charged by cardholders for goods and services and
cash advances and monthly premiums charged to cardholders for insurance plans
offered with respect to the Accounts ("Principal Receivables") and amounts
charged to the Accounts in respect of periodic finance charges, overlimit fees,
late charges, returned check fees, annual membership fees, annual service
charges, transaction charges, cash advance fees and similar fees and charges
("Finance Charge Receivables"); [provided, however, that an amount equal to the
product of the Discount Percentage and the amount of Receivables that would
otherwise be Principal Receivables will be treated as Finance Charge
Receivables]. In addition, amounts collected in respect of Interchange will be
treated as Finance Charge Collections. All new Receivables arising in the
Accounts will be automatically transferred to the Trust.
The Agreement will provide that, unless the Transferor elects to suspend or
discontinue such feature and subject to certain limitations and conditions set
forth in the Agreement, all Automatic Additional Accounts will be automatically
included as Accounts upon their creation and the Receivables in such Automatic
Additional Accounts, whether then existing or thereafter created, will be
automatically transferred to the Trust. In addition, the Agreement will permit
or, under certain circumstances, require the Transferor to designate from time
to time, in each case subject to certain limitations and conditions set forth in
the Agreement, Supplemental Accounts and to transfer the Receivables in such
Supplemental Accounts, whether then existing or thereafter created, to the
Trust. Any Supplemental Accounts designated pursuant to the Agreement must be
Eligible Accounts as of the designation date. [The Transferor will also have the
right to designate from time to time, in each case subject to certain
limitations and conditions set forth in the Agreement, Removed Accounts and to
requi the Receivables in such Removed Accounts to the Transferor.] The Accounts
in which the Receivables arise will, on any date, be the Accounts designated by
the Transferor on the Cut-Off Date plus any Automatic Additional Accounts
created or Supplemental Accounts designated on or before such date [minus any
Removed Accounts designated by the Transferor on or before such date].
As of [June 30], 1997, the aggregate amount owing in respect of the
Receivables was $[ ], comprised of $[ ] of Principal
Receivables and $[ ] of Finance Charge Receivables [(which includes
$[ ] of Discount Receivables)]. As of [June 30], 1997, the average
Receivables balance of Accounts with debit balances was $[ ] and the
average credit limit of all Accounts was $[ ]. As of [June 30], 1997,
the average Receivables balance of Accounts with debit balances divided by the
average credit limit of all Accounts, expressed as a percentage, was [ ]%.
As of [June 30], 1997, cardholders with respect to the Accounts had billing
addresses in 50 states, the District of Columbia and certain United States
territories and possessions. As of [June 30], 1997, approximately [ ]% of
the cardholders with respect to the Accounts also held a Circuit City private
label credit card account. As of [June 30], 1997, the aggregate amount owing in
respect of the Receivables included approximately $[ ] owing in respect
of merchandise or services purchased at Circuit City stores.
29
<PAGE> 31
The following tables summarize the Receivables in the Trust Portfolio by
various criteria as of [June 30], 1997. Because the composition of the Trust
Portfolio will change over time, these tables are not necessarily indicative of
the composition of the Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
AS OF [JUNE 30], 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Credit Balance.........................
Zero Balance...........................
$0.01 to $1,500.00.....................
$1,500.01 to $3,000.00.................
$3,000.01 to $4,500.00.................
$4,500.01 to $10,000.00................
Over $10,000.00........................
TOTAL........................
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
AS OF [JUNE 30], 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------ --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Zero Limit.............................
$0.01 to $1,500.00.....................
$1,500.01 to $3,000.00.................
$3,000.01 to $4,500.00.................
$4,500.01 to $10,000.00................
Over $10,000.00........................
TOTAL........................
</TABLE>
30
<PAGE> 32
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
AS OF [JUNE 30], 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------------------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent.........................
Up to 30 Days..........................
31 to 60 Days..........................
61 to 90 Days..........................
91 to 120 Days.........................
121 to 150 Days........................
151 or More Days.......................
TOTAL........................
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
AS OF [JUNE 30], 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
0 to 3 Months..........................
4 to 6 Months..........................
7 to 9 Months..........................
10 to 12 Months........................
13 to 24 Months........................
25 to 36 Months........................
37 or More Months......................
TOTAL........................
</TABLE>
31
<PAGE> 33
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
AS OF [JUNE 30], 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
STATES, TERRITORIES AND POSSESSIONS ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----------------------------------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Alabama......................................
Alaska.......................................
Arizona......................................
Arkansas.....................................
California...................................
Colorado.....................................
Connecticut..................................
Delaware.....................................
District of Columbia.........................
Florida......................................
Georgia......................................
Hawaii.......................................
Idaho........................................
Illinois.....................................
Indiana......................................
Iowa.........................................
Kansas.......................................
Kentucky.....................................
Louisiana....................................
Maine........................................
Maryland.....................................
Massachusetts................................
Michigan.....................................
Minnesota....................................
Mississippi..................................
Missouri.....................................
Montana......................................
Nebraska.....................................
Nevada.......................................
New Hampshire................................
New Jersey...................................
New Mexico...................................
New York.....................................
North Carolina...............................
North Dakota.................................
Ohio.........................................
Oklahoma.....................................
Oregon.......................................
Other........................................
Pennsylvania.................................
Rhode Island.................................
South Carolina...............................
South Dakota.................................
Tennessee....................................
Texas........................................
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
STATES, TERRITORIES AND POSSESSIONS ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----------------------------------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Utah.........................................
Vermont......................................
Virginia.....................................
Washington...................................
West Virginia................................
Wisconsin....................................
Wyoming......................................
--------- ------ ----------------- ------
TOTAL..............................
========= ====== ================= ======
</TABLE>
Because the largest number of cardholders (based on billing addresses)
whose Accounts were included in the Trust Portfolio as of [June 30], 1997 were
located in [ ], [ ] and [ ], adverse changes in the
economic conditions in these areas could have a direct impact on the creation of
Receivables and the timing and amount of payments on the Certificates. See "Risk
Factors -- Social, Technological and Economic Factors."
MATURITY CONSIDERATIONS
The Class A Certificateholders will not receive principal payments until
the [ 200 ] Distribution Date (the "Class A Expected Final
Distribution Date"), or earlier in the event of an Early Amortization Event
which results in the commencement of the Early Amortization Period. The Class A
Certificateholders will receive principal payments on each Distribution Date
during the Early Amortization Period until the Class A Certificates have been
paid in full. The Class B Certificateholders will not receive principal payments
until the [ 200 ] Distribution Date (the "Class B Expected Final
Distribution Date"), or earlier in the event of an Early Amortization Event
which results in the commencement of the Early Amortization Period; provided,
however, that the Class B Certificateholders will in no event begin to receive
principal payments until the Class A Certificates have been paid in full.
If an Early Amortization Event occurs and the Early Amortization Period
commences, any amount on deposit in the Principal Funding Account will be paid
to the Certificateholders on the first Distribution Date with respect to the
Early Amortization Period, first to the Class A Certificateholders until the
Class A Certificates have been paid in full and then to the Class B
Certificateholders until the Class B Certificates have been paid in full.
Thereafter, Available Principal Collections will be paid to the
Certificateholders on each Distribution Date with respect to the Early
Amortization Period, first to the Class A Certificateholders until the Class A
Certificates have been paid in full and then to the Class B Certificateholders
until the Class B Certificates have been paid in full. See "Description of the
Certificates -- Early Amortization Events."
Although it is expected that a single principal payment will be made to the
Class A Certificateholders on the Class A Expected Final Distribution Date and
that a single principal payment will be made to the Class B Certificateholders
on the Class B Expected Final Distribution Date, there can be no assurance that
such payments will be made. The ability of the Certificateholders to receive
principal payments on the Class A Expected Final Distribution Date or the Class
B Expected Final Distribution Date, as applicable, depends on the payment rates
on the Receivables, the amount of outstanding Receivables, delinquencies,
charge-offs, the rate at which new Receivables are created, the issuance by the
Trust of additional Series and the availability of Shared Principal Collections.
Monthly payment rates on the Receivables may vary because, among other things,
cardholders may fail to make required minimum payments, may only make required
minimum payments or may make payments as high as the entire outstanding balance.
Monthly payment rates may also vary due to seasonal purchasing and payment
habits of cardholders and to changes in any terms of promotional programs in
which cardholders participate. The Transferor cannot predict, and no assurance
can be given as to, the cardholder monthly payment rates that will actually
occur in any future period, the actual rate of principal
33
<PAGE> 35
payments on the Certificates or whether the terms of any additional Series might
have an impact on the amount or timing of such payments.
The amount of outstanding Receivables, delinquencies, charge-offs and the
rate at which new Receivables are created may vary from month to month due to
seasonal variations, the availability of other sources of credit, legal factors,
general economic conditions and spending and borrowing habits of individual
cardholders. There can be no assurance that Principal Collections, and therefore
the rate at which the Principal Funding Account will be funded during the
Accumulation Period or the rate at which Certificateholders can expect to
receive principal payments on the Certificates during the Early Amortization
Period, will be similar to the historical experience set forth below. In
addition, since the Trust will issue the Concurrently Issued Series and may
issue additional Series from time to time, there can be no assurance that the
terms of any such Series might not have an adverse impact on the timing or
amount of principal payments received by the Certificateholders. Further, if an
Early Amortization Event occurs, the average life and maturity of the Class A
Certificates and the Class B Certificates, respectively, could be significantly
reduced. In the event of an early payment of principal on the Certificates, the
Certificateholders may realize a lower yield on their reinvestment of such early
payment and may be required to incur costs associated with reinvesting such
early payment.
For the reasons set forth above, there can be no assurance that the
Principal Funding Account will be funded in accordance with the applicable
Controlled Accumulation Amount or that the actual number of months elapsed from
the date of issuance of the Class A Certificates and the Class B Certificates to
their respective final Distribution Dates will equal the expected number of
months.
The following table sets forth the highest and lowest monthly payment rates
("MPR") for the Receivables in the Trust Portfolio for each month during the
periods shown and the average monthly payment rates for the Receivables in the
Trust Portfolio for all months during the periods shown, in each case calculated
[by dividing the total amount collected in respect of the Receivables during a
given month by the average Receivables balance during such month and expressing
such amount as a percentage]. Payment rates shown in the table are based on
amounts which would be deemed payments of Principal Receivables and payments of
Finance Charge Receivables with respect to the Accounts.
MONTHLY PAYMENT RATES
TRUST PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEAR ENDED
JUNE 30, FEBRUARY 28 OR 29,
------------- ---------------------
1997 1996 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Lowest Month.............................................
Highest Month............................................
Monthly Average..........................................
</TABLE>
34
<PAGE> 36
YIELD CONSIDERATIONS
The following table sets forth the yield from finance charges and fees
billed with respect to the Accounts for each of the periods shown. The
historical yield figures in the following table are calculated on an accrual
basis. Collections in respect of the Receivables will be on a cash basis and may
not reflect the historical yield experience in the table. 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 and any fees, changes 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.
PORTFOLIO YIELD
TRUST PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEAR ENDED
JUNE 30, FEBRUARY 28 OR 29,
------------- ---------------------
1997 1996 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Average Total Receivables Outstanding(1).................
Finance Charges Billed...................................
Yield From Finance Charges............................... (2) (2)
</TABLE>
- ---------------
(1) Average Total Receivables Outstanding for a particular period is the average
of the balance outstanding at the beginning and end of each month during
such period.
(2) The percentages reflected for the six months ended [June 30], 1997 and 1996
are annualized figures which are not necessarily indicative of results for
the entire year.
The yield for the Trust Portfolio shown in the above table is comprised of
monthly periodic finance charges and other service charges, such as late fees
and returned check fees. As payment rates decline, the balances subject to
monthly periodic finance charges tend to grow, assuming no change in the level
of purchasing activity. Accordingly, under these circumstances, the yield
related to periodic finance charges normally increases. The yield related to
service charges varies with the type and volume of activity in and the amount of
each account. As account balances increase, annual cardholder fees, which remain
constant, represent a smaller percentage of the aggregate account balances.
THE TRUST
The Trust will be formed pursuant to the Agreement. The Trust will not
engage in any activity other than acquiring and holding the Receivables, issuing
the Investor Certificates and related interests in the Trust, issuing the
Exchangeable Transferor Certificate, making payments with respect to such
certificates and related interests and engaging in related activities
(including, with respect to any Series, obtaining any Enhancement and entering
into related agreements). The Trust is not expected to have any need for, or
source of, additional capital resources other than the assets of the Trust.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to the
Transferor. The Transferor will use such proceeds to repay a portion of the
Concurrently Issued Series and for general corporate purposes.
35
<PAGE> 37
DESCRIPTION OF THE AGREEMENT
The Trust will be formed pursuant to a Master Pooling and Servicing
Agreement dated as of [August ], 1997 (the "Agreement") between First North
American National Bank, as transferor (in such capacity, the "Transferor") and
servicer (in such capacity, the "Servicer"), and [ ], a [national
banking association], as trustee (in such capacity, the "Trustee"). The
following description of the Agreement 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.
INVESTOR CERTIFICATES; EXCHANGEABLE TRANSFEROR CERTIFICATE
The Agreement will provide for the Trustee to issue two types of
certificates: (i) one or more series of investor certificates which evidence an
undivided interest in the Trust Property and may be transferable (collectively,
the "Investor Certificates") and (ii) a certificate which evidences the
undivided interest in the Trust Property not evidenced by the Investor
Certificates or the interests of any Enhancement Providers, if applicable, and
which generally is not transferable (the "Exchangeable Transferor Certificate").
Each series of Investor Certificates (each, a "Series") may consist of one or
more classes of Investor Certificates (each, a "Class") and may be included in a
designated group of Series (each, a "Group"). The Exchangeable Transferor
Certificate will initially be held by the Transferor.
The Agreement will provide that, pursuant to one or more Series
Supplements, the Transferor may tender or cause to be tendered the Exchangeable
Transferor Certificate, or the Exchangeable Transferor Certificate and the
Investor Certificates of any Series, to the Trustee in exchange for one or more
newly issued Series of Investor Certificates and a reissued Exchangeable
Transferor Certificate. The Principal Terms of such newly issued Series may
include methods for determining applicable allocation percentages and allocating
amounts collected in respect of the Receivables, provisions creating security or
Enhancement, different Classes of Investor Certificates (including subordinated
Classes), provisions subordinating such Series to another Series (if the Series
Supplement relating to such Series so permits) or another Series to such Series
(if the Series Supplement for such other Series so permits) and any other
amendment or supplement to the Agreement which is made applicable only to such
Series. The issuance of such newly issued Series may affect the amount and
timing of payments on the Investor Certificates of any then outstanding Series.
See "-- Exchanges."
THE TRUST PROPERTY
The property of the Trust (the "Trust Property") includes and will include
all right, title and interest of the Transferor in, to and under (i) all
receivables (the "Receivables") arising from time to time in a portfolio of
MasterCard and VISA credit card accounts (the "Accounts"), including any
Supplemental Accounts following their designation and any Automatic Additional
Accounts following their creation [but excluding any Removed Accounts following
their designation], originated or acquired by the Transferor and satisfying
certain eligibility criteria described herein, (ii) all monies due or to become
due with respect to the Receivables (including recoveries of amounts previously
charged-off ("Recoveries")), (iii) certain interchange fees received by the
Transferor in connection with the Receivables ("Interchange"), (iv) all monies
on deposit in certain bank accounts of the Trust (including, to the extent
specified in the related Series Supplement, investment earnings on such
amounts), (v) all proceeds of the foregoing and (vi) any Enhancement with
respect to any particular Series or Class as provided in the related Series
Supplement. [The Trust Property with respect to Series 1997-2 will include the
right to payment under an interest rate cap agreement for the exclusive benefit
of the Class A Certificateholders (the "Class A Interest Rate Cap") and the
right to payment under an interest rate cap agreement for the exclusive benefit
of the Class B Certificateholders (the "Class B Interest Rate Cap" and, together
with the Class A Interest Rate Cap, the "Interest Rate Caps"), each provided by
[ ] (the "Interest Rate Cap Provider").] Each of the Certificates will
represent an undivided interest in the Trust Property.
At the time of the formation of the Trust, the Transferor will transfer to
the Trust all Receivables in the Accounts as of [July 31], 1997 (the "Cut-Off
Date") and satisfying certain eligibility criteria described herein and all
Receivables arising from time to time thereafter in such Accounts until
termination of the Trust. In
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connection with such transfer, the Transferor will indicate in its records,
including its computer files, that the Receivables have been transferred to the
Trust. In addition, the Transferor will agree to deliver to the Trustee on a
monthly basis a computer file or microfiche list identifying each Account by
account number and outstanding balance as of the last day of the immediately
preceding Collection Period. FNANB, as initial Servicer, will retain, and will
not deliver to the Trustee, any other records or agreements relating to the
Accounts or the Receivables. Except as described above, the records and
agreements relating to the Accounts and the Receivables will not be segregated
from those relating to other credit card accounts and receivables and neither
the computer files nor the physical documentation relating to the Accounts or
the Receivables will be stamped or marked to reflect the transfer of the
Receivables from the Transferor to the Trust. The Trustee will have reasonable
access to such records and agreements as may be required by applicable law or to
enforce the rights of the Certificateholders. The Transferor will file UCC-1
financing statements in accordance with applicable state law to perfect the
interest of the Trust in the Receivables. See "Risk Factors -- Insolvency Risk
Considerations" and "Certain Legal Aspects of the Receivables."
ENHANCEMENT
The Trust Property with respect to any Series may include one or more forms
of credit support, including, without limitation, any letter of credit,
guaranteed rate agreement, maturity guaranty facility, liquidity facility, cash
collateral account, cash collateral guaranty, collateral indebtedness amount,
collateral interest, surety bond, insurance policy, interest rate protection
agreement, spread account, reserve account, subordination arrangement,
cross-support feature or other similar arrangement or any combination of the
foregoing (collectively, "Enhancement"). Enhancement may be obtained through a
reallocation of Trust Property or may be provided by a third party (the
"Enhancement Provider"). The type, characteristics and amount of the Enhancement
for any Series will be determined based on several factors, including the
characteristics of the Receivables as of the closing date with respect to such
Series, and will be established on the basis of requirements imposed by each
Rating Agency that provides a rating with respect to such Series. Any
Enhancement obtained with respect to a Series will not directly benefit any
other Series.
EXCHANGES
The Agreement will provide that, pursuant to one or more Series
Supplements, the Transferor may tender or cause to be tendered the Exchangeable
Transferor Certificate, or the Exchangeable Transferor Certificate and the
Investor Certificates of any Series, to the Trustee in exchange for one or more
newly issued Series of Investor Certificates and a reissued Exchangeable
Transferor Certificate (each, an "Exchange"). Under the Agreement, the
Transferor may define, with respect to any newly issued Series: (i) its name or
designation, (ii) its initial invested amount (or the method of calculating such
amount), (iii) its interest rate (or the formula for determining such rate),
(iv) the rights of the holder of the Exchangeable Transferor Certificate that
have been transferred to the holders of such Series pursuant to such Exchange
(including any rights to allocations of Principal Collections), (v) the interest
payment date or dates and the date or dates from which interest will accrue,
(vi) the method of allocating Principal Collections for such Series and, if
applicable, with respect to other Series and the method by which the principal
amount of Investor Certificates of such Series will amortize or accrete and the
method for allocating Finance Charge Collections and collections of amounts due
with respect to Defaulted Accounts, (vii) the names of any accounts to be used
by such Series and the terms governing the operation of any such account, (viii)
the Servicing Fee percentage, (ix) the Minimum Transferor Percentage applicable
to such Series, (x) the minimum amount of Principal Receivables required to be
maintained with respect to such Series, (xi) the final date on which interest
and principal are scheduled to be distributed with respect to such Series, (xii)
the terms of any Enhancement, (xiii) the Enhancement Provider, if any, (xiv) the
base rate, if any, (xv) the terms on which the Investor Certificates of such
Series may be repurchased at the option of the Transferor or the terms on which
the Investor Certificates of such Series may be remarketed to other investors,
(xvi) any deposit into any account provided for such Series, (xvii) the number
of classes of such Series, and if more than one class, the rights and priorities
of each such class, (xviii) the extent to which the Investor Certificates of
such Series will be issuable in temporary or permanent global form (and, in such
case, the depository for such global certificate, the terms and conditions, if
any, upon which such global certificate may be exchanged in whole or in part for
Definitive Certificates and
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the manner in which any interest payable on a temporary or global certificate
will be paid), (xix) whether the Investor Certificates of such Series may be
issued in bearer form and any limitations imposed thereon and provisions
relating to compliance with applicable laws and rules for bearer instruments,
(xx) the priority of such Series with respect to any other Series, (xxi) the
Group, if any, to which such Series belongs and (xxii) any other relevant terms
of such Series (collectively, the "Principal Terms"). The Transferor may define
different Principal Terms for each Series, and there is no limit to the number
of Exchanges that the Transferor may perform under the Agreement.
The Transferor, the Servicer, the Trustee and the Trust are not required
and do not intend to obtain the consent of any Certificateholder to issue any
additional Series. An Exchange may only occur, however, upon the satisfaction of
certain conditions provided in the Agreement. Under the Agreement, the
Transferor may perform an Exchange by notifying the Trustee at least three
business days in advance of the date upon which the Exchange is to occur, which
notice will state the designation of any Series to be issued on the date of the
Exchange and, with respect to each such Series, its initial invested amount (or
the method of calculating such amount) and its interest rate (or the method for
allocating interest payments or other cash flow to such Series). On the date of
the Exchange, the Trustee will issue any such Series only upon delivery to it of
the following: (i) a Series Supplement in form satisfactory to the Trustee
signed by the Transferor and specifying the Principal Terms of such Series; (ii)
the Enhancement agreement, if any, with respect to such Series executed by the
Transferor, if applicable, and the related Enhancement Provider; (iii) a Tax
Opinion with respect to such Series; (iv) written confirmation that the Rating
Agency Condition shall have been satisfied; and (v) the existing Exchangeable
Transferor Certificate and the Investor Certificates of the Series to be
exchanged, if applicable. Upon satisfaction of such conditions, the Trustee will
cancel the existing Exchangeable Transferor Certificate and the Investor
Certificates of the exchanged Series, if applicable, and issue the new Series
and a new Exchangeable Transferor Certificate. The Transferor intends to issue
additional Series.
"Tax Opinion" means, with respect to act to any Series, an opinion of
counsel to the effect that the Investor Certificates of such Series (other than
any Class of Investor Certificates required to be retained by the Transferor)
will be characterized as either indebtedness or an interest in a partnership
(that is not taxable as a corporation) under existing law for federal income tax
purposes and that such action will not have a material adverse impact on the
federal income tax characterization of any outstanding Series that has been the
subject of a previous opinion of tax counsel or result in the Trust being
taxable as an association or as a publicly traded partnership taxable as a
corporation for federal or applicable state tax purposes.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have notified the Transferor, the Servicer and the Trustee
in writing that such action will not result in a downgrade or withdrawal of the
rating by such Rating Agency of any Class of Investor Certificates of any then
outstanding Series; provided, however, that, in certain instances, "Rating
Agency Condition" also means that the holders of certain unrated Investor
Certificates of any then outstanding Series shall have consented to such action.
REPRESENTATIONS AND WARRANTIES
The Transferor will represent and warrant to the Trustee, on behalf of the
Trust, as of the Cut-Off Date with respect to the Receivables in each initial
Account, as of the related date of creation with respect to the Receivables in
each Automatic Additional Account and as of the related Addition Cut-Off Date
with respect to the Receivables in each Supplemental Account, that (i) each
Receivable then existing is an Eligible Receivable and (ii) the computer file or
microfiche list of Accounts, Automatic Additional Accounts or Supplemental
Accounts, as applicable, provided to the Trustee by the Transferor was an
accurate and complete listing of all such Accounts in all material respects and
the information contained therein with respect to the identity of such Accounts
and the related Receivables was true and correct in all material respects as of
the date such information was provided to the Trustee. In the event that any of
the representations and warranties set forth above is breached and, as a result
of such breach, any Receivable is charged off as uncollectible or the Trust's
rights in, to or under such Receivable or its proceeds are materially impaired
or the proceeds of such Receivable are not available for any reason to the Trust
free and clear of any lien (other than certain tax or other governmental liens)
(each, an "Ineligible Receivable") and such breach
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has not been cured within 60 days (or such longer period as may be agreed upon
by the Trustee, not to exceed an additional 120 days) after the earlier of
discovery of such breach by the Transferor or receipt by the Transferor of
written notice of such breach given by the Trustee, the Transferor shall accept
the reassignment of such Receivable by directing the Servicer to deduct the
principal balance of such Ineligible Receivable from the aggregate amount of
Principal Receivables. In the event that such deduction would cause the
Transferor Amount to be reduced below zero (after giving effect to any addition
of any Principal Receivables to the Trust), the Transferor will make a deposit
into the Excess Funding Account in an amount equal to the amount by which the
Transferor Amount would be reduced below zero. Any deposit into the Excess
Funding Account in connection with the reassignment of an Ineligible Receivable
shall be deemed a payment in full of such Ineligible Receivable and will be
applied in accordance with the provisions of the Agreement and the terms of each
applicable Series Supplement. The obligation of the Transferor described above
constitutes the sole remedy available to the holders of the Investor
Certificates with respect to any breach by the Transferor of such
representations and warranties. The Certificateholders will not incur any costs
in connection with the reassignment of an Ineligible Receivable.
The Transferor will represent and warrant to the Trustee, on behalf of the
Trust, as of the date of any Series Supplement and the related closing date,
that (i) the Transferor is duly organized and validly existing in good standing
under the laws of the United States, has the full power, authority and legal
right to own its properties and conduct its business as such properties are
presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under the Agreement and such Series
Supplement and to execute and deliver to the Trustee the related Investor
Certificates, (ii) the Agreement and such Series Supplement constitute legal,
valid, binding and enforceable obligations of the Transferor and (iii) the
Agreement constitutes a valid transfer to the Trust of all right, title and
interest of the Transferor in, to and under the Receivables, whether then
existing or thereafter created, and the proceeds thereof, or the grant of a
first priority perfected security interest in the Receivables, subject to
certain tax or other governmental liens, and, with certain exceptions made for
certain limited time periods, the proceeds thereof, which is effective as to
each Receivable upon the transfer thereof to the Trust or upon its creation, as
the case may be. In the event of a breach of any of the representations and
warranties described above, if such breach has not been cured within 60 days (or
such longer period as may be agreed upon by the Trustee, not to exceed an
additional 120 days) after the earlier of discovery of such breach by the
Transferor or receipt by the Transferor of written notice of such breach given
by the Trustee, either the Trustee or the holders of Investor Certificates
evidencing undivided interests aggregating more than 50% of the Aggregate
Invested Amount (the "Required Investor Certificateholders"), by notice then
given in writing to the Transferor (and to the Trustee and the Transferor, if
given by such holders), may direct the Transferor to accept reassignment of all
the Receivables on any Distribution Date occurring within 60 days of such
notice, or within such longer period as may be specified in such notice (not to
exceed an additional 120 days). The deposit amount for such reassignment will be
equal to the Aggregate Invested Amount on the Record Date related to the
Distribution Date on which such deposit is made (less the aggregate principal
amount on deposit in the Excess Funding Account or any principal funding account
with respect to any Series) plus (i) an amount equal to all accrued but unpaid
interest on the Investor Certificates of all then outstanding Series at the
applicable interest rates through the end of the respective interest accrual
period(s) of such Series, (ii) any other unpaid amounts required to be paid
pursuant to the Agreement or any Series Supplement and (iii) an amount equal to
all other payment obligations of the Transferor under the Agreement, any Series
Supplement or any other agreement with the holders of the Investor Certificates
of any then outstanding Series. Payment of the reassignment deposit amount and
all other amounts in the Collection Account in respect of the preceding
Collection Period will be considered a prepayment in full of all of the
Receivables. The obligation of the Transferor described above constitutes the
sole remedy available to the holders of the Investor Certificates with respect
to any breach by the Transferor of such representations and warranties. The
Certificateholders will not incur any costs in connection with the reassignment
of all the Receivables.
"Eligible Receivable" means each Receivable (i) which has arisen under an
Eligible Account, (ii) which was created in compliance with all applicable
requirements of law and pursuant to a cardholder agreement which complies with
all applicable requirements of law in either case the failure to comply with
which would have a material adverse effect upon the holders of the Investor
Certificates of any then outstanding Series,
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(iii) with respect to which all material consents, licenses, approvals or
authorizations of, or registrations with, any governmental authority required to
be obtained or given by the Transferor in connection with the creation of such
Receivable or the execution, delivery and performance by the Transferor of the
related cardholder agreement have been duly obtained or given and are in full
force and effect as of such date of creation, (iv) as to which at the time of
the transfer of such Receivable to the Trust, the Trust will have good and
marketable title, free and clear of all liens, encumbrances, charges and
security interests (except certain tax or other governmental liens), (v) which
has been the subject of either a valid transfer and assignment from the
Transferor to the Trust of all of the Transferor's right, title and interest
therein or the grant by the Transferor to the Trust of a first priority
perfected security interest therein (and in the proceeds thereof to the extent
set forth in Section 9-306 of the UCC), effective until the termination of the
Trust, (vi) which is the legal, valid and binding payment obligation of the
obligor thereof enforceable against such obligor in accordance with its terms,
subject to certain bankruptcy and equity related exceptions, (vii) which
constitutes an "account" or a "general intangible" under and as defined in
Article 9 of the UCC, (viii) which, at the time of its transfer to the Trust,
has not been waived or modified except in accordance with the policies and
procedures of the Transferor relating to the operation of its consumer credit
card business, (ix) which is not subject to any setoff, right of rescission,
counterclaim or other defense (including the defense of usury), other than
certain bankruptcy and equity related defenses, (x) as to which the Transferor
has satisfied all obligations to be satisfied at the time of the transfer of
such Receivable to the Trust and (xi) as to which the Transferor has done
nothing, at the time of the transfer of such Receivable to the Trust, to impair
the rights of the Trust or the holders of the Investor Certificates of all then
outstanding Series therein.
"Eligible Account" means each Account (i) which is in existence and owned
by the Transferor, (ii) which is payable in United States dollars, (iii) as to
which the related credit card has not been reported lost or stolen or designated
as fraudulent, (iv) which is not identified in the Transferor's computer files
as canceled due to the obligor's bankruptcy, insolvency or death, (v) the
receivables in which have not been charged off as uncollectible, (vi) the
receivables in which have not been assigned, pledged or sold, (vii) the obligor
on which has provided a billing address in the United States or its territories
or possessions and (viii) on which neither the Transferor nor any affiliate of
the Transferor is the obligor.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of the Accounts or the Receivables or any records
relating to the Accounts or the Receivables for the purpose of establishing the
presence or absence of defects or compliance with the Transferor's
representations and warranties or for any other purpose.
CERTAIN COVENANTS
The Transferor will covenant in the Agreement that, among other things, (i)
it will take no action to cause any Receivable to be evidenced by an
"instrument" under and as defined in Article 9 of the UCC (except in connection
with the enforcement or collection of such Receivable), (ii) it will not sell,
pledge, assign or transfer to any other person, or grant, create, incur, assume
or suffer to exist any lien on (or the filing of any financing statement with
respect to) any Receivable (other than certain tax and other governmental
liens), (iii) it will, except as otherwise permitted under the Agreement,
deposit or cause to be deposited in the Collection Account all amounts collected
by it in respect of the Receivables within two business days after receipt
thereof and (iv) it will not change its name, identity or structure in any
manner that could cause any financing statement or continuation statement filed
pursuant to the Agreement to be misleading or change its chief executive office
or the location of the principal records concerning the Receivables, in each
case unless prior written notice of such change has been given to the Trustee
and certain actions necessary or advisable to protect the interests of the
Trustee in the Receivables and the other Trust Property have been taken.
AUTOMATIC ADDITIONAL ACCOUNTS
The Agreement will provide that, unless the Transferor elects to suspend or
discontinue such feature and subject to certain limitations and conditions set
forth in the Agreement, all MasterCard and VISA credit card accounts satisfying
certain eligibility criteria described herein will be automatically included as
Accounts ("Automatic Additional Accounts") upon their creation and the
Receivables in such Automatic Additional
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Accounts, whether then existing or thereafter created, will be automatically
transferred to the Trust. Unless each Rating Agency otherwise consents, the
number of Automatic Additional Accounts plus the number of Supplemental Accounts
added without prior Rating Agency consent may not (i) with respect to any
calendar quarter, exceed 15% of the sum of the number of Accounts as of the
first day of such calendar quarter (or the Cut-Off Date, whichever is later)
plus the number of Supplemental Accounts added with Rating Agency consent during
such calendar quarter and (ii) with respect to any period of twelve consecutive
Collection Periods, exceed 20% of the sum of the number of Accounts as of the
first day of such period (or the Cut-Off Date, whichever is later) plus the
number of Supplemental Accounts added with Rating Agency consent during such
period (the "Aggregate Addition Limit").
The inclusion of Automatic Additional Accounts allows the Transferor to
increase the Aggregate Principal Receivables and thereby permit the issuance of
additional Series or decrease the risk of the occurrence of certain Early
Amortization Events. The Certificateholders will not incur any costs in
connection with the inclusion of Automatic Additional Accounts. There can be no
assurance that the Automatic Additional Accounts, if any, will be of the same
credit quality as the initial Accounts.
SUPPLEMENTAL ACCOUNTS
The Agreement will permit or, under the circumstances described below,
require the Transferor to designate from time to time, in each case subject to
certain limitations and conditions set forth in the Agreement, additional
MasterCard or VISA credit card accounts as Accounts (the "Supplemental
Accounts") and to transfer the Receivables in such Supplemental Accounts,
whether then existing or thereafter created, to the Trust. If, as of the end of
any Collection Period, (i) the Transferor Amount (after giving effect to any
amounts deposited in the Excess Funding Account) is less than the Minimum
Transferor Amount or (ii) the Aggregate Principal Receivables is less than the
Minimum Aggregate Principal Receivables, the Transferor is required, before the
close of business on the related Distribution Date, to designate Supplemental
Accounts and to transfer the Receivables in such Supplemental Accounts, whether
then existing or thereafter created, to the Trust in an amount sufficient to
cure all such deficiencies; provided, however, that the Transferor need not make
any such transfer to the extent that such deficiencies have been reduced on or
before such Distribution Date through reductions in the Aggregate Invested
Amount. A failure to make any such transfer when required or within any
applicable grace period will result in an Early Amortization Event.
"Transferor Amount" means, on any date of determination, the Aggregate
Principal Receivables at the end of the day immediately prior to such date plus
the amount on deposit in the Excess Funding Account at the end of such day minus
the Aggregate Invested Amount at the end of such day.
"Aggregate Principal Receivables" means, with respect to any date of
determination, the aggregate amount of Principal Receivables at the end of such
date.
"Aggregate Invested Amount" means, on any date of determination, the
aggregate invested amount of all then outstanding Series.
"Minimum Transferor Amount" means, as of any date of determination, the
product of the Aggregate Principal Receivables at the end of such date and the
Minimum Transferor Percentage.
"Minimum Transferor Percentage" means, as of any date of determination, the
highest percentage specified as such in any Series Supplement for any then
outstanding Series (currently 0%). The Minimum Transferor Percentage specified
in the Series 1997-2 Supplement is 0%.
"Minimum Aggregate Principal Receivables" means, as of any date of
determination, the aggregate of the amounts specified as such in each Series
Supplement for each then outstanding Series (generally equal to the invested
amount for such Series). The Minimum Aggregate Principal Receivables specified
in the Series 1997-2 Supplement is the Invested Amount plus the principal amount
of any additional Class D Certificates which may be issued or, subject to
satisfaction of the Rating Agency Condition, such lesser amount as may be
designated by the Transferor.
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Each designation of Supplemental Accounts is subject to the following
conditions, among others: (i) the Transferor must give notice of such
designation to the Trustee, the Servicer, each Rating Agency and each other
person entitled thereto pursuant to the related Series Supplement; (ii) the
Transferor must deliver to the Trustee an officer's certificate certifying,
among other things, that each such Supplemental Account was, as of the date of
its designation, an Eligible Account and that no selection procedures believed
by the Transferor to be materially adverse to the interests of any Series or any
Enhancement Provider were utilized in selecting such Supplemental Account; and
(iii) in the case of an optional transfer, the Rating Agency Condition shall
have been satisfied. The designation of Supplemental Accounts allows the
Transferor to increase the Aggregate Principal Receivables and thereby permit
the issuance of additional Series or decrease the risk of the occurrence of
certain Early Amortization Events. The Certificateholders will not incur any
costs in connection with the designation of Supplemental Accounts. There can be
no assurance that the Supplemental Accounts, if any, will be of the same credit
quality as the initial Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding sentence, the
Transferor may, but will not be obligated to, designate from time to time (which
may be restricted to certain periods if so provided in the related Series
Supplement) certain Accounts, the Receivables in which are to be removed from
the Trust (the "Removed Accounts"). This feature is intended to permit the
Transferor to obtain unencumbered ownership of Receivables not needed to support
any then outstanding Series. The Certificateholders will not incur any cost in
connection with the designation of Removed Accounts. The Transferor may
designate and require reassignment to it of the Receivables in any Removed
Accounts only upon satisfaction of the following conditions: (i) the removal of
the Receivables in the Removed Accounts will not, in the reasonable belief of
the Transferor, cause an early amortization event to occur with respect to any
then outstanding Series; (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 Receivables in such Removed
Accounts; (iii) (A) the Receivables in the Removed Accounts are not more than
[ ]% delinquent by estimated principal amount and the weighted average
delinquency of such Receivables does not exceed [ ] days and (B) the
Receivables in the Removed Accounts are not more than [ ]% delinquent by
estimated principal balance and the weighted average delinquency of such
Receivables does not exceed [ ] days and (C) the Receivables in the Removed
Accounts do not exceed any additional delinquency restrictions specified in the
Series Supplement for any then outstanding Series; (iv) the Transferor shall
have represented and warranted that no selection procedures believed by the
Transferor to be materially adverse to the interests of the holders of the
Investor Certificates of any then outstanding Series were utilized in selecting
the Removed Accounts; (v) the Rating Agency Condition shall have been satisfied;
(vi) the aggregate amount of Principal Receivables of the Accounts then existing
less the aggregate amount of Principal Receivables of the Removed Accounts shall
not be less than the amount, if any, specified in the Series Supplement for any
then outstanding Series; (vii) the Principal Receivables of the Removed Accounts
shall not equal or exceed [ ]% (or such other percentage provided in the
Series Supplement for any then outstanding Series) of the Aggregate Principal
Receivables at such time; (viii) such other conditions as may be provided in the
Series Supplement for any then outstanding Series shall have been satisfied; and
(ix) the Transferor shall have delivered to the Trustee an officer's certificate
confirming the terms set forth in clauses (i) through (viii) above.
Notwithstanding the above, the Transferor will be permitted to designate as a
Removed Account, without the consent of the Trustee, the holders of the Investor
Certificates of any then outstanding Series or any Rating Agency, any Account
that has a zero balance.
COLLECTION ACCOUNT
The Trustee will establish and maintain with an Eligible Institution in the
name of the Trustee, on behalf of the Trust, a segregated trust account (the
"Collection Account") for the benefit of all then outstanding Series. An
"Eligible Institution" means (i) a depository institution, which may include the
Trustee, organized under the laws of the United States or any one of the states
thereof or the District of Columbia, the deposits in which are insured by the
Federal Deposit Insurance Corporation and which at all times has a short-term
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unsecured debt rating in the highest rating category from each applicable Rating
Agency or (ii) a depository institution, which may include the Trustee, which is
acceptable to each Rating Agency assigning a rating for any Class of Investor
Certificates of any then outstanding Series.
Funds on deposit in the Collection Account will be invested by the Trustee,
at the direction of the Servicer, in Eligible Investments. "Eligible
Investments" means (i) negotiable instruments or securities represented by
instruments in bearer or registered or in book-entry form which evidence (A)
obligations fully guaranteed by the United States of America; (B) time deposits
in, or bankers acceptances issued by, any depository institution or trust
company incorporated under the laws of the United States of America or any state
thereof (or any domestic branch or agency of any foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however, that at the time of the Trust's
investment or contractual commitment to invest therein, the certificates of
deposit or short-term deposits, if any, or long-term unsecured debt obligations
(other than any such obligation whose rating is based on collateral or on the
credit of a person other than such institution or trust company) of such
depository institution or trust company shall have a rating in the highest
rating category from each applicable Rating Agency, in the case of certificates
of deposit or short-term deposits, or a rating not lower than one of the two
highest rating categories from each applicable Rating Agency, in the case of
long-term unsecured debt obligations; (C) certificates of deposit having, at the
time of the Trust's investment or contractual commitment to invest therein, a
rating in the highest rating category from each applicable Rating Agency; or (D)
investments in money market funds rated in the highest investment category or
otherwise approved in writing by each applicable Rating Agency, (ii) demand
deposits in the name of the Trust or the Trustee on behalf of the Trust in any
depository institution or trust company referred to in (i)(B) above, (iii)
commercial paper (having original or remaining maturities of no more than 30
days) having, at the time of the Trust's investment or contractual commitment to
invest therein, a rating in the highest rating category from each applicable
Rating Agency, (iv) Eurodollar time deposits having a rating in the highest
rating category from each applicable Rating Agency, (v) repurchase agreements
involving any of the investments described in clauses (i)(A), (i)(C) and (iv)
above so long as the other party to the repurchase agreement has, at the time of
the Trust's investment therein, a rating in the highest rating category from
each applicable Rating Agency and (vi) any other investment if the Rating Agency
Condition is satisfied. Any such investment will be held to maturity. On each
Distribution Date, all interest and other investment earnings (net of losses and
investment expenses) on funds on deposit in the Collection Account will be paid
to the holder of the Exchangeable Transferor Certificate. The Servicer will have
the revocable power to withdraw funds from the Collection Account and to
instruct the Trustee to make withdrawals and payments from the Collection
Account for the purpose of carrying out the Servicer's or the Trustee's duties
under the Agreement.
The Servicer need not deposit amounts collected in respect of the
Receivables into the Collection Account until the business day preceding the
following Distribution Date, and may use such funds for its own purposes, so
long as (i) FNANB or an affiliate has and maintains a certain short-term debt
rating, (ii) FNANB or such affiliate obtains and maintains in force a letter of
credit or other surety covering collection risk acceptable to each applicable
Rating Agency and certain holders of any unrated Investor Certificates or (iii)
FNANB obtains the consent of such holders and obtains a written notification
from each Rating Agency assigning a rating to any Class of Investor Certificates
of any then outstanding Series to the effect that the Rating Agency Condition
has been satisfied. See "-- Allocation of Collections; Deposits in Collection
Account."
[DISCOUNT OPTION]
[Pursuant to the Agreement, the Transferor will designate [ ]% (the
"Discount Percentage") of the amount of Receivables arising in the Accounts on
and after the date of such designation that would otherwise be treated as
Principal Receivables to be treated as Finance Charge Receivables (the "Discount
Option Receivables"). The Transferor may, without notice to or consent of the
Certificateholders, from time to time, elect (the "Discount Option") to
increase, reduce or eliminate (subject to the limitations described below) the
Discount Percentage for Discount Option Receivables arising in the Accounts on
and after the date of such change. The Transferor must provide 30 days' prior
written notice to the Servicer, the Trustee and each
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Rating Agency of any such increase, reduction or elimination, and such increase,
reduction or elimination will become effective on the date specified therein
only if (i) the Transferor has delivered to the Trustee a certificate of an
authorized officer to the effect that, based on the facts known to such officer
at the time, the Transferor reasonably believes that such increase, reduction or
elimination will not at the time of its occurrence cause an early amortization
event or an event which with notice or the lapse of time would constitute an
early amortization event, to occur with respect to any Series, including Series
1997-2 and (ii) such designation would cause the Discount Percentage to be less
than [ ]% or more than [ ]%, the Transferor, the Servicer and the
Trustee shall have received written notice from each Rating Agency that such
increase, reduction or elimination will not result in a reduction or withdrawal
of the ratings of any outstanding rated Series. On the date of processing of any
collections during the time the Discount Option is in effect, collections in an
amount equal to the product of (i) a fraction the numerator of which is the
amount of Discount Option Receivables and the denominator of which is the amount
of all of the Principal Receivables (including Discount Option Receivables) at
the end of the prior Collection Period and (ii) collections of Receivables that
arise in the Accounts during such time that would otherwise be Principal
Collections will be deemed Finance Charge Collections and will be applied
accordingly. The discount feature allows the Transferor to increase the
Portfolio Yield and thereby decrease the risk of the occurrence of certain Early
Amortization Events.]
ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT
The Servicer will allocate Finance Charge Collections and Principal
Collections with respect to each Collection Period among Series 1997-2, the
interests of the Concurrently Issued Series, the interests of all other then
outstanding Series, the interests of any Enhancement Providers, if applicable,
and the interest of the holder of the Exchangeable Transferor Certificate (the
"Transferor Interest"). Except as described below, the Servicer will, no later
than the second business day after amounts collected in respect of the
Receivables are processed or payments made by the Transferor in respect of
Ineligible Receivables or Adjustment Amounts are received, deposit such amounts
or payments into the Collection Account; provided, however, that (i) prior to
the occurrence of an Early Amortization Event, the amount of Finance Charge
Collections with respect to each Collection Period deposited in the Collection
Account will not exceed the sum of the Class A Monthly Interest plus the Class B
Monthly Interest plus the Collateral Monthly Interest, in each case for the
following Distribution Date (plus, if FNANB is not the Servicer, the sum of the
Class A Servicing Fee plus the Class B Servicing Fee plus the Collateral
Servicing Fee, in each case with respect to such following Distribution Date)
and (ii) Principal Collections will only be deposited in the Collection Account
during the Accumulation Period (to the extent of the Controlled Deposit Amount)
and the Early Amortization Period. The Servicer need not deposit amounts
collected in respect of the Receivables in the Collection Account within two
business days of each date of processing, but rather may make a single deposit
into the Collection Account in immediately available funds on the business day
prior to each Distribution Date in an amount equal to the amounts collected with
respect to the preceding Collection Period, to the extent such amounts are
allocated to the holders of the Investor Certificates of any Series (net of the
Investor Servicing Fee and net of any amounts to be distributed to the
Transferor), if FNANB or an affiliate of FNANB is the Servicer and (i) FNANB or
such affiliate has and maintains a short-term debt rating (which in each case
may be an implied rating) in the highest rating category from each applicable
Rating Agency, (ii) FNANB or such affiliate obtains and maintains in force a
letter of credit or other surety covering collection risk of the Servicer
acceptable to each Rating Agency and certain holders of the Investor
Certificates of any then outstanding Series which is not assigned a rating by
any Rating Agency, or (iii) FNANB obtains (A) the consent of the holders of
66 2/3% of the invested amount of each Class of Investor Certificates of any
then outstanding Series which is not assigned a rating by any Rating Agency and
such consent has not been withdrawn in accordance with the terms of the related
Series Supplement and (B) a written notification from each Rating Agency
assigning a rating for any Class of Investor Certificates of any then
outstanding Series to the effect that the Rating Agency Condition has been
satisfied with respect to the Servicer's inability to satisfy the rating
requirement specified in clause (i) above. Until such amounts and payments are
deposited in the Collection Account, such amounts and payments will not be
segregated from the assets of the Servicer, and the proceeds of any short-term
investment of such proceeds will accrue to the Servicer. If the Servicer holds
amounts
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collected in respect of the Receivables allocable to the Certificateholders and
payments made by the Transferor in respect of Ineligible Receivables and
Adjustment Amounts and is permitted to use such amounts and payments for its own
benefit, the Certificateholders are subject to risk of loss, including risk
resulting from the insolvency of the Servicer. The Servicer will pay no fee to
the Trust or the Certificateholders for the use of such amounts and payments.
Amounts collected in respect of the Receivables allocable to the Transferor
Interest will be remitted by the Servicer on each business day to the
Transferor. Amounts collected in respect of the Receivables will be allocated
among Series 1997-2, the interests of the Concurrently Issued Series, the
interests of all other then outstanding Series, the interests of any Enhancement
Providers, if applicable, and the Transferor Interest based upon the allocation
percentages specified in each Series Supplement. See "Description of the
Certificates -- Allocation of Collections and Default Amounts."
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Each Series in a Group will be entitled to share Shared Excess Finance
Charge Collections in the manner, and to the extent, provided in the related
Series Supplement with each other Series, if any, in such Group. Finance Charge
Collections and certain other amounts allocable to any Series which is included
in such Group in excess of the amounts necessary to make required payments with
respect to such Series (including, without limitation, payments to any related
Enhancement Provider) that are payable out of Finance Charge Collections
("Shared Excess Finance Charge Collections") will be applied to cover any
shortfalls with respect to amounts payable from Finance Charge Collections
allocable to any other Series in such Group pro rata based upon the amount of
the shortfall, if any, with respect to each other Series in such Group. Any
Shared Excess Finance Charge Collections remaining after covering shortfalls
with respect to all outstanding Series in a Group will be paid to the holder of
the Exchangeable Transferor Certificate to the extent provided in the related
Series Supplement. The sharing of excess Finance Charge Collections may enable
the Transferor to avoid the occurrence of an Early Amortization Event that would
otherwise occur as a result of a shortfall in Finance Charge Collections
allocable to Series 1997-2. There can be no assurance, however, that excess
Finance Charge Collections will exist or be allocated to Series 1997-2 with
respect to any Collection Period.
SHARED PRINCIPAL COLLECTIONS
Each Series in a Group will be entitled to share Shared Principal
Collections in the manner, and to the extent, provided in the related Series
Supplement with each other Series, if any, in such Group. Principal Collections
and certain other amounts allocable to any Series which is included in such
Group in excess of the amounts necessary to make required payments with respect
to such Series (including, without limitation, any required deposits into a
principal funding account or required principal distributions to such Series)
that are payable out of Principal Collections ("Shared Principal Collections")
will be applied to cover any shortfalls with respect to amounts payable from
Principal Collections allocated to any other Series in such Group pro rata based
upon the amount of the shortfall, if any, with respect to each other Series in
such Group. Any Shared Principal Collections remaining after covering shortfalls
with respect to all outstanding Series in a Group will be paid to the holder of
the Exchangeable Transferor Certificate to the extent provided in the related
Series Supplement; provided, however, that (i) such Shared Principal Collections
will be distributed to the holder of the Exchangeable Transferor Certificate
only to the extent that the Transferor Amount exceeds the Minimum Transferor
Amount and (ii) in certain circumstances described below under "-- Excess
Funding Account," such Shared Principal Collections will be deposited in the
Excess Funding Account. Any such reallocation of Principal Collections and other
amounts will not result in a reduction in the invested amount of the Series to
which such collections were initially allocated. The sharing of Principal
Collections may enable the Transferor to avoid the occurrence of an Early
Amortization Event that would otherwise occur as a result of a shortfall in
Principal Collections allocated to Series 1997-2. There can be no assurance,
however, that excess Principal Collections will exist or be allocated to Series
1997-2 with respect to any Collection Period.
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EXCESS FUNDING ACCOUNT
The Trustee will establish and maintain with an Eligible Institution in the
name of the Trustee, on behalf of the Trust, a segregated trust account (the
"Excess Funding Account") for the benefit of all then outstanding Series. If on
any date the Transferor Amount is less than the Minimum Transferor Amount (after
giving effect to any Automatic Additional Accounts or Supplemental Accounts),
the Servicer will not distribute to the holder of the Exchangeable Transferor
Certificate any Principal Collections that otherwise would be distributed to the
holder of the Exchangeable Transferor Certificate but instead will deposit such
funds in the Excess Funding Account. Funds on deposit in the Excess Funding
Account will be withdrawn and paid to the holder of the Exchangeable Transferor
Certificate on any date to the extent that the Transferor Amount exceeds the
Minimum Transferor Amount on such date; provided, however, that funds on deposit
in the Excess Funding Account may be released and treated as Shared Principal
Collections to the extent needed to cover principal payments due to or for the
benefit of a Series if required by the related Series Supplement. Funds on
deposit in the Excess Funding Account will be invested by the Trustee, at the
direction of the Servicer, in Eligible Investments. On each Distribution Date,
all interest and other investment earnings (net of losses and investment
expenses) on funds on deposit in the Excess Funding Account will be deposited in
the Collection Account. The Servicer will have the revocable power to withdraw
funds from the Excess Funding Account and to instruct the Trustee to make
withdrawals and payments from the Excess Funding Account for the purpose of
carrying out the Servicer's or the Trustee's duties under the Agreement.
DEFAULTED ACCOUNTS
The Servicer will allocate the Default Amount with respect to each
Collection Period among Series 1997-2, the interests of the Concurrently Issued
Series, the interests of all other then outstanding Series, the interests of any
Enhancement Providers, if applicable, and the Transferor Interest. "Default
Amount" means, for any Collection Period, the aggregate amount of Principal
Receivables that were charged off during such Collection Period minus the amount
of Recoveries received by the Servicer with respect to Defaulted Accounts during
such Collection Period. "Defaulted Account" means an Account the Receivables in
which should be charged off as uncollectible in accordance with the usual and
customary servicing policies and procedures of the Servicer. Receivables will be
considered charged-off for purposes of the Agreement on the date on which such
Receivables are recorded as charged-off by the Servicer, but in any event no
later than the earlier of (i) the last day of the month in which the related
Account becomes 180 days delinquent on a contractual basis and (ii) 30 days
after receipt of notice by the Servicer that the related obligor has died or
become the subject of a bankruptcy proceeding. See "Description of the
Certificates -- Allocation of Investor Default Amount; Allocation of Series
Adjustment Amount; Investor Charge-Offs."
ADJUSTMENTS
If the Transferor or the Servicer adjusts downward the amount of any
Receivable because of a rebate, refund, unauthorized charge or billing error to
an obligor or because such Receivable was created in respect of goods or
services which were refused, returned or not received by an obligor, or if the
Transferor or the Servicer otherwise adjusts downward the amount of any
Receivable without receiving collections therefor or without charging off such
amount as uncollectible, then, in any such case, the amount of the Aggregate
Principal Receivables will be reduced by the amount of such adjustment. In
addition, the amount of the Aggregate Principal Receivables will be reduced by
the amount of any Receivable which was discovered as having been created through
a fraudulent transaction or with respect to which a lien (other than certain tax
and other governmental liens) exists. Any adjustment required pursuant to either
of the two preceding sentences (each, an "Adjustment") will be made on or prior
to the end of the Collection Period in which such adjustment obligation arises.
If, following any Adjustment, the Transferor Amount would be less than the
Minimum Transferor Amount, within two business days of the date on which such
adjustment obligation arises, the Transferor will pay to the Servicer, for
deposit into the Excess Funding Account, in immediately available funds an
amount equal to the amount by which the Transferor Amount would be reduced below
the Minimum Transferor Amount (each, an "Adjustment Payment"). If the Transferor
fails to make any required Adjustment Payment and, as a result of such failure,
the Transferor Amount is less than zero as of
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the last day of any Collection Period, the amount of such deficiency (the
"Adjustment Amount") will, to the extent such Adjustment Amount is not otherwise
reduced, be allocated among all then outstanding Series. An Adjustment Amount
will be reduced to the extent that amounts are deposited in the Excess Funding
Account, the Aggregate Principal Receivables increase, certain decreases occur
in the Aggregate Invested Amount or the Transferor subsequently makes a required
Adjustment Payment. See "Description of the Certificates -- Allocation of
Investor Default Amount; Allocation of Series Adjustment Amount; Investor
Charge-Offs."
INDEMNIFICATION
The Agreement will provide that the Servicer will indemnify the Trust, for
the benefit of the holders of all then outstanding Series, and the Trustee,
including its officers, directors and employees, from and against any loss,
liability, expense, damage or injury arising out of or relating to any claims,
actions or proceedings brought or asserted by third parties which are suffered
or sustained by reason of any acts or omissions of the Servicer pursuant to the
Agreement or any Series Supplement; provided, however, that the Servicer will
not indemnify the Trust, for the benefit of all then outstanding Series, or the
Trustee, or its officers, directors or employees, for any liabilities, costs or
expenses with respect to (i) any action taken by the Trustee at the request of
the holders of any Series, (ii) any U.S. federal, state or local taxes required
to be paid by the Trust, the Trustee or the holders of any Series, (iii) with
respect to the Trustee and its officers, directors and employees, any wrongful
actions taken by or omissions of the Trustee or (iv) market or investment risks
of the holders of any Series.
Under the Agreement, the Transferor will be liable directly to an injured
party for the entire amount of any losses, claims, damages or liabilities (other
than those incurred by a holder in the capacity of an investor in the Investor
Certificates of any Series) arising out of or based on the arrangement created
by the Agreement or the actions of the Servicer taken pursuant to the Agreement
as though the Agreement created a partnership under the Uniform Partnership Act.
The Transferor will also pay, indemnify and hold harmless each holder of any
Series for any such losses, claims,damages or liabilities (other than those
incurred by such holder in the capacity of an investor in the Investor
Certificates of any Series) except to the extent that they arise from any action
by any holder. In the event of a Service Transfer, the successor Servicer will
indemnify the Transferor for any losses, claims, damages and liabilities of the
Transferor as described in this paragraph arising from the actions or omissions
of such successor Servicer.
Except as provided in the preceding paragraph, the Agreement will provide
that neither the Transferor nor the Servicer, nor any of their respective
officers, directors, employees or agents, will be under any other liability to
the Trust, the Trustee, the holders of any Series, any Enhancement Provider or
any other person for any action taken, or for refraining from taking any action,
in good faith pursuant to the Agreement. However, neither the Transferor nor the
Servicer, nor any of their respective officers, directors, employees or agents,
will be protected against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or gross negligence of any such person
in the performance of their duties. The Servicer is not under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
servicing responsibilities under the Agreement. The Servicer may, in its sole
discretion, undertake any such legal action which it may deem necessary or
desirable for the benefit of the holders of the Investor Certificates with
respect to the Agreement and the rights and duties of the parties thereto and
the interest of such holders thereunder.
SERVICING DUTIES
The Servicer, whether acting itself or through one or more subservicers, is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with its usual and customary servicing policies and
procedures for servicing credit card receivables comparable to the Receivables.
The Servicer is required to maintain fidelity bond coverage insuring against
losses through wrongdoing of its officers and employees who are involved in the
servicing of the Receivables covering such actions and in such amounts as the
Servicer believes to be commercially reasonable from time to time.
The servicing activities to be performed by the Servicer with respect to
the Receivables include collecting and recording payments, communicating with
cardholders, investigating payment delinquencies, providing
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billing records to cardholders and maintaining internal records. The managerial
and custodial services to be performed by the Servicer on behalf of the Trust
include providing assistance in any inspections of the documents and records
relating to the Accounts and the Receivables by the Trustee pursuant to the
Agreement, maintaining the agreements, documents and files relating to the
Accounts and the Receivables as custodian for the Trust and providing related
data processing and reporting services for the holders of the Investor
Certificates and on behalf of the Trustee.
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that such duties are impermissible under
applicable law, regulation or order. No such resignation will become effective
until the Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Agreement. The Servicer may delegate
certain of its duties under the Agreement to any person who agrees to conduct
such duties in accordance with the usual and customary servicing policies and
procedures of the Servicer. Notwithstanding any such delegation, the Servicer
will continue to be liable for all of its obligations as Servicer under the
Agreement.
SERVICER COVENANTS
The Servicer will covenant that (i) it will duly satisfy in all material
respects its obligations under or in connection with each Account and each
Receivable, will maintain in effect all material qualifications required in
order to service properly each Account and each Receivable and will comply in
all material respects with all applicable requirements of law in connection with
servicing each Account and each Receivable the failure to comply with which
would have a material adverse effect on the holders of the Investor Certificates
(without regard to the amount of any Enhancement), (ii) except in connection
with an Adjustment Payment, it will not permit any rescission or cancellation of
any Receivable except as ordered by a court of competent jurisdiction or other
governmental authority or in the ordinary course of its business and in
accordance with its usual and customary servicing procedures and (iii) it will
take no action which, nor omit to take any action the omission of which, would
impair the rights of the holders of the Investor Certificates in any Receivable
or the rights of any Enhancement Provider, and will not reschedule, revise,
waive or defer payments due on any Receivable except in the ordinary course of
business and in accordance with its usual and customary servicing policies and
procedures.
In the event of a breach with respect to a Receivable of any of the
covenants set forth above which has a material adverse effect on the interest of
the holders of the Investor Certificates in such Receivable and has not been
cured within 60 days (or such longer period as may be agreed upon by the
Trustee, not to exceed an additional 120 days) after the earlier of discovery of
such breach by the Servicer or receipt by the Servicer of written notice of such
breach given by the Trustee, the Servicer is required to deposit into the
Collection Account prior to the next succeeding Distribution Date an amount
equal to the outstanding principal balance of such breach given by the Trustee,
the Servicer is required to deposit into the Collection Account prior to the
next proceeding Distribution Date an amount equal to the outstanding principal
balance of such Receivable at the end of the preceding Collection Period. Any
such deposit will be considered a payment in full of such Receivable and will be
allocated and applied in accordance with the Agreement. The obligation of the
Servicer described above constitutes the sole remedy available to the holders of
the Investor Certificates with respect to any breach by the Servicer of such
covenants. It is not required or anticipated that the Trustee will make any
initial or periodic general examination of the Servicer for the purpose of
establishing compliance by the Servicer with its representations or warranties
or the performance by the Servicer of its obligations under the Agreement or any
Series Supplement or for any other purpose. The Servicer is required, however,
to deliver to the Trustee on or before June 30 of each calendar year, beginning
with June 30, 1998, an officer's certificate stating that, to the best of such
officer's knowledge, there has occurred no event which would constitute a
Servicer Default.
SERVICING COMPENSATION
The Servicer is entitled to receive, as compensation for its servicing
activities under the Agreement, a monthly servicing fee (the "Servicing Fee") in
an amount, on any Distribution Date, equal to, with respect to each Series,
one-twelfth of the product of (i) the applicable servicing fee percentage with
respect to such
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Series and (ii) the sum of an allocable portion of the amount of the Transferor
Amount and the invested amount with respect to such Series with respect to the
preceding Collection Period. The Servicing Fee will be allocated among the
Transferor Interest and the holders of the Investor Certificates of all then
outstanding Series. The portion of the Servicing Fee allocable to the holders of
the Investor Certificates on each Distribution Date (the "Investor Servicing
Fee") will be specified in the related Series Supplement. The Investor Servicing
Fee will be paid with respect to each Collection Period from the Collection
Account (unless such amount has been netted against deposits to the Collection
Account). See "Description of the Certificates -- Servicing Compensation."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Accounts and the Receivables,
including, without limitation, expenses related to enforcement of the
Receivables, payment of fees and disbursements of the Trustee and independent
accountants and all other fees and expenses which are not expressly stated in
the Agreement to be payable by the Trust or the holders of the Investor
Certificates, other than federal, state and local income and franchise taxes, if
any, of the Trust.
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
The Agreement prohibits the Transferor and the Servicer from consolidating
with or merging into another corporation or from conveying or transferring their
respective properties and assets substantially as an entirety to another person
except in certain limited circumstances. Any person into which either the
Transferor or the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which either the Transferor or the Servicer
is a party, or any person succeeding to the business of either the Transferor or
the Servicer, will be the successor to the Transferor or the Servicer, as the
case may be, under the Agreement.
SERVICER DEFAULT
In the event of any Servicer Default that has not been remedied, either the
Trustee or the Required Investor Certificateholders, by written notice to the
Servicer (and to the Trustee, if given by such holders), may terminate all of
the rights and obligations of the Servicer under the Agreement with respect to
the Receivables and the proceeds thereof, and the Trustee will thereafter
appoint a new Servicer (a "Service Transfer"). The rights and interests of the
holder of the Transferor Interest will not be affected by any Service Transfer.
The Transferor will have the right to nominate to the Trustee a potential
successor Servicer. The Trustee will as promptly as possible appoint the entity
nominated by the Transferor if such entity meets certain eligibility criteria
set forth in the Agreement. If the Transferor does not nominate an entity to be
successor Servicer, the Trustee will as promptly as possible appoint a successor
Servicer, and if no successor Servicer has been appointed by the Trustee and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all rights and obligations of the Servicer under the Agreement will pass to, and
be vested in, the Trustee. Prior to any Service Transfer, the Trustee will seek
to obtain bids from potential Servicers meeting certain eligibility requirements
set forth in the Agreement to serve as successor Servicer for servicing
compensation not in excess of the Servicing Fee. If the Trustee is unable to
obtain any bids from eligible potential Servicers and the Servicer delivers an
officer's certificate to the Trustee to the effect that it cannot in good faith
cure the related Servicer Default, then the Trustee will under certain
circumstances offer the Transferor the right to accept the retransfer of all of
the Receivables. The deposit amount for such a retransfer will be equal to the
sum of the Aggregate Invested Amount (less the aggregate principal amount on
deposit in the Excess Funding Account and any principal funding account with
respect to any Series) plus accrued and unpaid interest on the Investor
Certificates of all then outstanding Series plus certain amounts payable to
Enhancement Providers, if applicable.
"Servicer Default" means any of the following events:
(a) the Servicer shall fail to make any payment, transfer or deposit,
or to give instructions or notice to the Trustee to make any payment,
transfer or deposit or as to any required drawing under any Enhancement, on
the date required under the Agreement or any Series Supplement or within
five business days thereafter;
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(b) the Servicer shall fail to observe or perform any other covenants
or agreements of the Servicer set forth in the Agreement or any Series
Supplement which continues unremedied for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Required Investor Certificateholders, which
failure has a material adverse effect on the rights of the holders of the
Investor Certificates of any then outstanding Series; provided, however,
that if the covenant which was breached relates to any particular
Receivable or group of Receivables a Servicer Default will not be deemed to
have occurred if the Servicer has made a deposit in the Collection Account
with respect to such breach in accordance with the Agreement;
(c) any representation, warranty or certification made by the Servicer
in the Agreement or any Series Supplement or in any certificate delivered
pursuant to the Agreement or any Series Supplement shall prove to have been
incorrect when made and continues to be incorrect in any material respect
for a period of 60 days after the date on which written notice of such
breach, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee, or to the Servicer and the Trustee by the Required
Investor Certificateholders, which incorrectness has a material adverse
effect on the rights of the holders of the Investor Certificates of any
then outstanding Series; or
(d) certain events of insolvency or receivership shall have occurred
with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of 10 business days after the
applicable grace period or a delay in or failure of performance referred to
under clauses (b) or (c) above for a period of 60 business days after the
applicable grace period shall not constitute a Servicer Default if such delay or
failure could not have been prevented by the exercise 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 shall
not be relieved from using its best reasonable efforts to perform its
obligations in a timely manner in accordance with the terms of the Agreement or
any Series Supplement and the Servicer shall provide the Trustee, each
Enhancement Provider, if any, applicable to any Series, the Transferor and the
holders of the Investor Certificates of all then outstanding Series prompt
notice of such failure or delay, together with a description of its efforts to
so perform its obligations. The Servicer will immediately notify the Trustee in
writing of any Servicer Default. The Servicer is required to deliver to the
Trustee on or before June 30 of each calendar year, beginning with June 30,
1998, an officer's certificate stating that, to the best of such officer's
knowledge, there has occurred no event which would constitute a Servicer
Default.
MONTHLY SERVICER REPORT
On the eighth day of each month (or, if such eighth day is not a business
day, the next succeeding business day) (each, a "Determination Date"), the
Servicer will forward to the Trustee a statement (the "Monthly Servicer Report")
prepared by the Servicer setting forth certain information with respect to the
Trust and each Series, including, without limitation: (i) the aggregate amount
collected in respect of the Receivables, the aggregate amount of Finance Charge
Collections and the aggregate amount of Principal Collections processed during
the preceding Collection Period; (ii) the allocation percentages applicable with
respect to such Collection Period; (iii) the amount to be distributed on the
next succeeding Distribution Date to the holders of each Class of Investor
Certificates of each then outstanding Series; (iv) the aggregate outstanding
balance of all Accounts which were delinquent by 31 to 60, 61 to 90 and 91 or
more days as of the end of such Collection Period; (v) the Default Amount
allocable to each Series for such Collection Period; (vi) the amount of investor
charge-offs and the amount of reimbursements of investor charge-offs allocated
to each Series for such Collection Period; (vii) the amount of the Investor
Servicing Fee allocable to each Series for the following Distribution Date;
(viii) the Aggregate Principal Receivables at the close of business on the last
day of such Collection Period; (ix) the Aggregate Invested Amount at the close
of business on the last day of such Collection Period; (x) whether an Early
Amortization Event has occurred; and (xi) certain information relating to the
certificate interest rates, if applicable, for such Collection Period. The
Trustee will make such statement available to the holders of the Investor
Certificates of each then outstanding Series upon request.
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EVIDENCE AS TO COMPLIANCE
On or before June 30 of each calendar year, beginning with 1998, the
Servicer will cause a firm of nationally recognized independent accountants to
furnish to the Trustee, each Rating Agency assigning a rating for any Class of
Investor Certificates then outstanding and any Enhancement Provider, if
applicable, (i) a report, prepared in accordance with standards established by
the Agreement, to the effect that, in their opinion, the Monthly Servicer
Reports are, in all material respects, in conformity with the Agreement and (ii)
a report to the effect that such firm has applied procedures, as agreed upon
between such firm and the Servicer, to certain documents and records relating to
the administration and servicing of the Accounts and the Receivables during the
preceding year ended February 28 or 29 and that, based upon such agreed-upon
procedures, no matters came to their attention that caused them to believe that
such servicing was not conducted in compliance with certain applicable terms and
conditions set forth in the Agreement except for such exceptions or errors as
shall be set forth in such report. In addition, on or before June 30 of each
calendar year, such accountants will compare the mathematical calculations of
the amounts contained in the Monthly Servicer Reports delivered during the
preceding year ended February 28 or 29 with the computer reports of the Servicer
and the statements of any agents engaged by the Servicer to perform servicing
activities which were the source of such amounts and deliver a report to the
Trustee stating that such amounts are in agreement except for such exceptions as
shall be set forth in such report.
On or before June 30 of each calendar year, the Servicer will deliver to
the Trustee a statement signed by an officer of the Servicer to the effect that
the Servicer has, or has caused to be, fully performed its obligations in all
material respects under the Agreement throughout the preceding year ended
February 28 or 29 or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by any holder of the Investor Certificates or any Certificate
Owner by a request in writing delivered to the Trustee.
AMENDMENTS
The Agreement and any Series Supplement may be amended by the Transferor,
the Servicer and the Trustee, without the consent of the holders of the Investor
Certificates, to cure any ambiguity, to correct or supplement any provision
therein which may be inconsistent with any other provision therein and to add
any other provisions with respect to matters or questions arising under the
Agreement or any Series Supplement which are not inconsistent with the
provisions of the Agreement or any Series Supplement, provided that such action
shall not adversely affect in any material respect the interest of any holder of
the Investor Certificates. In addition, the Agreement and any Series Supplement
may be amended from time to time by the Transferor, the Servicer and the
Trustee, without the consent of the holders of the Investor Certificates, for
the purpose of adding any provisions to, changing in any manner or eliminating
any of the provisions of the Agreement or any Series Supplement or modifying in
any manner the rights of the holders of the Investor Certificates of any then
outstanding Series provided that (i) the Servicer must provide an opinion of
counsel to the Trustee to the effect that such amendment will not materially and
adversely affect the interests of the holders of the Investor Certificates of
any then outstanding Series, which opinion of counsel may rely as to any rated
Series solely on the rating confirmation referred to in clause (iii) below (or
100% of the holders of the Investor Certificates so affected shall have
consented), (ii) such amendment shall not, as evidenced by an opinion of
counsel, cause the Trust to be characterized for federal income tax purposes as
an association taxable as a corporation or otherwise have any material adverse
impact on the federal income tax characterization of any outstanding Series of
Investor Certificates or the federal income taxation of any holder of the
Investor Certificates or any Certificate Owner and (iii) the Rating Agency
Condition shall have been satisfied. No such amendment, however, may (i) reduce
in any manner the amount of, or delay the timing of, distributions required to
be made on such Series, (ii) change the definition or the manner of calculating
the invested amount, any allocation percentage, the applicable available amount
under any Enhancement or the Default Amount allocable to such Series, or (iii)
reduce the aforesaid percentage of undivided interests the holders of which are
required to consent to any such amendment, in each case without the consent of
all holders of the Investor Certificates of all Series adversely affected. Any
Series Supplement and any amendments regarding the
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designation of Supplemental Accounts will not require the consent of the holders
of the Investor Certificates under the provisions of the Agreement or any Series
Supplement.
The Agreement and any Series Supplement may also be amended by the
Transferor, the Servicer and the Trustee with the consent of the holders of
Investor Certificates evidencing undivided interests aggregating not less than
66 2/3% of the invested amounts of all Series adversely affected for the purpose
of adding any provisions to, changing in any manner or eliminating any of the
provisions of the Agreement or any Series Supplement or modifying in any manner
the rights of the holders of the Investor Certificates of any then outstanding
Series. Any such amendment shall require that the Rating Agency Condition be
satisfied. No such amendment, however, may (i) reduce in any manner the amount
of, or delay the timing of, distributions required to be made on such Series,
(ii) change the definition or the manner of calculating the invested amount, any
allocation percentage, the applicable available amount under any Enhancement or
the Default Amount allocable to such Series, or (iii) reduce the aforesaid
percentage of undivided interests the holders of which are required to consent
to any such amendment, in each case without the consent of all holders of the
Investor Certificates of all Series adversely affected.
Promptly following the execution of any amendment to the Agreement or any
Series Supplement, the Trustee will furnish written notice of the substance of
such amendment to each holder of the Investor Certificates of all then
outstanding Series (or, with respect to an amendment to any Series Supplement,
to each holder of the Investor Certificates of the related Series).
LIST OF CERTIFICATEHOLDERS
Upon the written request of any one or more holders of the Investor
Certificates representing undivided interests in the Trust aggregating not less
than 10% of the invested amount of a Series, the Trustee, after having been
adequately indemnified for its costs and expenses, will afford such holders
access during business hours to the current list of holders of the Investor
Certificates of such Series for purposes of communicating with such other
holders with respect to their rights under the Agreement. The Agreement
generally does not provide for any annual or other meetings of the holders of
the Investor Certificates.
THE TRUSTEE
[ ] is the Trustee under the Agreement. The Transferor and 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 and the Servicer, and any of their respective
affiliates, may hold Investor Certificates in their own names; provided,
however, that any Investor Certificates so held shall not be entitled to
participate in any decisions made or instructions given to the Trustee by the
holders of the Investor Certificates as a group. The address of the Trustee is
[ ].
For purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint a co-trustee or
separate trustee of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee will be conferred or imposed upon and exercised or performed by
the Trustee and such co-trustee or separate trustee jointly or, in any
jurisdiction in which the Trustee is incompetent or unqualified to perform
certain acts, singly upon such co-trustee or separate trustee, who will exercise
and perform such rights, powers, duties and obligations solely at the direction
of the Trustee.
The Trustee may resign at any time, in which event a successor Trustee will
be appointed as provided in the Agreement. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, a
successor Trustee will be appointed as provided in the Agreement. Any
resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by the successor
Trustee.
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TERMINATION OF THE TRUST
Unless the Transferor instructs the Trustee otherwise, the Trust will only
terminate on the earlier to occur of (i) the day following the date on which
funds shall have been deposited in the Collection Account in an amount
sufficient to pay (A) the Aggregate Invested Amount and the aggregate invested
amount of all outstanding Enhancement, if applicable, in full plus (B) interest
on the Investor Certificates of all then outstanding Series accrued through the
last day of the applicable interest accrual period preceding such date and (ii)
[August ], 2097 (the "Final Termination Date"); provided, however, that in no
event will the Trust continue beyond the expiration of 21 years from the death
of the last survivor of the descendants of George Herbert Walker Bush, former
President of the United States, living on the date of the Agreement. Upon the
termination of the Trust and the surrender of the Exchangeable Transferor
Certificate, the Trustee will convey to the Transferor all right, title and
interest of the Trust in, to and under the Receivables and the other Trust
Property (other than amounts in the accounts maintained by the Trust for the
final payment of principal and interest to the holders of the Investor
Certificates of all then outstanding Series).
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DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement as supplemented
by the Series 1997-2 Supplement. The Trust will issue the Concurrently Issued
Series pursuant to a Series Supplement, and the Transferor and the Trustee may
execute further Series Supplements in order to issue additional Series. See
"Annex A" for a description of certain terms of the Concurrently Issued Series.
The following description of the Certificates does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all of the
provisions of the Agreement and the Series 1997-2 Supplement.
BOOK-ENTRY REGISTRATION
The Certificates will be issued in book-entry form. Certificateholders may
hold their Certificates through DTC (in the United States) or Cedel or Euroclear
(in Europe), which in turn hold through DTC, if they are participants of such
systems, or indirectly through organizations that are participants in such
systems.
Cede & Co., as nominee for DTC, will hold the global certificates. Cedel
and Euroclear will hold omnibus positions on behalf of the Cedel Participants
and the Euroclear Participants, respectively, through customers' securities
accounts in Cedel's and Euroclear's names on the books of their respective
depositaries (collectively, the "Depositaries") which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
DTC is a limited-purpose trust company organized under the 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 Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. 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 Participant, either directly
or indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits or securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement
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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
Participants, which will receive a credit for the Certificates on DTC's records.
The ownership interest of each Certificate Owner is in turn to be recorded on
the 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
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 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
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 Participants to whose accounts such Certificates are credited,
which may or may not be the Certificate Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by 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
the 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 Participants to whose accounts the
Certificates are credited on the record date (identified in a listing attached
thereto). Principal and interest payments on the Certificates will be made to
DTC. DTC's practice is to credit Participants' accounts on the 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 the Distribution Date.
Payments by 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 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 Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Certificate Owners shall be the responsibility of 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 printed and
delivered.
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 by Cedel in any of 36 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulations by the
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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. Indirect access to
Cedel is also available to others, such as banks, brokers, dealers and trust
companies, that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in any of 34 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by the Brussels, Belgium office of Morgan Guaranty Trust
Company of New York (the "Euroclear Operator" or "Euroclear") under a contract
with Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear system on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters of any Series. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission. Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
Cedel or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Agreement on behalf of a
Cedel Participant or a Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depositary's ability to effect
such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of the 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
The Certificates of each Class will be issued in fully registered,
certificated form to the Certificate Owners of such Class or their nominees
("Definitive Certificates"), rather than to DTC or its nominee (together with
any successor depository selected by the Transferor, the "Depository"), only if
(i) the Transferor advises the Trustee in writing that the Depository is no
longer willing or able to discharge properly its responsibilities as Depository
with respect to the Certificates of such Class, and the Trustee or the
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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 the Depository or (iii) after the occurrence of a
Servicer Default, Certificate Owners representing not less than 50% of the
invested amount of such Class advise the Trustee and the Depository through
Participants in writing that the continuation of a book-entry system through the
Depository is no longer in the best interest of the Certificate Owners of such
Class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Depository is required to notify all Participants of
the availability through the Depository of Definitive Certificates. Upon
surrender by the Depository of the definitive certificate representing the
Certificates of the affected Class and instructions for registration, the
Trustee will issue the Certificates of such Class 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 Certificateholders 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 the Certificateholders in whose names
the Definitive Certificates were registered at the close of business on the
related Record Date. Distributions will be made by check mailed to the address
of such Certificateholder as it appears on the register maintained by the
Trustee. The final payment on any Certificate, however, will be made only upon
presentation and surrender of such Certificate at the office or agency specified
in the notice of final distribution to Certificateholders. The Trustee will
provide such notice to registered Certificateholders mailed not later than the
[fifth] day of the month of such final distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the transfer agent and registrar, which initially will be the Trustee
(in such capacity, the "Transfer Agent and Registrar"). 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 herewith. The Transfer Agent and
Registrar will not be required to register the transfer or exchange of
Definitive Certificates for the period from the Record Date preceding the due
date for any payment to the Distribution Date with respect to such Definitive
Certificates.
INTEREST PAYMENTS
Interest on the principal amount of the Class A Certificates and the
principal amount of the Class B Certificates will accrue during each Interest
Period at the [applicable] Class A Certificate Rate and the [applicable] Class B
Certificate Rate, respectively. Interest will be distributed on the [September]
1997 Distribution Date, and on each Distribution Date thereafter, to
Certificateholders in whose names the Certificates were registered at the close
of business on the last day of the month preceding the date of such distribution
(each, a "Record Date"). "Interest Period" means, with respect to any
Distribution Date, the period from and including the previous Distribution Date
through and including the day preceding such Distribution Date, except that the
initial Interest Period will be the period from and including the Closing Date
through and including the day preceding the initial Distribution Date.
The Class A Certificates will bear interest for the period from the Closing
Date through the day preceding the [September] 1997 Distribution Date and with
respect to each Interest Period thereafter at the rate of [[ ]% above
LIBOR prevailing on the related LIBOR Determination Date with respect to such
period] [ ]% (the "Class A Certificate Rate"). Interest on the Class A
Certificates will be distributed on each Distribution Date in an amount equal to
[the product of (i) the Class A Certificate Rate for the related Interest
Period, (ii) a fraction, the numerator of which is the actual number of days in
such Interest Period and the denominator of which is 360 and (iii) the
outstanding principal amount of the Class A Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date)] [one-twelfth of the product of the Class A Certificate Rate and the
outstanding principal amount of the Class A Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date), except that interest for the first Distribution Date will accrue from the
Closing Date
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through [September 14], 1997 and will be calculated on the basis of a 360-day
year consisting of twelve 30-day months].
The Class B Certificates will bear interest for the period from the Closing
Date through the day preceding the [September] 1997 Distribution Date and with
respect to each Interest Period thereafter at the rate of [[ ]% above
LIBOR prevailing on the related LIBOR Determination Date with respect to such
period] [ ]% (the "Class B Certificate Rate"). Interest on the Class B
Certificates will be distributed on each Distribution Date in an amount equal to
[the product of (i) the Class B Certificate Rate for the related Interest
Period, (ii) a fraction, the numerator of which is the actual number of days in
such Interest Period and the denominator of which is 360 and (iii) the
outstanding principal amount of the Class B Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date)] [one-twelfth of the product of the Class B Certificate Rate and the
outstanding principal amount of the Class B Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date), except that interest for the first Distribution Date will accrue from the
Closing Date through [September 14], 1997 and will be calculated on the basis of
a 360-day year consisting of twelve 30-day months].
[Interest on the Class A Certificates or the Class B Certificates due 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 Class
A Certificate Rate or the Class B Certificate Rate, as applicable, plus 2.00%
per annum.]
[The Trustee will determine LIBOR with respect to the Certificates on
[August ] 1997 for the initial Interest Period and on the second business day
preceding the commencement of each Interest Period for each Interest Period
thereafter (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.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a one-month period which appears on Telerate Page 3750
as of 11:00 a.m., London time, on such LIBOR Determination Date. If such rate
does not appear on Telerate Page 3750, the rate for that LIBOR Determination
Date will be determined on the basis of the rates at which deposits in United
States dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on that day to prime banks in the London interbank market for a
one-month period. The 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 that LIBOR Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are provided,
the rate for that LIBOR Determination Date will be the arithmetic mean of the
rates quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a one-month period.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means the principal London offices of four major banks in
the London interbank market selected by the Servicer upon notice to the Trustee.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Periods may be obtained by
telephoning the Trustee at its Corporate Trust Office at [ ].]
Payments of Class A Monthly Interest and any overdue Class A Monthly
Interest for any Distribution Date will be funded from Class A Available Funds
for the preceding Collection Period. To the extent Class A Available Funds are
insufficient to pay such interest, Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2, amounts on deposit in the Cash
Collateral Account, if any, and Reallocated Principal Collections will be used
to make such payments.
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"Class A Available Funds" means, for any Collection Period, the sum of (i)
the Class A Floating Allocation Percentage of Finance Charge Collections with
respect to such Collection Period [plus (ii) the Class A Cap Payment, if any,
deposited in the Collection Account on the Distribution Date immediately
following such Collection Period,] plus (iii) if [such] Distribution Date occurs
before the Class B Principal Commencement Date, the Principal Funding Investment
Proceeds, if any, with respect to such Distribution Date plus (iv) the amount,
if any, to be withdrawn from the Reserve Account and included in Class A
Available Funds with respect to such Distribution Date pursuant to the Series
1997-2 Supplement plus (v) the net investment earnings, if any, on funds on
deposit in the Reserve Account to be withdrawn from the Reserve Account and
included in Class A Available Funds with respect to such Distribution Date
pursuant to the Series 1997-2 Supplement.
"Class B Principal Commencement Date" means the Class B Expected Final
Distribution Date or, if the Early Amortization Period has commenced, the date
on which the Class A Certificates have been paid in full.
Payments of Class B Monthly Interest and any overdue Class B Monthly
Interest for any Distribution Date will be funded from Class B Available Funds
for the preceding Collection Period. To the extent Class B Available Funds are
insufficient to pay such interest, Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2, amounts on deposit in the Cash
Collateral Account, if any, and Reallocated Principal Collections (in each case
after application of such amounts in respect of the Class A Certificates), other
than Class B Subordinated Principal Collections, will be used to make such
payments.
"Class B Available Funds" means, for any Collection Period, the sum of (i)
the Class B Floating Allocation Percentage of Finance Charge Collections with
respect to such Collection Period [plus (ii) the Class B Cap Payment, if any,
deposited in the Collection Account on the Distribution Date immediately
following such Collection Period,] plus (iii) if [such] Distribution Date occurs
on or after the Class B Principal Commencement Date, the Principal Funding
Investment Proceeds, if any, with respect to such Distribution Date plus (iv)
the amount, if any, to be withdrawn from the Reserve Account and included in
Class B Available Funds with respect to such Distribution Date pursuant to the
Series 1997-2 Supplement plus (v) the net investment earnings, if any, on funds
on deposit in the Reserve Account to be withdrawn from the Reserve Account and
included in Class B Available Funds with respect to such Distribution Date
pursuant to the Series 1997-2 Supplement.
[THE INTEREST RATE CAPS]
[On or prior to the Closing Date, the Transferor will enter into the
Interest Rate Caps with the Interest Rate Cap Provider. The Class A Interest
Rate Cap and the Class B Interest Rate Cap will be for the exclusive benefit of
the Class A Certificateholders and the Class B Certificateholders, respectively.
The Transferor will assign to the Trustee, for the benefit of the Class A
Certificateholders and the Class B Certificateholders, all of the Transferor's
rights under the Class A Interest Rate Cap and the Class B Interest Rate Cap,
respectively.
The notional amount of the Class A Interest Rate Cap (the "Class A Notional
Amount") will at all times prior to the termination of the Class A Interest Rate
Cap equal or exceed the Class A Invested Amount plus the Principal Funding
Account Balance. Pursuant to the Class A Interest Rate Cap, on each Distribution
Date on which the Class A Certificate Rate for the related Interest Period
exceeds [ ]% (the "Class A Cap Rate"), the Interest Rate Cap Provider will
make a payment (the "Class A Cap Payment") to the Trustee, on behalf of the
Trust, in an amount equal to the product of (i) such excess, (ii) the Class A
Notional Amount as of such Distribution Date and (iii) a fraction, the numerator
of which is the actual number of days in such Interest Period and the
denominator of which is 360. Such payment will be included in Class A Available
Funds on such Distribution Date. The Class A Interest Rate Cap will terminate on
the earlier of the day on which the Class A Certificates are paid in full and
the day following the Stated Series Termination Date; provided, however, that
the Class A Interest Rate Cap may be terminated on an earlier date if the
Servicer has obtained a substitute interest rate cap (a "Replacement Interest
Rate Cap") or entered into an alternative arrangement (a "Qualified Substitute
Arrangement") satisfactory to the Rating Agencies which, in each case, will not
result in the reduction or withdrawal of the rating of the Certificates.
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The notional amount of the Class B Interest Rate Cap (the "Class B Notional
Amount") will at all times prior to the termination of the Class B Interest Rate
Cap equal or exceed the Class B Invested Amount plus, after the Class A
Certificates have been paid in full, the Principal Funding Account Balance.
Pursuant to the Class B Interest Rate Cap, on each Distribution Date on which
the Class B Certificate Rate for the related Interest Period exceeds [ ]%
(the "Class B Cap Rate"), the Interest Rate Cap Provider will make a payment
(the "Class B Cap Payment") to the Trustee, on behalf of the Trust, in an amount
equal to the product of (i) such excess, (ii) the Class B Notional Amount as of
such Distribution Date and (iii) a fraction, the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360. Such payment will be included in Class B Available Funds on such
Distribution Date. The Class B Interest Rate Cap will terminate on the earlier
of the day on which the Class B Certificates are paid in full and the day
following the Stated Series Termination Date; provided, however, that the Class
B Interest Rate Cap may be terminated on an earlier date if the Servicer has
obtained a Replacement Interest Rate Cap or has entered into a Qualified
Substitute Arrangement.
In the event that the rating of the Interest Rate Cap Provider is reduced
or withdrawn, as specified in the Interest Rate Caps, the Servicer will use its
best efforts either to obtain for each such Interest Rate Cap a Replacement
Interest Rate Cap, at the expense of the Interest Rate Cap Provider, or to enter
into a Qualified Substitute Arrangement.]
[THE INTEREST RATE CAP PROVIDER]
[The following information has been obtained from the Interest Rate Cap
Provider and has not been verified by the Transferor or the Underwriters. No
representation or warranty is made by the Transferor or the Underwriters with
respect thereto.
The interest rate cap provider is [ ] (the "Interest Rate Cap
Provider"), [a bankruptcy remote derivative products company based in
[ ]]. The Interest Rate Cap Provider was organized in [
19 ]. The Interest Rate Cap Provider is in the business of providing
[ ]. As of [June 30], 1997, the Interest Rate Cap Provider had assets
of approximately $[ ] and equity of approximately $[ ].
Requests for further information regarding the Interest Rate Cap Provider should
be directed to [ ] at [( ) - ].]
PRINCIPAL PAYMENTS
During the Revolving Period, which will commence on the Closing Date and
end on the earlier of the commencement of the Accumulation Period and the
commencement of the Early Amortization Period, all Principal Collections
allocated to Series 1997-2 (other than Reallocated Principal Collections) will,
subject to certain limitations described herein, be treated as Shared Principal
Collections and applied to cover principal payments due to or for the benefit of
other Series included in Group One (to the extent provided in the Series
Supplement for such other Series), be deposited in the Excess Funding Account,
be paid to the holder of the Exchangeable Transferor Certificate or, under
certain limited circumstances described herein, be paid to the Collateral
Indebtedness Holder or the Class D Certificateholders. During the Accumulation
Period (on or prior to the Class A Expected Final Distribution Date or the Class
B Expected Final Distribution Date, as applicable), all Principal Collections
allocated to Series 1997-2 (other than Reallocated Principal Collections) will
be deposited in the Principal Funding Account and principal payments will be
made to the Certificateholders as described below. During the Early Amortization
Period, which will commence upon the occurrence of an Early Amortization Event,
principal payments will be made to the Certificateholders as described below.
On each Distribution Date with respect to the Class A Accumulation Period,
the Trustee will deposit in the Principal Funding Account an amount equal to the
least of (i) the Available Principal Collections for such Distribution Date,
(ii) the applicable Controlled Deposit Amount for such Distribution Date and
(iii) the Class A Invested Amount on such Distribution Date (before giving
effect to such deposit). Unless an Early Amortization Event has occurred,
amounts on deposit in the Principal Funding Account will be paid to the Class A
Certificateholders on the Class A Expected Final Distribution Date. On each
Distribution Date with
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respect to the Class B Accumulation Period, the Trustee will deposit in the
Principal Funding Account an amount equal to the least of (i) the Available
Principal Collections for such Distribution Date (minus any portion thereof
applied to Class A Monthly Principal on such Distribution Date), (ii) the
applicable Controlled Deposit Amount for such Distribution Date and (iii) the
Class B Invested Amount on such Distribution Date (before giving effect to such
deposit). Unless an Early Amortization Event has occurred, amounts on deposit in
the Principal Funding Account will be paid to the Class B Certificateholders on
the Class B Expected Final Distribution Date.
"Available Principal Collections" means, for any Distribution Date, the sum
of (i) the Floating Allocation Percentage or the Fixed Allocation Percentage, as
applicable, of Principal Collections with respect to the preceding Collection
Period plus (ii) the amount of Shared Principal Collections allocated to Series
1997-2 minus (iii) the amount of Reallocated Principal Collections required to
be used with respect to such Distribution Date.
"Controlled Deposit Amount" means, for any Distribution Date with respect
to the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date plus any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.
"Controlled Accumulation Amount" means (i) for any Distribution Date with
respect to the Class A Accumulation Period, $[ ]; provided, however,
that if the commencement of the Accumulation Period is postponed as described
below under "-- Postponement of Accumulation Period," the Controlled
Accumulation Amount will be higher and (ii) for any Distribution Date with
respect to the Class B Accumulation Period, $[ ].
"Deficit Controlled Accumulation Amount" means (i) on the first
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, as applicable, the excess, if any, of the applicable
Controlled Accumulation Amount for such Distribution Date over the amount
deposited in the Principal Funding Account as Class A Monthly Principal or Class
B Monthly Principal, as applicable, for such Distribution Date and (ii) on each
subsequent Distribution Date with respect to the Class A Accumulation Period or
the Class B Accumulation Period, as applicable, the excess, if any, of the
applicable Controlled Deposit Amount for such subsequent Distribution Date over
the amount deposited in the Principal Funding Account as Class A Monthly
Principal or Class B Monthly Principal, as applicable, for such subsequent
Distribution Date.
If the Available Principal Collections with respect to any Distribution
Date exceed the Controlled Deposit Amount for such Distribution Date, the
Controlled Deposit Amount will be deposited in the Principal Funding Account and
such excess will be paid to the Collateral Indebtedness Holder to the extent
that the Available Enhancement Amount exceeds the Required Enhancement Amount
(provided that the Transferor shall have elected to make such payment) and any
remaining excess will be applied as Shared Principal Collections. Although it is
expected that a single principal payment will be made to the Class A
Certificateholders on the Class A Expected Final Distribution Date and that a
single principal payment will be made to the Class B Certificateholders on the
Class B Expected Final Distribution Date, there can be no assurance that such
payments will be made. See "Maturity Considerations" and "-- Application of
Collections" below.
On each Distribution Date with respect to the Early Amortization Period,
Available Principal Collections will be paid to the Class A Certificateholders
until the Class A Certificates have been paid in full or the Stated Series
Termination Date occurs. On each Distribution Date with respect to the Early
Amortization Period after payment in full of the Class A Certificates, Available
Principal Collections will be paid to the Class B Certificateholders until the
Class B Certificates have been paid in full or the Stated Series Termination
Date occurs.
POSTPONEMENT OF ACCUMULATION PERIOD
The Accumulation Period is scheduled to commence at the close of business
on the last day of the [ 200 ] Collection Period. Upon written notice
to the Trustee, the Servicer may elect to postpone
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the commencement of the 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 prior to the commencement of the Accumulation Period, the
Servicer will determine the Accumulation Period Length. If the Accumulation
Period Length is less than [ ] months, the Servicer may, at its sole option,
postpone the commencement of the Accumulation Period such that the number of
months included in the Class A Accumulation Period will equal or exceed the
Accumulation Period Length. The effect of the Accumulation Period Length
calculation is to permit the reduction of the length of the Class A Accumulation
Period based on (i) the invested amounts of certain other Series which are
scheduled to be in their revolving periods during the Class A Accumulation
Period and (ii) increases in the principal payment rate occurring after the
Closing Date. The length of the Class A Accumulation Period will not be less
than one month. If the commencement of the Accumulation Period is postponed as
described above, and if an Early Amortization Event occurs after the date on
which the Accumulation Period was originally scheduled to commence, the
Certificateholders may receive some of their principal later than if the
commencement of the Accumulation Period had not been postponed.
"Accumulation Period Length" means, as of any date of determination, the
number of months expected to be required to fund the Principal Funding Account
up to the Class A Initial Invested Amount no later than the Class A Expected
Final Distribution Date, based on (i) the monthly Principal Collections expected
to be distributable to the holders of the Investor Certificates of all then
outstanding Series (excluding certain other Series), assuming a principal
payment rate no greater than the lowest monthly principal payment rate on the
Receivables for the preceding twelve months and (ii) the amount of principal
expected to be distributable to the holders of the Investor Certificates of all
then outstanding Series (excluding certain other Series) which are not expected
to be in their revolving periods during the Accumulation Period.
SUBORDINATION OF THE CLASS B CERTIFICATES, THE COLLATERAL INDEBTEDNESS INTEREST
AND THE CLASS D CERTIFICATES
The Class B Certificates, the Collateral Indebtedness Interest and the
Class D Certificates will be subordinated to the extent necessary to fund
certain payments with respect to the Class A Certificates. In addition, the
Collateral Indebtedness Interest and the Class D Certificates will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain Principal Collections otherwise allocable to
the Class B Certificateholders ("Class B Subordinated Principal Collections")
may be reallocated to the Class A Certificateholders and the Class B Invested
Amount reduced accordingly. Similarly, certain Principal Collections allocated
to the Class D Certificates and the Collateral Indebtedness Interest may be
reallocated to the Class A Certificateholders and the Class B Certificateholders
and the Class D Invested Amount and the Collateral Indebtedness Amount reduced
accordingly. To the extent the Class B Invested Amount is reduced, the
percentage of Finance Charge Collections allocated to the Class B
Certificateholders in subsequent Collection Periods will be reduced. Moreover,
to the extent the amount of such reduction in the Class B Invested Amount is not
reimbursed, the amount of principal distributable to the Class B
Certificateholders will be reduced. See "-- Allocation of Collections and
Default Amounts," "-- Reallocation of Cash Flow," and "-- Application of
Collections -- Excess Spread; Shared Excess Finance Charge Collections."
ALLOCATION OF COLLECTIONS AND DEFAULT AMOUNTS
The Servicer will allocate Finance Charge Collections, Principal
Collections and Default Amounts with respect to each Collection Period among
Series 1997-2, the interests of the Concurrently Issued Series, the interests of
all other then outstanding Series, the interests of any Enhancement Providers,
if applicable, and the Transferor Interest.
Finance Charge Collections with respect to any Collection Period, Principal
Collections with respect to any Collection Period during the Revolving Period
and Default Amounts with respect to any Collection Period will be allocated to
Series 1997-2 based on the Floating Allocation Percentage. The "Floating
Allocation Percentage" means, with respect to any Collection Period, the sum of
the Class A Floating Allocation
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Percentage, the Class B Floating Allocation Percentage, the Collateral Floating
Allocation Percentage and the Class D Floating Allocation Percentage.
"Class A Floating Allocation Percentage" means, with respect to any
Collection Period, the percentage equivalent of a fraction the numerator of
which is equal to the Class A Invested Amount as of the end of the last day of
the immediately preceding Collection Period (or the Class A Initial Invested
Amount, in the case of the first Collection Period applicable to Series 1997-2)
and the denominator of which is equal to the greater of (i) the Aggregate
Principal Receivables as of the end of the last day of such immediately
preceding Collection Period (or as of the Closing Date, in the case of the first
Collection Period applicable to Series 1997-2) plus the amount on deposit in the
Excess Funding Account as of the end of such last day and (ii) the sum of the
numerators used to calculate the corresponding allocation percentages for all
Series outstanding as of the date on which such determination is being made.
"Class B Floating Allocation Percentage" means, with respect to any
Collection Period, the percentage equivalent of a fraction the numerator of
which is equal to the Class B Invested Amount as of the end of the last day of
the immediately preceding Collection Period (or the Class B Initial Invested
Amount, in the case of the first Collection Period applicable to Series 1997-2)
and the denominator of which is equal to the greater of (i) the Aggregate
Principal Receivables as of the end of the last day of such immediately
preceding Collection Period (or as of the Closing Date, in the case of the first
Collection Period applicable to Series 1997-2) plus the amount on deposit in the
Excess Funding Account as of the end of such last day and (ii) the sum of the
numerators used to calculate the corresponding allocation percentages for all
Series outstanding as of the date on which such determination is being made.
"Collateral Floating Allocation Percentage" means, with respect to any
Collection Period, the percentage equivalent of a fraction the numerator of
which is equal to the Collateral Indebtedness Amount as of the end of the last
day of the immediately preceding Collection Period (or the initial Collateral
Indebtedness Amount, in the case of the first Collection Period applicable to
Series 1997-2) and the denominator of which is equal to the greater of (i) the
Aggregate Principal Receivables as of the end of the last day of such
immediately preceding Collection Period (or as of the Closing Date, in the case
of the first Collection Period applicable to Series 1997-2) plus the amount on
deposit in the Excess Funding Account as of the end of such last day and (ii)
the sum of the numerators used to calculate the corresponding allocation
percentages for all Series outstanding as of the date on which such
determination is being made.
"Class D Floating Allocation Percentage" means, with respect to any
Collection Period, the percentage equivalent of a fraction the numerator of
which is equal to the Class D Invested Amount as of the end of the last day of
the immediately preceding Collection Period (or the Class D Initial Invested
Amount, in the case of the first Collection Period applicable to Series 1997-2)
and the denominator of which is equal to the greater of (i) the Aggregate
Principal Receivables as of the end of the last day of such immediately
preceding Collection Period (or as of the Closing Date, in the case of the first
Collection Period applicable to Series 1997-2) plus the amount on deposit in the
Excess Funding Account as of the end of such last day and (ii) the sum of the
numerators used to calculate the corresponding allocation percentages for all
Series outstanding as of the date on which such determination is being made.
Principal Collections with respect to any Collection Period during the
Accumulation Period or the Early Amortization Period will be allocated to Series
1997-2 based on the Fixed Allocation Percentage. The "Fixed Allocation
Percentage" means, with respect to any Collection Period, the sum of the Class A
Fixed Allocation Percentage, the Class B Fixed Allocation Percentage, the
Collateral Fixed Allocation Percentage and the Class D Fixed Allocation
Percentage.
"Class A Fixed Allocation Percentage" means, with respect to any Collection
Period, the percentage equivalent of a fraction the numerator of which is equal
to the Class A Invested Amount as of the end of the last day of the Revolving
Period and the denominator of which is equal to the greater of (i) the Aggregate
Principal Receivables as of the end of the last day of the immediately preceding
Collection Period (or as of the Closing Date, in the case of the first
Collection Period applicable to Series 1997-2) plus the amount on deposit in the
Excess Funding Account as of the end of such last day and (ii) the sum of the
numerators used to
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calculate the corresponding allocation percentages for all Series outstanding as
of the date on which such determination is being made.
"Class B Fixed Allocation Percentage" means, with respect to any Collection
Period, the percentage equivalent of a fraction the numerator of which is equal
to the Class B Invested Amount as of the end of the last day of the Revolving
Period and the denominator of which is equal to the greater of (i) the Aggregate
Principal Receivables as of the end of the last day of the immediately preceding
Collection Period (or as of the Closing Date, in the case of the first
Collection Period applicable to Series 1997-2) plus the amount on deposit in the
Excess Funding Account as of the end of such last day and (ii) the sum of the
numerators used to calculate the corresponding allocation percentages for all
Series outstanding as of the date on which such determination is being made.
"Collateral Fixed Allocation Percentage" means, with respect to any
Collection Period, the percentage equivalent of a fraction the numerator of
which is equal to the Collateral Indebtedness Amount as of the end of the last
day of the Revolving Period and the denominator of which is equal to the greater
of (i) the Aggregate Principal Receivables as of the end of the last day of the
immediately preceding Collection Period (or as of the Closing Date, in the case
of the first Collection Period applicable to Series 1997-2) plus the amount on
deposit in the Excess Funding Account as of the end of such last day and (ii)
the sum of the numerators used to calculate the corresponding allocation
percentages for all Series outstanding as of the date on which such
determination is being made.
"Class D Fixed Allocation Percentage" means, with respect to any Collection
Period, the percentage equivalent of a fraction the numerator of which is equal
to the Class D Invested Amount as of the end of the last day of the Revolving
Period and the denominator of which is equal to the greater of (i) the Aggregate
Principal Receivables as of the end of the last day of the immediately preceding
Collection Period (or as of the Closing Date, in the case of the first
Collection Period applicable to Series 1997-2) plus the amount on deposit in the
Excess Funding Account as of the end of such last day and (ii) the sum of the
numerators used to calculate the corresponding allocation percentages for all
Series outstanding as of the date on which such determination is being made.
"Class A Invested Amount" means, on any date of determination, an amount
equal to (a) the Class A Initial Invested Amount minus (b) the Principal Funding
Account Balance on such date minus (c) the aggregate amount of principal
payments made to the Class A Certificateholders prior to such date minus (d) the
excess, if any, of the aggregate amount of Class A Investor Charge-Offs for all
prior Distribution Dates over the sum of the aggregate amount of reimbursed
Class A Investor Charge-Offs and, without duplication, reductions of the Class A
Adjustment Amount, in each case for all prior Distribution Dates; provided,
however, that the Class A Invested Amount may not be reduced below zero.
"Class B Invested Amount" means, on any date of determination, an amount
equal to (a) the Class B Initial Invested Amount minus (b) after the Class A
Certificates have been paid in full, the Principal Funding Account Balance on
such date minus (c) the aggregate amount of principal payments made to the Class
B Certificateholders prior to such date minus (d) the aggregate amount of Class
B Investor Charge-Offs for all prior Distribution Dates minus (e) the amount of
Reallocated Principal Collections used to make payments in respect of the Class
A Certificates on all prior Distribution Dates that have not resulted in a
reduction of the Class D Invested Amount or the Collateral Indebtedness Amount
minus (f) an amount equal to the amount by which the Class B Invested Amount has
been reduced on all prior Distribution Dates in respect of the Class A Allocable
Amount plus (g) the sum of the amount of Excess Spread and Shared Excess Finance
Charge Collections allocated and available on all prior Distribution Dates for
the purpose of reimbursing amounts deducted pursuant to the foregoing clauses
(d), (e) and (f) and, without duplication, reductions of the Class B Adjustment
Amount for all prior Distribution Dates; provided, however, that the Class B
Invested Amount may not be reduced below zero.
"Collateral Indebtedness Amount" means, on any date of determination, an
amount equal to (a) the initial Collateral Indebtedness Amount equal to
$[ ] minus (b) the aggregate amount of principal payments made to the
Collateral Indebtedness Holder on or prior to such date minus (c) the amount of
Reallocated Principal Collections used to make payments in respect of the
Certificates on all prior
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Distribution Dates that have not resulted in a reduction of the Class D Invested
Amount minus (d) an amount equal to the amount by which the Collateral
Indebtedness Amount has been reduced on all prior Distribution Dates in respect
of the Class A Allocable Amount, the Class B Allocable Amount and the Collateral
Allocable Amount plus (e) the sum of the amount of Excess Spread and Shared
Excess Finance Charge Collections allocated and available on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (c) and (d) and, without duplication, reductions of the
Collateral Adjustment Amount for all prior Distribution Dates; provided,
however, that the Collateral Indebtedness Amount may not be reduced below zero.
"Class D Invested Amount" means, on any date of determination, an amount
equal to (a) the initial Class D Invested Amount equal to $[ ] (plus
the initial principal amount of any additional Class D Certificates issued, at
the sole option of the Transferor, during the Revolving Period) minus (b) the
aggregate amount of principal payments made to the Class D Certificateholders
prior to such date minus (c) the amount of Reallocated Principal Collections
used to make payments in respect of the Certificates and the Collateral
Indebtedness Interest on all prior Distribution Dates minus (d) an amount equal
to the amount by which the Class D Invested Amount has been reduced on all prior
Distribution Dates in respect of the Class A Allocable Amount, the Class B
Allocable Amount, the Collateral Allocable Amount and the Class D Allocable
Amount plus (e) the sum of the amount of Excess Spread and Shared Excess Finance
Charge Collections allocated and available on all prior Distribution Dates for
the purpose of reimbursing amounts deducted pursuant to the foregoing clauses
(c) and (d) and, without duplication, reductions of the Class D Adjustment
Amount for all prior Distribution Dates; provided, however, that the Class D
Invested Amount may not be reduced below zero.
"Invested Amount" means, on any date of determination, the sum of the Class
A Invested Amount, the Class B Invested Amount, the Collateral Indebtedness
Amount and the Class D Invested Amount.
PRINCIPAL FUNDING ACCOUNT
The Servicer will establish and maintain with an Eligible Institution in
the name of the Trustee, on behalf of the Trust, a segregated trust account (the
"Principal Funding Account") for the benefit of the Certificateholders. During
the Accumulation Period, the Servicer will transfer Available Principal
Collections from the Collection Account to the Principal Funding Account as
described under "-- Application of Collections -- Payment of Principal."
The principal amount on deposit in the Principal Funding Account (the
"Principal Funding Account Balance") on any Distribution Date (after giving
effect to any deposits to, or withdrawals from, the Principal Funding Account to
be made on such Distribution Date) will be invested by the Trustee, at the
direction of the Servicer, in Eligible Investments that mature prior to the
following Distribution Date. On each Distribution Date with respect to the
Accumulation Period (on or prior to the Class B Expected Final Distribution
Date), all interest and other investment earnings (net of losses and investment
expenses) on funds on deposit in the Principal Funding Account received during
the preceding Interest Period (the "Principal Funding Investment Proceeds") will
be withdrawn from the Principal Funding Account and treated as a portion of
Class A Available Funds (until the Class A Certificates have been paid in full)
or Class B Available Funds (after the Class A Certificates have been paid in
full). If such investments during any Interest Period yield less than the Class
A Certificate Rate or the Class B Certificate Rate, as applicable, for such
Interest Period, the Principal Funding Investment Proceeds with respect to the
following Distribution Date will be less than the Covered Amount for such
Distribution Date. It is intended that any such shortfall will be funded from
Class A Available Funds or Class B Available Funds, as applicable (including a
withdrawal from the Reserve Account, if necessary, as described below under
"-- Reserve Account"), from Excess Spread and Shared Excess Finance Charge
Collections allocated to Series 1997-2 (to the extent available as described
below under "-- Application of Collections"), from a withdrawal from the Cash
Collateral Account as described below under "-- Cash Collateral Account" or from
Reallocated Principal Collections to the extent available therefor. The
Available Reserve Account Amount and the Available Cash Collateral Amount at any
time will be limited and may be zero, and there can be no assurance that
sufficient funds will be available to fund any such shortfall.
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"Covered Amount" means (i) for any Distribution Date with respect to the
Class A Accumulation Period or the first Distribution Date with respect to the
Early Amortization Period, if such Distribution Date occurs before the Class B
Principal Commencement Date, an amount equal to 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 and (B) the Class A Certificate Rate
for such Interest Period and (C) the Principal Funding Account Balance, if any,
as of the preceding Distribution Date and (ii) for any Distribution Date with
respect to the Class B Accumulation Period or the first Distribution Date with
respect to the Early Amortization Period, if such Distribution Date occurs on or
after the date on which the Class A Certificates have been paid in full, an
amount equal to 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 and (B) the Class B Certificate Rate for such Interest Period and
(C) the Principal Funding Account Balance, if any, as of the preceding
Distribution Date.
RESERVE ACCOUNT
The Servicer will establish and maintain with an Eligible Institution in
the name of the Trustee, on behalf of the Trust, a segregated trust account (the
"Reserve Account") for the benefit of the Certificateholders. The Reserve
Account is intended to help assure the payment of interest on the Certificates
during the Accumulation Period. On each Distribution Date from and after the
Reserve Account Funding Date, but prior to the termination of the Reserve
Account, the Trustee will apply Excess Spread and Shared Excess Finance Charge
Collections allocated to Series 1997-2 (to the extent available as described
below under "-- Application of Collections") to increase the amount on deposit
in the Reserve Account (to the extent such amount is less than the Required
Reserve Account Amount). On each Distribution Date, after giving effect to any
deposits to, or withdrawals from, the Reserve Account to be made on such
Distribution 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 will apply such excess in
accordance with the Loan Agreement.
"Reserve Account Funding Date" means the Distribution Date following the
Collection Period which commences [ ] months prior to the commencement
of the Class A Accumulation Period (or earlier, under certain circumstances
relating to the yield on the Receivables).
"Required Reserve Account Amount" means, for any Distribution Date on or
after the Reserve Account Funding Date, an amount equal to [ ]% of the sum
of the Class A Invested Amount and the Principal Funding Account Balance or any
other amount designated by the Transferor; provided, however, that, if such
designation is of a lesser amount, the Rating Agency Condition shall have 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 such officer, such designation
will not cause an Early Amortization Event or an event that, after the giving of
notice or the lapse of time, would constitute an Early Amortization Event.
The principal amount on deposit in the Reserve Account on any Distribution
Date (after giving effect to any deposits to, or withdrawals from, the Reserve
Account to be made on such Distribution Date) will be invested by the Trustee,
at the direction of the Servicer, in Eligible Investments that mature prior to
the following Distribution Date. All interest and other investment earnings (net
of losses and investment expenses) on funds on deposit in the Reserve Account
will be retained in the Reserve Account (to the extent the amount on deposit
therein is less than the Required Reserve Account Amount) or treated as Class A
Available Funds (until the Class A Certificates have been paid in full) or Class
B Available Funds (after the Class A Certificates have been paid in full), as
applicable.
On or before each Distribution Date with respect to the Accumulation Period
(on or prior to the Class B Expected Final Distribution Date) and on or before
the first Distribution Date with respect to the Early Amortization Period, a
withdrawal will be made from the Reserve Account and the amount of such
withdrawal will be deposited in the Collection Account and included in Class A
Available Funds (until the Class A Certificates have been paid in full) or Class
B Available Funds (after the Class A Certificates have
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been paid in full) in an amount equal to the lesser of (i) the Available Reserve
Account Amount with respect to such Distribution Date and (ii) the excess, if
any, of the Covered Amount with respect to such Distribution Date over the
Principal Funding Investment Proceeds with respect to such Distribution Date. On
each Distribution 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
deposits to, or withdrawals from, the Reserve Account to be made on such
Distribution Date) and the Required Reserve Account Amount for such Distribution
Date.
The Reserve Account will be terminated following the earliest of (i) the
termination of the Trust pursuant to the Agreement, (ii) the date on which the
Certificates are paid in full and (iii) if the Accumulation Period has not
commenced, the occurrence of an Early Amortization Event or, if the Accumulation
Period has commenced, the earlier of the first Distribution Date with respect to
the Early Amortization Period and the Class B Expected Final Distribution Date.
Upon termination of the Reserve Account, all amounts on deposit therein (after
giving effect to any deposits to, or withdrawals from, the Reserve Account on
such date) will be applied in accordance with the Loan Agreement.
REALLOCATION OF CASH FLOWS
On or before each Distribution Date, the Servicer will determine the Class
A Required Amount for such Distribution Date. If the Class A Required Amount is
greater than zero, Excess Spread and Shared Excess Finance Charge Collections
allocable to Series 1997-2 and available for such purpose will be used to fund
the Class A Required Amount. If such Excess Spread and Shared Excess Finance
Charge Collections are insufficient to fund the Class A Required Amount,
amounts, if any, on deposit in the Cash Collateral Account will then be used to
fund the remaining Class A Required Amount. If such Excess Spread and Shared
Excess Finance Charge Collections and amounts, if any, on deposit in the Cash
Collateral Account are insufficient to fund the Class A Required Amount,
Principal Collections allocated first to the Class D Certificates, then to the
Collateral Indebtedness Interest and then to the Class B Certificates for the
preceding Collection Period ("Reallocated Principal Collections") will then be
used to fund the remaining Class A Required Amount. If such Reallocated
Principal Collections are insufficient to fund the remaining Class A Required
Amount, then certain reductions of the Invested Amount will occur. See
"-- Allocation of Investor Default Amount; Allocation of Series Adjustment
Amount; Investor Charge-Offs."
"Class A Required Amount" means, for any Distribution Date, the amount, if
any, by which (i) the sum of (A) the Class A Monthly Interest for such
Distribution Date, (B) any Class A Monthly Interest previously due but not paid
to the Class A Certificateholders on a prior Distribution Date, (C) any Class A
Additional Interest for such Distribution Date and any Class A Additional
Interest previously due but not paid to the Class A Certificateholders on a
prior Distribution Date, (D) the Class A Allocable Amount, if any, for such
Distribution Date and (E) if FNANB is no longer the Servicer, the Class A
Servicing Fee for such Distribution Date and any unpaid Class A Servicing Fee
for a prior Distribution Date exceeds (ii) the Class A Available Funds for the
preceding Collection Period.
On or before each Distribution Date, the Servicer will determine the Class
B Required Amount for such Distribution Date. If the Class B Required Amount is
greater than zero, Excess Spread and Shared Excess Finance Charge Collections
allocable to Series 1997-2 and not required to fund the Class A Required Amount
or reimburse Class A Investor Charge-Offs will be used to fund the Class B
Required Amount. If such Excess Spread and Shared Excess Finance Charge
Collections are insufficient to fund the Class B Required Amount, amounts, if
any, on deposit in the Cash Collateral Account and not required to fund the
Class A Required Amount will then be used to fund the remaining Class B Required
Amount. If such Excess Spread and Shared Excess Finance Charge Collections and
amounts, if any, available in the Cash Collateral Account are insufficient to
fund the Class B Required Amount, Reallocated Principal Collections allocated
first to the Class D Certificates and then to the Collateral Indebtedness
Interest and not required to fund the Class A Required Amount will then be used
to fund the remaining Class B Required Amount. If such Reallocated Principal
Collections are insufficient to fund the remaining Class B Required Amount, then
certain reductions of the Invested Amount will occur. See "-- Allocation of
Investor Default Amount; Allocation of Series Adjustment Amount; Investor
Charge-Offs."
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"Class B Required Amount" means, for any Distribution Date, the amount, if
any, by which (i) the sum of (A) the Class B Monthly Interest for such
Distribution Date, (B) any Class B Monthly Interest previously due but not paid
to the Class B Certificateholders on a prior Distribution Date, (C) any Class B
Additional Interest for such Distribution Date and any Class B Additional
Interest previously due but not paid to the Class B Certificateholders on a
prior Distribution Date and (D) if FNANB is no longer the Servicer, the Class B
Servicing Fee for such Distribution Date and any unpaid Class B Servicing Fee
for a prior Distribution Date exceeds (ii) the Class B Available Funds for the
preceding Collection Period plus the amount, if any, by which the Class B
Allocable Amount, if any, for such Distribution Date exceeds the amount of
Excess Spread and Shared Excess Finance Charge Collections allocable to Series
1997-2 available on such Distribution Date as specified in clause (d) under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections" below.
Reductions of the Class A Invested Amount or Class B Invested Amount will
thereafter be reimbursed and the Class A Invested Amount or Class B Invested
Amount, as applicable, increased to the extent of Excess Spread and Shared
Excess Finance Charge Collections allocable to Series 1997-2 and available for
such purpose on each Distribution Date. In addition, to the extent that such
reductions are due to the allocation of Adjustment Amounts, such reductions may
be reimbursed as a result of deposits in the Excess Funding Account, increases
in the Aggregate Principal Receivables, certain decreases in the Aggregate
Invested Amount and subsequent Adjustment Payments.
On or before each Distribution Date, the Servicer will determine the
Collateral Required Amount for such Distribution Date. If the Collateral
Required Amount is greater than zero, amounts, if any, on deposit in the Cash
Collateral Account and not required to fund the Class A Required Amount or the
Class B Required Amount or pay certain other amounts will be used to fund the
Collateral Required Amount. If amounts, if any, available in the Cash Collateral
Account are insufficient to fund the Collateral Required Amount, Reallocated
Principal Collections allocated to the Class D Certificates and not required to
fund the Class A Required Amount or the Class B Required Amount will then be
used to fund the remaining Collateral Required Amount. If such Reallocated
Principal Collections are insufficient to fund the remaining Collateral Required
Amount, then certain reductions in the Invested Amount will occur.
"Collateral Required Amount" means, for any Distribution Date, the amount,
if any, by which (i) the sum of (A) the Collateral Monthly Interest for such
Distribution Date, (B) any Collateral Monthly Interest previously due but not
paid to the Collateral Indebtedness Holder on a prior Distribution Date, (C) any
Collateral Additional Interest for such Distribution Date and any Collateral
Additional Interest previously due but not paid to the Collateral Indebtedness
Holder on a prior Distribution Date and (D) if FNANB is no longer the Servicer,
the Collateral Servicing Fee for such Distribution Date and any unpaid
Collateral Servicing Fee for a prior Distribution Date exceeds (ii) the
Collateral Available Funds and any Excess Spread and Shared Excess Finance
Charge Collections for the preceding Collection Period available to make
payments with respect thereto plus the amount, if any, by which the Collateral
Allocable Amount, if any, for such Distribution Date exceeds the amount of
Excess Spread and Shared Excess Finance Charge Collections allocable to Series
1997-2 available on such Distribution Date as specified in clause (h) under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections" below.
APPLICATION OF COLLECTIONS
Payment of Interest, Fees and Other Items. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds, Collateral Available Funds and Class D
Available Funds as follows:
(A) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to the Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to the Class A Certificateholders on
a prior Distribution Date at a rate
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equal to the Class A Certificate Rate for the related Interest Period
plus 2.00% per annum ("Class A Additional Interest"), will be
distributed to the Class A Certificateholders;
(ii) if FNANB is no longer the Servicer, an amount equal to the
Class A Servicing Fee for such Distribution Date, plus the amount of any
Class A Servicing Fee previously due but not paid to the Servicer on a
prior Distribution Date, will be distributed to the Servicer;
(iii) an amount equal to the Class A Allocable Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payment of
Principal" below; and
(iv) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections" below.
(B) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to the Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to the Class B Certificateholders on
a prior Distribution Date at a rate equal to the Class B Certificate
Rate for the related Interest Period plus 2.00% per annum ("Class B
Additional Interest"), will be distributed to the Class B
Certificateholders;
(ii) if FNANB is no longer the Servicer, an amount equal to the
Class B Servicing Fee for such Distribution Date, plus the amount of any
Class B Servicing Fee previously due but not paid to the Servicer on a
prior Distribution Date, will be distributed to the Servicer; and
(iii) the balance, if any, will constitute Excess Spread and will
be allocated and distributed as described under "-- Excess Spread;
Shared Excess Finance Charge Collections" below.
(C) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) if FNANB is no longer the Servicer, an amount equal to the
Collateral Servicing Fee for such Distribution Date, plus the amount of
any Collateral Servicing Fee previously due but not paid to the Servicer
on a prior Distribution Date, will be distributed to the Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections" below.
(D) On each Distribution Date, an amount equal to the Class D
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) if FNANB is no longer the Servicer, an amount equal to the
Class D Servicing Fee for such Distribution Date, plus the amount of any
Class D Servicing Fee previously due but not paid to the Servicer on a
prior Distribution Date, will be distributed to the Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections" below.
"Class A Monthly Interest" means, for any Distribution Date, an amount
equal to [the product of (i) the Class A Certificate Rate for the related
Interest Period, (ii) a fraction, the numerator of which is the actual number of
days in such Interest Period and the denominator of which is 360, and (iii) the
outstanding principal amount of the Class A Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date)] [one-twelfth of the product of the Class A Certificate Rate and the
outstanding principal amount of the Class A Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date), except that interest for the first Distribution Date will accrue from the
Closing Date through [September 14], 1997 and will be calculated on the basis of
a 360-day year consisting of twelve 30-day months].
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"Class B Monthly Interest" means, for any Distribution Date, an amount
equal to [the product of (i) the Class B Certificate Rate for the related
Interest Period, (ii) a fraction, the numerator of which is the actual number of
days in such Interest Period and the denominator of which is 360, and (iii) the
outstanding principal amount of the Class B Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date)] [one-twelfth of the product of the Class B Certificate Rate and the
outstanding principal amount of the Class B Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date), except that interest for the first Distribution Date will accrue from the
Closing Date through [September 14], 1997 and will be calculated on the basis of
a 360-day year consisting of twelve 30-day months].
"Collateral Available Funds" means, with respect to any Collection Period,
an amount equal to the Collateral Floating Allocation Percentage of Finance
Charge Collections with respect to such Collection Period.
"Class D Available Funds" means, with respect to any Collection Period, an
amount equal to the Class D Floating Allocation Percentage of Finance Charge
Collections with respect to such Collection Period.
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clauses (A) (iv), (B) (iii), (C)
(ii) and (D) (ii) above plus the net investment earnings, if any, on funds on
deposit in the Cash Collateral Account received during the preceding Collection
Period.
Excess Spread; Shared Excess Finance Charge Collections. On each
Distribution Date, the Trustee, acting pursuant to the Servicer's instructions,
will apply Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1997-2 with respect to the preceding Collection Period to make the
following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Distribution Date will be used to fund any deficiency
pursuant to clauses (A) (i), (ii) and (iii) under "-- Payment of Interest,
Fees and Other Items" above, in that order of priority;
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Available Principal Collections for such Distribution Date as
described under "-- Payment of Principal" below;
(c) an amount up to the Class B Required Amount, if any, with respect
to such Distribution Date will be used to fund any deficiency pursuant to
clauses (B) (i) and (ii) under "-- Payment of Interest, Fees and Other
Items" above, in that order of priority;
(d) an amount equal to the Class B Allocable Amount, if any, for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payment of
Principal" below;
(e) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (d), (e) and (f) of
the definition of "Class B Invested Amount" under "-- Allocation of
Collections and Default Amounts" above (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) will
be treated as a portion of Available Principal Collections for such
Distribution Date as described under "-- Payment of Principal" below;
(f) an amount equal to the Collateral Monthly Interest for such
Distribution Date, plus the amount of any Collateral Monthly Interest
previously due but not paid to the Collateral Indebtedness Holder on a
prior Distribution Date, plus any additional interest with respect to
interest amounts that were due but not paid to the Collateral Indebtedness
Holder on a prior Distribution Date at a rate equal to the Collateral Rate
plus 2.00% per annum ("Collateral Additional Interest"), will be
distributed to the Collateral Indebtedness Holder;
(g) if FNANB is the Servicer, an amount equal to the Class A Servicing
Fee, the Class B Servicing Fee and the Collateral Servicing Fee for such
Distribution Date (or, if FNANB is no longer the Servicer,
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the portion thereof remaining unpaid), plus the amount of any Class A
Servicing Fee, Class B Servicing Fee or Collateral Servicing Fee previously
due but not paid to the Servicer on a prior Distribution Date, will be
distributed to the Servicer;
(h) an amount equal to the Collateral Allocable Amount, if any, for
such Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payment of
Principal" below;
(i) an amount equal to the aggregate amount by which the Collateral
Indebtedness Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Collateral Indebtedness Amount" under "-- Allocation of
Collections and Default Amounts" above (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) will
be treated as a portion of Available Principal Collections for such
Distribution Date as described under "-- Payment of Principal" below;
(j) an amount equal to the excess, if any, of the Required Cash
Collateral Account Amount over the Available Cash Collateral Account Amount
(without giving effect to any deposit made on such date under the
Agreement) will be deposited in the Cash Collateral Account;
(k) an amount equal to the Class D Monthly Interest for such
Distribution Date, plus the amount of any Class D Monthly Interest
previously due but not paid to the Class D Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to the Class D Certificateholders on a
prior Distribution Date at a rate equal to the Class D Certificate Rate
plus 2.00% per annum ("Class D Additional Interest"), will be distributed
to the Class D Certificateholders;
(l) if FNANB is the Servicer, an amount equal to the Class D Servicing
Fee for such Distribution Date (or, if FNANB is no longer the Servicer, the
portion thereof remaining unpaid), plus the amount of any Class D Servicing
Fee previously due but not paid to the Servicer on a prior Distribution
Date, will be distributed to the Servicer;
(m) an amount equal to the Class D Allocable Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payment of
Principal" below;
(n) an amount equal to the aggregate amount by which the Class D
Invested Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Class D Invested Amount" under "-- Allocation of Collections
and Default Amounts" above (but not in excess of the aggregate amount of
such reductions which have not been previously reimbursed) will be treated
as a portion of Available Principal Collections for such Distribution Date
as described under "-- Payment of Principal" below;
(o) an amount equal to the aggregate of any other amounts then due to
the Collateral Indebtedness Holder pursuant to the Loan Agreement will be
applied in accordance with the Loan Agreement;
(p) an amount equal to the excess, if any, of the Required Reserve
Account Amount over the amount on deposit in the Reserve Account will be
deposited in the Reserve Account; and
(q) the balance, if any, will constitute "Shared Excess Finance Charge
Collections" with respect to Group One to be applied with respect to other
Series in Group One or deposited in the Excess Funding Account in
accordance with the Agreement.
"Collateral Monthly Interest" means, for any Distribution Date, an amount
equal to [the product of (i) the Collateral Rate for the related Interest
Period, (ii) a fraction, the numerator of which is the actual number of days in
such Interest Period and the denominator of which is 360 and (iii) the
outstanding principal amount of the Collateral Indebtedness Interest as of the
preceding Record Date (or, in the case of the first Distribution Date, as of the
Closing Date)].
"Collateral Rate" means a rate equal to [LIBOR plus [ ]%] per
annum, or such lesser rate as may be designated pursuant to the Loan Agreement.
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"Class D Monthly Interest" means, for any Distribution Date, an amount
equal to [the product of (i) the Class D Certificate Rate for the related
Interest Period, (ii) a fraction, the numerator of which is the actual number of
days in such Interest Period and the denominator of which is 360 and (iii) the
outstanding principal amount of the Class D Certificates as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date)].
"Class D Certificate Rate" means a rate equal to [LIBOR plus] [ ]%
per annum, or such lesser rate as may be designated by the Transferor.
Payment of Principal. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will apply Available Principal
Collections as follows:
(A) On each Distribution Date with respect to the Revolving Period,
all Available Principal Collections, less any portion thereof allocated, at
the sole option of the Transferor, as part of Collateral Monthly Principal
or Class D Monthly Principal to make a payment with respect to the
Collateral Indebtedness Interest or the Class D Invested Amount (subject to
maintaining the Required Enhancement Amount and subject to any other
restrictions specified in the Loan Agreement), will constitute Shared
Principal Collections with respect to other Series in Group One or be
deposited in the Excess Funding Account as described under "Description of
the Agreement -- Shared Principal Collections;" and
(B) On each Distribution Date with respect to the Accumulation Period
or the Early Amortization Period, all Available Principal Collections will
be deposited or distributed in the following priority:
(i) an amount equal to the Class A Monthly Principal for such
Distribution Date will, during the Class A Accumulation Period, be
deposited in the Principal Funding Account for payment to the Class A
Certificateholders on the earlier to occur of the Class A Expected Final
Distribution Date and the first Distribution Date with respect to the
Early Amortization Period and, during the Early Amortization Period, be
paid to the Class A Certificateholders until the Class A Certificates
have been paid in full;
(ii) an amount equal to the Class B Monthly Principal for such
Distribution Date will, during the Class B Accumulation Period, be
deposited in the Principal Funding Account for payment to the Class B
Certificateholders on the earlier to occur of the Class B Expected Final
Distribution Date and the first Distribution Date with respect to the
Early Amortization Period and, during the Early Amortization Period, be
paid to the Class B Certificateholders until the Class B Certificates
have been paid in full;
(iii) an amount equal to the Collateral Monthly Principal for such
Distribution Date will be applied in accordance with the Loan Agreement;
(iv) an amount equal to the Class D Monthly Principal for such
Distribution Date will be distributed to the Class D Certificateholders;
and
(v) the balance, if any, will constitute Shared Principal
Collections with respect to other Series in Group One or be deposited in
the Excess Funding Account as described under "Description of the
Agreement -- Shared Principal Collections."
"Class A Monthly Principal" means, for any Distribution Date with respect
to the Accumulation Period or the Early Amortization Period, the least of (i)
the Available Principal Collections for such Distribution Date, (ii) for any
Distribution Date with respect to the Accumulation Period, the Controlled
Deposit Amount for such Distribution Date and (iii) the Class A Invested Amount
on such Distribution Date.
"Class B Monthly Principal" means, for any Distribution Date with respect
to the Accumulation Period or the Early Amortization Period, the least of (i)
the Available Principal Collections for such Distribution Date (minus any
portion of such Available Principal Collections applied to Class A Monthly
Principal on such Distribution Date), (ii) for any Distribution Date with
respect to the Accumulation Period, after the Class A
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Certificates have been paid in full, the Controlled Deposit Amount for such
Distribution Date and (iii) the Class B Invested Amount on such Distribution
Date.
"Collateral Monthly Principal" means, for any Distribution Date prior to
the payment in full of the Class B Certificates, the lesser of (i) the Available
Principal Collections for such Distribution Date (minus the portion of such
Available Principal Collections applied to Class A Monthly Principal or Class B
Monthly Principal on such Distribution Date) and (ii) the Enhancement Surplus on
such Distribution Date (provided that the Transferor shall have elected to pay
such Collateral Monthly Principal) and, for any Distribution Date after the
Class B Certificates have been paid in full, the lesser of (i) the Available
Principal Collections for such Distribution Date (minus the portion of such
Available Principal Collections applied to Class A Monthly Principal or Class B
Monthly Principal on such Distribution Date) and (ii) the Collateral
Indebtedness Amount on such Distribution Date.
"Class D Monthly Principal" means, for any Distribution Date after the
Collateral Indebtedness Interest has been paid in full, or prior thereto subject
to the requirements of the Loan Agreement, the least of (i) the Available
Principal Collections for such Distribution Date (minus the portion of such
Available Principal Collections applied to Class A Monthly Principal, Class B
Monthly Principal or Collateral Monthly Principal on such Distribution Date),
(ii) the Enhancement Surplus on such Distribution Date and (iii) the Class D
Invested Amount on such Distribution Date.
"Enhancement Surplus" means, with respect to any Distribution Date, the
excess, if any, of (i) the sum of the amount on deposit in the Cash Collateral
Account (after giving effect to any deposits or withdrawals from the Cash
Collateral Account on such Distribution Date), the Collateral Indebtedness
Amount and the Class D Invested Amount over (ii) the Required Enhancement
Amount.
"Required Enhancement Amount" means, with respect to any Distribution Date,
an amount equal to the product of the Invested Amount and [ ]%, but not
less than $[ ]; provided, however, that (i) if an Early Amortization
Event occurs, then the Required Enhancement Amount will equal the Required
Enhancement Amount on the Distribution Date immediately preceding such Early
Amortization Event, (ii) in no event will the Required Enhancement Amount exceed
the sum of the Class A Invested Amount and the Class B Invested Amount on such
Distribution Date and (iii) the Required Enhancement Amount may be reduced
without the consent of the Certificateholders if (x) the Rating Agency Condition
shall have been satisfied, (y) the Transferor shall have delivered to the
Trustee an officer's certificate to the effect that, based on the facts known to
such officer at such time, in the reasonable belief of the Transferor, such
reduction will not cause an Early Amortization Event, or an event that, after
the giving of notice or the lapse of time, would constitute an Early
Amortization Event, to occur and (z) the Transferor shall have delivered an
opinion of counsel, acceptable to the Trustee, to the effect that such reduction
will not (a) adversely affect the tax characterization as debt of the
certificates of any outstanding Series or Class with respect to which an opinion
of counsel was delivered at the time of their issuance that such certificates
would be characterized as debt, (b) cause the Trust to be classified, for
federal income tax purposes, as an association (or publicly traded partnership)
taxable as a corporation or (c) cause or constitute an event in which gain or
loss would be recognized by any Certificateholder.
CASH COLLATERAL ACCOUNT
The Trustee will establish and maintain with an Eligible Institution in the
name of the Trustee, on behalf of the Trust, a segregated trust account (the
"Cash Collateral Account") for the benefit of the Certificateholders, the
Collateral Indebtedness Holder and the Class D Certificateholders, as their
interests appear in the Series 1997-2 Supplement and, in the case of the
Collateral Indebtedness Holder, in the loan agreement among the Trustee, the
Transferor, the Servicer and the Collateral Indebtedness Holder (the "Loan
Agreement") (which interest, in the case of the Collateral Indebtedness Holder
and the Class D Certificateholders, will be subordinated to the interests of the
Certificateholders as provided in the Series 1997-2 Supplement). The principal
amount on deposit in the Cash Collateral Account on any Distribution Date will
be invested by the Trustee, at the direction of the Servicer, in Eligible
Investments that mature on or prior to the following Distribution Date. On each
Distribution Date, all interest and other investment earnings (net of
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losses and investment expenses) on funds on deposit in the Cash Collateral
Account received during the preceding Interest Period will be withdrawn from the
Cash Collateral Account and treated as a portion of Excess Spread.
On each Distribution Date, one or more withdrawals may be made from the
Cash Collateral Account in an amount up to the amount on deposit therein to fund
the amounts specified in clauses (a) through (f) and clause (h) under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections" above in the order of priority specified therein.
On each Distribution Date, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2 (to the extent available as
described above under "-- Application of Collections -- Excess Spread; Shared
Excess Finance Charge Collections") to increase the amount on deposit in the
Cash Collateral Account up to the Required Cash Collateral Account Amount. The
"Required Cash Collateral Account Amount" will be determined in accordance with
the Loan Agreement.
ALLOCATION OF INVESTOR DEFAULT AMOUNT; ALLOCATION OF SERIES ADJUSTMENT AMOUNT;
INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount, if any, for the preceding Collection Period. "Investor Default
Amount" means, for any Collection Period, the product of (i) the Floating
Allocation Percentage with respect to such Collection Period and (ii) the
Default Amount for such Collection Period. A portion of the Investor Default
Amount will be allocated to the Class A Certificateholders (the "Class A
Investor Default Amount") on each Distribution Date in an amount equal to the
product of (i) the Class A Floating Allocation Percentage with respect to the
preceding Collection Period and (ii) the Default Amount for such Collection
Period. A portion of the Investor Default Amount will be allocated to the Class
B Certificateholders (the "Class B Investor Default Amount") on each
Distribution Date in an amount equal to the product of (i) the Class B Floating
Allocation Percentage with respect to the preceding Collection Period and (ii)
the Default Amount for such Collection Period. A portion of the Investor Default
Amount will be allocated to the Collateral Indebtedness Holder (the "Collateral
Default Amount") on each Distribution Date in an amount equal to the product of
(i) the Collateral Floating Allocation Percentage with respect to the preceding
Collection Period and (ii) the Default Amount for such Collection Period. A
portion of the Investor Default Amount will be allocated to the Class D
Certificateholders (the "Class D Investor Default Amount") on each Distribution
Date in an amount equal to the product of (i) the Class D Floating Allocation
Percentage with respect to the preceding Collection Period and (ii) the Default
Amount for such Collection Period.
On each Determination Date, the Servicer will also calculate the Series
Adjustment Amount, if any, for the preceding Collection Period. "Series
Adjustment Amount" means, for any Collection Period, the product of (i) the
percentage equivalent of a fraction the numerator of which is the Invested
Amount as of the last day of such Collection Period and the denominator of which
is the Aggregate Invested Amount as of the last day of such Collection Period
and (ii) the Adjustment Amount as of such last day. A portion of the Series
Adjustment Amount will be allocated to the Class A Certificateholders (the
"Class A Adjustment Amount") on each Distribution Date in an amount equal to the
product of (i) the percentage equivalent of a fraction the numerator of which is
the Class A Floating Allocation Percentage with respect to the preceding
Collection Period and the denominator of which is the Floating Allocation
Percentage with respect to such Collection Period and (ii) the Series Adjustment
Amount as of the end of such Collection Period. A portion of the Series
Adjustment Amount will be allocated to the Class B Certificateholders (the
"Class B Adjustment Amount") on each Distribution Date in an amount equal to the
product of (i) the percentage equivalent of a fraction the numerator of which is
the Class B Floating Allocation Percentage with respect to the preceding
Collection Period and the denominator of which is the Floating Allocation
Percentage with respect to such Collection Period and (ii) the Series Adjustment
Amount as of the end of such Collection Period. A portion of the Series
Adjustment Amount will be allocated to the Collateral Indebtedness Holder (the
"Collateral Adjustment Amount") on each Distribution Date in an amount equal to
the product of (i) the percentage equivalent of a fraction the numerator of
which is the Collateral Floating Allocation Percentage with respect to the
preceding Collection Period and the denominator of which is the Floating
Allocation Percentage with respect to such
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Collection Period and (ii) the Series Adjustment Amount as of the end of such
Collection Period. A portion of the Series Adjustment Amount will be allocated
to the Class D Certificateholders (the "Class D Adjustment Amount") on each
Distribution Date in an amount equal to the product of (i) the percentage
fraction the numerator of which is the Class D Floating Allocation Percentage
with respect to the preceding Collection Period and the denominator of which is
the Floating Allocation Percentage with respect to such Collection Period and
(ii) the Series Adjustment Amount as of the end of such Collection Period. An
Adjustment Amount will be reduced to the extent that amounts are deposited in
the Excess Funding Account, the Aggregate Principal Receivables increase,
certain decreases occur in the Aggregate Invested Amount or the Transferor
subsequently makes required Adjustment Payments. Reductions in a Series
Adjustment Amount will be allocated first to the Class A Certificates, then to
the Class B Certificates, then to the Collateral Indebtedness Interest and
finally to the Class D Certificates, in each case to the extent of any
reductions in the Class A Invested Amount, the Class B Invested Amount, the
Collateral Indebtedness Amount or the Class D Invested Amount, as applicable,
attributable to a Series Adjustment Amount.
"Class A Allocable Amount" means, for any Distribution Date, the sum of the
Class A Investor Default Amount and the Class A Adjustment Amount for such
Distribution Date. "Class B Allocable Amount" means, for any Distribution Date,
the sum of the Class B Investor Default Amount and the Class B Adjustment Amount
for such Distribution Date. "Collateral Allocable Amount" means, for any
Distribution Date, the sum of the Collateral Default Amount and the Collateral
Adjustment Amount for such Distribution Date. "Class D Allocable Amount" means,
for any Distribution Date, the sum of the Class D Investor Default Amount and
the Class D Adjustment Amount for such Distribution Date.
An amount equal to the Class A Allocable Amount for each Distribution Date
will be funded with Class A Available Funds, Excess Spread and Shared Excess
Finance Charge Collections allocable to Series 1997-2, amounts, if any, on
deposit in the Cash Collateral Account and Reallocated Principal Collections
applied as described above in "-- Application of Collections -- Payment of
Interest, Fees and Other Items" and "-- Reallocation of Cash Flows." An amount
equal to the Class B Allocable Amount for each Distribution Date will be funded
with Class B Available Funds, Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1997-2, amounts, if any, on deposit in the Cash
Collateral Account and Reallocated Principal Collections applied as described
above in "-- Application of Collections -- Payment of Interest, Fees and Other
Items" and "-- Reallocation of Cash Flows."
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2, amounts, if any, on deposit in
the Cash Collateral Account and Reallocated Principal Collections, then the
Class D Invested Amount will be reduced by the amount of such excess, but not by
more than the principal amount of the Class A Allocable Amount for such
Distribution Date. In the event that such reduction would cause the Class D
Invested Amount to be a negative number, the Class D Invested Amount will be
reduced to zero and the Collateral Indebtedness Amount will be reduced by the
amount by which the Class D Invested Amount would have been reduced below zero.
In the event that such reduction would cause the Collateral Indebtedness Amount
to be a negative number, the Collateral Indebtedness Amount will be reduced to
zero and the Class B Invested Amount will be reduced by the amount by which the
Collateral Indebtedness Amount would have been reduced below zero. In the event
that such reduction would cause the Class B Invested Amount to be a negative
number, the Class B Invested Amount will be reduced to zero and the Class A
Invested Amount will be reduced by the amount by which the Class B Invested
Amount would have been reduced below zero (a "Class A Investor Charge-Off"). Any
such reduction in the Class A Invested Amount will have the effect of slowing or
reducing the return of principal to the Class A Certificateholders. If the Class
A Invested Amount has been reduced by the amount of any Class A Investor
Charge-Offs, it will thereafter be increased on any Distribution Date (but not
by an amount in excess of the aggregate Class A Investor Charge-Offs) by the
amount of Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1997-2 and available for such purpose as described above in
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections." In addition, to the extent that such reduction is due to the
allocation of Adjustment Amounts, such reduction may be reimbursed as a result
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of deposits in the Excess Funding Account, increases in the Aggregate Principal
Receivables, certain decreases in the Aggregate Invested Amount or subsequent
Adjustment Payments.
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2 not required to pay the Class A
Required Amount or reimburse Class A Investor Charge-Offs, amounts, if any, on
deposit in the Cash Collateral Account not required to pay the Class A Required
Amount and Reallocated Principal Collections (exclusive of Class B Subordinated
Principal Collections) not required to pay the Class A Required Amount, then the
Class D Invested Amount remaining after any reduction for the benefit of the
Class A Certificates will be reduced by the amount of such excess, but not by
more than the principal amount of the Class B Allocable Amount for such
Distribution Date. In the event that such reduction would cause the Class D
Invested Amount to be a negative number, the Class D Invested Amount will be
reduced to zero and the Collateral Indebtedness Amount remaining after any
reduction for the benefit of the Class A Certificates will be reduced by the
amount by which the Class D Invested Amount would have been reduced below zero.
In the event that such reduction would cause the Collateral Indebtedness Amount
to be a negative number, the Collateral Indebtedness Amount will be reduced to
zero and the Class B Invested Amount will be reduced by the amount by which the
Collateral Indebtedness Amount would have been reduced below zero (a "Class B
Investor Charge-Off"). Any such reduction in the Class B Invested Amount will
have the effect of slowing or reducing the return of principal to the Class B
Certificateholders. If the Class B Invested Amount has been reduced by the
amount of any Class B Investor Charge-Offs, it will thereafter be increased on
any Distribution Date (but not by an amount in excess of the aggregate Class B
Investor Charge-Offs) by the amount of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2 and available for such purpose as
described above in "-- Application of Collections -- Excess Spread; Shared
Excess Finance Charge Collections." In addition, to the extent that such
reduction is due to the allocation of Adjustment Amounts, such reduction may be
reimbursed as a result of deposits in the Excess Funding Account, increases in
the Aggregate Principal Receivables, certain decreases in the Aggregate Invested
Amount or subsequent Adjustment Payments.
On each Distribution Date, if the Collateral Required Amount for such
Distribution Date exceeds the sum of amounts, if any, on deposit in the Cash
Collateral Account not required to pay the Class A Required Amount or the Class
B Required Amount or to pay certain other amounts and Reallocated Principal
Collections (exclusive of Class B Subordinated Principal Collections and
Principal Collections allocated to the Collateral Indebtedness Holder) not
required to pay the Class A Required Amount or the Class B Required Amount, then
the Class D Invested Amount remaining after any reduction for the benefit of the
Class A Certificates or the Class B Certificates will be reduced by the amount
of such excess, but not by more than the principal amount of the Collateral
Allocable Amount for such Distribution Date. In the event that such reduction
would cause the Class D Invested Amount to be a negative number, the Class D
Invested Amount will be reduced to zero and the Collateral Indebtedness Amount
will be reduced by the amount by which the Class D Invested Amount would have
been reduced below zero.
On each Distribution Date, if the Class D Allocable Amount exceeds the
amount of Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1997-2 available on such Distribution Date as specified in clause (m)
under "-- Application of Collections -- Excess Spread; Shared Excess Finance
Charge Collections" above, then the Class D Invested Amount will be reduced by
the amount of such excess.
EARLY AMORTIZATION EVENTS
The Revolving Period will continue through the last day of the
[ 200 ] Collection Period (or such later date determined as described
above under "-- Postponement of Accumulation Period") unless an Early
Amortization Event occurs prior to such date. "Early Amortization Event" means
any of the following events (subject to certain notice requirements described in
the following paragraph):
(a) the Transferor shall fail to make any payment or deposit on the
date required under the Agreement or the Series 1997-2 Supplement or within
five business days thereafter;
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(b) the Transferor shall fail to observe or perform in any material
respect any other covenants or agreements of the Transferor set forth in
the Agreement or the Series 1997-2 Supplement and such failure shall
continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Transferor by the Trustee, or to the Transferor and the
Trustee by the holders of not less than 50% of the Invested Amount, which
failure has a material adverse effect on the interests of the
Certificateholders;
(c) any representation or warranty made by the Transferor in the
Agreement or the Series 1997-2 Supplement shall prove to have been
incorrect in any material respect when made and shall continue to be
incorrect in any material respect for a period of 60 days after the date on
which written notice of such breach, requiring the same to be remedied,
shall have been given to the Transferor by the Trustee, or to the
Transferor and the Trustee by the holders of not less than 50% of the
Invested Amount, which incorrectness has a material adverse effect on the
interests of the Certificateholders; provided, however, that if the
representation or warranty which was breached relates to any particular
Receivable or group of Receivables an Early Amortization Event will not be
deemed to have occurred if the Transferor has accepted retransfer of such
Receivable or group of Receivables during such period (or such longer
period as may be agreed upon by the Trustee, not to exceed an additional
120 days) in accordance with the provisions of the Agreement and the Series
1997-2 Supplement;
(d) certain events of insolvency or receivership shall occur with
respect to FNANB or any holder of the Exchangeable Transferor Certificate;
(e) either the Transferor or the Trust shall become an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(f) the Transferor shall become unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the
Agreement;
(g) any Servicer Default shall occur which has a material adverse
effect on the interests of the Certificateholders;
(h) the Transferor shall fail to designate Supplemental Accounts when
required pursuant to the Agreement [or within 10 business days thereafter];
(i) the average of the Portfolio Yields for any three consecutive
Collection Periods shall be less than the average of the Base Rates for
such Collection Periods;
(j) [the Interest Rate Cap Provider shall fail to make any payment
under the Class A Interest Rate Cap or the Class B Interest Rate Cap within
five business days after the date on which such payment was due;] or
[(k)] the Class A Certificates shall not be paid in full on or before
the Class A Expected Final Distribution Date or the Class B Certificates
shall not be paid in full on or before the Class B Expected Final
Distribution Date.
In the case of any event described in clause (a), (b), (c) or (g) above, an
Early Amortization Event will be deemed to have occurred with respect to the
Certificates only if, after any applicable grace period, either the Trustee or
holders of more than [ ]% of the Invested Amount, by written notice to the
Transferor and the Servicer (and to the Trustee, if given by the
Certificateholders), declare that an Early Amortization Event has occurred with
respect to the Certificates as of the date of such notice. In the case of any
event described in clause (d), (e), (f) or (h) above, an Early Amortization
Event with respect to all Series, and in the case of any event described in
clause (i), [(j) or (k)] above, an Early Amortization Event with respect to only
the Certificates, will be deemed to have occurred without any notice or other
action on the part of the Trustee or the Certificateholders or the holders of
the Investor Certificates of any other then outstanding Series, as applicable,
immediately upon the occurrence of such event. The Early Amortization Period
will commence on the date on which an Early Amortization Event is deemed to have
occurred.
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"Base Rate" means, for any Collection Period, the sum of (i) the annualized
percentage equivalent of a fraction the numerator of which is equal to the sum
of the Class A Monthly Interest, the Class B Monthly Interest, the Collateral
Monthly Interest and the Class D Monthly Interest for the following Distribution
Date and the denominator of which is the Adjusted Invested Amount as of the last
day of [such] Collection Period and (ii) the product of (A) 2.00% per annum and
(B) a fraction the numerator of which is equal to the Invested Amount as of the
last day of [such] Collection Period and the denominator of which is equal to
the Adjusted Invested Amount.
"Adjusted Invested Amount" means, as of any date, the Invested Amount as of
such date plus the Principal Funding Account Balance as of such date.
"Portfolio Yield" means, for any Collection Period, the annualized
percentage equivalent of a fraction the numerator of which is equal to (i) the
Finance Charge Collections (including interest and other investment earnings
(net of losses and investment expenses) on funds on deposit in the Excess
Funding Account) plus (ii) Shared Excess Finance Charge Collections allocated to
Series 1997-2 with respect to such Collection Period plus (iii) Principal
Funding Investment Proceeds and the amounts withdrawn from the Reserve Account
and deposited in the Collection Account to be included as Class A Available
Funds or Class B Available Funds with respect to such Collection Period plus
(iv) interest and other investment earnings (net of losses and investment
expenses) on funds on deposit in the Cash Collateral Account deposited in the
Collection Account with respect to such Collection Period [plus (v) the amount
of any payment made by the Interest Rate Cap Provider under the Interest Rate
Caps deposited in the Collection Account on the Distribution Date immediately
following such Collection Period] minus(vi) the Investor Default Amount for
[such] Distribution Date and the denominator of which is the Adjusted Invested
Amount as of the last day of such Collection Period.
If, because of the occurrence of an Early Amortization Event, the Early
Amortization Period commences earlier than the Class A Expected Final
Distribution Date or the Class B Expected Final Distribution Date, as
applicable, the Class A Certificateholders or the Class B Certificateholders, as
applicable, will begin receiving distributions of principal earlier than they
otherwise would have, which may shorten the average life of the Certificates. If
the only Early Amortization Event to occur were either the insolvency or
receivership of the Transferor or the appointment of a conservator or receiver
for the Transferor, the conservator or receiver might have the power to delay or
prevent commencement of the Early Amortization Period.
In addition to the consequences of an Early Amortization Event discussed
above, if the Transferor voluntarily enters liquidation or any person is
appointed as conservator or receiver for the Transferor, the Transferor will
promptly give notice of such event to the Trustee and will, on the day of such
liquidation or appointment, immediately cease to transfer Receivables to the
Trust. Within 15 days of its receipt of such notice, the Trustee will (i)
publish a notice of such liquidation or appointment stating that the Trustee
intends to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and (ii) send written notice to the holders of
the Investor Certificates of all then outstanding Series and any Enhancement
Provider entitled thereto describing the applicable provisions of the Agreement
and requesting instructions as to the action to be taken. If, after 90 days
after the day notice pursuant to clause (i) above is first published, the
Trustee is not otherwise instructed by holders representing undivided interests
aggregating more than 50% of the invested amount of each Series (or, in the case
of any Series having more than one Class, each Class of such Series), including
a majority in interest in each collateral indebtedness interest, each holder of
an interest in the Transferor Interest (other than the Transferor) and any other
person specified in any Series Supplement, 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 other
liquidation of the Receivables will be treated as amounts collected in respect
of the Receivables and such proceeds will be distributed to the holders of the
Investor Certificates of such Series and other holders of interests in the
Trust, if applicable. If the Trustee is instructed not to sell a portion of the
Receivables allocable to a Series as described above, then the Trust will
continue with respect to such Series pursuant to the terms of the Agreement and
the applicable Series Supplement. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Receivership."
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SERVICING COMPENSATION
The share of the Servicing Fee allocable to Series 1997-2 with respect to
any Distribution Date (the "Investor Monthly Servicing Fee") will be equal to
one-twelfth of the product of 2.00% and the Invested Amount as of the last day
of the immediately preceding Collection Period; provided, however, that, with
respect to the first Distribution Date, the Investor Monthly Servicing Fee will
be equal to $[ ]. The share of the Investor Monthly Servicing Fee
allocable to the Class A Certificates with respect to any Distribution Date (the
"Class A Servicing Fee") will be equal to one-twelfth of the product of 2.00%
and the Class A Invested Amount as of the last day of the immediately preceding
Collection Period; provided, however, that, with respect to the first
Distribution Date, the Class A Servicing Fee will be equal to $[ ]. The
share of the Investor Monthly Servicing Fee allocable to the Class B
Certificates with respect to any Distribution Date (the "Class B Servicing Fee")
will be equal to one-twelfth of the product of 2.00% and the Class B Invested
Amount as of the last day of the immediately preceding Collection Period;
provided, however, that, with respect to the first Distribution Date, the Class
B Servicing Fee will be equal to $[ ]. The share of the Investor
Monthly Servicing Fee allocable to the Collateral Indebtedness Interest with
respect to any Distribution Date (the "Collateral Servicing Fee") will be equal
to one-twelfth of the product of 2.00% and the Collateral Indebtedness Amount as
of the last day of the immediately preceding Collection Period; provided,
however, that, with respect to the first Distribution Date, the Collateral
Servicing Fee will be equal to $[ ]. The share of the Investor Monthly
Servicing Fee allocable to the Class D Certificates with respect to any
Distribution Date (the "Class D Servicing Fee") will be equal to one-twelfth of
the product of 2.00% and the Class D Invested Amount as of the last day of the
immediately preceding Collection Period; provided, however, that, with respect
to the first Distribution Date, the Class D Servicing Fee will be equal to
$[ ]. The Class A Servicing Fee, the Class B Servicing Fee, the
Collateral Servicing Fee and the Class D Servicing Fee will be payable solely to
the extent amounts are available for distribution in respect thereof as
described above in "-- Application of Collections." The remainder of the
Servicing Fee will be paid by the Transferor or from amounts allocable to other
Series (as provided in the Agreement and the Series Supplements relating to such
other Series) and in no event will the Trust, the Trustee or the
Certificateholders be liable for the share of the Servicing Fee to be paid by
the Transferor or from amounts allocable to such other Series.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, a paying agent appointed pursuant to the
Agreement (the "Paying Agent"), on behalf of the Trustee, will forward to each
Certificateholder of record a statement (the "Distribution Date Statement")
prepared by the Servicer setting forth [the information with respect to the
Certificates set forth in the Monthly Servicer Report supplied to the Trustee
since the preceding Distribution Date and the following additional information
(which, in the case of (i), (ii) and (iii) below, will be stated on the basis of
an original principal amount of $1,000 per Certificate): (i) the total amount
distributed on such Distribution Date; (ii) the amount of such distribution
allocable to principal; (iii) the amount of such distribution allocable to
interest; and (iv) the amount, if any, by which the principal balance of the
Certificates exceeds the Invested Amount as of the related Record Date].
The fiscal year of the Trust will end on February 28 or 29 in each year. On
or before January 31 of each year, the Paying Agent, on behalf of the Trustee,
will furnish or cause to be furnished to each person who at any time during the
preceding calendar year was a Certificateholder of record (or, if so provided in
applicable Treasury regulations, make available to the Certificate Owners) a
statement prepared by the Servicer containing the information required to be
provided by an issuer of indebtedness under the Code for such calendar year or
the applicable portion thereof during which such person was a Certification as
the Servicer deems necessary or desirable to enable the Certificateholders to
prepare their tax returns.
OPTIONAL REPURCHASE
The Transferor may, at its sole option and subject to certain conditions
set forth in the Agreement, repurchase the Series 1997-2 Certificates on any
Distribution Date on or after which the Invested Amount is reduced to an amount
less than or equal to [10]% of the initial Invested Amount by depositing into
the
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Collection Account, on such Distribution Date, an amount equal to the Invested
Amount plus interest on all outstanding Series 1997-2 Certificates accrued
through the last day of the immediately preceding Interest Period. The amount
deposited in connection with any such repurchase will be paid to the holders of
the Series 1997-2 Certificates in accordance with the Agreement on the
Distribution Date following the date of such deposit.
FINAL PAYMENT OF PRINCIPAL
The Certificates will be retired on the day following the Distribution Date
on which the final payment of principal is scheduled to be made to the
Certificateholders, whether as a result of an optional repurchase by the
Transferor or otherwise. If the Invested Amount is greater than zero on the
Stated Series Termination Date, the Servicer will sell or cause to be sold on or
prior to the following Distribution Date an amount of Receivables or interests
in Receivables up to 110% of the Invested Amount at the close of business on
such date in the manner provided in the Agreement. The proceeds of any such sale
will be treated as amounts collected in respect of the Receivables and will be
allocated and applied in accordance with the Agreement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Transferor will represent and warrant in the Agreement that the
transfer of the Receivables to the Trust constitutes either a valid sale and
assignment to the Trust of all right, title and interest of the Transferor in,
to and under the Receivables, except for the interest of the holder of the
Exchangeable Transferor Certificate, or a grant to the Trust of a security
interest in the Receivables. The Transferor will also represent and warrant in
the Agreement that, in the event the transfer of the Receivables to the Trust is
deemed to be a grant to the Trust of a security interest in the Receivables
under the UCC and assuming that the Transferor is not at the time the subject of
any insolvency proceedings, there exists a valid, subsisting and enforceable
first priority perfected security interest in the Receivables in existence since
the time of the formation of the Trust in favor of the Trust and there will
exist a valid, subsisting and enforceable first priority perfected security
interest in the Receivables created thereafter and, with certain exceptions, and
for certain limited time periods, the proceeds thereof, in favor of the Trust on
and after their creation, subject in each case to certain tax and other
governmental liens. UCC searches have been and will be conducted in the records
of the Georgia Central Filing Office to determine what UCC financing statements
have been filed there with respect to the Transferor as debtor or seller.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after the date on
which such Receivables are transferred to the Trust could have an interest in
such Receivables with priority over the Trust's interest. A tax or other
governmental lien on property of the Transferor arising before a Receivable
comes into existence may also have priority over the interest of the Trust in
such Receivable. The Transferor will covenant in the Agreement to accept the
reassignment of any Receivable transferred to the Trust that is not free and
clear of the lien of any third party (other than certain tax and other
governmental liens). In addition, the Transferor will covenant that it will not
sell, pledge, assign, transfer or grant any lien on any Receivable (or any
interest therein) other than to the Trust.
Unless continuation statements are filed within the time periods specified
in the UCC in respect of the security interest of the Trust in the Receivables,
the perfection of such interest will lapse.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), which
became effective August 9, 1989, sets forth certain powers that the FDIC could
exercise if it were appointed as conservator or receiver for the Transferor.
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To the extent that (i) the Transferor has granted a security interest in
the Receivables to the Trust, (ii) such interest is validly perfected before the
Transferor's insolvency and is not taken in contemplation of insolvency or with
the intent to hinder, delay or defraud the Transferor or its creditors, (iii)
the Agreement is continuously a record of the Transferor and (iv) the Agreement
represents a bona fide and arm's length transaction undertaken for adequate
consideration in the ordinary course of business and the Trustee is not an
insider or affiliate of the Transferor, such valid perfected security interest
of the Trustee should be enforceable (to the extent of the Trust's "actual
direct compensatory damages" (as described below)) notwithstanding the
insolvency of, or the appointment of a conservator or receiver for, the
Transferor and payments to the Trust with respect to the Receivables (up to the
amount of such damages) should not be subject to an automatic stay of payment or
to recovery by the FDIC as conservator or receiver of the Transferor. If,
however, the FDIC were to assert that the security interest was unperfected or
unenforceable, or were to require the Trust to establish its right to those
payments by submitting to and completing the administrative claims procedure
established under FIRREA, or the FDIC were to request a stay of proceedings with
respect to the Transferor as provided under FIRREA, delays in payments to the
Trust and on the Certificates and possible reductions in the amount of those
payments could occur. In the event of a repudiation of obligations by a
conservator or receiver, FIRREA provides that a claim for the repudiated
obligation is limited to "actual direct compensatory damages" determined as of
the date of the appointment of the conservator or receiver. The FDIA does not
define the term "actual direct compensatory damages." On April 10, 1990, the
"RTC"), which administered the resolution of failed savings associations under
the FDIA and which is no longer in existence, adopted a statement of policy with
respect to the payment of interest on collateralized borrowings. The RTC policy
statement states that interest on such borrowings will be payable at the
contract rate up to the date of the redemption or payment by the conservator,
receiver, or trustee of an amount equal to the principal owed plus the contract
rate of interest up to the date of such payment or redemption, plus any expenses
of liquidation if provided for in the contract, to the extent secured by the
collateral. In a 1993 case involving zero-coupon bonds, however, a United States
federal district court held that "actual direct compensatory damages" in the
case of a marketable security meant the value of the repudiated bonds as of the
date of repudiation. The FDIC itself has not adopted a policy statement on
payment of interest on collateralized borrowings.
The Agreement will provide that, upon the insolvency of the Transferor or
the appointment of a receiver or conservator for the Transferor, the Transferor
will promptly give notice thereof to the Trustee and an Early Amortization Event
with respect to all Series will occur. Under the Agreement, no new Receivables
will be transferred to the Trust and, unless otherwise instructed within a
specified period by the holders of interests in the Trust as described under
"Description of the Certificates -- Early Amortization Events," or unless
otherwise required by the receiver or conservator for the Transferor, the
Trustee will proceed to sell, dispose of or otherwise liquidate the Receivables
in a commercially reasonable manner and on commercially reasonable terms. The
proceeds from the sale of the Receivables would then be treated by the Trustee
as amounts collected in respect of the Receivables and would be distributed to
the holders of the Investor Certificates as described in the Agreement. If the
only Early Amortization Event to occur is either the insolvency of the
Transferor or the appointment of a receiver or conservator for the Transferor,
such receiver or conservator may have the power to require the Transferor to
continue to transfer new Receivables to the Trust and to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the Early
Amortization Period.
CONSUMER AND DEBTOR PROTECTION LAWS
The relationship between the cardholder and credit card issuer is
extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by the Transferor the most significant federal
laws include the Federal Truth-In-Lending and Equal Credit Opportunity Acts, the
Fair Debt Collection Practices Act and the Fair Credit Reporting Act. These
statutes and certain state laws impose disclosure requirements when a credit
card account is advertised, when an account is opened, at the end of monthly
billing cycles, upon account renewal for accounts on which annual fees are
assessed and at year-end and, in addition, limit cardholder liability for
unauthorized use, prohibit certain discriminatory practices in extending credit,
impose certain limitations on the type of account-related charges that may be
issued and
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regulate collection practices. In addition, cardholders are entitled under these
laws to have payments and credits applied to the credit card account promptly
and to require billing errors to be resolved promptly.
The Trust may be liable for certain violations of consumer protection laws
that apply to the Receivables, either as assignee from the Transferor with
respect to obligations arising before the transfer of the Receivables to the
Trust or as the party directly responsible for obligations arising after such
transfer. In addition, a cardholder may be entitled to assert such violations by
way of set off against such cardholder's obligation to pay the amount of
Receivables owing. The Transferor will agree in the Agreement to accept the
transfer of all Receivables that were not created in compliance in all material
respects 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. See "Description of the Agreement -- Representations and
Warranties."
Various proposed laws and amendments to existing laws have from time to
time been introduced in Congress and certain state and local legislatures that,
if enacted, would further regulate the credit card industry, certain of which
would, among other things, impose a ceiling on the rate at which a financial
institution may assess finance charges and fees on credit card accounts that
would be substantially below the rates of the finance charges and fees the
Transferor currently assesses on the Accounts. In particular, on June 19, 1997,
a proposal to amend the Federal Truth-in-Lending Act was introduced to the House
of Representatives and referred to the Committee on Banking and Financial
Services which would, among other things, prohibit the imposition of certain
minimum finance charges and other fees, prohibit certain methods of calculating
finance charges, require prior notice of any increase in the interest rate
assessed with respect to a credit card account and limit the amount of certain
fees. Although such proposed legislation has not been enacted, there can be no
assurance that such a bill will not become law in the future. The potential
effect of any legislation which limits the amount of finance charges and fees
that may be charged on credit cards could be to reduce the portfolio yield on
the Accounts. Any failure by the Transferor or the Servicer to comply with such
legal requirements also could adversely affect the Trust's ability to collect
the full amount of the Receivables.
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals on
active duty in the military to cap the interest rate on debts incurred before
the call to active duty to 6% per annum. In addition, subject to judicial
discretion, any action or court proceeding in which an individual in military
service is involved may be stayed if the individual's rights would be prejudiced
by denial of such stay.
The application of federal and state bankruptcy and debtor relief laws to
the obligations represented by the Receivables could adversely affect the
interests of the Certificateholders if such laws result in any Receivables being
charged off as uncollectible. See "Description of the Certificates -- Allocation
of Investor Default Amount; Allocation of Series Adjustment Amount; Investor
Charge-Offs."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing the material anticipated United
States federal income tax aspects of the purchase, ownership and disposition of
the Certificates, is based upon the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury regulations promulgated thereunder,
and published rulings and court decisions in effect as of the date hereof, all
of which are subject to change, possibly retroactively. This discussion is
directed to prospective purchasers who purchase Certificates in the initial
distribution thereof, who are citizens or residents of the United States,
including domestic corporations and partnerships, and who hold the Certificates
as "capital assets" within the meaning of section 1221 of the Code. This
discussion does not address every aspect of the federal income tax laws that may
be relevant to Certificate Owners in light of their personal investment
circumstances or to certain types of Certificate Owners subject to special
treatment under the federal income tax laws (for example, banks, life insurance
companies and tax-exempt organizations). Furthermore, legislative, judicial or
administrative changes may occur, perhaps with retroactive effect, which could
affect the accuracy of the statements and conclusions set forth herein as well
as the tax consequences to Certificate Owners.
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, LOCALITY, FOREIGN COUNTRY, OR OTHER TAXING
JURISDICTION.
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Special tax counsel to FNANB ("Special Tax Counsel") will render its
opinion that the Certificates will be treated as indebtedness for federal income
tax purposes. 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.
FNANB will express in the Agreement the intent that for federal, state and
local income and franchise tax purposes, the Certificates will be indebtedness
[secured by the Receivables]. FNANB will agree and each Certificateholder and
Certificate Owner, by acquiring an interest in a Certificate, will be deemed to
agree to treat the Certificates as indebtedness of FNANB for federal, state and
local income and franchise tax purposes (except to the extent that different
treatment is explicitly required under state or local tax statutes). However,
because different criteria are used to determine the non-tax accounting
characterization of the transaction, FNANB 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 factors in making this determination are 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 will express
the opinion that the ownership of the Receivables has not been transferred for
federal income tax purposes to the Certificate Owners.
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. Special Tax Counsel is of the opinion
that the rationale of those cases will not apply to this transaction.
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TREATMENT OF THE TRUST
The Trust could be viewed for federal income tax purposes either as (i) a
collateral arrangement for debt issued directly by FNANB and other holders of
equity interests in the Trust or (ii) a separate entity issuing its own debt and
owned by FNANB and all other holders of equity interests in the Trust. However,
in the opinion of Special Tax Counsel, in the former event the Trust will be
disregarded for federal income tax purposes and in the latter event the Trust
would be a partnership rather than an association (or publicly traded
partnership) taxable as a corporation. Therefore, in the opinion of Special Tax
Counsel, the Trust will not be subject to federal income tax at the entity
level.
POSSIBLE CLASSIFICATION OF THE TRANSACTION AS A PARTNERSHIP OR AS AN ASSOCIATION
TAXABLE AS A CORPORATION
It is possible that the IRS could assert that, for purposes of the Code,
some or all of the Certificates are not debt obligations for federal income tax
purposes and that the proper classification of the legal relationship between
FNANB, any other holders of equity interests in the Trust, and the Certificate
Owners resulting from the transaction is that of a partnership, a publicly
traded partnership taxable as a corporation, or an association taxable as a
corporation.
If some or all of the Certificates were treated as equity interests in a
partnership (other than a "publicly traded partnership"), the partnership itself
would not be subject to federal income tax; rather, the partners of such
partnership, including the Certificate Owners, 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 Certificates were held to constitute
partnership interests, rather than indebtedness. Moreover, 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 Certificates. Furthermore, if any
Certificates were treated as equity interests in a partnership, all or a portion
of such income in subsequent years 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) might constitute "unrelated
business taxable income" generally taxable to such investor under the Code.
Finally, if any Certificates were treated as equity interests in a partnership
in which other interests were debt, all or part of a tax-exempt investor's share
of income from the Certificates that were treated as equity would be treated
under the Code as unrelated debt-financed income taxable to the investor.
If the Trust were treated in whole or in part as a partnership in which
some or all Certificate Owners were partners, that partnership could be
classified as a publicly traded partnership taxable as a corporation. A
partnership will be classified as a publicly traded partnership taxable as a
corporation if equity interests therein are traded on an "established securities
market," or are "readily tradable" on a "secondary market" or its "substantial
equivalent" unless certain exceptions apply. One such exception would apply if
the Trust is not engaged in a "financial business" and 90% or more of its income
consists of interest and certain other types of passive income. Because Treasury
regulations do not clarify the meaning of a "financial business" for this
purpose, it is unclear whether this exception applies. FNANB has taken and
intends to take measures designed to reduce the risk that the Trust could be
classified as a publicly traded partnership taxable as a corporation. However,
there can be no assurance that the Trust could not become a publicly traded
partnership, because certain of the actions necessary to comply with such
exceptions are not fully within the control of FNANB.
If it were determined that a transaction created an entity classified as a
corporation (including 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. Such classification might
also have adverse state and local tax consequences that would further 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
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association) generally would be treated as dividends for tax purposes to the
extent of such deemed corporation's earnings and profits, and in the case of
Certificate Owners that are non-United States persons, would be subject to
withholding tax.
Because FNANB will treat the Certificates as indebtedness for federal
income tax purposes, the Trustee will not comply with the federal income tax
reporting requirements that would apply under the foregoing alternative
characterizations of the Certificates.
TAXATION OF INTEREST INCOME OF CERTIFICATE OWNERS
As set forth above, Special Tax Counsel will render an opinion, upon
issuance, that the Certificates will be treated as indebtedness for federal
income tax purposes. Interest on the Certificates meets the requirements for
"qualified stated interest" under Treasury regulations (the "OID Regulations")
relating to original issue discount ("OID"), and any OID on the Certificates
(i.e., any excess of the principal amount of the Certificates over their issue
price) does not exceed a de minimis amount (i.e., 1/4% of the principal amount
multiplied by the number of full years until maturity), all within the meaning
of the OID Regulations. Except as discussed below, the Certificates will not be
issued with OID and, accordingly, interest thereon will be includable 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. Under the OID
Regulations, a holder of a Certificate issued with a de minimis amount of OID
must include any such OID in income, on a pro rata basis, as principal payments
are made on the Certificate. Interest received on the Certificates may also
constitute "investment income" for purposes of certain limitations of the Code
concerning the deductibility of investment interest expense.
A subsequent holder who purchases a Certificate at a discount may be
subject to the "market discount" rules of the Code. These rules provide, in
part, for the treatment of gain attributable to accrued market discount as
ordinary income upon the receipt of partial principal payments or on the sale or
other disposition of the Certificate, and for the deferral of certain interest
deductions with respect to debt incurred to acquire or carry the market discount
Certificate.
A subsequent holder who purchases a Certificate at a premium may elect to
amortize and deduct this premium over the Certificate in accordance with rules
set forth in Section 171 of the Code.
DISPOSITION OF A CERTIFICATE
In general, a Certificate Owner will recognize gain or loss upon the sale,
exchange, redemption, or other taxable disposition of a 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 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, provided that the
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, capital losses generally may be used by
corporate taxpayers only to offset capital gains and by individual taxpayers
only to the extent of capital gains plus $3,000 of other income.
RECENT LEGISLATION
Recently enacted provisions of the Code provide for the creation of a new
type of entity for federal income tax purposes, the "financial asset
securitization trust" ("FASIT"). However, these provisions are not effective
until September 1, 1997, and many technical issues concerning FASITs must be
addressed by Treasury regulations that have yet to be drafted. Although
transition rules permit an entity in existence on August 31, 1997, such as the
Trust, to elect FASIT status, at the present time it is not clear how
outstanding interests of such an entity would be treated subsequent to such an
election. In particular, it is not clear whether
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Certificates outstanding on August 31, 1997 would be treated as "regular
interests" in a FASIT if FNANB were to elect FASIT status for the Trust after
that date.
FOREIGN INVESTORS
As set forth above, Special Tax Counsel will render an opinion, upon
issuance, that the Certificates will be treated as indebtedness for federal
income tax purposes. The following information describes the federal income tax
treatment of investors that are not U.S. persons if the Certificates are treated
as indebtedness. 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
political subdivision thereof or (iii) an estate or trust the income of which is
includable in gross income for U.S. federal income tax purposes, regardless of
its source (except, with respect to the tax year of any trust that begins after
December 31, 1996, a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
fiduciaries who have authority to control all substantial decisions of the
trust).
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
carried on in the United States and the investor evidences this fact by
delivering an IRS Form 4224 or (ii) the Foreign Investor and each securities
clearing organization, bank, or other financial institution that holds the
Certificates on behalf of such Foreign Investor 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 FNANB (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 FNANB (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 or (ii) IRS Form 1001,
signed by the Certificate Owner or such Certificate Owner's agent, claiming
exemption from withholding under an applicable tax treaty; 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. Recently proposed
Treasury regulations (the "Proposed Regulations") could affect the procedures to
be followed by a Foreign Investor in complying with United States federal
withholding, backup withholding and information reporting rules. The Proposed
Regulations are not currently effective and could be altered before being
adopted in final form but, if finalized in their current form, would be
effective for payments made after December 31, 1997. Prospective investors are
urged to consult their tax advisors regarding the effect, if any, of the
Proposed Regulations on the purchase, ownership, and disposition of the
Certificates.
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 a 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 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 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 Certificate Owner that is a
corporation (unless eliminated under an applicable tax treaty), 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
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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.
BACKUP WITHHOLDING
Certain Certificate Owners may be subject to backup withholding at the rate
of 31% with respect to interest paid on the Certificates if the Certificate
Owner, upon issuance, fails to supply the Trustee or its broker with its
taxpayer identification number, furnishes an incorrect taxpayer identification
number, fails to report interest, dividends, or other "reportable payments" (as
defined in the Code) properly, or, under certain circumstances, fails to provide
the Trustee or broker with a certified statement, under penalty of perjury, that
the Certificate Owner is not subject to backup withholding. Information returns
will be sent annually to the IRS and to each Certificate Owner setting forth the
amount of interest paid on the Certificates and the amount of tax withheld
thereon.
PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE
STATE AND LOCAL INCOME AND FRANCHISE TAX CONSEQUENCES OF AN INVESTMENT IN THE
CERTIFICATES.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and the Code impose certain restrictions on (i) employee benefit plans (as
defined in Section 3(3) of ERISA), (ii) plans described in Section 4975(e)(1) of
the Code, including individual retirement accounts or Keogh plans, (iii)
entities whose underlying assets include plan assets by reason of a plan's
investment in such entities and (iv) persons who have certain specified
relationships to such plans. Section 406 of ERISA prohibits employee benefit
plans described in Section 401 of ERISA from engaging in certain transactions
with persons who are "parties in interest" unless a statutory or administrative
exemption applies to the transaction. Section 4975 of the Code prohibits plans
described in Section 4975(e)(1) of the Code from engaging in certain
transactions with persons who are "disqualified persons" unless a statutory or
administrative exemption applies. Moreover, based on the reasoning of the United
States Supreme Court in John Hancock Life Ins. Co. v. Harris Trust and Sav.
Bank, 510 U.S. 86 (1993), an insurance company's general account may be deemed
to include assets of the employee benefit plans investing in the general account
(e.g., through the purchase of an annuity contract), and the insurance company
might be treated as a party in interest with respect to a plan by virtue of such
investment. In addition, ERISA imposes certain duties on persons who are
fiduciaries of plans subject to ERISA. Under ERISA, a person who exercises
discretionary authority or control respecting the management or disposition of
the assets of a plan, renders investment advice or has the authority to render
investment advice to a plan for a fee or other compensation, or has any
discretionary authority or responsibility with respect to the administration of
a plan is generally considered to be a fiduciary of such plan. Fiduciaries,
parties in interest and disqualified persons with respect to employee benefit
plans described in Section 401 of ERISA and plans described in Section
4975(e)(1) of the Code (collectively, "Benefit Plans"), may be subject to excise
taxes, civil fines and other liabilities for violating the fiduciary
responsibility and prohibited transaction rules of Section 406 of ERISA and
Section 4975 of the Code.
Benefit Plan fiduciaries should determine whether the acquisition and
holding of the Certificates 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
that purchase the Certificates are deemed to own an interest in the underlying
assets of the Trust. There may also be an improper delegation of the fiduciary
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.
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Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor (the "DOL") concerning the definition of what constitutes
the "plan assets" of a Benefit Plan, 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 the Certificates, the Trust could be deemed to hold plan assets
unless one of the exceptions under the Final Regulation is applicable to the
Certificates and the Trust.
The Final Regulation applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that interests in the Class A
Certificates are equity interests for purposes of the Final Regulation, the
Final Regulation contains an exception that may apply to the purchase of the
Class A Certificates by a Benefit Plan. Under this exception, the issuer of a
security is not deemed to hold plan assets of a Benefit Plan that purchases the
security so long as the security qualifies as a "publicly-offered security" for
purposes of the Final Regulation. 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 Benefit Plan as part of an offering
of securities to the public pursuant to an effective registration statement
under the Securities Act and the class of securities of which such security is a
part is registered under the Exchange Act within 120 days (or such later time as
may be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred.
In addition to the exception described above for publicly-offered
securities, the Final Regulation generally provides that if at all times more
than 75% of the value of all classes of equity interests in the Trust are held
by investors other than "benefit plan investors" the assets of a Benefit Plan
holding the Certificates will not include any of the underlying assets of the
Trust. For purposes of the Final Regulation, a "benefit plan investor" includes
any employee benefit plan within the meaning of Section 3(3) of ERISA (whether
or not it is subject to ERISA), a plan described in Section 4975(e)(1) of the
Code, and any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity.
It is anticipated that interests in the Class A Certificates will meet the
criteria of publicly-offered securities as set forth above. The Underwriters of
the Class A Certificates expect (although no assurances can be given) that
interests in the Class A Certificates will be held by at least 100 investors
independent of the Transferor and of one another at the conclusion of the
offering of the Certificates, that there will be no restrictions imposed on the
transfer of interests in the Class A Certificates, and that interests in the
Class A Certificates will be sold as part of an offering pursuant to an
effective registration statement under the Securities Act and then will be
timely registered under the Exchange Act. The Underwriter of the Class B
Certificates does not expect that the Class B Certificates will qualify as
publicly-offered securities. The Underwriters can provide no assurances that
more than 75% of the value of any class of equity interest in the Trust will at
all times be held by investors who are not "benefit plan investors" within the
meaning of the Final Regulation.
If interests in the Certificates fail to meet the criteria of
publicly-offered securities or are held to a significant extent by benefit plan
investors, 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 Benefit Plans might be
prohibited under Section 406 of ERISA and Section 4975 of the Code unless an
exemption is applicable. In addition, the Transferor or any Underwriter 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 the Certificates may be a prohibited transaction under ERISA and the
Code unless such investment is subject to a statutory or administrative
exemption.
There are five class exemptions issued by the DOL that could apply to the
purchase, holding and resale of the Class B Certificates by a Benefit Plan: DOL
Prohibited Transaction Exemption 84-14 (Class Exemption for Plan Asset
Transactions Determined by Independent Qualified Professional Asset Managers),
91-38 (Class Exemption for Certain Transactions Involving Bank Collective
Investment Funds), 90-1 (Class Exemption for Certain Transactions Involving
Insurance Company Pooled Separate Accounts), 95-60 (Class Exemption for Certain
Transactions Involving Insurance Company General Accounts) and 96-23 (Class
88
<PAGE> 90
Exemption for Plan Asset Transactions Determined by In-House Asset Managers).
There can be no assurance, however, that these exemptions, even if all of the
conditions specified therein are satisfied, will apply to transactions involving
the Certificates.
It should be noted that the Small Business Job Protection Act of 1996 added
new Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and Section 4975 of the Code. Pursuant to
Section 401(c), the DOL is required to issue final regulations (the "General
Account Regulations") not later than December 31, 1997 with respect to insurance
policies issued on or before December 31, 1998 that are supported by an
insurer's general account. The General Account Regulations are to provide
guidance on which assets held by the insurer constitute "plan assets" of a
Benefit Plan for purposes of the fiduciary responsibility provisions of ERISA
and Section 4975 of the Code. Section 401(c) also provides that, except in the
case of avoidance of the General Account Regulations and actions brought by the
Secretary of Labor relating to certain breaches of fiduciary duties that also
constitute breaches of state or federal criminal law, until the date that is 18
months after the General Account Regulations become final, no liability under
the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 may result on the basis of a claim that the assets of the general
account of an insurance company constitute the plan assets of a Benefit Plan.
The plan asset status of insurance company separate accounts is unaffected by
new Section 401(c) of ERISA, and separate account assets continue to be treated
as the plan assets of a Benefit Plan invested in a separate account.
As discussed above, while it is expected that the Certificates will be
treated as indebtedness for federal income tax purposes, if any Certificates
were instead treated as equity interests in a partnership, a Benefit Plan could
have its share of income from the partnership treated as "unrelated business
taxable income" under the Code and thus taxable to the Benefit Plan.
Furthermore, if any Certificates were treated as equity interests in a
partnership in which other interests were debt, all or part of a tax-exempt
investor's share of income from the Certificates that were treated as equity
probably would be treated under the Code as unrelated debt-financed income
taxable to the investor.
In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of interests in the Certificates should consult their own counsel as to
whether the acquisition of the Certificates would be a prohibited transaction,
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 the Certificates 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.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated as of [August ], 1997 (the "Underwriting Agreement") between the
Transferor and the underwriters named below (the "Underwriters"), the Transferor
has agreed to sell to the Underwriters, and each of the Underwriters has
severally agreed to purchase from the Transferor, the principal amount of the
Class A Certificates and Class B Certificates set forth opposite its name.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS CLASS A CERTIFICATES
- ------------ --------------------
<S> <C>
NationsBanc Capital Markets, Inc............................ $ []
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITER CLASS B CERTIFICATES
- ----------- --------------------
<S> <C>
NationsBanc Capital Markets, Inc............................ $ []
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates if
any of the Certificates are purchased.
The Underwriters propose initially to offer the Class A Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of [ ]% of the principal amount of
the Class A Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of [ ]% of the principal amount of the
Class A Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms applicable to the
Class A Certificates may be changed by the Underwriters.
The Underwriter of the Class B Certificates proposes initially to offer the
Class B Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in excess of
[ ]% of the principal amount of the Class B Certificates. The Underwriter of
the Class B Certificates 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 applicable to the Class B Certificates
may be changed by the Underwriter of the Class B Certificates.
Until the distribution of the Certificates is completed, the 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 Underwriters are permitted to engage in over-allotment transactions,
stabilizing transactions, syndicate coveraging 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 as 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 the Underwriters
to reclaim 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 Transferor nor any of the Underwriters makes 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 Transferor nor any of the Underwriters represents that any of the
Underwriters will engage in any such transactions or that such transactions,
once commenced, will not be discontinued without notice.
Each Underwriter has represented and agreed that (i) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment
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<PAGE> 92
Advertisements) (Exemptions) Order 1996 or who is a person to whom the document
may otherwise lawfully be issued or passed on, (ii) 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 Certificates in, from or
otherwise involving the United Kingdom and (iii) if that Underwriter is an
authorized person under the Financial Services Act 1986, it has only promoted
and will only promote (as that term is defined in Regulation 1.02 of the
Financial Services (Promotion of Unregulated Schemes) Regulations 1991) to any
person in the United Kingdom the scheme described herein if that person is of a
kind described either in Section 76(2) of the Financial Services Act 1986 or in
Regulation 1.04 of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991.
The Transferor will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and/or commercial banking
transactions with the Transferor, the Trust and their respective affiliates.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates, and the
federal tax consequences of such issuance, will be passed upon for the
Transferor by McGuire, Woods, Battle & Boothe, L.L.P. Certain legal matters
relating to the issuance of the Certificates will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP.
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<PAGE> 93
INDEX TO LOCATION OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Accounts....................................................
Accumulation Period.........................................
Accumulation Period Length..................................
Addition Cut-Off Date.......................................
Adjusted Invested Amount....................................
Adjustment..................................................
Adjustment Amount...........................................
Adjustment Payment..........................................
Aggregate Addition Limit....................................
Aggregate Invested Amount...................................
Aggregate Principal Receivables.............................
Agreement...................................................
Automatic Additional Accounts...............................
Available Enhancement Amount................................
Available Principal Collections.............................
Available Reserve Account Amount............................
Bank Portfolio..............................................
Base Rate...................................................
Benefit Plans...............................................
Cash Collateral Account.....................................
Cedel.......................................................
Cedel Participants..........................................
Certificateholders..........................................
Certificate Owners..........................................
Certificates................................................
Circuit City................................................
Class.......................................................
Class A Accumulation Period.................................
Class A Additional Interest.................................
Class A Adjustment Amount...................................
Class A Allocable Amount....................................
Class A Available Funds.....................................
Class A Cap Payment.........................................
Class A Cap Rate............................................
Class A Certificate Rate....................................
Class A Certificateholders..................................
Class A Certificates........................................
Class A Expected Final Distribution Date....................
Class A Fixed Allocation Percentage.........................
Class A Floating Allocation Percentage......................
Class A Initial Invested Amount.............................
Class A Interest Rate Cap...................................
Class A Invested Amount.....................................
Class A Investor Charge-Off.................................
Class A Investor Default Amount.............................
Class A Monthly Interest....................................
Class A Monthly Principal...................................
Class A Notional Amount.....................................
Class A Required Amount.....................................
</TABLE>
92
<PAGE> 94
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Class A Servicing Fee.......................................
Class B Accumulation Period.................................
Class B Additional Interest.................................
Class B Adjustment Amount...................................
Class B Allocable Amount....................................
Class B Available Funds.....................................
Class B Cap Payment.........................................
Class B Cap Rate............................................
Class B Certificate Rate....................................
Class B Certificateholders..................................
Class B Certificates........................................
Class B Expected Final Distribution Date....................
Class B Fixed Allocation Percentage.........................
Class B Floating Allocation Percentage......................
Class B Initial Invested Amount.............................
Class B Interest Rate Cap...................................
Class B Invested Amount.....................................
Class B Investor Charge-Off.................................
Class B Investor Default Amount.............................
Class B Monthly Interest....................................
Class B Monthly Principal...................................
Class B Notional Amount.....................................
Class B Principal Commencement Date.........................
Class B Required Amount.....................................
Class B Servicing Fee.......................................
Class B Subordinated Principal Collections..................
Class D Additional Interest.................................
Class D Adjustment Amount...................................
Class D Allocable Amount....................................
Class D Available Funds.....................................
Class D Certificate Rate....................................
Class D Certificateholders..................................
Class D Certificates........................................
Class D Fixed Allocation Percentage.........................
Class D Floating Allocation Percentage......................
Class D Invested Amount.....................................
Class D Investor Default Amount.............................
Class D Monthly Interest....................................
Class D Monthly Principal...................................
Class D Servicing Fee.......................................
Closing Date................................................
Code........................................................
Collateral Additional Interest..............................
Collateral Adjustment Amount................................
Collateral Allocable Amount.................................
Collateral Available Funds..................................
Collateral Default Amount...................................
Collateral Fixed Allocation Percentage......................
Collateral Floating Allocation Percentage...................
Collateral Indebtedness Amount..............................
Collateral Indebtedness Holder..............................
</TABLE>
93
<PAGE> 95
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Collateral Indebtedness Interest............................
Collateral Monthly Interest.................................
Collateral Monthly Principal................................
Collateral Rate.............................................
Collateral Required Amount..................................
Collateral Servicing Fee....................................
Collection Account..........................................
Collection Period...........................................
Commission..................................................
Concurrently Issued Series..................................
Controlled Accumulation Amount..............................
Controlled Deposit Amount...................................
Cooperative.................................................
Covered Amount..............................................
Cut-Off Date................................................
Default Amount..............................................
Defaulted Account...........................................
Deficit Controlled Accumulation Amount......................
Definitive Certificates.....................................
Depositaries................................................
Depository..................................................
Determination Date..........................................
Discount Option.............................................
Discount Option Receivables.................................
Discount Percentage.........................................
Distribution Date...........................................
Distribution Date Statement.................................
DOL.........................................................
DTC.........................................................
DTC Participants............................................
Early Amortization Event....................................
Early Amortization Period...................................
Enhancement.................................................
Enhancement Provider........................................
Enhancement Surplus.........................................
Eligible Account............................................
Eligible Institution........................................
Eligible Investments........................................
Eligible Receivable.........................................
ERISA.......................................................
Euroclear...................................................
Euroclear Operator..........................................
Euroclear Participants......................................
Euroclear System............................................
Excess Funding Account......................................
Excess Spread...............................................
Exchange....................................................
Exchange Act................................................
Exchangeable Transferor Certificate.........................
FASIT.......................................................
FDIA........................................................
</TABLE>
94
<PAGE> 96
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Final Regulation............................................
Final Termination Date......................................
Finance Charge Collections..................................
Finance Charge Receivables..................................
FIRREA......................................................
Fixed Allocation Percentage.................................
Floating Allocation Percentage..............................
FNANB.......................................................
Foreign Investor............................................
General Account Regulations.................................
Global Securities...........................................
Group.......................................................
Indirect Participants.......................................
Ineligible Receivable.......................................
Interchange.................................................
Interest Period.............................................
Interest Rate Cap Provider..................................
Interest Rate Caps..........................................
Invested Amount.............................................
Investor Certificates.......................................
Investor Default Amount.....................................
Investor Monthly Servicing Fee..............................
Investor Servicing Fee......................................
IRS.........................................................
[LIBOR].....................................................
[LIBOR Determination Date]..................................
Loan Agreement..............................................
Minimum Aggregate Principal Receivables.....................
Minimum Transferor Amount...................................
Minimum Transferor Percentage...............................
Monthly Servicer Report.....................................
MPR.........................................................
OID.........................................................
OID Regulations.............................................
Paying Agent................................................
Portfolio Yield.............................................
Principal Collections.......................................
Principal Funding Account...................................
Principal Funding Account Balance...........................
Principal Funding Investment Proceeds.......................
Principal Receivables.......................................
Principal Terms.............................................
Proposed Regulations........................................
Qualified Substitute Arrangement............................
Rating Agency...............................................
Rating Agency Condition.....................................
Reallocated Principal Collections...........................
Receivables.................................................
Record Date.................................................
Recoveries..................................................
[Reference Banks]...........................................
</TABLE>
95
<PAGE> 97
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Removed Accounts............................................
Replacement Interest Rate Cap...............................
Required Cash Collateral Account Amount.....................
Required Enhancement Amount.................................
Required Investor Certificateholders........................
Required Reserve Account Amount.............................
Reserve Account.............................................
Reserve Account Funding Date................................
Revolving Period............................................
RTC.........................................................
Securities Act..............................................
Series......................................................
Series 1997-2...............................................
Series 1997-2 Certificates..................................
Series 1997-2 Supplement....................................
Series Adjustment Amount....................................
Series Supplement...........................................
Service Transfer............................................
Servicer....................................................
Servicer Default............................................
Servicing Fee...............................................
Shared Excess Finance Charge Collections....................
Shared Principal Collections................................
Special Tax Counsel.........................................
Stated Series Termination Date..............................
Supplemental Accounts.......................................
Tax Opinion.................................................
[Telerate Page 3750]........................................
Terms and Conditions........................................
Transfer Agent and Registrar................................
Transferor..................................................
Transferor Amount...........................................
Transferor Interest.........................................
Trust.......................................................
Trust Portfolio.............................................
Trust Property..............................................
Trustee.....................................................
TSYS........................................................
UCC.........................................................
Underwriters................................................
Underwriting Agreement......................................
U.S. Person.................................................
</TABLE>
96
<PAGE> 98
ANNEX A
CONCURRENTLY ISSUED SERIES
The table below sets forth the principal characteristics of the Series
1997-1 Certificates, which Series is being issued concurrently with the Series
1997-2 Certificates and is in Group One. For more specific information with
respect to Series 1997-1, any prospective investor should contact the Transferor
at (770) 423-7900.
SERIES 1997-1
Initial Invested Amount
Invested Amount as of [July 31], 1997
Expected Invested Amount as of end of Closing Date
Certificate Rate
Enhancement
Series Servicing Fee Percentage
Stated Series Termination Date
Issuance Date
97
<PAGE> 99
ANNEX B
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered FNANB Credit
Card Master Trust Asset Backed Certificates (the "Global Securities") to be
issued from time to time will be available only in book-entry form. Investors in
the Global Securities may hold such Global Securities through any of 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 corporation
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
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
98
<PAGE> 100
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 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 (on the basis of actual days elapsed and a
360-day year). 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 to 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 the
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 (on the basis of actual days elapsed and a
360-day year). The payment will then be reflected in the account of the Cedel
Participant or the Euroclear Participant the following day, and receipt of the
cash proceeds in the Cedel Participant's or Euroclear Participant's account
would be back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the Cedel Participant or Euroclear
Participant have a line of credit with its respective clearing system and elect
to be in debit in anticipation of receipt of the sale proceeds in its account,
the back-valuation will extinguish any overdraft charges incurred over that
one-day period. If settlement is not completed on the intended value date (i.e.
the trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
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
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<PAGE> 101
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(1) borrowing through 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;
(2) 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
accounts in order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the 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) or registered debt issued by U.S.
Persons unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the beneficial owner or
his agent.
Exemption for U.S. Person (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial 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
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
100
<PAGE> 102
======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRANSFEROR OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE TRANSFEROR OR THE RECEIVABLES SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Certificateholders........ 2
Available Information................ 3
Incorporation of Certain Documents by
Reference.......................... 3
Prospectus Summary................... 5
Risk Factors......................... 18
First North American National Bank... 24
First North American National Bank
Credit Card Operations............. 24
The Receivables...................... 29
Maturity Considerations.............. 33
Yield Considerations................. 35
The Trust............................ 35
Use of Proceeds...................... 35
Description of the Agreement......... 36
Description of the Certificates...... 54
Certain Legal Aspects of the
Receivables........................ 80
Certain Federal Income Tax
Consequences....................... 83
ERISA Considerations................. 87
Underwriting......................... 90
Legal Matters........................ 91
Index to Location of Defined Terms... 92
Annex A (Concurrently Issued
Series)............................ 97
Annex B (Global Clearance, Settlement
and Tax Documentation
Procedures)........................ 98
</TABLE>
---------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
FNANB CREDIT CARD
MASTER TRUST
$ CLASS A
[FLOATING RATE]
[ ]% ASSET BACKED
CERTIFICATES, SERIES 1997-2
$ CLASS B
[FLOATING RATE]
[ ]% ASSET BACKED
CERTIFICATES, SERIES 1997-2
FIRST NORTH AMERICAN
NATIONAL BANK
Transferor and Servicer
------------------------
PROSPECTUS
------------------------
NATIONSBANC CAPITAL MARKETS, INC.
UNDERWRITERS OF THE CLASS A CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
UNDERWRITER OF THE CLASS B CERTIFICATES
======================================================
<PAGE> 103
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>
<S> <C>
Registration Fee............................................ $ *
Printing and Engraving...................................... *
Trustee's Fees.............................................. *
Legal Fees and Expenses..................................... *
Blue Sky Fees and Expenses.................................. *
Accountants' Fees and Expenses.............................. *
Rating Agency Fees.......................................... *
Miscellaneous Fees.......................................... *
--------
Total............................................. $ *
========
</TABLE>
- ---------------
* To be added by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article ELEVENTH of FNANB's Articles of Association provides that FNANB
shall indemnify any person who was or is made a party or is threatened to be
made a party to any threatened, pending or completed action, suit, proceeding or
appeal, whether civil, criminal, administrative or investigative and whether
formal or informal, because he or she is or was a director or officer of FNANB
or, while a director or officer of FNANB, is or was serving any other legal
entity in any capacity at the request of FNANB against all judgments,
settlements, penalties, fines or other obligations and reasonable expenses
incurred in such action, suit, proceeding or appeal except such obligations and
expenses as are incurred because of the indemnitee's willful misconduct or
knowing violation of criminal law (regardless of whether such action, suit,
proceeding or appeal is by or in the right of FNANB). FNANB is obligated to make
advances and reimbursements for expenses incurred by an indemnitee in any such
action, suit, proceeding or appeal upon receipt of an undertaking (which
undertaking may be an unlimited, unsecured general obligation of the indemnitee
and shall be accepted by FNANB without reference to the indemnitee's ability to
make repayment) from the indemnitee to repay the same if it is ultimately
determined that the indemnitee is not entitled to indemnification.
Article ELEVENTH also provides that FNANB may, to a lesser extent or to the
same extent that it is required to provide indemnification and make advances and
reimbursements for expenses to its directors and officers, provide
indemnification and make advances and reimbursements for expenses to its
employees and agents, the directors, officers, employees and agents of its
subsidiaries and predecessor entities, and any person serving any other legal
entity in any capacity at the request of FNANB and, if authorized by FNANB's
board of directors, may contract in advance to do so.
The determination that indemnification is permissible and the evaluation as
to reasonableness of expenses shall be made, in the case of a director, as
provided by law and, in the case of an officer, as authorized from time to time
by FNANB's board of directors (which authorization may be made before or after
the claim for indemnification is made) or as otherwise provided by law. If,
however, in either case, a majority of the directors serving on the board of
directors has changed after the date of the alleged conduct giving rise to a
claim for indemnification, such determination and evaluation shall, at the
option of the indemnitee, be made by special legal counsel agreed upon by the
board of directors and such indemnitee. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that an indemnitee acted in
such a manner as to make him or her ineligible for indemnification.
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<PAGE> 104
Article ELEVENTH provides that the indemnification provided thereby shall
not be exclusive of any other right of indemnification to which an indemnitee
may be entitled including indemnification pursuant to a valid contract,
indemnification by legal entities other than FNANB and indemnification under
policies of insurance purchased and maintained by FNANB or others; provided,
however, that no indemnitee shall be entitled to indemnification by FNANB to the
extent he or she is indemnified by another, including an insurer.
FNANB is authorized under Article ELEVENTH to purchase and maintain
insurance against any liability it may have under Article ELEVENTH or to protect
any indemnitee against any liability arising from his or her service to FNANB or
to any other legal entity at the request of FNANB regardless of FNANB's power to
indemnify against such liability.
Article ELEVENTH does not permit (i) the indemnification of directors,
officers or employees of FNANB against expenses, penalties or other payments
incurred in any administrative proceeding or action instituted by an appropriate
bank regulatory agency which proceeding or action results in a final order
assessing civil money penalties or requires affirmative action by an individual
or individuals in the form of payment to FNANB or (ii) insurance coverage for a
formal order assessing civil money penalties against a director or employee of
FNANB.
In the Underwriting Agreement, a proposed form of which is attached as
Exhibit 1.1 hereto, the Underwriters will agree to indemnify, under certain
conditions, the Registrant, its directors, certain of its officers and persons
who control the Registrant within the meaning of the Securities Act against
certain liabilities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
<TABLE>
<S> <C> <S>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Articles of Association.*
3.2 -- Bylaws.*
4.1 -- Form of Master Pooling and Servicing Agreement between First
North American National Bank, as transferor and servicer,
and the Trustee.*
4.2 -- Form of Series 1997-2 Supplement (including form of
Certificates).*
5.1 -- Opinion of McGuire, Woods, Battle & Boothe, L.L.P. with
respect to legality.*
8.1 -- Opinion of McGuire, Woods, Battle & Boothe, L.L.P. with
respect to tax matters.*
23.1 -- Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included
in its opinion filed as Exhibit 5.1).*
23.2 -- Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included
in its opinion filed as Exhibit 8.1).*
24.1 -- Powers of Attorney (see signature page).
</TABLE>
- ---------------
* To be filed by amendment.
(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) 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
II-2
<PAGE> 105
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.
(b) 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.
(c) 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.
(d) 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)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(e) That, for purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 106
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Richmond, Commonwealth of Virginia, on July 31, 1997.
FIRST NORTH AMERICAN NATIONAL BANK
By: /s/ MICHAEL T. CHALIFOUX
------------------------------------
Michael T. Chalifoux
Chairman
Each individual whose signature appears below constitutes and appoints
Michael T. Chalifoux and Philip J. Dunn, and each of them, such individual's
true and lawful attorneys-in-fact and agents with full power of substitution,
for such individual and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and to file the same (and any and all related
exhibits) with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on July 31, 1997 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL T. CHALIFOUX Chairman and Director July 31, 1997
- ----------------------------------------------------- (Principal Executive
Michael T. Chalifoux Officer)
/s/ FREDERICK G. KRAEGEL President and Director July 31, 1997
- ----------------------------------------------------- (Principal Financial Officer
Frederick G. Kraegel and Principal Accounting
Officer)
/s/ PHILIP J. DUNN Director July 31, 1997
- -----------------------------------------------------
Philip J. Dunn
/s/ CYNTHIA S. KLING Director July 31, 1997
- -----------------------------------------------------
Cynthia S. Kling
/s/ MARK A. ARENSMEYER Director July 31, 1997
- -----------------------------------------------------
Mark A. Arensmeyer
</TABLE>
II-4
