<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1997
REGISTRATION NO. 333-32591
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
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
<TABLE>
<CAPTION>
==============================================================================================================
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....... $738,000,000 100% $738,000,000 $223,636.36
==============================================================================================================
</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
** Includes $303.03 previously paid.
================================================================================
<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 NOVEMBER 13, 1997
PROSPECTUS
FNANB CREDIT CARD MASTER TRUST
$603,000,000 CLASS A FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1997-2
$135,000,000 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 October 30, 1997 (the "Agreement")
between First North American National Bank, as transferor (in such capacity, the
"Transferor") and servicer (in such capacity, the "Servicer"), and First Union
National Bank, 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 and all amounts received with respect to 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 $63,000,000 and Class D Certificates having an
initial aggregate principal balance of $99,000,000 (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 has previously issued, 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 as described herein. 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 16.
---------------------
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.
<TABLE>
<CAPTION>
=========================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT TRANSFEROR(1)(2)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Certificate.......................... % % %
- -------------------------------------------------------------------------------------------------------------------------
Per Class B Certificate.......................... % % %
- -------------------------------------------------------------------------------------------------------------------------
Total............................................ $ $ $
=========================================================================================================================
</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 , 1997 through
the facilities of The Depository Trust Company, Cedel Bank, societe anonyme and
the Euroclear System.
---------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
NATIONSBANC MONTGOMERY
CREDIT SUISSE FIRST BOSTON
BANCAMERICA ROBERTSON STEPHENS
DEUTSCHE MORGAN GRENFELL
UNDERWRITER OF THE CLASS B CERTIFICATES
NATIONSBANC MONTGOMERY
---------------------
The date of this Prospectus is , 1997
<PAGE> 3
(Continued from the cover page)
Interest will accrue on the Class A Certificates from ,
1997 (the "Closing Date") through the day preceding the December 1997
Distribution Date (as defined herein) 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 (the "Class A Certificate
Rate"). Interest will accrue on the Class B Certificates from the Closing Date
through the day preceding the December 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 (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 , 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 December 1997 Distribution Date.
Principal on the Class A Certificates is scheduled to be paid on the November
2002 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 January 2003
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
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 89.
The Certificates........... $603,000,000 aggregate principal amount of Class A
Floating Rate Asset Backed Certificates, Series
1997-2 (the "Class A Certificates") and
$135,000,000 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 FNANB Credit Card Master Trust (the "Trust")
was 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 Class A
Investor Charge-Offs or Class B Investor
Charge-Offs, as applicable, 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, 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 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 Trust was formed pursuant to a Master Pooling
and Servicing Agreement dated as of October 30,
1997 (the "Agreement") between First North
American National Bank, a limited purpose credit
card national bank, as transferor (in such
capacity, the "Transferor") and servicer (in such
capacity, the "Servicer"), and First Union
National
4
<PAGE> 6
Bank, a national banking association, as trustee
(in such capacity, the "Trustee"). The Agreement
provides for the Trust 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 is currently
held by the Transferor.
The Trust has previously issued one other Series
(the "Previously 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 (Previously
Issued Series)" for a description of certain
terms of the Previously 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 ("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 $63,000,000 and deemed to be a Class
of Investor Certificates (the "Collateral
Indebtedness Interest") and $99,000,000 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 may not be transferred
unless the Transferor shall have delivered to the
Trustee a tax opinion to the effect that such
transfer will not adversely affect the tax
characterization of the Trust and such transfer
shall not, in the reasonable belief of the
Transferor, cause an Early Amortization Event to
occur. 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 provides 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
5
<PAGE> 7
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 and to (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") originated or
acquired by the Transferor and satisfying certain
eligibility criteria described herein (including
any Supplemental Accounts following their
designation and any Automatic Additional Accounts
following their creation but excluding any
Removed Accounts following their designation),
(ii) all monies due or to become due and all
amounts received with respect to the Receivables
on and after the Cut-Off Date (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. Each of the
Certificates will represent an undivided interest
in the Trust Property. See "Description of the
Agreement -- The Trust Property."
The Receivables 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 charges, late
charges, returned check charges, annual fees,
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, all amounts collected
in respect of Interchange will be treated as
Finance Charge Collections. As of September 30,
1997, the aggregate amount owing in respect of
the Receivables was $1,656,264,214, comprised of
$1,579,900,190 of Principal Receivables and
$76,364,024 of Finance Charge Receivables (which
includes $32,242,861 of Discount Option
Receivables). See "The Receivables" and
"Description of the Agreement -- Discount
Option."
At the time of the formation of the Trust, the
Transferor transferred to the Trust all
Receivables in the Accounts as of September 30,
1997 (the "Cut-Off Date") and all Receivables
arising in the Accounts from time to time
thereafter until termination of the Trust. All
new
- ---------------
(1)MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Incorporated and VISA USA Incorporated, respectively.
6
<PAGE> 8
Receivables arising in the Accounts are
automatically transferred to the Trust. The
Agreement provides 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 permits or,
under certain circumstances, requires 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. In addition, the Agreement
permits the Transferor to designate from time to
time, subject to certain limitations and
conditions set forth in the Agreement, certain
Accounts the Receivables in which are to be
removed from the Trust (the "Removed Accounts").
See "The Receivables" and "Description of the
Agreement -- Automatic Additional Accounts,"
"-- Supplemental Accounts" and "-- Removal of
Accounts."
Servicing Compensation..... 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 second 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 second 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 second 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 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
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<PAGE> 9
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 has established and will 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 Previously 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 Record Date (or, in the case of the
first Distribution Date, as of the Closing Date).
The aggregate undivided interest in the Aggregate
Principal Receivables evidenced by the Class A
Certificates (the "Class A Invested Amount")
initially will equal $603,000,000 (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
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<PAGE> 10
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 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). The aggregate undivided interest in the
Aggregate Principal Receivables evidenced by the
Class B Certificates (the "Class B Invested
Amount") initially will equal $135,000,000 (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 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,"
"-- Reallocation of Cash Flows" 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
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<PAGE> 11
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
March 2006 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,
Available 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 Supplements 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........ The Servicer will establish and maintain, in the
name of the Trustee, a segregated trust account
(the "Principal Funding Account") for the benefit
of the Certificateholders. Unless an Early
Amortization Event has occurred, on each
Distribution Date with respect to the period (the
"Accumulation Period") commencing at the close of
business on the last day of the October 2001
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, Available
Principal Collections 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 September 2002
Collection Period. See "Description of the
Certificates -- Principal Payments," "-- Post-
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<PAGE> 12
ponement 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 October 2001
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 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 "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 Available Principal Collections for any
Distribution Date with respect to the
Accumulation Period 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 (to the extent
amounts are available to make such deposit). If
the Available Principal Collections for any
Distribution Date with respect to the
Accumulation Period 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
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<PAGE> 13
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 is deemed to have occurred and
ending on the earlier of (i) the date on which
the Series 1997-2 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 the Available Principal
Collections 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
Finance Charge 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 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 allocated 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 Available Principal Collections.
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
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<PAGE> 14
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 may 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 may 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
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 18% and (B) $27,000,000
(the amount described in this clause (ii), 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. The Required
Enhancement Amount may be reduced without the
consent of the Certificateholders if the Rating
Agency Condition and certain other conditions
shall have been satisfied. If the Available
Enhancement Amount is less than the Required
Enhancement Amount on any Distribution Date
(after giving effect to any optional issuance of
additional Class D Certificates made on such
Distribution Date in accordance with the
Agreement), 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 Available Enhancement
Amount
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<PAGE> 15
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 Excess Spread and Shared Excess
Finance Charge Collections allocated to Series
1997-2 are required to be or are otherwise
deposited therein. 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."
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 5% 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
agrees, and the Certificate Owners will be deemed
to agree, to treat the Certificates as
indebtedness of the Transferor 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 will 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 Underwriters of the Class A
Certificates expect, although no assurance can be
given, that the
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<PAGE> 16
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,
the amounts held in any trust account for the
benefit of the Class A Certificates and the terms
of the Class B Certificates, the Collateral
Indebtedness Interest and the Class D
Certificates. See "Risk Factors -- Certificate
Rating" and "Description of the
Certificates -- 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, the amounts held in any trust account for
the benefit of the Class B Certificates and the
terms of the Collateral Indebtedness Interest and
the Class D Certificates. See "Risk Factors --
Certificate Rating" and "Description of the
Certificates -- Subordination of the Class B
Certificates, the Collateral Indebtedness
Interest and the Class D Certificates."
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<PAGE> 17
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 provides that the Transferor has transferred all of
its right, title and interest in and to 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
and any other Class of Investor Certificates that may be issued and retained by
the Transferor. The Transferor represents and warrants in the Agreement that the
transfer of the Receivables to the Trust constitutes either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor in
and to the Receivables or a grant to the Trust of a security interest in the
Receivables. The Transferor has taken certain actions required to perfect the
interest of the Trust in the Receivables and warrants 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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<PAGE> 18
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 Required
Investor 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> 19
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, Available 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. 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 may 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. 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 provides 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 permits or, under certain
circumstances, requires 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 or to
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<PAGE> 20
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 (such as
California, Florida, Illinois, Ohio and Texas) 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.
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<PAGE> 21
In addition, the ability of the Certificate Owners to pledge the Certificates to
persons or entities that do not 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 has not transferred to the Trust
the Accounts but only the Receivables arising in the Accounts. As owner of the
Accounts, the Transferor has 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 agrees 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 has 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, 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 has issued the Previously 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
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<PAGE> 22
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. 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 the Previously Issued Series or 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."
The Transferor, at or after the commencement of the Accumulation Period,
may cause the Trust to issue another Series as a Paired Series with respect to
Series 1997-2 and use the proceeds of such issuance to finance the increase in
the Transferor Interest caused by the deposit of Available Principal Collections
into the Principal Funding Account. Because the terms of the Series 1997-2
Certificates may vary from the terms of such other Series, the early
amortization events with respect to such other Series may vary from the Early
Amortization Events and may include early amortization events that are unrelated
to the status of the Transferor, the Servicer or the Receivables, such as early
amortization events related to the continued availability and rating of certain
Enhancement Providers with respect to such other Series. If an early
amortization event were to occur with respect to any such Paired Series prior to
the payment in full of the Series 1997-2 Certificates, the Fixed Allocation
Percentage might be reduced and the payment of principal to the Series 1997-2
Certificateholders might be reduced or delayed. See "Description of the
Certificates -- Paired Series."
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 of 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.
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<PAGE> 23
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.
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 September 30, 1997,
FNANB had assets of approximately $394.0 million and equity of approximately
$193.1 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 transferred to the Trust arise from transactions made by
holders of various MasterCard and VISA credit cards issued by FNANB. FNANB is a
member of MasterCard International Incorporated and VISA USA Incorporated. FNANB
also administers a private label credit card program under which cardholders may
purchase merchandise, services and service contracts at Circuit City stores. The
receivables in the private label credit card accounts have not been transferred
to the Trust.
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 or 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
credit cards solely to certain existing holders of Circuit City private label
credit cards. 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 September 30,
1997, purchases at Circuit City stores charged on FNANB MasterCard or VISA
credit cards as a percentage of total FNANB MasterCard or VISA purchases
averaged less than 1%.
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FNANB solicits new bank card applicants through pre-approved direct mail
solicitations and telemarketing. 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 predict the potential credit risk of prospective cardholders. FNANB
sends mass mailings to pre-approved consumers, who may return a sign-up card to
acknowledge acceptance of the card offer. FNANB does not provide applications
for its MasterCard or VISA credit card accounts in Circuit City stores.
Customers who do not respond to the pre-approved 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. 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
original pre-approved criteria, FNANB is not required to extend the applicant
credit.
In April 1997, FNANB enhanced its underwriting criteria by establishing a
higher minimum credit bureau risk score requirement. Since April 1997, the
average credit score for newly originated accounts has increased markedly from
the prior twelve months. This strategic change in minimum credit score
requirements 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 strategic change may result in lower
new account origination rates.
FNANB uses both generic credit bureau risk scores and a customized credit
risk monitoring system to develop and manage strategies for credit line
adjustments, overlimit charges and delinquent collection actions. These risk
management 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 predominantly 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 score is purchased a minimum of
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 with
respect to certain accounts if a cardholder exceeds a specified
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<PAGE> 25
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 $.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 assessed retroactively 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 relies upon a calculation of "average daily balance" 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. One component of FNANB's collection strategy involves the segregation
of FNANB's collections staff 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 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 account 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.
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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 low APR
accounts) or 12% of the outstanding balance (for standard APR accounts). FNANB
policy requires that a partial payment of less than the full monthly minimum
payment (plus or minus $0.99) due on an account will result in the forward aging
of the delinquency status.
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.
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
----------------------------------------------------- ---------------------------------------
1997 1996 1996 1995
------------------------- ------------------------- ------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Receivables
Outstanding(1)..... $1,656,802 100.00% $1,208,177 100.00% $1,486,705 100.00% $806,321
========== ====== ========== ====== ========== ====== ========
Delinquent 31 to 60
Days(2)............ 54,537 3.29 36,805 3.05 44,951 3.02 30,601
Delinquent 61 to 90
Days(2)............ 35,176 2.12 24,680 2.04 29,545 1.99 2,804
Delinquent 91 or More
Days(2)............ 63,913 3.86 40,716 3.37 53,581 3.60 23,235
---------- ------ ---------- ------ ---------- ------ --------
Total................ $ 153,626 9.27% $ 102,201 8.46% $ 128,077 8.61% $ 56,640
========== ====== ========== ====== ========== ====== ========
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------
1995 1994
----------- -------------------------
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- -----------
<S> <C> <C> <C>
Total Receivables
Outstanding(1)..... 100.00% $309,991 100.00%
====== ======== ======
Delinquent 31 to 60
Days(2)............ 3.80 4,505 1.45
Delinquent 61 to 90
Days(2)............ 0.35 2,125 0.69
Delinquent 91 or More
Days(2)............ 2.88 3,129 1.01
------ -------- ------
Total................ 7.03% $ 9,759 3.15%
====== ======== ======
</TABLE>
- ---------------
(1) Total Receivables Outstanding consists of all amounts due from cardholders
as posted to the accounts as of the date shown.
(2) The delinquency rates are the amount of delinquent receivables as of the
date shown divided by the Total Receivables Outstanding as of the same 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>
NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------- --------------------------------
1997 1996 1996 1995 1994
---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Principal Receivables(1)......................... $1,534,963 $926,020 $1,015,406 $487,576 $100,757
Gross Principal Charge-Off(s)(2)....................... 145,853 74,381 110,730 32,638 6,109
Recoveries............................................. 14,664 4,762 6,955 1,439 282
Net Principal Charge-Offs.............................. 131,189 69,619 103,775 31,199 5,827
Net Principal Charge-Offs as a percentage of Average
Principal Receivables................................ 11.40%(3) 10.02%(3) 10.22% 6.40% 5.78%
</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) Gross Principal Charge Offs are charge offs before Recoveries and do not
include fraud losses.
(3) The percentages reflected for the nine months ended September 30, 1997 and
1996 are annualized figures, which are not necessarily indicative of results
for the entire year.
25
<PAGE> 27
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.
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.
26
<PAGE> 28
THE RECEIVABLES
The Receivables 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
charges, late charges, returned check charges, annual fees, 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, all amounts collected in respect of
Interchange will be treated as Finance Charge Collections. All new Receivables
arising in the Accounts are automatically transferred to the Trust.
The Agreement provides 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 permits or,
under certain circumstances, requires 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 Account designated pursuant to the Agreement must be an
Eligible Account as of the designation date. The Transferor also has 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 require that the
Receivables in such Removed Accounts be reassigned 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 by the Transferor on or
before such date minus any Removed Accounts designated by the Transferor on or
before such date.
As of September 30, 1997, the aggregate amount owing in respect of the
Receivables was $1,656,264,214, comprised of $1,579,900,190 of Principal
Receivables and $76,364,024 of Finance Charge Receivables (which includes
$32,242,861 of Discount Option Receivables). As of September 30, 1997, the
average Receivables balance of Accounts with debit balances was $1,775 and the
average credit limit of all Accounts was $2,970. As of September 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 59.77%. As
of September 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 September 30, 1997, approximately 17% of the
cardholders with respect to the Accounts also held a Circuit City private label
credit card account. For the twelve months ended September 30, 1997, less than
1% of all purchases on FNANB's MasterCard and VISA credit card accounts were
made at Circuit City store locations.
27
<PAGE> 29
The following tables summarize the Receivables in the Trust Portfolio by
various criteria as of September 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 SEPTEMBER 30, 1997
<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......................... 9,606 0.70% $ (802,030.04) (0.05)%
Zero Balance........................... 422,460 30.94 0.00 0.00
$0.01 to $1,500.00..................... 495,246 36.27 294,181,537.95 17.76
$1,500.01 to $3,000.00................. 241,806 17.71 538,701,030.39 32.53
$3,000.01 to $4,500.00................. 136,703 10.01 497,160,305.70 30.02
Over $4,500.00......................... 59,628 4.37 327,023,370.20 19.74
--------- ------ ----------------- ------
TOTAL........................ 1,365,449 100.00% $1,656,264,214.20 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
AS OF SEPTEMBER 30, 1997
<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............................. 9 0.00% $ 0.00 0.00%
$0.01 to $1,500.00..................... 471,237 34.51 183,871,325.71 11.10
$1,500.01 to $3,000.00................. 332,855 24.38 382,709,373.72 23.11
$3,000.01 to $4,500.00................. 264,757 19.39 492,230,238.89 29.72
Over $4,500.00......................... 296,591 21.72 597,453,275.88 36.07
--------- ------ ----------------- ------
TOTAL........................ 1,365,449 100.00% $1,656,264,214.20 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
AS OF SEPTEMBER 30, 1997
<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......................... 1,202,314 88.05% $1,340,892,448.51 80.96%
Up to 30 Days.......................... 86,937 6.37 161,974,792.34 9.78
31 to 60 Days.......................... 28,186 2.07 54,463,142.66 3.29
61 to 90 Days.......................... 17,476 1.28 35,133,014.40 2.12
91 to 120 Days......................... 11,643 0.85 24,441,418.82 1.48
121 to 150 Days........................ 10,780 0.79 22,055,971.86 1.33
151 or More Days....................... 8,113 0.59 17,303,425.61 1.04
--------- ------ ----------------- ------
TOTAL........................ 1,365,449 100.00% $1,656,264,214.20 100.00%
========= ====== ================= ======
</TABLE>
28
<PAGE> 30
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
AS OF SEPTEMBER 30, 1997
<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.......................... 37,090 2.72% $ 7,984,762.16 0.48%
4 to 6 Months.......................... 16,377 1.20 6,615,803.52 0.40
7 to 9 Months.......................... 19,954 1.46 17,645,710.70 1.07
10 to 12 Months........................ 224,322 16.43 212,139,448.42 12.81
13 to 24 Months........................ 495,151 36.26 666,031,350.83 40.21
25 to 36 Months........................ 371,748 27.22 559,322,989.08 33.77
37 or More Months...................... 200,807 14.71 186,524,149.49 11.26
--------- ------ ----------------- ------
TOTAL........................ 1,365,449 100.00% $1,656,264,214.20 100.00%
========= ====== ================= ======
</TABLE>
29
<PAGE> 31
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
AS OF SEPTEMBER 30, 1997
<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...................................... 9,815 0.72% $ 8,875,997.41 0.54%
Alaska....................................... 451 0.03 575,261.49 0.03
Arizona...................................... 26,617 1.95 33,112,622.76 2.00
Arkansas..................................... 15,638 1.15 20,785,529.26 1.25
California................................... 180,678 13.23 219,218,929.48 13.23
Colorado..................................... 27,287 2.00 38,395,410.40 2.32
Connecticut.................................. 10,312 0.76 11,901,378.87 0.72
Delaware..................................... 2,386 0.17 2,926,758.18 0.18
Florida...................................... 94,356 6.91 106,772,288.23 6.44
Georgia...................................... 52,316 3.84 59,507,747.78 3.59
Hawaii....................................... 658 0.05 836,640.02 0.05
Idaho........................................ 5,834 0.43 7,289,027.89 0.44
Illinois..................................... 69,481 5.09 91,406,361.84 5.51
Indiana...................................... 38,172 2.80 52,347,464.55 3.16
Iowa......................................... 13,124 0.96 15,946,284.39 0.96
Kansas....................................... 9,600 0.70 11,901,342.46 0.72
Kentucky..................................... 30,748 2.25 34,056,914.15 2.06
Louisiana.................................... 24,772 1.81 32,021,498.29 1.93
Maine........................................ 2,479 0.18 2,502,228.20 0.15
Maryland..................................... 35,028 2.58 37,732,825.21 2.28
Massachusetts................................ 25,690 1.88 26,187,099.68 1.58
Michigan..................................... 32,398 2.37 38,457,282.46 2.32
Minnesota.................................... 14,936 1.09 17,034,699.78 1.03
Mississippi.................................. 11,438 0.84 15,541,108.09 0.94
Missouri..................................... 33,875 2.48 44,534,178.95 2.69
Montana...................................... 2,877 0.21 3,688,028.40 0.22
Nebraska..................................... 8,028 0.59 7,249,648.39 0.44
Nevada....................................... 18,200 1.33 26,818,223.87 1.62
New Hampshire................................ 2,951 0.22 3,679,358.00 0.22
New Jersey................................... 35,831 2.62 41,435,208.99 2.50
New Mexico................................... 10,516 0.77 14,622,514.18 0.88
New York..................................... 2,557 0.19 3,153,728.99 0.19
North Carolina............................... 45,123 3.30 45,579,723.44 2.75
North Dakota................................. 2,317 0.17 2,953,330.96 0.18
Ohio......................................... 70,086 5.13 95,499,603.45 5.77
Oklahoma..................................... 20,132 1.47 25,714,514.30 1.55
Oregon....................................... 20,807 1.52 30,204,568.04 1.82
Other........................................ 2,539 0.19 3,116,080.53 0.19
Pennsylvania................................. 54,757 4.01 62,462,570.25 3.77
Rhode Island................................. 5,474 0.40 6,104,437.93 0.37
South Carolina............................... 20,201 1.48 20,299,020.99 1.23
South Dakota................................. 1,914 0.14 1,940,513.94 0.12
Tennessee.................................... 47,748 3.50 57,763,471.16 3.49
Texas........................................ 119,244 8.73 154,198,941.31 9.31
Utah......................................... 7,711 0.56 9,392,080.64 0.57
Vermont...................................... 598 0.04 770,372.60 0.05
</TABLE>
30
<PAGE> 32
<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>
Virginia..................................... 41,685 3.05 42,507,952.98 2.57
Washington................................... 24,602 1.80 32,909,749.65 1.99
Washington DC................................ 5,186 0.38 6,730,965.25 0.41
West Virginia................................ 5,273 0.39 5,268,497.56 0.32
Wisconsin.................................... 19,352 1.42 20,375,207.78 1.23
Wyoming...................................... 1,651 0.12 1,959,020.80 0.12
--------- ------ ----------------- ------
TOTAL.............................. 1,365,449 100.00% $1,656,264,214.20 100.00%
========= ====== ================= ======
</TABLE>
Because the largest number of cardholders (based on billing addresses)
whose Accounts were included in the Trust Portfolio as of September 30, 1997
were located in California, Florida, Illinois, Ohio and Texas, adverse changes
in the economic conditions in these areas could have a direct impact on the
creation of Receivables or the timing or 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 November 2002 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 January 2003 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
31
<PAGE> 33
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 Available 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, because the Trust has issued the Previously 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
for the receivables in the Bank Portfolio for each month during the periods
shown and the average monthly payment rates for the receivables in the Bank
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 beginning receivables balance during such month and expressing such
amount as a percentage.
MONTHLY PAYMENT RATES(1)
BANK PORTFOLIO
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------------------
1997 1996 1996 1995 1994
----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C>
Lowest Month..................... 8.29% 8.25% 8.25% 8.40% 7.87%
Highest Month.................... 9.54% 9.79% 9.79% 11.43% 13.70%
Monthly Average.................. 8.82% 8.91% 8.91% 9.98% 9.83%
</TABLE>
- ---------------
(1) The monthly payment rates are calculated with the numerator as the total
amount of collections received (including interchange) during the month and
the denominator as the beginning receivables balance for the month.
32
<PAGE> 34
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
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------
1997 1996 1996 1995 1994
---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Principal Receivables
Outstanding(1).......................... $1,534,963 $926,020 $1,015,406 $487,576 $100,757
Finance Charges and Fees Billed(2)........ 282,763 174,743 256,000 127,432 24,581
Interchange............................... 14,175 10,726 16,843 9,765 1,782
Sum of Finance Charges, Fees Billed and
Interchange............................. 296,938 185,469 272,843 137,197 26,363
Yield From Finance Charges, Fees and
Interchange............................. 25.79%(3) 26.70%(3) 26.87% 28.14% 26.17%
Discount Option Receivable Collections
(2.00% Discount Percentage)............. $ 19,163 $ 11,484 $ 16,671 $ 8,891 $ 1,796
Portfolio Yield, Discount-Adjusted(4)..... 27.46%(3) 28.36%(3) 28.51% 29.96% 27.95%
</TABLE>
- ---------------
(1) Average Principal Receivables Outstanding for a particular period is the
average of the principal balances outstanding at the beginning and end of
each month during such period.
(2) Finance Charges and Fees Billed are net of finance charge and other fee
charge-offs.
(3) The percentages reflected for the nine months ended September 30, 1997 and
1996 are annualized figures, which are not necessarily indicative of results
for the entire year.
(4) Represents the historical portfolio yield adjusted to reflect the inclusion
of Discount Option Receivable Collections and a Discount Percentage of 2%
for all periods indicated.
The yield for the Bank 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 was 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
Previously Issued Series and for general corporate purposes.
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DESCRIPTION OF THE AGREEMENT
The Trust was formed pursuant to a Master Pooling and Servicing Agreement
dated as of October 30, 1997 (the "Agreement") between First North American
National Bank, a limited purpose credit card national bank, as transferor (in
such capacity, the "Transferor") and servicer (in such capacity, the
"Servicer"), and First Union National Bank, 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 provides for the Trust 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 is
currently held by the Transferor.
The Agreement provides 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 or 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 and to (i) all receivables
(the "Receivables") arising from time to time in a portfolio of MasterCard and
VISA credit card accounts (the "Accounts") originated or acquired by the
Transferor and satisfying certain eligibility criteria described herein
(including any Supplemental Accounts following their designation and any
Automatic Additional Accounts following their creation but excluding any Removed
Accounts following their designation), (ii) all monies due or to become due and
all amounts received with respect to the Receivables on and after the Cut-Off
Date (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. Each of the Certificates
will represent an undivided interest in the Trust Property.
At the time of the formation of the Trust, the Transferor transferred to
the Trust all Receivables in the Accounts as of September 30, 1997 (the "Cut-Off
Date") and all Receivables arising in the Accounts from time to time thereafter
until termination of the Trust. In connection with such transfer, the Transferor
has indicated in its records, including its computer files, that the Receivables
have been transferred to the Trust. In addition, the Transferor has agreed 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
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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 has filed 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, tax 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 provides 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 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
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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 issuance of such new Series
may affect the amount or timing of payments on the Investor Certificates of any
then outstanding Series. 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 represents and warrants to the Trustee, on behalf of the
Trust, as of the initial closing date with respect to the initial Accounts and
as of the related supplemental closing date with respect to Supplemental
Accounts, that (i) each Receivable existing in the initial Accounts as of the
Cut-Off Date was an Eligible Receivable as of such date and each Receivable
existing in the Supplemental Accounts as of the related Addition Cut-Off Date
was an Eligible Receivable as of such date, (ii)(A) the computer file or
microfiche list of the initial Accounts delivered by the Transferor to the
Trustee is an accurate and complete listing of the initial Accounts in all
material respects as of the Cut-Off Date and the information contained therein
with respect to the identity of such Accounts and the Receivables existing
thereunder was true and correct in all material respects as of the Cut-Off Date
and (B) each computer file or microfiche list delivered by the Transferor to the
Trustee with respect to Supplemental Accounts is an accurate and complete
listing of such Supplemental Accounts in all material respects as of the related
Addition Cut-Off Date and the information contained therein with respect to the
identity of such Supplemental Accounts and the Receivables existing thereunder
was true and correct in all material respects as of such Addition Cut-Off Date
and (iii) no selection procedure believed by the Transferor to be adverse to the
interests of the Investor Certificateholders has been used in selecting the
Accounts. In addition, (i) on each day on which any new Receivable is created
(including, without limitation, any Receivable created in an Automatic
Additional Account), the Transferor
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will be deemed to represent and warrant to the Trust that each Receivable
created on such day is an Eligible Receivable and (ii) on each day on which a
computer file or microfiche list is delivered by the Transferor to the Trustee
with respect to Automatic Additional Accounts, the Transferor will be deemed to
represent and warrant to the Trust that such computer file or microfiche list is
an accurate and complete listing of all the Accounts in all material respects as
of the last day of the preceding Collection Period and that the information
contained therein with respect to the identity of such Accounts and the
Receivables existing thereunder was true and correct in all material respects as
of the last day of such preceding Collection Period. In the event that any of
the representations and warranties set forth above is breached with respect to a
Receivable and, as a result of such breach, such Receivable is charged off as
uncollectible or the Trust's rights in and to 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 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 is required
to accept the reassignment of such Receivable by directing the Servicer to
deduct the principal balance of such Ineligible Receivable from the Aggregate
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
will 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 represents and warrants 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 execution and delivery of the Agreement and such Series
Supplement and the execution and delivery to the Trustee of the related Investor
Certificates and the consummation of the transactions provided for in the
Agreement and such Series Supplement have been duly authorized by the Transferor
by all necessary action on the part of the Transferor, (iii) the Agreement and
such Series Supplement constitute legal, valid, binding and enforceable
obligations of the Transferor, subject to certain bankruptcy and equity related
exceptions, and (iv) the Agreement constitutes either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor in
and to 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 a
materially adverse effect on the holders of the Investor Certificates, or in the
event that a material amount of Receivables are not Eligible Receivables and
such event has a materially adverse effect on the holders of the Investor
Certificates, 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 Servicer, 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); provided, however, that no such reassignment
shall be required if such breach shall have been cured prior to such
Distribution Date. The deposit amount for such reassignment will be equal to the
Aggregate Invested Amount on the close of business on the Record Date related to
the Distribution
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Date on which such deposit is made (less the aggregate principal amount on
deposit in the Excess Funding Account or, without duplication, 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 and (ii) any other unpaid amounts
required to be paid pursuant to the Agreement or any Series Supplement. 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, (iii) with respect to which all
material consents, licenses, approvals or authorizations of, or registrations
with, any governmental authority required to be obtained, effected 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, effected 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 "chattel paper," 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, (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 and (xii) which was
generated by the Transferor in the ordinary course of business.
"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 was created in accordance with, or under standards no
less stringent than, the policies and procedures of the Transferor relating to
the operation of its consumer credit card business, (v) which is not identified
in the Transferor's computer files as canceled due to the bankruptcy, insolvency
or death of the related obligor, (vi) the receivables in which have not been
charged off as uncollectible, (vii) the receivables in which have not been
assigned, pledged or sold, (viii) which is not a corporate account, (ix) the
obligor on which has provided a billing address in the United States or its
territories or possessions or which is a United States military address and (x)
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.
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CERTAIN COVENANTS
The Transferor covenants 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 any Receivable 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 notify the Trustee of any change in its name, identity
or structure which would cause any financing statement or continuation statement
filed pursuant to the Agreement to be misleading or any change in its principal
executive office or the location of the principal records concerning the
Receivables which would require the filing of any amendment to any such
financing statement or continuation statement or the filing of any new financing
statement and, in connection with any such change, will take certain actions
necessary or advisable to protect the interests of the Trustee in the
Receivables and the other Trust Property.
AUTOMATIC ADDITIONAL ACCOUNTS
The Agreement provides 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. 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 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 permits or, under the circumstances described below, requires
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
business day preceding the following 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
eliminated on or before such preceding business day through reductions in the
Aggregate Invested Amount or through increases in the amount on deposit in the
Excess Funding Account. A failure to make any such transfer when required or
within any applicable grace period will result in an Early Amortization Event.
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"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 minus any additional
invested amount allocated to any Enhancement pursuant to any Series Supplement.
"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 as of such date.
"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 as of the Closing Date
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.
Each designation of Supplemental Accounts is subject to the following
conditions, among others: (i) the Transferor shall have given 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 shall have delivered to the Trustee an officer's certificate
certifying, among other things, that each such Supplemental Account was, as of
the related Addition Cut-Off Date, 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 used 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
The Agreement permits the Transferor to designate from time to time (which
may be restricted to certain periods if so provided in the related Series
Supplement), subject to certain limitations and conditions set forth in the
Agreement, 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 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; (ii) 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 used in selecting the Removed Accounts;
(iii) the removal of the Receivables in the Removed Accounts shall not, in the
reasonable belief of the Transferor, cause an early amortization event to occur
with respect to any then outstanding Series; (iv) the Rating Agency Condition
shall have been satisfied; (v) the Transferor shall have
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delivered to the Trustee an officer's certificate confirming the items set forth
in clauses (i) through (iv) above; and (vi) such other conditions as may be
provided in the Series Supplement for any then outstanding Series shall have
been satisfied. Notwithstanding the above, the Transferor may designate as a
Removed Account (i) 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 and (ii) without the consent of the Trustee or
the holders of the Investor Certificates of any then outstanding Series (but
with the consent of, or in accordance with written procedures approved by,
Moody's Investors Service, Inc. and Standard & Poor's), any Defaulted Account.
The designation of Defaulted Accounts as Removed Accounts might have an impact
on the amount or timing of Recoveries.
COLLECTION ACCOUNT
The Trustee has established and will 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 state thereof or
the District of Columbia (or any domestic branch or agency of any foreign bank),
the deposits in which are insured by the Federal Deposit Insurance Corporation
and which at all times has a short-term 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 of or fully guaranteed by the United States of America; (B) time
deposits in, or promissory notes or bankers acceptances issued by, any
depository institution or trust company organized under the laws of the United
States of America or any state thereof or the District of Columbia (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 depository 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 rating 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 short-term 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.
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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 has designated 2.00% of the
amount of Receivables arising in the Accounts 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 to increase, reduce or eliminate
(subject to the limitations described below) the percentage used to determine
Discount Option Receivables (the "Discount Percentage"), which change will apply
to 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 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) if such designation would cause the
Discount Percentage to be less than 1.00% or more than 3.00%, the Rating Agency
Condition has been satisfied. On each date of processing of any collections
during the time the discount feature 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 ("Discount Option Receivable 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 Previously 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 (A) 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 (B) 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,
plus (C) an amount equal to the average Investor Default Amount for the three
preceding Collection Periods and (ii) Principal Collections will only be
deposited into 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 into
the Collection Account within two business days of each date of processing, but
rather may make a single deposit into the Collection
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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 may be an implied rating) of
at least "P-1" by Moody's Investors Service, Inc. and "A-1" by Standard &
Poor's, (ii) FNANB or such affiliate obtains and maintains in force a letter of
credit or other surety covering collection risk of the Servicer approved in
writing by 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 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 into 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 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
Previously 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 allocated 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
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 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 allocated to any Series which is 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
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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.
EXCESS FUNDING ACCOUNT
The Trustee has established and will 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.
On each Distribution Date during the Early Amortization Period, there will
be withdrawn from the Excess Funding Account an amount equal to the product of
(i) the amount on deposit in the Excess Funding Account, if any, and (ii) a
fraction, the numerator of which is the principal shortfall with respect to
Series 1997-2 and the denominator of which is equal to the aggregate principal
shortfalls of all Series then outstanding. Such amount will be deposited in the
Collection Account and be considered as part of Available Principal Collections
with respect to Series 1997-2.
DEFAULTED ACCOUNTS
The Servicer will allocate the Default Amount with respect to each
Collection Period among Series 1997-2, the interests of the Previously 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 in all Accounts which became Defaulted Accounts 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
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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
Principal 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
Principal 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 Principal 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 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 provides that the Servicer will indemnify and hold harmless
the Trust, for the benefit of the holders of all then outstanding Series, and
the Trustee, including its directors, officers, employees and agents, from and
against any loss, liability, claim, damage, injury or expense (including,
without limitation, reasonable fees and expenses of counsel) arising out of or
relating to (i) the acceptance by the Trustee of the Trust pursuant to the
Agreement or (ii) any claims, actions or proceedings brought or asserted against
the Trust, the Trustee or any director, officer, employee or agent of the
Trustee pursuant to the Agreement or any Series Supplement; provided, however,
that the Servicer will not indemnify or hold harmless the Trust, for the benefit
of the holders of all then outstanding Series, the Trustee or any director,
officer, employee or agent of the Trustee for any loss, liability, claim,
damage, injury or expense arising out of or relating to (i) the willful
misfeasance, bad faith or negligence of the Trustee in the performance of its
duties under the Agreement or (ii) any action taken by the Trustee at the
request of the holders of any Series; and provided further, that the Servicer
will not indemnify the Trust, for the benefit of the Certificateholders, from or
against (i) any federal, state or local taxes required to be paid by the Trust
or the holders of any Series in connection with the Agreement to any taxing
authority or (ii) any loss, liability, claim, damage, injury or expense incurred
by the holders of any Series in their capacity as investors as a result of any
action taken by the holders of any Series, or as a result of the performance of
the Receivables, market fluctuations , a shortfall in any Enhancement or other
similar market or investment risks (except to the extent that such loss,
liability, claim, damage, injury or expense was incurred by reason of the
failure by the Servicer to act in accordance with the Agreement and its usual
and customary servicing policies and procedures).
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
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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 provides 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 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 has covenanted 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
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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 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 (without regard to
the amount of any Enhancement) 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 Receivable at the end of the preceding Collection Period plus
the amount of finance charges at the applicable monthly periodic rate from the
last date billed through the end of such 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 Series and (ii) the sum of an allocable portion of the
Transferor Amount and the invested amount with respect to such Series as of the
last day of the second 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 on each Distribution Date
from amounts on deposit in the Collection Account (unless the amount of such fee
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 or 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.
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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;
(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 of any
Series adversely affected thereby, 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 of any Series adversely affected thereby, 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 clause (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
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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 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
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; and
(x) whether an Early Amortization Event has occurred. The Trustee will make such
statement available to the holders of the Investor Certificates of each then
outstanding Series upon request.
EVIDENCE AS TO COMPLIANCE
On or before June 30 of each calendar year, beginning with June 30, 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.
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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 or publicly traded partnership 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 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
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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
First Union National Bank 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
901 East Cary Street, 2nd Floor, Richmond, Virginia 23219, Attention: Corporate
Trust Department.
For purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee has 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.
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)
October 1, 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 Trustee or the
Servicer on behalf of 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 has issued the Previously 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 Previously 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 DTC Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic book-entry
changes in DTC Participant accounts, thereby eliminating the need for physical
movement of securities certificates. DTC Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a DTC Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and the DTC 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
DTC 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 DTC Participants' and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchase, but Certificate Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect Participant through which the
Certificate Owner entered into the transaction. Transfers of ownership interests
in the Certificates are to be accomplished by entries made on the books of DTC
Participants acting on behalf of Certificate Owners. Certificate Owners will not
receive certificates representing their ownership interest in Certificates,
except in the event that use of the book-entry system for the Certificates is
discontinued.
To facilitate subsequent transfers, all Certificates deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Certificates with DTC and their registration in the name of Cede
& Co. effects no change in beneficial ownership. DTC has no knowledge of the
actual Certificate Owners of the Certificates. DTC's records reflect only the
identity of the DTC Participants to whose accounts such Certificates are
credited, which may or may not be the Certificate Owners. The DTC Participants
will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect Participants, and by DTC Participants and
Indirect Participants to Certificate Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time. Neither DTC nor Cede & Co. will consent or vote with
respect to 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 DTC 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 DTC 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 DTC Participants to Certificate Owners
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such DTC
Participant and not of DTC, the Trustee or the Transferor, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the Trustee,
disbursement of such payments to DTC Participants shall be the responsibility of
DTC, and disbursement of such payments to the Certificate Owners shall be the
responsibility of DTC Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Certificates at any time by giving reasonable notice to the
Transferor or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Definitive Certificates are
required to be printed and delivered. The Transferor may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor securities
depository). In that event, Definitive Certificates will be 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
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domestic markets in several countries. As a professional depository, Cedel is
subject to regulations by the Luxembourg Monetary Institute. Cedel Participants
are recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters 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 in 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
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its responsibilities as Depository with respect to the Certificates of such
Class, and the Trustee or the Transferor is unable to locate a qualified
successor, (ii) the Transferor, at its option, advises the Trustee in writing
that it elects to terminate the book-entry system through the Depository or
(iii) after the occurrence of a Servicer Default, Certificate Owners
representing not less than 50% of the invested amount of Series 1997-2 advise
the Trustee and the Depository through its participating organizations in
writing that the continuation of a book-entry system through the Depository is
no longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Depository is required to notify its participating
organizations 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 Class A Certificates and 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 December 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 December 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).
The Class B Certificates will bear interest for the period from the Closing
Date through the day preceding the December 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
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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).
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
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 (800) 829-8432.
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.
"Class A Available Funds" means, for any Collection Period, the sum of (i)
the Class A Floating Allocation Percentage (with respect to any Collection
Period during the Revolving Period or the Accumulation Period) or the Class A
Fixed Allocation Percentage (with respect to any Collection Period during the
Early Amortization Period) of Finance Charge Collections with respect to such
Collection Period (including net investment earnings, if any, on funds on
deposit in the Excess Funding Account that are to be treated as Finance Charge
Collections in accordance with the Series 1997-2 Supplement) plus (ii) if the
Distribution Date immediately following such Collection Period occurs before the
Class B Principal Commencement Date, the Principal Funding Investment Proceeds,
if any, to be withdrawn from the Principal Funding Account on such Distribution
Date plus (iii) the amount, if any, to be withdrawn from the Reserve Account and
included in Class A Available Funds on such Distribution Date pursuant to the
Series 1997-2 Supplement plus (iv) 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 on such Distribution Date pursuant to the
Series 1997-2 Supplement.
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"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 (with respect to any Collection
Period during the Revolving Period or the Accumulation Period) or the Class B
Fixed Allocation Percentage (with respect to any Collection Period during the
Early Amortization Period) of Finance Charge Collections with respect to such
Collection Period (including net investment earnings, if any, on funds on
deposit in the Excess Funding Account that are to be treated as Finance Charge
Collections in accordance with the Series 1997-2 Supplement) plus (ii) if the
Distribution Date immediately following such Collection Period occurs on or
after the Class B Principal Commencement Date, the Principal Funding Investment
Proceeds, if any, to be withdrawn from the Principal Funding Account on such
Distribution Date plus (iii) the amount, if any, to be withdrawn from the
Reserve Account and included in Class B Available Funds on such Distribution
Date pursuant to the Series 1997-2 Supplement plus (iv) 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 on such
Distribution Date pursuant to the Series 1997-2 Supplement.
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, Available 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 Supplements 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), Available 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 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
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to the preceding Collection Period plus (ii) any available Excess Spread and
Shared Excess Finance Charge Collections to be treated as Available Principal
Collections as specified under "-- Application of Collections -- Excess Spread;
Shared Excess Finance Charge Collections" below plus (iii) the amount of Shared
Principal Collections allocated to Series 1997-2 with respect to such
Distribution Date plus (iv) during the Early Amortization Period, amounts on
deposit in the Excess Funding Account allocated to Series 1997-2 with respect to
such Distribution Date minus (v) 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, $50,250,000; 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, $67,500,000.
"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 October 2001 Collection Period. Upon written notice to
the Trustee, the Servicer may elect to postpone the commencement of the
Accumulation Period and extend the length of the Revolving Period, subject to
certain conditions, including those set forth below. The Servicer may make such
election only if the Accumulation Period Length (determined as described below)
is less than 12 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 12 months, the Servicer
may, at its sole option, postpone the commencement of the Accumulation Period
such that the number of months included in the
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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.
PAIRED SERIES
The Series 1997-2 Certificates may be paired with one or more other Series
(each a "Paired Series"). Each Paired Series either will be prefunded with an
initial deposit to a prefunding account in an amount up to the initial principal
balance of such Paired Series and will be funded primarily from the proceeds of
the sale of such Paired Series or will have a variable principal amount. Any
such prefunding account will be held for the benefit of such Paired Series and
not for the benefit of the Certificateholders. As funds are accumulated in the
Principal Funding Account, either (i) in the case of a prefunded Paired Series,
an equal amount of funds on deposit in any prefunding account for such prefunded
Paired Series will be released (which funds will be distributed to the
Transferor) or (ii) in the case of a Paired Series having a variable principal
amount, an interest in such variable Paired Series in an equal or lesser amount
may be sold by the Trust (and the proceeds thereof will be distributed to the
Transferor) and, in either case, the invested amount of such Paired Series will
increase by up to a corresponding amount. Upon payment in full of Series 1997-2,
assuming that there have been no unreimbursed charge-offs with respect to any
related Paired Series, the aggregate invested amount of such related Paired
Series will have been increased by an amount up to an aggregate amount equal to
the Invested Amount on the Closing Date. The issuance of a Paired Series will be
subject to the conditions described under "Description of the
Agreement -- Exchanges." There can be no assurance that the terms of any Paired
Series might not have an impact on the timing or amount of payments received by
the Certificateholders. In particular, the numerator of the allocation
percentage used to allocate Principal Collections may be changed upon the
occurrence of an early amortization event with respect to a Paired Series
(provided that such numerator is not less than the Invested Amount as of the
last day of the revolving period for such Paired Series). In such case, the time
over which principal will be received by the Certificateholders will be
extended. See "Risk Factors -- Master Trust Considerations," "Maturity
Considerations" and "-- Allocation of Collections and Default Amounts."
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
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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 Flows" 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 Previously 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 during the
Revolving Period or the Accumulation 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
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 initial Class D 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
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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.
Finance Charge Collections with respect to any Collection Period during the
Early Amortization Period and 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 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.
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"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
$63,000,000 minus (b) the aggregate amount of principal payments made to the
Collateral Indebtedness Holder prior to such date minus (c) the amount of
Reallocated Principal Collections used to make payments in respect of the
Certificates on all prior 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 $99,000,000 (plus the
initial principal amount of any additional Class D Certificates issued, at the
sole option of the Transferor, on or prior to such Distribution Date) 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
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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 amount on deposit in the Cash
Collateral Account 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.
"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 three 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 0.50% 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
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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 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
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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."
"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
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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 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
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(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).
"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).
"Collateral Available Funds" means, with respect to any Collection Period,
an amount equal to the Collateral Floating Allocation Percentage (with respect
to any Collection Period during the Revolving Period or the Accumulation Period)
or the Collateral Fixed Allocation Percentage (with respect to any Collection
Period during the Early Amortization Period) 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 (with respect to any
Collection Period during the Revolving Period or the Accumulation Period) or the
Class D Fixed Allocation Percentage (with respect to any Collection Period
during the Early Amortization Period) 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 up 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;
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(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, 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 amount on deposit in the Cash Collateral
Account (without giving effect to any deposit made on such date under the
Agreement and after giving effect to any payment of Collateral Monthly
Principal or Class D Monthly Principal being made on such date) 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
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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 excess, if any, of the Required Reserve
Account Amount over the Available Reserve Account Amount will be deposited
in the Reserve Account;
(p) 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; and
(q) the balance, if any, will constitute "Shared Excess Finance Charge
Collections" with respect to Group One and will 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 1.00% per annum, or such
lesser rate as may be designated pursuant to the Loan Agreement.
"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 1.00% 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;
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(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 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 18%, but not less than
$27,000,000; 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 the occurrence of 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 such officer, 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
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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 Cash
Collateral Account will have a beginning balance of zero, which balance may be
increased to the extent Excess Spread and Shared Excess Finance Charge
Collections allocated to Series 1997-2 are required to be or are otherwise
deposited therein. 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 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
Investor 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.
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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 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 equivalent of a 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 Investor 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 the amount 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
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Class D Invested Amount will be reduced by the amount of such excess, but not by
more than the unfunded portion 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
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 the amount 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 unfunded portion 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 Allocable Amount for such
Distribution Date exceeds the sum of the amount of Excess Spread and Shared
Excess Finance Charge Collections allocable to Series 1997-2 not required to pay
the Class A Required Amount or the Class B Required Amount or to pay certain
other amounts, 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
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the Class A Certificates or the Class B Certificates will be reduced by the
amount of such excess, but not by more than the unfunded portion 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 October 2001
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;
(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 reassignment 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;
(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 plus 2.00%;
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(j) 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; or
(k) the Retained Percentage shall be equal to or less than 2.00% as of
the last day of any Collection Period.
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 50% of the Invested Amount, by written notice to the
Transferor and the Servicer (and to the Trustee, if given by the
Certificateholders), declare that an Early Amortization Event has occurred with
respect to the Certificates as of the date of such notice. In the case of any
event described in clause (d), (e) or (f) above, an Early Amortization Event
with respect to all Series, and in the case of any event described in clause
(h), (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.
"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 the preceding 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 preceding Collection Period and the denominator of
which is equal to the Adjusted Invested Amount as of the last day of such
preceding Collection Period.
"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 allocated to Series 1997-2 with respect to such
Collection Period (including interest and other investment earnings (net of
losses and investment expenses) on funds on deposit in the Excess Funding
Account allocable to Series 1997-2) 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 minus (v) the Investor Default Amount for the Distribution Date
immediately following such Collection Period and the denominator of which is the
Adjusted Invested Amount as of the last day of such Collection Period.
"Retained Percentage" means, on any date of determination, the percentage
equivalent of a fraction the numerator of which is the Retained Interest on such
date and the denominator of which is the Aggregate Principal Receivables on such
date plus all amounts then on deposit in the Excess Funding Account (not
including interest and other investment earnings on such amounts).
"Retained Interest" means, on any date of determination, the sum of the
Transferor Amount on such date and the invested amount of each Class of Investor
Certificates retained by the Transferor on such date.
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
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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."
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 second 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 second 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 second 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 second
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 second 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.
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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 Certificateholder
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 5% 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. 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 represents and warrants in the Agreement that the transfer
of the Receivables to the Trust constitutes either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor in
and to the Receivables, except for the interest of the holder of the
Exchangeable Transferor Certificate, or a grant to the Trust of a security
interest in the Receivables. The Transferor also represents and warrants 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
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governmental liens. UCC searches have been and will be conducted in the records
of the Georgia Central Filing Office and certain local filing offices 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 covenants 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 covenants 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.
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 Federal Deposit Insurance Corporation (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 Resolution Trust Corporation (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 provides 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
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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 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 has agreed 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 has also agreed 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 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.
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.
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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."
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 expresses in the Agreement the intent that, for federal, state and
local income and franchise tax purposes, the Certificates will be indebtedness.
FNANB agrees 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.
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In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. Special Tax Counsel is of the opinion
that the rationale of those cases will not apply to this transaction.
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
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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 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 holding requirement for long-term capital gain treatment, any such gain or
loss generally will be long-term capital gain or loss, provided that the
Certificate was held as a capital asset. Under the Taxpayer Relief Act of 1997,
the holding requirement for long-term capital gain or loss treatment for
individuals was increased to 18 months. Individuals who have held the
Certificates for more than 18 months are subject to a maximum long-term capital
gain rate of 20 percent. 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.
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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 investment trust" ("FASIT"). However, these provisions were not
effective until September 1, 1997, and many technical issues concerning FASITs
must be addressed by Treasury regulations that have yet to be issued. Although
transition rules permit an entity in existence on August 31, 1997, such as the
Trust, to elect FASIT status, at the present time it is not clear how
outstanding interests of such an entity would be treated subsequent to such an
election. In particular, it is not clear whether Certificates 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 issued Treasury
regulations provide alternative methods for satisfying the identification
requirements described above. In the case of Certificates held by a foreign
partnership, the new regulations require that (i) certification be provided (x)
by the partners of the foreign partnership or (y) by the foreign partnership if
it has entered into an agreement with the IRS to be treated as a "withholding
foreign partnership" and (ii) the foreign partnership provide certain
information, including a United States taxpayer identification number. A
look-through rule applies in the case of tiered partnerships. The new
regulations are effective for payments made after December 31, 1998.
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
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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 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
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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.
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
85
<PAGE> 87
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
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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<PAGE> 88
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated as of November , 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 Montgomery Securities, Inc...................... $261,500,000
Credit Suisse First Boston Corporation...................... 261,500,000
BancAmerica Robertson Stephens.............................. 50,000,000
Deutsche Morgan Grenfell Inc................................ 30,000,000
------------
Total.................................................. $603,000,000
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITER CLASS B CERTIFICATES
- ----------- --------------------
<S> <C>
NationsBanc Montgomery Securities, Inc...................... $135,000,000
============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates if
any of the Certificates are purchased.
The Underwriters of the Class A Certificates propose initially to offer the
Class A Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in excess of
% of the principal amount of the Class A Certificates. The Underwriters of
the Class A Certificates 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 of the Class A Certificates.
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 covering transactions and penalty bids with
respect to the Certificates in accordance with Regulation M under the Exchange
Act.
Over-allotment transactions involve syndicate sales in excess of the
offering size, which create syndicate short positions. Stabilizing transactions
permit bids to purchase the Certificates 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
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<PAGE> 89
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 Advertisements) (Exemptions) Order 1996 (as amended) 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.
88
<PAGE> 90
INDEX TO LOCATION OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------------
<S> <C>
Accounts.................................................... 1, 6, 34
Accumulation Period......................................... 10
Accumulation Period Length.................................. 59
Addition Cut-Off Date....................................... 27
Adjusted Invested Amount.................................... 75
Adjustment.................................................. 45
Adjustment Amount........................................... 45
Adjustment Payment.......................................... 45
Aggregate Invested Amount................................... 40
Aggregate Principal Receivables............................. 40
Agreement................................................... 1, 4, 5 34
Automatic Additional Accounts............................... 7, 39
Available Enhancement Amount................................ 13
Available Principal Collections............................. 57
Available Reserve Account Amount............................ 64
Bank Portfolio.............................................. 25
Base Rate................................................... 75
Benefit Plans............................................... 84
Cash Collateral Account..................................... 14, 71
Cedel....................................................... 53
Cedel Participants.......................................... 53
Certificateholders.......................................... 2
Certificate Owners.......................................... 2
Certificates................................................ 1, 4
Circuit City................................................ 22
Class....................................................... 5, 34
Class A Accumulation Period................................. 11
Class A Additional Interest................................. 66
Class A Adjustment Amount................................... 72
Class A Allocable Amount.................................... 72
Class A Available Funds..................................... 56
Class A Certificate Rate.................................... 2, 55
Class A Certificateholders.................................. 8
Class A Certificates........................................ 1, 4
Class A Expected Final Distribution Date.................... 2, 31
Class A Fixed Allocation Percentage......................... 61
Class A Floating Allocation Percentage...................... 60
Class A Initial Invested Amount............................. 8
Class A Invested Amount..................................... 8, 61
Class A Investor Charge-Off................................. 73
Class A Investor Default Amount............................. 71
Class A Monthly Interest.................................... 67
Class A Monthly Principal................................... 70
Class A Required Amount..................................... 64
Class A Servicing Fee....................................... 76
Class B Accumulation Period................................. 11
Class B Additional Interest................................. 66
Class B Adjustment Amount................................... 72
Class B Allocable Amount.................................... 72
</TABLE>
89
<PAGE> 91
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------------
<S> <C>
Class B Available Funds..................................... 57
Class B Certificate Rate.................................... 2, 55
Class B Certificateholders.................................. 9
Class B Certificates........................................ 1, 4
Class B Expected Final Distribution Date.................... 2, 31
Class B Fixed Allocation Percentage......................... 61
Class B Floating Allocation Percentage...................... 60
Class B Initial Invested Amount............................. 9
Class B Invested Amount..................................... 9, 62
Class B Investor Charge-Off................................. 73
Class B Investor Default Amount............................. 71
Class B Monthly Interest.................................... 67
Class B Monthly Principal................................... 70
Class B Principal Commencement Date......................... 57
Class B Required Amount..................................... 65
Class B Servicing Fee....................................... 76
Class B Subordinated Principal Collections.................. 59
Class D Additional Interest................................. 68
Class D Adjustment Amount................................... 72
Class D Allocable Amount.................................... 72
Class D Available Funds..................................... 67
Class D Certificate Rate.................................... 69
Class D Certificateholders.................................. 10
Class D Certificates........................................ 5
Class D Fixed Allocation Percentage......................... 61
Class D Floating Allocation Percentage...................... 60
Class D Invested Amount..................................... 62
Class D Investor Default Amount............................. 71
Class D Monthly Interest.................................... 69
Class D Monthly Principal................................... 70
Class D Servicing Fee....................................... 76
Closing Date................................................ 2
Code........................................................ 80
Collateral Additional Interest.............................. 68
Collateral Adjustment Amount................................ 72
Collateral Allocable Amount................................. 72
Collateral Available Funds.................................. 67
Collateral Fixed Allocation Percentage...................... 61
Collateral Floating Allocation Percentage................... 60
Collateral Indebtedness Amount.............................. 62
Collateral Indebtedness Holder.............................. 10
Collateral Indebtedness Interest............................ 5
Collateral Investor Default Amount.......................... 71
Collateral Monthly Interest................................. 69
Collateral Monthly Principal................................ 70
Collateral Rate............................................. 69
Collateral Required Amount.................................. 65
Collateral Servicing Fee.................................... 76
Collection Account.......................................... 8, 41
Collection Period........................................... 4
Commission.................................................. 2
</TABLE>
90
<PAGE> 92
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------------
<S> <C>
Controlled Accumulation Amount.............................. 58
Controlled Deposit Amount................................... 11, 58
Cooperative................................................. 54
Covered Amount.............................................. 63
Cut-Off Date................................................ 6, 34
Default Amount.............................................. 44
Defaulted Account........................................... 44
Deficit Controlled Accumulation Amount...................... 58
Definitive Certificates..................................... 54
Depositaries................................................ 52
Depository.................................................. 54
Determination Date.......................................... 49
Discount Option Receivable Collections...................... 42
Discount Option Receivables................................. 42
Discount Percentage......................................... 42
Distribution Date........................................... 2
Distribution Date Statement................................. 77
DOL......................................................... 85
DTC......................................................... 2
DTC Participants............................................ 52
Early Amortization Event.................................... 74
Early Amortization Period................................... 12
Enhancement................................................. 35
Enhancement Provider........................................ 35
Enhancement Surplus......................................... 70
Eligible Account............................................ 38
Eligible Institution........................................ 41
Eligible Investments........................................ 41
Eligible Receivable......................................... 38
ERISA....................................................... 84
Euroclear................................................... 54
Euroclear Operator.......................................... 54
Euroclear Participants...................................... 54
Euroclear System............................................ 54
Excess Funding Account...................................... 44
Excess Spread............................................... 67
Exchange.................................................... 35
Exchange Act................................................ 2
Exchangeable Transferor Certificate......................... 5, 34
FASIT....................................................... 83
FDIA........................................................ 78
FDIC........................................................ 78
Final Regulation............................................ 14, 85
Final Termination Date...................................... 51
Finance Charge Collections.................................. 8
Finance Charge Receivables.................................. 6, 27
FIRREA...................................................... 16, 78
Fixed Allocation Percentage................................. 61
Floating Allocation Percentage.............................. 60
FNANB....................................................... 22
Foreign Investor............................................ 83
</TABLE>
91
<PAGE> 93
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------------
<S> <C>
General Account Regulations................................. 86
Global Securities........................................... 95
Group....................................................... 5, 34
Group One................................................... 5
Indirect Participants....................................... 52
Ineligible Receivable....................................... 37
Interchange................................................. 6, 26, 34
Interest Period............................................. 9, 55
Invested Amount............................................. 62
Investor Certificates....................................... 5, 34
Investor Default Amount..................................... 71
Investor Monthly Servicing Fee.............................. 7, 76
Investor Servicing Fee...................................... 47
IRS......................................................... 80
LIBOR....................................................... 2, 56
LIBOR Determination Date.................................... 2
Loan Agreement.............................................. 71
Minimum Aggregate Principal Receivables..................... 40
Minimum Transferor Amount................................... 40
Minimum Transferor Percentage............................... 40
Monthly Servicer Report..................................... 49
OID......................................................... 82
OID Regulations............................................. 82
Paired Series............................................... 59
Paying Agent................................................ 77
Portfolio Yield............................................. 75
Previously Issued Series.................................... 5
Principal Collections....................................... 8
Principal Funding Account................................... 10, 62
Principal Funding Account Balance........................... 62
Principal Funding Investment Proceeds....................... 63
Principal Receivables....................................... 6, 27
Principal Terms............................................. 35
Rating Agency............................................... 15
Rating Agency Condition..................................... 36
Reallocated Principal Collections........................... 64
Receivables................................................. 1, 6, 34
Record Date................................................. 55
Recoveries.................................................. 6, 34
Reference Banks............................................. 56
Removed Accounts............................................ 7,40
Required Cash Collateral Account Amount..................... 71
Required Enhancement Amount................................. 13, 70
Required Investor Certificateholders........................ 37
Required Reserve Account Amount............................. 63
Reserve Account............................................. 11, 63
Reserve Account Funding Date................................ 63
Retained Interest........................................... 75
Retained Percentage......................................... 75
Revolving Period............................................ 10
RTC......................................................... 78
</TABLE>
92
<PAGE> 94
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------------
<S> <C>
Securities Act.............................................. 3
Series...................................................... 5, 34
Series 1997-2............................................... 5
Series 1997-2 Certificates.................................. 5
Series 1997-2 Supplement.................................... 5
Series Adjustment Amount.................................... 72
Series Supplement........................................... 5
Service Transfer............................................ 48
Servicer.................................................... 1, 4, 34
Servicer Default............................................ 48
Servicing Fee............................................... 7, 47
Shared Excess Finance Charge Collections.................... 43
Shared Principal Collections................................ 43
Special Tax Counsel......................................... 80
Stated Series Termination Date.............................. 10
Supplemental Accounts....................................... 7, 39
Tax Opinion................................................. 36
Telerate Page 3750.......................................... 56
Terms and Conditions........................................ 54
Transfer Agent and Registrar................................ 55
Transferor.................................................. 1, 4, 34
Transferor Amount........................................... 40
Transferor Interest......................................... 8, 42
Trust....................................................... 1, 4
Trust Portfolio............................................. 27
Trust Property.............................................. 6, 34
Trustee..................................................... 1, 5, 34
TSYS........................................................ 26
UCC......................................................... 16
Underwriters................................................ 87
Underwriting Agreement...................................... 87
U.S. Person................................................. 97
</TABLE>
93
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ANNEX A
PREVIOUSLY ISSUED SERIES
The Trust has previously issued Series 1997-1. The table below sets forth
the principal characteristics of Series 1997-1. For more specific information
with respect to Series 1997-1, any prospective investor should contact the
Transferor at (770) 423-7900.
SERIES 1997-1
<TABLE>
<S> <C>
Initial Invested Amount................................... $1,576,000,000
Invested Amount as of October 30, 1997.................... $1,576,000,000
Expected Invested Amount as of end of Closing Date........ $675,000,000
Certificate Rate.......................................... Floating (Uncapped)
Enhancement............................................... Guaranty
Series Servicing Fee Percentage........................... 2.00%
Stated Series Termination Date............................ 43rd Distribution Date
after Termination Date
Issuance Date............................................. October 30, 1997
</TABLE>
94
<PAGE> 96
ANNEX B
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered FNANB Credit
Card Master Trust Floating Rate 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
95
<PAGE> 97
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 Global
Securities 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
96
<PAGE> 98
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.
97
<PAGE> 99
======================================================
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................... 4
Risk Factors......................... 16
First North American National Bank... 22
First North American National Bank
Credit Card Operations............. 22
The Receivables...................... 27
Maturity Considerations.............. 31
Yield Considerations................. 33
The Trust............................ 33
Use of Proceeds...................... 33
Description of the Agreement......... 34
Description of the Certificates...... 52
Certain Legal Aspects of the
Receivables........................ 77
Certain Federal Income Tax
Consequences....................... 80
ERISA Considerations................. 84
Underwriting......................... 87
Legal Matters........................ 88
Index to Location of Defined Terms... 89
Annex A (Previously Issued Series)... 94
Annex B (Global Clearance, Settlement
and Tax Documentation
Procedures)........................ 95
</TABLE>
---------------------
UNTIL FEBRUARY , 1998, 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
$603,000,000 CLASS A
FLOATING RATE
ASSET BACKED
CERTIFICATES, SERIES 1997-2
$135,000,000 CLASS B
FLOATING RATE
ASSET BACKED
CERTIFICATES, SERIES 1997-2
FIRST NORTH AMERICAN
NATIONAL BANK
TRANSFEROR AND SERVICER
------------------------
PROSPECTUS
------------------------
NATIONSBANC MONTGOMERY
CREDIT SUISSE FIRST BOSTON
BANCAMERICA
ROBERTSON STEPHENS
DEUTSCHE MORGAN GRENFELL
UNDERWRITERS OF THE CLASS A CERTIFICATES
NATIONSBANC MONTGOMERY
UNDERWRITER OF THE CLASS B CERTIFICATES
======================================================
<PAGE> 100
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............................................ $223,637
Printing and Engraving...................................... 20,000
Trustee's Fees.............................................. 12,025
Legal Fees and Expenses..................................... 225,000
Blue Sky Fees and Expenses.................................. 10,000
Accountants' Fees and Expenses.............................. 45,000
Rating Agency Fees.......................................... 235,000
Miscellaneous Fees.......................................... 30,000
--------
Total............................................. $800,662
========
</TABLE>
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.
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
II-1
<PAGE> 101
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 -- Master Pooling and Servicing Agreement dated as of October
30, 1997 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>
(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 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.
II-2
<PAGE> 102
(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> 103
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 Amendment
No. 1 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Richmond, Commonwealth of Virginia, on November 12, 1997.
FIRST NORTH AMERICAN NATIONAL BANK
By: /s/ MICHAEL T. CHALIFOUX
------------------------------------
Michael T. Chalifoux
Chairman
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 has been signed on November , 1997 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL T. CHALIFOUX Chairman and Director November 12, 1997
- ----------------------------------------------------- (Principal Executive
Michael T. Chalifoux Officer)
/s/ FREDERICK G. KRAEGEL President and Director November 12, 1997
- ----------------------------------------------------- (Principal Financial
Frederick G. Kraegel Officer and Principal
Accounting Officer)
/s/ PHILIP J. DUNN Director November 12, 1997
- -----------------------------------------------------
Philip J. Dunn
Director November 12, 1997
- -----------------------------------------------------
Cynthia S. Kling
/s/ MARK A. ARENSMEYER Director November 12, 1997
- -----------------------------------------------------
Mark A. Arensmeyer
</TABLE>
II-4
<PAGE> 1
EXHIBIT 1.1
FIRST NORTH AMERICAN NATIONAL BANK
Transferor
FNANB CREDIT CARD MASTER TRUST
November ____, 1997
UNDERWRITING AGREEMENT
(Standard Terms)
NationsBanc Montgomery Securities, Inc.,
(as Representative of the several Underwriters
listed in Schedule 1 to the Terms Agreement)
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
1. Introductory. First North American National Bank ("FNANB"
or the "Transferor") has formed a master trust entitled the FNANB Credit Card
Master Trust (the "Trust"), which will issue, from time to time, asset backed
securities (the "Certificates") in one or more series (each, a "Series"). Each
Certificate will evidence a fractional, undivided percentage interest in the
Trust. The property of the Trust will include receivables (the "Receivables")
generated from time to time in a portfolio of credit card accounts (the
"Accounts"), collections thereon and certain related property to be conveyed to
the Trust by the Transferor (the "Trust Property"). The Certificates to which
this agreement applies (the "Offered Certificates") will be issued pursuant to
the Master Pooling and Servicing Agreement, dated as of October 30, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Pooling and
Servicing Agreement"), among the Transferor, FNANB, as servicer (the
"Servicer"), and First Union National Bank, as trustee (the "Trustee"), as
supplemented by the supplement relating to each Series (each, a "Supplement").
To the extent not defined herein, capitalized terms used herein shall have the
meanings specified in the Pooling and Servicing Agreement and the applicable
Supplement.
<PAGE> 2
Each offering of the Certificates to which this Agreement
applies made pursuant to the Registration Statement (as herein defined) will be
made through you or through you and other underwriters for whom you are acting
as representative or through an underwriting syndicate managed by you.
Whenever the Transferor determines to make such an offering of Certificates to
which this Agreement shall apply, it will enter into an agreement (the "Terms
Agreement") providing for the sale of such Certificates to, and the purchase
and offering thereof by, (i) you, (ii) you and such other underwriters (such
other underwriters to be approved by the Transferor, which approval shall not
be unreasonably withheld) who execute the Terms Agreement and agree thereby to
become severally and not jointly obligated to purchase Certificates from the
Transferor or (iii) you and such other underwriters, if any, selected by you
(such other underwriters to be approved by the Transferor, which approval shall
not be unreasonably withheld) as have authorized you to enter into such Terms
Agreement on their behalf (in each case, the "Underwriters"). (It is
understood that the Transferor shall not be obligated to sell any particular
Series or Class of Certificates offered pursuant to the Registration Statement
to you or you and other Underwriters.) Execution of a Terms Agreement by the
Transferor shall be conclusive evidence of the Transferor's approval of all
Underwriters named therein. Such Terms Agreement shall specify the initial
principal amount of Certificates of each Series and Class of the Certificates
to be issued and their terms not otherwise specified in this Agreement, the
price at which such Certificates are to be purchased by the Underwriters from
the Transferor, the aggregate amount of Certificates to be purchased by you and
any other Underwriter that is a party to such Terms Agreement and the initial
public offering price or the method by which the price at which such
Certificates are to be sold will be determined. The Terms Agreement, which
shall be substantially in the form of Exhibit A hereto, may take the form of an
exchange of any standard form of written communication between or among the
Underwriters and the Transferor. Each such offering of the Certificates for
which a Terms Agreement is entered into will be governed by this Agreement, as
supplemented by such Terms Agreement, and this Agreement and such Terms
Agreement shall inure to the benefit of and be binding upon the Underwriters
participating in the offering of such Certificates.
2. Representations and Warranties of the Transferor. The
Transferor represents and warrants to you as of the date hereof and to the
Underwriters named in the appli-
2
<PAGE> 3
cable Terms Agreement as of the date of such Terms Agreement, as follows:
(a) a registration statement on Form S-3 (having the
registration number stated in the applicable Terms Agreement),
including a prospectus and such amendments thereto as may have been
required to the date hereof, relating to the Certificates and the
offering thereof from time to time in accordance with Rule 415 under
the Securities Act of 1933, as amended (the "Act"), has been filed
with the Securities and Exchange Commission (the "Commission") (which
may have included one or more preliminary prospectuses and prospectus
supplements (each, a "Preliminary Prospectus") meeting the
requirements of Rule 430 of the Act), and such registration statement,
as amended, has become effective; such registration statement, as
amended, and the prospectus relating to the sale of the Certificates
offered thereby by the Transferor constituting a part thereof, as from
time to time amended or supplemented (including any prospectus filed
with the Commission pursuant to Rule 424(b) of the rules and
regulations of the Commission (the "Rules and Regulations") under the
Act), are respectively referred to herein as the "Registration
Statement" and the "Prospectus"; provided, however, that a supplement
to the Prospectus prepared pursuant to Section 5(a) hereof (each, a
"Prospectus Supplement") shall be deemed to have supplemented the
Prospectus only with respect to the offering of the Certificates to
which it relates; and the conditions to the use of a registration
statement on Form S-3 under the Act, as set forth in the General
Instructions to Form S-3, and the conditions of Rule 415 under the
Act, have been satisfied with respect to the Registration Statement;
(b) as of the date of execution of the related Terms
Agreement, the Registration Statement and the Prospectus, except with
respect to any modification to which you have agreed in writing, shall
be in all substantive respects in the form furnished to you prior to
such date or, to the extent not completed on such date, shall contain
only such specific additional information and other changes (beyond
that contained in the latest Preliminary Prospectus that has
previously been furnished to you) as the Transferor has advised you,
prior to such time will be included or made therein;
3
<PAGE> 4
(c) on the effective date of the Registration Statement,
the Registration Statement and the Prospectus complied in all material
respects with the applicable requirements of the Act and the Rules and
Regulations, and did not include any untrue statement of a material
fact or, in the case of the Registration Statement, omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading and, in the case of the
Prospectus, omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading, and on the date of each Terms Agreement and
on each Delivery Date (as defined in Section 3 hereof), the
Registration Statement and the Prospectus will comply in all material
respects with the applicable requirements of the Act and the Rules and
Regulations, and neither of such documents included or will include
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; provided, however, that the
foregoing does not apply to information contained in or omitted from
either of such documents based upon written information furnished to
the Transferor by any Underwriter specifically for use in connection
with the preparation of the Registration Statement or the Prospectus;
(d) the Transferor is a national banking association duly
organized and validly existing in good standing under the laws of the
United States, with full power, authority and legal right to own its
properties and conduct its business as described in the Prospectus, is
duly qualified to do business and is in good standing (or is exempt
from such requirements), and has obtained all necessary licenses and
approvals (except with respect to the state securities or Blue Sky
laws of various jurisdictions) in each jurisdiction in which failure
to so qualify or obtain such licenses and approvals would have a
material adverse effect on the inter- ests of Certificateholders under
the Pooling and Servicing Agreement or under any Supplement;
(e) the Certificates of the related Series, on the date
of such Terms Agreement, will have been duly and validly authorized
and, when such Certificates are duly and validly executed by or on
behalf of the Transferor, authenticated by the Trustee and delivered
in accordance with the Pooling and Servicing Agreement and
4
<PAGE> 5
the applicable Supplement and delivered and paid for as provided
herein or in such Terms Agreement, will be validly issued and
outstanding and entitled to the benefits and security afforded by the
Pooling and Servicing Agreement and the applicable Supplement;
(f) the execution, delivery and performance by the
Transferor of this Agreement, each applicable Terms Agreement, any
applicable agreement relating to an Enhancement (an "Enhancement
Agreement"), the Pooling and Servicing Agreement, each applicable
Supplement and the Certificates of a Series, and the consummation by
the Transferor of the transactions provided for herein and therein,
have been, or will have been, duly authorized by the Transferor by all
necessary action on the part of the Transferor; and neither the
execution and delivery by the Transferor of such instruments, nor the
performance by the Transferor of the transactions herein or therein
contemplated, nor the compliance by the Transferor with the provisions
hereof or thereof, will (i) conflict with or result in a breach of any
of the terms and provisions of, or constitute a default under, any of
the provisions of the articles of association or by-laws of the
Transferor, or (ii) conflict with any of the provisions of any law,
government rule, regulation, judgment, decree or order binding on the
Transferor or its properties or (iii) conflict with any of the
provisions of any material indenture, mortgage, contract or other
instrument to which the Transferor is a party or by which it is bound
or (iv) result in the creation or imposition of any lien, charge or
encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument;
(g) when executed and delivered by the parties thereto,
the Pooling and Servicing Agreement, the applicable Supplement and any
applicable Enhancement Agreement will each constitute a legal, valid
and binding agreement of the Transferor, enforceable against the
Transferor in accordance with its terms, except to the extent that the
enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
in general or the rights of creditors of national banking associations
as such laws would apply in the event of the insolvency, liquidation
or reorganization or other similar occurrence with respect to the
Trans-
5
<PAGE> 6
feror or in the event of any moratorium or similar occurrence
affecting the Transferor and to general principles of equity;
(h) all approvals, authorizations, consents, orders or
other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official (except with
respect to the state securities or Blue Sky laws of various
jurisdictions), required in connection with the valid and proper
authorization, issuance and sale of the Certificates of a Series
pursuant to this Agreement, the applicable Terms Agreement, the
Pooling and Servicing Agreement and the applicable Supplement, have
been or will be taken or obtained on or prior to the applicable
Delivery Date;
(i) this Agreement has been and, as of the date thereof,
the applicable Terms Agreement will have been, duly executed and
delivered by the Transferor;
(j) the Transferor has delivered to you complete and
correct copies of publicly available portions of the Consolidated
Reports of Condition and Income of the Transferor for the three most
recent years for which such reports are available, as submitted to the
Comptroller of the Currency; except as set forth in or contemplated in
the Registration Statement and the Prospectus, there has been no
material adverse change in the condition (financial or otherwise) of
the Transferor since the last such report;
(k) any taxes, fees and other governmental charges in
connection with the execution, delivery and performance by the
Transferor of this Agreement, the applicable Terms Agreement, the
Pooling and Servicing Agreement, the applicable Supplement, any
applicable Enhancement Agreement and the Certificates of the related
Series shall have been paid or will be paid by or on behalf of the
Transferor at or prior to the applicable Delivery Date to the extent
then due; and
(l) the Certificates of the related Series, the Pooling
and Servicing Agreement, the applicable Supplement and any
applicable Enhancement Agreement conform in all material respects to
the description thereof in the Prospectus.
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<PAGE> 7
3. Purchase, Sale and Delivery of Certificates. Delivery of
and payment for the Certificates to which this Agreement applies will be made
at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue,
New York, New York 10022, or such other offices specified in the applicable
Terms Agreement, at such time as shall be specified in the applicable Terms
Agreement, or at such other time thereafter or other place as you and the
Transferor shall agree upon, each such time being herein referred to as a
"Delivery Date". Delivery of such Certificates shall be made by the Transferor
to the Underwriters against payment of the purchase price specified in the
applicable Terms Agreement in same day funds wired to such bank as may be
designated by the Transferor, or by such other manner of payment as may be
agreed upon by the Transferor and you. Unless otherwise provided in the
applicable Terms Agreement, payment for the Certificates shall be made against
delivery through the facilities of The Depository Trust Company ("DTC") of
Book-Entry Certificates to you for the respective accounts of the several
Underwriters. Unless otherwise provided in a Terms Agreement, the Certificates
so to be delivered shall be global certificates registered in the name of Cede
& Co., as nominee for DTC. The number and denomination of definitive
certificates so delivered shall be as specified by DTC. The definitive
certificates for the Certificates will be made available for inspection and
packaging by you at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, or
such other offices specified in the applicable Terms Agreement, not later than
1:00 P.M., New York City time, on the Business Day prior to the Delivery Date.
4. Offering by Underwriters. It is understood that the
several Underwriters propose to offer the Certificates subject to this
Agreement for sale to the public as set forth in the Prospectus.
5. Covenants of the Transferor. The Transferor hereby
covenants and agrees with you and the several Underwriters participating in the
applicable offering of the Certificates that:
(a) immediately following the execution of each Terms
Agreement, the Transferor will prepare a Prospectus Supplement setting
forth the amount of Certificates covered thereby and the terms thereof
not otherwise specified in the Prospectus, the price at which such
Certificates are to be purchased by the Underwriters from the
Transferor, either the initial public offering
7
<PAGE> 8
price or the method by which the price at which such Certificates are
to be sold will be determined, the selling concessions and allowances,
if any, and such other information as the Transferor deems appropriate
in connection with the offering of such Certificates, but the
Transferor will not file any amendments to the Registration Statement
as in effect with respect to the Certificates, or any amendments or
supplements to the Prospectus, unless it shall first have delivered
copies of such amendments or supplements to you, or if you shall have
reasonably objected thereto promptly after receipt thereof; the
Transferor will immediately advise you and your counsel (i) when
notice is received from the Commission that any post-effective
amendment to the Registration Statement has become or will become
effective and (ii) of any order or communication suspending or
preventing, or threatening to suspend or prevent, the offer and sale
of the Certificates or of any proceedings or examinations that may
lead to such an order or communication, whether by or of the
Commission or any authority administering any state securities or Blue
Sky law, as soon as practicable after the Transferor is advised
thereof, and will use every reasonable effort both to prevent the
issuance of any such order or communication and to obtain as soon as
possible its lifting, if issued;
(b) if, at any time when a Prospectus relating to the
Certificates is required to be delivered under the Act, any event
occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend
or supplement the Prospectus to comply with the Act or the Rules and
Regulations, the Transferor will promptly prepare and (subject to
review and no reasonable objection by you as described in Section 5(a)
hereof) file with the Commission an amendment or supplement that will
correct such statement or omission or an amendment that will effect
such compliance and, within two Business Days thereafter, furnish to
you as many copies of the Prospectus as amended or supplemented as you
may reasonably request; provided, however, that your consent to any
amendment shall not constitute a waiver of any of the conditions of
Section 6 hereof;
8
<PAGE> 9
(c) the Transferor will make generally available to the
holders of the Certificates (the "Certificateholders") of the related
Series (the Certificateholders being the applicable Clearing Agency in
the case of Book-Entry Certificates), in each case as soon as
practicable, a statement which will satisfy the provisions of Section
11(a) of the Act and Rule 158 of the Commission with respect to the
related Series of Certificates;
(d) the Transferor will furnish to each Underwriter
copies of the Registration Statement (at least one copy to be
delivered to each Underwriter will be signed and will include all
documents and exhibits thereto or incorporated by reference therein),
the Prospectus, and all amendments and supplements to such documents,
in each case as soon as available and in such quantities as you
reasonably request;
(e) the Transferor will assist you in arranging for the
qualification of the Certificates for sale and the determination of
their eligibility for investment under the laws of such jurisdictions
as you designate and will continue to assist you in maintaining such
qualifications in effect so long as required for the distribution and
will file or cause to be filed such statements and reports with
respect to the distribution as may be required by the laws of each
jurisdiction in which the Certificates have been qualified as provided
above; provided, however, that neither the Transferor nor the Trust
shall be required to qualify to do business in any jurisdiction where
it is now not qualified or to take any action which would subject it
to general or unlimited service of process in any jurisdiction in
which it is now not subject to service of process;
(f) except as otherwise specified in the related Terms
Agreement, the Transferor will pay all expenses incident to the
performance of its obligations under this Agreement and the related
Terms Agreement and will reimburse the Underwriters for any expenses
reasonably incurred by them in connection with qualification of the
related Series of Certificates and determination of their eligibility
for investment under the laws of such jurisdictions as you may
designate (including reasonable fees and disbursements of the
Underwriters' counsel) and the printing of memoranda relating thereto,
for any fees charged by investment rating agencies for the rating of
such Certificates and, to the extent
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<PAGE> 10
previously agreed upon with you, for expenses incurred in distributing
the Prospectus (including any amendments and supplements thereto) to
the Underwriters; and
(g) the Transferor will, for so long as Certificates purchased
pursuant hereto remain outstanding, deliver or cause to be delivered
to you copies of the annual servicer's certificate and the annual
accountants' reports delivered to the Trustee pursuant to the Pooling
and Servicing Agreement.
6. Conditions to the Obligations of the Underwriters. The
obligations of the several Underwriters named in any Terms Agreement to
purchase and pay for the Certificates of the related Series subject to this
Agreement and such Terms Agreement will be subject to the accuracy of the
representations and warranties on the part of the Transferor herein as of the
date hereof, the date of the applicable Terms Agreement and the applicable
Delivery Date, to the accuracy of the statements of the Transferor made
pursuant to the provisions thereof, to the performance by the Transferor in all
material respects of its obligations hereunder and to the following additional
conditions precedent:
(a) you shall have received a letter from KPMG Peat
Marwick, or such other independent public accountants specified in the
applicable Terms Agreement, dated the date of the applicable Terms
Agreement, and, if requested by you, a letter from such accountants,
dated the Delivery Date, each in the forms heretofore agreed to;
(b) all actions required to be taken and all filings
required to be made by the Transferor under the Act prior to the
Delivery Date for the Certificates of such Series shall have been duly
taken or made; and prior to the applicable Delivery Date, no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Transferor, threatened by the
Commission;
(c) unless otherwise specified in the applicable Terms
Agreement, the Certificates subject to this Agreement and offered by
means of the Registration Statement shall be rated at the time of
issuance in the highest rating category by the nationally recognized
statistical rating organization[s] specified in the applicable Terms
Agreement and shall not have been
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<PAGE> 11
placed on any credit watch with a negative implication for downgrade;
(d) you shall have received an opinion of McGuire, Woods,
Battle & Boothe, L.L.P. (or such other counsel as shall be specified in
the applicable Terms Agreement), counsel to the Transferor (and of
Skadden, Arps, Slate, Meagher & Flom LLP, or such other counsel as
shall be specified in the applicable Terms Agreement, as to matters of
New York law specified in clause (v) below), dated the applicable
Delivery Date, substantially to the effect that:
(i) the Transferor is a national banking
association duly organized, validly existing and in good
standing under the laws of the United States, with full power
and authority to own its assets and operate its business as
described in the Prospectus, and had at all relevant times and
now has, the power, authority and legal right to acquire, own
and service the Receivables transferred or proposed to be
transferred to the Trust as described in the Prospectus;
(ii) the Transferor has full power and
authority to sign the Registration Statement and to execute
and deliver this Agreement, the applicable Terms Agreement,
any applicable Enhancement Agreement, the Pooling and
Servicing Agreement and the applicable Supplement and to
consummate the transactions contemplated herein and therein;
(iii) the agreements referred to in clause (ii)
above have been authorized by all necessary action on the part
of the Transferor and have been duly executed and delivered by
the Transferor;
(iv) the Certificates have been duly authorized
by all necessary action of the Transferor;
(v) this Agreement, the applicable Terms
Agreement, any applicable Enhancement Agreement, the Pooling
and Servicing Agreement and the applicable Supplement each
constitutes the legal, valid and binding agreement of the
Transferor, enforceable against the Transferor in accordance
with its terms, subject, as to enforcement, to (A) the effect
of bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, conservator-
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<PAGE> 12
ship, receivership, or other similar laws of general
applicability relating to or affecting creditors' rights
generally or the rights of creditors of national banking
associations, (B) the application of general principles of
equity (regardless of whether enforceability is considered in
a proceeding in equity or at law) and (C) the unenforceability
under certain circumstances of provisions indemnifying a party
against liability where such indemnification is contrary to
public policy;
(vi) no consent, approval, authorization or
order of, or filing with, any governmental agency or body or
any court is required under applicable Federal banking laws
for the consummation of the transactions contemplated herein,
in the applicable Terms Agreement, the Pooling and Servicing
Agreement, the applicable Supplement or any applicable
Enhancement Agreement, except such as have been obtained or
made and such as may be required under state securities or
Blue Sky laws;
(vii) the execution, delivery and performance by
the Transferor of its obligations under this Agreement, the
applicable Terms Agreement, the Pooling and Servicing
Agreement, the applicable Supplement or any applicable
Enhancement Agreement, the transfer of the Receivables to the
Trust, the issuance and sale of the Certificates, and the
consummation of any other of the transactions contemplated
herein, in the applicable Terms Agreement, the Pooling and
Servicing Agreement, the applicable Supplement or any
applicable Enhancement Agreement, will not conflict with,
result in a breach of or violation of any of the terms of, or
constitute a default under, the articles of association or
by-laws of the Transferor, each as amended, the terms of any
material indenture or other material agreement or instrument
known to such counsel to which the Transferor is a party or by
which it or its properties are bound or any rule, order known
to such counsel, statute or regulation, to the extent the
foregoing relate to Federal banking law, of any court,
regulatory body, administrative agency or governmental body
having jurisdiction over the Transferor; provided, however,
that such counsel need express no opinion as to state
securities or Blue Sky laws;
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<PAGE> 13
(viii) except as otherwise disclosed in the
Prospectus or the Registration Statement, to the best of such
counsel's knowledge (after reasonable investigation), there
are no actions, proceedings or investigations pending or
threatened before any court, administrative agency or other
tribunal (A) asserting the invalidity of this Agreement, the
applicable Terms Agreement, the Pooling and Servicing
Agreement, the applicable Supplement, any applicable
Enhancement Agreement or the Certificates, (B) seeking to
prevent the issuance of the Certificates or the consummation
of any of the transactions contemplated by this Agreement, the
applicable Terms Agreement, the Pooling and Servicing
Agreement, the applicable Supplement, any applicable
Enhancement Agreement or the Certificates, which if adversely
determined would materially and adversely affect the
performance by the Transferor of its obligations under, or the
validity or enforceability of, this Agreement, the applicable
Terms Agreement, the Pooling and Servicing Agreement, the
applicable Supplement, any applicable Enhancement Agreement or
the Certificates, or (C) seeking adversely to affect the
federal income tax attributes of the Certificates as described
in the Prospectus under the headings "Prospectus Summary --
Tax Status" and "Certain Federal Income Tax Consequences";
(ix) the Registration Statement has become
effective under the Act and the Prospectus has been filed with
the Commission pursuant to Rule 424(b) promulgated under the
Act; to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or threatened under the Act; and the Registration
Statement and the Prospectus (other than the financial,
numerical and statistical information contained therein as to
which such counsel need express no opinion) as of their
respective effective date or date of issuance complied as to
form in all material respects with the requirements of the Act
and the rules and regulations promulgated thereunder;
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<PAGE> 14
(x) this Agreement, the applicable Terms
Agreement, the Pooling and Servicing Agreement, the applicable
Supplement, any applicable Enhancement Agreement and the
Certificates conform in all material respects to the
descriptions thereof contained in the Registration Statement
and the Prospectus; and
(xi) the Pooling and Servicing Agreement and
the applicable Supplement will not be required to be qualified
under the Trust Indenture Act of 1939, as amended, and the
Trust is not now, and immediately following the sale of the
Certificates pursuant hereto will not be, required to be
registered under the 1940 Act.
Such counsel also shall state that, subject to its customary practices
and limitations relating to the scope of such counsel's participation
in the preparation of the Registration Statement and the Prospectus
and its investigation or verification of information contained
therein, it has no reason to believe that at its effective date the
Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or
that the Prospectus on the applicable Delivery Date includes any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in each
case, other than financial, numerical and statistical information
contained therein as to which such counsel need express no opinion);
in rendering such opinion, such counsel may rely as to matters of
fact, to the extent deemed proper and as stated therein, on
certificates of responsible officers of the Transferor, the Servicer
and public officials;
(e) you shall have received an opinion of McGuire, Woods,
Battle & Boothe, L.L.P. (or such other counsel as shall be specified in
the applicable Terms Agreement), counsel for the Transferor, dated the
Delivery Date, in form and substance satisfactory to you and your
counsel, to the effect that:
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<PAGE> 15
(i) the statements in the Prospectus under the
heading "Certain Federal Income Tax Consequences" and the
summary thereof under the heading "Prospectus Summary -- Tax
Status," to the extent they constitute matters of Federal law
or legal conclusions with respect thereto, have been reviewed
by such counsel and are correct in all material respects; and
(ii) the statements in the Prospectus under the
headings "Certain Legal Aspects of the Receivables" and to the
extent they constitute matters of Federal law or legal
conclusions with respect thereto, have been reviewed by such
counsel and are correct in all material respects;
(f) you shall have received an opinion or opinions from
Alston & Bird LLP (or such other counsel as shall be specified in the
applicable Terms Agreement), special Georgia tax counsel for the
Transferor, dated the Delivery Date, and in form and substance
satisfactory to you and your counsel, to the effect that the Offered
Certificates are characterized as indebtedness for Georgia state income
tax purposes and that the Trust will not be characterized as an
association (or publicly traded partnership) taxable as a corporation
under the laws of the State of Georgia;
(g) you shall have received an opinion or opinions from
McGuire, Woods, Battle & Boothe, L.L.P. (or such other counsel as shall
be specified in the applicable Terms Agreement), special tax counsel
for the Transferor, dated the Delivery Date, and in form and substance
satisfactory to you and your counsel, to the effect that the Offered
Certificates are characterized as indebtedness for Virginia state
income tax purposes and that the Trust will not be characterized as an
association (or publicly traded partnership) taxable as a corporation
under the laws of the Commonwealth of Virginia;
(h) you shall have received an opinion or opinions from
McGuire, Woods, Battle & Boothe, L.L.P. (or such
15
<PAGE> 16
other counsel as shall be specified in the applicable Terms
Agreement), special tax counsel to the Transferor, dated the Delivery
Date, and in form and substance acceptable to you and your counsel, to
the effect that the Offered Certificates are characterized as
indebtedness for federal income tax purposes and that the Trust will
not be characterized as an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes;
(i) you shall have received an opinion or opinions of
Alston & Bird LLP (or such other counsel as shall be specified in the
applicable Terms Agreement), special Georgia counsel for the
Transferor, dated the Delivery Date, in form and substance
satisfactory to you and your counsel, with respect to the perfection
and priority of the Trust's interest in the Receivables and with
respect to other related matters in a form previously approved by you
and your counsel;
(j) you shall have received an opinion or opinions of
McGuire, Woods, Battle & Boothe, L.L.P. (or such other counsel as shall
be specified in the applicable Terms Agreement), special counsel for
the Transferor, dated the Delivery Date, in form and substance
satisfactory to you and your counsel, with respect to certain matters
relating to the transfer of the Receivables, with respect to the
validity of the Trust's interest in the Receivables and certain other
matters relating to the effect of receivership of the Transferor on
such interest in the Receivables and with respect to other related
matters in a form previously approved by you and your counsel;
(k) you shall have received from Skadden, Arps, Slate,
Meagher & Flom LLP (or such other counsel as may be named in the
applicable Terms Agreement), special counsel for the Underwriters,
such opinion or opinions, dated the Delivery Date, in form and
substance satisfactory to you, with respect to the organization of the
Transferor, the validity of the Certificates, the Registration
Statement, the Prospectus and other related matters as you may
require, and the Transferor shall have furnished to such counsel such
documents as they may reasonably request for the purpose of enabling
them to pass upon such matters;
(l) you shall have received, with respect to the
Transferor, a certificate, dated the Delivery Date, of
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<PAGE> 17
a Vice President or more senior officer of the Transferor in which
such officer, to the best of his or her knowledge after reasonable
investigation, shall state that (A) the representations and warranties
of the Transferor in this Agreement are true and correct in all
material respects on and as of the Delivery Date, (B) the Transferor
has complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder and under the applicable Terms Agreement at or prior to the
Delivery Date, (C) the Registration Statement has become effective, no
stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been
instituted or are threatened by the Commission and (D) subsequent to
the date of the Prospectus, there has been no material adverse change
in the condition (financial or otherwise) of the Transferor except as
set forth in or contemplated in the Registration Statement and the
Prospectus or as described in such certificate;
(m) you shall have received an opinion of Hunton &
Williams,(or such other counsel as may be named in the applicable Terms
Agreement), counsel to the Trustee, dated the Delivery Date, in form
and substance satisfactory to you and your counsel, to the effect that:
(i) the Trustee has been duly organized and is
validly existing as a national banking association and has the
power and authority to enter into and to perform all actions
required of it under the Pooling and Servicing Agreement, and
the applicable Supplement and any applicable Enhancement
Agreement;
(ii) each of the Pooling and Servicing
Agreement, the applicable Supplement and any applicable
Enhancement Agreement has been duly authorized, executed and
delivered by the Trustee and constitutes a legal, valid and
binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms, except as such
enforceability may be limited by (A) bankruptcy, insolvency,
liquidation, reorganization, moratorium, conservatorship,
receivership or other similar laws now or hereafter in effect
relating to the enforcement of creditors' rights in general,
as such laws would apply in the event of a bankruptcy,
insolvency, liquidation, reorganiza-
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<PAGE> 18
tion, moratorium, conservatorship, receivership or similar
occurrence affecting the Trustee, and (B) general principles
of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(iii) the Certificates have been duly
authenticated and delivered by the Trustee;
(iv) the execution and delivery of the Pooling
and Servicing Agreement, the applicable Supplement and any
applicable Enhancement Agreement by the Trustee and the
performance by the Trustee of their respective terms do not
conflict with or result in a violation of (A) any law or
regulation of the United States of America governing the
banking or trust powers of the Trustee, or (B) the articles of
association or by-laws of the Trustee; and
(v) no approval, authorization or other action
by, or filing with, any governmental authority of the United
States of America having jurisdiction over the banking or
trust powers of the Trustee is required in connection with the
execution and delivery by the Trustee of the Pooling and
Servicing Agreement, the applicable Supplement and any
applicable Enhancement Agreement or the performance by the
Trustee thereunder;
(n) you shall have received an opinion or opinions of
counsel to the Enhancement Provider, if any, dated the Delivery Date,
and satisfactory in form and substance to you and your counsel, to the
effect that:
(i) the Enhancement Provider is duly organized
and validly existing under the laws of the jurisdiction of its
incorporation, is duly qualified and/or licensed to do
business in all jurisdictions where the nature of its
operations as contemplated in the applicable Enhancement
Agreement requires such qualification, and has the power and
authority (corporate and other) to enter into the applicable
Enhancement Agreement and to perform its obligations
thereunder; and
(ii) each applicable Enhancement Agreement has
been duly authorized, executed and delivered by the
Enhancement Provider, and constitutes the
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<PAGE> 19
legal, valid and binding obligation of the Enhancement
Provider, enforceable against the Enhancement Provider in
accordance with its terms, except as such enforceability may
be limited by (A) bankruptcy, insolvency, liquidation,
reorganization, conservatorship, moratorium, receivership or
other similar laws now or hereafter in effect relating to the
enforcement of creditors' rights in general, as such laws
would apply in the event of a bankruptcy, insolvency,
liquidation, reorganization, conservatorship, moratorium,
receivership or other similar occurrence with respect to the
Enhancement Provider or in the event of any moratorium or
similar occurrence affecting the Enhancement Provider, and (B)
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law);
(o) you shall have received reliance letters, if
applicable, with respect to any opinions delivered to the Transferor
by foreign counsel of each provider of Enhancement (the "
Enhancement Provider") for the applicable Series under an Enhancement
Agreement, if any, which opinions shall include matters relating to
(i) the due organization of the Enhancement Provider, (ii) the
authorization, execution, delivery and performance by the Enhancement
Provider of the Enhancement Agreement and the binding effect of the
Enhancement Agreement, and (iii) the enforceability in the foreign
jurisdiction in which such Enhancement Provider is located of a
judgment obtained under the Enhancement Agreement in a United States
federal court or in a court of the State of New York; such reliance
letters shall include all matters that are contained in the opinions
of foreign counsel; and
(p) you shall have received reliance letters with respect to
any opinions that the Transferor is required to deliver to the Rating
Agency.
The Transferor will furnish to you conformed copies of such opinions,
certificates, letters and documents as you reasonably request.
7. Indemnification.
(a) The Transferor will indemnify and hold harmless each
Underwriter and each person, if any, who
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<PAGE> 20
controls any Underwriter within the meaning of the Act or the Exchange
Act and the respective officers, directors and employees of each such
person, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may
become subject, under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and will reimburse each Underwriter and each such officer,
director, employee or controlling person for any legal or other
expenses reasonably incurred by such Underwriter and each such
officer, director, employee or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action, subject to the following proviso, as such expenses are
incurred; provided, however, that (i) the Transferor will not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement in or omission or alleged
omission made in any such documents in reliance upon and in conformity
with written information furnished to the Transferor by an Underwriter
specifically for use therein and (ii) such indemnity with respect to
any untrue statement or alleged untrue statement or omission or
alleged omission in any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or any person controlling such
Underwriter) from whom the person asserting any such loss, claim,
damage or liability purchased the Certificates which are the subject
thereof, if such person was not given or sent a copy of the Prospectus
including the related Prospectus Supplement excluding documents
incorporated therein by reference, at or prior to the confirmation of
the sale of such Certificates to such person in any case where such
delivery is required by the Act and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact
contained in any Preliminary Prospectus and forming the basis for the
related cause of action was corrected in the Prospectus or the related
Prospectus Supplement. This indemnity agreement will be in addi-
20
<PAGE> 21
tion to any liability which the Transferor may otherwise have.
(b) Each Underwriter severally, and not jointly, will
indemnify and hold harmless the Transferor, each of its directors,
each of its officers who have signed the Registration Statement and
each person, if any, who controls the Transferor within the meaning of
the Act or the Exchange Act and the respective officers, directors and
employees of each such person against any losses, claims, damages or
liabilities to which the Transferor or any such director, officer or
controlling person may become subject, under the Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Transferor by
such Underwriter specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Transferor or any
such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred. This indemnity agreement will
be in addition to any liability that such Underwriter may otherwise
have.
(c) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section, notify the
indemnifying party of the commencement thereof; but the omission
and/or delay so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party
otherwise than in this Section unless such omission caused actual
prejudice to the party not notified; in case any such action is
brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the
21
<PAGE> 22
indemnifying party will be entitled to participate therein, and, to
the extent that it may elect by written notice jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in
connection with defense thereof other than reasonable costs of
investigation. If the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or
parties. No indemnifying party may avoid its duty to indemnify under
this Section 7 if such indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of any judgement in, any
pending or threatened action in respect of which any indemnified party
is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on
all claims that are the subject matter of such action. An
indemnifying party shall not be liable for any settlement of any claim
effected without its written consent.
(d) If recovery is not available under the foregoing
indemnification provisions of this Section for any reason other than
as specified therein, the parties entitled to indemnification by the
terms thereof shall be entitled to contribution to liabilities and
expenses, except to the extent that contribution is not permitted
under Section 11(f) of the Act. In determining the amount of
contribution to which the respective parties are entitled, there shall
be considered (i) the relative benefit received by the Transferor on
the one hand and the Underwriters on the other hand from the offering
of the Certificates or (ii) if the allocation provided by clause (i)
above is not permitted by appli-
22
<PAGE> 23
cable law, the relative benefits referred to in clause (i) above but
also the relative fault of the Transferor on the one hand and the
Underwriters on the other hand in connection with the statement or
omission that resulted in such liabilities and expenses as well as any
other relevant equitable considerations. The relative benefits
received by the Transferor on the one hand and the Underwriters on the
other hand shall be deemed to be in the same proportion as the total
net proceeds of the offering of the Certificates (before deducting
expenses) received by the Transferor bear to the total underwriting
discounts and commissions received by the Underwriters in connection
with the offering of the Certificates. The relative fault of the
parties shall be determined by reference to, among other things, the
parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity
to correct and prevent any statement or omission, and any other
equitable considerations appropriate under the circumstances. The
Transferor and the Underwriters agree that it would not be equitable
if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity
for such purpose).
8. Default of Underwriters. If any Underwriter or
Underwriters participating in an offering of Certificates default in their
obligations to purchase Certificates hereunder and under the Terms Agreement
and the aggregate principal amount of such Certificates which such defaulting
Underwriter or Underwriters agreed, but failed, to purchase does not exceed 10%
of the total principal amount of the Certificates set forth in such Terms
Agreement, you may make arrangement satisfactory to the Transferor for the
purchase of such Certificates by other persons, including any of the
Underwriters participating in such offering, but if no such arrangements are
made within a period of 36 hours after the applicable Delivery Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to
their respective total commitments hereunder and under such Terms Agreement, to
purchase the Certificates which such defaulting Underwriters agreed but failed
to purchase. If any Underwriter or Underwriters so default and the aggregate
principal amount of Certificates with respect to which such default or defaults
occur is more than 10% of the total principal amount of the Certificates set
forth in such Terms Agreement and arrangements satisfactory to you and the
Transferor for the purchase of such Certificates by other
23
<PAGE> 24
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Transferor, except as provided in Section 10. As used in this Agreement,
the term "Underwriter" includes any person substituted for an Underwriter under
this Section. Nothing herein will relieve a defaulting Underwriter from
liability for its default.
9. Termination of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Certificates on the Delivery
Date shall be terminable by the Underwriters by written notice delivered to the
Transferor if at any time on or prior to the Delivery Date (i) trading in
securities generally on the New York Stock Exchange shall have been suspended
or materially limited, or there shall have been any setting of minimum prices
for trading on such exchange or any suspension of trading of the securities of
Circuit City Stores, Inc. on any exchange or in the over-the-counter market,
(ii) a general moratorium on commercial banking activities in New York or
Georgia shall have been declared by any of Federal, New York or Georgia
authorities, (iii) there shall have occurred any material outbreak or
escalation of hostilities or other calamity or crisis, the effect of which on
the financial markets of the United States is such as to make it, in your
reasonable judgement as representative of the Underwriters, impracticable to
market the Certificates on the terms and in the manner contemplated in the
Prospectus, (iv) the rating of another Series of Certificates shall have been
reduced or withdrawn or (v) any change or any development involving a
prospective change, materially and adversely affecting (A) the Trust Property
taken as whole or (B) the business or properties of the Transferor or Circuit
City Stores, Inc. occurs, which, in your reasonable judgment as representative
of the Underwriters, in the case of either (A) or (B), makes it impracticable
to market the Certificates on the terms and in the manner contemplated in the
Prospectus.
10. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements by the Transferor or its officers and of the several Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results
thereof, made by or on behalf of the Underwriters, the Transferor or any of
their respective officers or directors or any controlling person, and will
survive delivery of and payment for the Certificates.
24
<PAGE> 25
If this Agreement is terminated pursuant to Sections 8 and 9 or if for
any reason the purchase of the Certificates by the Underwriters is not
consummated, the Transferor shall remain responsible for the expenses to be
paid or reimbursed by it pursuant to Section 5(f), and the obligations of the
Transferor and the Underwriters pursuant to Section 7 or 8 shall remain in
effect.
11. Notices. All communications hereunder will be in
writing and, if sent to an Underwriter, will be mailed, delivered or telecopied
to NationsBanc Montgomery Securities, Inc., NationsBank Corporate Center, 100
North Tryon Street, Charlotte, North Carolina 28255-0001, Attention: William A.
Glenn, facsimile number 704-388-0622 and to any other Underwriter at such
address, if any, as is specified in writing to the Transferor for notices
hereunder, or if sent to the Transferor, will be mailed, delivered or telecopied
to 1800 Parkway Place, Marietta, Georgia 30067, Attention: Michael T. Chalifoux,
facsimile number 404-423-7901, or such other address specified in the applicable
Terms Agreement; provided however, that any notice to an Underwriter pursuant to
Section 7 will be mailed, delivered or telecopied to such Underwriter at the
address furnished by it.
12. Successors. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
the officers, directors and controlling persons referred to in Section 7
hereof, and their successors and assigns, and no other person will have any
right or obligation hereunder.
13. Representations of Underwriters. You will act for
the several Underwriters in connection with this financing, and any action
under this Agreement and any Terms Agreement taken by you will be binding upon
all the Underwriters identified in such Terms Agreement.
14. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
25
<PAGE> 26
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon it will
become a binding agreement among the Transferor and the several Underwriters in
accordance with its terms. Alternatively, the execution of this Agreement by
the Transferor and its acceptance by or on behalf of the Underwriters may be
evidenced by an exchange of telecopied or other written communications.
Very truly yours,
FIRST NORTH AMERICAN NATIONAL
BANK,
as Transferor
By
-----------------------------
Name: Michael T. Chalifoux
Title: President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
NATIONSBANC MONTGOMERY SECURITIES, INC.,
as Representative of the
several Underwriters
By
---------------------------
Name: William A. Glenn
Title: Director
26
<PAGE> 27
EXHIBIT A
FIRST NORTH AMERICAN NATIONAL BANK
FNANB CREDIT CARD MASTER TRUST
ASSET BACKED CERTIFICATES
TERMS AGREEMENT
Dated: _________, 19__
To: First North American National Bank, as Transferor under the Master
Pooling and Servicing Agreement dated as of October 30, 1997.
Re: Underwriting Agreement dated November __, 1997 (the "Agreement").
Title: Asset Backed Certificates, Series ______ [State by Class if more
than one Class].
Registration No.: _______________________.
Initial Principal Amount, Series and Class Designation Schedule: [insert
relevant description of Series and Classes of Certificates].
Certificate Rating: [" " by Moody's Investors Service, Inc.][" " by
Standard & Poor's Investors Service, a division of the McGraw-Hill Companies,
Inc.][" " by [other Rating Agency]][State by Class if more than one Class].
Certificate Rate: [____% per annum][Floating rate--describe] [State by Class
if more than one Class].
Terms of Sale: [The purchase price for the Certificates to the Underwriter[s]
will be ___% of the aggregate principal amount of the Certificates as of
______, 19__, plus accrued interest at the Certificate Rate from _______, 19__,
together with estimated expenses of approximately $___________.] [The
Underwriters will offer the Certificates to the public from time to time, in
negotiated transactions or otherwise, at varying prices to be determined at the
time of sale.]
Distribution Dates: ___________________.
Delivery Date and Location: __:__ A.M., New York Time, on ______, 19__, or at
such other time not later than seven full business days thereafter as may be
agreed upon, at the offices
A-1
<PAGE> 28
of [Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York 10022][other offices].
Notwithstanding anything in the Agreement or in this Terms Agreement to the
contrary, the Agreement and this Terms Agreement constitute the entire
agreement and understanding among the parties hereto with respect to the
purchase and sale of the above-referenced Certificates. This Terms Agreement
may be amended only by written agreement of the parties hereto.
The Underwriters [named in Schedule 1 hereto agree, severally and
not jointly], subject to the terms and provisions of the Agreement, which is
incorporated by reference herein and made a part hereof, to purchase the
Initial Principal Amount of Certificates [set forth opposite their names in
Schedule 1].
Very truly yours,
NATIONSBANC MONTGOMERY
SECURITIES, INC.,
as [Representative][Underwriter]
By
----------------
Name:
Title:
Accepted:
FIRST NORTH AMERICAN
NATIONAL BANK,
as Transferor
By
---------------------------
Name:
Title:
A-2
<PAGE> 29
SCHEDULE 1
<TABLE>
<CAPTION>
$_________ Principal Amount of [Class ____] Asset Backed Certificates, Series ______
Principal Amount
----------------
<S> <C>
[Names of Underwriters] $
----------------
$
================
$_________ Principal Amount of [Class _____] Asset Backed Certificates, Series ______
Principal Amount
----------------
[Names of Underwriters] $
----------------
$
================
</TABLE>
A-3
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business
of banking under the laws of the United States, the undersigned do enter into
the following Articles of Association:
FIRST. The title of this association shall be First North American
National Bank.
SECOND. The main office of the association shall be located in the
City of Marietta, County of Cobb, State of Georgia. The general business of the
association shall be conducted at its main office.
THIRD. The association
(i) will engage only in credit card operations;
(ii) will not accept demand deposits or deposits that the
depositor may withdraw by check or similar means for
payment to third parties or others;
(iii) will not accept any savings or time deposit of less
than $100,000;
(iv) will maintain no more than one office that accepts
deposits;
(v) will not engage in the business or making commercial
loans; and
(vi) will not eliminate or amend this Article without the
advance written approval of the Office of the
Comptroller of the Currency ("OCC").
FOURTH. The board of directors of this association shall
consist of not less than five nor more than twenty-five directors, the exact
number to be fixed and determined from time to time by resolution of a majority
of the full board of directors or by resolution of the shareholders of this
association at any annual or special meeting thereof. Each director, during the
full term of his or her directorship, shall own a minimum of $1,000 aggregate
fair market value of stock in a company which has control of the bank in
accordance with applicable laws and regulations. Unless otherwise provided by
the laws of the United States, any vacancy in the board of directors may be
filled by action of the board of directors.
FIFTH. There shall be an annual meeting of the shareholders
to elect directors and to transact whatever other business may be brought
before the meeting. It shall be held at the main office or any other convenient
place the board of directors may designate, on the day of each year specified
therefor in the bylaws, but if no election is held on that day, it may be held
on
<PAGE> 2
any subsequent day according to such lawful rules as may be prescribed by the
board of directors.
SIXTH. The authorized amount of capital stock of this
association shall be one hundred thousand (100,000) shares of common stock of
the par value of one hundred dollars ($100.00); but said capital stock may be
increased or decreased from time to time, according to the provisions of the
laws of the United States.
No holder of shares of the capital stock of any class of the
association shall have any preemptive or preferential right of subscription to
any shares of any class of stock of the association, whether now or hereafter
authorized, or to any obligations convertible into stock of the association,
issued, or sold, or any right of subscription to any thereof other than such,
if any, as the board of directors, in its discretion may from time to time
determine and at such price as the board of directors may from time to time
fix.
The association, at any time and from time to time, may
authorize and issue debt obligations, whether or not subordinated, without the
approval of the shareholders.
SEVENTH. The board of directors shall appoint one of its
members president of this association, who shall be chairman of the board,
unless the board appoints another director to be the chairman. The board of
directors shall have the power to appoint one or more vice presidents, a
cashier and such other officers and employees as may be required to transact
the business of this association.
The board of directors shall have the power to define the
duties of the officers and employees of the association; to fix the salaries to
be paid to the officers and employees and to dismiss them; to require bonds
from officers and employees and to fix the penalty thereof; to regulate the
manner in which any increase of the capital of the association shall be made;
to manage and administer the business and affairs of the association; to make
all bylaws that it may be lawful for the board of directors to make; and
generally to perform all acts that are legal for a board of directors to
perform.
EIGHTH. The board of directors shall have the power to
change the location of the main office of this association to any other place
within the limits of Marietta, Georgia without the approval of the
shareholders.
NINTH. The corporate existence of this association shall
continue until terminated according to the laws of the United States.
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<PAGE> 3
TENTH. The board of directors of this association or any
one or more shareholders owning, in the aggregate, not less than 50 percent of
the stock of this association may call a special shareholders meeting at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place, and purpose of every annual and special meeting of the
shareholders shall be given by first-class mail, postage prepaid, mailed at
least 10, and no more than 60, days prior to the date of the meeting to each
shareholder of record at his or her address as shown upon the books of this
association.
Any action required or permitted to be taken by the
shareholders of this association at an annual or special meeting thereof, may,
unless otherwise provided by law, be taken pursuant to waiver of notice thereof
and upon unanimous written consent of all shareholders of the association.
ELEVENTH.
A. Definitions. For purposes of this Article the
following definitions shall apply:
"Association" means this association only and no predecessor
entity or other legal entity.
"Expenses" include counsel fees, expert witness fees, and
costs of investigation, litigation and appeal, as well as any amounts expended
in asserting a claim for indemnification.
"Liability" means the obligation to pay a judgment,
settlement, penalty, fine, or other such obligation, including, without
limitation, any excise tax assessed with respect to an employee benefit plan.
"Legal Entity" means a corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise.
"Predecessor Entity" means a legal entity the existence of
which ceased upon its acquisition by this association in a merger or otherwise.
"Proceeding" means any threatened, pending, or completed
action, suit, proceeding or appeal whether civil, criminal, administrative or
investigative and whether formal or informal.
B. Indemnification of Directors and Officers. This
association shall indemnify and may contract in advance to indemnify an
individual who is, was or is threatened to be made a party to a proceeding
because he is or was a director or officer of this association or, while a
director or officer of this association, is or was serving this association or
any other
-3-
<PAGE> 4
legal entity in any capacity at the request of this association against all
liabilities and reasonable expenses incurred in the proceeding except such
liabilities and expenses as are incurred because of his willful misconduct or
knowing violation of the criminal law (regardless of whether the proceeding is
by or in the right of this association). The determination that indemnification
under this Paragraph B is permissible and the evaluation as to the
reasonableness of expenses in a specific case shall be made, in the case of a
director, as provided by law, and in the case of an officer, as provided in
Paragraph C of this Article; provided, however, that if a majority of the
directors of this association 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 person claiming indemnification, be made by special
legal counsel agreed upon by the board of directors and such person. Unless a
determination has been made that indemnification is not permissible, this
association shall make advances and reimbursements for expenses incurred by a
director or officer in a proceeding upon receipt of an undertaking from him to
repay the same if it is ultimately determined that he is not entitled to
indemnification. Such undertaking shall be an unlimited, unsecured general
obligation of the director or officer and shall be accepted without reference
to his ability to make repayment. The termination of a proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that a director or officer
acted in such a manner as to make him ineligible for indemnification.
C. Indemnification of Others. This association may, to
a lesser extent or to the same extent that this association 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
this association, and, if authorized by general or specific action of the board
of directors, may contract in advance to do so. The determination that
indemnification under this Paragraph C is permissible, the authorization of
such indemnification and the valuation as to the reasonableness of expenses in
a specific case shall be made as authorized from time to time by general or
specific action of the board of directors, which action may be taken before or
after a claim for indemnification is made, or as otherwise provided by law. No
person's rights under Paragraph B of this Article shall be limited by the
provisions of this Paragraph C.
D. Miscellaneous. Every reference in this Article to
persons who are or may be entitled to indemnification shall
-4-
<PAGE> 5
include all persons who formerly occupied any of the positions referred to and
their respective heirs, executors and administrators. Special legal counsel
selected to make determinations under this Article may be counsel for this
association. Indemnification pursuant to this Article shall not be exclusive of
any other right of indemnification to which any person may be entitled
including indemnification pursuant to a valid contract, indemnification by
legal entities other than this association and indemnification under policies
of insurance purchased and maintained by this association or others. However,
no person shall be entitled to indemnification by this association to the
extent he is indemnified by another, including an insurer. This association is
authorized to purchase and maintain insurance against any liability it may have
under this Article or to protect any of the persons named above against any
liability arising from their service to this association or any other legal
entity at the request of this association regardless of this association's
power to indemnify against such liability. The provisions of this Article shall
not be deemed to prohibit this association from entering into contracts
otherwise permitted by law with any individuals or legal entities, including
those named above, for the purposes of conducting the business of this
association. If any provision of this Article or its application to any person
or circumstance is held invalid by a court of competent jurisdiction, the
invalidity shall not affect other provisions or applications of this Article,
and to this and the provisions of this Article are severable.
E. Certain Limitations. In no event shall the foregoing
provisions (a) allow the indemnification of directors, officers, or employees
of this association against expenses, penalties, or other payments incurred in
an administrative proceeding or action instituted by an appropriate bank
regulatory agency which proceeding or action results in a final order assessing
civil money penalties or requiring affirmative action by an individual or
individuals in the form of payments to this association; or (b) permit
insurance coverage for a formal order assessing civil money penalties against a
director or employee of this association.
TWELFTH. These articles of association may be amended at any
regular or special meeting of the shareholders by the affirmative vote of the
holders of a majority of the stock of this association unless the vote of the
holders of a greater amount of stock is required by law, and in that case by
the vote of the holders of such greater amount.
-5-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
FIRST NORTH AMERICAN NATIONAL BANK
Article I
Meetings of Shareholders
Section 1.1. Annual Meeting. The annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the association, 1800 Parkway
Place, Marietta, Georgia at such place or time as the board of directors may
designate. Unless otherwise provided by law, notice of the meeting shall be
delivered in person or mailed, postage prepaid, at least 10 days and no more
than 60 days prior to the date thereof, addressed to each shareholder at his/her
address appearing on the books of the association. If, for any cause, an
election of directors is not made on that date, or in the event of a legal
holiday, on the next following banking day, an election may be held on any
subsequent day within 60 days of the date fixed, to be designated by the board
of directors, or, if the directors fail to fix the date, by shareholders
representing two thirds of the shares.
Section 1.2. Special Meetings. Except as otherwise specifically provided
by statute, special meetings of the shareholders may be called for any purpose
at any time by the board of directors or by any one or more shareholders owning,
in the aggregate, not less than twenty-five percent (25%) of the stock of the
association. Every such special meeting, unless otherwise provided by law, shall
be called by delivering in person or mailing, postage prepaid, not less than 10
days nor more than 60 days prior to the date fixed for the meeting, to each
shareholder at the address appearing on the books of the association a notice
stating the purpose of the meeting.
The board of directors may fix a record date for determining shareholders
entitled to notice and to vote at any meeting, in reasonable proximity to the
date of giving notice to the shareholders of such meeting. The record date for
determining shareholders entitled to demand a special meeting is the date the
first shareholder signs a demand for the meeting describing the purpose or
purposes for which it is to be held.
A special meeting may be called by shareholders or the board of directors to
amend the articles of association or bylaws, whether or not such bylaws may be
amended by the board in the absence of shareholder approval.
<PAGE> 2
If an annual or special shareholders' meeting is adjourned to a different date,
time, or place, notice need not be given of the new date, time or place, if the
new date, time or place is announced at the meeting before adjournment, unless
any additional items of business are to be considered, or the association
becomes aware of an intervening event materially affecting any matter to be
voted on more than 10 days prior to the date to which the meeting is adjourned.
If a new record date for the adjourned meeting is fixed, however, notice of the
adjourned meeting must be given to persons who are shareholders as of the new
record date.
Section 1.3. Nominations of Directors. Nominations for election to the
board of directors may be made by the board of directors or by any stockholder
of any outstanding class of capital stock of the association entitled to vote
for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the association, shall be made in writing
and shall be delivered or mailed to the president of the association and to the
Comptroller of the Currency, Washington, D.C., not less than 14 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors, provided, however, that if less than 21 days' notice of the meeting
is given to shareholders, such nomination shall be mailed or delivered to the
president of the association and to the Comptroller of the Currency not later
than the close of business on the seventh day following the day on which the
notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholders:
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the association
that will be voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the association owned
by the notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
Section 1.4. Judges of Election. Every election of directors shall be
managed by three judges, who shall be appointed from among the shareholders by
the board of directors. The judges of election shall hold and conduct the
election at which they are
-2-
<PAGE> 3
appointed to serve. After the election, they shall file with the cashier a
certificate signed by them, certifying the result thereof and the names of the
directors elected. The judges of election, at the request of the chairperson of
the meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall certify the result thereof. So long as there is only one
holder of record of all of the outstanding shares entitled to vote at the
meeting the requirements of this Section 1.4 shall not apply.
Section 1.5. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting. Proxies
shall be dated and filed with the records of the meeting. Proxies with rubber
stamped facsimile signatures may be used and unexecuted proxies may be counted
upon receipt of a confirming telegram from the shareholder. Proxies meeting the
above requirements submitted at any time during a meeting shall be accepted.
Section 1.6. Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law, or by the shareholders or
directors pursuant to Section 8.2. but less than a quorum may adjourn any
meeting, from time to time, and the meeting may be held, as adjourned, without
further notice. A majority of the votes cast shall decide every question or
matter submitted to the shareholders at any meeting, unless otherwise provided
by law or by the articles of association, or by the shareholders or directors
pursuant to Section 8.2.
Section 1.7. Waiver of Notice. The shareholders by unanimous vote may
waive any requirement for notice of a meeting of shareholders.
Article II
Directors
Section 2.1. Board of Directors. The board of directors (board) shall have
the power to manage and administer the business and affairs of the association.
Except as expressly limited by law, all corporate powers of the association
shall be vested in and may be exercised by the board.
Section 2.2. Number. The board shall consist of not less than five nor
more than twenty-five shareholders, the exact number within such minimum and
maximum limits to be fixed and determined from time to time by resolution of a
majority of the full board or by resolution of a majority of the shareholders
at any meeting thereof.
-3-
<PAGE> 4
Section 2.3. Organization Meeting. The secretary or cashier, upon receiving
the certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the association to organize the new board and elect
and appoint officers of the association for the succeeding year. Such meeting
shall be held on the day of the election or as soon thereafter as practicable,
and, in any event, within 30 days thereof. If, at the time fixed for such
meeting, there shall not be a quorum, the directors present may adjourn the
meeting, from time to time, until a quorum is obtained.
Section 2.4. Regular Meetings. The board of directors may hold regular
meetings at such time and place as the board may from time to time determine.
Regular meetings may be held without notice.
Section 2.5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the Chairman of the Board, the President,
or any three directors. Notice of the time and place of each special meeting
shall be given orally or in writing to each director at least 24 hours prior to
a meeting. Any director may waive notice of any meeting, and attendance at or
participation in any meeting shall constitute a waiver of notice of such meeting
unless the director objects at the beginning of the meeting, or promptly upon
the director's arrival, to holding it or transacting business at the meeting and
does not thereafter vote for or assent to action taken at the meeting.
Section 2.6. Quorum. A majority of the director positions on the board
shall constitute a quorum at any meeting, except when otherwise provided by law,
or the bylaws, provided that quorum may not be reduced to below one-third of the
number of director positions, but a lesser number may adjourn any meeting, from
time to time, and the meeting may be held, as adjourned, without further notice.
If the number of directors is reduced below the number that would constitute a
quorum, no business may be transacted, except selecting directors to fill
vacancies in conformance with Section 2.7.
If a quorum is present, the board of directors may take action through the vote
of a majority of the directors who are in attendance.
Section 2.7. Vacancies. When any vacancy occurs among the directors,
including a vacancy resulting from an increase in the number of directors, a
majority of the remaining members of the board, may appoint a director to fill
such vacancy at any regular meeting of the board, or at a special meeting called
for that purpose at which a quorum is present, or if the directors remaining in
office constitute fewer than a quorum of the board,
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by the affirmative vote of a majority of all the directors remaining in office,
or by shareholders at a special meeting called for that purpose, in conformance
with Section 1.2 of this Article. At any such shareholder meeting, each
shareholder entitled to vote shall have the right to multiply the number of
votes he or she is entitled to cast by the number of vacancies being filled and
cast the product for a single candidate or distribute the product among two or
more candidates.
A vacancy that will occur at a specific later date (by reason of a resignation
effective at a later date) may be filled before the vacancy occurs but the new
director may not take office until the vacancy occurs.
Section 2.8. Telephone Meetings. Any or all directors may participate in a
regular or special meeting by means of a conference telephone call or any other
type of communication by which all directors participating may simultaneously
hear each other during the meeting. A director participating in a meeting by
this means is deemed to be present in person at the meeting.
Section 2.9. Action Without a Meeting. Any action required or permitted to
be taken at a meeting of directors may be taken without a meeting if one or more
written consents stating the action taken are signed by all directors before or
after such action. Such written consent shall have the same force and effect as
a unanimous vote.
Article III
Committees of the Board
(INSTRUCTION: The board of director has power over and is solely responsible for
the management, supervision and administration of the association. The board of
directors may delegate its power, but not any of its responsibilities, to such
persons or committees as the board may determine.)
The board of directors must formally ratify written policies authorized by
committees of the board before such policies become effective. Each committee
must have one or more member(s), who serve at the pleasure of the board of
directors. Provision of the articles and bylaws governing place of meetings,
notice of meeting, quorum and voting requirements, telephone meetings and action
without a meeting, of the board of directors, apply to committees and their
members as well. The creation of a committee and appointment of members to it
must be approved by the board of directors.
Section 3.1. Committees. The board of directors may appoint, from time to
time, from its own members, one or more committees
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of one or more persons, for such purposes and with such powers as the board may
determine.
However a committee may not:
(1) Authorize distributions of assets or dividends.
(2) Approve action required to be approved by shareholders.
(3) Fill vacancies on the board of directors or any of its committees.
(4) Amend articles of association.
(5) Adopt, amend or repeal bylaws.
(6) Authorize or approve issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences
and limitations of a class or series of shares.
Article IV
Officers and Employees
Section 4.1. Chairman of the Board. The board of directors shall appoint
one of its members to be the chairman of the board to serve at its pleasure.
Such person shall preside at all meetings of the board of directors. The
chairman of the board shall supervise the carrying out of the policies adopted
or approved by the board; shall have general executive powers, as well as the
specific powers conferred by these bylaws; and shall also have and may exercise
such further powers and duties as from time to time may be conferred upon, or
assigned by the board of directors.
Section 4.2. President. The board of directors shall appoint one of its
members to be the president of the association. In the absence of the chairman,
the president shall preside at any meeting of the board. The president shall
have general executive powers, and shall have and may exercise any and all other
powers and duties pertaining by law, regulation, or practice, to the office of
president, or imposed by these bylaws. The president shall also have and may
exercise such further powers and duties as from time to time may be conferred,
or assigned by the board of directors.
Section 4.3. Vice President. The board of directors may appoint one or more
vice presidents. Each vice president shall have such powers and duties as may be
assigned by the board of directors or the president. One vice president shall be
designated by the board of directors, in the absence of the president, to
perform all the duties of the president.
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Section 4.4. Secretary. The board of directors shall appoint a secretary,
cashier, or other designated officer who shall be secretary of the board and of
the association, and shall keep accurate minutes of all meetings. The secretary
shall attend to the giving of all notices required by these bylaws; shall be
custodian of the corporate seal, records, documents and papers of the
association; shall provide for the keeping of proper records of all transactions
of the association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the office of cashier, or
imposed by these bylaws; and shall also perform such other duties as may be
assigned from time to time, by the board of directors.
Section 4.5. Other Officers. The board of directors may appoint one or
more other officers and attorneys in fact as from time to time may appear to the
board of directors to be required or desirable to transact the business of the
association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to them by the board of directors, the chairperson of the board, or the
president. The board of directors may authorize an officer to appoint one or
more officers or assistant officers.
Section 4.6. Tenure of Office. The president and all other officers shall
hold office for the current year for which the board was elected, unless they
shall resign, become disqualified, or be removed; and any vacancy occurring in
the office of president shall be filled promptly by the board of directors.
Section 4.7. Resignation. An officer may resign at any time by delivering
notice to the association. A resignation is effective when the notice is given
unless the notice specifies a later effective date.
Section 4.8. Mechanical Endorsement. The Chairman of the Board, the
President, any Vice President, the Secretary or the Cashier may authorize any
endorsement on behalf of the association to be made by such mechanical means or
stamps as any of such officers may deem appropriate.
Article V
Stock and Stock Certificates
Section 5.1. Transfers. Shares of the association shall be transferable
only on the books of the association, and a transfer book shall be kept in which
all transfers of such shares shall be recorded. Every person becoming a
shareholder by such transfer shall in proportion to his or her shares, succeed
to all rights of the prior holder of such shares. The board of directors may
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impose conditions upon the transfer of the stock reasonably calculated to
simplify the work of the association with respect to stock transfers, voting at
shareholder meetings, and related matters and to protect it against fraudulent
transfers.
Section 5.2. Form and Signatures. Certificates evidencing shares of the
association shall be in such form as may be determined by the board of
directors. Such certificates shall be signed (manually or by facsimile) by the
president and by the secretary or an assistant secretary or the cashier or an
assistant cashier and shall be sealed by the seal of the association or a
facsimile thereof.
The board of directors may adopt or utilize procedures for replacing lost,
stolen, or destroyed stock certificates as permitted by law.
The association may establish a procedure through which the beneficial owner of
shares that are registered in the name of a nominee may be recognized by the
association as the shareholder. The procedure may set forth:
(1) The types of nominees to which it applied.
(2) The rights or privileges that the association recognizes in a
beneficial owner.
(3) How the nominee may request the association to recognize the
beneficial owner as the shareholder.
(4) The information that must be provided when the procedure is selected.
(5) The period over which the association will continue to recognize
the beneficial owner as the shareholder.
(6) Other aspects of the rights and duties created.
Section 5.3. Issue. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the person to whom the
shares represented thereby are issued, with the number of shares and the date of
issue, shall be entered on the stock transfer records of the association.
Article VI
Corporate Seal
The president, the cashier, the secretary or any assistant cashier or assistant
secretary, or other officer thereunto designated by the board of directors,
shall have authority to affix the corporate seal to any document requiring such
seal, and
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to attest the same. Such seal shall be substantially in the following
form:
( Impression )
( of )
( Seal )
Article VII
Miscellaneous Provisions
Section 7.1. Fiscal Year. The fiscal year of the association shall be the
calendar year or such other period as shall be fixed by the board of directors
and permitted by law.
Section 7.2. Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declaration, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
on behalf of the association by the chairperson of the board, or the president,
or any vice president, or the secretary, or the cashier. Any such instruments
may also be executed, acknowledged, verified, delivered or accepted on behalf of
the association in such other manner and by such other officers as the board of
directors may from time to time direct. The provisions of this section 7.2 are
supplementary to any other provision of these bylaws.
Section 7.3. Records. The articles of association, the bylaws and the
proceedings of all meetings of the shareholders, the board of directors, and
standing committees of the board, shall be recorded in appropriate minute books
provided for that purpose. The minutes of each meeting shall be signed by the
secretary, cashier or other officer appointed to act as secretary of the
meeting.
Section 7.4. Waiver of Notice. Unless otherwise provided by law, whenever
any notice is required to be given to any shareholder or director or member of
any committee of the association under the provisions of these bylaws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
Section 7.5. Designation of Law Applicable to Corporate Governance
Procedures. The body of law selected by the association for its corporate
governance procedures is the Virginia Stock Corporation Act.
Article VIII
Bylaws
Section 8.1. Inspection. A copy of the bylaws, with all amendments, shall
at all times be kept in a convenient place at
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the main office of the association, and shall be open for inspection to all
shareholders during banking hours.
Section 8.2 Amendments. The bylaws may be amended, altered or repealed, at
any regular meeting of the board of directors, by a vote of a majority of the
total number of the directors except as provided below. The association's
shareholders may amend or repeal the bylaws even though the bylaws also may be
amended or repealed by its board of directors.
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EXHIBIT 4.1
---------------------------------------------------------
FIRST NORTH AMERICAN NATIONAL BANK
Transferor and Servicer
and
FIRST UNION NATIONAL BANK
Trustee
on behalf of the Certificateholders
FNANB Credit Card Master Trust
-------------------------------------------
MASTER POOLING AND SERVICING AGREEMENT
Dated as of October 30, 1997
-------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions..........................................................................................1
Section 1.2 Other Definitional Provisions.......................................................................22
ARTICLE II
APPOINTMENT OF TRUSTEE;
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1 Appointment of Trustee; Conveyance of Receivables...................................................23
Section 2.2 Acceptance by Trustee...............................................................................25
Section 2.3 Representations and Warranties......................................................................25
Section 2.4 Representations and Warranties of the Transferor
Relating to the Agreement and any Supplement
and the Receivables...................................................................28
Section 2.5 Covenants of the Transferor.........................................................................34
Section 2.6 Addition of Accounts; Repurchase of Investor
Certificates..........................................................................36
Section 2.7 Removal of Accounts.................................................................................41
Section 2.8 Discount Option Receivables.........................................................................43
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other Matters
Relating to the Servicer..............................................................45
Section 3.2 Servicing Compensation..............................................................................47
Section 3.3 Representations, Warranties and Covenants
of the Servicer.......................................................................48
Section 3.4 Reports and Records for the Trustee.................................................................51
Section 3.5 Annual Servicer's Certificate.......................................................................53
Section 3.6 Annual Independent Public Accountants'
Servicing Report......................................................................53
Section 3.7 Tax Treatment.......................................................................................54
Section 3.8 Adjustments.........................................................................................55
Section 3.9 Reports to the Commission...........................................................................56
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<TABLE>
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ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1 Establishment of Collection Account and
Allocations with Respect to the Exchangeable
Transferor Certificate................................................................57
ARTICLE V
[ARTICLE V IS RESERVED AND MAY BE
SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates....................................................................................65
Section 6.2 Authentication of Certificates......................................................................65
Section 6.3 Registration of Transfer and Exchange of
Certificates..........................................................................66
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates...................................................70
Section 6.5 Persons Deemed Owners...............................................................................71
Section 6.6 Appointment of Paying Agent.........................................................................71
Section 6.7 Access to List of Certificateholders' Names
and Addresses.........................................................................73
Section 6.8 Authenticating Agent................................................................................73
Section 6.9 Tender of Exchangeable Transferor Certificate...................................................... 74
Section 6.10 Global Certificate; Euro-Certificate Exchange
Date..................................................................................77
Section 6.11 Book-Entry Certificates.............................................................................79
Section 6.12 Notices to Clearing Agency..........................................................................80
Section 6.13 Definitive Certificates.............................................................................80
Section 6.14 Meetings of Certificateholders......................................................................81
Section 6.15 Uncertificated Classes..............................................................................84
ARTICLE VII
OTHER MATTERS RELATING
TO THE TRANSFEROR
Section 7.1 Liability of the Transferor.........................................................................85
Section 7.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Transferor....................................................85
Section 7.3 Limitation on Liability of the Transferor...........................................................86
Section 7.4 Liabilities.........................................................................................86
</TABLE>
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<TABLE>
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ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
Section 8.1 Liability of the Servicer...........................................................................88
Section 8.2 Merger or Consolidation of, or Assumption
of the Obligations of, the Servicer...................................................88
Section 8.3 Limitation on Liability of the Servicer and Others..................................................88
Section 8.4 Indemnification of the Trust and the Trustee .......................................................89
Section 8.5 The Servicer Not to Resign..........................................................................90
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables.............................................................90
Section 8.7 Delegation of Duties................................................................................91
Section 8.8 Examination of Records..............................................................................91
ARTICLE IX
EARLY AMORTIZATION EVENTS
Section 9.1 Early Amortization Events...........................................................................92
Section 9.2 Additional Rights Upon the Occurrence of
Certain Events........................................................................92
ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults..................................................................................96
Section 10.2 Trustee to Act; Appointment of Successor...........................................................98
Section 10.3 Notification to Certificateholders................................................................101
Section 10.4 Waiver of Past Defaults...........................................................................101
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee.................................................................................101
Section 11.2 Certain Matters Affecting the Trustee.............................................................104
Section 11.3 Trustee Not Liable for Recitals in
Certificates.........................................................................106
Section 11.4 Trustee May Own Certificates......................................................................106
Section 11.5 The Servicer to Pay Trustee's Fees and
Expenses ............................................................................107
Section 11.6 Eligibility Requirements for Trustee..............................................................107
Section 11.7 Resignation or Removal of Trustee.................................................................108
Section 11.8 Successor Trustee.................................................................................108
Section 11.9 Merger or Consolidation of Trustee................................................................109
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<TABLE>
<S> <C>
Section 11.10 Appointment of Co-Trustee or Separate Trustee.....................................................109
Section 11.11 Tax Returns and Compliance........................................................................111
Section 11.12 Trustee May Enforce Claims Without Possession
of Certificates......................................................................112
Section 11.13 Suits for Enforcement.............................................................................112
Section 11.14 Rights of Certificateholders to Direct
Trustee..............................................................................112
Section 11.15 Representations and Warranties of Trustee.........................................................113
Section 11.16 Maintenance of Office or Agency...................................................................113
Section 11.17 Waiver of Bond Requirement........................................................................113
Section 11.18 Waiver of Inventory, Accounting and Appraisal
Requirements.........................................................................113
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust...............................................................................115
Section 12.2 Optional Purchase; Final Termination Date of
Investor Certificates of any Series..................................................116
Section 12.3 Final Payment with Respect to any Series...........................................................117
Section 12.4 Transferor's Termination Rights....................................................................118
Section 12.5 Defeasance.........................................................................................119
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment..........................................................................................121
Section 13.2 Protection of Right, Title and Interest
to Trust.............................................................................123
Section 13.3 Limitation on Rights of Certificateholders.........................................................125
Section 13.4 Governing Law......................................................................................126
Section 13.5 Notices............................................................................................126
Section 13.6 Severability of Provisions.........................................................................127
Section 13.7 Assignment.........................................................................................127
Section 13.8 Certificates Nonassessable and Fully Paid..........................................................127
Section 13.9 Further Assurances.................................................................................127
Section 13.10 No Waiver: Cumulative Remedies....................................................................127
Section 13.11 Counterparts......................................................................................128
Section 13.12 Third-Party Beneficiaries.........................................................................128
Section 13.13 Actions by Certificateholders.....................................................................128
Section 13.14 Merger and Integration............................................................................128
Section 13.15 Headings..........................................................................................128
Section 13.16 Certificates and Opinions of Counsel..............................................................128
Section 13.17 Nonpetition Covenant..............................................................................129
</TABLE>
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SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Schedule 1 Account List
<S> <C>
Exhibit A Form of Exchangeable Transferor Certificate
Exhibit B Form of Assignment
Exhibit C Form of Reassignment
Exhibit D Form of Initial Report
Exhibit E Form of Monthly Servicer's Certificate
Exhibit F Form of Annual Servicer's Certificate
Exhibit G Form of Opinion of Counsel
Exhibit H Form of Annual Opinion of Counsel
Exhibit I Form of Depository Agreement
</TABLE>
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MASTER POOLING AND SERVICING AGREEMENT, dated as of October
30, 1997, between FIRST NORTH AMERICAN NATIONAL BANK, a national banking
association, as Transferor and Servicer, and FIRST UNION NATIONAL BANK, a
national banking association with its main office located in Richmond, Virginia,
as Trustee.
In consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other party and, to the
extent provided herein or in any Supplement, for the benefit of the
Certificateholders and any Enhancement Provider:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Whenever used in this Agreement,
the following words and phrases shall have the following meanings:
"Account" shall mean each MasterCard(R) or VISA(R) credit card
account originated or acquired by the Transferor, which account is established
pursuant to an Account Agreement and (i) is identified in the Servicer's master
computer files by the four digit identifying code number 2003, 2004, 2009, 3101,
3102, 3103, 3104, 3312, 3313, 3314, 3315, 3316 or 3317 or (ii) is or will be
identified in the computer file or microfiche list delivered to the Trustee by
the Transferor pursuant to Section 2.1 or Section 2.6. The term "Account" shall
include (A) each Transferred Account, (B) each Supplemental Account, but only
from and after the Supplemental Closing Date with respect thereto, (C) each
Automatic Additional Account, but only from and after the Creation Date with
respect thereto, and (D) each Removed Account, but only prior to the Removal
Date with respect thereto.
"Account Agreements" shall mean the agreements and Federal
Truth in Lending Statements for MasterCard and VISA credit card accounts between
any Obligor and the Transferor, as such agreements may be amended, modified or
otherwise changed from time to time.
"Account Guidelines" shall mean the written policies and
procedures of the Transferor relating to the operation of its credit card
business, including, without limitation, the policies and procedures for
determining the creditworthiness of customers and the extension of credit to
customers and relating to the maintenance of credit card accounts and the
collection of receivables, as such policies and procedures may be amended from
time to time in accordance with Section 2.5(c).
"Accumulation Period" shall have, with respect to any Series
or any Class within a Series, the meaning, if any, specified in the related
Supplement.
<PAGE> 8
"Adjustment Amount" shall have the meaning specified in
Section 3.8(a).
"Adjustment Payment" shall have the meaning specified
in Section 3.8(a).
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person.
"Aggregate Automatic Addition Limit" shall mean (i) the number
of Eligible Accounts designated as Automatic Additional Accounts pursuant to
Section 2.6(d) which would either (x) with respect to any calendar quarter,
equal 15% of the sum of the number of Accounts as of the first day of such
calendar quarter (or the Initial Cut-Off Date, whichever is later) and the
number of Supplemental Accounts included as Accounts pursuant to Section 2.6(a)
or Section 2.6(b) since such first day (or the Initial Cut-Off Date, whichever
is later) and (y) with respect to any period of twelve consecutive Collection
Periods, equal 20% of the sum of the number of Accounts as of the first day of
such period (or the Initial Cut-Off Date, whichever is later) and the number of
Supplemental Accounts included as Accounts pursuant to Section 2.6(a) or Section
2.6(b) since such first day (or the Initial Cut-Off Date, whichever is later) or
(ii) such higher number of Automatic Additional Accounts as to which the Rating
Agencies shall consent in writing.
"Aggregate Invested Amount" shall mean, on any date of
determination, the sum of the Invested Amounts with respect to all Series then
outstanding.
"Aggregate Invested Percentage" shall mean, on any date of
determination, the sum of the applicable Invested Percentages with respect to
all Series then outstanding.
"Aggregate Principal Receivables" shall mean, on any date of
determination, the aggregate amount of Principal Receivables at the end of such
date.
"Agreement" shall mean this Master Pooling and Servicing
Agreement and all amendments hereof and supplements hereto including, without
limitation, any Supplement.
"Amortization Period" shall mean, with respect to any Series,
the Accumulation Period, Controlled Amortization Period, Principal Amortization
Period, Early Amortization Period or other type of amortization period specified
in the related Supplement.
"Applicants" shall have the meaning specified in
Section 6.7.
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"Appointment Day" shall have the meaning specified in
Section 9.2(a).
"Assignment" shall have the meaning specified in
Section 2.6.
"Authorized Newspaper" shall mean one or more newspapers of
general circulation in the Borough of Manhattan, The City of New York printed in
the English language and customarily published on each Business Day, whether or
not published on Saturdays, Sundays and holidays.
"Automatic Additional Accounts" shall have the meaning
specified in Section 2.6(d).
"Bearer Certificates" shall have the meaning specified
in Section 6.1.
"Bearer Rules" shall mean the provisions of the Internal
Revenue Code, in effect from time to time, governing the treatment of bearer
obligations, including sections 163(f), 871, 881, 1441, 1442 and 4701, and any
regulations thereunder including, to the extent applicable to any Series,
proposed or temporary regulations.
"Book-Entry Certificates" shall mean certificates evidencing
beneficial interests in the Investor Certificates, ownership and transfers of
which shall be evidenced or made through book entries by a Clearing Agency as
described in Section 6.11; provided, however, that after the occurrence of a
condition whereupon book-entry registration and transfer are no longer permitted
and Definitive Certificates are issued to the Certificate Owners, such
Definitive Certificates shall replace Book-Entry Certificates.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in Richmond, Virginia, Atlanta,
Georgia or New York, New York (or, with respect to any Series, any additional
city specified in the related Supplement) are authorized or obligated by law or
executive order to be closed.
"CEDEL" shall mean Cedel S.A. or any successor thereto.
"Certificate" shall mean one of any Series of the
Investor Certificates or the Exchangeable Transferor Certificate.
"Certificateholder" or "Holder" shall mean the Person in whose
name a Certificate is registered in the Certificate Register and, if applicable,
the holder of any Bearer Certificate or coupon, as the case may be, or such
other Person deemed to be a "Certificateholder" or "Holder" in any related
Supplement.
3
<PAGE> 10
"Certificate Interest" shall mean interest payable in respect
of the Investor Certificates of any Series pursuant to the applicable
Supplement.
"Certificate Owner" shall mean, with respect to any Book-Entry
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate, as reflected on the books of the Clearing Agency or on the books of
a Person maintaining an account with such Clearing Agency (directly or as an
indirect participant in accordance with the rules of such Clearing Agency).
"Certificate Principal" shall mean principal payable in
respect of the Investor Certificates of any Series pursuant to the applicable
Supplement.
"Certificate Rate" shall mean, with respect to any Series of
Certificates (or, for any Series with more than one Class, with respect to each
Class of such Series), the rate per annum expressed as a percentage (or the
formula on the basis of which such rate shall be determined) stated in the
applicable Supplement; provided, however, that, unless otherwise provided in the
applicable Supplement, in each case such rate shall be calculated on the basis
of a 360 day year consisting of twelve 30-day months.
"Certificate Register" shall mean the register maintained
pursuant to Section 6.3 providing for the registration of the applicable
Certificates and transfers and exchanges thereof.
"Class" shall mean, with respect to any Series, any class of
Certificates of such Series as specified in the related Supplement.
"Clearing Agency" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended, or any successor provision thereto.
"Clearing Agency Participant" shall mean a broker, dealer,
bank, other financial institution or other Person for whom from time to time a
Clearing Agency or Foreign Clearing Agency effects book-entry transfers and
pledges of securities deposited with the Clearing Agency or Foreign Clearing
Agency.
"Closing Date" shall mean, with respect to any Series, the
date of issuance of such Series of Certificates, as specified in the related
Supplement.
"Collection Account" shall have the meaning specified
in Section 4.1.
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"Collection Period" shall mean, unless otherwise provided in
any Supplement, the period from and including the first day of a calendar month
to and including the last day of such calendar month.
"Collections" shall mean (i) all payments (including Insurance
Proceeds) received by the Servicer with respect to the Receivables, in the form
of cash, checks, wire transfers, ATM transfers or other form of payment in
accordance with the related Account Agreements in effect from time to time and
(ii) with respect to any Collection Period, (A) all Recoveries received during
such Collection Period, (B) the Interchange Amount, if any, with respect to such
Collection Period (to the extent received by the Trust) and (C) interest and
other investment earnings (net of losses and investment expenses) on funds on
deposit in the Excess Funding Account.
"Common Depositary" shall mean the Person appointed as such as
specified in the related Supplement, in its capacity as common depositary for
the respective accounts of a Foreign Clearing Agency.
"Controlled Amortization Period" shall have, with respect to
any Series, the meaning, if any, specified in the related Supplement.
"Corporate Trust Office" shall mean the principal office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date of the execution of this Agreement is
located at 901 East Cary Street, 2nd Floor, Richmond, Virginia 23219.
"Coupons" shall have the meaning specified in Section
6.1.
"Creation Date" shall mean the date that an Account is
originated and is identified in the Servicer's master computer files by the four
digit identifying code number 2003, 2004, 2009, 3101, 3102, 3103, 3104, 3312,
3313, 3314, 3315, 3316 or 3317.
"Date of Processing" shall mean, with respect to any
transaction, the Business Day on which such transaction is first recorded on the
Servicer's computer master file of MasterCard and VISA credit card accounts
(without regard to the effective date of such recordation).
"Default Amount" shall mean, for any Collection Period, the
aggregate amount of Principal Receivables (other than Ineligible Receivables) in
all Accounts which became Defaulted Accounts during such Collection Period
(determined in each case as of the date on which the related Account became a
Defaulted
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<PAGE> 12
Account) minus Recoveries, if any, received during such Collection Period.
"Defaulted Account" shall mean each Account with respect to
which, in accordance with the Account Guidelines pursuant to which such Account
is governed or the customary and usual servicing procedures of the Servicer for
servicing consumer revolving credit card receivables comparable to the
Receivables, the Servicer has charged off the Receivables in such Account as
uncollectible. An Account shall be deemed a Defaulted Account no later than the
earlier of (i) the last day of the calendar month in which such 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 has filed a
bankruptcy petition or has had a bankruptcy petition filed against him.
Notwithstanding any other provision hereof, any Receivables in a Defaulted
Account which are Ineligible Receivables shall be treated as Ineligible
Receivables rather than Receivables in Defaulted Accounts.
"Defeasance" shall have the meaning specified in
Section 12.5.
"Defeased Series" shall have the meaning specified in
Section 12.5.
"Definitive Certificates" shall have the meaning
specified in Section 6.11.
"Definitive Euro-Certificates" shall have the meaning
specified in Section 6.10.
"Depository Agreement" shall mean the agreement among the
Transferor, the Trustee and the initial Clearing Agency, substantially in the
form of Exhibit I, or such other agreement as may be specified in the related
Supplement.
"Determination Date" shall mean, with respect to any Series,
the eighth day of each calendar month or, if such day is not a Business Day, the
next succeeding Business Day, or such other date as may be specified in the
related Supplement.
"Discount Collections" shall mean, on any Date of Processing,
the product of (a) a fraction the numerator of which is the amount of Discount
Option Receivables and the denominator of which is the sum of the Principal
Receivables and the Discount Option Receivables, in each case at the end of the
prior Collection Period, and (b) Collections of Principal Receivables (without
giving effect to Discount Option Receivables) on such Date of Processing.
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<PAGE> 13
"Discount Option Receivables" shall mean, on any Date of
Processing, the sum of (a) the aggregate Discount Option Receivables at the end
of the prior Date of Processing (which amount, at the end of the Date of
Processing prior to the Initial Cut-Off Date shall be $1,610,469,630) plus (b)
any new Discount Option Receivables created on such Date of Processing minus (c)
any Discount Collections received on such Date of Processing. Discount Option
Receivables created on any Date of Processing shall mean the product of the
amount of any Principal Receivables created on such Date of Processing (without
giving effect to Discount Option Receivables) and the Discount Percentage.
"Discount Percentage" shall have the meaning specified
in Section 2.8.
"Dissolution Event" shall have the meaning specified in
Section 9.2(a).
"Distribution Date" shall mean, with respect to any Series,
the fifteenth day of each calendar month, or, if such fifteenth day is not a
Business Day, the next succeeding Business Day, or such other date as may be
specified in the related Supplement.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating
Company.
"Early Amortization Event" shall mean, with respect to any
Series, each event specified in Section 9.1 and each additional event, if any,
specified in the related Supplement as an Early Amortization Event with respect
to such Series.
"Early Amortization Period" shall have, with respect to any
Series, the meaning, if any, specified in the related Supplement.
"Eligible Account" shall mean, as of the Initial CutOff Date
(or, with respect to Supplemental Accounts, as of the related Supplemental
Cut-Off Date or, with respect to Automatic Additional Accounts, as of the
related Creation Date) each Account (i) which is in existence and owned by the
Transferor, (ii) which is payable in United States dollars, (iii) the credit
card or cards related to which have not been reported lost or stolen or
designated fraudulent, (iv) which was created in accordance with, or under
standards no less stringent than, the Account Guidelines, (v) which is not
identified by the Transferor in its computer files as having been canceled due
to the bankruptcy, insolvency or death of the related Obligor, (vi) the
receivables in which have not been charged off as uncollectible prior to the
Initial Cut-Off Date, the related Supplemental CutOff Date or the related
Creation Date, as applicable, in accordance with the Account Guidelines, (vii)
which is not a
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<PAGE> 14
corporate account, (viii) the receivables in which have not been assigned,
pledged or sold (other than pursuant to this Agreement), (ix) the Obligor of
which has provided, as its most recent billing address, an address in the United
States or its territories or possessions or which is a United States military
address and (x) with respect to which neither the Transferor nor any Affiliate
of the Transferor is the Obligor.
"Eligible Institution" shall mean (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 (or
any domestic branch or agency of any foreign bank), the deposits in which are
insured by the FDIC and which at all times has a short-term unsecured debt or
certificate of deposit rating from Moody's and Standard & Poor's of "P-1" and
"A-1+", respectively, and from Duff & Phelps of at least "D-1" (if Duff & Phelps
is a Rating Agency for any then outstanding Series and the short-term unsecured
debt obligations or certificates of deposit of such institution are rated by
Duff & Phelps) and from Fitch of at least "F-1" (if Fitch is a Rating Agency for
any then outstanding Series and the short-term unsecured debt obligations or
certificates of deposit of such institution are rated by Fitch) or (ii) any
other depository institution, which may include the Trustee, approved in writing
by each Rating Agency for any Series.
"Eligible Investments" shall mean (a) negotiable instruments
or securities represented by instruments in bearer or registered or in
book-entry form which evidence (i) obligations of or fully guaranteed by the
United States of America or its agencies; (ii) time deposits in, or promissory
notes or bankers acceptances issued by, any depository institution or trust
company organized under the laws of the United States of America or any state
thereof or the District of Columbia (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, in the
case of certificates of deposit or short-term deposits, a credit rating from
Moody's and Standard & Poor's of "P-1" and "A-1+", respectively, and from Duff &
Phelps of at least "D-1" (if Duff & Phelps is a Rating Agency for any then
outstanding Series and the certificates of deposit or short-term deposits of
such institution are rated by Duff & Phelps) and from Fitch of at least "F-1"
(if Fitch is a Rating Agency for any then outstanding Series and the
certificates of deposit or short-term deposits of such institution are rated by
Fitch) and, in the case of long-
8
<PAGE> 15
term unsecured debt obligations, a credit rating from Moody's in one of the two
highest rating categories and from Standard & Poor's in the highest rating
category, and from Duff & Phelps in one of the two highest rating categories (if
Duff & Phelps is a Rating Agency for any then outstanding Series and the
long-term unsecured debt obligations of such institution are rated by Duff &
Phelps) and from Fitch in one of the two highest rating categories (if Fitch is
a Rating Agency for any then outstanding Series and the long-term unsecured debt
obligations of such institution are rated by Fitch); (iii) certificates of
deposit having, at the time of the Trust's investment or contractual commitment
to invest therein, a rating from Moody's and Standard & Poor's of "P-1" and
"A-1+", respectively, and from Duff & Phelps of at least "D-1" (if Duff & Phelps
is a Rating Agency for any then outstanding Series and such certificates of
deposit are rated by Duff & Phelps) and from Fitch of at least "F-1" (if Fitch
is a Rating Agency for any then outstanding Series and such certificates of
deposit are rated by Fitch); or (iv) investments in money market funds rated in
the highest rating category or otherwise approved in writing by each applicable
Rating Agency, (b) 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 clause (a)(ii) above, (c) 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 credit rating from
Moody's and Standard & Poor's of "P-1" and "A-1+", respectively, and from Duff &
Phelps of at least "D-1" (if Duff & Phelps is a Rating Agency for any then
outstanding Series and such commercial paper is rated by Duff & Phelps) and from
Fitch of at least "F-1" (if Fitch is a Rating Agency for any then outstanding
Series and such commercial paper is rated by Fitch), (d) Eurodollar time
deposits having a credit rating from Moody's and Standard & Poor's of "P- 1" and
"A-l+", respectively, and from Duff & Phelps of at least "D-1" (if Duff & Phelps
is a Rating Agency for any then outstanding Series and such deposits are rated
by Duff & Phelps) and from Fitch of at least "F-1" (if Fitch is a Rating Agency
for any then outstanding Series and such deposits are rated by Fitch), (e)
repurchase agreements involving any of the investments described in clauses
(a)(i), (a)(iii) and (d) hereof so long as the certificates of deposit,
short-term deposits or commercial paper of the other party to the repurchase
agreement have, at the time of the Trust's investment therein, a rating from
Moody's and Standard & Poor's of "P-1" and "A-1+", respectively, and from Duff &
Phelps of at least "D-1" (if Duff & Phelps is a Rating Agency for any then
outstanding Series and such other party is rated by Duff & Phelps) and from
Fitch of at least "F-1" (if Fitch is a Rating Agency for any then outstanding
Series and such other party is rated by Fitch ) and (f) any other investment if
the Rating Agency Condition is satisfied, provided that such investment will not
cause the Trust to be treated as an "investment company" within the meaning of
the 1940 Act.
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<PAGE> 16
"Eligible Receivable" shall mean each Receivable:
(i) which has arisen under an Eligible Account;
(ii) which was created in compliance with all
applicable requirements of law and pursuant to an Account Agreement
which complies with all applicable requirements of law in either case
the failure to comply with which would have a material adverse effect
upon Certificateholders,
(iii) with respect to which all material consents,
licenses, approvals or authorizations of, or registrations with, any
governmental authority required to be obtained, effected 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 Account Agreement have been duly obtained, effected 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 had good and marketable title, free
and clear of all liens, encumbrances, charges and security interests
arising under or through the Transferor or any of its Affiliates
(except those permitted by Section 2.5(b));
(v) which has been the subject of either a valid
transfer and assignment from the Transferor to the Trust of all of the
Transferor's right, title and interest therein or the grant of a first
priority perfected security interest therein (and in the proceeds
thereof to the extent set forth in Section 9-306 of the UCC as in
effect in the Relevant UCC State), 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, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors' rights in general and except
as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity);
(vii) which constitutes either "chattel paper," an
"account" or a "general intangible" under and as defined in Article 9
of the UCC as then in effect in the Relevant UCC State;
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<PAGE> 17
(viii) which, at the time of its transfer to the
Trust, has not been waived or modified except as permitted
hereunder;
(ix) which is not subject to any set off, right of
rescission, counterclaim or other defense (including the defense of
usury), other than defenses arising out of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights in general;
(x) as to which the Transferor has satisfied all
obligations to be satisfied at the time it is transferred
to the Trust;
(xi) as to which the Transferor has done nothing,
at the time of its transfer to the Trust, to impair the
rights of the Trust or Certificateholders therein; and
(xii) which was generated by the Transferor in
the ordinary course of business.
"Eligible Servicer" shall mean First North American National
Bank, the Trustee, or any entity which, at the time of its appointment as
Servicer, (i) has a net worth of not less than $50,000,000 as of the end of its
most recent fiscal quarter, (ii) is servicing a portfolio of consumer revolving
credit card accounts, (iii) is legally qualified and has the capacity to service
the Accounts, (iv) has demonstrated the ability to professionally service a
portfolio of similar accounts in accordance with standards of skill and care
customary in the industry and (v) is qualified to use the software that is then
currently being used to service the Accounts or obtains the right to use or has
its own software which is adequate to perform its duties under this Agreement.
"Enhancement" shall mean, with respect to any Series or Class
within a Series, any letter of credit, guaranteed rate agreement, maturity
guaranty facility, liquidity facility, cash collateral account, collateral
indebtedness amount, collateral interest, cash collateral guaranty, surety bond,
insurance policy, tax protection agreement, interest rate swap, interest rate
cap, spread account, reserve account, subordination arrangement, cross-support
feature or other contract, agreement or arrangement (including the subordination
of a Series or Class to another Series or Class), or combination of same, for
the benefit of Certificateholders of such Series or Class, as set forth in the
related Supplement.
"Enhancement Agreement" shall mean any agreement, instrument
or document governing the terms of any Enhancement or pursuant to which any
Enhancement is issued or outstanding.
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<PAGE> 18
"Enhancement Invested Amount" shall have, with respect to any
Series, the meaning specified in the related Supplement.
"Enhancement Provider" shall mean, with respect to any Series,
that Person designated as such in the related Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated
thereunder.
"Euro-Certificate Exchange Date" shall mean, with respect to
any Series, the date specified in the related Supplement.
"Euroclear Operator" shall mean Morgan Guaranty Trust Company
of New York, Brussels office, as operator of the Euroclear System or any
successor thereto.
"Excess Automatic Additional Accounts" shall mean, with
respect to any calendar quarter or any period of twelve consecutive months, all
Automatic Additional Accounts designated by the Transferor during such calendar
quarter or such twelve month period after the designation of the Automatic
Additional Account that caused the number of Automatic Additional Accounts
designated during such calendar quarter or such twelve month period to equal the
applicable Aggregate Automatic Addition Limit.
"Excess Funding Account" shall have the meaning specified in
Section 4.1(f).
"Excess Funding Amount" shall mean, on any date of
determination, the amount on deposit in the Excess Funding Account on such date.
"Exchange" shall mean the procedure described under Section
6.9.
"Exchange Date" shall have, with respect to any Series issued
pursuant to an Exchange, the meaning specified in Section 6.9.
"Exchangeable Transferor Certificate" shall mean the
certificate executed by the Transferor and authenticated by the Trustee,
substantially in the form of Exhibit A, and any Exchangeable Transferor
Certificate reissued pursuant to Section
6.9.
"Exchange Notice" shall have, with respect to any Series
issued pursuant to an Exchange, the meaning specified in Section 6.9.
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<PAGE> 19
"FDIC" shall mean the Federal Deposit Insurance Corporation,
or any successor thereto.
"Final Termination Date" shall have the meaning specified in
Section 12.1(a).
"Finance Charge Receivables" shall mean (i) Receivables
created in respect of Finance Charges, cash advance fees, annual fees, late
charges, overlimit charges, returned check charges and all other fees and
charges on the Accounts (other than Insurance Charges) and (ii) Discount Option
Receivables. Collections of Finance Charge Receivables with respect to any
Collection Period shall be deemed to include (i) all Recoveries received during
such Collection Period and (ii) the Interchange Amount, if any, with respect to
such Collection Period (to the extent received by the Trust).
"Finance Charge Shortfalls" shall have, with respect to any
Series, the meaning specified in the related Supplement.
"Finance Charges" shall have the meaning specified in the
Account Agreement applicable to each Account.
"Fiscal Year" shall mean the period commencing on March 1 of
any year and ending on February 28 (or February 29, if applicable) of the
following year.
"Fitch" shall mean Fitch Investors Service, L.P.
"Fixed Allocation Percentage" shall have, with respect to any
Series, the meaning specified in the related Supplement.
"Floating Allocation Percentage" shall have, with respect to
any Series, the meaning specified in the related Supplement.
"Foreign Clearing Agency" shall mean, with respect to any
Series, CEDEL or the Euroclear Operator or any other established clearing agency
for securities outside the United States designated in the related Supplement.
"Global Certificate" shall have the meaning specified
in Section 6.10(a).
"Governmental Authority" shall mean the United States of
America, any state or other political subdivision thereof and any United States
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
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<PAGE> 20
"Group" shall mean, with respect to any Series, the group of
Series, if any, in which the related Supplement specifies such Series is to be
included.
"Ineligible Receivable" shall have the meaning specified in
Section 2.4(d)(iii).
"Initial Closing Date" shall mean October 30, 1997.
"Initial Cut-Off Date" shall mean the opening of business on
September 30, 1997.
"Initial Invested Amount" shall mean, with respect to any
Series, the amount specified in the related Supplement.
"Insurance Charges" shall mean, with respect to any Account,
the monthly premiums charged to the related Obligor with respect to any
Insurance Policies.
"Insurance Policies" shall mean any credit insurance policies
offered through the Transferor with respect to the Accounts.
"Insurance Proceeds" shall mean amounts received or recovered
pursuant to any Insurance Policies.
"Interchange" shall mean interchange fees payable to the
Transferor, in its capacity as credit card issuer, through MasterCard
International Incorporated and VISA USA Incorporated.
"Interchange Amount" shall mean, with respect to any
Collection Period, the amount of Interchange paid to the Transferor with respect
to such Collection Period multiplied by a fraction the numerator of which is the
aggregate amount of cardholder charges for goods and services (net of
adjustments arising from rebates, discounts, allowances, disputes or
chargebacks) in the Accounts with respect to such Collection Period and the
denominator of which is the aggregate amount of cardholder charges for goods and
services (net of adjustments arising from rebates, discounts, allowances,
disputes or chargebacks) in all the MasterCard and VISA credit card accounts
(including the Accounts) owned by the Transferor with respect to such Collection
Period.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"Invested Amount" shall have, with respect to any Series, the
meaning specified in the related Supplement.
"Invested Percentage" shall have, with respect to any Series,
the meaning specified in the related Supplement.
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<PAGE> 21
"Investor Certificate" shall mean any one of the certificates
executed by the Transferor and authenticated by the Trustee substantially in the
form (or forms in the case of a Series with multiple Classes) attached to any
Supplement, or such other interest in the Trust deemed to be an "Investor
Certificate" in any related Supplement.
"Investor Certificateholder" shall mean the holder of
record of an Investor Certificate.
"Investor Charge Offs" shall have, with respect to any Series,
the meaning specified in the related Supplement.
"Investor Default Amount" shall have, with respect to any
Series, the meaning specified in the related Supplement.
"Investor Monthly Servicing Fee" shall have the meaning
specified in Section 3.2.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, participation, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority right or interest or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the Uniform
Commercial Code (other than any such financing statement filed for informational
purposes only) or comparable law of any jurisdiction to evidence any of the
foregoing; provided, however, that any assignment pursuant to Section 7.2 shall
not be deemed to constitute a Lien.
"Manager" shall mean the managing underwriter of any
Series.
"Minimum Aggregate Principal Receivables" shall mean, on any
date of determination, the aggregate of the amounts set forth in each Supplement
for each then outstanding Series as the "Minimum Aggregate Principal
Receivables" for such Series, which shall be the Initial Invested Amount of each
such Series unless
otherwise specified in such Supplement.
"Minimum Transferor Amount" shall mean, on any date of
determination, the product of the Aggregate Principal Receivables on such date
and the Minimum Transferor Interest Percentage on such date.
"Minimum Transferor Interest Percentage" shall mean, on any
date of determination, the highest percentage set forth in any Supplement for
any then outstanding Series as the "Minimum Transferor Interest Percentage" for
such Series.
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<PAGE> 22
"Monthly Servicing Fee" shall have the meaning
specified in Section 3.2.
"Moody's" shall mean Moody's Investors Service, Inc.
"1940 Act" shall have the meaning specified in Section 9.1.
"Obligations" shall have the meaning specified in Section
2.1(b).
"Obligor" shall mean, with respect to any Account, the Person
or Persons obligated to make payments with respect to such Account, including
any guarantor thereof.
"Officer's Certificate" shall mean a certificate signed by any
Vice President or more senior officer of either of the Transferor or the
Servicer and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel,
who may be counsel for or an employee of the Person providing the opinion, and
who shall be reasonably acceptable to the Trustee; provided, however, that any
Tax Opinion or other opinion relating to federal income tax matters shall be an
opinion of nationally recognized tax counsel; and, provided further, that no
such written opinion (including, without limitation, any Tax Opinion) shall be
an expense of the Trustee.
"Paying Agent" shall mean any paying agent appointed pursuant
to Section 6.6 and shall initially be the Trustee.
"Person" shall mean any legal person, including any
individual, corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Authority or other entity of similar nature.
"Principal Amortization Period" shall have, with respect to
any Series, the meaning, if any, specified in the related Supplement.
"Principal Receivables" shall mean Receivables other
than Finance Charge Receivables, Receivables in Defaulted
Accounts and Discount Option Receivables.
"Principal Sharing Series" shall mean a Series that, pursuant
to the related Supplement, is entitled to receive Shared Principal Collections.
"Principal Shortfalls" shall have, with respect to any Series,
the meaning specified in the related Supplement.
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<PAGE> 23
"Principal Terms" shall have, with respect to any Series
issued pursuant to an Exchange, the meaning specified in Section 6.9.
"Publication Date" shall have the meaning specified in
Section 9.2(a).
"Pro Forma Investor Default Amount" shall mean, for any
Distribution Date with respect to any Series, the average of the Investor
Default Amounts for such Series for the three consecutive Distribution Dates
preceding such Distribution Date; provided, however, that the Investor Default
Amount for the three consecutive Distribution Dates preceding the initial
Distribution Date with respect to any Series shall be calculated based on the
Default Amount and Invested Percentages that would have applied had such Series
been outstanding at all relevant times with an Invested Amount equal to the
Initial Invested Amount of such Series.
"Rating Agency" shall mean, with respect to any Series, the
rating agency or agencies selected by the Transferor to rate the Investor
Certificates of such Series.
"Rating Agency Condition" shall mean, 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 with respect to which it is a Rating
Agency.
"Reassignment" shall have the meaning specified in
Section 2.7.
"Receivable" shall mean any amount owing by an Obligor under
an Account from time to time, including, without limitation, amounts owing for
the payment of goods and services, cash advances, Insurance Charges, Finance
Charges, cash advance fees, annual fees, late charges, overlimit charges,
returned check charges and all other fees and charges. In calculating the
aggregate amount of Receivables on any day, the amount of Receivables shall be
reduced by the aggregate amount of credit balances, and other adjustments stated
in Section 3.8 hereof, in the Accounts on such day. Any Receivables which the
Transferor is unable to transfer as provided in Section 2.5(d) shall not be
included in calculating the aggregate amount of Receivables.
"Record Date" shall mean, with respect to any Distribution
Date for any Series, the last Business Day of the immediately preceding
Collection Period, or such other date as may be specified in the related
Supplement.
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<PAGE> 24
"Recoveries" shall mean all amounts (including Insurance
Proceeds, if any) received by the Servicer with respect to Receivables in
Defaulted Accounts (net of any out-of-pocket costs and expenses of collection
and certain other post-charge off adjustments) and the net proceeds of the
transfer of any credit card account that is removed as a Zero Balance Account
pursuant to Section 2.7(c).
"Registered Certificates" shall have the meaning
specified in Section 6.1.
"Relevant UCC State" shall mean all jurisdictions where a UCC
filing is required to perfect and maintain the security interest of the Trustee
in the Receivables and the proceeds thereof.
"Removal Date" shall mean the date on which the Receivables in
certain designated Removed Accounts will be reassigned by the Trustee to the
Transferor.
"Removal Notice Date" shall mean the fifth Business Day prior
to a Removal Date.
"Removed Accounts" shall have the meaning specified in
Section 2.7.
"Repurchase Terms" shall mean, with respect to any Series
issued pursuant to an Exchange, the terms and conditions under which the
Transferor may repurchase such Series of Certificates pursuant to Section 12.2.
"Required Investor Certificateholders" shall have, with
respect to any Series, the meaning specified in the related Supplement.
"Requirements of Law" shall mean, with respect to any Person,
the certificate of incorporation or articles of association and by-laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation, or determination of an arbitrator or Governmental Authority, in
each case applicable to or binding upon such Person or to which such Person is
subject, whether Federal, state or local (including, without limitation, usury
laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the
Board of Governors of the Federal Reserve System).
"Responsible Officer" shall mean any officer of the Trustee
assigned by it to administer its corporate trust matters.
"Revolving Period" shall mean, with respect to any Series, the
period from and including the date of initial issuance of the Investor
Certificates of such Series to but not
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including the day on which an Amortization Period for such Series commences.
"Series" shall mean any Series of Investor Certificates, each
as designated in the related Supplement (including any Enhancement Invested
Amount related thereto).
"Series Adjustment Amount" shall mean, with respect to any
Collection Period for any Series, the product of (i) the percentage equivalent
of a fraction, the numerator of which is the Invested Amount with respect to
such Series as of the last day of such Collection Period and the denominator of
which is the Aggregate Invested Amount on such last day and (ii) the Adjustment
Amount as of such last day.
"Servicer" shall mean initially First North American National
Bank, and its permitted successors and assigns, and thereafter any Person
appointed as successor as herein provided to service the Receivables.
"Servicer Default" shall have the meaning specified in
Section 10.1.
"Service Transfer" shall have the meaning specified in
Section 10.1.
"Servicing Fee Percentage" shall have, with respect to any
Series, the meaning specified in the related Supplement.
"Servicing Officer" shall mean any officer of the Servicer
involved in, or responsible for, the administration and servicing of the
Receivables whose name appears on a list of servicing officers furnished to the
Trustee by the Servicer, as such list may from time to time be amended.
"Shared Excess Finance Charge Collections" shall have, with
respect to any Series, the meaning specified in the related Supplement.
"Shared Principal Collections" shall have, with respect to any
Series, the meaning specified in the related Supplement.
"Standard & Poor's" shall mean Standard & Poor's, a division
of The McGraw-Hill Companies, Inc.
"Stated Series Termination Date" shall have, with respect to
any Series, the meaning specified in the related Supplement.
"Successor Servicer" shall have the meaning specified
in Section 10.2.
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"Supplement" shall mean, with respect to any Series, a
supplement to this Agreement complying with the terms of Section 6.9, executed
in conjunction with the issuance of such Series.
"Supplemental Account" shall have the meaning specified
in Section 2.6(a).
"Supplemental Closing Date" shall mean each date on which
Supplemental Accounts will be included as Accounts pursuant to Section 2.6.
"Supplemental Cut-Off Date" shall mean, with respect to any
Supplemental Account, the last day of the Collection Period preceding the
related Supplemental Closing Date.
"Tax Opinion" shall have the meaning specified in
Section 6.9(b).
"Termination Notice" shall have, with respect to any Series,
the meaning specified in Section 10.1.
"Transfer Agent and Registrar" shall have the meaning
specified in Section 6.3 and shall initially be the Trustee.
"Transfer Date" shall mean the Business Day preceding
each Distribution Date.
"Transferor" shall mean First North American National Bank, as
transferor of the Receivables, and its permitted successors and assigns.
"Transferor Amount" shall mean, on any date of determination,
the Aggregate Principal Receivables at the end of the day immediately prior to
such date of determination, plus the Excess Funding Amount at the end of such
day, minus the Aggregate Invested Amount at the end of such day, minus any
Enhancement Invested Amount at the end of such day (to the extent not included
in the Aggregate Invested Amount).
"Transferor Interest" shall have the meaning specified
in Section 4.1(a).
"Transferor Interest Percentage" shall mean, on any date of
determination, the Transferor Amount divided by the Aggregate Principal
Receivables.
"Transferor Percentage" shall mean, on any date of
determination, when used with respect to Collections of Principal Receivables,
Finance Charge Receivables and Receivables in Defaulted Accounts, one hundred
percent minus the Aggregate Invested Percentage calculated on such date with
respect to such categories of Receivables as calculated by the Servicer.
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"Transferred Account" shall mean a MasterCard or VISA credit
card account with respect to which a new credit card account number has been
issued by the Servicer or the Transferor in accordance with the Servicer's usual
and customary servicing practices and in accordance with the Account Guidelines,
and which can be traced or identified by reference to or by way of the computer
files or microfiche lists delivered to the Trustee pursuant to Sections 2.1 and
2.6 as an account into which an Account has been transferred (including such
transfers occurring between the Initial Cut-Off Date and the Initial Closing
Date and between any Supplemental Cut-Off Date and the related Supplemental
Closing Date).
"Trust" shall mean the trust created by this Agreement, the
corpus of which shall consist of the Trust Property.
"Trust Property" shall have the meaning specified in
Section 2.1(b).
"Trustee" shall mean the institution executing this Agreement
as trustee, the successor to its corporate trust business, or its successor in
interest, or any successor trustee appointed as herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in any specified jurisdiction.
"Undivided Interest" shall mean the undivided interest
of any Certificateholder in the Trust.
"Zero Balance Account" shall mean an Account with a Receivable
balance of zero.
Section 1.2 Other Definitional Provisions.
(a) All terms defined in any Supplement or this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein. The
definitions of all terms defined herein shall include the singular as well as
the plural form of such terms and the masculine of such terms as well as the
feminine and neuter genders of such terms.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
Section 1.1, and accounting terms partly defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles on the date of determination. To the extent that
the definitions of accounting terms herein are inconsistent with the meanings of
such terms under generally
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accepted accounting principles, the definitions contained herein
shall control.
(c) The agreements, representations and warranties of First
North American National Bank in this Agreement in its capacity as Transferor or
Servicer shall be deemed to be the agreements, representations and warranties of
First North American National Bank solely in such capacity for so long as it
acts in such capacity under this Agreement.
(d) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to any Supplement or this
Agreement as a whole and not to any particular provision of such Supplement or
this Agreement, as the case may be; Section, subsection, Schedule and Exhibit
references contained in this Agreement or any Supplement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement or any
Supplement unless otherwise specified; and the word "including" means including
without limitation.
[END OF ARTICLE I]
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ARTICLE II
APPOINTMENT OF TRUSTEE;
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1 Appointment of Trustee; Conveyance of
Receivables.
(a) The Transferor appoints and authorizes First Union
National Bank to act as Trustee as provided herein and to exercise such powers
under this Agreement as are delegated to the Trustee by the terms hereof
together with all such powers as are reasonably incidental thereto. The Trustee
hereby accepts such appointment and agrees to exercise such powers and perform
such functions on behalf of the Certificateholders from time to time as are
specifically delegated to the Trustee by the terms hereof.
(b) The Transferor does hereby transfer, assign, set- over,
and otherwise convey to the Trust for the benefit of the Certificateholders,
without recourse, all right, title and interest of the Transferor in and to the
Receivables, now existing and hereafter created, all monies due or to become due
and all amounts received with respect thereto (including all Finance Charge
Receivables and Recoveries) on and after the Initial Cut-Off Date, all proceeds
of such Receivables, all Insurance Proceeds relating to such Receivables, and
the right to receive certain amounts payable as Interchange (if provided for in
any Supplement). Such property, together with all monies as are from time to
time deposited in the Collection Account, the Excess Funding Account and any
other account or accounts maintained for the benefit of the Certificateholders
(including, to the extent specified in the related Supplement, investment
earnings on such amounts), all proceeds of the foregoing and all monies as are
from time to time available under any Enhancement for any Series for payment to
Certificateholders shall constitute the property of the Trust (the "Trust
Property"). The foregoing transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Trust, the Trustee or any Certificateholder of any obligation of the Servicer,
the Transferor or any other Person in connection with the Accounts, the
Receivables or under any agreement or instrument relating thereto including,
without limitation, any obligation to any Obligors, merchant service
establishments or insurers.
In connection with such transfer, the Transferor agrees to
record and file, at its own expense, financing statements (and continuation
statements with respect to such financing statements when applicable) with
respect to the Receivables now existing and hereafter created for the transfer
of chattel paper, accounts and
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general intangibles (each as defined in the UCC as in effect in the Relevant UCC
State) meeting the requirements of applicable state law in such manner and in
such jurisdictions as are necessary to perfect the transfers and assignments of
the Receivables by the Transferor to the Trust, and to deliver a file-stamped
copy of such financing statements or other evidence of such filings to the
Trustee on or prior to the Initial Closing Date (which may, for the purposes of
this Section 2.1, consist of telephone confirmation of such filing) and, in the
case of continuation statements, as soon as reasonably practical after receipt
thereof.
In connection with such transfer, the Transferor agrees, at
its own expense, on or prior to the Initial Closing Date to indicate clearly and
unambiguously in its computer files that the Receivables created in connection
with the Accounts (other than any Supplemental Account or Automatic Additional
Account) have been transferred to the Trust pursuant to this Agreement for the
benefit of the Certificateholders. The Transferor further agrees to deliver to
the Trustee (a) on the Initial Closing Date, a computer file or microfiche list
containing a true and complete list of all such Accounts, identified by account
number as of the Initial Cut-Off Date and (b) so long as Automatic Additional
Accounts are being included automatically pursuant to Section 2.6(d), on or
prior to each Distribution Date, a new computer file or microfiche list
containing a true and complete list of all Accounts identified as described in
the preceding clause (a) as of the last day of the most recent Collection Period
or an Officer's Certificate stating that the file or list of Accounts most
recently delivered pursuant to this subsection remains a true and complete list
of all Accounts. Such file or list shall be marked as Schedule 1 to this
Agreement, shall be delivered to the Trustee as confidential and proprietary,
and is hereby incorporated into and made a part of this Agreement. Any such
additional file or list shall be marked as Schedule 1 to this Agreement, shall
be delivered to the Trustee as confidential and proprietary, shall replace the
then existing Schedule 1 to this Agreement, and shall be incorporated into and
made a part of this Agreement. The Transferor agrees, at its own expense, by the
end of the Collection Period in which any Transferred Accounts have been
originated to indicate clearly and unambiguously in its computer files that the
Receivables created in connection with the Transferred Accounts have been
transferred to the Trust pursuant to this Agreement for the benefit of the
Certificateholders.
The Transferor hereby grants to the Trustee a first priority
perfected security interest in all right, title and interest of the Transferor
in and to the Receivables and all other Trust Property, now existing and
hereafter created, in order to secure the payment of each Series (the
"Obligations").
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This Agreement shall constitute a security agreement under applicable law.
Pursuant to the request of the Transferor, the Trustee shall
cause Certificates in authorized denominations evidencing the entire interest in
the Trust to be duly authenticated and delivered to or upon the order of the
Transferor pursuant to Section 6.2.
Section 2.2 Acceptance by Trustee.
(a) The Trustee hereby acknowledges its acceptance, to the
extent validly transferred, assigned, set over or otherwise conveyed to the
Trust as provided in Section 2.1(b), on behalf of the Trust, of all right, title
and interest previously held by the Transferor in and to the Receivables and all
other Trust Property, now existing and hereafter created, and declares that it
shall hold such right, title and interest, in trust as herein set forth and
subject to the terms hereof, for the benefit of all Certificateholders. The
Trustee further acknowledges that, prior to or simultaneously with the execution
and delivery of this Agreement, the Transferor delivered to the Trustee the
computer file or microfiche list represented by the Transferor to be the
computer file or microfiche list described in the third paragraph of Section
2.1(b).
(b) The Trustee hereby agrees not to disclose to any Person
(including any Certificateholder or Certificate Owner) any of the account
numbers or other information contained in the computer files or microfiche lists
delivered to the Trustee by the Transferor pursuant to Sections 2.1 and 2.6,
except as is required in connection with the performance of its duties hereunder
or as may be provided in any Supplement, or in connection with audits,
examinations, investigations and other inquiries which are required in
connection with the Trustee's regulatory supervision or in response to a court
order, subpoena, or other judicial or governmental demand or in enforcing the
rights of the Certificateholders or to a Successor Servicer appointed pursuant
to Section 10.2 or a successor Trustee appointed pursuant to Section 11.8. The
Trustee agrees to take such measures as shall be necessary or reasonably
requested by the Transferor to protect and maintain the security and
confidentiality of such information.
(c) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2.3 Representations and Warranties. The Transferor
hereby represents and warrants to the Trustee, on behalf of the Trust, with
respect to any Series of Certificates,
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as of the date of the related Supplement and the related Closing Date, unless
otherwise stated in such Supplement that:
(i) Organization and Good Standing. The Transferor is
a national banking association duly organized, validly existing and in
good standing under the laws of the United States of America, and has
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, to execute, deliver and perform its obligations
under this Agreement and any Supplement and to execute and deliver to
the Trustee the Certificates pursuant hereto.
(ii) Due Qualification. The Transferor is duly
qualified to do business and is in good standing (or is exempt from
such requirements) and has obtained all necessary licenses and
approvals with respect to the Transferor, in each jurisdiction in which
failure to so qualify or to obtain such licenses and approvals would
render any Account Agreement relating to an Account or any Receivable
unenforceable by it or the Trust or would have a material adverse
effect on the Investor Certificateholders or on the Transferor's or the
Servicer's ability to perform its obligations under this Agreement or
any Supplement; provided, however, that no representation or warranty
is made with respect to any qualifications, licenses or approvals which
the Trustee would have to obtain to do business in any state in which
the Trustee seeks to enforce any Receivable.
(iii) Due Authorization. The execution and delivery
of this Agreement and any Supplement and the execution and delivery to
the Trustee of the Certificates and the consummation of the
transactions provided for in this Agreement and any Supplement by the
Transferor have been duly authorized by the Transferor by all necessary
action on the part of the Transferor.
(iv) No Violation. The execution and delivery of this
Agreement, any Supplement and the Certificates by the Transferor, the
performance by the Transferor of the transactions contemplated by this
Agreement and any Supplement and the fulfillment by the Transferor of
the terms hereof and thereof will not conflict with, violate or result
in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, any Requirement of Law applicable to the Transferor or any
material indenture, contract, agreement, mortgage, deed of trust or
other instrument to which the Transferor is a party or by which it or
any of its properties are bound.
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(v) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the Transferor,
threatened against the Transferor before any court, regulatory body,
administrative agency, arbitrator or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, any
Supplement or the Certificates, (ii) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Agreement, any Supplement or the Certificates,
(iii) seeking any determination or ruling that, in the reasonable
judgment of the Transferor, would materially and adversely affect the
performance by the Transferor of its obligations under this Agreement
or any Supplement, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this
Agreement, any Supplement or the Certificates or (v) seeking to affect
adversely the Federal income tax attributes of the Trust.
(vi) Eligibility of Accounts. As of the Initial
Cut-Off Date, the related Supplemental Cut-Off Date or the related
Creation Date, as applicable, each Account was an Eligible Account.
(vii) All Consents Required. All approvals,
authorizations, consents, orders or other actions of any Person or of
any Governmental Authority required to be obtained on or prior to the
date as of which this representation is being made in connection with
the execution and delivery by the Transferor of this Agreement, any
Supplement and the Certificates, the performance by the Transferor of
the transactions contemplated by this Agreement and any Supplement and
the fulfillment by the Transferor of the terms hereof and thereof, have
been obtained; provided, however, that no representation or warranty is
made regarding state securities or "Blue Sky" laws in connection with
any distribution of the Certificates.
(viii) Amount of Receivables; Computer File. As of
the Initial Cut-Off Date, the amount of Receivables was $1,654,544,994.
The computer file or microfiche list delivered pursuant to Section 2.1
hereof is complete and accurately reflects the information regarding
the Receivables under the Accounts in all material respects as of the
applicable time referred to in Section 2.1.
The representations and warranties set forth in this Section
2.3 shall survive the transfer and assignment of the Receivables to the Trust
and termination of the rights and obligations of the Servicer pursuant to
Section 10.1. Upon discovery by the Transferor, the Servicer or the Trustee of a
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breach of any of the representations and warranties set forth in this Section
2.3, the party discovering such breach shall give prompt written notice thereof
to the others.
Section 2.4 Representations and Warranties of the
Transferor Relating to this Agreement and any Supplement and the Receivables.
(a) Binding Obligation; Valid Transfer and Assignment. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, with respect to any Series of Certificates, as of the date of the related
Supplement and the related Closing Date, unless otherwise stated in such
Supplement that:
(i) Each of this Agreement and any Supplement constitutes
a legal, valid and binding obligation of the Transferor, enforceable
against the Transferor in accordance with its terms, subject to
applicable bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and
the rights of creditors of national banking associations and except as
such enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(ii) This Agreement constitutes either (A) a valid
transfer and assignment to the Trust of all right, title and interest
of the Transferor in and to the Receivables (other than Receivables in
Supplemental Accounts) now existing and hereafter created, all monies
due or to become due and all amounts received with respect thereto on
and after the Initial Cut-Off Date and all proceeds thereof (to the
extent set forth in Section 9-306 of the UCC as in effect in Relevant
UCC State), and such Receivables and all proceeds thereof will be
conveyed to the Trust free and clear of any Lien of any Person claiming
through or under the Transferor or any of its Affiliates, except for
(x) Liens permitted under Section 2.5(b),(y) the interest of the
Transferor as holder of the Exchangeable Transferor Certificate or any
other Class of Certificates held by the Transferor from time to time
and (z) any right of the holder of the Exchangeable Transferor
Certificate to receive interest accruing on, and investment earnings
with respect to, the Collection Account or any other account or
accounts maintained for the benefit of the Certificateholders or any
Enhancement Provider as provided in this Agreement and any Supplement
or (B) a grant of a security interest (as defined in the UCC as in
effect in the Relevant UCC State) in such property to the Trustee on
behalf of the Trust, which is enforceable with respect to existing
Receivables (other than Receivables in Supplemental
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Accounts) and the proceeds thereof (to the extent set forth in Section
9-306 of the UCC as in effect in the Relevant UCC State) upon execution
and delivery of this Agreement, and which will be enforceable with
respect to such Receivables hereafter created and the proceeds thereof
to such extent upon such creation. If this Agreement constitutes the
grant of a security interest to the Trust in such property, upon the
filing of financing statements as described in Section 2.1 and, in the
case of Receivables (other than Receivables in Supplemental Accounts)
hereafter created and the proceeds thereof, upon such creation, the
Trust shall have a first priority perfected security interest in such
property and the proceeds thereof (to the extent set forth in Section
9- 306 of the UCC as in effect in the Relevant UCC State), except for
Liens permitted under Section 2.5(b). Except as otherwise specifically
provided in this Agreement or any Supplement, neither the Transferor
nor any Person claiming through or under the Transferor shall have any
claim to or interest in the Collection Account or any other account or
accounts maintained for the benefit of the Certificateholders or any
Enhancement Provider, except for any right of the Transferor to receive
interest accruing on, and investment earnings with respect to, any such
account as provided in this Agreement and any Supplement and, if this
Agreement constitutes the grant of a security interest in such
property, except for the interest of the Transferor in such property as
a debtor for purposes of the UCC as in effect in the Relevant UCC
State.
(b) Eligibility of Receivables. The Transferor hereby
represents and warrants to the Trustee, on behalf of the Trust, as of the
Initial Closing Date with respect to the initial Accounts and as of the related
Supplemental Closing Date with respect to the Supplemental Accounts, that (i)
each Receivable existing in the initial Accounts as of the Initial Cut-Off Date
was an Eligible Receivable as of such date and each Receivable existing in the
Supplemental Accounts as of the related Supplemental Cut-Off Date was an
Eligible Receivable as of such date, (ii)(A) Schedule 1 to this Agreement is an
accurate and complete listing of the initial Accounts in all material respects
as of the Initial Cut-Off Date and the information contained therein with
respect to the identity of such Accounts and the Receivables existing thereunder
was true and correct in all material respects as of the Initial Cut-Off Date and
(B) each computer file or microfiche list referred to in Section 2.6(c)(ii) is
an accurate and complete listing of the related Supplemental Accounts in all
material respects as of the related Supplemental Cut-Off Date and the
information contained therein with respect to the identity of such Accounts and
the Receivables existing thereunder was true and correct in all material
respects as of such related Supplemental Cut-Off Date and (iii) no selection
procedure believed by the Transferor to be adverse to
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the interests of the Investor Certificateholders has been used in selecting the
Accounts. On each day on which any new Receivable is created (including, without
limitation, any Receivable created in an Automatic Additional Account), the
Transferor shall be deemed to represent and warrant to the Trust that each
Receivable created on such day is an Eligible Receivable. On each day on which a
computer file or microfiche list is delivered pursuant to Section 2.1(b) with
respect to Automatic Additional Accounts, the Transferor shall be deemed to
represent and warrant to the Trust that such computer file or microfiche list is
an accurate and complete listing of all the Accounts in all material respects as
of the last day of the preceding Collection Period and that the information
contained therein with respect to the identity of such Accounts and the
Receivables existing thereunder was true and correct in all material respects as
of the last day of such preceding Collection Period.
(c) Notice of Breach. The representations and warranties set
forth in this Section 2.4 shall survive the transfer and assignment of the
Receivables to the Trust and the termination of the rights and obligations of
the Servicer pursuant to Section 10.1. Upon discovery by the Transferor, the
Servicer or the Trustee of a breach of any of the representations and warranties
set forth in this Section 2.4, the party discovering such breach shall give
prompt written notice thereof to the others.
(d) Transfer of Ineligible Receivables.
(i) Automatic Removal. In the event that a
Receivable is not an Eligible Receivable as a result of the failure
to satisfy the conditions set forth in clause (iv) of the definition
of Eligible Receivable, and either of the following two conditions is
met:
(A) the Lien upon the subject Receivable
(1)ranks prior to the Lien created pursuant to this Agreement,
(2) arises in favor of the United States of America or any
state or any agency or instrumentality thereof or involves
taxes or liens arising under Title IV of ERISA, or (3) has
been consented to by the Transferor or
(B) the Lien on the subject Receivable is
not of the types described in clause (A) above, but, as a
result of such breach or event, such Receivable becomes a
Receivable in a Defaulted Account 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 except
Liens permitted pursuant to Section 2.5(b)
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then, upon the earlier to occur of the discovery of such breach or
event by the Transferor or receipt by the Transferor of written notice
of such breach or event given by the Trustee, each such Receivable or,
at the option of the Transferor, all such Receivables with respect to
the related Account, shall be automatically removed from the Trust on
the terms and conditions set forth in Section 2.4(d)(iii).
(ii) Removal after Cure Period. In the event of a
breach of any of the representations and warranties set forth in
Section 2.4(b) with respect to a Receivable (other than in the event
that a Receivable is not an Eligible Receivable as a result of the
failure to satisfy the conditions set forth in clause (iv) of the
definition of Eligible Receivable), and, as a result of such breach,
such Receivable becomes a Receivable in a Defaulted Account 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 except
Liens permitted pursuant to Section 2.5(b), then, upon the expiration
of 60 days or any longer period agreed upon by the Trustee (not to
exceed an additional 120 days) from the earlier to occur of the
discovery of such breach by the Transferor or receipt by the Transferor
of written notice of such breach given by the Trustee, each such
Receivable or, at the option of the Transferor, all such Receivables
with respect to the related Account, shall be removed from the Trust on
the terms and conditions set forth in Section 2.4(d)(iii); provided
however, that no such removal shall be required to be made if, on any
day within such applicable period, (A) such representation and warranty
with respect to such Receivable shall then be true and correct in all
material respects as if such Receivable had been created on such day,
and (B) the related Account is no longer a Defaulted Account as the
result of the breach of such representation and warranty, and the
Trust's rights in, to or under such Receivable or its proceeds are no
longer materially impaired as a result of a breach of such
representation and warranty, and the proceeds of such Receivable are
available to the Trust free and clear of all Liens resulting in the
breach of such representation and warranty, as applicable.
(iii) Removal Terms and Conditions. When required or
permitted with respect to a Receivable by the provisions of Section
2.4(d)(i) or Section 2.4(d)(ii) (an "Ineligible Receivable"), the
Transferor shall accept reassignment of such Ineligible Receivable by
directing the Servicer to deduct the principal balance of such
Ineligible Receivable from the Aggregate Principal Receivables and to
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decrease the Transferor Amount by such amount. On and after the date of
such removal, each Ineligible Receivable shall be deducted from the
Aggregate Principal Receivables used in the calculation of any Invested
Percentage, any Fixed Allocation Percentage, any Floating Allocation
Percentage, the Transferor Percentage and the Transferor Amount. In the
event that the exclusion of an Ineligible Receivable from the
calculation of the Transferor Amount would cause the Transferor Amount
to be reduced below zero or would otherwise not be permitted by law,
the Transferor shall immediately 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 zero (or designate
Supplemental Accounts pursuant to Section 2.6(b) for inclusion as
Accounts no later than 10 Business Days after such event). Any such
deposit into the Excess Funding Account in connection with the
reassignment of an Ineligible Receivable shall be considered a payment
in full of the Ineligible Receivable and such deposit shall be applied
in accordance with the provisions of Article IV. Upon the reassignment
to the Transferor of an Ineligible Receivable, the Trust shall, without
further action, be deemed to transfer, assign, set over and otherwise
convey to the Transferor, without recourse, representation or warranty,
all the right, title and interest of the Trust in and to such
Ineligible Receivable, all monies due or to become due and all amounts
received thereafter with respect thereto and all proceeds thereof. The
Trustee shall execute such documents and instruments of transfer or
assignment as are prepared by the Transferor and take such other
actions as shall reasonably be requested by the Transferor to effect
the conveyance of such Ineligible Receivable pursuant to this
subsection. In the event that on any day within 60 days, or any longer
period agreed upon by the Trustee (not to exceed an additional 120
days), of the date on which the removal of Receivables which are not
Eligible Receivables from the Trust pursuant to this Section is
effected, (A) the applicable representations and warranties with
respect to such Receivable shall be true and correct in all material
respects on such date and (B) the Receivable is an Eligible Receivable,
the related Account is no longer a Defaulted Account and the Trust's
rights in, to or under such Receivable or its proceeds are no longer
materially impaired as a result of the breach of such representation
and warranty and the proceeds of such Receivable are available to the
Trust free and clear of all Liens resulting in the breach of such
representation and warranty, the Transferor may, but shall not be
required to, direct the Servicer to include such Receivable in the
Trust. Upon reinclusion of a Receivable in the Trust pursuant to this
subsection, the Transferor shall be deemed to make the applicable
representations and warranties in Section 2.4(b) as of the
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date of such addition, as if the Receivable had been created on such
date, and shall execute all such necessary documents and instruments of
transfer or assignment and take such other actions as shall be
necessary to effect and perfect the reconveyance of such Receivable to
the Trust. The obligation of the Transferor set forth in this
subsection shall constitute the sole remedy respecting any breach by
the Transferor of the representations and warranties set forth in the
above-referenced subsections with respect to such Receivable available
to the Certificateholders or the Trustee on behalf of
Certificateholders. Notwithstanding any other provision of this Section
2.4(d), a reassignment of an Ineligible Receivable shall not occur if
the Transferor fails to make a deposit or designation of Supplemental
Accounts required by this Section 2.4(d) with respect to such
Ineligible Receivable.
(iv) No Impairment. For the purposes of Sections
2.4(d)(i) and 2.4(d)(ii), proceeds of a Receivable shall not be deemed
to be impaired hereunder solely because such proceeds are held by the
Servicer for more than the applicable period under Section 9-306(3) of
the UCC as in effect in the Relevant UCC State.
(e) Reassignment of Trust Portfolio. In the event of (i) a
breach of any of the representations or warranties set forth in Section 2.3(i),
2.3(iii) or 2.4(a) or (ii) a material amount of Receivables are not Eligible
Receivables and, in either case, such event has a materially adverse effect on
the Investor Certificateholders (without regard to the amount of any
Enhancement), either the Trustee or the Holders of Investor Certificates
evidencing Undivided Interests aggregating more than 50% of the Aggregate
Invested Amount, by notice then given in writing to the Transferor (and to the
Trustee and the Servicer, if given by the Investor Certificateholders), may
direct the Transferor to accept reassignment of all Receivables 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) and the Transferor shall be obligated to
accept such reassignment on a Distribution Date specified by the Transferor
occurring within such applicable period on the terms and conditions set forth
below; provided, however, that no such reassignment shall be required to be
made, and the Transferor shall not be obligated to accept such reassignment, if,
on the Business Day prior to such Distribution Date the representations and
warranties contained in Section 2.3(i) and 2.4(a) shall then be true and correct
in all material respects. The Transferor shall deposit in the Collection Account
on the Business Day prior to such Distribution Date (in immediately available
funds) an amount equal to the reassignment deposit amount for such Receivables
for distribution pursuant to the provisions of Section 12.3. The deposit amount
for such reassignment shall be equal to the
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Aggregate Invested Amount on the close of business on the Record Date related to
the Distribution Date with respect to which such deposit is made (less the
aggregate principal amount on deposit in the Excess Funding Account and any
principal funding account relating to any Series), plus (i) an amount equal to
all accrued but unpaid interest on the Certificates of all Series at the
applicable Certificate Rates through the end of the respective interest accrual
period(s) of such Series and (ii) any other unpaid amounts required to be paid
pursuant to this Section 2.4(e) or under any Supplement or Enhancement
Agreement. Payment of the reassignment deposit amount and all other amounts in
the Collection Account in respect of the preceding Collection Period shall be
considered a prepayment in full of all such Receivables. On the Distribution
Date with respect to which such amount has been deposited in full into the
Collection Account, the Receivables and all monies due or to become due and all
amounts received thereafter with respect thereto and all proceeds thereof (after
payment of all amounts otherwise due on or before such date pursuant to the
terms of any Supplement or Enhancement Agreement) shall be released to the
Transferor and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, representation or
warranty, as shall be reasonably requested by the Transferor to vest in the
Transferor or its designee or assignee, all right, title and interest of the
Trust in and to the Receivables, all monies due or to become due and all amounts
received thereafter with respect thereto and all proceeds thereof. If the
Trustee or the Investor Certificateholders give a notice directing the
Transferor to accept reassignment as provided herein and the Transferor is
obligated to accept such reassignment as provided herein, then such obligation
of the Transferor to accept such reassignment and pay the reassignment deposit
amount shall constitute the sole remedy respecting a breach of the
representations and warranties contained in Section 2.3(i), or 2.4(a) available
to the Investor Certificateholders or the Trustee on behalf of the Investor
Certificateholders.
(f) Nothing contained in this Section 2.4 shall create an
obligation on the part of the Trustee to verify the accuracy or continued
accuracy of the representations or warranties contained in this Section 2.4. The
Trustee shall have no obligation to give any notice pursuant to this Section 2.4
unless it has actual knowledge of facts which would permit the giving of such
notice.
Section 2.5 Covenants of the Transferor. The Transferor hereby
covenants that:
(a) Receivables Not to be Evidenced by Promissory Notes.
Except in connection with its enforcement or collection of an Account, the
Transferor will take no action to cause any
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Receivable to be evidenced by any instrument (as defined in the UCC as in effect
in the Relevant UCC State).
(b) Security Interests. Except for the conveyances hereunder,
the Transferor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on, any Receivable,
whether now existing or hereafter created, or any interest therein; the
Transferor will notify the Trustee of the existence of any Lien on any
Receivable transferred by the Transferor immediately upon discovery thereof; and
the Transferor will defend the right, title and interest of the Trust in, to and
under the Receivables, whether now existing or hereafter created, against all
claims of third parties claiming through or under the Transferor; provided,
however, that nothing in this Section 2.5(b) shall prevent or be deemed to
prohibit the Transferor from suffering to exist upon any of the Receivables any
Liens for municipal or other local taxes and other governmental charges if such
taxes or governmental charges shall not at the time be due and payable or if the
Transferor shall currently be contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books adequate reserves
under generally accepted accounting principles with respect thereto; and,
provided further, that nothing in this subsection shall prohibit the Transferor
from conveying an interest in the Exchangeable Transferor Certificate in
accordance with Section 6.3(b) hereof.
(c) Account Agreements and Account Guidelines. The Transferor
shall comply with and perform its obligations under the applicable Account
Agreements relating to the Accounts and the Account Guidelines except insofar as
any failure so to comply or perform would not materially and adversely affect
the rights of the Trust or the Investor Certificateholders hereunder (without
regard to the amount of any Enhancement) or under the Certificates. Subject to
compliance with all Requirements of Law the failure to comply with which would
have a material adverse effect on the Investor Certificateholders (without
regard to the amount of any Enhancement), the Transferor may change the terms
and provisions of the Account Agreements or the Account Guidelines in any
respect (including, without limitation, the required minimum monthly payment,
the calculation of the amount, or the timing, of chargeoffs and the Finance
Charges and other fees to be assessed thereon) only if such change (i) would
not, in the reasonable belief of the Transferor, cause an Early Amortization
Event to occur and (ii) is made applicable to the comparable segment of the
revolving credit card accounts owned and serviced by the Transferor which have
characteristics the same as, or substantially similar to, the Accounts that are
the subject of such change, except as otherwise restricted by an endorsement,
sponsorship or other agreement between the Transferor and an unrelated third
party or by the terms of the Account Agreements.
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(d) Account Allocations. In the event that the Transferor is
unable for any reason to transfer Receivables to the Trust in accordance with
the provisions of this Agreement (including, without limitation, by reason of
the application of the provisions of Section 9.2 or an order by any Federal
governmental agency having regulatory authority over the Transferor or an order
of any court of competent jurisdiction that the Transferor not transfer any
additional Receivables to the Trust) then, in any such event, (A) the Transferor
agrees (except as prohibited by any such order) to allocate and pay to the
Trust, after the date of such inability, all Collections with respect to
Principal Receivables and Discount Option Receivables transferred to the Trust
prior to the occurrence of such event, and all amounts which would have
constituted Collections with respect to such Principal Receivables and Discount
Option Receivables which would have been Principal Receivables but for the
Transferor's inability to transfer such Receivables to the Trust (up to an
aggregate amount equal to the Aggregate Principal Receivables or Discount Option
Receivables in the Trust on such date); (B) the Transferor agrees to have such
amounts applied as Collections in accordance with Article IV; and (C) for only
so long as the allocation and application of such Collections and all amounts
which would have constituted Collections are made in accordance with clauses (A)
and (B) above, Collections of Principal Receivables and all amounts which would
have constituted Collections of Principal Receivables or Discount Option
Receivables but for the Transferor's inability to transfer Receivables to the
Trust which are charged off as uncollectible in accordance with this Agreement
and the Account Guidelines shall continue to be allocated in accordance with
Article IV and all amounts which would have constituted Collections of Principal
Receivables but for the Transferor's inability to transfer Receivables to the
Trust shall be deemed to be Collections of Principal Receivables for the purpose
of calculating the applicable Invested Percentage and the Aggregate Invested
Percentage thereunder. If the Transferor is unable pursuant to any Requirement
of Law to allocate Collections as described above, the Transferor agrees that it
shall, in any such event, and to the extent not prohibited by law, allocate,
after the date that the Transferor becomes unable to allocate Collections as
described above, payments on each Account with respect to the balance of such
Account first to the oldest receivable in such Account and to have such payments
applied as Collections in accordance with Article IV.
(e) Delivery of Collections. In the event that the Transferor
receives Collections, the Transferor agrees to pay to the Servicer all payments
received by the Transferor with respect to Collections on the Receivables
promptly after receipt thereof by the Transferor, but in no event later than two
Business Days after the receipt by the Transferor thereof.
Section 2.6 Addition of Accounts; Repurchase of
Investor Certificates.
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(a) 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, then the Transferor shall, before the close of business on the
following Transfer Date, designate additional Eligible Accounts (the
"Supplemental Accounts") to be included as Accounts, in a sufficient amount such
that, after giving effect to such designation, the Transferor Amount at least
equals the Minimum Transferor Amount and the Aggregate Principal Receivables at
least equals the Minimum Aggregate Principal Receivables; provided, however,
that the Transferor need not make any such designation to the extent that the
deficiencies described in clauses (i) and (ii) above have been eliminated on or
before such Transfer Date through reductions in the Aggregate Invested Amount or
through increases in the amount on deposit in the Excess Funding Account.
(b) In addition to its obligation under Section 2.6(a), the
Transferor may, but shall not be obligated to, designate from time to time
Supplemental Accounts to be included as Accounts as of the related Supplemental
Closing Date.
(c) The Transferor agrees that any designation of Supplemental
Accounts under Section 2.6(a) or (b) shall satisfy the following conditions:
(i) On or before the fifth Business Day prior to the
Supplemental Closing Date, the Transferor shall give the Trustee, the
Servicer, each Rating Agency and each other Person entitled thereto
pursuant to the related Supplement written notice that the Supplemental
Accounts will be included as Accounts and specifying the approximate
aggregate amount of the Receivables to be transferred;
(ii) On or prior to the Supplemental Closing Date, the
Transferor shall have delivered to the Trustee a written assignment
(and the Trustee shall have accepted such assignment on behalf of the
Trust for the benefit of the Investor Certificateholders and any
Enhancement Provider) substantially in the form of Exhibit B (the
"Assignment") and shall have clearly indicated in its computer files
that the Receivables created in connection with the Supplemental
Accounts have been transferred to the Trust and the Transferor shall
have delivered to the Trustee a computer file or microfiche list
represented by the Transferor to contain a true and complete list of
the Supplemental Accounts identified by account number and by
Receivable
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balance in the Supplemental Accounts as of the Supplemental Cut-Off
Date, which computer file or microfiche list shall be as of the date of
such Assignment incorporated into and made a part of such Assignment
and this Agreement;
(iii) The Transferor shall represent and warrant that
(x) each Supplemental Account was, as of the Supplemental Cut-Off Date,
an Eligible Account, (y) no selection procedures believed by the
Transferor to be materially adverse to the interests of any outstanding
Series of Investor Certificates or any Enhancement Provider were used
in selecting the Supplemental Accounts from the available Eligible
Accounts in the Transferor's portfolio; and (z) as of the Supplemental
Closing Date, the Transferor is not insolvent and will not be made
insolvent by the transfer of the Receivables of the Supplemental
Accounts;
(iv) The Transferor shall represent and warrant that,
as of the Supplemental Closing Date, the Assignment constitutes either
(x) a valid transfer and assignment to the Trust of all right, title
and interest of the Transferor in and to the Receivables then existing
and thereafter created in the Supplemental Accounts, all monies due or
to become due and all amounts received with respect thereto on and
after the Supplemental Cut-Off Date and all proceeds thereof (to the
extent set forth in Section 9-306 of the UCC as in effect in the
Relevant UCC State), and such Receivables and all proceeds thereof will
be conveyed to the Trust free and clear of any Lien of any Person
claiming through or under the Transferor or any of its Affiliates,
except for (i) Liens permitted under Section 2.5(b), (ii) the interest
of the Transferor as holder of the Exchangeable Transferor Certificate
or any other Class of Certificates held by the Transferor from time to
time and (iii) any right of the holder of the Exchangeable Transferor
Certificate to receive interest accruing on, and investment earnings
with respect to, the Collection Account or any other account or
accounts maintained for the benefit of the Certificateholders or any
Enhancement Provider as provided in this Agreement and any Supplement
or (y) a grant of a security interest (as defined in the UCC as in
effect in the Relevant UCC State) in such property to the Trustee on
behalf of the Trust, which is enforceable with respect to then existing
Receivables in the Supplemental Accounts and the proceeds thereof (to
the extent set forth in Section 9- 306 of the UCC as in effect in the
Relevant UCC State) upon the conveyance of such Receivables to the
Trust, and which will be enforceable with respect to the Receivables
thereafter created in the Supplemental Accounts and the proceeds
thereof to such extent upon such creation; and (z) if the Assignment
constitutes the grant of a security interest to the Trust in such
property, upon the filing of
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financing statements as described in Section 2.1 with respect to the
Supplemental Accounts and, in the case of Receivables thereafter
created in the Supplemental Accounts and the proceeds thereof, upon
such creation, the Trust shall have a first priority perfected security
interest in such property and the proceeds thereof (to the extent set
forth in Section 9-306 of the UCC as in effect in the Relevant UCC
State), except for Liens permitted under Section 2.5(b);
(v) The Transferor shall deliver to the Trustee
(with a copy to the Rating Agencies) an Officer's Certificate
confirming the items set forth in paragraphs (ii),(iii) and (iv) above
and (vii) below (and the Trustee may conclusively rely on such
Officer's Certificate, shall have no duty to make inquiries with
regard to the matters set forth therein and shall incur no liability
in so relying);
(vi) The Transferor shall deliver to the Trustee,
with a copy to each Rating Agency, an Opinion of Counsel with respect
to the Receivables in the Supplemental Accounts substantially in the
form of Part One of Exhibit G;
(vii) The Transferor shall record and file financing
statements with respect to the Receivables then existing and thereafter
created in the Supplemental Accounts for the transfer of accounts,
general intangibles and chattel paper (each as defined in the UCC as in
effect in the Relevant UCC State) meeting the requirements of
applicable state law in such manner and in such jurisdictions as are
necessary to perfect the transfer and assignment of the Receivables in
Supplemental Accounts by the Transferor to the Trust; and
(viii) The Rating Agencies shall have received from
the Transferor five Business Days' notice, in the case of Supplemental
Accounts being added pursuant to Section 2.6(a), and ten Business Days'
notice, in the case of Supplemental Accounts being added pursuant to
Section 2.6(b), of such proposed addition of Supplemental Accounts and,
in the event that Supplemental Accounts are being added pursuant to
Section 2.6(b), the Rating Agency Condition shall have been satisfied.
(d) The Transferor may, but shall not be obligated to,
designate from time to time additional consumer revolving credit card accounts
(the "Automatic Additional Accounts") to be included as Accounts by causing such
Accounts to be identified in the Servicer's master computer files by the four
digit identifying code number 2003, 2004, 2009, 3101, 3102, 3103, 3104, 3312,
3313, 3314, 3315, 3316 or 3317 and in the computer file or
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microfiche list delivered to the Trustee by the Transferor with respect to such
Accounts pursuant to Section 2.1(b). For purposes of this Section 2.6(d),
Automatic Additional Accounts shall be deemed to include only Eligible Accounts
(x) of a type included as Accounts on the Initial Closing Date or any
Supplemental Closing Date (but only if such Supplemental Closing Date related to
Supplemental Accounts added pursuant to Section 2.6(b)) or consented to in
writing by each Rating Agency and (y) not prohibited from being included as
Accounts pursuant to the terms of any Supplement.
If the number of Automatic Additional Accounts designated
during any calendar quarter or any period of twelve consecutive months exceeds
the applicable Aggregate Automatic Addition Limit, then, upon discovery of such
excess designation, (x) the Excess Automatic Additional Accounts shall be deemed
to be Removed Accounts and (y) the Trustee shall, without further action, be
deemed to transfer, assign, set-over and otherwise convey to the Transferor,
without recourse, representation or warranty, all right, title and interest of
the Trust in and to the Receivables in the Excess Automatic Additional Accounts,
all monies due or to become due and all amounts received thereafter with respect
thereto and all proceeds thereof. The Trustee shall execute such documents and
instruments of transfer or assignment as are prepared by the Transferor and take
such other actions as shall be reasonably requested by the Transferor to effect
the conveyance of such Receivables pursuant to this Section 2.6(d)(ii). If the
removal of Excess Automatic Additional Accounts causes the Transferor Amount to
be less than the Minimum Transferor Amount or the Aggregate Principal
Receivables to be less than the Minimum Aggregate Principal Receivables, then
the Transferor shall, no later than 10 Business Days after such removal,
designate Supplemental Accounts to be included as Accounts in accordance with
Section 2.6(a) in an amount such that, after giving effect to such designation,
the Transferor Amount at least equals the Minimum Transferor Amount and the
Aggregate Principal Receivables at least equals the Minimum Aggregate Principal
Receivables; provided, however, that the Transferor need not make any such
designation to the extent that such deficiencies have been eliminated on or
before such tenth Business Day through reductions in the Aggregate Invested
Amount or through increases in the amount on deposit in the Excess Funding
Account. The removal of Excess Automatic Additional Accounts in accordance with
this Section 2.6(d)(ii) shall be deemed to cure any violation of the Aggregate
Automatic Addition Limit, and such removal shall constitute the sole remedy
respecting any such violation available to Certificateholders or the Trustee on
behalf of Certificateholders.
The Transferor shall record and file, at its own expense,
financing statements (and continuation statements with respect to such financing
statements when applicable) with
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respect to the Receivables then existing and thereafter created in the Automatic
Additional Accounts for the transfer of chattel paper, accounts and general
intangibles (each as defined in the UCC as in effect in the Relevant UCC State)
meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the transfer and assignment of such
Receivables by the Transferor to the Trust, and to deliver a file-stamped copy
of such financing statements or other evidence of such filings to the Trustee.
Section 2.7 Removal of Accounts.
(a) Subject to the conditions set forth below, the Transferor
may, but shall not be obligated to, designate from time to time Accounts for
deletion and removal ("Removed Accounts") from the Accounts; provided, however,
that the Transferor shall not make more than one such designation in any
Collection Period. On or before the fifth Business Day (the "Removal Notice
Date") prior to the date on which the designated Removed Accounts will be
reassigned by the Trustee to the Transferor (the "Removal Date"), the Transferor
shall give the Trustee and the Servicer written notice that the Receivables from
such Removed Accounts are to be reassigned to the Transferor.
(b) The Transferor shall be permitted to designate and require
reassignment to it of Receivables from Removed Accounts only upon satisfaction
of the following conditions:
(i) on or prior to the Removal Date, the Transferor
shall have delivered to the Trustee for execution a written instrument
of reassignment substantially in the form of Exhibit C (the
"Reassignment") and a computer file or microfiche list containing a
true and complete list of all Removed Accounts identified by account
number and by the aggregate balance of the Receivables in such Removed
Accounts as of the Removal Notice Date, which computer file or
microfiche list shall as of the Removal Date modify and amend and be
made a part of this Agreement;
(ii) The Transferor shall represent and warrant that
no selection procedures believed by the Transferor to be materially
adverse to the interests of any outstanding Series of Investor
Certificates or any Enhancement Provider were used in selecting the
Removed Accounts to be removed from the Trust;
(iii) The removal of any Receivables of any Removed
Accounts on any Removal Date shall not, in the reasonable belief of the
Transferor, (a) cause an Early Amortization Event, or an event which,
with notice or lapse of time or both, would constitute an Early
Amortization Event, to occur; provided, however, for the purpose of
this
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subsection 2.7(b)(iii), the Receivables of each Removed Account shall
be deemed to have been removed as of the Removal Date, (b) cause the
Transferor Interest Percentage to be less than the Minimum Transferor
Interest Percentage on such Removal Date, (c) cause the aggregate
amount of Principal Receivables to be less than the Minimum Aggregate
Principal Receivables, or (d) result in the failure to make any
payments specified in the related Supplement with respect to any
Series;
(iv) The Rating Agencies shall have received five
Business Days' notice from the Transferor of such proposed removal of
Accounts and the Rating Agency Condition shall have been satisfied; and
(v) The Transferor shall deliver to the Trustee
(with a copy to the Rating Agencies) an Officer's Certificate
confirming the items set forth in paragraphs (i) through (iv) above
(and the Trustee may conclusively rely on such Officer's Certificate,
shall have no duty to make inquiries with regard to the matters set
forth therein and shall incur no liability in so relying).
Upon satisfaction of the above conditions, the Trustee shall
execute and deliver the Reassignment to the Transferor, and the Receivables from
the Removed Accounts shall no longer constitute a part of the Trust.
(c) The Transferor may, but shall not be obligated to,
designate from time to time Zero Balance Accounts for deletion and removal from
the Accounts; provided, however, that, prior to such designation and removal,
the Transferor shall have delivered to each Rating Agency and the Trustee an
Officer's Certificate to the effect that the removal of the Receivables in the
Zero Balance Accounts shall not, in the reasonable belief of the Transferor,
cause an Early Amortization Event to occur. The Trustee may conclusively rely on
such Officer's Certificate, shall have no duty to make inquiries with regard to
the matters set forth therein and shall incur no liability in so relying. On or
before the date on which the designated Zero Balance Accounts are removed, the
Transferor shall deliver to the Trustee a computer file or microfiche list
containing a true and complete list of such Zero Balance Accounts identified by
account number, which computer file or microfiche list shall as of the removal
date modify and amend and be made a part of this Agreement. On the date on which
the designated Zero Balance Accounts are removed, the Trustee shall, without
further action, be deemed to transfer, assign, set-over and otherwise convey to
the Transferor, without recourse, representation or warranty, all right, title
and interest of the Trust in and to the Receivables in the Zero Balance
Accounts, all monies due or to become due and all amounts received thereafter
with respect thereto and all
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proceeds thereof. The Trustee shall execute such documents and instruments of
transfer or assignment as are prepared by the Transferor and take such other
actions as shall be reasonably requested by the Transferor to effect the
conveyance of such Receivables pursuant to this Section 2.7(c).
(d) The Transferor may, but shall not be obligated to,
designate from time to time Defaulted Accounts for deletion and removal from the
Accounts; provided, however, that each such designation must be approved in
writing by, or be made in accordance with written procedures approved in writing
by, Standard & Poor's and Moody's. On or before the date on which the designated
Defaulted Accounts are removed, the Transferor shall deliver to the Trustee a
computer file or microfiche list containing a true and complete list of such
Defaulted Accounts identified by account number, which computer file or
microfiche list shall as of the removal date modify and amend and be made a part
of this Agreement. On the date on which the designated Defaulted Accounts are
removed, the Trustee shall, without further action, be deemed to transfer,
assign, set-over and otherwise convey to the Transferor, without recourse,
representation or warranty, all right, title and interest of the Trust in and to
all Receivables (including, without limitation, all Finance Charge Receivables)
in such Defaulted Accounts, all monies due or to become due and all amounts
received thereafter with respect thereto and all proceeds thereof; provided,
however, that all Recoveries with respect to such Receivables shall be applied
as provided herein. The Trustee shall execute such documents and instruments of
transfer or assignment as are prepared by the Transferor and take such other
actions as shall be reasonably requested by the Transferor to effect the
conveyance of such Receivables pursuant to this Section 2.7(d).
Section 2.8 Discount Option Receivables.
(a) The Transferor agrees that a specified percentage (the
"Discount Percentage") of the Receivables in the Accounts shall be treated as
Discount Option Receivables in accordance with the provisions of this Section
2.8. The Discount Percentage shall not apply to Finance Charges, cash advance
fees, annual fees, late charges, overlimit charges, returned check charges or
any other fees and charges on the Accounts (other than Insurance Charges) or to
Receivables in Defaulted Accounts. The Discount Percentage may be fixed or
variable.
(b) Discount Option Receivables shall be considered Finance
Charge Receivables for all purposes hereunder, including for the purposes of
allocating Collections pursuant to Article IV.
(c) The Discount Percentage as of the Initial Closing
Date shall be 2.0%. The Transferor may, without notice to or
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consent of the Certificateholders, from time to time, elect 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; provided, however, that the Transferor shall not change
any existing Discount Option Receivables into Principal Receivables and the
Transferor shall not increase the Discount Percentage during any Early
Amortization Period or if such increase would cause the Aggregate Principal
Receivables to be less than the Minimum Aggregate Principal Receivables.
(d) The Transferor shall provide to the Servicer, the Trustee
and each Rating Agency 30 days' prior written notice of any increase, reduction
or elimination of the Discount Percentage, and such increase, reduction or
elimination shall become effective on the date specified in such notice only if
(i) the Transferor has delivered to the Trustee an Officer's Certificate to the
effect that 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, and (ii) if such
designation would cause the Discount Percentage to be less than 1.0% or more
than 3.0%, the Transferor, the Servicer and the Trustee shall have received,
within 30 days of such notice to the Rating Agencies, written notice from each
Rating Agency that the Rating Agency Condition has been satisfied with respect
to such increase, reduction or elimination. The Trustee may conclusively rely on
such Officer's Certificate, shall have no duty to make inquiries with regard to
the matters set forth therein and shall incur no liability in so relying.
(e) On each 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.
[END OF ARTICLE II]
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ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other
Matters Relating to the Servicer.
(a) First North American National Bank hereby agrees
to act as the Servicer under this Agreement. The Investor
Certificateholders, by their acceptance of the Investor
Certificates, consent to First North American National Bank
acting as Servicer.
(b) The Servicer shall service and administer the Receivables
and shall collect payments due under the Receivables in accordance with its
customary and usual servicing procedures for servicing credit card receivables
comparable to the Receivables and in accordance with the applicable Account
Guidelines and shall have full power and authority, acting alone or through any
party properly designated by it hereunder, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable. Without limiting the generality of the foregoing and subject to
Section 10.1, the Servicer is hereby authorized and empowered (i) to make
withdrawals and payments and to instruct the Trustee to make withdrawals and
payments from the Collection Account, the Excess Funding Account or any other
account or accounts maintained for the benefit of the Certificateholders or with
regard to any Enhancement as set forth in this Agreement and any Supplement,
(ii) unless such power and authority is revoked by the Trustee on account of the
occurrence of a Servicer Default pursuant to Section 10.1, to instruct the
Trustee to take any action permitted or required under any Enhancement at such
time as is set forth in this Agreement or any Supplement, (iii) to execute and
deliver, on behalf of the Trust for the benefit of the Certificateholders, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Receivables and, after the delinquency of any Receivable and to the extent
permitted under and in compliance with applicable law and regulations, to
commence enforcement proceedings with respect to such Receivables and (iv) to
make any filings, reports, notices, applications, or registrations with, and to
seek any consents or authorizations from, the Securities and Exchange Commission
and any state securities laws authority on behalf of the Trust as may be
necessary or advisable to comply with any Federal or state securities laws or
reporting requirements. Prior to receipt by a Responsible Officer of the Trustee
of written notice of a Servicer Default the Trustee shall promptly follow the
written instructions of the Servicer to withdraw funds from the
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Collection Account and any other account or accounts maintained for the benefit
of the Certificateholders or with regard to any Enhancement. The Trustee shall
furnish the Servicer with limited powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder, and the Trustee shall not be held responsible
for any act or omission by the Servicer in its use of such powers of attorney.
(c) In the event that the Transferor is unable for any reason
to transfer Receivables to the Trust in accordance with the provisions of this
Agreement (including, without limitation, by reason of the application of the
provisions of Section 9.2 or the order of any Federal governmental agency having
regulatory authority over the Transferor or any court of competent jurisdiction
that the Transferor not transfer any additional Receivables to the Trust) then,
in any such event, (A) the Servicer agrees to allocate, after such date, all
Collections with respect to Principal Receivables and Discount Option
Receivables, and all amounts which would have constituted Collections with
respect to Principal Receivables and Discount Option Receivables but for the
Transferor's inability to transfer such Receivables to the Trust (up to an
aggregate amount equal to the Aggregate Principal Receivables in the Trust as of
such date), in accordance with Section 2.5(d) and to apply such amounts as
Collections in accordance with Article IV and (B) for only so long as all
Collections and all amounts which would have constituted Collections are
allocated and applied in accordance with clause (A) above, Collections of
Principal Receivables and Discount Option Receivables and all amounts which
would have constituted Collections of Principal Receivables but for the
Transferor's inability to transfer Receivables to the Trust which are charged
off as uncollectible in accordance with this Agreement shall continue to be
allocated in accordance with Article IV and all amounts which would have
constituted Collections of Principal Receivables but for the Transferor's
inability to transfer Receivables to the Trust shall be deemed to be Collections
of Principal Receivables for the purpose of calculating the applicable Invested
Percentage thereunder; provided, however, that if the Servicer is unable
pursuant to any Requirement of Law to allocate payments on the Accounts as
described above, the Servicer agrees that it shall, in any such event, allocate,
after the date that the Transferor becomes unable to do so, payments on each
Account with respect to the balance of such Account first to the oldest
Receivable in such Account. Finance Charge Receivables, whenever created,
accrued in respect of Principal Receivables which have been conveyed to the
Trust, or which would have been conveyed to the Trust but for the above
described inability to transfer such Receivables, shall continue to be a part of
the Trust notwithstanding any cessation of the transfer of additional Principal
Receivables and Discount Option Receivables to the Trust and Collections with
respect
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thereto shall continue to be allocated and paid in accordance with Article IV.
(d) The Servicer shall not be obligated to use separate
servicing procedures, offices, employees or accounts for servicing the
Receivables from the procedures, offices, employees and accounts used by the
Servicer in connection with servicing other revolving consumer credit card
receivables.
(e) The Servicer shall maintain fidelity bond coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of Receivables covering such actions with such
insurers and in such amounts as the Servicer believes to be commercially
reasonable from time to time.
(f) The Servicer shall comply with and perform its obligations
under the Account Agreements and the Account Guidelines except insofar as any
failure to so comply would not materially and adversely affect the rights of the
Trust or the Certificateholders hereunder or under the Certificates.
Section 3.2 Servicing Compensation. As full compensation for
its servicing activities hereunder and reimbursement for its expenses as set
forth in the immediately following paragraph, the Servicer shall be entitled to
receive a monthly servicing fee with respect to any Collection Period (or
portion thereof) prior to the termination of the Trust pursuant to Section 12.1
(the "Monthly Servicing Fee") payable in arrears on each Distribution Date in an
amount equal to, with respect to each Series then outstanding, one-twelfth of
the product of the Servicing Fee Percentage for such Series and the sum of an
allocable portion of the Transferor Amount and the Invested Amount of such
Series, each as of the last day of the Collection Period preceding the
Collection Period with respect to which the Monthly Servicing Fee is being paid.
The share of the Monthly Servicing Fee allocable to each Series of Investor
Certificateholders with respect to any Distribution Date (with respect to any
such Series, the "Investor Monthly Servicing Fee") shall be determined and paid
to the Servicer in accordance with the related Supplement. The remainder of the
Monthly Servicing Fee shall be paid by the Transferor, and in no event shall the
Trust, the Trustee, any Enhancement Provider or the Investor Certificateholders
be liable for the share of the Monthly Servicing Fee to be paid by the
Transferor. In the case of the first Collection Period, the Monthly Servicing
Fee and the Investor Monthly Servicing Fee shall accrue from the Initial CutOff
Date.
The Servicer's expenses include the amounts due to the Trustee
pursuant to Section 11.5 and the reasonable fees and disbursements of
independent accountants and all other expenses
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incurred by the Servicer in connection with its activities hereunder; provided,
however, that the Servicer shall not be liable for any liabilities, costs or
expenses of the Trust, the Investor Certificateholders or the Certificate Owners
arising under any tax law, including, without limitation, any Federal, state or
local income or franchise taxes or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith), except to the extent incurred as a result of the
Servicer's violation of the provisions of this Agreement. The Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Monthly Servicing Fee.
Section 3.3 Representations, Warranties and Covenants of the
Servicer. First North American National Bank, as initial Servicer, hereby makes,
and any Successor Servicer by its appointment hereunder shall make, the
following representations, warranties and covenants with respect to any Series
of Certificates (with appropriate modifications to Section 3.3(a) to reflect
such Successor Servicer's organization), as of the date of the related
Supplement and the related Closing Date, unless otherwise stated in such
Supplement, on which the Trustee has relied in accepting the Receivables and the
other property conveyed pursuant to Section 2.1 in trust and in authenticating
the Certificates:
(a) Organization and Good Standing. The Servicer is a national
banking association duly organized, validly existing and in good standing under
the laws of the United States of America, and has 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 this Agreement and any Supplement.
(b) Due Qualification. The Servicer is duly qualified to do
business and is in good standing (or is exempt from such requirements) in any
state where such qualification is necessary in order to service the Receivables
as required by this Agreement and any Supplement and has obtained all necessary
licenses and approvals as required under Federal and state law, and if the
Servicer shall be required by any Requirement of Law to so qualify or register
or obtain such license or approval, then it shall do so except where the failure
to obtain such license or approval does not materially affect the Servicer's
ability to perform its obligations hereunder or the enforceability of any
Receivable.
(c) Due Authorization. The execution, delivery, and
performance of this Agreement and any Supplement and the consummation of the
transactions provided for in this Agreement
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and any Supplement have been duly authorized by the Servicer by all necessary
action on the part of the Servicer.
(d) Binding Obligation. Each of this Agreement and any
Supplement constitutes a legal, valid and binding obligation of the Servicer,
enforceable against the Servicer in accordance with its terms, subject to
applicable bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or other similar laws now or hereinafter in effect
affecting the enforcement of creditors' rights in general and the rights of
creditors of national banking associations and except as such enforceability may
be limited by general principles of equity (whether considered in a proceeding
at law or in equity).
(e) No Violation. The execution and delivery of this Agreement
and any Supplement by the Servicer, the performance by the Servicer of the
transactions contemplated by this Agreement and any Supplement and the
fulfillment by the Servicer of the terms hereof and thereof, will not conflict
with, violate or result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
default under, any Requirement of Law applicable to the Servicer or any material
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it is bound.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Servicer, threatened against the
Servicer before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by this
Agreement or any Supplement, seeking any determination or ruling that, in the
reasonable judgment of the Servicer, would materially and adversely affect the
performance by the Servicer of its obligations under this Agreement or any
Supplement, or seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement or any
Supplement.
(g) Compliance with Requirements of Law. The Servicer shall
duly satisfy in all material respects its obligations under or in connection
with each Receivable and the corresponding Account, will maintain in effect all
material qualifications required under all Requirements of Law in order to
service properly each Receivable and the corresponding Account and will comply
in all material respects with all other Requirements of Law in connection with
servicing each Receivable and the related Account the failure to comply with
which would have a material adverse effect on the Certificateholders (without
regard to the amount of any Enhancement).
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(h) No Rescission or Cancellation. Except in connection with
an Adjustment Payment pursuant to Section 3.8, the Servicer shall 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 the applicable Account Guidelines.
(i) Protection of Certificateholders' Rights. The Servicer
shall take no action which, nor omit to take any action the omission of which,
would impair the rights of Certificateholders in any Receivable or the rights of
any Enhancement Provider, nor shall it reschedule, revise, waive or defer
payments due on any Receivable except in accordance with the applicable Account
Guidelines.
(j) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental Authority
required to be obtained on or prior to each date as of which this representation
is being made in connection with the execution and delivery by the Servicer of
this Agreement and any Supplement, the performance by the Servicer of the
transactions contemplated by this Agreement and any Supplement and the
fulfillment by the Servicer of the terms hereof and thereof, have been obtained;
provided, however, that no representation or warranty is made regarding state
securities or "Blue Sky" laws in connection with any distribution of the
Certificates.
(k) Receivables Not to be Evidenced by Promissory Notes.
Except in connection with its enforcement or collection of an Account, the
Servicer will take no action to cause any Receivable to be evidenced by any
instrument (as defined in the UCC as in effect in the Relevant UCC State).
In the event of a breach of any of the covenants set forth in
Section 3.3(g), (h), (i) or (k) with respect to a Receivable, and such breach
has a material adverse effect on the Certificateholders' interest in such
Receivable (without regard to the amount of any Enhancement) then, upon the
expiration of 60 days or any longer period agreed upon by the Trustee (not to
exceed an additional 120 days) from the earlier to occur of the discovery of any
such event by the Servicer or receipt by the Servicer of written notice of any
such event given by the Trustee, unless such breach has been cured, each such
Receivable or, at the option of the Transferor, all such Receivables with
respect to the related Account, shall be assigned and transferred to the
Servicer upon the deposit by the Servicer into the Collection Account in
immediately available funds prior to the next succeeding Distribution Date of an
amount equal to the amount of each such Receivable at the end of the Collection
Period preceding such Distribution Date, plus the amount of
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finance charges at the monthly periodic rate applicable to such Receivable from
the last date billed through the end of such Collection Period to the extent not
included in the amount of such Receivable. Any such deposit into the Collection
Account in connection with any such assignment of a Receivable shall be
considered a payment in full of such Receivable and such deposit shall be
applied in accordance with the provisions of Article IV. Upon the assignment to
the Servicer of such a Receivable, the Trust shall, without further action, be
deemed to transfer, assign, set-over and otherwise convey to the Servicer,
without recourse, representation or warranty, all the right, title and interest
of the Trust in and to such Receivable, all monies due or to become due and all
amounts received thereafter with respect thereto and all proceeds thereof. The
Trustee shall execute such documents and instruments of transfer or assignment,
in each case without recourse, representation or warranty, and take such other
actions as shall reasonably be requested by the Servicer to effect the
conveyance of such Receivable pursuant to this subsection. The obligation of the
Servicer set forth in this Section 3.3 shall constitute the sole remedy
respecting any breach by the Servicer of the representations and warranties set
forth in the above-referenced subsections with respect to such Receivable
available to Certificateholders or the Trustee on behalf of Certificateholders.
Notwithstanding any other provision of this Section 3.3, no assignment of a
Receivable to the Servicer pursuant to this Section 3.3 shall occur if the
Servicer fails to make the deposit required by this Section 3.3 with respect to
such Receivable.
Section 3.4 Reports and Records for the Trustee.
(a) Initial Report. On the Closing Date with respect to each
Series, the Servicer shall prepare and deliver, as provided in Section 13.5, to
the Trustee and the Rating Agencies an Officer's Certificate substantially in
the form of Exhibit D setting forth the Aggregate Principal Receivables, the
Transferor Amount and the Transferor Interest Percentage as of the end of the
day two Business Days preceding the Closing Date and the expected Transferor
Interest Percentage after giving effect to the issuance of such Series.
(b) Daily Reports. For so long as deposits of Collections are
required to be made daily by the Servicer pursuant to Section 4.1(e), on each
Business Day commencing on the Initial Closing Date, the Servicer shall prepare,
and make available for inspection by the Trustee, and maintain at the office of
the Servicer a record setting forth the aggregate amount of Collections
processed by the Servicer on the second preceding Business Day. The Servicer
shall prepare such other reports on a daily (or less frequent) basis as may be
required by any Supplement.
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(c) Monthly Servicer's Certificate. The Servicer shall
deliver, as provided in Section 13.5, to the Trustee, the Paying Agent and the
Rating Agencies, on each Determination Date, an Officer's Certificate signed by
a Servicing Officer substantially in the form of Exhibit E (with the Monthly
Certificateholder's Statement required pursuant to the applicable Supplement
attached) setting forth the following information (which, in the case of clauses
(iii), (iv) and (v) below, will be stated on the basis of an original principal
amount of $1,000 per Certificate): (i) the aggregate amount of Collections
processed for the immediately preceding Collection Period and the aggregate
amount of Collections of Finance Charge Receivables and the aggregate amount of
Collections of Principal Receivables processed during such Collection Period;
(ii) the Invested Percentage with respect to the immediately preceding
Collection Period of each Series of Certificates with respect to Collections of
Principal Receivables and the Invested Percentage with respect to such
Collection Period of each Series of Certificates with respect to Collections of
Finance Charge Receivables and Defaulted Receivables; (iii) for each Series and
for each Class within any such Series, the total amount to be distributed to
Investor Certificateholders on the next succeeding Distribution Date, if
applicable; (iv) for each Series and for each Class within any such Series, the
amount of such distribution allocable to principal, if applicable; (v) for each
Series and for each Class within any such Series, the amount of such
distribution allocable to interest, if applicable; (vi) the aggregate
outstanding balance of the Accounts which were delinquent by 31 to 60, 61 to 90
and 91 or more days as of the close of business on the last day of the
immediately preceding Collection Period; (vii) for each Series and for each
Class within any such Series, the Investor Default Amount for the related
Distribution Date; (viii) for each Series and for each Class within any such
Series, the amount of the Investor Charge Offs and the amount of the
reimbursements of Investor Charge Offs for the next succeeding Distribution
Date; (ix) for each Series, the Investor Monthly Servicing Fee for the next
succeeding Distribution Date; (x) for each Series, the existing deficit
controlled amortization amount or deficit controlled accumulation amount, if
applicable; (xi) the aggregate amount of Receivables in the Trust at the close
of business on the last day of the immediately preceding Collection Period;
(xii) for each Series, the Invested Amount at the close of business on the last
day of the immediately preceding Collection Period; (xiii) the available amount
of any Enhancement for each Series; and (xiv) whether an Early Amortization
Event with respect to any Series shall have occurred during or with respect to
the immediately preceding Collection Period. The Trustee shall be under no duty
to recalculate, verify or recompute the information supplied to it under this
Section 3.4.
Section 3.5 Annual Servicer's Certificate. The Servicer
shall deliver, as provided in Section 13.5, to the
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Trustee and the Rating Agencies, and to each Enhancement Provider, on or before
June 30 of each year, beginning with 1998, an Officer's Certificate signed by a
Servicing Officer substantially in the form of Exhibit F (a) stating that a
review of the activities of the Servicer during the preceding Fiscal Year (or,
in the case of the first such certificate, during the period from the Initial
Closing Date until February 28, 1998) and of its performance under this
Agreement was made under the supervision of the officer signing such certificate
and (b) stating that to the best of such officer's knowledge, based on such
review, either there has occurred no event which, with the giving of notice or
passage of time or both, would constitute a Servicer Default and the Servicer
has fully performed all its obligations under this Agreement throughout such
year or, if there has occurred such an event, specifying each such event known
to such officer and the nature and status thereof. A copy of such Officer's
Certificate may be obtained by any Investor Certificateholder or Certificate
Owner by a request in writing to the Trustee addressed to the Corporate Trust
Office.
Section 3.6 Annual Independent Public Accountants'
Servicing Report.
(a) On or before June 30 of each year, beginning with 1998,
the Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the
Transferor) to furnish, as provided in Section 13.5, a report prepared in
accordance with standards established by the American Institute of Certified
Public Accountants and, accordingly, including such procedures as they
considered necessary in the circumstances, to the Trustee, the Rating Agencies
and, as required, any Enhancement Provider to the effect that, in their opinion,
the Monthly Servicer's Certificates issued during the period covered by the
report (which shall be the preceding Fiscal Year or, in the case of the report
to be delivered by June 30, 1998, the period from the Initial Closing Date to
February 28, 1998) are, in all material respects, in conformity with the terms
and conditions set forth in Section 3.4(c). Such procedures will include
comparisons of the mathematical calculations of each amount set forth in the
Monthly Servicer's Certificates forwarded by the Servicer pursuant to Section
3.4(c) during the period covered by such report with the Servicer's computer
reports that were the source of such amounts, and such report shall state that,
on the basis of such comparison, such accountants are of the opinion that such
amounts are in agreement, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in such report. A
copy of such report may be obtained by any Investor Certificateholder or
Certificate Owner by a request in writing to the Trustee addressed to the
Corporate Trust Office.
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(b) On or before June 30 of each year, beginning with 1998,
the Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the
Transferor) to furnish, as provided in Section 13.5, a report to the Trustee,
the Rating Agencies and, as required, any Enhancement Provider to the effect
that in connection with their examination of the monthly Servicer's
Certificates, nothing came to their attention that caused them to believe that
the Servicer failed to comply with the terms and conditions set forth in
Sections 3.2, 3.4(c), 4.1 and 8.8 of this Agreement.
(c) On or before June 30 of each year, beginning with 1998,
the Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the
Transferor) to furnish, as provided in Section 13.5, a report to the Trustee to
the effect that such firm has applied certain procedures agreed upon with the
Servicer to certain documents and records relating to the administration and
servicing of Accounts under this Agreement and any Supplement during the
preceding fiscal year, and has reported on the findings.
Section 3.7 Tax Treatment. The Transferor has structured this
Agreement and the Investor Certificates (other than any Investor Certificates
held by the Transferor) with the intention that such Investor Certificates will
qualify under applicable tax law as indebtedness of the Transferor or, if
specified in the applicable Supplement, an interest in a partnership (and not as
an association or publicly traded partnership taxable as a corporation for
purposes of federal income tax law), and the Transferor, any entity acquiring
any direct or indirect interest in the Exchangeable Transferor Certificate, each
Investor Certificateholder (or Certificate Owner) by acceptance of its
Certificate (or, in the case of a Certificate Owner, by virtue of such
Certificate Owner's acquisition of a beneficial interest therein) and each
holder of an interest in any Enhancement Invested Amount by its acceptance
thereof agree, and shall be deemed to agree, to treat such Investor Certificates
(or beneficial interest therein) or Enhancement Invested Amount for purposes of
Federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness or, if specified in the applicable
Supplement, an interest in a partnership. Each Certificateholder agrees that it
will cause any Certificate Owner acquiring an interest in a Certificate through
it to comply with this Agreement as to treatment as indebtedness or, if
specified in the applicable Supplement, an interest in a partnership, for
certain tax purposes. Consistent with the foregoing, the Trustee shall not file
a Federal income tax return on behalf of the Trust or apply for a taxpayer
identification number on behalf of the Trust unless required to do so as a
result of a determination by
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the Internal Revenue Service or pursuant to the terms of any Supplement.
Section 3.8 Adjustments.
(a) If the Transferor or the Servicer adjusts downward the
amount of any Principal 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 Principal Receivable without receiving Collections therefor or
without charging off such amount as uncollectible, then, in any such case, the
Servicer shall deduct from the Aggregate Principal Receivables and decrease the
Transferor Amount by the amount of such adjustment. Similarly, the amount of the
Aggregate Principal Receivables and the Transferor Amount will be reduced by the
amount of any Principal Receivable which was discovered as having been created
through a fraudulent or counterfeit charge or with respect to which the covenant
contained in Section 2.5(b) was breached. Any adjustment required pursuant to
either of the two preceding sentences shall be made on or prior to the end of
the Collection Period in which such adjustment obligation arises. In the event
that, following any such exclusion, 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 shall 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. Any amount deposited into the Excess Funding
Account pursuant to the immediately preceding sentence (an "Adjustment Payment")
shall be applied in accordance with Article IV and the terms of each Supplement.
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 the last day of
any Collection Period, the amount of such deficiency (the "Adjustment Amount")
shall, to the extent such Adjustment Amount is not otherwise reduced, be
allocated among all then outstanding Series. An Adjustment Amount shall be
reduced to the extent that amounts are deposited in the Excess Funding Account,
the Aggregate Principal Receivables increase, the Aggregate Invested Amount is
reduced (other than as a result of the allocation of an Adjustment Amount) or
the Transferor subsequently makes a required Adjustment Payment. In the event
that the Servicer adjusts upwards the principal amount of any Receivable, the
Aggregate Principal Receivables shall be increased by the amount of such upward
adjustment.
(b) If (i) the Servicer makes a deposit into the Collection
Account in respect of a Collection of a Receivable and such Collection was
received by the Servicer in the form of a
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check which is not honored for any reason or (ii) the Servicer makes a mistake
with respect to the amount of any Collection and deposits an amount that is less
than or more than the actual amount of such Collection, the Servicer shall
appropriately adjust the amount subsequently deposited into the Collection
Account to reflect such dishonored check or mistake. Any Receivable in respect
of which a dishonored check is received shall be deemed not to have been paid.
Notwithstanding the first two sentences of this paragraph, no adjustments shall
be made pursuant to this paragraph that will change any amount of Collections
previously reported pursuant to Section 3.4(c).
Section 3.9 Reports to the Commission. The Servicer shall, on
behalf of the Trust, cause to be filed with the Securities and Exchange
Commission any periodic reports required to be filed under the provisions of the
Securities Exchange Act of 1934 and the rules and regulations of the Securities
and Exchange Commission thereunder. The Transferor shall, at the expense of the
Servicer, cooperate in any reasonable request of the Servicer in connection with
such filings.
[END OF ARTICLE III]
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ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1 Establishment of Collection Account and
Allocations with Respect to the Exchangeable Transferor
Certificate.
(a) The Collection Account. The Trustee, for the benefit of
the Certificateholders, shall establish and maintain or cause to be established
and maintained in the name of the Trustee, on behalf of the Trust, with an
Eligible Institution a segregated trust account (the "Collection Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Investor Certificateholders. The Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Collection Account and in all proceeds thereof. The Collection Account
shall be under the sole dominion and control of the Trustee for the benefit of
the Investor Certificateholders. If, at any time, the institution holding the
Collection Account ceases to be an Eligible Institution, the Trustee (or the
Servicer on its behalf) shall within ten Business Days establish a new
Collection Account meeting the conditions specified above with an Eligible
Institution and shall transfer any cash and/or any investments to such new
Collection Account, and from the date such new Collection Account is
established, it shall be the "Collection Account." Pursuant to the authority
granted to the Servicer in Section 3.1(b), the Servicer shall have the power,
revocable by the Trustee, to make withdrawals and payments from the Collection
Account and to instruct the Trustee to make withdrawals and payments from the
Collection Account for the purposes of carrying out the Servicer's or the
Trustee's duties hereunder.
Each Series shall represent undivided interests in the Trust,
including the benefits of any Enhancement to be provided with respect to such
Series as indicated in the Supplement relating to such Series and the right to
receive Collections and other amounts at the times and in the amounts specified
in this Article IV to be deposited in the Collection Account and any other
accounts maintained for the benefit of the Certificateholders or to be paid to
the Investor Certificateholders of such Series. The Exchangeable Transferor
Certificate shall represent the interest in the Trust not represented by any
Series then outstanding, including the right to receive Collections and other
amounts at the times and in the amounts specified in this Article IV to be paid
to the Transferor (the "Transferor Interest"); provided, however, that the
Exchangeable Transferor Certificate shall not represent any interest in the
Collection Account or any other accounts
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maintained for the benefit of the Certificateholders or the benefits of any
Enhancement to be provided by an Enhancement Provider issued with respect to any
Series, except as specifically provided in this Article IV. The Certificates do
not represent obligations of, or any interest in, the Transferor, the Servicer
or any Affiliate thereof, and neither the Certificates nor the Accounts or the
Receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency. The Certificates are limited in
right of payment to certain Collections respecting the Receivables and the other
assets of the Trust allocable to such Certificates as provided herein and in the
applicable Supplement.
(b) Administration of the Collection Account. At the written
direction of the Servicer, funds on deposit in the Collection Account to be
invested shall be invested by the Trustee in Eligible Investments selected by
the Servicer. In the absence of written direction of the Servicer, funds on
deposit in the Collection Account shall be invested in money market funds as
specified in clause (a)(iv) of the definition of Eligible Investments. All such
Eligible Investments shall be held by the Trustee for the benefit of the
Investor Certificateholders. Investments of funds representing Collections
collected during any Collection Period shall be invested in Eligible Investments
that will mature so that such funds will be available by the close of business
on the Transfer Date next succeeding such Collection Period. Any funds on
deposit in the Collection Account to be so invested shall be invested solely in
Eligible Investments. All Eligible Investments shall be held to maturity. The
Trustee shall maintain possession of the negotiable instruments or securities,
if any, evidencing such Eligible Investments. On each Distribution Date, all
interest and other investment earnings (net of losses and investment expenses)
on funds on deposit in the Collection Account shall be paid to the Holder of the
Exchangeable Transferor Certificate. The Transferor, at its option, may direct
the Servicer's investment of funds pursuant to this Section 4.1(b).
(c) Allocations For the Exchangeable Transferor Certificate.
Throughout the existence of the Trust, the Servicer shall allocate to the Holder
of the Exchangeable Transferor Certificate an amount equal to the product of (i)
the Transferor Percentage and (ii) the aggregate amount of Collections allocated
to Principal Receivables and Finance Charge Receivables, respectively, in
respect of each Collection Period. Notwithstanding anything to the contrary in
Section 4.1, unless specified in any Supplement, the Servicer need not deposit
this amount, or any other amounts so allocated to the Exchangeable Transferor
Certificate pursuant to any Supplement, into the Collection Account and shall
pay such amounts as collected to the Holder of the Exchangeable Transferor
Certificate.
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(d) Allocation of Collections Between Collections of Principal
Receivables and Collections of Finance Charge Receivables. The Servicer shall
allocate Collections processed with respect to any Account to Finance Charge
Receivables to the extent of outstanding Finance Charge Receivables with respect
to such Account. The balance of Collections processed with respect to such
Account shall be allocated to Principal Receivables.
(e) Collections. The Servicer will apply all Collections with
respect to the Receivables for each Collection Period as described in this
Article IV and each Supplement. Except as otherwise provided below, the Servicer
shall deposit all Collections into the Collection Account no later than the
second Business Day following the Date of Processing of such Collections.
Subject to the express terms of any Supplement, but notwithstanding anything
else in this Agreement to the contrary, for so long as, and only so long as,
First North American National Bank or an Affiliate of First North American
National Bank shall be the Servicer hereunder and (i) First North American
National Bank or such Affiliate shall maintain a short-term debt rating (which
may be an implied rating) of at least "P-1" by Moody's and "A-1" by Standard &
Poor's, or (ii) First North American National Bank or such Affiliate shall
obtain and maintain in force a letter of credit or other surety covering
collection risk of the Servicer approved in writing by each Rating Agency and
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 (it being understood that any such letter of credit must
include, without limitation, provisions acceptable to each Rating Agency and
such holders addressing the downgrade or withdrawal of any required debt rating
maintained by the issuer of such letter of credit), or (iii) First North
American National Bank shall obtain (x) 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 shall not have been withdrawn in accordance with the terms of the
related Supplement, and (y) a written notification from each Rating Agency 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), and for two Business Days following any reduction of either such rating or
failure to satisfy the conditions of clause (ii), the Servicer need not deposit
Collections into the Collection Account or make payments to the holder of the
Exchangeable Transferor Certificate prior to the close of business on the second
Business Day following the Date of Processing, but rather may make a single
deposit in the Collection Account in immediately available funds on the Business
Day prior to each Distribution Date in an amount equal to the Collections with
respect to the Collection Period preceding such Distribution Date to the extent
such amounts and Collections are allocated to one
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or more Series in accordance with Article IV. Collections shall not be required
to be invested in Eligible Investments until such time as they are deposited
into the Collection Account. The Servicer shall promptly notify the Trustee of
any downgrade or withdrawal of its short-term credit or certificate of deposit
rating or, if an Affiliate of First North American National Bank is acting as
Servicer hereunder, of any such downgrade or withdrawal with respect to such
Affiliate.
If the Servicer is required to make daily deposits of
Collections into the Collection Account pursuant to this subsection, the
Servicer may, prior to the occurrence of an Early Amortization Event and subject
to the provisions of the applicable Supplement, cease depositing Collections of
Finance Charge Receivables received during any Collection Period and allocable
to a Series at such time as the amount of Collections of Finance Charge
Receivables allocable to such Series and deposited into the Collection Account
equals the sum of (i) the amount of interest scheduled to be paid on the next
succeeding Distribution Date with respect to such Series, (ii) if First North
American National Bank is no longer the Servicer, the Investor Monthly Servicing
Fee scheduled to be paid on such Distribution Date with respect to such Series
and (iii) the Pro Forma Investor Default Amount for such Distribution Date with
respect to such Series. Collections of Finance Charge Receivables allocable to
such Series in excess of such amount shall be distributed on a daily basis as
they are collected to the Transferor.
If the Servicer is required to make daily deposits of
Collections into the Collection Account pursuant to this subsection, the
Servicer may, during any Amortization Period and subject to the provisions of
the applicable Supplement, cease depositing Collections of Principal Receivables
received during any Collection Period and allocable to a Series at such time as
the amount of Collections of Principal Receivables allocable to such Series and
deposited into the Collection Account equals the amount of principal scheduled
or permitted to be paid on the next succeeding Distribution Date with respect to
such Series. Collections of Principal Receivables allocable to such Series in
excess of such amount shall be distributed on a daily basis as they are
collected to the Transferor.
(f) Excess Funding Account. The Trustee, for the benefit of
the Certificateholders, shall establish and maintain or cause to be established
and maintained in the name of the Trustee, on behalf of the Trust, with an
Eligible Institution a segregated trust account (the "Excess Funding Account"),
which may be a subaccount of the Collection Account, bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Investor Certificateholders. The Trustee shall possess all right, title and
interest in all funds
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on deposit from time to time in the Excess Funding Account and in all proceeds
thereof. The Excess Funding Account shall be under the sole dominion and control
of the Trustee for the benefit of the Investor Certificateholders. If, at any
time, the institution holding the Excess Funding Account ceases to be an
Eligible Institution, the Trustee (or the Servicer on its behalf) shall within
five Business Days establish a new Excess Funding Account meeting the conditions
specified above with an Eligible Institution and shall transfer any cash and/or
any investments to such new Excess Funding Account, and from the date such new
Excess Funding Account is established, it shall be the "Excess Funding Account."
Pursuant to the authority granted to the Servicer in Section 3.1(b), the
Servicer shall have the power, revocable by the Trustee, to make withdrawals and
payments from the Excess Funding Account and to instruct the Trustee to make
withdrawals and payments from the Excess Funding Account for the purposes of
carrying out the Servicer's or the Trustee's duties hereunder.
At the written direction of the Servicer, funds on deposit in
the Excess Funding Account to be invested shall be invested by the Trustee in
Eligible Investments selected by the Servicer. In the absence of written
direction of the Servicer, funds on deposit in the Excess Funding Account shall
be invested in money market funds as specified in clause (a)(iv) of the
definition of Eligible Investments. All such Eligible Investments shall be held
by the Trustee for the benefit of the Investor Certificateholders. The Trustee
shall maintain for the benefit of the Investor Certificateholders possession of
the negotiable instruments or securities, if any, evidencing such Eligible
Investments. Funds on deposit in the Excess Funding Account on any date (after
giving effect to any withdrawals from the Excess Funding Account on such date)
will be invested in Eligible Investments that will mature so that funds will be
available at the close of business on the next Business Day following such date.
On each Determination Date, the Servicer shall instruct the Trustee to withdraw
on the next succeeding Distribution Date from the Excess Funding Account and
deposit in the Collection Account all interest and other investment earnings
(net of losses and investment expenses) on funds on deposit in the Excess
Funding Account, for application as Collections of Finance Charge Receivables
with respect to the prior Collection Period. Interest (including reinvested
interest) and other investment income and earnings on funds on deposit in the
Excess Funding Account shall not be considered part of the Excess Funding Amount
for purposes of this Agreement. On each Business Day, the Servicer shall
determine the Transferor Amount. If the Transferor Amount exceeds the Minimum
Transferor Amount on any Business Day, the Servicer shall instruct the Trustee
to withdraw an amount equal to such excess (but not to exceed the Excess Funding
Amount) from the Excess Funding Account on such day and pay such amount to the
Holder of the Exchangeable Transferor
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Certificate. If the Minimum Transferor Amount exceeds the Transferor Amount on
any Business Day, the Servicer shall deposit Collections of Principal
Receivables that would otherwise be distributed to the Transferor on such day
into the Excess Funding Account on such day in an amount equal to such excess.
On each Determination Date on which one or more Series is in an Amortization
Period, the Servicer shall determine the aggregate amount of Principal
Shortfalls, if any, with respect to each such Series that is a Principal Sharing
Series (after giving effect to the allocation and payment provisions in the
Supplement with respect to each such Series on the next succeeding Distribution
Date), and the Servicer shall instruct the Trustee to withdraw such amount (up
to the Excess Funding Amount) from the Excess Funding Account on the next
succeeding Distribution Date and allocate such amount among each such Series as
Shared Principal Collections as specified in each related Supplement.
(g) Shared Principal Collections. On each Distribution Date,
(i) the Servicer shall allocate Shared Principal Collections to each Principal
Sharing Series in a Group, pro rata, in proportion to the Principal Shortfalls,
if any, with respect to each such Series and (ii) the Servicer shall withdraw
(or shall instruct the Trustee to withdraw) from the Collection Account or the
Excess Funding Account and pay to the Holder of the Exchangeable Transferor
Certificate (x) an amount equal to the excess, if any, of (A) the aggregate
amount of Shared Principal Collections for all such Series for such Distribution
Date over (B) the aggregate amount of Principal Shortfalls for all such Series
for such Distribution Date and (y) the aggregate amount for all outstanding
Series of that portion of Collections which the related Supplements specify are
to be allocated and paid to the Transferor with respect to such Distribution
Date; provided, however, that such amounts shall be paid to the Holder of the
Exchangeable Transferor Certificate only to the extent that the Transferor
Amount for such Distribution Date (determined after giving effect to any
Principal Receivables transferred to the Trust on such date) exceeds the Minimum
Transferor Amount; and, provided further, that if on any Distribution Date the
Transferor Amount is less than or equal to the Minimum Transferor Amount, the
Servicer will not distribute to the Holder of the Exchangeable Transferor
Certificate any Shared Principal Collections then on deposit in the Collection
Account that otherwise would be distributed to such Holder, but shall deposit
such funds in the Excess Funding Account.
(h) Shared Excess Finance Charge Collection. On each
Distribution Date, (i) the Servicer shall allocate Shared Excess Finance Charge
Collections with respect to the Series in a Group to each Series in such Group,
pro rata, in proportion to the Finance Charge Shortfalls, if any, with respect
to each such Series and (ii) the Servicer shall withdraw (or shall instruct
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the Trustee to withdraw) from the Collection Account and pay to the Holder of
the Exchangeable Transferor Certificate an amount equal to the excess, if any,
of (x) the aggregate amount of Shared Excess Finance Charge Collections for all
such Series for such Distribution Date over (y) the aggregate amount of Finance
Charge Shortfalls for all such Series for such Distribution Date to the extent
any Shared Excess Finance Charge Collections are held on deposit in the
Collection Account.
(i) Net Deposits. For so long as First North American National
Bank or an Affiliate of First North American National Bank shall be the Servicer
hereunder and a Servicer Default shall not have occurred and be continuing, the
Servicer may make deposits into the Collection Account or the Excess Funding
Account on any date net of amounts payable as of such date to the Transferor or
the Servicer from amounts on deposit in the Collection Account or the Excess
Funding Account and may make deposits into the Collection Account on each
Transfer Date net of amounts payable on the following Distribution Date to the
Transferor or the Servicer from amounts on deposit in the Collection Account, it
being understood that the Investor Monthly Servicing Fee with respect to any
Series shall be payable to the Servicer only in accordance with the provisions
specified in the related Supplement and that the foregoing shall in no event
increase the amount payable to the Transferor or the Servicer hereunder or
pursuant to any Supplement.
[THE REMAINDER OF ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
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ARTICLE V
[ARTICLE V IS RESERVED AND MAY BE
SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
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ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates. Subject to Sections 6.10 and
6.11, the Investor Certificates of each Series and any Class thereof may be
issued in bearer form (the "Bearer Certificates") with attached interest coupons
and a special coupon (collectively, the "Coupons") or in fully registered form
(the "Registered Certificates"), and shall be substantially in the form of the
exhibits with respect thereto attached to the applicable Supplement. The
Exchangeable Transferor Certificate shall be substantially in the form of
Exhibit A. The Investor Certificates and the Exchangeable Transferor Certificate
shall, upon issue pursuant hereto or to Section 6.9 or Section 6.11, be executed
and delivered by the Transferor (or the Trustee on behalf of the Trust, if
specified in the applicable Supplement) to the Trustee for authentication and
redelivery as provided in Section 6.2. Any Investor Certificates shall be issued
in minimum denominations of $1,000 and in integral multiples of $1,000 in excess
thereof, unless otherwise specified in any Supplement. If specified in the
related Supplement for any Series, the Investor Certificates shall be issued
upon initial issuance as a single certificate in an original principal amount
equal to the Initial Invested Amount as described in Section 6.10. The
Exchangeable Transferor Certificate may also be issued in two or more
certificates. Each Certificate executed by the Transferor shall be executed by
manual or facsimile signature on behalf of the Transferor by its President, any
Senior Vice President or any Vice President. Certificates bearing the manual or
facsimile signature of the individual who was, at the time when such signature
was affixed, authorized to sign on behalf of the Transferor or the Trustee shall
not be rendered invalid, notwithstanding that such individual has ceased to be
so authorized prior to the authentication and delivery of such Certificates or
does not hold such office at the date of such Certificates. Unless otherwise
provided in the related Supplement, no Certificate shall be entitled to any
benefit under this Agreement or any applicable Supplement, or be valid for any
purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein executed by or on
behalf of the Trustee by the manual signature of a duly authorized signatory,
and such certificate upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication,
except that Bearer Certificates shall be dated the date of their issuance.
Section 6.2 Authentication of Certificates.
Contemporaneously with the assignment and transfer of the
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Receivables and the other Trust Property to the Trust, the Trustee shall
authenticate and deliver the initial Series of Investor Certificates upon the
order of the Transferor, to the Persons designated in the related Supplement.
The Trustee shall authenticate and deliver the Exchangeable Transferor
Certificate to the Transferor simultaneously with its delivery of the initial
Series of Investor Certificates. Upon an Exchange as provided in Section 6.9 and
the satisfaction of the conditions specified therein, the Trustee shall
authenticate and deliver the Investor Certificates of additional Series (with
the designation provided in the applicable Supplement), upon the order of the
Transferor, to the Persons designated in such Supplement. Upon the order of the
Transferor, the Certificates of any Series shall be duly authenticated by or on
behalf of the Trustee, in authorized denominations equal to (in the aggregate)
the Initial Invested Amount of such Series of Investor Certificates. If
specified in the related Supplement for any Series, the Trustee shall
authenticate and deliver outside the United States the Global Certificate that
is issued upon original issuance thereof, upon the written order of the
Transferor, to the Common Depositary as provided in Section 6.10 against payment
of the purchase price therefor. If specified in the related Supplement for any
Series, the Trustee shall authenticate Book-Entry Certificates that are issued
upon original issuance thereof, upon the written order of the Transferor, to a
Clearing Agency or its nominee as provided in Section 6.11 against payment of
the purchase price therefor.
Section 6.3 Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at the office or agency
to be maintained by a transfer agent and registrar (which may be the Trustee)
(the "Transfer Agent and Registrar") in accordance with the provisions of
section 6.3(c) a register (the "Certificate Register") in which, subject to such
reasonable regulations as it may prescribe, the Transfer Agent and Registrar
shall provide for the registration of the Registered Certificates and of
transfers and exchanges of the Registered Certificates as herein provided. The
Trustee is hereby initially appointed Transfer Agent and Registrar for the
purpose of registering the Registered Certificates and transfers and exchanges
of the Registered Certificates as herein provided. The Trustee shall be
permitted to resign as Transfer Agent and Registrar upon 30 days, prior written
notice to the Transferor and the Servicer; provided, however, that such
resignation shall not be effective and the Trustee shall continue to perform the
duties of Transfer Agent and Registrar until the Transferor has appointed a
successor Transfer Agent and Registrar acceptable to the Transferor and the
Trustee. If specified in the related Supplement for any Series, the Transferor
shall appoint any co- transfer agent and co-registrar chosen by the Transferor,
and acceptable to the Trustee, including, if and so long as the
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Registered Certificates are listed on the Luxembourg Stock Exchange or other
stock exchange and such exchange shall so require, a co-transfer agent and
co-registrar in Luxembourg or the location required by such other stock
exchange. If specified in such related Supplement, so long as the Registered
Certificates relating to such Supplement are outstanding, the Transferor shall
maintain a co-transfer agent and co-registrar in New York City or any other city
designated in such Supplement and any reference in this Agreement to the
Transfer Agent and Registrar shall include any co-transfer agent and
co-registrar unless the context requires otherwise.
Upon surrender for registration of transfer of any Registered
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose, the Transferor (or the Trustee on behalf of the
Trust, if specified in the applicable Supplement) shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee, one or
more new Registered Certificates in authorized denominations of the same Series
representing like aggregate Undivided Interests in the Trust; provided, however,
that the provisions of this paragraph shall not apply to Bearer Certificates.
At the option of any Holder thereof, Registered Certificates
may be exchanged for other Registered Certificates of the same Series in
authorized denominations of like aggregate Undivided Interests in the Trust,
upon surrender of the Registered Certificates to be exchanged at any office or
agency of the Transfer Agent and Registrar maintained for such purpose. At the
option of any Holder thereof, subject to applicable laws and regulations, Bearer
Certificates may be exchanged for other Bearer Certificates or Registered
Certificates of the same Series in authorized denominations of like aggregate
Undivided Interests in the Trust, upon surrender of the Bearer Certificates to
be exchanged at an office or agency of the Transfer Agent and Registrar located
outside the United States. Each Bearer Certificate surrendered pursuant to this
Section 6.3 shall have attached thereto all unmatured Coupons, provided that any
Bearer Certificate so surrendered after the close of business on the Record Date
preceding the relevant Distribution Date after the related Series Termination
Date need not have attached the Coupon relating to such Distribution Date. No
Registered Certificates may be exchanged for a Bearer Certificate.
The preceding provisions of this Section 6.3 notwithstanding,
the Trustee or the Transfer Agent and Registrar, as the case may be, shall not
be required to register the transfer of or exchange any Certificate of any
Series for a period of 15 days preceding the due date for any payment with
respect to the Certificates of such Series.
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Whenever any Investor Certificates of any Series are
surrendered for exchange, the Transferor (or the Trustee on behalf of the Trust,
if specified in the applicable Supplement) shall execute, and the Trustee shall
authenticate and the Transfer Agent and Registrar shall deliver (in the case of
Bearer Certificates, outside the United States), the Investor Certificates of
such Series which the Certificateholder making the exchange is entitled to
receive. Every Investor Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
a form satisfactory to the Trustee and the Transfer Agent and Registrar duly
executed by the Certificateholder thereof or his attorney-in-fact duly
authorized in writing.
Except as provided in any Supplement, no service charge shall
be made for any registration of transfer or exchange of Investor Certificates,
but the Transfer Agent and Registrar and the Trustee or any co-transfer agent
and co-registrar or co-trustee may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
transfer or exchange of Investor Certificates.
All Investor Certificates (together with any Coupons attached
to Bearer Certificates) surrendered for registration of transfer or exchange
shall be canceled by the Transfer Agent and Registrar and disposed of in a
manner satisfactory to the Trustee and the Transferor. The Trustee shall cancel
and mutilate the Global Certificate upon its exchange in full for Definitive
Certificates and shall deliver to the Transferor either a certificate of
destruction or such canceled and mutilated Global Certificate. The Trustee shall
also forward to the Transferor a copy of each certificate of each Foreign
Clearing Agency to the effect referred to in Section 6.10 which was received by
the Trustee with respect to each portion of the Global Certificate exchanged for
Definitive Certificates.
The Transferor shall execute and deliver to the Trustee or the
Transfer Agent and Registrar, as applicable, Bearer Certificates and Registered
Certificates in such amounts and at such times as are necessary to enable the
Trustee to fulfill its responsibilities under this Agreement and the
Certificates.
(b) Except as provided in Sections 6.9 and 7.2 or in any
Supplement, the Transferor's interest in the Exchangeable Transferor Certificate
and other amounts payable to the Transferor pursuant to this Agreement shall not
be sold, transferred, assigned, exchanged, pledged, participated or otherwise
conveyed, unless (i) the Servicer has delivered to the Trustee an Officer's
Certificate stating that such sale, transfer, assignment, exchange, pledge,
participation or conveyance will not, while any Series of Certificates remains
outstanding, reduce the Transferor's retained interest in the
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Exchangeable Transferor Certificate below the Minimum Transferor Interest
Percentage and (ii) prior to such sale, transfer, assignment, exchange, pledge,
participation or conveyance, the Rating Agency Condition is satisfied and (iii)
the Trustee receives prior thereto an opinion of Counsel to the effect that (x)
the conveyed interest in the Exchangeable Transferor Certificate will be treated
as either debt or an interest in a partnership for Federal income tax purposes
and that the conveyance of such interest will not 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 or
applicable state income taxation of any outstanding Series of Investor
Certificates or any Certificate Owner and (y) such transfer will not cause a
taxable event for Federal income tax purposes to any Investor Certificateholder.
(c) The Transfer Agent and Registrar will maintain at its
expense in the Borough of Manhattan, the City of New York (and, if specified in
the related Supplement for any Series, Luxembourg (or subject to Section 6.3(a)
any other city designated in such Supplement)), an office or offices or agency
or agencies where Investor Certificates may be surrendered for registration of
transfer or exchange (except that Bearer Certificates may not be surrendered for
exchange at any such office or agency in the United States).
(d) Unless otherwise provided in any related Supplement,
registration of transfer of Registered Certificates containing a legend relating
to the restrictions on transfer of such Registered Certificates (which legend
shall be set forth in the Supplement relating to such Investor Certificates)
shall be effected only if:
(i) the sale is of at least U.S. $500,000 principal
amount of such Certificates and (b) a letter from the purchaser
satisfactory to counsel to the Servicer is executed and received; or
(ii) (a) the Registered Certificates are transferred
in compliance with Rule 144 (or any amendment thereto) or Rule 144A (or
any amendment thereto) under the Securities Act of 1933, as amended,
and (b) a letter from the purchaser satisfactory to counsel to the
Servicer is executed and received; or
(iii) the Registered Certificates are sold or
otherwise transferred in any other transaction that does not require
registration under the United States Securities Act of 1933, as
amended, and, if the Transferor, the Servicer, the Trustee or the
Transfer Agent and Registrar so request, an Opinion of Counsel
satisfactory to it or them, in form
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and substance satisfactory to it or them, is furnished to such effect.
Registered Certificates issued upon registration of transfer
of, or Registered Certificates issued in exchange for, Registered Certificates
bearing the legend referred to above shall also bear such legend unless the
Transferor, the Servicer, the Trustee and the Transfer Agent and Registrar
receive an opinion of Counsel satisfactory to each of them, to the effect that
such legend may be removed.
Whenever a Registered Certificate containing the legend set
forth in the related Supplement is presented to the Transfer Agent and Registrar
for registration of transfer, the Transfer Agent and Registrar shall promptly
seek written instructions from the Servicer regarding such transfer. The
Transfer Agent and Registrar and the Trustee shall be entitled to receive
written instructions signed by a Servicing Officer prior to registering any such
transfer or authenticating new Registered Certificates, as the case may be. The
Servicer hereby agrees to indemnify the Transfer Agent and Registrar and the
Trustee and to hold each of them harmless against any loss, liability or expense
incurred without bad faith on their part arising out of or in connection with
actions taken or omitted by them in reliance on and in accordance with any such
written instructions furnished pursuant to this Section 6.3(d).
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate (together, in the case of Bearer Certificates,
with all unmatured Coupons (if any) appertaining thereto) is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Transfer Agent and Registrar, the
Trustee and the Transferor such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Trustee
that such Certificate has been acquired by a bona fide purchaser, the Transferor
(or the Trustee on behalf of the Trust, if specified in the applicable
Supplement) shall execute and the Trustee shall authenticate and the Transfer
Agent and Registrar shall deliver (in the case of Bearer Certificates, outside
the United States), in exchange for or in lieu of any such mutilated, destroyed,
lost or stolen Certificate, a new Certificate of like tenor and aggregate
Undivided Interest, if applicable. In connection with the issuance of any new
Certificate under this Section 6.4, the Trustee or the Transfer Agent and
Registrar may require the payment by the Certificateholder of a sum sufficient
to cover any tax or other governmental expenses (including those incurred by the
Trustee or the Transfer Agent and Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 6.4 shall constitute complete and
indefeasible evidence
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of ownership in the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
Section 6.5 Persons Deemed Owners. Prior to due presentation
of a Certificate (other than a Bearer Certificate) for registration of transfer,
the Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent of
any of them may treat the person in whose name any Certificate is registered as
the owner of such Certificate for the purpose of receiving distributions
pursuant to Article IV and for all other purposes whatsoever, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any
of them shall be affected by any notice to the contrary. In the case of a Bearer
Certificate, the Trustee, the Paying Agent, the Transfer Agent and Registrar and
any agent of any of them may treat the bearer of a Bearer Certificate or Coupon
as the owner of such Bearer Certificate or Coupon for the purpose of receiving
distributions pursuant to Article IV and for all other purposes whatsoever, and
neither the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any
agent of any of them shall be affected by any notice to the contrary.
Notwithstanding the foregoing provisions of this Section 6.5, in determining
whether the holders of the requisite Undivided Interests have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Certificates owned by the Transferor, the Servicer or any affiliate thereof (as
defined in Rule 405 under the Securities Act of 1933, as amended) shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates which a
Responsible Officer of the Trustee knows to be so owned shall be so disregarded.
Certificates so owned which have been pledged in good faith shall not be
disregarded and may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the United States, the Transferor, the
Servicer or an affiliate thereof (as defined above).
Section 6.6 Appointment of Paying Agent. The Paying Agent
shall make distributions to Investor Certificateholders from the Collection
Account (or any other account or accounts maintained for the benefit of
Certificateholders as specified in the related Supplement for any Series)
pursuant to Articles IV and V. Any Paying Agent shall have the revocable power
to withdraw funds from the Collection Account (or any other account or accounts
maintained for the benefit of Certificateholders as specified in the related
Supplement for any Series) for the purpose of making distributions referred to
above. The Trustee (or the Servicer if the Trustee is the Paying Agent) may
revoke such power and remove the Paying Agent if the Trustee (or the
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Servicer if the Trustee is the Paying Agent) determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect or for other good cause. The Paying Agent
shall (unless otherwise specified in the related Supplement for any Series)
initially be the Trustee and any co-paying agent chosen by the Transferor and
acceptable to the Trustee, including, if and so long as any Series of Investor
Certificates is listed on the Luxembourg Stock Exchange or other stock exchange
and such exchange so requires, a co-paying agent in Luxembourg or the location
of such other stock exchange. The Trustee shall be permitted to resign as Paying
Agent upon 30 days' prior written notice to the Servicer and the Transferor;
provided, however, that such resignation shall not be effective and the Trustee
shall continue to perform the duties of Paying Agent until the appointment of a
successor Paying Agent, pursuant to this Section 6.6. The Transferor shall
notify the Rating Agencies of any resignation or replacement of the Paying
Agent. In the event that the Trustee shall no longer be the Paying Agent, the
Transferor shall appoint a successor to act as Paying Agent and such successor
shall be acceptable to the Trustee. The Trustee shall cause the initial Paying
Agent (unless the initial Paying Agent is the Trustee) and each successor Paying
Agent or any additional Paying Agent appointed by the Transferor to execute and
deliver to the Trustee an instrument in which such initial or successor Paying
Agent or additional Paying Agent shall agree with the Trustee that, as Paying
Agent, such initial or successor Paying Agent or additional Paying Agent will
hold all sums, if any, held by it for payment to the Investor Certificateholders
in trust for the benefit of the Investor Certificateholders entitled thereto
until such sums shall be paid to such Certificateholders and shall comply with
all requirements of the Internal Revenue Code regarding the withholding by the
Trustee of payments in respect of federal income taxes due from
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Trustee and upon removal of a Paying Agent shall also return all funds in its
possession to the Trustee. The provisions of Sections 11.1, 11.2 and 11.3 shall
apply to the Trustee also in its role as Paying Agent, for so long as the
Trustee shall act as Paying Agent. Any reference in this Agreement to the Paying
Agent shall include any co-paying agent unless the context requires otherwise.
If specified in the related Supplement for any Series, so long
as the Investor Certificates of such Series are outstanding, the Transferor
shall, if the Paying Agent is not located in New York City, appoint a co-paying
agent in New York City (for Registered Certificates only) acceptable to the
Trustee or any other city designated in such Supplement which, if and so long as
any Series of Investor Certificates is listed on the Luxembourg Stock Exchange
or other stock exchange and such exchange so requires, shall be in Luxembourg or
the location required by such other stock exchange.
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Section 6.7 Access to List of Certificateholders' Names and
Addresses. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Servicer or the Paying Agent (or any agent thereof),
within five Business Days after receipt by the Trustee of a request therefor
from the Servicer or the Paying Agent, respectively, in writing, a list in the
form maintained by the Transfer Agent and Registrar, of the names and addresses
of the Investor Certificateholders (other than Bearer Certificateholders). If
Holders representing Undivided Interests in the Trust aggregating not less than
l0% of the Invested Amount of the Investor Certificates of such Series (the
"Applicants") apply in writing to the Trustee, and such application states that
the Applicants desire to communicate with other Investor Certificateholders of
such Series with respect to their rights under this Agreement or under the
Investor Certificates and is accompanied by a copy of the communication which
such Applicants propose to transmit, then the Trustee, after having been
adequately indemnified by such Applicants for its costs and expenses, shall
afford or shall cause the Transfer Agent and Registrar to afford such Applicants
access during normal business hours to the most recent list of
Certificateholders (other than Bearer Certificateholders) maintained by the
Transfer Agent and Registrar, or shall mail or cause to be mailed such list
within five Business Days after the receipt of such application. Such list shall
be as of a date no more than 45 days prior to the date of receipt of such
Applicants' request.
Every Certificateholder, by receiving and holding a
Certificate agrees with the Trustee that neither the Trustee, the Transfer Agent
and Registrar, nor any of their respective agents shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Certificateholders (other than Bearer Certificateholders) hereunder,
regardless of the sources from which such information was derived.
Section 6.8 Authenticating Agent.
(a) The Trustee may appoint one or more authenticating agents
with respect to the Certificates which shall be authorized to act on behalf of
the Trustee in authenticating the Certificates in connection with the issuance,
delivery, registration of transfer, exchange or repayment of the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent. Each authenticating agent must be
reasonably acceptable to the Transferor.
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(b) Any institution succeeding to the corporate agency
business of an authenticating agent shall continue to be an authenticating agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such authenticating agent.
(c) An authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Transferor. The Trustee
may at any time terminate the agency of an authenticating agent by giving notice
of termination to such authenticating agent and to the Transferor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time an authenticating agent shall cease to be acceptable to the Trustee or
the Transferor, the Trustee promptly may appoint a successor authenticating
agent. Any successor authenticating agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
authenticating agent. No successor authenticating agent shall be appointed
unless acceptable to the Trustee and the Transferor.
(d) The Trustee agrees to pay, on behalf of the Trust, to each
authenticating agent from time to time reasonable compensation for its services
under this Section 6.8.
(e) The provisions of Sections 11.1, 11.2 and 11.3 shall be
applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.8,
the Certificates may have endorsed thereon, in lieu of the Trustee's certificate
of authentication, an alternate certificate of authentication in substantially
the following form:
This is one of the Certificates described in the Master
Pooling and Servicing Agreement.
-------------------------------
as Authenticating Agent
for the Trustee,
By:
----------------------------
Authorized Officer
Section 6.9 Tender of Exchangeable Transferor
Certificate.
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(a) Upon any Exchange, the Trustee shall issue to the
Transferor under Section 6.1 for execution (unless the Trustee is to execute
such Series on behalf of the Trust, as specified in the applicable Supplement)
and redelivery to the Trustee for authentication under Section 6.2 one or more
new Series of Investor Certificates. Any such Series of Investor Certificates
shall be substantially in the form specified in the applicable Supplement and
shall bear, upon its face, the designation for such Series to which it belongs
as selected by the Transferor. Except as specified in the Supplement for any
Series as to differing treatment of the Investor Certificates within such
Series, all Investor Certificates of any Series shall be equally and ratably
entitled as provided herein to the benefits hereof without preference, priority
or distinction on account of the actual time or times of authentication and
delivery (except that Enhancement provided for any Series shall not be available
for any other Series), all in accordance with the terms and provisions of this
Agreement and the applicable Supplement.
(b) The Holder of the Exchangeable Transferor Certificate may
tender the Exchangeable Transferor Certificate, or the Exchangeable Transferor
Certificate and the Investor Certificates of any Series, to the Trustee in
exchange for (i) one or more newly issued Series of Investor Certificates and
(ii) a reissued Exchangeable Transferor Certificate (any such tender an
"Exchange"). The Transferor may perform an Exchange, without the consent of any
Certificateholder, by notifying the Trustee, in writing at least three Business
Days in advance (an "Exchange Notice") of the date upon which the Exchange is to
occur (an "Exchange Date"). Any Exchange Notice shall state the designation of
any Series to be issued on the Exchange Date and, with respect to each such
Series: (x) its Initial Invested Amount (or the method for calculating such
Initial Invested Amount), if any, which, in the aggregate, at any time, may not
be greater than the current principal amount of the Exchangeable Transferor
Certificate less the product of the Minimum Transferor Interest Percentage and
the Aggregate Principal Receivables at such time, and (y) its Certificate Rate
(or the method for allocating interest payments or other cash flow to such
Series), if any. On the Exchange Date, the Trustee shall authenticate and
deliver any such Series only upon delivery to it of the following: (A) a
Supplement in form satisfactory to the Trustee executed by the Transferor and
specifying the Principal Terms of such Series, (B) an Opinion of Counsel to the
effect that, unless otherwise specified in the related Supplement, the newly
issued Series of Investor Certificates (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 the
issuance of the newly issued Series of Investor Certificates will not have any
material adverse impact on the Federal income tax
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characterization of any outstanding Series of Investor Certificates that have
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 (such opinion, a "Tax
Opinion"), (C) an agreement, if any, pursuant to which the Enhancement Provider
agrees to provide Enhancement, (D) written confirmation from each Rating Agency
that the Exchange will not result in the Rating Agency's reducing or withdrawing
its rating on any then outstanding Series rated by it and (E) the existing
Exchangeable Transferor Certificate and the Investor Certificate of the Series,
if any, to be exchanged. Upon satisfaction of such conditions, the Trustee shall
cancel the existing Exchangeable Transferor Certificate and issue, as provided
above, such Series of Investor Certificates and a new Exchangeable Transferor
Certificate, dated the Exchange Date. There is no limit to the number of
Exchanges that may be performed under this Agreement.
(c) In conjunction with an Exchange, the parties hereto shall
execute a Supplement, which shall specify the relevant terms with respect to any
Series of Investor Certificates, which may include, without limitation: (i) its
name or designation, (ii) an Initial Invested Amount or the method of
calculating the Initial Invested Amount, (iii) a Certificate Rate (or formula
for the determination thereof), (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, (v) the interest payment date or dates
and the date or dates from which interest shall accrue, (vi) the method of
allocating Collections of Principal Receivables 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 shall amortize or accrete and the
method for allocating Collections of Finance Charge Receivables and Receivables
in 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 Interest Percentage, (x) the Minimum
Aggregate Principal Receivables, (xi) the Series Termination Date, (xii) the
terms of any Enhancement, (xiii) the Enhancement Provider, if any, (xiv) the
base rate, if any, (xv) the Repurchase Terms or the terms on which the
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 will be
issuable in temporary or permanent global form and, in such case, the depository
for such global certificate or certificates, the terms and conditions, if any,
upon which such global certificate may be exchanged in whole or in part for
Definitive Certificates, and the manner in which any
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interest payable on a temporary or global certificate will be paid, (xix)
whether the Certificates 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) whether Interchange or other fees will be included in
the funds available to be paid with respect to such Series, (xxii) whether such
Series will or may be paired with any other Series and the Series with which it
will be paired, if applicable, (xxiii) the Group, if any, to which such Series
belongs, and (xxiv) any other relevant terms of such Series (all such terms, the
"Principal Terms" of such Series). The terms of such Supplement may modify or
amend the terms of this Agreement solely as applied to such new Series. If on
the date of the issuance of such Series there is issued and outstanding no
Series of Investor Certificates which is currently rated by a Rating Agency,
then as a condition to such Exchange a nationally recognized investment banking
firm or commercial bank shall also deliver to the Trustee an officer's
certificate stating, in substance, that the Exchange will not have an adverse
effect on the timing or distribution of payments to such other Series of
Investor Certificates then issued and outstanding.
(d) In connection with the creation or sale of any additional
interest in the Trust or the Receivables, whether or not designated as an
Exchange (including, without limitation, the receipt by the Trust or the
Transferor of the proceeds of any loan or additional loan provided by an
Enhancement Provider), the Transferor shall deliver to the Trustee and to each
Rating Agency assigning a rating to any Class of Investor Certificates of any
then outstanding Series (if so requested by any such Rating Agency) a Tax
Opinion with respect to such interest.
Section 6.10 Global Certificate; Euro-Certificate
Exchange Date.
(a) If specified in the Supplement for any Series, the
Investor Certificates of such Series may be initially issued in the form of a
single temporary Global Certificate (the "Global Certificate") in bearer form,
without interest coupons, in the denomination of the Initial Invested Amount and
substantially in the form attached to such Supplement. Unless otherwise
specified in the applicable Supplement, the provisions of this Section 6.10
shall apply to such Global Certificate. The Global Certificate will be
authenticated by the Trustee upon the same conditions, in substantially the same
manner and with the same effect as the Definitive Certificates. The Global
Certificate may be exchanged as described in this Section 6.10 or in the
applicable Supplement for Bearer Certificates and/or Registered Certificates in
definitive form (the "Definitive Euro-Certificates"). Notwithstanding the
foregoing, no Certificates shall be issued in bearer form unless the Transferor
has determined, and delivers an
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Opinion of Counsel to the Trustee substantially to the effect that, the terms
and procedures governing issuance and transfer of such Certificates result in
favorable treatment to Investor Certificateholders under the Bearer Rules.
(b) The Manager shall, upon its determination of the date of
completion of the distribution of the Certificates, so advise the Trustee, the
Transferor, the Common Depositary, and each Foreign Clearing Agency in writing
forthwith. Without unnecessary delay, but prior to the Euro-Certificate Exchange
Date, the Transferor will execute and deliver to the Trustee at its office or to
the Trustee's designated agent outside the United States definitive Bearer
Certificates in an aggregate principal amount equal to the Initial Invested
Amount of the Global Certificate. All Bearer Certificates so issued and
delivered will have Coupons attached. The Global Certificate may be exchanged
for an equal aggregate principal amount of Definitive Euro-Certificates only on
or after the Euro- Certificate Exchange Date. A United States institutional
investor will be required to deliver to the Transferor, the Trustee and the
Manager at the time of its purchase of Registered Certificates a signed
certificate substantially in the form attached to the Supplement for the related
Series. Upon any demand for exchange for Definitive Certificates in accordance
with this paragraph, the Transferor shall cause the Trustee to authenticate and
deliver the Definitive Certificates to the Holder (x) outside the United States,
in the case of Bearer Certificates, and (y) according to the instructions of the
Holder, in the case of Registered Certificates, but only upon presentation to
the Trustee of a written statement substantially in the form attached to the
Supplement for the related Series with respect to the Global Certificate or
portion thereof being exchanged signed by a Foreign Clearing Agency, to the
effect that it has received in writing or by tested telex a certification
substantially in the form of the certificate attached to the Supplement for the
related Series, such certificate being dated no earlier than 15 days prior to
the Euro-Certificate Exchange Date and signed by or on behalf of the person
appearing in the records of a Foreign Clearing Agency as the beneficial owner of
the Global Certificate or portion thereof being exchanged. Upon receipt of such
certification, the Trustee shall cause the Global Certificate to be endorsed in
accordance with paragraph (d) below. Unless otherwise provided in the applicable
Supplement, any exchange as provided in this Section 6.10(b) shall be made free
of charge to the holders and the beneficial owners of the Global Certificate and
to the beneficial owners of the Definitive Euro-Certificates issued in exchange,
except that a person receiving Definitive Euro-Certificates must bear the cost
of insurance, postage, transportation and the like in the event that such person
does not receive such Definitive Euro-Certificates in person at the offices of a
Foreign Clearing Agency.
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(c) The delivery to the Trustee by a Foreign Clearing Agency
of any written statement referred to above may be relied upon by the Transferor
and the Trustee as conclusive evidence that a corresponding certification or
certifications has or have been delivered to such Foreign Clearing Agency,
pursuant to the terms of this Agreement.
(d) Upon any such exchange of all or a portion of the Global
Certificate for a Definitive Euro-Certificate or Certificates, such Global
Certificate shall be endorsed by or on behalf of the Trustee to reflect the
reduction of its principal amount by an amount equal to the aggregate principal
amount of such Definitive Euro-Certificate or Certificates. Until so exchanged
in full, such Global Certificate shall in all respects be entitled to the same
benefits under this Agreement as Definitive Euro-Certificates authenticated and
delivered hereunder except that the beneficial owners of such Global Certificate
shall not be entitled to receive payments of interest on the Certificates until
they have exchanged their beneficial interests in such Global Certificate for
Definitive Euro- Certificates.
Section 6.11 Book-Entry Certificates. Unless otherwise
provided in any related Supplement, the Investor Certificates, upon original
issuance, will be issued in the form of the requisite number of typewritten
Certificates representing the Book-Entry Certificates, to be delivered to The
Depository Trust Company, which shall be the initial Clearing Agency, by, or on
behalf of, the Transferor. The Investor Certificates shall initially be
registered on the Certificate Register in the name of CEDE & Co., the nominee of
the initial Clearing Agency, and no Certificate Owner will receive a definitive
certificate representing such Certificate Owner's interest in the Investor
Certificates, except as provided in Section 6.13. Unless and until definitive,
fully registered Investor Certificates (the "Definitive Certificates") have been
issued to Certificate Owners pursuant to Section 6.13:
(i) the provision of this Section 6.11 shall be
in full force and effect;
(ii) the Transferor, the Servicer, the Paying Agent,
the Transfer Agent and Registrar and the Trustee may deal with the
Clearing Agency for all purposes (including the making of distributions
on the Investor Certificates)as the authorized representatives of the
Certificate Owners, and, absent gross negligence or willful misconduct
on its part, the Transferor, the Servicer, the Paying Agent, the
Transfer Agent and Registrar and the Trustee shall have no
responsibility or liability for any aspect of the records pertaining
to, or the making of any distribution to, the Clearing Agency
Participants or the Certificate Owners;
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(iii) to the extent that the provisions of this
Section 6.11 conflict with any other provisions of this Agreement, the
provisions of this Section 6.11 shall control;
(iv) the rights of Certificate Owners shall be
exercised only through the Clearing Agency and the Clearing Agency
Participants and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the Depository
Agreement, unless and until Definitive Certificates are issued pursuant
to Section 6.13, the initial Clearing Agency will make book entry
transfers among the Clearing Agency Participants and receive and
transmit distributions of principal and interest on the Investor
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits
actions to be taken based upon instructions or directions of a
specified percentage of the Invested Amount of any or all Series of
Certificates outstanding, the Clearing Agency shall be deemed to
represent such percentage only to the extent that it has received
instructions to such effect from Certificate Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in Investor Certificates.
Section 6.12 Notices to Clearing Agency. Whenever notice or
other communication to the Investor Certificateholders is required under this
Agreement, unless and until Definitive Certificates shall have been issued to
Certificate Owners pursuant to Section 6.13, the Trustee, the Servicer and the
Paying Agent shall give all such notices and communications specified herein to
be given to Holders of the Investor Certificates to the applicable Clearing
Agency.
Section 6.13 Definitive Certificates. If Book-Entry
Certificates have been issued pursuant to Section 6.11 and if (i)(A) the
Transferor advises the Trustee in writing that the Clearing Agency or Foreign
Clearing Agency is no longer willing or able to discharge properly its
responsibilities under the Depository Agreement, and (B) the Trustee or the
Transferor is unable to locate a qualified successor (which successor must be
treated as maintaining a book-entry system within the meaning of Section
163(f)(3) of the Internal Revenue Code), (ii) the Transferor at its option,
advises the Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency or Foreign Clearing Agency with respect to the
Certificates or (iii) after the occurrence of a Servicer Default, Certificate
Owners representing beneficial interests aggregating
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not less than 50% of the Invested Amount of any Series advise the Trustee and
the Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Certificate Owners, the Trustee shall notify all
Certificate Owners, through each applicable Clearing Agency, of the occurrence
of any such event and of the availability of Definitive Certificates to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
Investor Certificates by the Clearing Agency or Foreign Clearing Agency,
accompanied by registration instructions from the Clearing Agency for
registration, the Trustee shall issue the Definitive Certificates. Neither the
Transferor, the Transfer Agent and Registrar nor the Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates, the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
Section 6.14 Meetings of Certificateholders.
(a) Unless not permitted by the Supplement for any Series
issued in whole or in part in Bearer Certificates, the Transferor, the Servicer
or the Trustee may at any time call a meeting of the Certificateholders of such
Series or of all Series, to be held at such time and at such place as the
Transferor, the Servicer or the Trustee, as the case may be, shall determine,
for the purpose of approving a modification of or amendment to, or obtaining a
waiver of, any covenant or condition set forth in this Agreement with respect to
such Series or in the Certificates of such Series, subject to Section 13.1.
References in this Section 6.14 to Certificateholders shall be deemed to refer
to the Exchangeable Transferor Certificates and only those Series of Investor
Certificates for which this Section 6.14 is applicable. Notice of any meeting of
Certificateholders, setting forth the time and place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be given in
accordance with Section 13.5 and at least once in an Authorized Newspaper and,
if and for so long as the Certificates are listed on the Luxembourg Stock
Exchange or other stock exchange and such exchange so requires, in a newspaper
of general circulation in Luxembourg (which newspaper shall be printed in the
English or French language and customarily published on each business day in
Luxembourg) or the location required by such other stock exchange, the first
publication to be not less that 20 nor more than 180 days prior to the date
fixed for the meeting. To be entitled to vote at any meeting of
Certificateholders, a person shall be (i) a Holder of one or more Certificates
of the applicable Series or (ii) a person appointed by an instrument in writing
as proxy by the Holder of one or more Certificates. The only Persons who shall
be entitled to be
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present or to speak to any meeting of Certificateholders shall be the Persons
entitled to vote at such meeting and their counsel and any representatives of
the Transferor, the Servicer and the Trustee and their respective counsels.
(b) At a meeting of Investor Certificateholders, persons
entitled to vote Investor Certificates evidencing Undivided Interests
aggregating a majority of the Invested Amount of the applicable Series or all
outstanding Series, as the case may be, shall constitute a quorum. No business
shall be transacted in the absence of a quorum, unless a quorum is present when
the meeting is called to order. In the absence of a quorum at any such meeting,
the meeting may be adjourned for a period of not less than 10 days; in the
absence of a quorum at any such adjourned meeting, such adjourned meeting may be
further adjourned for a period of not less than 10 days; at the reconvening of
any meeting further adjourned for lack of a quorum, the Persons entitled to vote
at least 25% in Undivided Interest of the applicable Series or all outstanding
Series, as the case may be, shall constitute a quorum for the taking of any
action set forth in the notice of the original meeting. Notice of the
reconvening of any adjourned meeting shall be given as provided above except
that such notice must be given not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the reconvening of an
adjourned meeting shall state expressly the percentage of the aggregate
principal amount of the outstanding Investor Certificates which shall constitute
a quorum.
(c) Any Certificateholder who has executed an instrument in
writing appointing a person as proxy shall be deemed to be present for the
purposes of determining a quorum and be deemed to have voted; provided, however,
that such Certificateholder shall be considered as present or voting only with
respect to the matters covered by such instrument in writing. Subject to the
provisions of Section 13.1, any resolution passed or decision taken at any
meeting of Investor Certificateholders duly held in accordance with this Section
6.14 shall be binding on all the Investor Certificateholders whether or not
present or represented at the meeting.
(d) The holding of Bearer Certificates shall be proved by the
production of such Bearer Certificates or by a certificate, satisfactory to the
Servicer and the Trustee, executed by any bank, trust company or recognized
securities dealer, wherever situated, satisfactory to the Servicer and the
Trustee. Each such certificate shall be dated and shall state that on the date
thereof a Bearer Certificate bearing a specified serial number was deposited
with or exhibited to such bank, trust company or recognized securities dealer by
the person named in such certificate. Any such certificate may be issued in
respect of one or more Bearer Certificates specified therein. The
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holding by the person named in any such certificate of any Bearer Certificate
specified therein shall be presumed to continue for a period of one year from
the date of such certificate unless at the time of any determination of such
holding (i) another certificate bearing a later date issued in respect of the
same Bearer Certificate shall be produced, (ii) the Bearer Certificate specified
in such certificate shall be produced by some other person or (iii) the Bearer
Certificate specified in such certificate shall have ceased to be outstanding.
The appointment of any proxy shall be proved by having the signature of the
person executing the proxy guaranteed by any bank, trust company or recognized
securities dealer satisfactory to the Trustee. The holding of Registered
Certificates shall be proved by the Certificate Register or by a certificate or
certificates of the Transfer Agent and Registrar.
(e) The Trustee shall appoint a temporary chairman of the
meeting. A permanent chairman and a permanent secretary of the meeting shall be
elected by vote of the holders of a majority in Undivided Interest of the
Certificates of such Series represented at the meeting. No vote shall be cast or
counted at any meeting in respect of any Certificate challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote except as a
Certificateholder or proxy. Any meeting of Certificateholders duly called at
which a quorum is present may be adjourned from time to time, and the meeting
may be held as so adjourned without further notice.
(f) The vote upon any resolution submitted to any meeting of
Certificateholders shall be by written ballot on which shall be subscribed the
signatures of the Certificateholders or proxies and on which shall be inscribed
the serial number or numbers of the Certificates held or represented by them.
The permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Certificateholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was published as
provided above. The record shall be signed and verified by the permanent
chairman and secretary of the meeting and one of the duplicates shall be
delivered to the Servicer and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters
therein stated.
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Section 6.15 Uncertificated Classes. Notwithstanding anything
to the contrary contained in this Article VI or in Article XII, unless otherwise
specified in any Supplement, any provisions contained in this Article VI and in
Article XII relating to the registration, form, execution, authentication,
delivery, presentation, cancellation and surrender of Certificates shall not be
applicable to any uncertificated Certificates.
[END OF ARTICLE VI]
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ARTICLE VII
OTHER MATTERS RELATING
TO THE TRANSFEROR
Section 7.1 Liability of the Transferor. The Transferor shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Transferor in such capacity herein.
Section 7.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor.
(a) The Transferor shall not consolidate with or merge into
any other business entity or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(i) the business entity formed by such consolidation
or into which the Transferor is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Transferor
substantially as an entirety shall be organized and existing under the
laws of the United States of America or any State or the District of
Columbia, and shall be a national banking association, state banking
corporation or other entity which is not subject to the bankruptcy laws
of the United States of America, and if the Transferor is not the
surviving entity, shall expressly assume, by an agreement supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the Trustee, the performance of every covenant and obligation of the
Transferor, as applicable, hereunder and shall benefit from all the
rights granted to the Transferor, as applicable, hereunder. To the
extent that any right, covenant or obligation of the Transferor is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity;
(ii) the Transferor has delivered to the Trustee an
Officer's Certificate signed by a Vice President or more senior officer
of the Transferor stating that such consolidation, merger, conveyance
or transfer and such supplemental agreement comply with this Section
7.2 and that all conditions precedent herein provided for relating to
such transaction have been complied with and an Opinion of Counsel
stating that such supplemental agreement is legal, valid and binding
with respect to the Transferor; and
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(iii) the Transferor shall have delivered notice to
each Rating Agency of such consolidation, merger, conveyance or
transfer.
(b) The obligations of the Transferor hereunder shall not be
assignable nor shall any Person succeed to the obligations of the Transferor
hereunder except in each case in accordance with the provisions of the foregoing
paragraph.
Section 7.3 Limitation on Liability of the Transferor. The
directors, officers, employees or agents of the Transferor shall not be under
any liability to the Trust, the Servicer, the Trustee, the Certificateholders,
any Enhancement Provider or any other Person hereunder or pursuant to any
document delivered hereunder, it being expressly understood that all such
liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Agreement and any Supplement and the
issuance of the Certificates; provided, however, that this provision shall not
protect the directors, officers, employees or agents of the Transferor against
any liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations or duties hereunder or pursuant to any
document delivered hereunder. Except as provided in Section 7.4, the Transferor
shall not be under any liability to the Trust, the Servicer, the Trustee, the
Certificateholders, any Enhancement Provider or any other Person for any action
taken or for refraining from the taking of any action in its capacity as
Transferor pursuant to this Agreement or any Supplement whether arising from
express or implied duties under this Agreement or any Supplement; provided,
however, that this provision shall not protect the Transferor against any
liability which would otherwise be imposed by reason of its willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of its
reckless disregard of its obligations or duties hereunder or under any
Supplement. The Transferor and any director, officer, employee or agent of the
Transferor may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.
Section 7.4 Liabilities. Notwithstanding Section 7.3, by
entering into this Agreement, the Transferor agrees to be liable, directly to
the injured party, for the entire amount of any losses, claims, damages,
expenses, or liabilities (other than those incurred by a Certificateholder in
the capacity of an investor in the Investor Certificates as a result of the
performance of the Receivables, market fluctuations, a shortfall in any
Enhancement or other similar market or investment risks) arising out of or based
on the arrangement created by this Agreement and the actions of the Servicer
taken pursuant hereto as though this Agreement created a partnership under the
Uniform
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Partnership Act. The Transferor agrees to pay, indemnify and hold harmless each
Investor Certificateholder against and from any and all such losses, claims,
expenses, damages and liabilities (other than those incurred by a
Certificateholder in the capacity of an investor in the Investor Certificates as
a result of the performance of the Receivables, market fluctuations, a shortfall
in any Enhancement or other similar market or investment risks) except to the
extent that they arise from any action by such Investor Certificateholder.
Subject to Sections 8.3 and 8.4, in the event of a Service Transfer, the
Successor Servicer will indemnify and hold harmless the Transferor for any
losses, claims, damages and liabilities of the Transferor as described in this
Section 7.4 arising from the actions or omissions of such Successor Servicer.
[END OF ARTICLE VII]
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ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
Section 8.1 Liability of the Servicer. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
into any other business entity or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(i) the business entity formed by such consolidation
or into which the Servicer is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Servicer
substantially as an entirety shall be organized and existing under the
laws of the United States of America or any State or the District of
Columbia, and shall be a national banking association, state banking
corporation or other entity which is not subject to the bankruptcy laws
of the United States of America, and if the Servicer is not the
surviving entity, shall be an Eligible Servicer and shall expressly
assume, by an agreement supplemental hereto, executed and delivered to
the Trustee, the performance of every covenant and obligation of the
Servicer, as applicable, hereunder and shall benefit from all the
rights granted to the Servicer, as applicable, hereunder. To the extent
that any right, covenant or obligation of the Servicer is inapplicable
to the successor entity, such successor entity shall be subject to such
covenant or obligation, or benefit from such right, as would apply, to
the extent practicable, to such successor entity;
(ii) the Servicer has delivered to the Trustee an
Officer's Certificate stating that such consolidation, merger,
conveyance or transfer and such supplemental agreement comply with this
Section 8.2 and that all conditions precedent herein provided for
relating to such transaction have been complied with and an Opinion of
Counsel that such supplemental agreement is legal, valid and binding
with respect to the Servicer; and
(iii) the Servicer shall have delivered notice to
each Rating Agency of such consolidation, merger, conveyance or
transfer.
Section 8.3 Limitation on Liability of the Servicer
and Others. The directors, officers, employees or agents of the
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Servicer shall not be under any liability to the Trust, the Transferor, the
Trustee, the Certificateholders, any Enhancement Provider or any other Person
hereunder or pursuant to any document delivered hereunder, it being expressly
understood that all such liability is expressly waived and released as a
condition of, and as consideration for, the execution of this Agreement and any
Supplement and the issuance of the Certificates; provided, however, that this
provision shall not protect the directors, officers, employees or agents of the
Servicer against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations or duties hereunder or
pursuant to any document delivered hereunder. Except as provided in Section 8.4,
the Servicer shall not be under any liability to the Trust, the Transferor, the
Trustee, the Certificateholders, any Enhancement Provider or any other Person
for any action taken or for refraining from the taking of any action in its
capacity as Servicer pursuant to this Agreement or any Supplement whether
arising from express or implied duties under this Agreement or any Supplement,
provided, however, that this provision shall not protect the Servicer against
any liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of its reckless disregard of obligations or duties hereunder or under any
Supplement. The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties to service the
Receivables in accordance with this Agreement or any Supplement which in its
reasonable opinion may involve it in any expense or liability.
Section 8.4 Indemnification of the Trust and the Trustee. The
Servicer shall indemnify and hold harmless the Trust, for the benefit of the
Certificateholders, and the Trustee, including its directors, officers,
employees and agents, from and against any loss, liability, claim, damage,
injury or expense (including, without limitation, reasonable fees and expenses
of counsel) arising out of or relating to (i) the acceptance by the Trustee of
the Trust pursuant to this Agreement or (ii) any claims, actions or proceedings
brought or asserted against the Trust, the Trustee or any director, officer,
employee or agent of the Trustee pursuant to this Agreement or any Supplement,
including, without limitation, any judgment, award, settlement, costs or
expenses (including, without limitation, reasonable fees and expenses of
counsel) incurred in connection with the defense of any actual or threatened
action, proceeding or claim; provided, however, that the Servicer shall not
indemnify or hold harmless the Trust, for the benefit of the
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Certificateholders, the Trustee or any director, officer, employee or agent of
the Trustee for any loss, liability, claim, damage, injury or expense arising
out of or relating to (i) the willful misfeasance, bad faith or negligence of
the Trustee in the performance of its duties hereunder or (ii) any action taken
by the Trustee at the request of the Certificateholders; and, provided further,
that the Servicer shall not indemnify the Trust, for the benefit of the
Certificateholders, from or against (i) any Federal, state or local taxes (or
any interest or penalties with respect thereto) required to be paid by the Trust
or the Certificateholders in connection herewith to any taxing authority or (ii)
any loss, liability, claim, damage, injury or expense incurred by the
Certificateholders in their capacity as investors as a result of any action
taken by the Certificateholders or as a result of the performance of the
Receivables, market fluctuations, a shortfall in any Enhancement or other
similar market or investment risks (except to the extent that such loss,
liability, claim, damage, injury or expense was incurred by reason of the
failure by the Servicer to act in accordance with this Agreement and the Account
Guidelines). Subject to Sections 7.1 and 7.4 and Section 10.2(b), any
indemnification pursuant to this Section 8.4 shall only be from the assets of
the Servicer. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof and shall
survive the termination of this Agreement, the resignation and removal of the
Trustee and payment in full of the Certificates.
Section 8.5 The Servicer Not to Resign. The Servicer shall not
resign from the obligations and duties hereby imposed on it as such except upon
determination that (i) the performance of its duties hereunder is or will become
impermissible under applicable law, regulation or order and (ii) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced as to clause (i)
of this Section by an Opinion of Counsel to such effect delivered to the
Trustee. No such resignation shall be effective until the Trustee or a successor
to the Servicer has assumed the Servicer's responsibilities and obligations
under this Agreement. If the Trustee is unable within 120 days of the date of
such determination to appoint a Successor Servicer pursuant to Section 10.2(a),
the Trustee or its duly appointed agent (which may not be the outgoing Servicer)
shall serve as Successor Servicer hereunder but the Trustee shall have continued
authority to appoint another Person as Successor Servicer.
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables. The Servicer shall provide to the Trustee access to
the documentation regarding the Accounts and the Receivables in such cases where
the Trustee is
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required in connection with the enforcement of the rights of the Investor
Certificateholders, or by applicable statutes or regulations, to review such
documentation, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to such
security and confidentiality procedures as the Servicer may deem reasonably
necessary and (iv) at offices designated by the Servicer. Nothing in this
Section 8.6 shall derogate from the obligation of the Transferor, the Trustee or
the Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors and the failure of the Servicer to provide access as
provided in this Section 8.6 as a result of such obligation shall not constitute
a breach of this Section 8.6.
Section 8.7 Delegation of Duties. It is understood and agreed
by the parties hereto that the Servicer may delegate certain of its duties
hereunder to any Person who agrees to conduct such duties in accordance with the
applicable Account Guidelines and the usual and customary servicing policies and
procedures of the Servicer. The fees of any Person to whom such duties are
delegated shall be for the account of the Servicer. Any such delegations shall
not relieve the Servicer of its liability and responsibility with respect to
such duties, and shall not constitute a resignation within the meaning of
Section 8.5 hereof. If any such delegation is not in the ordinary course of
business, notification thereof shall be given by the Servicer to each Rating
Agency.
Section 8.8 Examination of Records. The Transferor and the
Servicer shall clearly and unambiguously identify each Account (including any
Account designated pursuant to Section 2.6) in its computer or other records to
reflect that the Receivables arising in such Account have been conveyed to the
Trust pursuant to this Agreement. The Servicer shall, prior to the sale or
transfer to a third party of any receivable held in its custody, examine its
computer and other records to determine that such receivable is not a
Receivable.
[END OF ARTICLE VIII]
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ARTICLE IX
EARLY AMORTIZATION EVENTS
Section 9.1 Early Amortization Events. Unless modified with
respect to any Series of Investor Certificates by the Supplement for such
Series, if any one of the following events shall occur:
(a) the Transferor shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or relating to
the Transferor or of or relating to all or substantially all of its property, or
a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Transferor; or the Transferor shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations;
(b) the Trust shall become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act"); or
(c) the Transferor shall become unable for any reason to
transfer Receivables to the Trust in accordance with the provisions of this
Agreement;
then, an Early Amortization Event with respect to all Series then outstanding
shall occur without any notice or other action on the part of the Trustee or the
Investor Certificateholders immediately upon the occurrence of such event. Upon
a Responsible Officer of the Trustee receiving actual notice thereof, the
Trustee shall advise the Rating Agencies in writing of the occurrence of any
Early Amortization Event.
Section 9.2 Additional Rights Upon the Occurrence of
Certain Events.
(a) If the Transferor voluntarily goes into liquidation or
consents to the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Transferor or of or relating to all or
substantially all its property, or a decree or order of a court
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or agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Transferor; or the Transferor shall admit in writing
its inability to pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors or voluntarily suspend payment of
its obligations; or the Transferor shall become unable for any reason to
transfer Receivables to the Trust in accordance with the provisions of this
Agreement (such voluntary liquidation, appointment, entering of such decree,
admission, filing, making, suspension or inability, a "Dissolution Event"), the
Transferor shall promptly give notice of such event to the Trustee, and the
Transferor shall on the day of such appointment, voluntary liquidation, entering
of such decree, admission, filing, making, suspension or inability, as the case
may be (the "Appointment Day"), immediately cease to transfer Principal
Receivables and Discount Option Receivables to the Trust hereunder.
Notwithstanding any cessation of the transfer to the Trust of additional
Principal Receivables and Discount Option Receivables, Principal Receivables and
Discount Option Receivables transferred to the Trust prior to the occurrence of
such Dissolution Event and Collections in respect of such Principal Receivables
and Discount Option Receivables and Finance Charge Receivables whenever created
shall continue to be part of the Trust, and such Collections shall continue to
be allocated and deposited in accordance with the provisions of Article IV.
Within 15 days of the receipt by the Trustee of the notice of a Dissolution
Event, the Trustee shall (i) publish a notice in an Authorized Newspaper that a
Dissolution Event has occurred and 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 Investor Certificateholders and any Enhancement
Provider entitled thereto describing the provisions of this Section 9.2 and
requesting instructions from such Holders, which notice shall request each
Investor Certificateholder to advise the Trustee in writing that it elects one
of the following options: (A) the Investor Certificateholder wishes the Trustee
to instruct the Servicer not to sell, dispose of or otherwise liquidate the
Receivables and to instruct the Servicer to reconstitute the Trust upon the same
terms and conditions set forth herein, or (B) the Investor Certificateholder
wishes the Trustee to instruct the Servicer to sell, dispose of or otherwise
liquidate the Receivables, or (C) the Investor Certificateholder refuses to
advise the Trustee as to the specific action the Trustee shall instruct the
Servicer to take. If after 90 days from the day notice pursuant to clause (i)
above is first published (the "Publication Date"), the Trustee shall not have
received written instructions of Holders
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of Investor Certificates aggregating in excess of 50% of the related Invested
Amount of each Series (or in the case of a Series having more than one Class of
Investor Certificates, each Class of such Series), each Holder of any interest
in the Exchangeable Transferor Certificate other than the Transferor, and any
other Person specified in any Supplement, to the effect that the Trustee shall
instruct the Servicer not to sell, dispose of, or otherwise liquidate the
Receivables and to instruct the Servicer to reconstitute the Trust upon the same
terms and conditions as set forth herein, the Trustee shall instruct the
Servicer to proceed to sell, dispose of, or otherwise liquidate the Receivables
in a commercially reasonable manner and on commercially reasonable terms, which
shall include the solicitation of competitive bids and the Servicer shall
proceed to consummate the sale, liquidation or disposition of the Receivables as
provided above with the highest bidder for the Receivables. If, however, with
respect to the portion of the Receivables allocable to any outstanding Series,
the Holders of more than 50% of the principal amount of each Class of such
Series and each Holder of any interest in the Exchangeable Transferor
Certificate other than the Transferor instruct the Trustee not to sell the
portion of the Receivables allocable to such Series, the Trust shall continue
with respect to such Series pursuant to the terms of this Agreement and the
applicable Supplement. If specified in the applicable Supplement, the holder of
an Enhancement Invested Amount with respect to a Series shall be entitled to
give instructions pursuant to this Section 9.2 as if such Enhancement Invested
Amount were a Class of such Series. The portion of the Receivables allocable to
any Series shall be equal to the sum of (1) the product of (A) the Transferor
Percentage, (B) the Aggregate Principal Receivables and (C) a fraction the
numerator of which is the related Invested Percentage with respect to Finance
Charge Receivables and the denominator of which is the sum of all Invested
Percentages with respect to Finance Charge Receivables of all Series outstanding
and (2) the Invested Amount of such Series. The Transferor or any of its
Affiliates shall be permitted to bid for the Receivables. In addition the
Transferor or any of its Affiliates shall have the right to match any bid by a
third person and be granted the right to purchase the Receivables at such
matched bid price. The Trustee may obtain a prior determination from the
conservator or receiver that the terms and manner of any proposed sale,
disposition or liquidation are commercially reasonable. The provisions of
Sections 9.1 and 9.2 shall not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of
the Receivables pursuant to Section (a) above shall be treated as Collections on
the Receivables allocable to the Investor Certificateholders and shall be
allocated and deposited as Collections allocable to the Investor
Certificateholders of the applicable Series in accordance with
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the provisions of Article IV; provided, however, that the Trustee shall
determine conclusively without liability for such determination the amount of
such proceeds which are allocable to Finance Charge Receivables and the amount
of such proceeds which are allocable to Principal Receivables. On the day
following the Distribution Date on which such proceeds are distributed to the
Investor Certificateholders (assuming that no Series elects to reconstitute the
Trust), the Trust shall terminate.
[END OF ARTICLE IX]
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ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults. if any one of the
following events (a "Servicer Default") shall occur and be
continuing:
(a) any failure by the Servicer to make any payment, transfer
or deposit or to give instructions or notice to the Trustee to make such
payment, transfer or deposit or to give notice to the Trustee as to any required
drawing or payment under any Enhancement on or before the date occurring five
Business Days after the date such payment, transfer, deposit or drawing or such
instruction or notice is required to be made or given, as the case may be, under
the terms of this Agreement or any Supplement;
(b) failure on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer set forth in this
Agreement or any Supplement, which has a material adverse effect on the
Certificateholders of any Series then outstanding (without regard to the amount
of any Enhancement) and 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 Holders of Investor Certificates evidencing
Undivided Interests aggregating more than 50% of the Invested Amount of any
Series adversely affected thereby, and which continues to materially adversely
affect the rights of the Certificateholders of any Series then
outstanding(without regard to the amount of any Enhancement) or the Servicer
shall delegate its duties under this Agreement, except as permitted by Section
8.7; provided, however, that any such failure that relates to any particular
Receivable or group of Receivables shall not constitute a Servicer Default if
the Servicer has made a deposit in the Collection Account with respect to such
failure in accordance with Section 3.3;
(c) any representation, warranty or certification made by the
Servicer in this Agreement or any Supplement or in any certificate delivered
pursuant to this Agreement or any Supplement shall prove to have been incorrect
when made, which has a material adverse effect on the rights of the
Certificateholders of any Series then outstanding (without regard to the amount
of any Enhancement) and which continues to be incorrect in any material respect
and which continues to affect materially and adversely the rights of the
Certificateholders of any Series (without regard to the amount of any
Enhancement) for a period of 60 days after the date on which written notice of
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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 Holders of
Investor Certificates evidencing Undivided Interests aggregating more than 50%
of the Invested Amount of any Series adversely affected thereby; or
(d) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or relating to
the Servicer or of or relating to all or substantially all of its property, or a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer and such decree or order
shall have remained in force undischarged or unstayed for a period of 60 days;
or the Servicer shall admit in writing its inability to pay its debts generally
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations;
then, so long as such Servicer Default shall not have been remedied, either the
Trustee or the Holders of Investor Certificates evidencing Undivided Interests
aggregating more than 50% of the Aggregate Invested Amount, by notice then given
in writing to the Servicer (and to the Trustee if given by the Investor
Certificateholders) (a "Termination Notice"), may terminate all of the rights
and obligations of the Servicer as Servicer under this Agreement and in and to
the Receivables and the proceeds thereof and appoint a new Servicer (a "Service
Transfer"). The rights and interests of the Transferor Interest will not be
affected by any Service Transfer. The Trustee, upon giving or receiving a
Termination Notice shall immediately notify the Rating Agencies and any
Enhancement Provider of such notice. After receipt by the Servicer of such
Termination Notice, and on the date that a Successor Servicer shall have been
appointed by the Trustee pursuant to Section 10.2, all authority and power of
the Servicer under this Agreement shall pass to and be vested in a Successor
Servicer, and, without limitation, the Trustee is hereby authorized and
empowered (upon the failure of the Servicer to cooperate) to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of the Servicer to execute or
deliver such documents or instruments, and to do and accomplish all other acts
or things necessary or appropriate to effect the purposes of such Service
Transfer. The Servicer agrees to take all reasonable actions to cooperate with
the Trustee and such Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing
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hereunder, including, without limitation, the transfer to such Successor
Servicer of all authority of the Servicer to service the Receivables provided
for under this Agreement, including, without limitation, all authority over all
Collections which shall on the date of transfer be held by the Servicer for
deposit, or which have been deposited by the Servicer, in the Collection
Account, or which shall thereafter be received with respect to the Receivables,
and in assisting the Successor Servicer and in enforcing all rights to
Recoveries. The Servicer shall promptly transfer its electronic records relating
to the Receivables to the Successor Servicer in such electronic form as the
Successor Servicer may reasonably request and shall promptly transfer to the
Successor Servicer all other records, correspondence and documents necessary for
the continued servicing of the Receivables in the manner and at such times as
the Successor Servicer shall reasonably request. To the extent that compliance
with this Section 10.1 shall require the Servicer to disclose to the Successor
Servicer information of any kind which the Servicer reasonably deems to be
confidential, the Successor Servicer shall be required to enter into such
customary licensing and confidentiality agreements as the Servicer shall deem
necessary to protect its interest.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in Section 10.1(a) for a period of 10 Business Days
after the applicable grace period or a delay in or failure of performance
referred to in Section 10.1(b) or (c) 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 be prevented by the exercise of reasonable diligence by the
Servicer and such delay or failure was caused by an act of God or the public
enemy, acts of declared or undeclared war, public disorder, rebellion, riot or
sabotage, epidemics, landslides, lightning, fire, hurricanes, tornadoes,
earthquakes, nuclear disasters or meltdowns, floods, power outages or similar
causes. The preceding sentence shall not relieve the Servicer from using its
best efforts to perform its obligations in a timely manner in accordance with
the terms of this Agreement and the Servicer shall provide the Trustee, any
Enhancement Provider, the Transferor and the Holders of Investor Certificates
with an Officer's Certificate giving prompt notice of such failure or delay by
it, together with a description of the cause of such failure or delay and its
efforts so to perform its obligations. The Servicer shall immediately notify a
Responsible officer of the Trustee in writing of any Servicer Default.
Section 10.2 Trustee to Act; Appointment of Successor.
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 10.1, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise
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specified by the Trustee in writing or, if no such date is specified in such
Termination Notice, or otherwise specified by the Trustee, until a date mutually
agreed upon by the Servicer and Trustee. The Trustee shall as promptly as
possible after the giving of a Termination Notice appoint a successor servicer
(the "Successor Servicer"), with the consent of any Enhancement Provider, and
such Successor Servicer shall accept its appointment by a written assumption in
a form acceptable to the Trustee and the Transferor. The Transferor shall have
the right to nominate to the Trustee the name of a potential successor servicer
which nominee shall be selected by the Trustee as the Successor Servicer. The
Trustee may obtain bids from any potential successor servicer. If the Trustee is
unable to obtain any bids from any potential successor servicer, the Trustee has
not appointed the Transferor's nominee and the Servicer delivers to the Trustee
an Officer's Certificate to the effect that it cannot in good faith cure the
Servicer Default which gave rise to a transfer of servicing, then the Trustee
shall notify each Enhancement Provider that a sale of the Receivables is
proposed and shall provide each Enhancement Provider an opportunity to bid on
the Receivables and shall offer the Transferor the right of first refusal to
purchase the Receivables on terms equivalent to the best purchase offer as
determined by the Trustee, but in no event less than an amount equal to 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) on the date of such purchase plus all accrued but unpaid interest on the
Certificates of all Series at the applicable Certificate Rates through the end
of the applicable interest accrual periods of such Series plus any other unpaid
amounts required to be paid pursuant to this Section 10.2 under any Supplement;
provided, however, that, if the Transferor shall not have a rating of "P-3" or
"Baa3" or higher by Moody's and "BBB-" or higher by Standard & Poor's, no such
reassignment shall occur unless the Transferor shall deliver to the Trustee and
the Rating Agencies an Opinion of Counsel reasonably acceptable to the Trustee
that such reassignment would not constitute a fraudulent conveyance. In the
event that a Successor Servicer has not been appointed and has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the Trustee
(as trustee hereunder) without further action shall automatically be appointed
the Successor Servicer. Notwithstanding the above, the Trustee shall, if it is
legally unable so to act, petition a court of competent jurisdiction to appoint
any established financial institution having a net worth of not less than
$50,000,000 and whose regular business includes the servicing of charge card or
revolving credit receivables as the Successor Servicer hereunder.
Notwithstanding anything to the contrary in this Agreement, the entire amount of
the reassignment deposit amount shall be distributed to the Investor
Certificateholders of the related Series on the subsequent Distribution Date for
such Series pursuant to Section 12.3 (except for amounts payable to
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any Enhancement Provider under the applicable Enhancement Agreement, which
amounts shall be distributed to such Enhancement Provider.)
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer; provided, however, that the outgoing
Servicer shall not be relieved of any liability hereunder for its actions prior
to the transfer of servicing hereunder; and, provided further, that (i) the
outgoing Servicer shall not indemnify the Trust or the Trustee under Section 8.4
for acts, omissions or alleged acts or omissions by a Successor Servicer and
(ii) the outgoing Servicer shall not pay or reimburse the Trustee pursuant to
Section 11.5 for any expense, disbursement or advance of the Trustee related to
or arising as a result of the negligence or bad faith of the Successor Servicer.
Any Successor Servicer, by its acceptance of its appointment, will automatically
agree to be bound by the terms and provisions of any applicable Enhancement
agreement.
(c) In connection with such appointment and assumption, the
Trustee shall be entitled to such compensation, or may make such arrangements
for the compensation of the Successor Servicer out of Collections, as it and
such Successor Servicer shall agree; provided, however, that no such
compensation shall be in excess of the Monthly Servicing Fee permitted to the
Servicer pursuant to Section 3.2.
(d) All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.1 and shall pass to and be vested in the
Transferor and, without limitation, the Transferor is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Successor Servicer agrees to
cooperate with the Transferor in effecting the termination of the
responsibilities and rights of the Successor Servicer to conduct servicing on
the Receivables. The Successor Servicer shall transfer its electronic records
relating to the Receivables to the Transferor in such electronic form as the
Transferor may reasonably request and shall transfer all other records,
correspondence and documents to the Transferor in the manner and at such times
as the Transferor shall reasonably request. To the extent that compliance with
this Section 10.2 shall require the Successor Servicer to disclose to the
Transferor information of
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any kind which the Successor Servicer deems to be confidential, the Transferor
shall be required to enter into such customary licensing and confidentiality
agreements as the Successor Servicer shall deem necessary to protect its
interests.
Section 10.3 Notification to Certificateholders. Upon
the occurrence of any Servicer Default, the Servicer shall give prompt written
notice thereof to the Trustee, the Rating Agencies and any Enhancement Provider,
and the Trustee shall give notice to the Investor Certificateholders at their
respective addresses appearing in the Certificate Register. Upon any termination
or appointment of a Successor Servicer pursuant to this Article X, the Trustee
shall give prompt written notice thereof to the Investor Certificateholders at
their respective addresses appearing in the Certificate Register, the Rating
Agencies and to any Enhancement Provider. Notice to Holders of Bearer
Certificates shall be given by publication in the manner described in Section
13.5.
Section 10.4 Waiver of Past Defaults. The Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 66-2/3% of the
Invested Amount of any Series then outstanding affected by any default by the
Servicer or the Transferor may, on behalf of all Holders of Certificates of such
affected Series, waive any default by the Servicer or the Transferor in the
performance of their respective obligations hereunder and its consequences,
except a default in the failure to make any required deposits or payments of
interest or principal with respect to any Series of Certificates. Upon any such
waiver of a past default, such default shall cease to exist, and any default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly so waived.
[END OF ARTICLE X]
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ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee.
(a) The Trustee, prior to the occurrence of a Servicer Default
and after the curing or waiving of all Servicer Defaults which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations of the Trustee shall be read into this Agreement. If a Servicer
Default has occurred (which has not been cured or waived), the Trustee (as
Trustee and not Successor Servicer) shall exercise such of the rights and powers
vested in it by this Agreement or any Supplement, and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement or any Supplement, shall
examine them to determine whether they conform as to form to the requirements of
this Agreement or any Supplement, but shall not be required to verify the
accuracy of any information, calculations or conclusions stated therein.
(c) Subject to Section 11.1(a), no provision of this Agreement
or any Supplement shall be construed to relieve the Trustee from liability for
its own negligent action, its own negligent failure to act or its own willful
misconduct; provided, however, that:
(i) the Trustee shall not be liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 50%
of the Invested Amount of any Series adversely affected thereby
relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement or any Supplement;
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(iii) the Trustee shall not be charged with knowledge
of any failure by the Servicer (other than the Trustee, in its capacity
as Successor Servicer) to comply with the obligations of the Servicer
referred to in clauses (a), (b) and (c) of Section 10.1 unless a
Responsible Officer of the Trustee obtains actual knowledge of such
failure (it being understood that knowledge of the Servicer, in its
capacity as agent for the Trustee, is not attributable to the Trustee)
or the Trustee receives written notice of such failure from the
Servicer, any Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Invested Amount of any
Series adversely affected thereby or any Enhancement Provider;
(iv) in making a determination of any material and
adverse effect upon Certificateholders or the Investor Certificates,
the Trustee may, as to matters of law, rely exclusively upon an Opinion
of Counsel.
(d) The Trustee (in its capacity as such) shall not be
required to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder, or in exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it, and none of the provisions contained in this Agreement
or any Supplement shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of the obligations of the
Transferor, the Servicer or the Successor Servicer under this Agreement or any
Supplement except during such time, if any, as the Trustee shall be the
Successor Servicer in accordance with the terms of this Agreement or any
Supplement.
(e) Except for actions expressly authorized by this Agreement
or any Supplement, the Trustee shall take no action reasonably likely to impair
the interests of the Trust in any Receivable now existing or hereafter created
or to impair the value of any Receivable now existing or hereafter created.
(f) Except as specifically provided in this Agreement, the
Trustee shall have no power to vary the corpus of the Trust.
(g) In the event that the Paying Agent or the Transfer Agent
and Registrar shall not be the Trustee and shall fail to perform any obligation,
duty or agreement in the manner or on the day required to be performed by the
Paying Agent or the Transfer Agent and Registrar, as the case may be, under this
Agreement, the Trustee shall be obligated promptly upon its knowledge thereof to
perform such obligation, duty or agreement in the
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manner so required but shall not be required to make a payment out of its own
funds.
(h) Any action, suit or proceeding brought in respect of one
or more particular Series shall have no effect on the Trustee's rights, duties
and obligations hereunder with respect to any one or more Series not the subject
of such action, suit or proceeding.
(i) The Trustee shall, upon the reasonable request of the
Transferor, enter into any intercreditor agreement relating to the assets of the
Transferor, provided that nothing in any such agreement shall impair the rights
of the Trustee hereunder.
Section 11.2 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 11.1:
(a) the Trustee may rely on and shall be protected in acting
on, or in refraining from acting in accord with, any resolution, Officer's
Certificate, Opinion of Counsel, certificate of independent public accountants
or any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document, including,
without limitation, any request or instruction by the Servicer or the Transferor
to make any deposit or payment or any draw on any Enhancement or to transfer any
Receivables or Accounts, prima facie properly executed and submitted to it
pursuant to this Agreement or any Supplement by the proper party or parties;
(b) the Trustee may consult with counsel as to matters of law
and any advice or opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel as to any
actions required to be taken or withheld hereunder;
(c) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement or any Supplement, or to
institute, conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders or Certificate
Owners or any Enhancement Provider, pursuant to the provisions of this Agreement
or any Supplement or any Enhancement, unless such Certificateholders or
Certificate Owners or such Enhancement Provider shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee (as Trustee but not as Successor Servicer)
of the obligations, upon the occurrence of any Servicer Default (which has not
been cured or waived), to exercise such of the rights and powers vested in it
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by this Agreement or any Supplement, and to use the same degree of care and
skill in their exercise, as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs;
(d) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement or
any Supplement;
(e) except as may be required by Section 11.1(a) or 11.1(b),
the Trustee shall not be bound to make any investigation into the facts of
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper or
document, except to the extent specifically requested in writing so to do by
Holders of Investor Certificates evidencing Undivided Interests aggregating more
than 50% of the Invested Amount of any Series which could be adversely affected
if the Trustee does not perform such acts and the Trustee is reasonably
indemnified therefor;
(f) the Trustee (in its capacity as such) may execute any of
the trusts or powers hereunder or perform any duties hereunder either directly
or by or through agents or attorneys or a custodian, and the Trustee (in its
capacity as such) shall not be responsible for any misconduct or negligence on
the part of any such agent, attorney or custodian appointed with due care by it
hereunder;
(g) except as may be required by Section 11.1(a) or 11.1(b)
hereof, the Trustee shall not be required to make any initial or periodic
examination of any documents or records related to the Receivables or the
Accounts for the purpose of establishing the presence or absence of defects, the
compliance by the Transferor or the Servicer with their representations,
warranties or covenants or for any other purpose;
(h) the permissive right of the Trustee to take actions
enumerated in this Agreement or any Supplement shall in no event be construed as
a duty;
(i) whenever in the administration of this Agreement or any
Supplement, the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officer's Certificate;
(j) except with respect to any Enhancement Invested Amount,
the Trustee shall not be deemed to be a fiduciary for the Enhancement Provider,
if any, in its capacity as such, and the Trustee's sole responsibility with
respect to the Enhancement
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Provider in its capacity as such shall be to perform those duties with respect
to the Enhancement Provider as are specifically set forth in the related
Enhancement Agreement and no implied covenants or obligations shall be read into
this Agreement against the Trustee with respect to the Enhancement Provider; and
(k) the Trustee shall have no duty (i) to see to any
recording, filing or depositing of this Agreement or any agreement referred to
herein or any financing statement or continuation statement evidencing a
security interest in the Receivables or the Accounts, or to see to the
maintenance of any such recording, filing or depositing or any rerecording,
refiling or redepositing of any thereof or (ii) to confirm or verify the
contents of any reports or certificates of the Servicer delivered to the Trustee
pursuant to this Agreement believed by the Trustee to be genuine and to have
been signed or presented by the proper party or parties.
Section 11.3 Trustee Not Liable for Recitals in Certificates.
The Trustee assumes no responsibility for the correctness of the recitals
contained herein, in any Supplement or in the Certificates (other than the
certificates of authentication on the Certificates). Except as set forth in
Section 2.2(a) or Section 11.15, the Trustee makes no representations as to (i)
the validity or sufficiency of this Agreement or any Supplement or of the
Certificates (other than the certificates of authentication on the
Certificates), (ii) the existence or validity of any Receivable, (iii) the
validity of any transfer or assignment of any Receivable to the Trust, (iv) the
validity of any grant of a security interest to the Trust in any Receivable, (v)
the perfection of any security interest (whether as of the date hereof or at any
future time) in any Receivable, (vi) the maintenance of or the taking of any
action to maintain such perfection, (vii) the receipt by the Trustee or the
Servicer of any Receivable, (viii) the performance or enforcement of any
Receivable, (ix) the compliance by the Transferor or the Servicer with any
covenant or representation, (x) the breach by the Transferor or the Servicer of
any warranty or representation made hereunder or in any related document or the
accuracy of any such warranty or representation or (xi) any action taken by the
Servicer in the name of the Trustee. The Trustee shall not be accountable for
the use or application by the Transferor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Transferor in respect of the Receivables or deposited in or withdrawn
from the Collection Account, the Excess Funding Account or other accounts now or
hereafter established to effectuate the transactions contemplated herein and in
accordance with the terms hereof.
Section 11.4 Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the
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owner or pledgee of Investor Certificates with the same rights as it would have
if it were not the Trustee and may transact any banking or trust business with
the Transferor, the Servicer or any of their respective Affiliates.
Section 11.5 The Servicer to Pay Trustee's Fees and Expenses.
The Servicer covenants and agrees to pay to the Trustee and any co-trustee(s)
appointed pursuant to Section 11.10 from time to time out of its own funds, and
the Trustee and any such co-trustee(s), shall be entitled to receive, reasonable
compensation (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) for all services rendered by
it in the execution of the trust hereby created and in the exercise and
performance of any of the powers and duties hereunder or pursuant to any
Supplement of the Trustee, and, subject to Section 8.4, the Servicer will pay or
reimburse the Trustee and any such co-trustee(s) (without reimbursement from the
Collection Account or otherwise) upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee or any such
co-trustee(s) in accordance with any of the provisions of this Agreement or any
Supplement (including the reasonable fees and expenses of its agents and
counsel) except any such expense, disbursement or advance as may arise from its
negligence or bad faith and except as provided in the following sentence. If the
Trustee is appointed Successor Servicer pursuant to Section 10.2, the provisions
of this Section 11.5 shall not apply to expenses, disbursements and advances
incurred or made by the Trustee in its capacity as Successor Servicer.
The obligations of the Servicer and the Transferor under this
Section 11.5, Section 7.4, Section 8.4 and Section 11.17 shall survive the
termination of the Trust and the resignation or removal of the Trustee or the
Servicer.
Section 11.6 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation or national banking association
organized and doing business under the laws of the United States of America or
any state thereof authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000, a rating as to
its long-term unsecured debt obligations of at least Baa3 by Moody's (if Moody's
shall then be a Rating Agency) and BBB- by Standard & Poor's (if Standard &
Poor's shall then be a Rating Agency) and a rating as to its short-term deposits
or long-term unsecured debt obligations that satisfies the rating requirement of
any other Rating Agency assigning a rating for any Class of Investor
Certificates of any then outstanding Series and subject to supervision or
examination by Federal or state authority. If such corporation or national
banking association publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
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authority, then for the purpose of this Section 11.6, the combined capital and
surplus of such corporation or national banking association shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 11.6, the Trustee
shall resign immediately in the manner and with the effect specified in Section
11.7.
Section 11.7 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign as Trustee and be
discharged from the trust hereby created by giving written notice thereof to the
Transferor and the Servicer. Upon receiving such notice of resignation, the
Transferor shall promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted such appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.6 and shall fail to resign after
written request therefor by the Transferor, or if at any time the Trustee shall
be legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Transferor may, but shall not be required to, remove the Trustee and promptly
appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee. The Transferor shall promptly pay all fees and expenses
owed to any removed Trustee.
(c) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section 11.7
shall not become effective until acceptance of appointment by the successor
trustee as provided in Section 11.8 and payment of all fees and expenses owed to
the resigning or removed Trustee. Any liability of the Trustee arising hereunder
shall survive such appointment of a successor trustee.
Section 11.8 Successor Trustee.
(a) Any successor trustee appointed as provided in Section
11.7 shall execute, acknowledge and deliver to the
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Transferor and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder and under
any Supplement, with like effect as if originally named as Trustee herein. The
predecessor Trustee shall upon payment of its fees and expenses deliver to the
successor trustee all documents held by it hereunder, and the Transferor and the
predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor trustee all such rights, powers, duties and
obligations.
(b) No successor trustee shall accept appointment as provided
in this Section 11.8 unless at the time of such acceptance such successor
trustee shall be eligible under the provisions of Section 11.6 hereof and shall
be an Eligible Servicer, and, if Standard & Poor's is then a Rating Agency,
unless Standard & Poor's shall have consented to such appointment.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.8, such successor trustee shall mail notice of such
succession hereunder to each Rating Agency and all Certificateholders (other
than Holders of Bearer Certificates) at their addresses as shown in the
Certificate Register. Notice to Holders of Bearer Certificates shall be given by
publication in the manner described in Section 13.5.
Section 11.9 Merger or Consolidation of Trustee. Any
Person into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided such Person shall be eligible
under the provisions of Section 11.6, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provision of this Agreement or
any Supplement, at any time, for the purpose of meeting any legal requirements
of any jurisdiction in which any part of the Trust may at the time be located,
the Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee, or separate trustee, of all
or any part of the Trust, and to vest in such
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Person, in such capacity and for the benefit of the Certificateholders, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 11.10, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 11.6 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 11.8. The Servicer shall be responsible for the fees and expenses of any
co-trustee or separate trustee appointed hereunder.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any laws
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee, or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee hereunder
appointed with due care; and
(iii) the Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement or any Supplement, specifically including every provision of
this Agreement or any Supplement relating to the conduct of, affecting
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the liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time appoint
the Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement or any Supplement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.11 Tax Returns and Compliance.
(a) In the event the Trust shall be required to file tax
returns, the Servicer shall prepare or cause to be prepared and is authorized
hereunder to sign any tax returns required to be filed by the Trust and, to the
extent possible, shall file such returns at least five days before such returns
are due to be filed. The Servicer shall prepare or shall cause to be prepared
all tax information required by law to be distributed to Certificateholders and
Certificate Owners and shall deliver such information to the Paying Agent at
least five days prior to the date it is required by law to be distributed to
Certificateholders and Certificate Owners. The Trustee shall, upon request,
furnish the Servicer with all such information known to the Trustee as may be
reasonably required in connection with the preparation of such tax returns and
shall, upon request, execute such tax returns. In no event shall the Trustee,
the Paying Agent or the Servicer be liable for any liabilities, costs or
expenses of the Trust, the Investor Certificateholders or the Certificate Owners
arising under any tax law, including, without limitation, Federal, state or
local income or excise taxes or any other tax imposed on or measured by income
(or any interest or penalty with respect thereto or arising from a failure to
comply therewith), except to the extent that such tax is imposed as a result of
a violation by such Person of the provisions of this Agreement or any
Supplement.
(b) The Trustee and each Paying Agent shall comply with all
Federal withholding requirements respecting payments to Investor
Certificateholders or persons receiving funds from the Trust. In the event the
Trustee or Paying Agent does withhold any amount from interest, principal, or
other payments pursuant to Federal withholding requirements, the Trustee or
Paying Agent shall indicate the amount withheld in writing with any payment to
the person otherwise entitled to such amount.
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Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or any
Supplement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
Section 11.13 Suits for Enforcement. If a Servicer Default
shall occur and be continuing, the Trustee, in its discretion, may, subject to
the provisions of Section 10.1, proceed to protect and enforce its rights and
the rights of the Certificateholders under this Agreement or any Supplement by
such suit, action or proceeding in equity or at law or otherwise, whether for
the specific performance of any covenant or agreement contained in this
Agreement or any Supplement or in aid of the execution of any power granted in
this Agreement or any Supplement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.
Section 11.14 Rights of Certificateholders to Direct Trustee.
Unless otherwise specified in the Supplement for a Series, Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 50% of the
Aggregate Invested Amount of all Series affected by the conduct of any
proceeding or the exercise of any right conferred on the Trustee shall have the
right to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee; provided, however, that, subject to Section 11.1, the Trustee shall
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of the Trustee, determine that the proceedings so directed
would be illegal or involve it in personal liability for which it has not been
adequately indemnified hereunder or be unduly prejudicial to the rights of
Certificateholders of such Series not parties to such direction or to the rights
of Certificateholders of other Series; and, provided further, that nothing in
this Agreement or any Supplement shall impair the right of the Trustee to take
any action deemed proper by the Trustee and which is not inconsistent with such
direction.
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Section 11.15 Representations and Warranties of Trustee. The
Trustee represents and warrants that:
(i) The Trustee is a national banking association,
organized, existing and in good standing under the laws of the United
States of America;
(ii) The Trustee has full power, authority and right
to execute, deliver and perform this Agreement and any Supplement, and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Agreement and any Supplement; and
(iii) This Agreement and any Supplement has been duly
executed and delivered by the Trustee and, assuming due execution and
delivery by the other parties hereto, consti tutes a legal, valid and
binding obligation of the Trustee enforceable against the Trustee in
accordance with its terms, subject to applicable bankruptcy,
insolvency, receivership, conservatorship, reorganization, moratorium
or other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights in general and the rights of creditors
of national banking associations and except as such enforceability may
be limited by general principles of equity (whether considered in a
proceeding at law or in equity).
Section 11.16 Maintenance of Office or Agency. The
Trustee will maintain at its expense in the Borough of Manhattan, The City of
New York, an office or offices or agency or agencies where notices and demands
to or upon the Trustee in respect of the Certificates and this Agreement may be
served. The address of such office or agency will be specified in the related
Supplement. The Trustee will give prompt written notice (or in the case of
Holders of Bearer Certificates, notice by publication in the manner described in
Section 13.5) to the Servicer and to Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
Section 11.17 Waiver of Bond Requirement. The Trustee shall be
relieved of, and each Certificateholder hereby waives, any requirement of any
jurisdiction in which the Trust, or any part thereof, may be located that the
Trustee post a bond or other surety with any court, agency or body whatsoever.
Section 11.18 Waiver of Inventory, Accounting and Appraisal
Requirements. The Trustee shall be relieved of, and each Certificateholder
hereby waives, any requirement of any jurisdiction in which the Trust, or any
part thereof, may be located that the Trustee file any inventory, accounting or
appraisal of the Trust or any Trust Property with any court, agency or body at
any time or in any manner whatsoever.
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[END OF ARTICLE XI]
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ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust.
(a) The respective obligations and responsibilities of the
Transferor, the Servicer, the Paying Agent and the Trustee and their agents
hereunder created hereby (other than the obligation of the Trustee to make
payments to Certificateholders as hereafter set forth) shall terminate, except
with respect to the duties described in Sections 2.4(c), 7.4, 8.4, 11.5 and
12.3(b), upon the earliest of (i) the day following the date on which funds
shall have been deposited in the Collection Account sufficient to pay the
Aggregate Invested Amount and any Enhancement Invested Amount plus applicable
Certificate Interest accrued through the last day of the interest accrual period
preceding such Distribution Date in full on all Series of Investor Certificates,
(ii) October 1, 2097 and (iii) 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 hereof (the "Final Termination Date").
(b) If on the last Distribution Date in the month immediately
preceding the month in which the Final Termination Date occurs (after giving
effect to all transfers, withdrawals, deposits and drawings to occur on such
date and the payment of principal on any Series of Certificates to be made on
such Distribution Date pursuant to Article IV), the Invested Amount or any
Enhancement Invested Amount of any Series would be greater than zero, the
Servicer shall sell within 30 days after such Distribution Date all of the
Receivables in a commercially reasonable manner and on commercially reasonable
terms which shall include the solicitation of competitive bids and shall
consummate the sale with the highest bidder for the Receivables. The Transferor
or any of its Affiliates shall be permitted to bid for the Receivables. In
addition, the Transferor or any Affiliate shall have the right to match any bid
by a third Person and be granted the right to purchase the Receivables at such
matched bid price. The proceeds of any such sale shall be treated as Collections
on the Receivables and shall be allocated in accordance with Article IV;
provided, however, that the Trustee shall determine conclusively the amount of
such proceeds which are allocable to Finance Charge Receivables and the amount
of such proceeds which are allocable to Principal Receivables. Prior to such
sale of Receivables, the Servicer shall continue to collect Collections on the
Receivables and allocate such payments in accordance with the provisions of
Article IV.
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Section 12.2 Optional Purchase; Final Termination Date
of Investor Certificates of any Series.
(a) If provided in any Supplement with respect to a Series of
Investor Certificates (which provision must refer specifically to this Section
12.2), on any Distribution Date, the Transferor may, but shall not be obligated
to, purchase such Series by depositing into the Collection Account, prior to
such Distribution Date, an amount equal to the Invested Amount thereof plus
interest accrued and unpaid thereon at the applicable Certificate Rate through
the interest accrual period preceding such Distribution Date plus any other
unpaid amounts required to be paid pursuant to this Section 12.2 under any
Supplement; provided, however, that, if the Transferor shall not have a rating
of "P-3" or "Baa3" or higher by Moody's and "BBB-" or higher by Standard &
Poor's, no such purchase of any Series of Investor Certificates shall occur
unless the Transferor shall deliver to the Trustee and the Rating Agencies an
Opinion of Counsel reasonably acceptable to the Trustee that such purchase of
any Series of Investor Certificates would not constitute a fraudulent
conveyance. Nothing herein limits the right of the Transferor or any Affiliate
to purchase Investor Certificates on the open market and submit them to the
Trustee for cancellation.
(b) The amount deposited pursuant to Section 12.2(a) shall be
paid to the Investor Certificateholders of the related Series pursuant to
Article IV on the Distribution Date following the date of such deposit. All
Certificates of a Series which are purchased by the Transferor pursuant to
Section 12.2(a) shall be delivered by the Transferor upon such purchase to, and
be canceled by, the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor.
(c) All principal or interest with respect to any Series of
Investor Certificates shall be due and payable no later than the Stated Series
Termination Date with respect to such Series. Unless otherwise provided in any
Supplement, in the event that the Invested Amount or any Enhancement Invested
Amount of any Series of Certificates is greater than zero on its Stated Series
Termination Date (after giving effect to all transfers, withdrawals, deposits
and drawings to occur on such date and the payment of principal to be made on
such Series on such date), the Trustee will sell or cause the Servicer to sell,
and pay the proceeds to all Certificateholders of such Series pro rata in final
payment of all principal of and accrued interest on such Series of Certificates,
an amount of Receivables or interests in Receivables up to 110% of the Invested
Amount and any Enhancement Invested Amount of such Series at the close of
business on such date (but not more than an amount of Receivables equal to the
sum of (1) the product of (A) the Transferor Percentage, (B) the Aggregate
Principal Receivables and (C) a fraction the numerator of which is the related
Invested Percentage with respect to
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Finance Charge Receivables and the denominator of which is the sum of all
Invested Percentages with respect to Finance Charge Receivables of all Series
outstanding and (2) the Invested Amount and any Enhancement Invested Amount of
such Series). The Trustee shall conduct the sale of Receivables in a
commercially reasonable manner and on commercially reasonable terms which shall
include the solicitation of competitive bids and shall consummate the sale with
the highest bidder for the Receivables. The Transferor or any of its Affiliates
shall be permitted to bid for the Receivables. In addition, the Transferor or
any Affiliate shall have the right to match any bid by a third Person and be
granted the right to purchase the Receivables at such matched bid price. Any
proceeds of such sale in excess of the outstanding principal and interest due to
Certificateholders of the applicable Series (which shall be paid to such
Holders) shall be paid to the Holder of the Exchangeable Transferor Certificate,
unless the applicable Supplement shall provide otherwise. Upon such Stated
Series Termination Date with respect to the applicable Series of Certificates,
final payment of all amounts allocable to any Investor Certificates of such
Series shall be made in the manner provided in Section 12.3.
Section 12.3 Final Payment with Respect to any Series.
(a) Written notice of any termination, specifying the
Distribution Date upon which the Investor Certificateholders of any Series may
surrender their Certificates for payment of the final distribution with respect
to such Series and cancellation, shall be given (subject to at least two
Business Days' prior notice from the Servicer to the Trustee) by the Trustee to
the Investor Certificateholders of such Series mailed not later than the fifth
day of the month of such final distribution (or, in the case of the Holders of
Bearer Certificates, by the publication by the Trustee of a notice at least once
in a newspaper of general circulation in Luxembourg (which newspaper shall be
printed in the English language and customarily published on each business day
in Luxembourg) and, so long as the Investor Certificates are listed on the
Luxembourg Stock Exchange or other stock exchange and such exchange so requires,
in Luxembourg or the location required by such other stock exchange) specifying
(a) the Distribution Date (which shall be the Distribution Date in the month in
which the deposit is made pursuant to Section 2.4, 9.2, 10.2 or 12.2(a) or such
other section as may be specified in the related Supplement) upon which final
payment of such Investor Certificates will be made upon presentation and
surrender of such Investor Certificates at the office or offices therein
designated (which, in the case of Bearer Certificates, shall be outside the
United States), (b) the amount of any such final payment and (c) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Investor Certificates at
the office or offices therein specified. The Servicer's notice to
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the Trustee in accordance with the preceding sentence shall be accompanied by an
Officer's Certificate setting forth the information specified in the applicable
Supplement covering the period during the then current calendar year through the
date of such notice and setting forth the date of such final distribution. The
Trustee shall give such notice to the Transfer Agent and Registrar and the
Paying Agent at the time such notice is given to such Investor
Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
Section 12.1(a) or the occurrence of the Stated Series Termination Date with
respect to any Series, all funds then on deposit in the Collection Account shall
continue to be held in trust for the benefit of the Certificateholders and the
Paying Agent or the Trustee shall pay such funds to the Certificateholders upon
surrender of their Certificates (which surrenders and payments, in the case of
Bearer Certificates, shall be made only outside the United States). In the event
that all of the Investor Certificateholders of such Series shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned notice, the Trustee shall give a second written notice
(or, in the case of Bearer Certificates, publication notice) to the remaining
Investor Certificateholders of such Series upon receipt of the appropriate
records from the Transfer Agent and Registrar to surrender their Certificates
for cancellation and receive the final distribution with respect thereto. If
within one and one-half years after the second notice all the Investor
Certificates of such Series shall not have been surrendered for cancellation,
the Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Investor Certificateholders of such
Series concerning surrender of their Certificates, and the cost thereof shall be
paid out of the funds in the Collection Account held for the benefit of such
Investor Certificateholders. The Trustee shall pay or cause to be paid to the
Transferor upon request all monies held for the payment of principal or interest
which remain unclaimed after two years. If the applicable escheat or unclaimed
property laws of any relevant jurisdiction require the Trustee to follow any
procedures with respect to any Trust Property inconsistent with the foregoing,
then to the extent of any such inconsistency the Trustee shall not be liable for
any failure to abide by the terms of this Agreement.
(c) All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancellation shall be
canceled by the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor.
Section 12.4 Transferor's Termination Rights. Upon
the termination of the Trust pursuant to Section 12.1 and the
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surrender of the Exchangeable Transferor Certificate, the Trustee shall return
to the Transferor (without recourse, representation or warranty) all right,
title and interest of the Trust in and to the Receivables, whether then existing
or thereafter created, and all monies due or to become due and all amounts
received thereafter with respect thereto and all proceeds thereof except for
amounts held by the Paying Agent pursuant to Section 12.3(b). The Trustee shall
execute and deliver such instruments of transfer and assignment, in each case
without recourse, representation or warranty as shall be reasonably requested by
the Transferor to vest in itself all right, title and interest which the Trust
had in the applicable Receivables.
Section 12.5 Defeasance. Notwithstanding anything to the
contrary in this Agreement, except as otherwise specifically provided with
respect to any Series in the related Supplement:
(a) The Transferor may at the Transferor's option be
discharged from its obligations hereunder with respect to any Series or all
outstanding Series (the "Defeased Series") on the date the applicable conditions
set forth in subsection 12.5(c) are satisfied (a "Defeasance"); provided,
however, that the following rights, obligations, powers, duties and immunities
shall survive with respect to the Defeased Series until otherwise terminated or
discharged hereunder: (i) the rights of the Holders of Investor Certificates of
the Defeased Series to receive, solely from the trust fund provided for in
Section 12.5(c), payments in respect of principal of and interest on such
Investor Certificates when such payments are due; (ii) the right of any
Enhancement Provider to the repayment of any amount due to it under the
applicable Enhancement Agreement and Supplement, including interest thereon;
(iii) the Transferor's obligations with respect to such Certificates under
Sections 6.3 and 6.4; (iv) the rights (including the right to payment of its
fees and expenses), powers, trusts, duties, and immunities of the Trustee, the
Paying Agent and the Transfer Agent and Registrar hereunder; and (v) this
Section 12.5.
(b) Subject to Section 12.5(c), the Transferor at its option
may cause Collections allocated to the Defeased Series and available to purchase
Principal Receivables to be applied to purchase Eligible Investments rather than
Principal Receivables.
(c) The following shall be the conditions to Defeasance under
Section 12.5(a):
(i) The Transferor irrevocably shall have deposited
or caused to be deposited with the Trustee (such deposit to be made
from other than the Transferor's funds), under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust for making the payments described
below, (A) U.S.
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Dollars in an amount, or (B) Eligible Investments which through the
scheduled payment of principal and interest in respect thereof will
provide, not later than the due date of payment thereon, money in an
amount, or (C) a combination thereof, in each case sufficient to pay
and discharge, and which shall be applied by the Trustee to pay and
discharge, all remaining scheduled interest and principal payments on
all outstanding Investor Certificates of the Defeased Series on the
dates scheduled for such payments in this Agreement and the applicable
Supplements and all amounts owing to the Enhancement Providers with
respect to the Defeased Series;
(ii) prior to its exercise of its right pursuant to
this Section 12.5 with respect to a Defeased Series to substitute money
or Eligible Investments for Receivables, the Transferor shall have
delivered to the Trustee an Opinion of Counsel to the effect that such
deposit and termination of obligations will not have any material
adverse impact on the Federal income tax characterization of any
outstanding Series of Investor Certificates that have been the subject
of a previous opinion of tax counsel or result in the Trust being
taxable as an association for Federal or applicable state tax purposes
and an opinion of Counsel to the effect that such deposit and
termination of obligations will not result in the Trust being required
to register as an "investment company" within the meaning of the 1940
Act;
(iii) the Transferor shall have delivered to the
Trustee and any Enhancement Provider an Officer's Certificate of the
Transferor stating the Transferor reasonably believes that such deposit
and termination of obligations will not, based on the facts known to
such officer at the time of such certification, then cause an Early
Amortization Event with respect to any Series or any event that, with
the giving of notice or the lapse of time, would result in the
occurrence of an Early Amortization Event with respect to any Series;
and
(iv) the Rating Agency Condition shall have been
satisfied.
[END OF ARTICLE XII]
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment.
(a) This Agreement and any Supplement may be amended from time
to time by the Servicer, the Transferor and the Trustee, without the consent of
any of the Investor Certificateholders, to cure any ambiguity, to correct or
supplement any provisions herein or therein which may be inconsistent with any
other provisions herein or therein, to add other identifying code numbers to the
definition of Account or to add any other provisions with respect to matters or
questions raised under this Agreement which shall not be inconsistent with the
provisions of this Agreement, including any matters arising under Section 2.5(d)
necessary to effect the conveyance contemplated thereunder; provided, however,
that such action shall not adversely affect in any material respect the
interests of any of the Investor Certificateholders. Additionally, this
Agreement and any Supplement may be amended from time to time by the Servicer,
the Transferor and the Trustee, without the consent of any of the
Certificateholders, to add to or change any of the provisions of this Agreement
to enable Bearer Certificates to be issued in conformity with the Bearer Rules,
to provide that Bearer Certificates may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of (or premium,
if any) or any interest on Bearer Certificates to comply with the Bearer Rules,
to permit Bearer Certificates to be issued in exchange for Registered
Certificates (if then permitted by the Bearer Rules), to permit Bearer
Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Certificates in
uncertificated form, provided any such action shall not adversely affect the
interests of the Holders of Bearer Certificates of any Series or any related
Coupons in any material respect unless such amendment is necessary to comply
with the Bearer Rules. Prior to executing any amendment in accordance with this
Section 13.1(a), the Trustee shall receive and shall be permitted to rely upon
an Opinion of Counsel to the effect that the conditions and requirements of this
Section 13.1(a) have been satisfied (without implying that such a rating
confirmation is required to be obtained, such Opinion of Counsel may rely as to
any rated Series solely on a rating confirmation from the Rating Agencies that
such amendment shall not cause a reduction or withdrawal of the rating of any
outstanding Series of Certificates). The Transferor shall deliver prior written
notice of any amendment pursuant to this Section 13.1(a) to each Rating Agency.
(b) This Agreement and any Supplement may also be amended from
time to time by the Servicer, the Transferor and the
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Trustee, without the consent of any of the Certificateholders, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or any Supplement or modifying in any manner the
rights of the Investor Certificateholders of any Series then issued and
outstanding; provided, however, that (i) the Servicer shall have provided an
Opinion of Counsel to the Trustee to the effect that such amendment will not
materially and adversely affect the interests of the Investor Certificateholders
of any outstanding Series, which Opinion of Counsel may rely as to any rated
Series solely on the rating confirmation referred to in clause (iii) below (or
100% of the Class of Certificateholders so affected shall have consented), (ii)
such amendment shall not, as evidenced by an Opinion of Counsel, cause any
outstanding Series as to which an opinion that it was debt was given on its
Closing Date to fail to qualify as debt for Federal income tax purposes, 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 Investor Certificateholder or
any Certificate Owner and (iii) the Rating Agency Condition shall have been
satisfied; and, provided further, that such amendment shall not reduce in any
manner the amount of, or delay the timing of, or change the priority of,
distributions which are required to be made on any Investor Certificate of such
Series without the consent of the related Investor Certificateholder or change
the definition of or the manner of calculating the interest of any Investor
Certificate of such Series without the consent of the related Investor
Certificateholder or reduce the required percentage for consents to amendments
pursuant to Section 13.1(c) without the consent of each affected Investor
Certificateholder.
(c) This Agreement and any Supplement may also be amended from
time to time by the Servicer, the Transferor 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 Amount of all Series adversely
affected, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or any Supplement or
modifying in any manner the rights of the Investor Certificateholders of any
Series then issued and outstanding; provided, however, that no such amendment
shall (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor Certificate of such
Series without the consent of the related Investor Certificateholders, (ii)
change the definition of or the manner of calculating the Invested Amount, the
Invested Percentage, the applicable available amount under any Enhancement or
the Investor Default Amount of such Series without the consent of the related
Investor Certificateholders or (iii) reduce the aforesaid
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percentage required to consent to any such amendment, without the consent of the
related Investor Certificateholders. Any amendment pursuant to this Section
13.1(c) shall require that each Rating Agency rating the affected Series confirm
that such amendment will not cause a reduction or withdrawal of the rating of
any outstanding Series of Certificates.
(d) Promptly after the execution of any such amendment other
than an amendment pursuant to Section 13.1(a), the Trustee shall furnish written
notification (or in the case of Bearer Certificates, publication notice in the
manner described in Section 13.5) of the substance of such amendment to each
Investor Certificateholder, and the Servicer shall furnish written notification
of the substance of such amendment to any related Enhancement Provider and each
Rating Agency.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 13.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such Certificateholders shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Investor
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(f) Any Assignment or Reassignment regarding the addition to
or removal of Receivables from the Trust respectively, as provided in Sections
2.6 and 2.7, respectively, executed in accordance with the provisions hereof
shall not be considered amendments to this Agreement, including, without
limitation, for the purpose of Sections 13.1(a), (b), (c) and (g).
(g) Prior to the execution of any amendment to this Agreement,
the Trustee shall be entitled to receive and rely upon an Opinion of Counsel
substantially in the form of Part Two of Exhibit G. The Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Trustee's
own rights, duties or immunities under this Agreement or otherwise.
(h) Notwithstanding anything in this Section 13.1 to
the contrary, any Supplement may be amended on the terms and in
accordance with the procedures specified therein.
Section 13.2 Protection of Right, Title and Interest
to Trust.
(a) The Servicer shall cause this Agreement, any Supplement,
all amendments hereto and/or all financing statements, amendments and
continuation statements and any other necessary documents covering the right,
title and interest of the Trust in the property conveyed hereunder to be
promptly recorded,
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registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law fully to
preserve and protect the right, title and interest of the Trustee hereunder to
all property comprising the Trust. The Servicer shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. The Transferor shall cooperate fully with the
Servicer in connection with the obligations set forth above and will execute any
and all documents reasonably required to fulfill the intent of this Section
13.2.
(b) Within 30 days after the Transferor makes any change in
its name, identity or corporate structure which would make any financing
statement, amendment or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of Section 9-402(7)
of the UCC as in effect in the Relevant UCC State, the Transferor shall give the
Trustee notice of any such change and shall file such financing statements or
amendments as may be necessary to continue the perfection of the Trust's
security interest in the Receivables and the proceeds thereof.
(c) The Transferor and the Servicer will give the Trustee
prompt written notice of any relocation of any office from which the Servicer
services Receivables or keeps records concerning the Receivables or of its
principal executive office and whether, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements, continuation statements or
amendments as may be necessary to continue the perfection of the Trust's
security interest in the Receivables and the proceeds thereof notwithstanding
any relocation of any office from which the Servicer services Receivables or
keeps records concerning the Receivables or of its principal executive office.
The Servicer will at all times maintain each office from which it services
Receivables, and the Transferor and the Servicer will at all times maintain
their respective principal executive offices, within the United States of
America.
(d) The Servicer will deliver to the Trustee and each Rating
Agency: (i) upon each date that any Supplemental Accounts are to be included in
the Accounts pursuant to Section 2.6 (other than Section 2.6(d)), an Opinion of
Counsel substantially in the form of Part One of Exhibit G; and (ii) on or
before June 30 of each year, beginning with 1998, an Opinion of Counsel, dated
as of a date within 90 days of such day, substantially in the form of Exhibit H.
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Section 13.3 Limitation on Rights of Certifi cateholders.
(a) The death or incapacity of any Investor Certificateholder
shall not operate to terminate this Agreement or the Trust, nor shall such death
or incapacity entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
(b) No Investor Certificateholder shall have any right to vote
(except as provided herein) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall any
Investor Certificateholder be under any liability to any third person by reason
of any action taken by the parties to this Agreement pursuant to any provision
hereof.
(c) No Investor Certificateholder shall have any right by
virtue of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Certificateholder previously shall have given notice to the Trustee,
and unless the Holders of Certificates evidencing Undivided Interests
aggregating more than 66-2/3% of the Invested Amount of any Series which may be
adversely affected but for the institution of such suit, action or proceeding
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Certificateholders shall have the right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb or prejudice the rights of the Certificateholders of any
other of the Certificates, or to obtain or seek to obtain priority over or
reference to any other such Certificateholder, or to enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 13.3, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity. Each Certificate Owner by its acquisition of a Book Entry Certificate
shall be deemed to have consented to the provisions of this Section 13.3.
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<PAGE> 132
Section 13.4 Governing Law. This Agreement shall be construed
in accordance with the laws of the State of New York, and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.
Section 13.5 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
sent by facsimile transmission to, sent by courier to or mailed by registered
mail, return receipt requested, to (a) in the case of the Transferor and the
Servicer, 1800 Parkway Place, Marietta, Georgia 30067, Attention: Chief
Financial Officer, telecopy number (770) 423-7901, telephone number (770)
423-7900, (b) in the case of the Trustee, to First Union National Bank, 901 East
Cary Street, 2nd Floor, Richmond, Virginia 23219, Attention: Corporate Trust
Department, telecopy number (804) 788-9661, or such other address as the Trustee
may designate from time to time by notice to the Certificateholders, the
Transferor and the Servicer; and (c) as to such other parties to which notices
hereunder or under any Supplement are required to be given pursuant to the terms
of any Supplement, the addresses specified in any Supplement or, as to each
party, such other address as shall be designated by such party in a written
notice to each other party. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
Any notice required or permitted to be made to Holders of
Bearer Certificates by publication shall be published in an Authorized Newspaper
and, if the Certificates of such Series are then listed on the Luxembourg Stock
Exchange and such stock exchange shall so require, in a newspaper of general
circulation in Luxembourg (which newspaper shall be printed in the English
language and customarily published on each business day in Luxembourg) and, if
the Certificates of such Series are listed on any other stock exchange and such
stock exchange shall so require, in any other city required by such stock
exchange outside the United States, or, if not practicable, elsewhere in Europe.
In case by reason of the suspension of publication of any
Authorized Newspaper or permitted newspaper with respect to Luxembourg or by
reason of any other cause it shall be impracticable to publish any notice to
Holders of Bearer Certificates as provided above, then such notification to
Holders of Bearer Certificates as shall be given with approval of the Trustee
shall constitute sufficient notice to such Holders for every purpose hereunder.
Neither the failure to give notice by publication to Holders of Bearer
Certificates as provided above,
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<PAGE> 133
nor any defect in any notice so published, shall affect the sufficiency of any
notice mailed to Holders of Registered Certificates as provided above.
Section 13.6 Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders thereof.
Section 13.7 Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Section 7.2, 8.2 and 8.5, this
Agreement, including any Supplement, may not be assigned by the Transferor or
the Servicer, as the case may be, without the prior consent of Holders of
Investor Certificates evidencing Undivided Interests aggregating more than 66%
of the Aggregate Invested Amount.
Section 13.8 Certificates Nonassessable and Fully Paid. It is
the intention of the parties to this Agreement that the Investor
Certificateholders (and the Certificate Owners) shall not be personally liable
for obligations of the Trust, that the Undivided Interests represented by the
Investor Certificates shall be nonassessable for any losses or expenses of the
Trust or for any reason whatsoever, and that Investor Certificates upon
authentication thereof by the Trustee pursuant to Section 6.2 are and shall be
deemed fully paid.
Section 13.9 Further Assurances. The Transferor and the
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
Trustee more fully to effect the purposes of this Agreement including, without
limitation, the execution of any financing statements or continuation statements
relating to the property of the Trust for filing under the provisions of the UCC
of the Relevant UCC State.
Section 13.10 No Waiver: Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of the Trustee or
the Investor Certificateholders, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
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<PAGE> 134
Section 13.11 Counterparts. This Agreement and any Supplement
may be executed in two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.
Section 13.12 Third-Party Beneficiaries. This Agreement and
any Supplement will inure to the benefit of and be binding upon the parties
hereto, the Certificateholders and the Certificate Owners and their respective
successors and permitted assigns. Except as otherwise provided in this Agreement
or any Supplement, no other person will have any right or obligation hereunder.
Section 13.13 Actions by Certificateholders.
(a) Wherever in this Agreement or any Supplement a provision
is made that an action may be taken or a notice, demand or instruction given by
Investor Certificateholders, such action, notice or instruction may be taken or
given by any Investor Certificateholder of any Series, unless such provision
requires a specific percentage of Investor Certificateholders of a certain
Series or all Series.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind such
Certificateholder and every subsequent holder of such Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or omitted to be done by the Trustee or the Servicer
in reliance thereon, whether or not notation of such action is made upon such
Certificate.
Section 13.14 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 13.15 Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section 13.16 Certificates and Opinions of Counsel.
(a) Any certificate delivered hereunder may be based, insofar
as it relates to legal matters, upon an Opinion of Counsel, unless the Person
delivering such certificate knows, or in the exercise of reasonable care should
know, that such opinion with respect to the matters upon which such certificate
may be
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<PAGE> 135
based as aforesaid is erroneous. Any Opinion of Counsel or certificate delivered
hereunder may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer or the Transferor, stating that the information with respect to such
factual matters is in the possession of such Person, unless the Person
delivering such certificate or such counsel knows, or in the exercise of
reasonable care should know, that such certificate, opinion or representations
with respect to such matters are erroneous. Any Opinion of Counsel delivered
hereunder may contain necessary exceptions and qualifications.
(b) Any Opinion of Counsel or certificate delivered hereunder
may be based, insofar as it relates to accounting matters, upon a certificate or
opinion of or representations by an independent public accountant or firm of
accountants, unless such counsel or the Person delivering such certificate, as
the case may be, knows that the certificate or opinions or representations with
respect to the accounting matters upon which the certificate or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous. Any certificate, opinion or representations of
any firm of independent public accountants filed with the Trustee shall contain
a statement that such firm is independent.
(c) Where any Person is required to make, give or execute two
or more applications, requests, consents, certificates, statements, opinions or
other instruments hereunder, they may, but need not, be consolidated and form
one instrument.
Section 13.17 Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, the Transferor, the Servicer, the Trustee, the
Transfer Agent and Registrar and each Paying Agent shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Trust, acquiesce, petition or otherwise invoke or cause the Trust
to invoke the process of any Governmental Authority for the purpose of
commencing or sustaining a case against the Trust under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Trust or any substantial part of its property or ordering the winding-up or
liquidation of the affairs of the Trust.
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IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Master Pooling and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
FIRST NORTH AMERICAN NATIONAL BANK,
as Transferor and Servicer
By:
---------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee and Paying Agent
By:
---------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.2
- -------------------------------------------------------------------------------
FIRST NORTH AMERICAN NATIONAL BANK,
as Transferor and Servicer
and
FIRST UNION NATIONAL BANK,
as Trustee
on behalf of the Certificateholders
-------------------------------
SERIES 1997-2 SUPPLEMENT
Dated as of November __, 1997
to
MASTER POOLING AND SERVICING AGREEMENT
Dated as of October 30, 1997
------------------------------
$900,000,000
------------
FNANB CREDIT CARD MASTER TRUST
SERIES 1997-2
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. Designation . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Definitions . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. Minimum Transferor Interest Percentage
and Minimum Aggregate Principal
Receivables . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4. Reassignment and Transfer Terms . . . . . . . . . . . 26
SECTION 5. Delivery and Payment for the
Certificates . . . . . . . . . . . . . . . . . . . . 26
SECTION 6. Form of Delivery of the Series
1997-2 Certificates . . . . . . . . . . . . . . . . . 26
SECTION 7. Servicing Compensation . . . . . . . . . . . . . . . 26
SECTION 8. Article IV of the Agreement . . . . . . . . . . . . . 27
ARTICLE IV
RIGHTS OF SERIES 1997-2 CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.2 Collections and Allocations . . . . . . . . . . . . . 28
Section 4.3 Determination of Monthly
Interest. . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.3A Determination of Certificate LIBOR . . . . . . . . . 32
Section 4.4 Determination of Monthly
Principal . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.5 Required Amount . . . . . . . . . . . . . . . . . . . 34
Section 4.6 Application of Class A Available
Funds, Class B Available Funds,
Collateral Available Funds, Class D
Available Funds and Collections of
Principal Receivables . . . . . . . . . . . . . . . . 37
Section 4.7 Defaulted Amounts; Adjustment Amounts;
Investor Charge Offs; Reductions
of Adjustment Amounts . . . . . . . . . . . . . . . . 40
Section 4.8 Excess Spread; Shared Excess Finance
Charge Collections . . . . . . . . . . . . . . . . . 44
Section 4.9 Reallocated Principal Collections . . . . . . . . . . 47
Section 4.10 Principal Shortfall . . . . . . . . . . . . . . . . . 48
Section 4.11 Finance Charge Shortfall . . . . . . . . . . . . . . 48
Section 4.12 Cash Collateral Account . . . . . . . . . . . . . . . 49
Section 4.13 Principal Funding Account . . . . . . . . . . . . . . 50
Section 4.14 Reserve Account . . . . . . . . . . . . . . . . . . . 52
Section 4.15 Postponement of Accumulation Period . . . . . . . . . 54
Section 4.16 Additional Issuances of Class D
Certificates . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 9. Article V of the Agreement . . . . . . . . . . . . . . 55
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
Section 5.1 Distributions . . . . . . . . . . . . . . . . . . . . . 55
Section 5.2 Statements to Series 1997-2
Certificateholders . . . . . . . . . . . . . . . . . . 57
Section 5.3 Distributions to Collateral Indebtedness
Holder . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10. Early Amortization Events . . . . . . . . . . . . . . . 57
SECTION 11. Restrictions on Transfer . . . . . . . . . . . . . . . 60
SECTION 12. Tax Characterization of the Collateral
Indebtedness Interest and the Class D
Certificates . . . . . . . . . . . . . . . . . . . . . 63
SECTION 13. Ratification of Master Pooling
and Servicing Agreement . . . . . . . . . . . . . . . . 64
SECTION 14. Counterparts . . . . . . . . . . . . . . . . . . . . . 64
SECTION 15. Governing Law . . . . . . . . . . . . . . . . . . . . . 64
SECTION 16. Subordination of Certain
Termination Payments . . . . . . . . . . . . . . . . . 64
SECTION 17. Third-Party Beneficiaries . . . . . . . . . . . . . . . 65
SECTION 18. FASIT Election . . . . . . . . . . . . . . . . . . . . 65
SECTION 19. Paired Series . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
Exhibit A Form of Class A Certificate
Exhibit B Form of Class B Certificate
Exhibit C Form of Class D Certificate
Exhibit D Form of Monthly Servicer's Certificate
Exhibit E Form of Monthly Certificateholder's Statement
Exhibit F Form of Transfer Certification
ii
<PAGE> 4
SERIES 1997-2 SUPPLEMENT, dated as of November __, 1997 (this
"Series Supplement"), by and among FIRST NORTH AMERICAN NATIONAL BANK, a
national banking association, as transferor and servicer (together with its
successors and permitted assigns in such capacities, the "Transferor" and the
"Servicer"), and FIRST UNION NATIONAL BANK, a national banking association, as
trustee (together with its successors in trust thereunder as provided in the
Agreement referred to below, the "Trustee") under the Master Pooling and
Servicing Agreement, dated as of October 30, 1997 (the "Agreement").
PRELIMINARY STATEMENTS
Section 6.9 of the Agreement provides, among other things,
that the Transferor and the Trustee may at any time and from time to time enter
into one or more Supplements to the Agreement for the purpose of authorizing the
issuance by the Trustee on behalf of the Trust to the Transferor, for execution
and redelivery to the Trustee for authentication, of one or more Series of
Certificates. The Transferor and the Servicer each hereby enter into this Series
Supplement with the Trustee as required by Section 6.9(c) of the Agreement to
provide for the issuance, authentication and delivery of the Investor
Certificates of Series 1997-2.
Pursuant to this Series Supplement, the Transferor and the
Trustee shall create a new Series of Investor Certificates and shall specify the
Principal Terms thereof. The Series 1997-2 Certificates shall not be
subordinated to any other Series. The Series 1997-2 Certificates shall be in
Group One and shall be a Principal Sharing Series.
In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Agreement, the terms and provisions of this Series Supplement shall govern.
SECTION 1. Designation. The Certificates issued hereunder
shall be designated generally as the Series 1997-2 Certificates. The Investor
Certificates of Series 1997-2 (collectively, the "Series 1997-2 Certificates")
shall be issued initially in three certificated Classes, which shall be
designated generally as the Class A Floating Rate Asset Backed Certificates,
Series 1997-2, the Class B Floating Rate Asset Backed Certificates, Series
1997-2 and the Class D Floating Rate Asset Backed Certificates, Series 1997-2.
In addition, there is hereby created a fourth Class of uncertificated interests
in the Trust which, except as expressly provided herein, shall be deemed to be
Investor Certificates for all purposes under the Agreement and this Series
Supplement and which shall be designated generally as the Collateral
Indebtedness Interest, Series 1997-2.
<PAGE> 5
Notwithstanding the foregoing, except as expressly provided herein, the
provisions of Article VI and Article XII of the Agreement relating to the
registration, authentication, delivery, presentation, cancellation and surrender
of registered Certificates shall not be applicable to the Collateral
Indebtedness Interest.
SECTION 2. Definitions. All capitalized terms not otherwise
defined herein are defined in the Agreement. All Article, Section or subsection
references herein shall mean Articles, Sections or subsections of the Agreement,
except as otherwise provided herein. Unless otherwise stated herein, as the
context otherwise requires or if such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall relate only to the
Series 1997-2 Certificates and to no other Series of Certificates issued by the
Trust.
The following words and phrases shall have the following
meanings with respect to the Series 1997-2 Certificates and the definitions of
such terms are applicable to the singular as well as the plural form of such
terms and to the masculine as well as the feminine and neuter genders of such
terms:
"Accumulation Period" shall mean the Class A Accumulation
Period and the Class B Accumulation Period.
"Accumulation Period Factor" shall mean, for any Collection
Period, a fraction, the numerator of which is equal to the sum of the initial
invested amounts of all outstanding Series, and the denominator of which is
equal to the sum of (a) the Initial Invested Amount (plus the aggregate initial
principal amount of any Additional Class D Certificates), (b) the initial
invested amounts of all outstanding Series (other than Series 1997-2) which are
not expected to be in their revolving periods during such Collection Period and
(c) the initial invested amounts of all other outstanding Series which are not
allocating Shared Principal Collections to other Series and are expected to be
in their revolving periods during such Collection Period.
"Accumulation Period Length" shall have the meaning specified
in Section 4.15.
"Additional Class D Certificates" shall have the meaning
specified in Section 4.16.
"Adjusted Invested Amount" shall mean, as of any date, the
Invested Amount as of such date plus the Principal Funding Account Balance as of
such date.
2
<PAGE> 6
"Amortization Period" shall mean, with respect to the Series
1997-2 Certificates, the period commencing on the earlier of (a) the first day
of the Accumulation Period and (b) the first day of the Early Amortization
Period and ending on the earlier of (i) the payment in full to the Class A
Certificateholders of the Class A Adjusted Invested Amount, to the Class B
Certificateholders of the Class B Adjusted Invested Amount, to the Collateral
Indebtedness Holder of the Collateral Indebtedness Amount and to the Class D
Certificateholders of the Class D Invested Amount and (ii) the Stated Series
Termination Date.
"Available Cash Collateral Amount" shall mean, with respect to
any Distribution Date, the amount on deposit in and available to be withdrawn
from the Cash Collateral Account on such date (before giving effect to any
deposit to, or withdrawal from, the Cash Collateral Account to be made with
respect to such date).
"Available Enhancement Amount" shall mean an amount equal to
the sum of the Available Cash Collateral Amount, the Collateral Indebtedness
Amount and the Class D Invested Amount.
"Available Principal Collections" shall mean, with respect to
any Distribution Date, an amount equal to (a) the applicable Invested Percentage
of Collections of Principal Receivables for the preceding Collection Period,
plus (b) amounts designated as Available Principal Collections pursuant to
Section 4.6 and Section 4.8, plus (c) Shared Principal Collections allocated to
Series 1997-2, plus (d) during the Early Amortization Period, any amounts
allocated to Series 1997-2 as described in Section 4.10, minus (e) Reallocated
Principal Collections applied pursuant to Section 4.9 for the preceding
Collection Period.
"Available Reserve Account Amount" shall mean, with respect to
any Distribution Date, the lesser of (a) the amount on deposit in and available
to be withdrawn from the Reserve Account on such date (before giving effect to
any deposit to, or withdrawal from, the Reserve Account on such date) and (b)
the Required Reserve Account Amount for such Distribution Date.
"Base Rate" shall mean, with respect to any Collection Period,
the sum of (a) the annualized percentage equivalent of a fraction, the numerator
of which is equal to the Monthly Interest distributable on the Distribution Date
immediately following the last day of such Collection Period and the denominator
of which is the Adjusted Invested Amount as of the last day of the preceding
Collection Period and (b) the product of (i) 2.00% per annum and (ii) a
fraction, the numerator of which is equal to the Invested Amount and the
denominator of which is equal to the
3
<PAGE> 7
Adjusted Invested Amount, in each case determined as of the last day of such
preceding Collection Period.
"Business Day" shall have the meaning specified in the
Agreement.
"Cash Collateral Account" shall have the meaning specified in
Section 4.12(a).
"Cash Enhancement Surplus" shall mean, as of any date of
determination, the lesser of (a) the Enhancement Surplus and (b) the excess of
the amount on deposit in the Cash Collateral Account (after giving effect to all
deposits to and withdrawals from the Cash Collateral Account with respect to
such date) over the Required Cash Collateral Amount.
"Certificate LIBOR" shall mean, for any Interest Period, the
London interbank offered rate for one-month dollar deposits determined by the
Trustee for each Interest Period in accordance with the provisions of Section
4.3A.
"Certificate LIBOR Determination Date" shall mean, with
respect to any Interest Period, the second Business Day prior to the
Distribution Date on which such Interest Period commences; provided, however,
that Certificate LIBOR Determination Date shall mean November __, 1997 with
respect to the initial Interest Period. For purposes of this definition, a
Business Day is any Business Day on which dealings in deposits in United States
dollars are transacted in the London interbank market.
"Circuit City" shall mean Circuit City Stores, Inc., a
Virginia corporation.
"Class A Accumulation Period" shall mean, unless an Early
Amortization Event with respect to Series 1997-2 shall have occurred prior
thereto, the period commencing at the close of business on the last day of the
October 2001 Collection Period, or such later date as shall be determined in
accordance with Section 4.15, and ending on the first to occur of (a) the
commencement of the Early Amortization Period, (b) the payment in full to Class
A Certificateholders of the Class A Adjusted Invested Amount or (c) the Stated
Series Termination Date.
"Class A Additional Interest" shall have the meaning specified
in Section 4.3(a).
"Class A Adjusted Invested Amount" shall mean, on any date of
determination, the Class A Invested Amount on such date plus the amount then on
deposit in the Principal Funding Account with respect to the Class A
Certificates on such date.
4
<PAGE> 8
"Class A Adjustment Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 as of the end of the preceding Collection Period and
(ii) the percentage equivalent of a fraction, the numerator of which is the
Class A Invested Amount and the denominator of which is the Invested Amount,
each as of the last day of the Collection Period preceding such preceding
Collection Period.
"Class A Allocable Amount" shall mean, with respect to any
Distribution Date, the sum of the Class A Investor Default Amount and the Class
A Adjustment Amount, in each case with respect to such Distribution Date.
"Class A Available Funds" shall mean, with respect to any
Collection Period, the sum of (i) the Class A Floating Allocation Percentage
(with respect to any Collection Period during the Revolving Period or the
Accumulation Period) or the Class A Fixed Allocation Percentage (with respect to
any Collection Period during the Early Amortization Period) of Collections of
Finance Charge Receivables and any other amounts, including interest and other
investment earnings, if any (net of losses and investment expenses), on funds on
deposit in the Excess Funding Account, that are to be treated as Collections of
Finance Charge Receivables in accordance with the Agreement, plus (ii) if the
Distribution Date immediately following the last day of such Collection Period
occurs before the Class B Principal Commencement Date, the Principal Funding
Investment Proceeds, if any, to be withdrawn from the Principal Funding Account
on such Distribution Date, plus (iii) the amount, if any, to be withdrawn from
the Reserve Account on such Distribution Date and included in Class A Available
Funds pursuant to Section 4.14(d) plus (iv) the investment earnings, if any (net
of losses and investment expenses), on funds on deposit in the Reserve Account
to be withdrawn from the Reserve Account on such Distribution Date and included
in Class A Available Funds pursuant to Section 4.14(b).
"Class A Certificate Rate" shall mean, with respect to the
Class A Certificates and each Interest Period, a per annum rate of [___]% in
excess of Certificate LIBOR, as determined on the related Certificate LIBOR
Determination Date.
"Class A Certificateholder" shall mean the Person in whose
name a Class A Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any one of the Certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
5
<PAGE> 9
"Class A Expected Final Distribution Date" shall mean the
November 2002 Distribution Date.
"Class A Fixed Allocation Percentage" shall mean, with respect
to any Collection Period, the percentage equivalent of a fraction, the numerator
of which is equal to the Class A Invested Amount as of the last day of the
Revolving Period and the denominator of which is equal to the greater of (i) the
sum of (a) the Aggregate Principal Receivables in the Trust as of the last day
of the immediately preceding Collection Period (or the Closing Date, in the case
of the first Collection Period applicable to Series 1997-2) plus (b) the Excess
Funding Amount at the end of such day and (ii) the sum of the numerators used to
calculate the corresponding Invested Percentages with respect to all Classes of
all Series outstanding as of the date on which such determination is being made;
provided, however, that, with respect to any Collection Period during which
Supplemental Accounts are included as Accounts pursuant to Section 2.6(a) or
Section 2.6(b), the denominator in clause (i) above shall be increased by the
amount of Principal Receivables in such Supplemental Accounts as of the
Supplemental Cut Off Date on and after the Supplemental Closing Date applicable
to such Supplemental Accounts.
"Class A Floating Allocation Percentage" shall mean, with
respect to any Collection Period, the percentage equivalent of a fraction, the
numerator of which is equal to the Class A Invested Amount as of the last day of
the 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 sum of (a) the
Aggregate Principal Receivables in the Trust as of the last day of the
immediately preceding Collection Period (or the Closing Date, in the case of the
first Collection Period applicable to Series 1997-2) plus (b) the Excess Funding
Amount at the end of such day and (ii) the sum of the numerators used to
calculate the corresponding Invested Percentages with respect to all Classes of
all Series outstanding as of the date on which such determination is being made;
provided, however, that, with respect to any Collection Period during which
Supplemental Accounts are included as Accounts pursuant to Section 2.6(a) or
Section 2.6(b), the denominator in clause (i) above shall be increased by the
amount of Principal Receivables in such Supplemental Accounts as of the
Supplemental Cut Off Date on and after the Supplemental Closing Date applicable
to such Supplemental Accounts.
"Class A Initial Invested Amount" shall mean the aggregate
initial principal amount of the Class A Certificates, which is $603,000,000.
6
<PAGE> 10
"Class A Interest Shortfall" shall have the meaning specified
in Section 4.3(a).
"Class A Invested Amount" shall mean, 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 Class A Investor Charge Offs reimbursed pursuant to Section
4.8(b) and, without duplication, the aggregate amount of the reductions of the
Series Adjustment Amounts allocable to the Class A Invested Amount pursuant to
Section 4.7(f) prior to such date; provided, however, that the Class A Invested
Amount may not be reduced below zero.
"Class A Investor Charge Offs" shall have the meaning
specified in Section 4.7(a).
"Class A Investor Default Amount" shall mean, with respect to
any Distribution Date, an amount equal to the product of (i) the Default Amount
for the preceding Collection Period and (ii) the Class A Floating Allocation
Percentage with respect to such Collection Period.
"Class A Monthly Interest" shall have the meaning specified in
Section 4.3(a).
"Class A Monthly Principal" shall have the meaning specified
in Section 4.4(a).
"Class A Penalty Rate" shall mean the sum of the Class A
Certificate Rate and 2.00% per annum.
"Class A Required Amount" shall have the meaning specified in
Section 4.5(a).
"Class A Servicing Fee" shall have the meaning specified in
Section 7 of this Supplement.
"Class B Accumulation Period" shall mean, unless an Early
Amortization Event with respect to Series 1997-2 shall have occurred prior
thereto, the period commencing on the Distribution Date on which the Class A
Adjusted Invested Amount is paid in full or, if the Class A Adjusted Invested
Amount is 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 ending on
the first to occur of (a) the commencement of the Early Amortization Period, (b)
the payment in full to the Class B
7
<PAGE> 11
Certificateholders of the Class B Adjusted Invested Amount or (c) the Stated
Series Termination Date.
"Class B Additional Interest" shall have the meaning specified
in Section 4.3(b).
"Class B Adjusted Invested Amount" shall mean, on any date of
determination, an amount equal to the Class B Invested Amount on such date plus,
after the Class A Invested Amount has been paid in full, the Principal Funding
Account Balance on such date.
"Class B Adjustment Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 as of the end of the preceding Collection Period and
(ii) the percentage equivalent of a fraction, the numerator of which is the
Class B Invested Amount and the denominator of which is the Invested Amount,
each as of the last day of the Collection Period preceding such preceding
Collection Period.
"Class B Allocable Amount" shall mean, with respect to any
Distribution Date, the sum of the Class B Investor Default Amount and the Class
B Adjustment Amount, in each case with respect to such Distribution Date.
"Class B Available Funds" shall mean, with respect to any
Collection Period, the sum of (i) the Class B Floating Allocation Percentage
(with respect to any Collection Period during the Revolving Period or the
Accumulation Period) or the Class B Fixed Allocation Percentage (with respect to
any Collection Period during the Early Amortization Period) of Collections of
Finance Charge Receivables and any other amounts, including interest and other
investment earnings, if any (net of losses and investment expenses), on funds on
deposit in the Excess Funding Account, that are to be treated as Collections of
Finance Charge Receivables in accordance with the Agreement, plus (ii) if the
Distribution Date immediately following the last day of such Collection Period
occurs on or after the Class B Principal Commencement Date, the Principal
Funding Investment Proceeds, if any, to be withdrawn from the Principal Funding
Account on such Distribution Date, plus (iii) the amount, if any, to be
withdrawn from the Reserve Account on such Distribution Date and included in
Class B Available Funds pursuant to Section 4.14(d) plus (iv) the investment
earnings, if any (net of losses and investment expenses), on funds on deposit in
the Reserve Account to be withdrawn from the Reserve Account on such
Distribution Date and included in Class A Available Funds pursuant to Section
4.14(b).
8
<PAGE> 12
"Class B Certificate Rate" shall mean, with respect to the
Class B Certificates and each Interest Period, a per annum rate of [___]% in
excess of Certificate LIBOR, as determined on the related Certificate LIBOR
Determination Date.
"Class B Certificateholder" shall mean the Person in whose
name a Class B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any one of the Certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit B.
"Class B Expected Final Distribution Date" shall mean the
January 2003 Distribution Date.
"Class B Fixed Allocation Percentage" shall mean, with respect
to any Collection Period, the percentage equivalent of a fraction, the numerator
of which is equal to the Class B Invested Amount as of the last day of the
Revolving Period and the denominator of which is equal to the greater of (i) the
sum of (a) the Aggregate Principal Receivables in the Trust as of the last day
of the immediately preceding Collection Period (or the Closing Date, in the case
of the first Collection Period applicable to Series 1997-2) plus (b) the Excess
Funding Amount at the end of such day and (ii) the sum of the numerators used to
calculate the corresponding Invested Percentages with respect to
9
<PAGE> 13
all Classes of all Series outstanding as of the date on which such determination
is being made; provided, however, that, with respect to any Collection Period
during which Supplemental Accounts are included as Accounts pursuant to Section
2.6(a) or Section 2.6(b), the denominator in clause (i) above shall be increased
by the amount of Principal Receivables in such Supplemental Accounts as of the
Supplemental Cut Off Date on and after the Supplemental Closing Date applicable
to such Supplemental Accounts.
"Class B Floating Allocation Percentage" shall mean, with
respect to any Collection Period, the percentage equivalent of a fraction, the
numerator of which is equal to the Class B Invested Amount as of the last day of
the immediately preceding Collection Period (or the Class B Initial Invested
Amount, in the case of the first Collection Period applicable to Series 1997-2)
and the denominator of which is equal to the greater of (i) the sum of (a) the
Aggregate Principal Receivables in the Trust as of the last day of the
immediately preceding Collection Period (or the Closing Date, in the case of the
first Collection Period applicable to Series 1997-2) plus (b) the Excess Funding
Amount at the end of such day and (ii) the sum of the numerators used to
calculate the corresponding Invested Percentages with respect to all Classes of
all Series outstanding as of the date on which such determination is being made;
provided, however, that, with respect to any Collection Period during which
Supplemental Accounts are included as Accounts pursuant to Section 2.6(a) or
Section 2.6(b), the denominator in clause (i) above shall be increased by the
amount of Principal Receivables in such Supplemental Accounts as of the
Supplemental Cut Off Date on and after the Supplemental Closing Date applicable
to such Supplemental Accounts.
"Class B Initial Invested Amount" shall mean the aggregate
initial principal amount of the Class B Certificates, which is $135,000,000.
"Class B Interest Shortfall" shall have the meaning specified
in Section 4.3(b).
"Class B Invested Amount" shall mean, on any date of
determination, an amount equal to (a) the Class B Initial Invested Amount, minus
(b) after the Class A Adjusted Invested Amount has 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 Class B Subordinated Principal
Collections allocated on all prior Distribution Dates pursuant to Section
4.9(a), minus (f) an amount equal to the amount by which the Class B Invested
Amount has been reduced on all prior Distribution Dates pursuant to Section
4.7(a), plus (g) the sum of the amount of Excess Spread and Shared Excess
Finance Charge Collections allocated and available on all prior Distribution
Dates pursuant to Section 4.8(e) for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (d), (e) and (f) and, without duplication, the
aggregate amount of the reductions of the Series Adjustment Amounts allocable to
the Class B Invested Amount pursuant to Section 4.7(f) prior to such date;
provided, however, that the Class B Invested Amount may not be reduced below
zero.
"Class B Investor Charge Offs" shall have the meaning
specified in Section 4.7(b).
"Class B Investor Default Amount" shall mean, with respect to
any Distribution Date, an amount equal to the product of (i) the Default Amount
for the preceding Collection Period and (ii) the Class B Floating Allocation
Percentage with respect to such Collection Period.
"Class B Monthly Interest" shall have the meaning specified in
Section 4.3(b).
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<PAGE> 14
"Class B Monthly Principal" shall have the meaning specified
Section 4.4(b).
"Class B Penalty Rate" shall mean the sum of the Class B
Certificate Rate and 2.00% per annum.
"Class B Principal Commencement Date" shall mean the
Distribution Date on which the Class A Adjusted Invested Amount is paid in full
or, if the Class A Adjusted Invested Amount is paid in full on the Class A
Expected Final Distribution Date and the Early Amortization Period has not
commenced, the Distribution Date following the Class A Expected Final
Distribution Date.
"Class B Required Amount" shall have the meaning specified in
Section 4.5(b).
"Class B Servicing Fee" shall have the meaning specified in
Section 7 of this Supplement.
"Class B Subordinated Principal Collections" shall mean, with
respect to any Collection Period, an amount equal to the product of (i) the
Class B Floating Allocation Percentage with respect to any Collection Period
during the Revolving Period or the Class B Fixed Allocation Percentage with
respect to any Collection Period during the Amortization Period and (ii) the
aggregate amount of Collections of Principal Receivables for such Collection
Period.
"Class D Additional Interest" shall have the meaning specified
in Section 4.3(d).
"Class D Adjustment Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 as of the end of the preceding Collection Period and
(ii) the percentage equivalent of a fraction, the numerator of which is the
Class D Invested Amount and the denominator of which is the Invested Amount,
each as of the last day of the Collection Period preceding such preceding
Collection Period.
"Class D Allocable Amount" shall mean, with respect to any
Distribution Date, the sum of the Class D Investor Default Amount and the Class
D Adjustment Amount, in each case with respect to such Distribution Date.
"Class D Available Funds" shall mean, with respect to any
Collection Period, the Class D Floating Allocation Percentage (with respect to
any Collection Period during the Revolving Period or the Accumulation Period)
or the Class D Fixed Allocation Percentage (with respect to any Collection
Period
11
<PAGE> 15
during the Early Amortization Period) of Collections of Finance Charge
Receivables and any other amounts, including interest and other investment
earnings, if any (net of losses and investment expenses), on funds on deposit in
the Excess Funding Account, that are to be treated as Collections of Finance
Charge Receivables in accordance with the Agreement.
"Class D Certificate Rate" shall mean, with respect to the
Class D Certificates and each Interest Period, a per annum rate of [___]% in
excess of Certificate LIBOR, as determined on the related Certificate LIBOR
Determination Date, or such lesser rate as may be designated by the Transferor.
"Class D Certificateholder" shall mean the Person in whose
name a Class D Certificate is registered in the Certificate Register.
"Class D Certificates" shall mean any one of the Certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit C.
"Class D Fixed Allocation Percentage" shall mean, 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 last day of the
Revolving Period and the denominator of which is equal to the greater of (i) the
sum of (a) the Aggregate Principal Receivables in the Trust as of the last day
of the immediately preceding Collection Period (or the Closing Date, in the case
of the first Collection Period applicable to Series 1997-2) plus (b) the Excess
Funding Amount at the end of such day and (ii) the sum of the numerators used to
calculate the corresponding Invested Percentages with respect to all Classes of
all Series outstanding as of the date on which such determination is being made;
provided, however, that, with respect to any Collection Period during which
Supplemental Accounts are included as Accounts pursuant to Section 2.6(a) or
Section 2.6(b), the denominator in clause (i) above shall be increased by the
amount of Principal Receivables in such Supplemental Accounts as of the
Supplemental Cut Off Date on and after the Supplemental Closing Date applicable
to such Supplemental Accounts.
"Class D Floating Allocation Percentage" shall mean, 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 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 sum of (a) the
Aggregate Principal Receivables in the Trust as of
12
<PAGE> 16
the last day of the immediately preceding Collection Period (or the Closing
Date, in the case of the first Collection Period applicable to Series 1997-2)
plus (b) the Excess Funding Amount at the end of such day and (ii) the sum of
the numerators used to calculate the corresponding Invested Percentages with
respect to all Classes of all Series outstanding as of the date on which such
determination is being made; provided, however, that, with respect to any
Collection Period during which Supplemental Accounts are included as Accounts
pursuant to Section 2.6(a) or Section 2.6(b), the denominator in clause (i)
above shall be increased by the amount of Principal Receivables in such
Supplemental Accounts as of the Supplemental Cut Off Date on and after the
Supplemental Closing Date applicable to such Supplemental Accounts.
"Class D Initial Invested Amount" shall mean the aggregate
initial principal amount of the Class D Certificates, which is $99,000,000.
"Class D Interest Shortfall" shall have the meaning specified
in Section 4.3(d).
"Class D Invested Amount" shall mean, on any date of
determination, an amount equal to (a) the Class D Initial Invested Amount (plus
the aggregate initial principal amount of any Additional Class D Certificates
issued on or prior to such date), minus (b) the aggregate amount of principal
payments made to the Class D Certificateholders prior to such date, minus (c)
the amount of Class D Subordinated Principal Collections allocated on all prior
Distribution Dates pursuant to Section 4.9(a), (b) and (c), minus (d) an amount
equal to the amount by which the Class D Invested Amount has been reduced on all
prior Distribution Dates pursuant to Section 4.7(a), (b), (c) and (d), plus (e)
the sum of the amount of Excess Spread and Shared Excess Finance Charge
Collections allocated and available on all prior Distribution Dates pursuant to
Section 4.8(n) for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c) and (d) and, without duplication, the aggregate amount of
the reductions of the Series Adjustment Amounts allocable to the Class D
Invested Amount pursuant to Section 4.7(f) prior to such date; provided,
however, that the Class D Invested Amount may not be reduced below zero.
"Class D Investor Charge Offs" shall have the meaning
specified in Section 4.7(d).
"Class D Investor Default Amount" shall mean, with respect to
any Distribution Date, an amount equal to the product of (i) the Default Amount
for the preceding Collection Period and
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<PAGE> 17
(ii) the Class D Floating Allocation Percentage with respect to such Collection
Period.
"Class D Monthly Interest" shall have the meaning specified in
Section 4.3(d).
"Class D Monthly Principal" shall have the meaning specified
in Section 4.4(d).
"Class D Penalty Rate" shall mean, for any Interest Period,
the sum of the Class D Certificate Rate for such Interest Period and 2.00% per
annum.
"Class D Servicing Fee" shall have the meaning specified in
Section of this Series Supplement.
"Class D Subordinated Principal Collections" shall mean, with
respect to any Collection Period, an amount equal to the product of (i) the
Class D Floating Allocation Percentage with respect to any Collection Period
during the Revolving Period or the Class D Fixed Allocation Percentage with
respect to any Collection Period during the Amortization Period and (ii) the
aggregate amount of Collections of Principal Receivables for such Collection
Period.
"Closing Date" shall mean November __, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral Additional Interest" shall have the meaning
specified in Section 4.3(c).
"Collateral Adjustment Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 as of the end of the preceding Collection Period and
(ii) the percentage equivalent of a fraction, the numerator of which is the
Collateral Indebtedness Amount and the denominator of which is the Invested
Amount, each as of the last day of the Collection Period preceding such
preceding Collection Period.
"Collateral Allocable Amount" shall mean, with respect to any
Distribution Date, the sum of the Collateral Investor Default Amount and the
Collateral Adjustment Amount.
"Collateral Available Funds" shall mean, with respect to any
Collection Period, the Collateral Floating Allocation Percentage (with respect
to any Collection Period during the Revolving Period or the Accumulation Period)
or the Collateral
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<PAGE> 18
Fixed Allocation Percentage (with respect to any Collection Period during the
Early Amortization Period) of Collections of Finance Charge Receivables and any
other amounts, including interest and other investment earnings, if any (net of
losses and investment expenses), on funds on deposit in the Excess Funding
Account, that are to be treated as Collections of Finance Charge Receivables in
accordance with the Agreement.
"Collateral Fixed Allocation Percentage" shall mean, 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 last
day of the Revolving Period and the denominator of which is equal to the greater
of (i) the sum of (a) the Aggregate Principal Receivables in the Trust as of the
last day of the immediately preceding Collection Period (or the Closing Date, in
the case of the first Collection Period applicable to Series 1997-2) plus (b)
the Excess Funding Amount at the end of such day and (ii) the sum of the
numerators used to calculate the corresponding Invested Percentages with respect
to all Classes of all Series outstanding as of the date on which such
determination is being made; provided, however, that, with respect to any
Collection Period during which Supplemental Accounts are included as Accounts
pursuant to Section 2.6(a) or Section 2.6(b), the denominator in clause (i)
above shall be increased by the amount of Principal Receivables in such
Supplemental Accounts as of the Supplemental Cut Off Date on and after the
Supplemental Closing Date applicable to such Supplemental Accounts.
"Collateral Floating Allocation Percentage" shall mean, 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 last
day of the immediately preceding Collection Period (or the Collateral Initial
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
sum of (a) the Aggregate Principal Receivables in the Trust as of the last day
of the immediately preceding Collection Period (or the Closing Date, in the case
of the first Collection Period applicable to Series 1997-2) plus (b) the Excess
Funding Amount at the end of such day and (ii) the sum of the numerators used to
calculate the corresponding Invested Percentages with respect to all Classes of
all Series outstanding as of the date on which such determination is being made;
provided, however, that, with respect to any Collection Period during which
Supplemental Accounts are included as Accounts pursuant to Section 2.6(a) or
Section 2.6(b), the denominator in clause (i) above shall be increased by the
amount of Principal Receivables in such Supplemental Accounts as of the
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<PAGE> 19
Supplemental Cut Off Date on and after the Supplemental Closing Date applicable
to such Supplemental Accounts.
"Collateral Indebtedness Amount" shall mean, on any date of
determination, an amount equal to (a) the Collateral Initial Indebtedness
Amount, 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
Collateral Subordinated Principal Collections allocated on all prior
Distribution Dates pursuant to Section 4.9(a) and (b), minus (d) an amount equal
to the amount by which the Collateral Indebtedness Amount has been reduced on
all prior Distribution Dates pursuant to Section 4.7(a), (b) and (c), plus (e)
the sum of the amount of Excess Spread and Shared Excess Finance Charge
Collections allocated and available on all prior Distribution Dates pursuant to
Section 4.8(i) for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c) and (d) and, without duplication, the aggregate amount of
the reductions of the Series Adjustment Amounts allocable to the Collateral
Indebtedness Amount pursuant to Section 4.7(f) prior to such date; provided,
however, that the Collateral Indebtedness Amount may not be reduced below zero.
"Collateral Indebtedness Holder" shall mean the entity
designated as such in the Loan Agreement.
"Collateral Indebtedness Interest" shall mean a fractional
undivided interest in the Trust which shall consist of the right to receive, to
the extent necessary to make the required payments to the Collateral
Indebtedness Holder under this Series Supplement, the portion of Collections
allocable thereto under the Agreement and this Series Supplement, funds on
deposit in the Collection Account allocable thereto pursuant to the Agreement
and this Series Supplement and, subject to the rights of the Series 1997-2
Certificateholders with respect thereto, funds on deposit in the Cash Collateral
Account and the Reserve Account.
"Collateral Initial Indebtedness Amount" shall mean the
aggregate initial principal amount of the Collateral Indebtedness Interest,
which is $63,000,000.
"Collateral Interest Shortfall" shall have the meaning
specified in Section 4.3(c).
"Collateral Investor Charge Offs" shall have the meaning
specified in Section 4.7(c).
"Collateral Investor Default Amount" shall mean, with respect
to any Distribution Date, an amount equal to the product
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<PAGE> 20
of (i) the Default Amount for the preceding Collection Period and (ii) the
Collateral Floating Allocation Percentage for such Collection Period.
"Collateral Monthly Interest" shall have the meaning
specified in Section 4.3(c).
"Collateral Monthly Principal" shall have the meaning
specified in Section 4.4(c).
"Collateral Penalty Rate" shall mean, for any Interest Period,
the rate designated as such in the Loan Agreement.
"Collateral Rate" shall mean, for any Interest Period, the
rate designated as such in the Loan Agreement.
"Collateral Required Amount" shall have the meaning specified
in Section 4.5(c).
"Collateral Servicing Fee" shall have the meaning specified
in Section 7 of this Series Supplement.
"Collateral Subordinated Principal Collections" shall mean,
with respect to any Collection Period, an amount equal to the product of (i) the
Collateral Floating Allocation Percentage with respect to any Collection Period
during the Revolving Period or the Collateral Fixed Allocation Percentage with
respect to any Collection Period during the Amortization Period and (ii) the
aggregate amount of Collections of Principal Receivables for such Collection
Period.
"Collection Period" shall have the meaning specified in the
Agreement; provided, however, that, with respect to the first Distribution Date,
the Collection Period shall be the period from and including the Closing Date
through and including December 14, 1997.
"Controlled Accumulation Amount" shall mean (a) for any
Distribution Date with respect to the Class A Accumulation Period, $50,250,000;
provided, however, if the Accumulation Period Length shall be determined to be
less than 12 months in accordance with Section 4.15, the Controlled Accumulation
Amount with respect to the Class A Certificates shall be equal to (i) the
product of (x) the Class A Initial Invested Amount and (y) the Accumulation
Period Factor for such Collection Period divided by (ii) the Required
Accumulation Factor Number and (b) for any Distribution Date with respect to the
Class B Accumulation Period, $67,500,000.
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<PAGE> 21
"Controlled Deposit Amount" shall mean, 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.
"Covered Amount" shall mean (a) for any Distribution Date with
respect to the Class A Accumulation Period or the first Special Distribution
Date, if such Special Distribution Date occurs before the Class B Principal
Commencement Date, an amount equal to the product of (i) a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360, (ii) the Class A Certificate Rate and (iii)
the Principal Funding Account Balance, if any, as of the preceding Distribution
Date and (b) for any Distribution Date with respect to the Class B Accumulation
Period or the first Special Distribution Date, if such Special Distribution Date
occurs after the Distribution Date on which the Class A Adjusted Invested Amount
has been paid in full, an amount equal to the product of (i) a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360, (ii) the Class B Certificate Rate and (iii)
the Principal Funding Account Balance, if any, as of the preceding Distribution
Date.
"Deficit Controlled Accumulation Amount" shall mean (a) 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 into the Principal Funding Account as Class A Monthly Principal
or Class B Monthly Principal, as the case may be, for such Distribution Date and
(b) on each subsequent Distribution Date with respect to the Class A
Accumulation Period or the Class B Accumulation Period, the excess, if any, of
the applicable Controlled Deposit Amount for such subsequent Distribution Date
over the amount deposited into the Principal Funding Account as Class A Monthly
Principal or Class B Monthly Principal, as applicable, for such subsequent
Distribution Date.
"Distribution Date" shall mean the fifteenth day of each
month, or, if such fifteenth day is not a Business Day, the next succeeding
Business Day, commencing with December 15, 1997.
"Early Amortization Event" shall mean an Early Amortization
Event as specified in Section 9.1 of the Agreement or Section 10 of this Series
Supplement.
"Early Amortization Period" shall mean the period commencing
at the close of business on the day on which an Early
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Amortization Event with respect to Series 1997-2 is deemed to have occurred, and
ending on the first to occur of (a) the payment in full of the Class A Adjusted
Invested Amount, the Class B Adjusted Invested Amount, the Collateral
Indebtedness Amount and the Class D Invested Amount, respectively, or (b) the
Stated Series Termination Date.
"Enhancement" shall mean (a) with respect to the Class A
Certificates, the subordination of the Class B Certificates, the Collateral
Indebtedness Interest and the Class D Certificates and amounts allocated to the
Class A Certificates from the Available Cash Collateral Amount, (b) with respect
to the Class B Certificates, the subordination of the Collateral Indebtedness
Interest and the Class D Certificates and amounts allocated to the Class B
Certificates from the Available Cash Collateral Amount and (c) with respect to
the Collateral Indebtedness Interest, the subordination of the Class D
Certificates.
"Enhancement Provider" shall mean the Collateral Indebtedness
Holder.
"Enhancement Surplus" shall mean, with respect to any
Distribution Date, the excess, if any, of the Available Enhancement Amount
(after giving effect to deposits to or withdrawals from the Cash Collateral
Account on such Distribution Date) over the Required Enhancement Amount.
"Excess Spread" shall mean, with respect to any Distribution
Date, the sum of the amounts, if any, specified pursuant to Sections 4.6(a)(iv),
4.6(b)(iii), 4.6(c)(ii), 4.6(d)(ii) and 4.12(b) with respect to such
Distribution Date plus the amount of interest and other investment earnings, if
any (net of losses and investment expenses), on funds on deposit in the Cash
Collateral Account.
"FASIT" shall have the meaning specified in Section 18 of this
Series Supplement.
"Finance Charge Shortfall" shall have the meaning specified
in Section 4.11.
"Fixed Allocation Percentage" shall mean, 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, in each case with respect to such
Collection Period.
"Floating Allocation Percentage" shall mean, with respect to
any Collection Period, the sum of the Class A Floating
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<PAGE> 23
Allocation Percentage, the Class B Floating Allocation Percentage, the
Collateral Floating Allocation Percentage and the Class D Floating Allocation
Percentage, in each case with respect to such Collection Period.
"Group One" shall mean Series 1997-2 and each other Series
specified in the related Supplement to be included in Group One.
"Initial Invested Amount" shall mean the aggregate initial
principal amount of the Series 1997-2 Certificates, which is $900,000,000.
"Interest Period" shall mean, with respect to any
Distribution Date, the period from and including the Distribution Date
immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, from and including the Closing Date) to but excluding such
Distribution Date.
"Invested Amount" shall mean, as of any date of determination,
an amount equal to the sum of the Class A Invested Amount, the Class B Invested
Amount, the Collateral Indebtedness Amount and the Class D Invested Amount, in
each case as of such date.
"Invested Percentage" shall mean, with respect to any
Collection Period, (a) when used with respect to Principal Receivables during
the Revolving Period or Finance Charge Receivables during the Revolving Period
or the Accumulation Period, the Floating Allocation Percentage with respect to
such Collection Period, (b) when used with respect to Principal Receivables
during the Amortization Period or Finance Charge Receivables during the Early
Amortization Period, the Fixed Allocation Percentage with respect to such
Collection Period, and (c) when used with respect to the Default Amount or the
Series Adjustment Amount at any time, the Floating Allocation Percentage with
respect to such Collection Period.
"Investor Charge Offs" shall mean, as of any date of
determination, the sum of the Class A Investor Charge Offs, the Class B Investor
Charge Offs, the Collateral Investor Charge Offs and the Class D Investor Charge
Offs, in each case as of such date.
"Investor Default Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (a) the Default Amount for
the immediately preceding Collection Period and (b) the Floating Allocation
Percentage with respect to such Collection Period.
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"Investor Monthly Servicing Fee" shall have the meaning
specified in Section 7 of this Series Supplement.
"LIBOR" shall have the meaning specified in the Loan
Agreement.
"Loan Agreement" shall mean the agreement dated the date
hereof among the Transferor, the Servicer, the Trustee and the Collateral
Indebtedness Holder, as amended, supplemented or modified from time to time.
"Minimum Aggregate Principal Receivables" shall have the
meaning specified in Section 3 of this Series Supplement.
"Minimum Transferor Interest Percentage" shall have the
meaning specified in Section 3 of this Series Supplement.
"Monthly Interest" shall mean, with respect to any
Distribution Date, the sum of the Class A Monthly Interest, the Class B Monthly
Interest, the Collateral Monthly Interest and the Class D Monthly Interest for
such Distribution Date.
"Paired Series" shall have the meaning specified in Section
19 of this Series Supplement.
"Portfolio Adjusted Yield" shall mean, with respect to any
Collection Period, the Portfolio Yield with respect to such Collection Period
minus the Base Rate with respect to such Collection Period.
"Portfolio Yield" shall mean, with respect to any Collection
Period, the annualized percentage equivalent of a fraction, the numerator of
which is equal to (a) an amount equal to the amount of Collections of Finance
Charge Receivables that are allocated to Series 1997-2 with respect to such
Collection Period (including interest and other investment earnings on funds on
deposit in the Excess Funding Account applied as Collections of Finance Charge
Receivables allocable to Series 1997-2), plus (b) any Shared Excess Finance
Charge Collections that are allocated to Series 1997-2 with respect to such
Collection Period, plus (c) any Principal Funding Investment Proceeds to be
included as Class A Available Funds or Class B Available Funds with respect to
such Collection Period, plus (d) interest and other investment earnings on funds
on deposit in the Reserve Account to be included as Class A Available Funds or
Class B Available Funds with respect to such Collection Period, plus (e) the
Reserve Draw Amount with respect to such Collection Period, plus (f) interest
and other investment earnings on funds on deposit in the Cash Collateral Account
deposited in the Collection Account with respect to such Collection Period,
minus (g) the Investor Default Amount with respect to the Distribution Date
immediately following the last day of such Collection Period, and the
denominator of which is the Adjusted
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<PAGE> 25
Invested Amount as of the last day of the preceding Collection Period.
"Principal Funding Account" shall have the meaning specified
in Section 4.13(a).
"Principal Funding Account Balance" shall mean, with respect
to any date of determination during the Accumulation Period, the principal
amount, if any, of funds on deposit in the Principal Funding Account on such
date of determination.
"Principal Funding Investment Proceeds" shall have the
meaning specified in Section 4.13(b).
"Principal Shortfall" shall have the meaning specified in
Section 4.10.
"Rating Agencies" shall mean Moody's and Standard & Poor's.
"Reallocated Principal Collections" shall mean, with respect
to any Collection Period, an amount equal to the sum of Class B Subordinated
Principal Collections, Collateral Subordinated Principal Collections and Class
D Subordinated Principal Collections, in each case for such Collection Period.
"Reference Banks" shall mean four major banks in the London
interbank market selected by the Servicer upon notice to the Trustee.
"Required Accumulation Factor Number" shall be a fraction,
rounded upwards to the nearest whole number, the numerator of which is one and
the denominator of which is equal to the lowest monthly principal payment rate
on the Accounts for the 12 months preceding the date of such calculation (or
any lower monthly principal payment rate selected by the Servicer at its option
in its sole discretion), expressed as a decimal.
"Required Cash Collateral Amount" shall mean the amount
specified as such in the Loan Agreement or such higher amount designated by the
Transferor.
"Required Draw Amount" shall have the meaning specified in
Section 4.12(c).
"Required Enhancement Amount" shall mean, with respect to any
Distribution Date, an amount equal to the greater of (a) $27,000,000 and (b) 18%
of the Invested Amount, in each case as of such Distribution Date after taking
into account all distributions made on such date; provided, however, that (i)
if
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an Early Amortization Event shall have occurred, the Required Enhancement Amount
for each Distribution Date thereafter (subject to clause (ii) below) shall equal
the Required Enhancement Amount for the Distribution Date immediately preceding
the occurrence of such Early Amortization Event, (ii) in no event shall the
Required Enhancement Amount exceed the sum of the Class A Invested Amount and
the Class B Invested Amount on such date and (iii) the Required Enhancement
Amount may be reduced at any time without the consent of the Series 1997-2
Certificateholders if (x) the Rating Agency Condition shall have been satisfied
with respect to Series 1997-2, (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 such officer, 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 provided an Opinion of
Counsel, addressed to the Trustee, dated the date of such reduction, that such
reduction will not adversely affect the tax characterization of any outstanding
Series or Class with respect to which an Opinion of Counsel addressed to the
Trustee was delivered at the time of their issuance that such Investor
Certificates would be characterized as debt, cause the Trust to be classified,
for federal income tax purposes, as an association (or publicly traded
partnership) taxable as a corporation and cause or constitute an event in which
gain or loss would be recognized by any Certificateholder.
"Required Reserve Account Amount" shall mean, with respect to
any Distribution Date prior to the Reserve Account Funding Date, $0, and on or
after the Reserve Account Funding Date, an amount equal to (a) 0.50% of the
Class A Adjusted Invested Amount as of the preceding Distribution Date (after
giving effect to all changes therein on such date) or (b) any other amount
designated by the Transferor; provided, however, that if such designation
pursuant to clause (b) above is of a lesser amount, (i) the Rating Agency
Condition shall have been satisfied and (ii) 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 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 to occur.
"Reserve Account" shall have the meaning specified in Section
4.14(a).
"Reserve Account Funding Date" shall mean the Distribution
Date following the Collection Period which commences
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<PAGE> 27
no later than [______] months prior to the commencement of the Class A
Accumulation Period; provided, however, that the Reserve Account Funding Date
shall be accelerated to (a) the Distribution Date following the Collection
Period which commences [______] months prior to the commencement of the Class A
Accumulation Period if the average of the Portfolio Adjusted Yields for any
three consecutive Collection Periods shall be less than [___]%; (b) the
Distribution Date following the Collection Period which commences [______]
months prior to the commencement of the Class A Accumulation Period if the
average of the Portfolio Adjusted Yields for any three consecutive Collection
Periods shall be less than [___]%; or (c) the Distribution Date following the
Collection Period which commences [______] months prior to the commencement of
the Class A Accumulation Period if the average of the Portfolio Adjusted Yields
for any three consecutive Collection Periods shall be less than [___]%.
"Reserve Account Surplus" shall mean, as of any date of
determination, the amount, if any, by which the amount on deposit in and
available to be withdrawn from the Reserve Account exceeds the Required Reserve
Account Amount.
"Reserve Draw Amount" shall have the meaning specified in
Section 4.14(c).
"Retained Interest" shall mean, on any date of determination,
the sum of the Transferor Amount on such date and the Invested Amount of each
Class of Investor Certificates retained by the Transferor on such date.
"Retained Percentage" shall mean, on any date of
determination, the percentage equivalent of a fraction, the numerator of which
is the retained interest on such date and the denominator of which is the
Aggregate Principal Receivables on such date plus the Excess Funding Amount (not
including interest and other investment earnings) on such date.
"Revolving Period" shall mean the period beginning on the
Closing Date and ending on the earlier of (a) the close of business on the day
preceding the commencement of the Class A Accumulation Period and (b) the close
of business on the day preceding the commencement of the Early Amortization
Period.
"Series 1997-2" shall mean the Series the terms of which are
specified in this Series Supplement.
"Series 1997-2 Certificate" shall have the meaning specified
in Section 1 of this Series Supplement.
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"Series 1997-2 Certificateholder" shall mean a holder of a
Series 1997-2 Certificate.
"Servicer" shall have the meaning specified in the preamble
to this Series Supplement.
"Servicing Fee Percentage" shall mean 2.00%.
"Shared Excess Finance Charge Collections" shall mean, with
respect to any Collection Period, the aggregate amount for all outstanding
Series in Group One of Collections of Finance Charge Receivables which the
related Supplements specify are to be treated as "Shared Excess Finance Charge
Collections" for such Collection Period.
"Shared Principal Collections" shall mean, with respect to any
Collection Period, the aggregate amount for all outstanding Series in Group One
of Collections of Principal Receivables which the related Supplements specify
are to be treated as "Shared Principal Collections" for such Collection Period.
"Special Distribution Date" shall mean each Distribution Date
with respect to the Early Amortization Period.
"Stated Series Termination Date" shall mean the March 2006
Distribution Date.
"Telerate Page 3750" shall mean 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).
"Transfer" shall have the meaning specified in Section 11 of
this Series Supplement.
"Transfer Date" shall mean the Business Day preceding each
Distribution Date.
"Transferor" shall have the meaning specified in the preamble
to this Series Supplement.
"Trustee" shall have the meaning specified in the preamble to
this Series Supplement.
SECTION 3. Minimum Transferor Interest Percentage and
Minimum Aggregate Principal Receivables. The Minimum Transferor Interest
Percentage applicable to the Series 1997-2 Certificates shall be 0%; provided,
however, that the Transferor may, at its option and in its sole discretion,
designate a higher percentage
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<PAGE> 29
as the Minimum Transferor Interest Percentage so long as, after giving effect to
such designation and any repurchase of Investor Certificates or designation of
Supplemental Accounts, the Transferor Amount shall equal or exceed the Minimum
Transferor Amount. The Minimum Aggregate Principal Receivables applicable to the
Series 1997-2 Certificates shall be the Initial Invested Amount plus the
principal amount of any Additional Class D Certificates that may be issued or,
subject to the Rating Agency Condition, such lesser amount designated by the
Transferor.
SECTION 4. Reassignment and Transfer Terms. The Series
1997-2 Certificates may be reassigned and transferred to the Transferor at the
option of the Transferor on any Distribution Date during the Amortization Period
on or after which the Invested Amount is reduced to an amount less than or equal
to 5% of the Initial Invested Amount, subject to the provisions of Section 12.2
of the Agreement.
SECTION 5. Delivery and Payment for the Certificates. The
Trustee shall deliver the Series 1997-2 Certificates upon the written direction
of the Transferor when authenticated in accordance with Section 6.2 of the
Agreement (except in the case of the Collateral Indebtedness Interest, which
shall be in uncertificated form).
SECTION 6. Form of Delivery of the Series 1997-2
Certificates. (a) The Class A Certificates and the Class B Certificates shall be
delivered as Book-Entry Certificates as provided in Section 6.11 of the
Agreement and shall be issued in minimum denominations of $1,000 and in integral
multiples of $1,000 in excess thereof. The Class D Certificates shall be
delivered as Registered Certificates as provided in Section 6.1 of the Agreement
and shall be issued in minimum denominations of $500,000 and in integral
multiples of $1,000 in excess thereof. The Collateral Indebtedness Interest
shall be issued in uncertificated form.
(b) The Class A Certificates and the Class B Certificates
shall initially be registered in the name of Cede & Co., as nominee for The
Depository Trust Company. [The Class A Certificates and the Class B Certificates
will initially be held by the Trustee as custodian for The Depository Trust
Company.]
SECTION 7. Servicing Compensation. The share of the Monthly
Servicing Fee allocable to the Series 1997-2 Certificateholders with respect to
any Distribution Date (the "Investor Monthly Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Servicing Fee Percentage and (b) the
Invested Amount as of the last day of the second preceding Collection Period;
provided, however, that with respect to the
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<PAGE> 30
first Distribution Date, the Investor Monthly Servicing Fee shall be equal to
$[__________]. The share of the Investor Monthly Servicing Fee allocable to the
Class A Certificateholders with respect to any Distribution Date (the "Class A
Servicing Fee") shall be equal to one-twelfth of the product of (a) the Class A
Invested Amount as of the last day of the second preceding Collection Period and
(b) the Servicing Fee Percentage; provided, however, that with respect to the
first Distribution Date, the Class A Servicing Fee shall be equal to
$[__________]. The share of the Investor Monthly Servicing Fee allocable to the
Class B Certificateholders with respect to any Distribution Date (the "Class B
Servicing Fee") shall be equal to one-twelfth of the product of (a) the Class B
Invested Amount as of the last day of the second preceding Collection Period and
(b) the Servicing Fee Percentage; provided, however, that with respect to the
first Distribution Date, the Class B Servicing Fee shall be equal to
$[__________]. The share of the Investor Monthly Servicing Fee allocable to the
Collateral Indebtedness Holder with respect to any Distribution Date (the
"Collateral Servicing Fee") shall be equal to one-twelfth of the product of (a)
the Collateral Indebtedness Amount as of the last day of the second preceding
Collection Period and (b) the Servicing Fee Percentage; provided, however, that
with respect to the first Distribution Date, the Collateral Servicing Fee shall
be equal to $[__________]. The share of the Investor Monthly Servicing Fee
allocable to the Class D Certificateholders with respect to any Distribution
Date (the "Class D Servicing Fee") shall be equal to one-twelfth of the product
of (a) the Class D Invested Amount as of the last day of the second preceding
Collection Period and (b) the Servicing Fee Percentage; provided, however, that
with respect to the first Distribution Date, the Class D Servicing Fee shall be
equal to $[__________]. The Class A Servicing Fee, the Class B Servicing Fee,
the Collateral Servicing Fee and the Class D Servicing Fee shall be payable
solely to the extent amounts are available for distribution in respect thereof
pursuant to this Series Supplement. The remainder of the Monthly Servicing Fee
shall be paid by the Transferor or from amounts allocable to other Series (as
provided in the Agreement and the Supplements relating to such other Series) and
in no event shall the Trust, the Trustee or the Series 1997-2 Certificateholders
be liable for the share of the Monthly Servicing Fee to be paid by the
Transferor or from amounts allocable to any other Series.
SECTION 8. Article IV of the Agreement. Any provisions of Article
IV of the Agreement which distribute Collections to the Transferor on the basis
of the Transferor Percentage shall continue to apply irrespective of the
issuance of the Series 1997-2 Certificates. Section 4.1 of the Agreement shall
read in its entirety as provided in the Agreement. Article IV of the
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<PAGE> 31
Agreement (except for Section 4.1) as it relates to Series 1997-2 shall read in
its entirety as follows:
ARTICLE IV
RIGHTS OF SERIES 1997-2 CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.2 Collections and Allocations. (a) The Servicer
shall apply, or shall instruct the Trustee to apply, all Collections and other
funds on deposit in the Collection Account that are allocated to the Series
1997-2 Certificates as described in this Article IV. Collections of Finance
Charge Receivables (including interest and other investment earnings, if any
(net of losses and investment expenses), on funds on deposit in the Excess
Funding Account) with respect to any Collection Period shall be allocated to
Series 1997-2 in an amount equal to the product of such Collections and the
applicable Invested Percentage for such Collection Period. Collections of
Principal Receivables with respect to any Collection Period shall be allocated
to Series 1997-2 in an amount equal to the product of such Collections and the
applicable Invested Percentage for such Collection Period.
(b) During the Revolving Period or the Amortization Period
(other than an Early Amortization Period), if daily deposits of Collections of
Finance Charge Receivables are required pursuant to Section 4.1(e), the Servicer
shall deposit Collections of Finance Charge Receivables allocable to Series
1997-2 into the Collection Account in accordance with Section 4.1(e). During the
Early Amortization Period, the Servicer shall deposit Collections of Finance
Charge Receivables allocable to Series 1997-2 into the Collection Account on a
daily basis in accordance with Section 4.1(e). If daily deposits are not
required pursuant to Section 4.1(e) or this Section 4.2(b), the Servicer shall,
subject to Section 4.1(i), deposit Collections of Finance Charge Receivables
allocable to Series 1997-2 with respect to any Collection Period into the
Collection Account on the following Transfer Date.
(c) During the Revolving Period, so long as the Available
Enhancement Amount is not less than the Required Enhancement Amount, the
Servicer need not deposit Collections of Principal Receivables allocable to
Series 1997-2 into the Collection Account on a daily basis and may distribute
such Collections to the Transferor; provided, however, that such Collections of
Principal Receivables shall be deposited in the Excess Funding Account in
accordance with Section 4.1(f); and, provided further, that if the Aggregate
Invested Amount exceeds
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<PAGE> 32
the sum of the Aggregate Principal Receivables and the Excess Funding Amount on
any Business Day, the Servicer shall deposit Collections of Principal
Receivables that would otherwise be distributed to the Transferor on such day
into the Excess Funding Account on such day in an amount equal to such excess.
During the Accumulation Period, after an amount of Collections of Principal
Receivables allocable to Series 1997-2 equal to the Controlled Deposit Amount
for the applicable Distribution Date has been deposited into the Collection
Account, and so long as the Available Enhancement Amount is not less than the
Required Enhancement Amount, the Servicer need not deposit Collections of
Principal Receivables allocable to Series 1997-2 into the Collection Account on
a daily basis and may distribute such Collections to the Transferor; provided,
however, that such Collections of Principal Receivables shall be deposited in
the Excess Funding Account in accordance with Section 4.1(f); and, provided
further, that if the Aggregate Invested Amount exceeds the sum of the Aggregate
Principal Receivables and the Excess Funding Amount on any Business Day, the
Servicer shall deposit Collections of Principal Receivables that would otherwise
be distributed to the Transferor on such day into the Excess Funding Account on
such day in an amount equal to such excess. If and for so long as the Required
Enhancement Amount exceeds the Available Enhancement Amount, the Servicer shall
deposit Collections of Principal Receivables allocable to Series 1997-2 into the
Collection Account on a daily basis. If daily deposits are not required pursuant
to Section 4.1(e) or this Section 4.2(b), the Servicer shall, subject to Section
4.1(i), deposit Collections of Principal Receivables allocable to Series 1997-2
with respect to any Collection Period into the Collection Account on the
following Transfer Date.
(d) Notwithstanding the foregoing, the Servicer need not make
daily deposits of Collections into the Collection Account at any time when the
requirements of Section 4.1(e) are satisfied.
Section 4.3. Determination of Monthly Interest. (a) The
amount of monthly interest ("Class A Monthly Interest") distributable from the
Collection Account with respect to the Class A Certificates on any Distribution
Date shall be an amount equal to the product of (i) the Class A Certificate Rate
for the related Interest Period, (ii) the outstanding principal amount of the
Class A Certificates as of the preceding Record 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; provided, however, that, with respect to the first
Distribution Date, Class A Monthly Interest shall be equal to $[__________].
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<PAGE> 33
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Class A Interest
Shortfall"), of (x) the Class A Monthly Interest for such Distribution Date over
(y) the aggregate amount of funds allocated and available to pay such Class A
Monthly Interest on such Distribution Date. If the Class A Interest Shortfall
with respect to any Distribution Date is greater than zero, an additional amount
("Class A Additional Interest") equal to the product of (i) the Class A Penalty
Rate for the related Interest Period, (ii) such Class A Interest Shortfall (or
the portion thereof which has not theretofore been paid to the Class A
Certificateholders) 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 shall
be payable as provided herein with respect to the Class A Certificates on each
Distribution Date following such Distribution Date to and including the
Distribution Date on which such Class A Interest Shortfall is paid to Class A
Certificateholders. Notwithstanding anything to the contrary herein, Class A
Additional Interest shall be payable or distributed to Class A
Certificateholders only to the extent permitted by applicable law.
(b) The amount of monthly interest ("Class B Monthly
Interest") distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to the product of
(i) the Class B Certificate Rate for the related Interest Period, (ii) the
outstanding principal amount of the Class B Certificates as of the preceding
Record 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; provided,
however, that, with respect to the first Distribution Date, Class B Monthly
Interest shall be equal to $[__________].
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Class B Interest
Shortfall"), of (x) the Class B Monthly Interest for such Distribution Date over
(y) the aggregate amount of funds allocated and available to pay such Class B
Monthly Interest on such Distribution Date. If the Class B Interest Shortfall
with respect to any Distribution Date is greater than zero, an additional amount
("Class B Additional Interest") equal to the product of (i) the Class B Penalty
Rate for the related Interest Period, (ii) such Class B Interest Shortfall (or
the portion thereof which has not theretofore been paid to the Class B
Certificateholders) 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 shall
be payable as provided herein with respect to the Class B Certificates on each
Distribution Date following such Distribution Date to and including the
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<PAGE> 34
Distribution Date on which such Class B Interest Shortfall is paid to Class B
Certificateholders. Notwithstanding anything to the contrary herein, Class B
Additional Interest shall be payable or distributed to Class B
Certificateholders only to the extent permitted by applicable law.
(c) The amount of monthly interest ("Collateral Monthly
Interest") distributable from the Collection Account with respect to the
Collateral Indebtedness Interest on any Distribution Date shall be an amount
equal to the product of (i) the Collateral Rate for the related Interest Period,
(ii) the outstanding principal amount of the Collateral Indebtedness Interest as
of the preceding Record 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.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Collateral Interest
Shortfall"), of (x) the Collateral Monthly Interest for such Distribution Date
over (y) the aggregate amount of funds allocated and available to pay such
Collateral Monthly Interest on such Distribution Date. If the Collateral
Interest Shortfall with respect to any Distribution Date is greater than zero,
an additional amount ("Collateral Additional Interest") equal to the product of
(i) the Collateral Penalty Rate for the related Interest Period, (ii) such
Collateral Interest Shortfall (or the portion thereof which has not theretofore
been paid to the Collateral Indebtedness Holder) 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 shall be payable as provided herein with respect to
the Collateral Indebtedness Interest on each Distribution Date following such
Distribution Date to and including the Distribution Date on which such
Collateral Interest Shortfall is paid to the Collateral Indebtedness Holder.
Notwithstanding anything to the contrary herein, Collateral Additional Interest
shall be payable or distributed to the Collateral Indebtedness Holder only to
the extent permitted by applicable law.
(d) The amount of monthly interest ("Class D Monthly
Interest") distributable from the Collection Account with respect to the Class D
Certificates on any Distribution Date shall be an amount equal to the product of
(i) the Class D Certificate Rate for the related Interest Period, (ii) the
outstanding principal amount of the Class D Certificates as of the preceding
Record 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; provided,
however, that, with respect to the first Distribution Date, Class D Monthly
Interest shall be equal to $[__________].
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On the Determination Date preceding each Distribution Date,
the Servicer shall determine the excess, if any (the "Class D Interest
Shortfall"), of (x) the Class D Monthly Interest for such Distribution Date over
(y) the aggregate amount of funds allocated and available to pay such Class D
Monthly Interest on such Distribution Date. If the Class D Interest Shortfall
with respect to any Distribution Date is greater than zero, an additional amount
("Class D Additional Interest") equal to the product of (i) the Class D Penalty
Rate for the related Interest Period, (ii) such Class D Interest Shortfall (or
the portion thereof which has not theretofore been paid to the Class D
Certificateholders) 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 shall
be payable as provided herein with respect to the Class D Certificates on each
Distribution Date following such Distribution Date to and including the
Distribution Date on which such Class D Interest Shortfall is paid to Class D
Certificateholders. Notwithstanding anything to the contrary herein, Class D
Additional Interest shall be payable or distributed to Class D
Certificateholders only to the extent permitted by applicable law.
Section 4.3A Determination of Certificate LIBOR. (a) On each
Certificate LIBOR Determination Date, the Trustee shall determine Certificate
LIBOR for the following Interest Period on the basis of the rate for deposits in
United States dollars for a one-month period (commencing on the first day of
such Interest Period) which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on such Certificate LIBOR Determination Date. If such rate does not
appear on Telerate Page 3750, Certificate LIBOR for such Interest Period shall
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 such Certificate LIBOR Determination Date to prime banks in the London
interbank market for a one-month period (commencing on the first day of such
Interest Period). The Trustee shall 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 Certificate LIBOR Determination Date
shall be the arithmetic mean of all of the provided quotations. If fewer than
two quotations are provided as requested, the rate for that Certificate LIBOR
Determination Date shall 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 (commencing on the first day of such
Interest Period).
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(b) The Class A Certificate Rate and the Class B Certificate
Rate applicable to the then current and the immediately preceding Interest
Periods may be obtained by any Series 1997-2 Certificateholder by telephoning
the Trustee at its Corporate Trust Office at 1 (800) 829-8432.
(c) On each Certificate LIBOR Determination Date, the Trustee
shall send to the Servicer and the Collateral Indebtedness Holder by facsimile
notification of Certificate LIBOR for the following Interest Period.
Section 4.4. Determination of Monthly Principal. (a) The
amount of monthly principal ("Class A Monthly Principal") distributable or
available for deposit into the Principal Funding Account from the Collection
Account with respect to the Class A Certificates on each Distribution Date,
beginning with the Distribution Date in the month following the month in which
the Amortization Period begins, shall be equal to the least of (x) the Available
Principal Collections on deposit in the Collection Account and available for
distribution with respect to such Distribution Date, (y) for each Distribution
Date with respect to the Class A Accumulation Period prior to the Class A
Expected Final Distribution Date, the Controlled Deposit Amount for such
Distribution Date and (z) the Class A Invested Amount on such Distribution Date.
(b) The amount of monthly principal ("Class B Monthly
Principal") distributable or available for deposit into the Principal Funding
Account from the Collection Account with respect to the Class B Certificates on
each Distribution Date, beginning with the Class B Principal Commencement Date,
shall be equal to the least of (x) the Available Principal Collections on
deposit in the Collection Account and available for distribution with respect to
such Distribution Date minus the portion of such Available Principal Collections
applied to any Class A Monthly Principal on such Distribution Date, (y) for each
Distribution Date with respect to the Class B Accumulation Period prior to the
Class B Expected Final Distribution Date, the Controlled Deposit Amount for such
Distribution Date and (z) the Class B Invested Amount on such Distribution Date.
(c) The amount, if any, of monthly principal ("Collateral
Monthly Principal") distributable with respect to the Collateral Indebtedness
Interest on each Distribution Date shall be equal to:
(i) on any Distribution Date prior to the
occurrence of an Early Amortization Event or the payment in full of
the Class B Adjusted Invested Amount, at the option of the Transferor,
to be exercised in its sole discretion,
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the lesser of (A) the Available Principal Collections on deposit in the
Collection Account and available for distribution with respect to such
Distribution Date minus the portion of such Available Principal
Collections applied to any Class A Monthly Principal or Class B Monthly
Principal on such Distribution Date and (B) the Enhancement Surplus on
such Distribution Date (after giving effect to any increase in the
amount on deposit in the Cash Collateral Account or increase in the
Class D Invested Amount on such Distribution Date); and
(ii) beginning with the Distribution Date
on which the Class B Adjusted Invested Amount has been paid in full,
the lesser of (A) the Available Principal Collections on deposit in the
Collection Account and available for distribution with respect to such
Distribution Date minus the portion of such Available Principal
Collections applied to any Class A Monthly Principal or Class B Monthly
Principal on such Distribution Date and (B) the Collateral Indebtedness
Amount on such Distribution Date.
(b) The amount of monthly principal ("Class D Monthly
Principal") distributable with respect to the Class D Certificates on each
Distribution Date, beginning with the Distribution Date on which the Collateral
Indebtedness Amount has been paid in full, or prior thereto subject to
satisfaction of the requirements of the Loan Agreement, shall be equal to the
least of (x) the Available Principal Collections on deposit in the Collection
Account and available for distribution with respect to such Distribution Date
minus the portion of such Available Principal Collections applied to any Class A
Monthly Principal, Class B Monthly Principal or Collateral Monthly Principal on
such Distribution Date, (y) the Enhancement Surplus on such Distribution Date
(after giving effect to any increase in the amount on deposit in the Cash
Collateral Account on such Distribution Date) and (z) the Class D Invested
Amount on such Distribution Date.
Section 4.5 Required Amount. (a) On each Determination Date,
the Servicer shall determine the amount (the "Class A Required Amount"), if any,
by which (a) the sum of (i) Class A Monthly Interest for the following
Distribution Date, (ii) any Class A Monthly Interest previously due but not paid
to the Class A Certificateholders on a prior Distribution Date, (iii) any Class
A Additional Interest for the following Distribution Date and any Class A
Additional Interest previously due but not paid to Class A Certificateholders on
a prior Distribution Date, (iv) the Class A Allocable Amount, if any, for the
following Distribution Date and (v) if First North American
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National Bank is no longer the Servicer, the Class A Servicing Fee for the
following Distribution Date and the amount of any Class A Servicing Fee
previously due but not distributed to the Servicer on a prior Distribution Date
exceeds (b) Class A Available Funds with respect to the preceding Collection
Period. In the event that the Class A Required Amount for any Distribution Date
is greater than zero, the Servicer shall give written notice to the Trustee of
such positive Class A Required Amount on the date of computation and all or a
portion of the Excess Spread and the Shared Excess Finance Charge Collections
allocable to Series 1997-2 pursuant to Section 4.1(h) with respect to the
preceding Collection Period shall be distributed from the Collection Account on
such Distribution Date pursuant to Section 4.8(a). In the event that the Class A
Required Amount for such Distribution Date exceeds the amount of the Excess
Spread and the Shared Excess Finance Charge Collections allocable to Series
1997-2 with respect to the preceding Collection Period, all or a portion of the
Available Cash Collateral Amount with respect to such Distribution Date in an
amount equal to such excess shall be applied to fund the Class A Required
Amount. In the event that the Class A Required Amount for such Distribution Date
exceeds the amount of the Excess Spread, the Shared Excess Finance Charge
Collections allocable to Series 1997-2 with respect to the preceding Collection
Period and the Available Cash Collateral Amount with respect to such
Distribution Date, all or a portion of the Reallocated Principal Collections
with respect to such Collection Period in an amount equal to such excess shall
be distributed from the Collection Account on such Distribution Date pursuant to
Section 4.9(a).
(b) On each Determination Date, the Servicer shall determine
the amount (the "Class B Required Amount"), if any, equal to the sum of (x) the
amount, if any, by which the sum of (i) Class B Monthly Interest for the
following Distribution Date, (ii) any Class B Monthly Interest previously due
but not paid to the Class B Certificateholders on a prior Distribution Date,
(iii) any Class B Additional Interest for the following Distribution Date and
any Class B Additional Interest previously due but not paid to Class B
Certificateholders on a prior Distribution Date and (iv) if First North American
National Bank is no longer the Servicer, the Class B Servicing Fee for the
following Distribution Date and the amount of any Class B Servicing Fee
previously due but not distributed to the Servicer on a prior Distribution Date
exceeds Class B Available Funds with respect to the preceding Collection Period
and (y) the amount, if any, by which the Class B Allocable Amount, if any, for
the following Distribution Date exceeds the amount available to make payments
with respect thereto pursuant to Section 4.8(d). In the event that the Class B
Required Amount for any Distribution Date is greater than zero, the Servicer
shall give written notice to
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the Trustee of such positive Class B Required Amount on the date of computation
and all or a portion of the Excess Spread and the Shared Excess Finance Charge
Collections allocable to Series 1997-2 pursuant to Section 4.1(h) with respect
to the preceding Collection Period shall be distributed from the Collection
Account on such Distribution Date pursuant to Sections 4.8(c) and (d). In the
event that the Class B Required Amount for such Distribution Date exceeds the
amounts distributed pursuant to Sections 4.8(c) and (d), all or a portion of the
Available Cash Collateral Amount with respect to such Distribution Date (other
than that portion of the Available Cash Collateral Amount applied to fund the
amounts described in Sections 4.8(a) and (b) with respect to such Distribution
Date) in an amount equal to such excess shall be applied to fund the Class B
Required Amount. In the event that the Class B Required Amount for such
Distribution Date exceeds such portion of the Available Cash Collateral Amount
and the amounts distributed pursuant to Sections 4.8(c) and (d), all or a
portion of the Reallocated Principal Collections with respect to the preceding
Collection Period (other than the portion of the Reallocated Principal
Collections applied to fund the Class A Required Amount and other than Class B
Subordinated Principal Collections) in an amount equal to such excess shall be
distributed from the Collection Account on such Distribution Date pursuant to
Section 4.9(b).
(c) On each Determination Date, the Servicer shall determine
the amount (the "Collateral Required Amount"), if any, equal to the sum of (x)
the amount, if any, by which the sum of (i) Collateral Monthly Interest for the
following Distribution Date, (ii) any Collateral Monthly Interest previously due
but not paid to the Collateral Indebtedness Holder on a prior Distribution Date,
(iii) any Collateral Additional Interest for the following Distribution Date and
any Collateral Additional Interest previously due but not paid to the Collateral
Indebtedness Holder on a prior Distribution Date and (iv) if First North
American National Bank is no longer the Servicer, the Collateral Servicing Fee
for the following Distribution Date and the amount of any Collateral Servicing
Fee previously due but not distributed to the Servicer on a prior Distribution
Date exceeds the amount available to make payments with respect thereto pursuant
to Sections 4.6(c)(i) and 4.8(f) with respect to the preceding Collection Period
and (y) the amount, if any, by which the Collateral Allocable Amount, if any,
for the following Distribution Date exceeds the amount available to make
payments with respect thereto pursuant to Section 4.8(h). In the event that the
Collateral Required Amount for any Distribution Date is greater than zero, the
Servicer shall give written notice to the Trustee of such positive Collateral
Required Amount on the date of computation and all or a portion of the Available
Cash Collateral Amount with respect to such Distribution Date (other
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than that portion of the Available Cash Collateral Amount applied to fund the
amounts described in Sections 4.8(a), (b), (c) and (d) with respect to such
Distribution Date) in an amount equal to such excess shall be applied to fund
the Collateral Required Amount. In the event that the Collateral Required Amount
for such Distribution Date exceeds the portion of the Available Cash Collateral
Amount with respect to such Distribution Date not used to fund the amounts
described in Sections 4.8(a), (b), (c) and (d) with respect to such Distribution
Date, all or a portion of the Reallocated Principal Collections with respect to
the preceding Collection Period (other than the portion of the Reallocated
Principal Collections applied to fund the Class A Required Amount or the Class B
Required Amount and other than Class B Subordinated Principal Collections or
Collateral Subordinated Principal Collections) in an amount equal to such excess
shall be distributed from the Collection Account on such Distribution Date
pursuant to Section 4.9(c).
Section 4.6 Application of Class A Available Funds, Class B
Available Funds, Collateral Available Funds, Class D Available Funds and
Collections of Principal Receivables. The Servicer shall apply or shall instruct
the Trustee to apply, on each Distribution Date, Class A Available Funds, Class
B Available Funds, Collateral Available Funds, Class D Available Funds and
Collections of Principal Receivables allocable to Series 1997-2 on deposit in
the Collection Account with respect to the Collection Period immediately
preceding such Distribution Date to make the following distributions:
(a) On each Distribution Date, Class A Available Funds with
respect to the Collection Period immediately preceding such Distribution Date
shall be applied in the following priority:
(i) an amount equal to Class A Monthly Interest
for such Distribution Date, plus the amount of any Class A Monthly
Interest previously due but not distributed to Class A
Certificateholders on a prior Distribution Date, plus the amount of any
Class A Additional Interest for such Distribution Date and any Class A
Additional Interest previously due but not distributed to Class A
Certificateholders on a prior Distribution Date, shall be distributed
to the Paying Agent for payment to the Class A Certificateholders;
(ii) if First North American National Bank 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 distributed to the Servicer on a prior
Distribution Date, shall be distributed to the Servicer;
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(iii) an amount equal to the Class A Allocable
Amount for such Distribution Date shall be treated as a portion of
Available Principal Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess
Spread and shall be allocated and distributed as set forth in Section
4.8.
(b) On each Distribution Date, Class B Available Funds with
respect to the Collection Period immediately preceding such Distribution Date
shall be applied in the following priority:
(i) an amount equal to Class B Monthly Interest
for such Distribution Date plus the amount of any Class B Monthly
Interest previously due but not distributed to Class B
Certificateholders on a prior Distribution Date, plus the amount of any
Class B Additional Interest for such Distribution Date and any Class B
Additional Interest previously due but not distributed to Class B
Certificateholders on a prior Distribution Date, shall be distributed
to the Paying Agent for payment to the Class B Certificateholders;
(ii) if First North American National Bank 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 distributed to the Servicer on a prior
Distribution Date, shall be distributed to the Servicer; and
(iii) the balance, if any, shall constitute Excess
Spread and shall be allocated and distributed as set forth in Section
4.8.
(c) On each Distribution Date, Collateral Available Funds with
respect to the Collection Period immediately preceding such Distribution Date
shall be applied in the following priority:
(i) if First North American National Bank 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
distributed to the Servicer on a prior Distribution Date,
shall be distributed to the Servicer; and
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(ii) the balance, if any, shall constitute Excess
Spread and shall be allocated and distributed as set forth in Section
4.8.
(d) On each Distribution Date, Class D Available Funds with
respect to the Collection Period immediately preceding such Distribution Date
shall be applied in the following priority:
(i) if First North American National Bank 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 distributed to the
Servicer on a prior Distribution Date, shall be distributed to
the Servicer; and
(ii) the balance, if any, shall constitute Excess
Spread and shall be allocated and distributed as set forth in Section
4.8.
(e) On each Distribution Date with respect to the Revolving
Period, Available Principal Collections shall be applied in the following
priority:
(i) an amount equal to Collateral Monthly
Principal for such Distribution Date shall be applied in accordance
with the Loan Agreement;
(ii) an amount equal to Class D Monthly Principal
for such Distribution Date shall be distributed to the Paying Agent for
payment to the Class D Certificateholders; and
(iii) the balance, if any, shall constitute "Shared
Principal Collections" with respect to Group One and shall be applied
in accordance with Section 4.1(g) (and be retained in the Excess
Funding Account if required by such provision).
(f) On each Distribution Date following the commencement of
the Amortization Period, Available Principal Collections shall be applied in the
following priority:
(i) an amount equal to Class A Monthly Principal
for such Distribution Date shall, during the Class A Accumulation
Period, be deposited into the Principal Funding Account for payment to
Class A Certificateholders on the earlier to occur of the Class A
Expected Final Distribution Date and the first Special Distribution
Date and, during the
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Early Amortization Period, be distributed to the Paying Agent for
payment to the Class A Certificateholders;
(ii) an amount equal to Class B Monthly Principal
for such Distribution Date shall, during the Class B Accumulation
Period, be deposited into the Principal Funding Account for payment to
Class B Certificateholders on the earlier to occur of the Class B
Expected Final Distribution Date and the first Special Distribution
Date and, during the Early Amortization Period, be distributed to the
Paying Agent for payment to the Class B Certificateholders;
(iii) an amount equal to Collateral Monthly
Principal for such Distribution Date shall be applied in accordance
with the Loan Agreement;
(iv) an amount equal to Class D Monthly Principal
for such Distribution Date shall be distributed to the Paying Agent for
payment to the Class D Certificateholders; and
(v) the balance, if any, shall constitute "Shared
Principal Collections" with respect to Group One and shall be applied
in accordance with Section 4.1(g) (and be retained in the Excess
Funding Account if required by such provision).
Section 4.7. Defaulted Amounts; Adjustment Amounts; Investor
Charge Offs; Reductions of Adjustment Amounts. (a) On each Determination Date,
the Servicer shall calculate the Class A Required Amount, if any, for the
related Distribution Date. If, on any Distribution Date, the Class A Required
Amount for such Distribution Date exceeds the sum of (x) the amount of Excess
Spread and the Shared Excess Finance Charge Collections allocable to Series
1997-2 with respect to such Distribution Date, (y) the Available Cash Collateral
Amount with respect to such Distribution Date and (z) the amount of Reallocated
Principal Collections available pursuant to Section 4.9(a) with respect to the
preceding Collection Period, then the Class D Invested Amount (after giving
effect to any reduction thereof pursuant to Section 4.7(d)) shall be reduced by
the amount of such excess, but not by more than the excess of the Class A
Allocable Amount for such Distribution Date over the amount of Excess Spread and
Shared Excess Finance Charge Collections, the amount withdrawn from the Cash
Collateral Account and the amount of Reallocated Principal Collections used to
fund 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 shall be reduced to zero and the Collateral
Indebtedness Amount (after giving effect to any reduction thereof
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pursuant to Section 4.7(c)) shall be reduced by the amount by which the Class D
Invested Amount would have been reduced below zero, but not by more than the
excess, if any, of the Class A Allocable Amount for such Distribution Date over
the amount of such reduction, if any, of the Class D Invested Amount with
respect to such Distribution Date and the amount of Excess Spread and Shared
Excess Finance Charge Collections, the amount withdrawn from the Cash Collateral
Account and the amount of Reallocated Principal Collections used to fund the
Class A Allocable Amount for such Distribution Date. In the event that such
reduction would cause the Collateral Indebtedness Amount to be a negative
number, the Collateral Indebtedness Amount shall be reduced to zero and the
Class B Adjusted Invested Amount (after giving effect to any reduction thereof
pursuant to Section 4.7(b)) shall be reduced by the amount by which the
Collateral Indebtedness Amount would have been reduced below zero, but not by
more than the excess, if any, of the Class A Allocable Amount for such
Distribution Date over the aggregate amount of the reductions, if any, of the
Class D Invested Amount and the Collateral Indebtedness Amount with respect to
such Distribution Date and the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class A
Allocable Amount for such Distribution Date. In the event that such reduction
would cause the Class B Adjusted Invested Amount to be a negative number, the
Class B Adjusted Invested Amount shall be reduced to zero, and the Class A
Adjusted Invested Amount shall be reduced by the amount by which the Class B
Adjusted Invested Amount would have been reduced below zero, but not by more
than the excess, if any, of the Class A Allocable Amount for such Distribution
Date over the aggregate amount of the reductions, if any, of the Class D
Invested Amount, the Collateral Indebtedness Amount and the Class B Adjusted
Invested Amount with respect to such Distribution Date and the amount of Excess
Spread and Shared Excess Finance Charge Collections, the amount withdrawn from
the Cash Collateral Account and the amount of Reallocated Principal Collections
used to fund the Class A Allocable Amount for such Distribution Date (a "Class A
Investor Charge Off"). Class A Investor Charge Offs shall thereafter be
reimbursed and the Class A Adjusted Invested Amount increased (but not by an
amount in excess of the aggregate unreimbursed Class A Investor Charge Offs) on
any Distribution Date by (i) the amount of Excess Spread and Shared Excess
Finance Charge Collections allocated and available for that purpose pursuant to
Section 4.8(b), and (ii) without duplication, the aggregate amount of the
reductions of the Series Adjustment Amounts allocable to the Class A Invested
Amount pursuant to Section 4.7(f).
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(b) On each Determination Date, the Servicer shall calculate
the Class B Required Amount, if any, for the related Distribution Date. If, on
any Distribution Date, the Class B Required Amount for such Distribution Date
exceeds the sum of (x) the amount of Excess Spread and the Shared Excess Finance
Charge Collections allocable to Series 1997-2 with respect to such Distribution
Date which are not used to fund the Class A Required Amount or reimburse Class A
Investor Charge Offs on the related Distribution Date, (y) the portion, if any,
of the Available Cash Collateral Amount which is remaining after applying the
Available Cash Collateral Amount to fund the Class A Required Amount with
respect to such Distribution Date and (z) the amount of Reallocated Principal
Collections which are available to fund the Class B Required Amount on such
Distribution Date pursuant to Section 4.9(b), then the Class D Invested Amount
(after giving effect to any reduction thereof pursuant to Sections 4.7(a) and
(d)) shall be reduced by the amount of such excess, but not by more than the
excess of the Class B Allocable Amount for such Distribution Date over the
amount of Excess Spread and Shared Excess Finance Charge Collections, the amount
withdrawn from the Cash Collateral Account and the amount of Reallocated
Principal Collections used to fund 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 shall be
reduced to zero and the Collateral Indebtedness Amount (after giving effect to
any reduction thereof pursuant to Sections 4.7(a) and (c)) shall be reduced by
the amount by which the Class D Invested Amount would have been reduced below
zero, but not by more than the excess, if any, of the Class B Allocable Amount
for such Distribution Date over the amount of such reduction, if any, of the
Class D Invested Amount with respect to such Distribution Date and the amount of
Excess Spread and Shared Excess Finance Charge Collections, the amount withdrawn
from the Cash Collateral Account and the amount of Reallocated Principal
Collections used to fund the Class B Allocable Amount for such Distribution
Date. In the event that such reduction would cause the Collateral Indebtedness
Amount to be a negative number, the Collateral Indebtedness Amount shall be
reduced to zero and the Class B Adjusted Invested Amount (after giving effect to
any reduction thereof pursuant to Section 4.7(a)) shall be reduced by the amount
by which the Collateral Indebtedness Amount would have been reduced below zero,
but not by more than the excess, if any, of the Class B Allocable Amount for
such Distribution Date over the aggregate amount of the reductions, if any, of
the Class D Invested Amount and the Collateral Indebtedness Amount with respect
to such Distribution Date and the amount of Excess Spread and Shared Excess
Finance Charge Collections, the amount withdrawn from the Cash Collateral
Account and the amount of Reallocated Principal Collections used to fund the
Class B Allocable Amount for such Distribution Date
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(a "Class B Investor Charge Off"). Class B Investor Charge Offs shall thereafter
be reimbursed and the Class B Adjusted Invested Amount increased (but not by an
amount in excess of the aggregate unreimbursed Class B Investor Charge Offs) on
any Distribution Date by (i) the amount of Excess Spread and Shared Excess
Finance Charge Collections allocated and available for that purpose pursuant to
Section 4.8(e), and (ii) without duplication, the aggregate amount of the
reductions of the Series Adjustment Amounts allocable to the Class B Invested
Amount pursuant to Section 4.7(f).
(c) On each Determination Date, the Servicer shall calculate
the Collateral Allocable Amount, if any, for the related Distribution Date. If,
on any Distribution Date, the Collateral Allocable Amount exceeds the sum of (x)
the amount of Excess Spread and Shared Excess Finance Charge Collections
available to fund the Collateral Allocable Amount on such Distribution Date
pursuant to Section 4.8(h), (y) the portion, if any, of the Available Cash
Collateral Amount available to fund the Collateral Allocable Amount on such
Distribution Date pursuant to Section 4.12(c) and (z) the amount of Reallocated
Principal Collections available to fund the Collateral Allocable Amount on such
Distribution Date pursuant to Section 4.9(c), then the Class D Invested Amount
(after giving effect to any reduction thereof pursuant to Sections 4.7(a), (b)
and (d)) shall be reduced by the amount of such excess. In the event that such
reduction would cause the Class D Invested Amount to be a negative number, the
Class D Invested Amount shall be reduced to zero and the Collateral Indebtedness
Amount shall be reduced by the amount by which the Class D Invested Amount would
have been reduced below zero (a "Collateral Investor Charge Off"); provided,
however, that the Collateral Indebtedness Amount shall not be reduced below
zero. Collateral Investor Charge Offs shall thereafter be reimbursed and the
Collateral Indebtedness Amount increased (but not by an amount in excess of the
aggregate unreimbursed Collateral Investor Charge Offs) on any Distribution Date
by (i) the amount of Excess Spread and Shared Excess Finance Charge Collections
allocated and available for that purpose pursuant to Section 4.8(h), and (ii)
without duplication, the aggregate amount of the reductions of the Series
Adjustment Amounts allocable to the Collateral Indebtedness Amount pursuant to
Section 4.7(f).
(d) On each Determination Date, the Servicer shall calculate
the Class D Allocable Amount, if any, for the related Distribution Date. If, on
any Distribution Date, the Class D Allocable Amount exceeds the amount of Excess
Spread and Shared Excess Finance Charge Collections available to fund the Class
D Allocable Amount on such Distribution Date pursuant to Section 4.8(m), then
the Class D Invested Amount shall be reduced by the
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amount of such excess (a "Class D Investor Charge Off"); provided, however, that
the Class D Invested Amount shall not be reduced below zero. Class D Investor
Charge Offs shall thereafter be reimbursed and the Class D Invested Amount
increased (but not by an amount in excess of the aggregate unreimbursed Class D
Investor Charge Offs) on any Distribution Date by (i) the amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available for
that purpose pursuant to Section 4.8(m), and (ii) without duplication, the
aggregate amount of the reductions of the Series Adjustment Amounts allocable to
the Class D Invested Amount pursuant to Section 4.7(f).
(e) Whenever funds or other amounts are available hereunder in
respect of the Class A Allocable Amount, the Class B Allocable Amount, the
Collateral Allocable Amount or the Class D Allocable Amount, as the case may be,
such funds or other amounts shall be applied first to the elimination of any
deficiency resulting from Default Amounts and then to any deficiency resulting
from Series Adjustment Amounts.
(f) Any reduction of the Series Adjustment Amount for Series
1997-2 as a result of the deposit of funds into the Excess Funding Account, the
repurchase or other repayment of Investor Certificates or the increase of the
Principal Receivables in the Trust shall 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 unreimbursed reduction of the Invested Amount thereof
attributable to Series Adjustment Amounts.
Section 4.8 Excess Spread; Shared Excess Finance Charge
Collections . The Servicer shall apply, or shall instruct the Trustee to apply,
on each Distribution Date, Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1997-2 pursuant to Section 4.1(h) with respect
to the preceding Collection Period, to make the following distributions in the
following priority:
(a) an amount up to the Class A Required Amount, if
any, with respect to such Distribution Date shall be distributed by the
Trustee to fund any deficiency pursuant to Sections 4.6(a)(i), (ii) and
(iii), 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 shall
be treated as a portion of Available Principal Collections for such
Distribution Date;
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(c) an amount up to the Class B Required Amount, if
any, with respect to such Distribution Date shall be distributed by the
Trustee to fund any deficiency pursuant to Sections 4.6(b)(i) and (ii),
in that order of priority;
(d) an amount equal to [any remaining portion of the
Class B Required Amount] for such Distribution Date shall be treated as
a portion of Available Principal Collections for such Distribution
Date;
(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" (but not in
excess of the aggregate amount of such reductions which have not been
previously reimbursed) shall be treated as a portion of Available
Principal Collections for such Distribution Date;
(f) an amount equal to Collateral Monthly Interest
for such Distribution Date, plus the amount of Collateral Monthly
Interest previously due but not distributed to the Collateral
Indebtedness Holder on a prior Distribution Date, plus the amount of
Collateral Additional Interest for such Distribution Date and any
Collateral Additional Interest previously due but not distributed to
the Collateral Indebtedness Holder shall be applied in accordance with
Section 2.10 of the Loan Agreement;
(g) if First North American National Bank is the
Servicer, an amount equal to the Class A Servicing Fee, the Class B
Servicing and the Collateral Servicing Fee for such Distribution Date
(or, if First North American National Bank is no longer the Servicer,
the portion thereof not paid pursuant to Section 4.6 (a),(b) or (c)),
plus the amount of any Class A Servicing Fee, Class B Servicing Fee or
Collateral Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, shall be distributed to the
Servicer;
(h) an amount equal to the Collateral Allocable
Amount, if any, for such Distribution Date shall be treated as a
portion of Available Principal Collections for such Distribution Date;
(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" (but
not in excess of the aggregate amount of such reductions which have not
been
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previously reimbursed) shall be treated as a portion of Available
Principal Collections for such Distribution Date;
(j) an amount equal to the excess, if any, of the
Required Cash Collateral Amount over the Available Cash Collateral
Amount (without giving effect to any deposit made on such date
hereunder and after giving effect to any payment of Collateral Monthly
Principal or Class D Monthly Principal being made on such date) shall
be deposited into the Cash Collateral Account;
(k) an amount equal to Class D Monthly Interest for
such Distribution Date, plus the amount of Class D Monthly Interest
previously due but not distributed to the Class D Certificateholders on
a prior Distribution Date, plus the amount of Class D Additional
Interest for such Distribution Date and any Class D Additional Interest
previously due but not distributed shall be distributed to the Paying
Agent for payment to the Class D Certificateholders;
(l) if First North American National Bank is the
Servicer, an amount equal to the Class D Servicing Fee for such
Distribution Date (or, if First North American National Bank is no
longer the Servicer, the portion of the Class D Servicing Fee for such
Distribution Date not paid pursuant to Section 4.6(d)(i)), plus the
amount of any Class D Servicing Fee previously due but not distributed
to the Servicer on a prior Distribution Date, shall be distributed to
the Servicer;
(m) an amount equal to the Class D Allocable Amount
for such Distribution Date shall be treated as a portion of Available
Principal Collections for such Distribution Date;
(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" (but not in
excess of the aggregate amount of such reductions which have not been
previously reimbursed) shall be treated as a portion of Available
Principal Collections for such Distribution Date;
(o) an amount equal to the excess, if any, of the
Required Reserve Account Amount over the amount on deposit in the
Reserve Account shall be deposited into the Reserve Account;
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(p) an amount equal to the aggregate of any other
amounts then due to the Collateral Indebtedness Holder pursuant to the
Loan Agreement shall be applied in accordance with Section 2.10 of the
Loan Agreement; and
(q) the balance, if any, shall constitute "Shared
Excess Finance Charge Collections" with respect to Group One and shall
be applied in accordance with Section 4.1(h).
Section 4.9 Reallocated Principal Collections. The Servicer
shall apply, or shall instruct the Trustee to apply, on each Distribution Date,
Reallocated Principal Collections (applying all Class D Subordinated Principal
Collections prior to applying any Collateral Subordinated Principal Collections,
and applying all Collateral Subordinated Principal Collections prior to applying
any Class B Subordinated Principal Collections, and applying no Class B
Subordinated Principal Collections with respect to the Class B Required Amount
pursuant to clause (b) below and applying no Class B Subordinated Principal
Collections or Collateral Subordinated Principal Collections with respect to the
Collateral Required Amount pursuant to clause (c) below) with respect to such
Distribution Date, to make the following distributions in the following
priority:
(a) an amount equal to the excess, if any, of (i) the
Class A Required Amount, if any, with respect to such Distribution Date
over (ii) the sum of (x) the amount of Excess Spread and Shared Excess
Finance Charge Collections allocable to Series 1997-2 with respect to
the preceding Collection Period pursuant to Section 4.8(a) and (y) the
Available Cash Collateral Amount with respect to such Distribution Date
shall be distributed by the Trustee to fund any deficiency pursuant to
Sections 4.6(a)(i), (ii) and (iii), in that order of priority;
(b) an amount equal to the excess, if any, of (i) the
Class B Required Amount, if any, with respect to such Distribution Date
over (ii) the sum of (x) the amount of Excess Spread and Shared Excess
Finance Charge Collections allocable to Series 1997-2 with respect to
the preceding Collection Period available in respect of the Class B
Required Amount pursuant to Section 4.8(c) and (d) on such Distribution
Date and (y) the amount withdrawn from the Cash Collateral Account in
respect of the Class B Required Amount with respect to such
Distribution Date shall be distributed by the Trustee to fund any
deficiency pursuant to Sections 4.8(c) and (d), in that order of
priority; and
(c) an amount equal to the excess, if any, of (i) the
Collateral Required Amount, if any, with respect to such
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Distribution Date over (ii) the sum of (x) the amount of Excess Spread
and Shared Excess Finance Charge Collections allocable to Series 1997-2
with respect to the preceding Collection Period available in respect of
the Collateral Required Amount pursuant to Sections 4.8(f) and (h) on
such Distribution Date and (y) the amount withdrawn from the Cash
Collateral Account in respect of the Collateral Required Amount with
respect to such Distribution Date shall be distributed by the Trustee
to fund any deficiency pursuant to Section 4.6(c)(i) and Sections
4.8(f) and (h), in that order of priority.
Section 4.10 Principal Shortfall. The "Principal Shortfall"
for Series 1997-2 shall be equal to (a) for any Distribution Date with respect
to the Revolving Period, zero or such higher amount designated by the Servicer
in an Officer's Certificate, (b) for any Distribution Date with respect to the
Accumulation Period (on or prior to the Class B Expected Final Distribution
Date), the excess, if any, of the Controlled Deposit Amount with respect to such
Distribution Date over the amount of Available Principal Collections for such
Distribution Date (excluding any portion thereof attributable to Shared
Principal Collections), (c) for any Distribution Date with respect to the Early
Amortization Period, unless and until the Class A Adjusted Invested Amount and
the Class B Adjusted Invested Amount shall have been paid in full, the excess,
if any, of the Invested Amount as of the end of the preceding Collection Period
over the amount of Available Principal Collections for such Distribution Date
(excluding any portion thereof attributable to Shared Principal Collections) and
(d) for each Distribution Date after the Class A Adjusted Invested Amount and
the Class B Adjusted Invested Amount have been paid in full, the excess, if any,
of the Invested Amount over the amount of Available Principal Collections for
such Distribution Date, or such lesser amount as may be designated by the
Servicer.
On each Distribution Date during the Early Amortization
Period, there shall be withdrawn from the Excess Funding Account an amount equal
to the product of (i) the amount on deposit in the Excess Funding Account, if
any, and (ii) a fraction, the numerator of which is the Principal Shortfall with
respect to Series 1997-2 and the denominator of which is equal to the aggregate
Principal Shortfalls of all Series then outstanding. Such amount shall be
deposited in the Collection Account and be considered as part of Available
Principal Collections with respect to Series 1997-2.
Section 4.11 Finance Charge Shortfall. The "Finance Charge
Shortfall" for Series 1997-2 for any Distribution Date shall be equal to the
excess, if any, of (a) the full amount
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required to be paid, without duplication, pursuant to Sections 4.6(a), 4.6(b),
4.6(c) and 4.6(d) and Section 4.8 (a)-(o) on such Distribution Date over (b) the
applicable Invested Percentage of Collections of Finance Charge Receivables with
respect to the preceding Collection Period.
Section 4.12 Cash Collateral Account. (a) The Servicer shall
establish and maintain, in the name of the Trustee, for the benefit of the
Series 1997-2 Certificateholders, with an Eligible Institution a segregated
trust account (the "Cash Collateral Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Series 1997-2 Certificateholders. The Cash Collateral Account shall initially be
established with the Trustee. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Cash Collateral
Account and in all proceeds thereof. The Cash Collateral Account shall be under
the sole dominion and control of the Trustee for the benefit of the Series
1997-2 Certificateholders. If, at any time, the institution holding the Cash
Collateral Account ceases to be an Eligible Institution, the Trustee (or the
Servicer on its behalf) shall within five Business Days establish a new Cash
Collateral Account meeting the conditions specified above with an Eligible
Institution and shall transfer any cash and/or any investments to such new Cash
Collateral Account. The Trustee, at the direction of the Servicer, shall make
deposits to and withdrawals from the Cash Collateral Account in the amounts and
at the times set forth in this Agreement and the Loan Agreement. All withdrawals
from the Cash Collateral Account shall be made in the priority set forth below.
The interest of the Collateral Indebtedness Holder in the Cash Collateral
Account shall be subordinated to the interests of the Class A Certificateholders
and the Class B Certificateholders as provided herein and in the Loan Agreement.
The Collateral Indebtedness Holder shall not be entitled to reimbursement from
the Trust Property for any withdrawals from the Cash Collateral Account except
as specifically provided in this Agreement and the Loan Agreement.
(b) Funds on deposit in the Cash Collateral Account shall be
invested at the direction of the Servicer by the Trustee in Eligible
Investments. Funds on deposit in the Cash Collateral Account on any Distribution
Date, after giving effect to any withdrawals from the Cash Collateral Account on
such Distribution Date, shall be invested in such investments that will mature
so that such funds will be available for withdrawal on or prior to the following
Distribution Date. No Eligible Investment shall be disposed of prior to its
maturity; provided, however, that the Trustee may sell, liquidate or dispose of
an Eligible Investment before its maturity, if so directed by the Servicer, the
Servicer having reasonably determined that the interest of the 1997-2
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Certificateholders may be adversely affected if such Eligible Investment is held
to its maturity. The proceeds of any such investments shall be invested in such
investments that will mature so that such funds will be available for withdrawal
on or prior to the Distribution Date immediately following the date of such
investment. The Trustee shall maintain for the benefit of the Series 1997-2
Certificateholders possession of the negotiable instruments or securities, if
any, evidencing such Eligible Investments. On each Distribution Date, all
interest and earnings (net of losses and investment expenses) on funds on
deposit in the Cash Collateral Account shall be treated as a portion of Excess
Spread for such Distribution Date and applied in accordance with Section 4.8.
(c) On each Determination Date, the Servicer shall calculate
the amount (the "Required Draw Amount") by which the amounts specified in
clauses (a) through (f) and clause (h) of Section 4.8 with respect to the
related Distribution Date exceed the amount of Excess Spread and Shared Excess
Finance Charge Collections allocable to Series 1997-2 with respect to the
preceding Collection Period available to pay such specified amounts. In the
event that for any Distribution Date the Required Draw Amount is greater than
zero, the Servicer shall give written notice to the Trustee of such positive
Required Draw Amount on the related Determination Date. On the Distribution
Date, the Required Draw Amount, if any, up to the Available Cash Collateral
Amount, shall be withdrawn from the Cash Collateral Account and distributed to
fund any deficiency pursuant to clauses (a) through (f) and clause (h) of
Section 4.8 (in the order of priority set forth in Section 4.8).
(d) In the event that the Cash Enhancement Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Cash Collateral Account and all payments of principal to Series 1997-2
Certificateholders with respect to such Distribution Date, is greater than zero,
the Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Cash Collateral Account, and pay to the Transferor, an amount
equal to such Cash Enhancement Surplus; provided, however, that the Transferor,
at its option, to be exercised in its sole discretion, may instruct the Servicer
not to instruct the Trustee to withdraw such Cash Enhancement Surplus (or any
portion thereof), in which event the Trustee shall not withdraw such Cash
Enhancement Surplus (or portion thereof) from the Cash Collateral Account.
Section 4.13 Principal Funding Account. (a) The Servicer
shall establish and maintain, in the name of the Trustee, for the benefit of the
Series 1997-2 Certificateholders, with an Eligible Institution a segregated
trust account (the
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"Principal Funding Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Series 1997-2
Certificateholders. The Principal Funding Account shall initially be established
with the Trustee. The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Principal Funding Account and in all
proceeds thereof. The Principal Funding Account shall be under the sole dominion
and control of the Trustee for the benefit of the Series 1997-2
Certificateholders. If, at any time, the institution holding the Principal
Funding Account ceases to be an Eligible Institution, the Trustee (or the
Servicer on its behalf) shall within five Business Days establish a new
Principal Funding Account meeting the conditions specified above with an
Eligible Institution and shall transfer any cash and/or any investments to such
new Principal Funding Account. Pursuant to the authority granted to the Servicer
in Section 3.1(b), the Servicer shall have the power, revocable by the Trustee,
to make withdrawals and payments or to instruct the Trustee to make withdrawals
and payments from the Principal Funding Account for the purposes of carrying out
the Servicer's or the Trustee's duties hereunder.
(b) Funds on deposit in the Principal Funding Account shall be
invested at the direction of the Servicer by the Trustee in Eligible
Investments. All such Eligible Investments shall be held by the Trustee for the
benefit of the Series 1997-2 Certificateholders; provided, however, that on each
Distribution Date all interest and other investment income (net of losses and
investment expenses) ("Principal Funding Investment Proceeds") on funds on
deposit therein shall be applied as set forth in Section 4.13(c) below. Funds on
deposit in the Principal Funding Account shall be invested in Eligible
Investments that will mature so that such funds will be available for withdrawal
on or prior to the following Distribution Date. No Eligible Investment shall be
disposed of prior to its maturity; provided, however, that the Trustee may sell,
liquidate or dispose of an Eligible Investment before its maturity, if so
directed by the Servicer, the Servicer having reasonably determined that the
interest of the 1997-2 Certificateholders may be adversely affected if such
Eligible Investment is held to its maturity.
(c) On each Distribution Date with respect to the Accumulation
Period, the Servicer shall direct the Trustee to withdraw from the Principal
Funding Account and deposit into the Collection Account all Principal Funding
Investment Proceeds then on deposit in the Principal Funding Account and such
Principal Funding Investment Proceeds shall be treated as a portion of (x) prior
to the payment in full of the Class A Adjusted Invested Amount, Class A
Available Funds and (y) thereafter, Class B Available Funds, in each case for
such Distribution Date.
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(d) Reinvested interest and other investment income on funds
deposited in the Principal Funding Account shall not be considered to be
principal amounts on deposit therein for purposes of this Agreement.
Section 4.14 Reserve Account. (a) The Servicer shall
establish and maintain, in the name of the Trustee, for the benefit of the
Series 1997-2 Certificateholders, with an Eligible Institution a segregated
trust account (the "Reserve Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Series 1997-2
Certificateholders. The Reserve Account shall initially be established with the
Trustee. The Trustee shall possess all right, title and interest in all funds on
deposit from time to time in the Reserve Account and in all proceeds thereof.
The Reserve Account shall be under the sole dominion and control of the Trustee
for the benefit of the Series 1997-2 Certificateholders. If at any time the
institution holding the Reserve Account ceases to be an Eligible Institution,
the Trustee (or the Servicer on its behalf) shall within five Business Days
establish a new Reserve Account meeting the conditions specified above with an
Eligible Institution, and shall transfer any cash and/or any investments to such
new Reserve Account. The Trustee, at the direction of the Servicer, shall (i)
make withdrawals from the Reserve Account from time to time in an amount up to
the Available Reserve Account Amount at such time, for the purposes set forth in
this Agreement, and (ii) on each Distribution Date (from and after the Reserve
Account Funding Date) prior to the termination of the Reserve Account, make a
deposit into the Reserve Account in the amount specified in, and otherwise in
accordance with, Section 4.8(p).
(b) Funds on deposit in the Reserve Account shall be invested
at the direction of the Servicer by the Trustee in Eligible Investments. Funds
on deposit in the Reserve Account on any Distribution Date, after giving effect
to any withdrawals from the Reserve Account on such Distribution Date, shall be
invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. The
Trustee shall maintain for the benefit of the Series 1997-2 Certificateholders
possession of the negotiable instruments or securities, if any, evidencing such
Eligible Investments. No Eligible Investment shall be disposed of prior to its
maturity; provided, however, that the Trustee may sell, liquidate or dispose of
an Eligible Investment before its maturity, if so directed by the Servicer, the
Servicer having reasonably determined that the interest of the Series 1997-2
Certificateholders may be adversely affected if such Eligible Investment is held
to its maturity. On each Distribution Date, all interest and earnings (net of
losses and investment expenses)
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on funds on deposit in the Reserve Account shall be retained in the Reserve
Account (to the extent that the Available Reserve Account Amount is less than
the Required Reserve Account Amount) and the balance, if any, shall be deposited
in the Collection Account and treated as a portion of (x) until the payment in
full of the Class A Adjusted Invested Amount, Class A Available Funds and (y)
thereafter, Class B Available Funds, in each case for such Distribution Date.
For purposes of determining the availability of funds or the balance in the
Reserve Account for any reason under this Agreement, except as otherwise
provided in the preceding sentence, investment earnings on such funds shall be
deemed not to be available or on deposit.
(c) On the Determination Date preceding each Distribution Date
with respect to the Accumulation Period (prior to the Class B Expected Final
Distribution Date) and the first Special Distribution Date, the Servicer shall
calculate the "Reserve Draw Amount" which shall be equal to the excess, if any,
of the Covered Amount with respect to such Distribution Date or Special
Distribution Date over the Principal Funding Investment Proceeds with respect to
such Distribution Date or Special Distribution Date.
(d) In the event that for any Distribution Date the Reserve
Draw Amount is greater than zero, the Reserve Draw Amount, up to the Available
Reserve Account Amount, shall be withdrawn from the Reserve Account on such
Distribution Date by the Trustee (acting in accordance with the instructions of
the Servicer), deposited into the Collection Account and included in (i) until
the payment in full of the Class A Adjusted Invested Amount, Class A Available
Funds and (ii) thereafter, Class B Available Funds, in each case for such
Distribution Date.
(e) In the event that the Reserve Account Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Reserve Account with respect to such Distribution Date, is greater than
zero, the Trustee, acting in accordance with the instructions of the Servicer,
shall withdraw from the Reserve Account, and pay in accordance with the Loan
Agreement, an amount equal to such Reserve Account Surplus.
(f) Upon the earliest to occur of (i) the termination of the
Trust pursuant to Article XII of the Agreement, (ii) the day on which the Class
A Adjusted Invested Amount and Class B Adjusted Invested Amount have been paid
in full, (iii) if the Accumulation Period has not commenced, the occurrence of
an Early Amortization Event with respect to Series 1997-2 and (iv) if the
Accumulation Period has commenced, the earlier of the first Special Distribution
Date and the Class B Expected Final Distribution Date, the Trustee, acting in
accordance with the
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instructions of the Servicer, after the prior payment of all amounts owing to
the Series 1997-2 Certificateholders which are payable from the Reserve Account
as provided herein, shall withdraw from the Reserve Account and pay in
accordance with the Loan Agreement all amounts, if any, on deposit in the
Reserve Account, and the Reserve Account shall be deemed to have terminated for
all purposes of the Agreement.
Section 4.15. Postponement of Accumulation Period. The
Accumulation Period is scheduled to commence at the end of the day on the last
day of the October 2001 Collection Period; provided, however, that, if the
Accumulation Period Length (determined as described below) shall be less than 12
months, the date on which the Accumulation Period actually commences may, at the
option of the Transferor, be delayed to the first day of any month that is a
number of whole months prior to the Class A Expected Final Distribution Date at
least equal to the Accumulation Period Length and, as a result, the number of
Collection Periods in the Accumulation Period shall at least equal the
Accumulation Period Length. On each Determination Date until the Accumulation
Period begins, the Servicer shall determine the "Accumulation Period Length,"
which shall equal the number of whole months such that the sum of the
Accumulation Period Factors for each month during such period will be equal to
or greater than the Required Accumulation Factor Number; provided, however, that
the Accumulation Period Length shall not be determined to be less than one
month.
Section 4.16 Additional Issuances of Class D Certificates.
(a) On any day in the Revolving Period, the Trustee shall issue to the
Transferor for execution, upon the Transferor's request, and the Trustee shall
authenticate and deliver, in accordance with the Transferor's instructions, an
additional principal amount of Class D Certificates ("Additional Class D
Certificates") as provided below.
(b) Additional Class D Certificates may be issued, executed
and delivered upon satisfaction of the following conditions:
(i) after giving effect to the issuance of such
Additional Class D Certificates, the Transferor Amount shall be at
least equal to the Minimum Transferor Amount and the Aggregate
Principal Receivables shall be at least equal to the Minimum Aggregate
Principal Receivables;
(ii) the Transferor shall have given notice by
10:00 A.M., New York City time, on the date such Additional Class D
Certificates are to be issued to the Trustee, the
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Paying Agent and the Collateral Indebtedness Holder of the proposed
issuance of such Additional Class D Certificates;
(iii) on or before the date on which such Additional
Class D Certificates are issued, the Transferor shall have delivered an
Opinion of Counsel addressed to the Trustee, dated the date of such
issuance, to the effect that such issuance will not adversely affect
the tax characterization as debt of Investor Certificates of any
outstanding Series or Class with respect to which an Opinion of Counsel
addressed to the Trustee was delivered at the time of their issuance
that such Investor Certificates would be characterized as debt, cause
the Trust to be classified, for federal income tax purposes, as an
association (or publicly traded partnership) taxable as a corporation,
or cause or constitute an event in which gain or loss would be
recognized by any Certificateholder; and
(iv) on or before the date such Additional Class D
Certificates are issued, the Transferor shall deliver to the Trustee an
Officer's Certificate confirming the item set forth in clause (i)
above. The Trustee may conclusively rely on such certificate, shall
have no duty to make inquiries with regard to matters set forth therein
and shall incur no liability in so relying.
[END OF ARTICLE IV]
SECTION 9. Article V of the Agreement. Article V of the
Agreement as it relates to Series 1997-2 shall read in its entirety as follows:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
Section 5.1 Distributions. (a) On each Determination Date,
the Servicer shall deliver to the Trustee and Paying Agent a certificate
substantially in the form of Exhibit D prepared by the Servicer.
(b) On each Distribution Date, the Paying Agent shall
distribute to each Class A Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class A Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay interest on the Class A
Certificates pursuant to this Agreement.
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(c) On the Class A Expected Final Distribution Date and each
Special Distribution Date, the Paying Agent shall distribute to each Class A
Certificateholder of record as of the preceding Record Date (other than as
provided in Section 12.2 respecting a final distribution) such Class A
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class A Certificates pursuant to this Agreement.
(d) On each Distribution Date, the Paying Agent shall
distribute to each Class B Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class B Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay interest on the Class B
Certificates pursuant to this Agreement.
(e) On the Class B Expected Final Distribution Date and each
Special Distribution Date, the Paying Agent shall distribute to each Class B
Certificateholder of record as of the preceding Record Date (other than as
provided in Section 12.2 respecting a final distribution) such Class B
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class B Certificates pursuant to this Agreement.
(f) On each Distribution Date, the Paying Agent shall
distribute to each Class D Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class D Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay interest on the Class D
Certificates pursuant to this Agreement.
(g) On each Distribution Date, the Paying Agent shall
distribute to each Class D Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class D Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay principal of the Class D
Certificates pursuant to this Agreement.
(h) Except as provided in Section 12.2 with respect to a final
distribution and Section 5.3, distributions to Series 1997-2 Certificateholders
hereunder shall be made by check mailed to each such Certificateholder at such
Certificateholder's address appearing in the Certificate Register without
presentation or surrender of any such Series 1997-2 Certificate or the making of
any notation thereon; provided, however, that with respect to such Certificates
registered in the name of a
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Clearing Agency, such distributions shall be made to such Clearing Agency in
immediately available funds.
Section 5.2 Statements to Series 1997-2 Certificateholders.
On each Distribution Date, the Paying Agent, on behalf of the Trustee, shall
forward to each Series 1997-2 Certificateholder, including, for the avoidance of
doubt, the Collateral Indebtedness Holder, a statement substantially in the form
of Exhibit E prepared by the Servicer setting forth certain information relating
to the Trust and the Series 1997-2 Certificates.
On or before January 31 of each calendar year, beginning with
1998, the Paying Agent, on behalf of the Trustee, shall furnish or cause to be
furnished to each Person who at any time during the preceding calendar year was
a Series 1997-2 Certificateholder a statement prepared by the Servicer
containing the information which is required to be contained in the monthly
statement referred to in the preceding paragraph, aggregated for such calendar
year or the applicable portion thereof during which such Person was a
Certificateholder of such Series, together with other information as is required
to be provided by an issuer of indebtedness under the Internal Revenue Code and
such other customary information as is necessary to enable the
Certificateholders of such Series to prepare their tax returns. Such obligation
of the Servicer shall be deemed to have been satisfied to the extent that
substantially comparable information shall have been provided by the Paying
Agent pursuant to any requirements of the Internal Revenue Code as from time to
time in effect.
Section 5.3 Distributions to Collateral Indebtedness Holder.
Notwithstanding the foregoing provisions of this Article V, amounts payable to
the Collateral Indebtedness Holder pursuant to this Series Supplement shall be
distributed in the manner provided for in the Loan Agreement.
[END OF ARTICLE V]
SECTION 10. Early Amortization Events. If any one of the
events specified in Section 9.1 of the Agreement or any one of the following
events shall occur during either the Revolving Period or the Accumulation Period
with respect to the Series 1997-2 Certificates:
(a) failure on the part of the Transferor (x) to make
any payment or deposit required by the terms of the Agreement on or
before the date occurring five Business Days after the date such
payment or deposit is required to be made; or (y) duly to observe or
perform in any material
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respect any other covenants or agreements of the Transferor set forth
in the Agreement that 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 Transferor by the
Trustee, or to the Transferor and the Trustee by the Holders of Series
1997-2 Certificates evidencing not less than 25% of the Invested
Amount, and as a result of which the interests of the Series 1997-2
Certificateholders are materially and adversely affected;
(b) any representation or warranty made by the
Transferor in the Agreement shall prove to have been incorrect in any
material respect when made that continues to be incorrect in any
material respect 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 Series 1997-2 Certificates
evidencing not less than 50% of the Invested Amount, and as a result of
which the interests of the Series 1997-2 Certificateholders are
materially and adversely affected; provided, however, that if the
representation or warranty which was breached relates to any particular
Receivable or group of Receivables, an Early Amortization Event shall
not be deemed to have occurred hereunder if the Transferor shall have
accepted reassignment of such Receivable, or all of such Receivables,
if applicable, during such period (or such longer period not to exceed
a total of 90 days as the Trustee may specify) in accordance with the
provisions hereof;
(c) the Transferor or Circuit City shall consent to
the appointment of a trustee, conservator, receiver, liquidator,
custodian or other similar official in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities,
receivership, conservatorship or similar proceedings of or relating to
the Transferor or Circuit City or of or relating to all or
substantially all of its property; or a decree or order of a court or
agency or supervisory authority having jurisdiction in the premises for
the appointment of a trustee, conservator, receiver, liquidator,
custodian or other similar official in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities,
receivership, conservatorship or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Transferor or Circuit City and such decree or order shall
have remained in force undischarged or unstayed for a period of 30
days; either the Transferor or Circuit City shall admit in writing
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<PAGE> 62
its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable bankruptcy, insolvency,
receivership, conservatorship or reorganization statute, make an
assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations; an involuntary proceeding shall be
commenced or an involuntary petition shall be filed with respect to the
Transferor or Circuit City in a court of competent jurisdiction seeking
to take advantage of any applicable bankruptcy, insolvency,
receivership, conservatorship or reorganization statute and such
proceeding or petition shall continue undismissed for 60 days; or the
Transferor shall become unable for any reason to transfer Receivables
to the Trust in accordance with the provisions of the Agreement;
(d) any Servicer Default shall occur that would have
a material adverse effect on the Series 1997-2 Certificates;
(e) the Transferor shall fail to designate
Supplemental Accounts or cause the Trust to repurchase Investor
Certificates in an amount and within the time period required by
Section 2.6(a) of the Agreement; or
(f) the average of the Portfolio Yields for any three
consecutive Collection Periods shall be less than the average of the
Base Rates for such period plus 2.00%;
(g) the Class A Invested Amount shall not be paid in
full on the Class A Expected Final Distribution Date or the Class B
Invested Amount shall not be paid in full on the Class B Expected Final
Distribution Date; or
(h) the Retained Percentage shall be equal to or
less than 2.00% as of the last day of any Collection Period;
then, in the case of any event described in clause (a), (b) or (d), an Early
Amortization Event will be deemed to have occurred with respect to the Series
1997-2 Certificates only if, after any applicable grace period described in the
clauses, either the Trustee or Series 1997-2 Certificateholders evidencing more
than 50% of the Invested Amount of such Series, by written notice to the
Transferor and the Servicer (and to the Trustee, if given by such
Certificateholders) declare that an Early Amortization Event has occurred as of
the date of such notice, and, in the case of any event described in Section 9.1
of the Agreement an Early Amortization Event with respect to all Series, and in
the case of any event described in clause (c), (e), (f), (g), or (h), an Early
Amortization Event with respect to only the Series 1997-2 Certificates, will be
deemed to have occurred without any notice
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or other action on the part of the Trustee or the Certificateholders or all
certificateholders, as appropriate, immediately upon the occurrence of such
event.
SECTION 11. Restrictions on Transfer. (a) The Collateral
Indebtedness Interest shall be subject to the restrictions on transfer set forth
in the Loan Agreement.
(b) The Transferor may at any time, without the consent of the
Series 1997-2 Certificateholders, (i) sell or transfer all or a portion of the
Class D Certificates, provided that (A) the Transferor shall have given notice
to the Trustee, the Servicer and the Rating Agencies of such proposed sale or
transfer of the Class D Certificates at least five Business Days prior to the
consummation of such sale or transfer; (B) the Rating Agency Condition shall
have been satisfied; (C) no Early Amortization Event shall have occurred prior
to the consummation of such proposed sale or transfer of Class D Certificates;
(D) the Transferor shall have delivered an Officer's Certificate dated the date
of the consummation of such proposed sale or transfer to the effect that, in the
reasonable belief of the Transferor, such action will not, based on the facts
known to such officer at the time of such certification, cause an Early
Amortization Event to occur with respect to any Series, and (E) the Transferor
shall have provided an Opinion of Counsel addressed to the Trustee, dated the
date of such certificate with respect to such action, that such proposed sale or
transfer will not (x) adversely affect the tax characterization as debt of
Investor Certificates of any outstanding Series or Class with respect to which
an Opinion of Counsel addressed to the Trustee was delivered at the time of
their issuance that such Investor Certificates would be characterized as debt,
(y) cause the Trust to be classified, for federal income tax purposes, as an
association (or publicly traded partnership) taxable as a corporation and (z)
cause or constitute an event in which gain or loss would be recognized by any
Certificateholder.
(c) No Class D Certificate or any interest therein may be
Transferred except in accordance with this Section 11. Any sale, conveyance,
assignment, hypothecation, pledge, participation or other transfer (each, a
"Transfer") of a Class D Certificate otherwise permitted by this Section 11 will
be permitted only if it consists of a pro rata percentage interest in all
payments made with respect to such holder's Class D Certificates. No Class D
Certificate or any interest therein may be Transferred to any Person (each, an
"Assignee") unless the Assignee shall have executed and delivered the
certification referred to in subsection 11(e) below and each of the Transferor
and the Servicer shall have granted its prior consent thereto. The consent of
the Transferor and the Servicer shall be granted
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unless the Transferor reasonably determines that such Transfer would create a
risk that the Trust would be classified for federal or any applicable state tax
purposes as an association or publicly traded partnership taxable as a
corporation; provided, however, that any attempted Transfer that would cause the
number of Targeted Holders to exceed ninety-nine shall be void.
(d) Each initial purchaser of a Class D Certificate or any
interest therein and any Assignee thereof shall certify to the Transferor, the
Servicer and the Trustee that it is either (x)(A) a citizen or resident of the
United States, (B) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision thereof which,
if such entity is a tax-exempt entity, recognizes that payments with respect to
the Class D Certificates may constitute unrelated business taxable income or (C)
a person not described in (A) or (B) whose ownership of the Class D Certificates
is effectively connected with the conduct of a trade or business within the
United States (within the meaning of the Code) and whose ownership of any
interest in a Class D Certificate will not result in any withholding obligation
with respect to any payments with respect to the Class D Certificates by any
person and who will furnish to the Certificateholder making the Transfer, the
Servicer and the Trustee, a properly executed United States Internal Revenue
Service Form 4224 (and to agree to provide a new Form 4224 upon the expiration
or obsolescence of any previously delivered form and comparable statements in
accordance with applicable United States laws) or (y) an estate or trust the
income of which is includible in gross income for United States federal income
tax purposes.
(e) Each initial purchaser of a Class D Certificate or any
interest therein and any Assignee thereof shall further certify to the
Transferor, the Servicer and the Trustee that it has neither acquired nor will
it sell, trade or transfer any interest in a Class D Certificate or cause an
interest in a Class D Certificate to be marketed on or through (i) an
"established securities market" within the meaning of Section 7704(b)(1) of the
Code and any treasury regulation thereunder, including, without limitation, an
over-the-counter-market or an interdealer quotation system that regularly
disseminates firm buy or sell quotations or (ii) a "secondary market" within the
meaning of Section 7704(b)(2) of the Code and any treasury regulation
thereunder, including, without limitation, a market wherein interests in the
Class D Certificates are regularly quoted by any Person making a market in such
interests and a market wherein any Person regularly makes available bid or offer
quotes with respect to interests in the Class D Certificates and stands ready to
effect buy or sell transactions at the quoted price for itself or on behalf of
others. In addition, each initial purchaser of a
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Class D Certificate or any interest therein and any Assignee shall certify,
prior to any delivery or Transfer to it of a Class D Certificate that it is not
and will not become, for so long as it holds an interest in a Class D
Certificate, a partnership, Subchapter S corporation or grantor trust for United
States federal income tax purposes. If an initial purchaser of an interest in a
Class D Certificate or an Assignee cannot make the certification described in
the preceding sentence, the Transferor may, in its sole discretion, prohibit a
Transfer to such entity; provided, however, that if the Transferor agrees to
permit such a Transfer, the Transferor may require additional certifications in
order to prevent the Trust from being treated as a publicly traded partnership.
Each Holder acknowledges that special tax counsel to the Transferor may render
Opinions of Counsel from time to time to the Transferor and others that the
Trust will not be treated as a publicly traded partnership taxable as a
corporation, and that such Opinions of Counsel will rely in part of the accuracy
of the certifications in this subsection 11(c).
(f) Each Class D Certificate will bear a legend or legends
substantially in the following form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
FIRST NORTH AMERICAN NATIONAL BANK AND THE TRUSTEE THAT SUCH PURCHASER IS NOT
(I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO
THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL,
STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" (AS DESCRIBED IN 29 C.F.R. 2510.3-101)
BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (V) A PERSON INVESTING "PLAN
ASSETS" (AS DESCRIBED IN 29 C.F.R. 2510.3-101) OF ANY SUCH PLAN (INCLUDING FOR
PURPOSES OF CLAUSES (IV) AND (V), INSURANCE COMPANY GENERAL CONTRACTS (WITHIN
THE MEANING OF SECTION 401(C) OF ERISA), BUT EXCLUDING, ANY ENTITY REGISTERED
UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED).
THIS CERTIFICATE MAY NOT BE ACQUIRED, SOLD, TRADED OR
TRANSFERRED, NOR MAY AN INTEREST IN THIS CERTIFICATE BE MARKETED, ON OR THROUGH
AN "ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF SECTION 7704(b)(1) OF
THE CODE AND ANY TREASURY REGULATION THEREUNDER, INCLUDING, WITHOUT LIMITATION,
AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER QUOTATION SYSTEM THAT REGULARLY
DISSEMINATES FIRM BUY OR SELL QUOTATIONS.
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THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT
THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO
THE TRANSFEROR OR (2) TO A LIMITED NUMBER OF INSTITUTIONAL "ACCREDITED
INVESTORS" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) AND IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (UPON DELIVERY OF THE DOCUMENTATION REQUIRED BY THE POOLING AND
SERVICING AGREEMENT AND, IF THE TRUSTEE SO REQUIRES, AN OPINION OF COUNSEL
SATISFACTORY TO THE TRUSTEE). EACH CERTIFICATE OWNER, BY ACCEPTING A BENEFICIAL
INTEREST IN THIS CERTIFICATE, IS DEEMED TO REPRESENT THAT IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT). THIS CERTIFICATE WILL NOT BE ACCEPTED FOR REGISTRATION OF
TRANSFER EXCEPT UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE TRANSFER AGENT
AND REGISTRAR THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SERIES 1997-2
SUPPLEMENT HAVE BEEN COMPLIED WITH. THIS CERTIFICATE MAY NOT BE REOFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF
EACH OF THE TRANSFEROR AND THE SERVICER AND UNLESS AND UNTIL THE TRUSTEE SHALL
HAVE RECEIVED THE CERTIFICATIONS REQUIRED BY THE SERIES 1997-2 SUPPLEMENT.
(g) Upon surrender for registration of transfer of a Class D
Certificate at the office of the Transfer Agent and Registrar, accompanied by a
certification by the Class D Certificateholder substantially in the form
attached as Exhibit F, executed by the registered owner, in person or by such
Class D Certificateholder's attorney thereunto duly authorized in writing, and
receipt by the Trustee of the written consent of each of the Transferor and the
Servicer to such transfer, such Class D Certificate shall be transferred upon
the Certificate Register, and the Transferor shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferees one or
more new registered Class D Certificates of any authorized denominations and of
a like aggregate principal amount and tenor. Such transfers of Class D
Certificates shall be subject to the restrictions set forth in this Section 11
and to such other restrictions as shall be set forth in the text of the Class D
Certificates. Successive registrations and registrations of transfers as
aforesaid may be made from time to time as desired, and each such registration
shall be noted on the Certificate Register.
SECTION 12. Tax Characterization of the Collateral
Indebtedness Interest and the Class D Certificates. It is the
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intention of the parties hereto that the Collateral Indebtedness Interest and
the Class D Certificates be treated under applicable tax law as indebtedness. In
the event that either the Collateral Indebtedness Interest or the Class D
Certificates are not so treated, it is the intention of the parties that the
Collateral Indebtedness Interest or the Class D Certificates, as the case may
be, be treated under applicable tax law as interests in a partnership that owns
the Receivables. In the event that either the Collateral Indebtedness Interest
or the Class D Certificates are treated under applicable tax law as interests in
a partnership, it is the intention of the parties that the Collateral
Indebtedness Interest or the Class D Certificates, as the case may be, be
treated as guaranteed payments and, if for any reason they are not so treated,
that the holders of the Collateral Indebtedness Interest or the Class D
Certificates, as the case may be, be specially allocated gross interest income
equal to the interest accrued during each Interest Period on the Collateral
Indebtedness Interest and on the Class D Certificates.
SECTION 13. Ratification of Master Pooling and Servicing
Agreement. As supplemented by this Series Supplement, the Agreement is in all
respects ratified and confirmed and the Agreement as so supplemented by this
Series Supplement shall be read, taken, and construed as one and the same
instrument; provided, however, that pursuant to Section 9.2(a) of the Agreement,
the Trustee shall sell the portion of the Receivables allocable to Series 1997-2
unless instructed not to sell, dispose of or otherwise liquidate the Receivables
by holders of interests aggregating more than 50% of each Class of each 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 a Supplement.
SECTION 14. Counterparts. This Series Supplement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all of such counterparts shall together constitute
but one and the same instrument.
SECTION 15. Governing Law. THIS SERIES SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 16. Subordination of Certain Termination Payments.
Notwithstanding anything contained in Section 12.2(c) of the Agreement, upon the
sale of Receivables or interests therein as provided in Section 12.2(c) of the
Agreement, the
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proceeds of any such sale payable in respect of the Series 1997-2 Certificates
shall be payable first to the Class A Certificateholders on a pro rata basis
until all obligations payable in respect of the Class A Certificates are paid in
full, then to the Class B Certificateholders on a pro rata basis until all
obligations payable in respect of the Class B Certificates are paid in full,
then to the Collateral Indebtedness Holder until all obligations payable in
respect of the Collateral Indebtedness Interest are paid in full and then to the
Class D Certificateholders on a pro rata basis until all obligations payable in
respect of the Class D Certificates are paid in full.
SECTION 17. Third-Party Beneficiaries. As provided in
Section 13.12 of the Agreement, the Agreement and this Series Supplement will
inure to the benefit of the Series 1997-2 Certificateholders and their
respective successors and permitted assigns.
SECTION 18. FASIT Election. Each Series 1997-2
Certificateholder, by acquiring an interest in a Series 1997-2 Certificate, is
deemed to consent to any amendment to the Agreement or this Series Supplement
necessary for the Transferor to elect for the Trust or any portion thereof to be
treated as a financial asset securitization investment trust ("FASIT") within
the meaning of Section 860L of the Code (or any successor provision thereto);
provided, however, that such election may not be made unless the Transferor
delivers to the Trustee an Opinion of Counsel to the effect that (i) the
issuance of FASIT regular interests will not adversely affect the federal or any
applicable state income tax characterization as debt of Investor 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 Investor Certificates would be
characterized as debt, (ii) following such issuance, the Trust will not be
classified, for federal or any applicable state income tax purposes, as an
association (or publicly traded partnership) taxable as a corporation, and (iii)
such issuance will not cause or constitute an event in which gain or loss would
be recognized by any Investor Certificateholder.
SECTION 19. Paired Series. Subject to obtaining confirmation
by each Rating Agency of the then existing ratings of each Class of Series
1997-2 Certificates which is then rated, and prior to the commencement of the
Early Amortization Period, the Series 1997-2 Certificates may be paired with one
or more other Series (each, a "Paired Series"). Each Paired Series either will
be pre-funded with an initial deposit to a pre-funding account in an amount up
to the initial principal balance of such Paired Series and primarily from the
proceeds of the sale of such Paired Series or will have a variable principal
amount.
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Any such pre-funding account will be held for the benefit of such Paired
Series and not for the benefit of the Series 1997-2 Certificateholders. As
principal is paid or deposited into the Principal Funding Account with respect
to the Series 1997-2 Certificates, either (i) in the case of a pre-funded Paired
Series, an equal amount of funds on deposit in any pre-funding account for such
pre-funded Paired Series will be released (which funds will be distributed to
the Transferor) or (ii) in the case of a Paired Series having a variable
principal amount, an interest in such variable Paired Series in an equal or
lesser amount may be sold by the Trust (and the proceeds thereof will be
distributed to the Transferor) and, in either case, the invested amount in the
Trust of such Paired Series will increase by up to a corresponding amount. Upon
payment in full of the Certificates, assuming that there have been no
unreimbursed charge-offs with respect to any related Paired Series, the
aggregate invested amount of such related Paired Series will have been increased
by an amount up to an aggregate amount equal to the Invested Amount paid to the
Series 1997-2 Certificateholders since the issuance of such Paired Series. The
issuance of a Paired Series will be subject to the conditions described in
subsection 6.9(b) of the Agreement.
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IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Series Supplement to be duly executed by their
respective officers thereunto duly authorized as of the day and year first above
written.
FIRST NORTH AMERICAN NATIONAL BANK,
as Transferor and Servicer
By:
-----------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee and Paying Agent
By:
-----------------------------------
Name:
Title:
67
<PAGE> 71
EXHIBIT A
REGISTERED [$_____________]
No. A-1 CUSIP No. ____________
Unless this Class A Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
FNANB CREDIT CARD MASTER TRUST
CLASS A FLOATING RATE ASSET BACKED CERTIFICATE,
SERIES 1997-2
Class A Expected Final Distribution Date:
November 2002 Distribution Date
Each $1,000 minimum denomination represents a
1/603,000 undivided interest
in certain assets of the
FNANB CREDIT CARD MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in a portfolio of
MasterCard(R) and VISA(R) credit card accounts of
FIRST NORTH AMERICAN NATIONAL BANK
(Not an interest in or obligation of First North
American National Bank or any affiliate thereof)
<PAGE> 72
This certifies that Cede & Co. (the "Class A Certificateholder") is the
registered owner of a fractional undivided interest in certain assets of a trust
(the "Trust") created pursuant to the Master Pooling and Servicing Agreement,
dated as of October 30, 1997 (as amended and supplemented, the "Agreement"), as
supplemented by the Series 1997-2 Supplement, dated as of November __, 1997 (as
amended and supplemented, the "Series Supplement"), among First North American
National Bank, a national banking association, as Transferor and Servicer, and
First Union National Bank, a national banking association, as trustee (the
"Trustee"). The corpus of the Trust consists of (i) receivables (the
"Receivables") generated from time to time in a portfolio of MasterCard(R) and
VISA(R) credit card accounts identified under the Agreement (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), (ii) all monies due or to become due and
all amounts received with respect to the Receivables on and after the Initial
Cut-Off Date (including recoveries of amounts previously charged-off), (iii)
certain interchange fees received by the Transferor in connection with the
Receivables, (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. Although a summary of certain provisions of the
Agreement and the Series Supplement is set forth below and on the Summary of
Terms and Conditions attached hereto and made a part hereof, this Class A
Certificate does not purport to summarize the Agreement and the Series
Supplement and reference is made to the Agreement and the Series Supplement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement and the Series Supplement (without
schedules) may be requested from the Trustee by writing to the Trustee at the
Corporate Trust Office: One James Center, 2nd Floor, 901 East Cary Street,
Richmond, Virginia 23219, Attention: Corporate Trust Department. To the extent
not defined herein, the capitalized terms used herein have the meanings ascribed
to them in the Agreement or the Series Supplement, as applicable.
This Class A Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Series Supplement, to which
Agreement and Series Supplement, each as amended and supplemented from time to
time, the Class A Certificateholder by virtue of the acceptance hereof assents
and is bound.
It is the intent of the Transferor and the Investor Certificateholders
(and Certificate Owners) that, for Federal, state and local income and
franchise tax purposes only, the Investor Certificates will qualify as
indebtedness of the
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<PAGE> 73
Transferor secured by the Receivables (unless otherwise specified in the
related Supplement). The Class A Certificateholder (and each Certificate Owner
of a Class A Certificate), by the acceptance of this Class A Certificate (or
its interest therein), is deemed to agree to treat this Class A Certificate for
Federal, state and local income and franchise tax purposes and any other tax
imposed on or measured by income as indebtedness of the Transferor.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class A Certificate
shall not be entitled to any benefit under the Agreement or the Series
Supplement or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class A Certificate
to be duly executed.
FIRST NORTH AMERICAN NATIONAL BANK
By:
---------------------------------------
Name:
Title:
Dated: November __, 1997
3
<PAGE> 74
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates described in the within-mentioned
Agreement and Series Supplement.
FIRST UNION NATIONAL BANK,
as Trustee
By:
-----------------------------------
Authorized Officer
4
<PAGE> 75
FNANB CREDIT CARD MASTER TRUST
CLASS A FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 1997-2
Summary of Terms and Conditions
This Class A Certificate is one of a Series of Certificates
entitled FNANB Credit Card Master Trust, Series 1997-2 Certificates (the "Series
1997-2 Certificates"), and one of a class thereof entitled Class A Floating Rate
Asset Backed Certificates, Series 1997-2 (the "Class A Certificates"), each of
which represents a fractional undivided interest in certain assets of the Trust.
The Trust property is allocated in part to the Investor Certificateholders of
all outstanding Series (the "Certificateholders' Interest") and the interests,
if any, of any Enhancement Providers, with the remainder allocated to the
Transferor. The aggregate interest represented by the Class A Certificates at
any time in the Principal Receivables in the Trust shall not exceed an amount
equal to the Class A Invested Amount at such time. The Class A Initial Invested
Amount is $603,000,000. The Class A Invested Amount on any date will be 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 Class A Investor Charge-Offs reimbursed pursuant to the Series
Supplement and, without duplication, the aggregate amount of the reductions of
the Series Adjustment Amounts allocable to the Class A Invested Amount pursuant
to the Series Supplement prior to such date; provided, however, that the Class A
Invested Amount may not be reduced below zero. In addition, classes of the
Series 1997-2 Certificates entitled Class B Floating Rate Asset Backed
Certificates, Series 1997-2 (the "Class B Certificates"), Collateral
Indebtedness Interest, Series 1997-2 (the "Collateral Indebtedness Interest")
and Class D Asset Backed Certificates, Series 1997-2 (the "Class D
Certificates") will be issued. The Exchangeable Transferor Certificate, which
represents the Tranferor Interest, has been issued to First North American
National Bank pursuant to the Agreement.
Subject to the terms and conditions of the Agreement, the
Transferor may from time to time direct the Trustee, on behalf of the Trust, to
issue one or more new Series of Investor Certificates, which will represent
fractional undivided interests in certain Trust Property.
Each Class A Certificate represents the right to receive
payments of (i) interest at the rate of 0.__% per annum above Certificate LIBOR
(as determined on the related Certificate LIBOR Determination Date), accruing
from November __, 1997,
<PAGE> 76
payable on December 15, 1997 and on the 15th day of each month thereafter (or,
if such 15th day is not a Business Day, the next succeeding Business Day)
(each, a "Distribution Date") and (ii) principal on the November 2002
Distribution Date (and on each Distribution Date thereafter, if the Class A
Certificates are not paid in full on the November 2002 Distribution Date) or,
upon the occurrence of an Early Amortization Event, on each Distribution Date
relating to the Early Amortization Period, in each case funded from a
percentage of the payments received with respect to the Receivables and certain
other funds, all as more fully described in the Agreement and the Series
Supplement. Interest on the Class A Certificates will be calculated on the
basis of a 360-day year and the actual number of days in the relevant Interest
Period.
The Class B Certificates, the Collateral Indebtedness
Interest and the Class D Certificates are subordinated to the Class A
Certificates to the extent set forth in the Series Supplement.
On each Distribution Date, the Paying Agent shall distribute
to each Class A Certificateholder of record on the last day of the preceding
calendar month (each, a "Record Date") such Class A Certificateholder's pro rata
share of such amounts (including amounts on deposit in the Principal Funding
Account) as are payable to the Class A Certificateholders pursuant to the
Agreement and the Series Supplement. Distributions with respect to this Class A
Certificate will be made by the Paying Agent by check mailed to the address of
the Class A Certificateholder of record appearing in the Certificate Register
without the presentation or surrender of this Class A Certificate or the making
of any notation thereon (except for the final distribution in respect of this
Class A Certificate), except that with respect to Class A Certificates
registered in the name of Cede & Co., the nominee for The Depository Trust
Company, distributions will be made in the form of immediately available funds.
Final payment of this Class A Certificate will be made only upon presentation
and surrender of this Class A Certificate at the office or agency specified in
the notice of final distribution delivered by the Trustee in accordance with
the Agreement and the Series Supplement.
On any Distribution Date occurring on or after the day on
which the Invested Amount is reduced to an amount less than or equal to 5% of
the Initial Invested Amount, the Class A Certificates are subject to retransfer
to the Transferor. The retransfer price will be equal to the Class A Invested
Amount plus accrued but unpaid interest thereon.
Subject to certain conditions in the Agreement, if the
Invested Amount is greater than zero on the March 2006 Distribution Date (the
"Stated Series Termination Date"), the
2
<PAGE> 77
Trustee shall sell or cause to be sold an amount of Receivables up to 110% of
the Invested Amount at the close of business on such date, but not more than
the total amount of Receivables allocable to the Series 1997-2 Certificates,
and apply the proceeds of such sale as provided in the Agreement and the Series
Supplement.
The Agreement and any Supplement may be amended from time to
time by the Servicer, the Transferor and the Trustee, without the consent of
any of the Investor Certificateholders, to cure any ambiguity, to correct or
supplement any provisions therein which may be inconsistent with any other
provisions therein or to add other identifying code numbers to the definition
of Account or to add any other provisions with respect to matters or questions
raised under the Agreement which shall not be inconsistent with the provisions
of the Agreement; provided, however, that such action shall not adversely
affect in any material respect the interests of any of the Investor
Certificateholders. In addition, the Agreement and any Supplement may be
amended from time to time by the Servicer, the Transferor and the Trustee,
without the consent of any of the Investor Certificateholders, to add or to
change any of the provisions of the Agreement to enable Bearer Certificates to
be issued in conformity with the Bearer Rules, to provide that Bearer
Certificates may be registrable as to principal, to change or eliminate any
restrictions on the payment of principal (or premium, if any) or any interest
on Bearer Certificates to comply with the Bearer Rules, to permit Bearer
Certificates to be issued in exchange for Registered Certificates (if then
permitted by the Bearer Rules), to permit Bearer Certificates to be issued in
exchange for Bearer Certificates of other authorized denominations or to permit
the issuance of Investor Certificates in uncertificated form, provided any such
action shall not adversely affect the interest of the Holders of Bearer
Certificates of any Series or any related Coupons in any material respect
unless such amendment is necessary to comply with the Bearer Rules.
The Agreement and any Supplement may also be amended from time
to time by the Servicer, the Transferor and the Trustee, without the consent of
any of the Investor Certificateholders, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Agreement, or of modifying in any manner the rights of the Holders of Investor
Certificates; provided, however, that (i) the Servicer shall have provided an
Opinion of Counsel to the Trustee to the effect that such amendment will not
materially and adversely affect the interests of the Investor Certificateholders
of any outstanding Series, which Opinion of Counsel may rely solely on the
rating confirmation referred to in clause (iii) below (or 100% of the class of
Certificateholders so affected shall have consented), (ii) such amendment shall
not, as evidenced by an
3
<PAGE> 78
Opinion of Counsel, cause any outstanding Series as to which an opinion that it
was debt was given on its Closing Date to fail to qualify as debt for Federal
income tax purposes, cause the Trust to be so characterized for Federal income
tax purposes as an association taxable as a corporation or otherwise have any
material adverse impact on the Federal income taxation characterization of any
outstanding Series of Investor Certificates or the Federal income taxation of
any Investor Certificateholder or any Certificate Owner and (iii) the Rating
Agencies shall confirm that such amendment shall not cause a reduction or
withdrawal of the rating of any outstanding Series of Certificates; and,
provided further, that such amendment shall not reduce in any manner the amount
of, or delay the timing of, or change the priority of, distributions which are
required to be made on any Investor Certificate of such Series without the
consent of the related Investor Certificateholder, change the definition of or
the manner of calculating the interest of any Investor Certificateholder of such
Series without the consent of the related Investor Certificateholder or reduce
the required percentage for consents to amendments pursuant to the following
paragraph without the consent of each affected Investor Certificateholder.
The Agreement and any Supplement may also be amended from
time to time by the Servicer, the Transferor 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 Amount of all Series
adversely affected, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Agreement or of
modifying in any manner the rights of the Investor Certificateholders of any
Series then issued and outstanding; provided, however, that no such amendment
shall (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor Certificate of such
Series without the consent of the related Investor Certificateholders; (ii)
change the definition of or the manner of calculating the Invested Amount, the
Invested Percentage, the applicable available amount under any Enhancement or
the Investor Default Amount of such Series without the consent of the related
Investor Certificateholders; or (iii) reduce the aforesaid percentage required
to consent to any such amendment, without the consent of the related Investor
Certificateholders. Any amendment pursuant to this paragraph shall require that
each Rating Agency rating the affected Series confirm that such amendment will
not cause a reduction or withdrawal of the rating of any outstanding Series of
Certificates.
The Class A Certificates are issuable only in minimum
denominations of $1,000 and integral multiples of $1,000 in excess thereof. The
transfer of this Class A Certificate shall be registered in the Certificate
Register upon surrender of this Class A Certificate
4
<PAGE> 79
for registration of transfer at any office or agency maintained by the Transfer
Agent and Registrar, and thereupon one or more new Class A Certificates in
authorized denominations representing like aggregate undivided interests in the
Trust will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain
limitations therein set forth, Class A Certificates are exchangeable for new
Class A Certificates in authorized denominations of like aggregate undivided
interests in the Trust as requested by the Class A Certificateholder
surrendering such Class A Certificates. No service charge may be imposed for
any transfer or exchange but the Transfer Agent and Registrar and the Trustee
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent of any of them may treat the person in whose name this
Class A Certificate is registered as the owner hereof for all purposes, and
neither the Trustee, the Paying Agent, the Transfer Agent and Registrar, nor
any agent of any of them, shall be affected by notice to the contrary.
THE AGREEMENT AND THIS CLASS A CERTIFICATE SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
5
<PAGE> 80
ASSIGNMENT
Social Security or other identifying number of assignee
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfe
unto
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ___________________________, attorney, to transfer
said certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: *
-----------------------------------
Signature Guaranteed:
----------------------------------
- -----------------------
(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
6
<PAGE> 81
EXHIBIT B
REGISTERED $[___________]
No. B-1 CUSIP No. ___________
Unless this Class B Certificate is presented by an
authorized representative of The Depository Trust Company, a New York
corporation ("DTC"), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
FNANB CREDIT CARD MASTER TRUST
CLASS B FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 1997-2
Class B Expected Final Distribution Date:
January 2003 Distribution Date
Each $1,000 minimum denomination represents a
1/135,000 undivided interest
in certain assets of the
FNANB CREDIT CARD MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in a portfolio of
MasterCard(R) and VISA(R) credit card accounts of
FIRST NORTH AMERICAN NATIONAL BANK
(Not an interest in or obligation of First North
American National Bank or any affiliate thereof)
This certifies that Cede & Co. (the "Class B Certificateholder") is the
registered owner of a fractional undivided interest in certain assets of a
trust (the "Trust") created pursuant to the Master Pooling and Servicing
Agreement, dated as of October 30, 1997 (as amended and supplemented, the
"Agreement"), as supplemented by the Series 1997-2 Supplement, dated as of
November ___, 1997 (as amended and supplemented, the "Series Supplement"),
among First North American National Bank, a national banking association, as
Transferor and Servicer, and First Union National Bank, a national banking
association, as trustee (the "Trustee"). The corpus of the Trust consists of
(i) receivables (the
<PAGE> 82
"Receivables") generated from time to time in a portfolio of MasterCard(R) and
VISA(R) credit card accounts identified under the Agreement (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), (ii) all monies due or to become due and
all amounts received with respect to the Receivables on and after the Initial
Cut-Off Date (including recoveries of amounts previously charged-off), (iii)
certain interchange fees received by the Transferor in connection with the
Receivables, (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. Although a summary of certain provisions of the
Agreement and the Series Supplement is set forth below and on the Summary of
Terms and Conditions attached hereto and made a part hereof, this Class B
Certificate does not purport to summarize the Agreement and the Series
Supplement and reference is made to the Agreement and the Series Supplement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights duties and obligations of
the Trustee. A copy of the Agreement and the Series Supplement (without
schedules) may be requested from the Trustee by writing to the Trustee at the
Corporate Trust Office: One James Center, 2nd Floor, 901 East Cary Street,
Richmond, Virginia 23219, Attention: Corporate Trust Department. To the extent
not defined herein, the capitalized terms used herein have the meanings ascribed
to them in the Agreement or the Series Supplement, as applicable.
This Class B Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement and the Series
Supplement, to which Agreement and Series Supplement, each as amended and
supplemented from time to time, the Class B Certificateholder by virtue of the
acceptance hereof assents and is bound.
It is the intent of the Transferor and the Investor
Certificateholders (and Certificate Owners) that, for Federal, state and local
income and franchise tax purposes only, the Investor Certificates will qualify
as indebtedness of the Transferor secured by the Receivables (unless otherwise
specified in the related Supplement). The Class B Certificateholder (and each
Certificate Owner of a Class B Certificate), by the acceptance of this Class B
Certificate (or its interest therein), is deemed to agree to treat this Class B
Certificate for Federal, state and local income and franchise tax purposes and
any other tax imposed on or measured by income as indebtedness of the
Transferor.
2
<PAGE> 83
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Class B
Certificate shall not be entitled to any benefit under the Agreement or the
Series Supplement or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class B
Certificate to be duly executed.
FIRST NORTH AMERICAN NATIONAL BANK
By:
--------------------------------------
Name:
Title:
Dated: November __, 1997
3
<PAGE> 84
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates described in the within-mentioned
Agreement and Series Supplement.
FIRST UNION NATIONAL BANK,
as Trustee
By:
---------------------------------
Authorized Officer
4
<PAGE> 85
FNANB CREDIT CARD MASTER TRUST
CLASS B FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 1997-2
Summary of Terms and Conditions
This Class B Certificate is one of a Series of Certificates entitled
FNANB Credit Card Master Trust, Series 1997-2 Certificates (the "Series 1997-2
Certificates"), and one of a class thereof entitled Class B Floating Rate Asset
Backed Certificates, Series 1997-2 (the "Class B Certificates"), each of which
represents a fractional undivided interest in certain assets of the Trust. The
Trust property is allocated in part to the Investor Certificateholders of all
outstanding Series (the "Certificateholders' Interest") and the interests, if
any, of any Enhancement Providers, with the remainder allocated to the
Transferor. The aggregate interest represented by the Class Certificates at any
time in the Principal Receivables in the Trust shall not exceed an amount equal
to the Class B Invested Amount at such time. The Class B Initial Invested Amount
is $135,000,000. The Class B Invested Amount on any date will be an amount equal
to (a) the Class B Initial Invested Amount, minus (b) after the Class A Adjusted
Invested Amount has 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 Class B Subordinated Principal Collections allocated on all prior
Distribution Dates pursuant to the Series Supplement, minus (f) an amount equal
to the amount by which the Class B Invested Amount has been reduced on all
prior Distribution Dates pursuant to the Series Supplement, plus (g) the sum of
the amount of Excess Spread and Shared Excess Finance Charge Collections
allocated and available on all prior Distribution Dates pursuant to the Series
Supplement for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (d), (e) and (f) and, without duplication, the aggregate
amount of the reductions of the Series Adjustment Amounts allocable to the
Class B Invested Amount pursuant to the Series Supplement prior to such date;
provided, however, that the Class B Invested Amount may not be reduced below
zero. In addition, classes of the Series 1997-2 Certificates entitled Class A
Floating Rate Asset Backed Certificates, Series 1997-2 (the "Class A
Certificates"), Collateral Indebtedness Interest, Series 1997-2 (the
"Collateral Indebtedness Interest") and Class D Asset Backed Certificates,
Series 1997-2 (the "Class D Certificates") will be issued. The Exchangeable
Transferor Certificate, which represents the Transferor Interest, has been
issued to First North American National Bank pursuant to the Agreement.
<PAGE> 86
Subject to the terms and conditions of the Agreement, the Transferor
may from time to time direct the Trustee, on behalf of the Trust, to issue one
or more new Series of Investor Certificates, which will represent fractional
undivided interests in certain Trust Property.
Each Class B Certificate represents the right to receive payments of
(i) interest at the rate of 0.__% per annum above Certificate LIBOR (as
determined on the related Certificate LIBOR Determination Date), accruing from
November ___, 1997, payable on December 15, 1997 and on the 15th day of each
month thereafter (or, if such 15th day is not a Business Day, the next
succeeding Business Day) (each, a "Distribution Date") and (ii) principal on the
January 2003 Distribution Date (and on each Distribution Date thereafter, if the
Class B Certificates are not paid in full on the January 2003 Distribution Date)
or, upon the occurrence of an Early Amortization Event, on each Distribution
Date relating to the Early Amortization Period, in each case funded from a
percentage of the payments received with respect to the Receivables and certain
other funds, all as more fully described in the Agreement and the Series
Supplement. Interest on the Class B Certificates will be calculated on the basis
of a 360-day year and the actual number of days in the relevant Interest Period.
The Collateral Indebtedness Interest and the Class D Certificates are
subordinated to the Class B Certificates to the extent set forth in the Series
Supplement.
On each Distribution Date, the Paying Agent shall distribute to each
Class B Certificateholder of record on the last day of the preceding calendar
month (each, a "Record Date") such Class B Certificateholder's pro rata share of
such amounts (including amounts on deposit in the Principal Funding Account) as
are payable to the Class B Certificateholders pursuant to the Agreement and the
Series Supplement. Distributions with respect to this Class B Certificate will
be made by the Paying Agent by check mailed to the address of the Class B
Certificateholder of record appearing in the Certificate Register without the
presentation or surrender of this Class B Certificate or the making of any
notation thereon (except for the final distribution in respect of this Class B
Certificate), except that with respect to Class B Certificates registered in the
name of Cede & Co., the nominee for The Depository Trust Company, distributions
will be made in the form of immediately available funds. Final payment of this
Class B Certificate will be made only upon presentation and surrender of this
Class B Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee in accordance with the Agreement and the
Series Supplement.
2
<PAGE> 87
On any Distribution Date occurring on or after the day on which the
Invested Amount is reduced to an amount less than or equal to 5% of the Initial
Invested Amount, the Class B Certificates are subject to retransfer to the
Transferor. The retransfer price will be equal to the Class B Invested Amount
plus accrued but unpaid interest thereon.
Subject to certain conditions in the Agreement, if the Invested Amount
is greater than zero on the March 2006 Distribution Date (the "Stated Series
Termination Date"), the Trustee shall sell or cause to be sold an amount of
Receivables up to 110% of the Invested Amount at the close of business on such
date, but not more than the total amount of Receivables allocable to the Series
1997-2 Certificates, and apply the proceeds of such sale as provided in the
Agreement and the Series Supplement.
The Agreement and any Supplement may be amended from time to time by
the Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to cure any ambiguity, to correct or supplement any
provisions therein which may be inconsistent with any other provisions therein
or to add other identifying code numbers to the definition of Account or to add
any other provisions with respect to matters or questions raised under the
Agreement which shall not be inconsistent with the provisions of the Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any of the Investor Certificateholders. In addition,
the Agreement and any Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to add or to change any of the provisions of the
Agreement to enable Bearer Certificates to be issued in conformity with the
Bearer Rules, to provide that Bearer Certificates may be registrable as to
principal, to change or eliminate any restrictions on the payment of principal
(or premium, if any) or any interest on Bearer Certificates to comply with the
Bearer Rules, to permit Bearer Certificates to be issued in exchange for
Registered Certificates (if then permitted by the Bearer Rules), to permit
Bearer Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Investor Certificates in
uncertificated form, provided any such action shall not adversely affect the
interest of the Holders of Bearer Certificates of any Series or any related
Coupons in any material respect unless such amendment is necessary to comply
with the Bearer Rules.
The Agreement and any Supplement may also be amended from time to time
by the Servicer, the Transferor and the Trustee, without the consent of any of
the Investor Certificateholders, for the purpose of adding any provisions to
3
<PAGE> 88
or changing in any manner or eliminating any of the provisions of the Agreement,
or of modifying in any manner the rights of the Holders of Investor
Certificates; provided, however, that (i) the Servicer shall have provided an
Opinion of Counsel to the Trustee to the effect that such amendment will not
materially and adversely affect the interests of the Investor
Certificateholders of any outstanding Series, which Opinion of Counsel may rely
solely on the rating confirmation referred to in clause (iii) below (or 100% of
the class of Certificateholders so affected shall have consented), (ii) such
amendment shall not, as evidenced by an Opinion of Counsel, cause any
outstanding Series as to which an opinion that it was debt was given on its
Closing Date to fail to qualify as debt for Federal income tax purposes, cause
the Trust to be so characterized for Federal income tax purposes as an
association taxable as a corporation or otherwise have any material adverse
impact on the Federal income taxation characterization of any outstanding
Series of Investor Certificates or the Federal income taxation of any Investor
Certificateholder or any Certificate Owner and (iii) the Rating Agencies shall
confirm that such amendment shall not cause a reduction or withdrawal of the
rating of any outstanding Series of Certificates; and, provided further, that
such amendment shall not reduce in any manner the amount of, or delay the
timing of, or change the priority of, distributions which are required to be
made on any Investor Certificate of such Series without the consent of the
related Investor Certificateholder, change the definition of or the manner of
calculating the interest of any Investor Certificateholder of such Series
without the consent of the related Investor Certificateholder or reduce the
required percentage for consents to amendments pursuant to the following
paragraph without the consent of each affected Investor Certificateholder.
The Agreement and any Supplement may also be amended from time to time
by the Servicer, the Transferor 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 Amount of all Series adversely affected, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Agreement or of modifying in any manner the rights of
the Investor Certificateholders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Investor Certificate of such Series without the consent of the related
Investor Certificateholders; (ii) change the definition of or the manner of
calculating the Invested Amount, the Invested Percentage, the applicable
available amount under any Enhancement or the Investor Default Amount of such
Series without the consent of the related Investor Certificateholders; or (iii)
reduce the aforesaid percentage required to consent to any such amendment,
without the
4
<PAGE> 89
consent of the related Investor Certificateholders. Any amendment pursuant to
this paragraph shall require that each Rating Agency rating the affected Series
confirm that such amendment will not cause a reduction or withdrawal of the
rating of any outstanding Series of Certificates.
The Class B Certificates are issuable only in minimum denominations of
$1,000 and integral multiples of $1,000 in excess thereof. The transfer of this
Class B Certificate shall be registered in the Certificate Register upon
surrender of this Class B Certificate for registration of transfer at any
office or agency maintained by the Transfer Agent and Registrar, and thereupon
one or more new Class B Certificates in authorized denominations representing
like aggregate undivided interests in the Trust will be issued to the
designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein
set forth, Class B Certificates are exchangeable for new Class B Certificates in
authorized denominations of like aggregate undivided interests in the Trust as
requested by the Class B Certificateholder surrendering such Class B
Certificates. No service charge may be imposed for any transfer or exchange but
the Transfer Agent and Registrar and the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and Registrar and
any agent of any of them may treat the person in whose name this Class B
Certificate is registered as the owner hereof for all purposes, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar, nor any agent of
any of them, shall be affected by notice to the contrary.
THE AGREEMENT AND THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
5
<PAGE> 90
ASSIGNMENT
Social Security or other identifying number of assignee ________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfer unto ______________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ___________________________, attorney, to transfer said
certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: _______________________________________________*
Signature Guaranteed:
________________________________________________
_______________________
(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
6
<PAGE> 1
EXHIBIT 5.1
[MCGUIRE WOODS BATTLE & BOOTHE LLP LETTERHEAD]
November 12, 1997
First North American National Bank
1800 Parkway Place
Marietta, Georgia 30067
FNANB Credit Card Master Trust
Floating Rate Asset Backed Certificates, Series 1997-2
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to First North American National
Bank, a national banking association ("FNANB"), in connection with the filing by
FNANB, on behalf of the FNANB Credit Card Master Trust (the "Trust"), with the
Securities and Exchange Commission of a Registration Statement on Form S-3 (the
"Registration Statement") registering $738,000,000 aggregate principal amount of
Floating Rate Asset Backed Certificates, Series 1997-2 representing undivided
interests in certain assets of the Trust (the "Certificates"). The Certificates
will be issued pursuant to the Master Pooling and Servicing Agreement dated as
of October 30, 1997 (the "Pooling and Servicing Agreement") between FNANB and
First Union National Bank, as Trustee (the "Trustee"), filed as Exhibit 4.1 to
the Registration Statement, and the Series 1997-2 Supplement to the Pooling and
Servicing Agreement (the "Series Supplement") between FNANB and the Trustee, the
form of which has been filed as Exhibit 4.2 to the Registration Statement.
In connection with our engagement, we have made such legal and
factual examinations and inquiries and have examined such corporate records,
certificates and other documents as we have deemed necessary or advisable for
purposes of this opinion.
Based upon such examination and review, we are of the opinion
that when the Certificates have been duly authorized by FNANB, duly executed and
authenticated in accordance with the terms of the Pooling and Servicing
Agreement and the Series Supplement and delivered and sold as contemplated by
the Registration Statement, the Certificates will be legally issued, fully paid
and non-assessable.
<PAGE> 2
First North American National Bank
November 12, 1997
Page 2
We express no opinion as to the laws of any jurisdiction other
than the Commonwealth of Virginia and the Federal laws of the United States of
America. To the extent that the Pooling and Servicing Agreement, the Series
Supplement or the Certificates are governed by the laws of any jurisdiction
other than the Commonwealth of Virginia, we have assumed that the laws of such
jurisdiction are in conformity with the laws of the Commonwealth of Virginia.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to McGuire, Woods, Battle &
Boothe, L.L.P. under the heading "Legal Matters" in the prospectus included in
the Registration Statement. We do not admit by giving this consent that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
<PAGE> 1
EXHIBIT 8.1
[MCGUIRE WOODS BATTLE & BOOTHE LLP LETTERHEAD]
November 12, 1997
First North American National Bank
1800 Parkway Place
Marietta, Georgia 30067
FNANB Credit Card Master Trust
Floating Rate Asset Backed Certificates, Series 1997-2
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special tax counsel to First North American
National Bank, a national banking association ("FNANB"), in connection with the
filing by FNANB, on behalf of the FNANB Credit Card Master Trust (the "Trust"),
with the Securities and Exchange Commission of a Registration Statement on Form
S-3 (the "Registration Statement") registering $738,000,000 aggregate principal
amount of Floating Rate Asset Backed Certificates, Series 1997-2, representing
undivided interests in certain assets of the Trust (the "Certificates"). The
Certificates will be issued pursuant to the Master Pooling and Servicing
Agreement dated as of October 30, 1997 (the "Pooling and Servicing Agreement")
between FNANB and First Union National Bank, as Trustee (the "Trustee"), filed
as Exhibit 4.1 to the Registration Statement, and the Series 1997-2 Supplement
to the Pooling and Servicing Agreement between FNANB and the Trustee, the form
of which has been filed as Exhibit 4.2 to the Registration Statement.
We hereby confirm that the statements set forth under the
heading "Certain Federal Income Tax Consequences" in the prospectus included in
the Registration Statement accurately describe the material Federal income tax
consequences to holders of the Certificates.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to McGuire, Woods, Battle &
Boothe, L.L.P. under the heading "Legal Matters" in the prospectus included in
the Registration Statement. We do not admit by giving this consent that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
