<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
FCC NATIONAL BANK
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME AS SPECIFIED IN REGISTRANT'S CHARTER)
FIRST CHICAGO MASTER TRUST II
(ISSUER OF THE CERTIFICATES)
UNITED STATES 6021 51-0269396
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
ONE GATEWAY CENTER
300 KING STREET
WILMINGTON, DELAWARE 19801
(302) 594-8606
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT A. ROSHOLT
EXECUTIVE VICE PRESIDENT AND PRINCIPAL FINANCIAL OFFICER
FIRST CHICAGO NBD CORPORATION
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60670
(312) 732-3209
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
LAURENCE GOLDMAN, ESQ. RICHARD F. KADLICK, ESQ.
FIRST CHICAGO NBD CORPORATION SKADDEN, ARPS, SLATE,
ONE FIRST NATIONAL PLAZA MEAGHER & FLOM LLP
CHICAGO, ILLINOIS 60670 919 THIRD AVENUE
(312) 732-3565 NEW YORK, NEW YORK 10022
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BE REGISTERED* REGISTERED CERTIFICATE** PRICE** REGISTRATION FEE
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<S> <C> <C> <C> <C>
Asset Backed
Securities............. $1,000,000 100% $1,000,000 $295
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* The securities are also being registered for the purpose of market-making.
** Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 7, 1998
PROSPECTUS
FIRST CHICAGO MASTER TRUST II
ASSET BACKED CERTIFICATES
FCC NATIONAL BANK, SELLER AND SERVICER
THE TRUST--
CONSIDER
CAREFULLY THE . may periodically issue asset backed certificates in one
RISK FACTORS or more series with one or more classes; and
BEGINNING ON
PAGE 10 IN
THIS
PROSPECTUS.
. will own--
. receivables in a portfolio of consumer revolving
credit card accounts;
A certificate
is not a
deposit and
neither the
certificates
nor the
underlying
accounts or
receivables
are insured
or guaranteed
by the
Federal
Deposit
Insurance
Corporation
or any other
governmental
agency.
. payments due on those receivables; and
. other property described in this prospectus and in
the accompanying prospectus supplement.
THE CERTIFICATES--
. will represent interests in the trust and will be paid
only from the trust assets;
. offered with this prospectus will be rated in one of the
four highest rating categories by at least one
nationally recognized rating organization;
. may have one or more forms of enhancement; and
. will be issued as part of a designated series which may
include one or more classes of certificates and
enhancement.
The
certificates
will
represent
interests in
the trust
only and will
not represent
interests in
or
obligations
of FCC
National Bank
or any FCC
National Bank
affiliate.
THE CERTIFICATEHOLDERS--
. will receive interest and principal payments from a
varying percentage of credit card account collections.
First Chicago Capital Markets, Inc. ("FCCM"), an affiliate of FCC National
Bank, may buy and sell Certificates in the secondary market as part of its
ordinary business as a broker-dealer. FCCM may use this prospectus and the
accompanying prospectus supplement in such transactions. FCCM will make any
such sale at the prevailing market price at the time of the sale.
This
prospectus
may be used
to offer and
sell any
series of
certificates
only if
accompanied
by the
prospectus
supplement
for that
series.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE CERTIFICATES OR DETERMINED THAT
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
April , 1998
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the Certificates in two separate
documents that progressively provide more detail: (a) the Prospectus, which
provides general information, some of which may not apply to a particular
Series of Certificates, including your Series, and (b) the accompanying
Prospectus Supplement, which will describe the specific terms of your Series
of Certificates, including:
. the timing of interest and principal payments;
. financial and other information about the Receivables;
. information about enhancement for each Class;
. the ratings for each Class; and
. the method for selling the Certificates.
IF THE TERMS OF A PARTICULAR SERIES OF CERTIFICATES VARY BETWEEN THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION
IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this Prospectus and in
the accompanying Prospectus Supplement including the information incorporated
by reference. We have not authorized anyone to provide you with different
information. We are not offering the Certificates in any state where the offer
is not permitted. We do not claim the accuracy of the information in this
Prospectus or the accompanying Prospectus Supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this Prospectus and in the accompanying
Prospectus Supplement to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying Prospectus Supplement provide the pages
on which these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus are defined under the caption "Index of Terms for Prospectus"
beginning on page 61 in this Prospectus.
2
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUMMARY........................................................ 5
The Trust and the Trustee................................................ 5
Trust Assets............................................................. 5
Information about the Receivables........................................ 5
Collections by the Servicer.............................................. 6
Allocation of Trust Assets............................................... 6
Interest Payments on the Certificates.................................... 6
Principal Payments on the Certificates................................... 6
Revolving Period......................................................... 6
Controlled Accumulation Period........................................... 7
Controlled Amortization Period........................................... 7
Principal Amortization Period............................................ 7
Rapid Accumulation Period................................................ 7
Rapid Amortization Period................................................ 8
Liquidation Events....................................................... 8
Shared Excess Finance Charge Collections................................. 8
Shared Principal Collections............................................. 8
Credit Enhancement....................................................... 8
Optional Repurchase...................................................... 8
Tax Status............................................................... 9
Certificate Ratings...................................................... 9
RISK FACTORS.............................................................. 10
Limited Ability to Resell Certificates................................... 10
Potential Priority of Certain Liens...................................... 10
Possible Effects of Insolvency of the Seller............................. 10
Seller's Ability to Change Terms of the Receivables and Possible Effect
on Certificateholders................................................... 11
Effects of Consumer Protection Laws on Certificateholders................ 12
Timing of Principal Payments............................................. 13
Effect of Subordination on Subordinated Certificateholders............... 13
Risks Relating to Receivables in Defaulted Accounts...................... 13
Basis Risk............................................................... 14
Effect on Certificateholders of Issuance of Additional Series by the
Trust................................................................... 14
Economic Factors Affecting Certificates.................................. 14
Addition of Accounts..................................................... 14
THE TRUST................................................................. 16
THE BANK'S CREDIT CARD BUSINESS........................................... 16
General.................................................................. 16
Collection Efforts....................................................... 17
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PAGE
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Loss and Delinquency Experience........................................... 18
Revenue Experience........................................................ 18
Interchange............................................................... 19
<CAPTION>
Competition in the Credit Card Industry................................... 19
<S> <C>
THE ACCOUNTS............................................................... 20
General................................................................... 20
Billing and Payments...................................................... 21
THE SELLER................................................................. 21
USE OF PROCEEDS............................................................ 22
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS.............................. 22
DESCRIPTION OF THE CERTIFICATES AND THE AGREEMENT.......................... 22
General................................................................... 23
Book-Entry Registration................................................... 24
Definitive Certificates................................................... 27
Interest Payments......................................................... 27
Principal Payments........................................................ 28
Conveyance of Receivables................................................. 28
Exchanges................................................................. 29
Covenants, Representations and Warranties................................. 30
Addition of Accounts...................................................... 32
Removal of Accounts....................................................... 33
Collection Account........................................................ 34
Other Trust Accounts...................................................... 34
Funding Period............................................................ 34
Paired Series............................................................. 35
Allocation Percentages.................................................... 35
Application of Collections................................................ 36
Discount Option........................................................... 37
Shared Collections of Finance Charge Receivables.......................... 37
Shared Collections of Principal Receivables............................... 37
Defaulted Receivables; Rebates and Fraudulent Charges..................... 37
Defeasance................................................................ 38
Final Payment of Principal; Termination of Trust.......................... 39
Liquidation Events........................................................ 39
Indemnification........................................................... 40
Collection and Other Servicing Procedures................................. 40
Servicer Covenants........................................................ 41
Servicing Compensation and Payment of Expenses............................ 41
</TABLE>
3
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
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PAGE
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Certain Matters Regarding the Servicer.................................... 42
Servicer Default.......................................................... 42
Reports to Certificateholders............................................. 43
Evidence as to Compliance................................................. 44
Conveyance of Accounts.................................................... 44
Amendments................................................................ 44
List of Certificateholders................................................ 45
The Trustee............................................................... 45
ENHANCEMENT................................................................ 46
General................................................................... 46
Subordination............................................................. 46
Cash Collateral Guaranty or Account....................................... 46
Collateral Interest....................................................... 47
Letter of Credit.......................................................... 47
Surety Bond or Insurance Policy........................................... 47
Interest Rate Swap........................................................ 47
Spread Account............................................................ 48
Reserve Account........................................................... 48
CERTIFICATE RATINGS........................................................ 48
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES................................... 48
Transfer of Receivables................................................... 48
Certain Matters Relating to Receivership.................................. 49
Consumer Protection Laws.................................................. 50
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
TAX MATTERS............................................................... 51
General.................................................................. 51
Characterization of Certificates as Indebtedness......................... 51
Taxation of Interest Income of Certificateholders........................ 52
Sale of a Certificate.................................................... 53
Tax Characterization of Trust............................................ 53
Recent Legislation....................................................... 54
Foreign Investors........................................................ 55
STATE AND LOCAL TAXATION.................................................. 56
ERISA CONSIDERATIONS...................................................... 56
PLAN OF DISTRIBUTION...................................................... 58
LEGAL MATTERS............................................................. 59
REPORTS TO CERTIFICATEHOLDERS............................................. 59
WHERE YOU CAN FIND MORE INFORMATION....................................... 59
INDEX OF TERMS FOR PROSPECTUS............................................. 61
ANNEX 1: GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES.... A-1
</TABLE>
4
<PAGE>
PROSPECTUS SUMMARY
. THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES
NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF THE
CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT.
. THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
THE TRUST AND THE TRUSTEE
First Chicago Master Trust II (the "Trust") was formed as of June 1, 1990 under
a Pooling and Servicing Agreement (the "Agreement") between FCC National Bank
(the "Bank" or the "Seller"), as seller and servicer, and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"). The Trust is a
master trust under which one or more Series will be issued through a Series
Supplement to the Agreement. Any Series may consist of one or more Classes. Any
Class or Series may be offered other than by this Prospectus; for example, they
may be offered in a private placement. The Trust may only engage in the
following activities:
. acquiring and holding specified assets;
. issuing and making payments on the Asset Backed Certificates (the
"Certificates") and other interests in the Trust; and
. engaging in related activities.
TRUST ASSETS
The Seller has transferred to the Trust the Receivables in certain VISA(R) and
MasterCard(R)* consumer revolving credit card Accounts. All new Receivables
generated in the Accounts will be transferred automatically to the Trust. The
total amount of Receivables in the Trust will fluctuate daily as new
Receivables are generated and payments are received on existing Accounts.
Additional similar assets may be transferred to the Trust. Under certain
circumstances, the Seller may be required to transfer additional similiar
assets to the Trust. See "The Receivables" and "Description of the Certificates
and the Agreement--Addition of Accounts" in this Prospectus.
- --------
* VISA(R) and MasterCard(R) are registered trademarks of VISA U.S.A., Inc. and
MasterCard International Inc., respectively.
The Trust assets also include payments due on the Receivables and other
proceeds of the Receivables. Currently, the Trust assets exclude payments on
receivables which have been written off as uncollectible. The Seller expects to
begin adding recoveries on such written off receivables to the Trust by the end
of the second quarter of 1998.
Additional Trust assets may include:
. rights to certain fees the Bank receives through VISA and MasterCard called
Interchange;
. monies deposited in certain of the Trust's bank accounts and investments of
those monies; and
. ""Enhancements," including any credit enhancement, guaranteed rate agree-
ment, maturity liquidity facility, tax protection agreement, interest rate
swap or cap, cash collateral account, collateral interest, currency swap or
other similar arrangement.
The Seller may remove, subject to certain limitations and conditions, Receiv-
ables that it transferred to the Trust. See "Description of the Certificates
and the Agreement--Removal of Accounts" in this Prospectus.
INFORMATION ABOUT THE RECEIVABLES
The Receivables arise in Accounts selected from the Bank's credit card
portfolio based on criteria established in the Agreement and applied on the
date of their selection.
The Receivables consist of both Principal Receivables and Finance Charge
Receivables.
"Principal Receivables" are, generally, (a) amounts charged by cardholders for
goods and services and (b) cash advances.
"Finance Charge Receivables" are the related periodic charges, annual fees,
late charges, over-limit fees and all other fees billed to cardholders.
5
<PAGE>
Certain Interchange may be treated as collections of Finance Charge
Receivables for a Series. Recoveries on written off receivables may also be
treated as collections of Finance Charge Receivables for a Series if the
Seller so provides in the future. See "The Bank's Credit Card Business--
Interchange" and "--Loss and Delinquency Experience" in this Prospectus.
COLLECTIONS BY THE SERVICER
The Bank services the Receivables under the Agreement. In limited cases, the
Bank may resign or be removed and either the Trustee or a third party may be
appointed as the new servicer. The Bank, or any new servicer, is called the
"Servicer." The Servicer receives a servicing fee from the Trust for each
Series. See "The Seller" in this Prospectus.
The Servicer receives collections on the Receivables, deposits those
collections in a trust account and keeps track of those collections that are
Finance Charge Receivables and those collections that are Principal
Receivables. The Servicer then allocates those collections as summarized
below.
ALLOCATION OF TRUST ASSETS
The Trust assets will be allocated to the holders of the Certificates and
other interests of each Series. The "Exchangeable Seller's Certificate"
represents the remaining interest in the assets of the Trust not represented
by the Certificates and other Series interests issued by the Trust. If there
is more than one Class in a Series, there may be a further allocation of Trust
assets among each Class.
The Servicer will allocate (a) collections of Finance Charge Receivables and
Principal Receivables and (b) Receivables in Accounts written off as uncol-
lectible to each Series based upon a varying percentage called the "Invested
Percentage," as described in the accompanying Prospectus Supplement.
The aggregate amount of Principal Receivables allocated to a Series estab-
lishes the "Invested Amount" for that Series. The "First Chicago Amount" will
be the aggregate amount of Principal Receivables in the Trust not allocated to
any Series.
Certificateholders are only entitled to amounts allocated to their Series
equal to the interest and principal payments on their Certificates. See "De-
scription of the Certificates and the Agreement--General" and "--Allocation
Percentages" in this Prospectus.
INTEREST PAYMENTS ON THE CERTIFICATES
Each Certificate of a Series will represent the right to receive payments of
interest as described in the accompanying Prospectus Supplement. If a Series
of Certificates consists of one or more Classes, each Class may differ in,
among other things, priority of payments, payment dates, interest rates,
method for computing interest and rights to Enhancement.
Each Class of Certificates may have a fixed, a floating or any other type of
interest rate. Generally, interest will be paid monthly, quarterly, semi-
annually or on other scheduled dates over the life of the Certificates, each
called a "Distribution Date."
If interest is paid less frequently than monthly, collections of Finance
Charge Receivables may be deposited monthly in one or more trust accounts and
invested under guidelines established by the Rating Agencies until paid to
Certificateholders. Interest payments for any Series of Certificates will be
funded from collections of Finance Charge Receivables allocated to the Series,
any applicable Enhancement and, if and to the extent specified in the accompa-
nying Prospectus Supplement, monies earned while collections were invested
pending payment to the Certificateholders. See "Description of the Certifi-
cates and the Agreement--Application of Collections," "--Shared Collections of
Finance Charge Receivables" and "Enhancement" in this Prospectus.
PRINCIPAL PAYMENTS ON THE CERTIFICATES
Each Certificate of a Series will represent the right to receive payments of
principal as described in the accompanying Prospectus Supplement. If a Series
of Certificates consists of one or more Classes, each
Class may differ in, among other things, the amounts allocated for principal
payments, priority of payments, payment dates, maturity and rights to
Enhancement.
REVOLVING PERIOD
Each Class of Certificates will begin with a period called a "Revolving
Period" during which the Trust
6
<PAGE>
will not pay, or accumulate, principal for the related Certificateholders. The
Trust will usually pay available principal to the holder of the Exchangeable
Seller's Certificate but may pay amounts due to holders of Certificates of
other Series. The Revolving Period for a Class starts on the date that Class is
issued and ends at the start of an amortization period or an accumulation
period.
Following the Revolving Period, each Class of Certificates will have one or a
combination of the following periods in which:
. principal is accumulated in specified amounts and paid on a scheduled date
(a "Controlled Accumulation Period");
. principal is paid in fixed amounts at scheduled intervals (a "Controlled
Amortization Period");
. principal is paid in varying amounts at scheduled intervals (a "Principal
Amortization Period");
. principal is accumulated in varying amounts following certain adverse
events and paid on a scheduled date (a "Rapid Accumulation Period");
. principal is paid in varying amounts each month following certain adverse
events (a "Rapid Amortization Period").
CONTROLLED ACCUMULATION PERIOD
If a Class of Certificates has a Controlled Accumulation Period, the Trust is
expected to pay available principal to those Certificateholders on a specific
date stated in the accompanying Prospectus Supplement called the "Scheduled
Payment Date." If the Series has more than one Class, each Class may have a
different priority for payment. For a period of time prior to the Scheduled
Payment Date, the Trust is scheduled to deposit available principal in a trust
account in specified amounts plus any specified amounts not previously deposit-
ed. If amounts sufficient to pay the Invested Amount for a Class have not been
accumulated by the Scheduled Payment Date for that Class, a Liquidation Event
will occur and the Rapid Amortization Period will begin. The Controlled Accumu-
lation Period for a Class starts on a date specified in the accompanying Pro-
spectus Supplement and ends when any one of the following occurs:
. the Invested Amount for the Class is paid in full;
. a Rapid Amortization Period or, if it applies, a Rapid Accumulation Period
starts; or
. the latest date by which principal and interest for the Series of
Certificates can be paid, called the "Series Termination Date."
CONTROLLED AMORTIZATION PERIOD
If a Class of Certificates has a Controlled Amortization Period, the Trust will
pay available principal to those Certificateholders on each Distribution Date
during the Controlled Amortization Period in a specified amount plus any
specified amounts not previously paid. If the Series has more than one Class,
each Class may have a different priority for payment. The Controlled
Amortization Period for a Class starts on the date specified in the
accompanying Prospectus Supplement and ends when any one of the following
occurs:
. the Invested Amount for the Class is paid in full;
. a Rapid Amortization Period starts; or
. the Series Termination Date.
PRINCIPAL AMORTIZATION PERIOD
If a Class of Certificates has a Principal Amortization Period, the Trust will
pay available principal to those Certificateholders on each Distribution Date
during the Principal Amortization Period. If a Series has more than one Class,
each Class may have a different priority for payment. The Principal
Amortization Period for a Class starts on the date specified in the
accompanying Prospectus Supplement and ends when any one of the following
occurs:
. the Invested Amount for the Class is paid in full;
. a Rapid Amortization Period starts; or
. the Series Termination Date.
RAPID ACCUMULATION PERIOD
If a Class of Certificates has a Controlled Accumulation Period, it may also
have a Rapid Accumulation Period. During a Rapid Accumulation Period, the Trust
will periodically deposit available principal in a trust account prior to the
Scheduled Payment Date. The Rapid Accumulation Period for a Class starts as
specified in the accompanying Prospectus Supplement on a day on or after a
designated Liquidation Event has occurred,
7
<PAGE>
but in no event later than the Scheduled Payment Date, and ends when one of
the following occurs:
. the Invested Amount for the Class is paid in full;
. a Rapid Amortization Period starts; or
. the Scheduled Payment Date.
RAPID AMORTIZATION PERIOD
If a Class of Certificates is in a Rapid Amortization Period, the Trust will
pay available principal to those Certificateholders on each Distribution Date.
If the Series has more than one Class, each Class may have a different
priority for payment. For a Class without a Rapid Accumulation Period, the
Rapid Amortization Period starts on the day a Liquidation Event occurs. For a
Class with a Rapid Accumulation Period, the Rapid Amortization Period starts
as specified in the accompanying Prospectus Supplement on a day on or after
one or more certain Liquidation Events occurs, but in no event later than the
Scheduled Payment Date for that Class. The Rapid Amortization Period ends when
any of the following occurs:
. the Invested Amount for the Class is paid in full; or
. the Series Termination Date.
LIQUIDATION EVENTS
A "Liquidation Event" for any Series of Certificates will include certain
adverse events described in the accompanying Prospectus Supplement, including
the following:
. certain events of insolvency, conservatorship or receivership relating to
the Seller; or
. the Trust becomes an "investment company" under the Investment Company Act
of 1940.
See "Description of the Certificates and the Agreement--Liquidation Events" in
this Prospectus.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
If specified in the accompanying Prospectus Supplement, to the extent that
collections of Finance Charge Receivables allocated to any Series are not
needed for that Series, those collections may be applied to certain shortfalls
of another Series if such other Series permits such application. See
"Description of the Certificates and the Agreement--Shared Collections of
Finance Charge Receivables" in this Prospectus.
SHARED PRINCIPAL COLLECTIONS
If specified in the accompanying Prospectus Supplement, to the extent that
collections of Principal Receivables allocated to any Series are not needed
for that Series, those collections may be applied to cover principal payments
for another Series if such other Series permits such application. Any
reallocation for this purpose will not reduce the Invested Amount for the
Series to which those collections were initially allocated. See "Description
of the Certificates and the Agreement--Shared Collections of Principal
Receivables" in this Prospectus.
CREDIT ENHANCEMENT
Each Class of a Series may be entitled to Enhancement. Enhancement provides
additional payment protection to investors in each Class of Certificates that
has Enhancement.
"Enhancement" for the Certificates of any Class may take the form of one or
more of the following:
. subordination . letter of credit
. collateral interest
. surety bond
. insurance policy . spread account
. cash collateral guaranty or account
. reserve account
The type, characteristics and amount of an Enhancement will be:
. based on several factors, including the characteristics of the Receivables
and Accounts at the time a Series of Certificates is issued; and
. established based on the requirements of each Rating Agency rating one or
more Classes of the Certificates of that Series.
See "Enhancement" and "Certificate Ratings" in this Prospectus.
OPTIONAL REPURCHASE
The Seller has the option to repurchase any Series of Certificates once the
Invested Amount for the Series is
8
<PAGE>
reduced to 5% or less of the initial Invested Amount. See "Description of the
Certificates and the Agreement--Final Payment of Principal; Termination of
Trust" in this Prospectus.
TAX STATUS
For information concerning the application of the Federal income tax laws,
including whether the Certificates will be characterized as debt for Federal
income tax purposes, see "Tax Matters" in this Prospectus and "Summary of
Series Provisions--Tax Status" in the accompanying Prospectus Supplement.
CERTIFICATE RATINGS
Any Certificate offered by this Prospectus and the accompanying Prospectus
Supplement will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization. Any nationally recognized
rating organization selected by the Seller to rate any Series is a "Rating
Agency."
A rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning Rating Agency. Each rating
should be evaluated independently of any other rating. See "Certificate
Ratings" in this Prospectus.
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RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the Certificates.
LIMITED ABILITY TO RESELL
CERTIFICATES.............. The underwriters may assist in resales of the
Certificates but they are not required to do so.
A secondary market for any Certificates may not
develop. If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to resell any of
your Certificates.
POTENTIAL PRIORITY OF The Seller has transferred Receivables to the
CERTAIN LIENS............. Trust. However, a court could conclude that the
Seller still owns the Receivables and that the
Trust holds only a security interest. The Seller
has taken certain steps to give the Trustee a
"first priority perfected security interest" in
the Receivables in the event a court concludes
the Seller still owns the Receivables. If a court
concludes that the transfer to the Trust is only
a grant of a security interest in the
Receivables, a tax or government lien (or other
lien permitted under the law without the consent
of the Seller) on the Seller's property arising
before new Receivables come into existence may
get paid before the Trust's interest in the
Receivables. Also, if the Seller became insolvent
or entered into bankruptcy and the Federal
Deposit Insurance Corporation (the "FDIC") were
appointed conservator or receiver of the Seller,
the FDIC's administrative expenses might be paid
from the Receivables before the Trust received
any payments on the Receivables. In addition, if
the Seller became insolvent or entered into
bankruptcy or a receivership, the Trust, under
certain circumstances, might not have a perfected
security interest in cash collections held by the
Seller which had not yet been deposited into the
Trust's account. See "Certain Legal Aspects of
the Receivables--Transfer of Receivables" and
"Description of the Certificates and the
Agreement--Covenants, Representations and
Warranties" in this Prospectus.
POSSIBLE EFFECTS OF
INSOLVENCY OF THE The Federal Deposit Insurance Act ("FDIA"), as
SELLER.................... amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA"),
provides that a security interest should be
respected by the FDIC where--
. the Seller's transfer of the Receivables is the
grant of a valid security interest in the
Receivables to the Trust;
. the Seller becomes insolvent and the FDIC is
appointed conservator or receiver of the
Seller; and
. the security interest (a) is validly perfected
before the Seller's insolvency and (b) was not
taken in contemplation of the Seller's
insolvency or with the intent to hinder, delay
or defraud the Seller or its creditors.
FDIC staff positions taken prior to the passage
of FIRREA do not suggest that the FDIC would
interrupt the timely transfer to the Trust of
payments collected on the Receivables. If the
FDIC were to assert a
different position, your payments of outstanding
principal and interest
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could be delayed and possibly reduced. For
example, under the FDIA, the FDIC could--
. require the Trustee to go through an
administrative claims procedure to establish
its right to those payments;
. request a stay of proceedings with respect to
the Seller; or
. reject the Seller's contract to transfer
Receivables to the Trust and limit the Trust's
resulting claim to "actual direct compensatory
damages."
If a conservator or receiver were appointed for
the Seller, then a Liquidation Event would occur
for all outstanding Series. Under the Agreement,
new Principal Receivables would not be
transferred to the Trust and the Trustee would
sell the Receivables (unless, generally, holders
of more than 50% of the Invested Amount of each
Class of outstanding Certificates and anyone else
authorized to vote on those matters in a Series
Supplement, gave the Trustee other instructions).
The Trust would then terminate earlier than was
planned and you could have a loss if the sale of
the Receivables produced insufficient net
proceeds to pay you in full. However, the
conservator or receiver may have the power--
. regardless of the terms of the Agreement, (a)
to prevent the beginning of the Rapid
Amortization (or, if applicable, the Rapid
Accumulation Period), (b) to prevent the early
sale of the Receivables and the termination of
the Trust or (c) to require new Principal
Receivables to continue being transferred to
the Trust; or
. regardless of the instructions of those
authorized to direct the Trustee's actions
under the Agreement, (a) to require the early
sale of the Receivables, (b) to require
termination of the Trust and retirement of the
Certificates or (c) to prohibit the continued
transfer of Principal Receivables to the Trust.
In addition, if a Servicer Default occurs solely
because a conservator or receiver is appointed
for the Servicer, the conservator or receiver
might have the power to prevent either the
Trustee or the Certificateholders from appointing
a new Servicer under the Agreement. See "Certain
Legal Aspects of the Receivables--Certain Matters
Relating to Receivership" and "Description of the
Certificates and the Agreement--Servicer Default"
in this Prospectus.
SELLER'S ABILITY TO CHANGE
TERMS OF THE RECEIVABLES
AND POSSIBLE EFFECT ON
CERTIFICATEHOLDERS........ The Seller transfers the Receivables to the Trust
but continues to own the Accounts. As owner of
the Accounts, the Seller retains the right to
change various Account terms (including periodic
charges and other fees it charges and the
required monthly minimum payment). A Liquidation
Event could occur if the Seller reduced the
periodic charge and other fees it charges and a
corresponding decrease in the collection of
Finance Charge Receivables resulted. In addition,
changes in the Account terms may alter payment
patterns. If payment rates decrease significantly
at a time when you are scheduled to receive
principal, you might receive principal more
slowly than planned.
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The Seller will not reduce the periodic rate it
charges on the Receivables or other fees if that
action would result in a Liquidation Event unless
the Seller is required by law or determines it is
necessary to maintain its credit card business,
based on its good faith assessment of its
business competition.
The Seller may change other terms of the Accounts
only (a) if it has other comparable accounts, it
makes the same change to such accounts, or (b) if
it does not have other comparable accounts, the
change is not made with the intent to materially
benefit the Seller over Certificateholders. See
"Description of the Certificates and the
Agreement--Collection and Other Servicing
Procedures" in this Prospectus.
Changes in relevant law, changes in the
marketplace or prudent business practices could
cause the Seller to change Account terms. See
"The Bank's Credit Card Business--Revenue
Experience" in this Prospectus.
EFFECTS OF CONSUMER
PROTECTION LAWS ON Federal and state consumer protection laws
CERTIFICATEHOLDERS........ regulate the creation and enforcement of consumer
loans. Congress, state legislatures and other
regulatory authorities could further regulate the
credit card and consumer credit industry in ways
that make it more difficult for the Servicer to
collect payments on the Receivables or that
reduce the periodic charge and other fees that
the Seller can charge on credit card account
balances. For example, if the Seller were
required to reduce its periodic charge and other
fees resulting in a corresponding decrease in the
Accounts' effective yield, this could lead to a
Liquidation Event, resulting in the payment of
principal sooner than expected.
The Seller makes representations and warranties
relating to the validity and enforceability of
the Receivables. Subject to certain conditions
described under "Description of the Certificates
and the Agreement--Covenants, Representations and
Warranties," the Seller must accept reassignment
of each Receivable that does not comply in all
material respects with all requirements of
applicable law if such Receivable is written off
as uncollectible or the payments on such
Receivable are not available to the Trust. In
addition, upon the breach of certain other
representations and warranties in the Agreement,
the Seller may be required to purchase all
outstanding Certificates. We do not anticipate
that the Trustee will make any examination of the
Receivables, the Accounts or the related records
for the purpose of determining the presence or
absence of defects, compliance with
representations and warranties, or for any other
purpose. See "Description of the Certificates and
the Agreement--Covenants, Representations and
Warranties" and "--Servicer Covenants" and
"Certain Legal Aspects of the Receivables--
Consumer Protection Laws" in this Prospectus.
If a cardholder sought protection under federal
or state bankruptcy or debtor relief laws, a
court could reduce or discharge completely the
cardholder's obligations to repay amounts due on
its Account and, as a result, the related
Receivables would be written off as
uncollectible.
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<PAGE>
The Certificateholders could suffer a loss if no
funds are available from Enhancement or other
sources. See "Description of the Certificates and
the Agreement--Defaulted Receivables; Rebates and
Fraudulent Charges" in this Prospectus.
TIMING OF PRINCIPAL The Receivables may be paid off at any time. We
PAYMENTS.................. cannot assure the creation of additional
Receivables in the Accounts or that any
particular pattern of cardholder payments will
occur. The commencement and continuation of a
Revolving Period, a Controlled Amortization
Period, a Principal Amortization Period or a
Controlled Accumulation Period for a Series or
Class of that Series depend upon the continued
generation of new Receivables to be conveyed to
the Trust. A significant decline in the amount of
Receivables generated could result in the
occurrence of a Liquidation Event for one or more
Series and the commencement of the Rapid
Amortization Period or, if applicable, the Rapid
Accumulation Period for each of those Series. If
a Liquidation Event occurs, you could receive
payment of principal sooner than expected.
The Seller's ability to compete in the current
industry environment will affect its ability to
generate new Receivables and might also affect
payment patterns on the Receivables. Certain
credit card issuers offer periodic charges
significantly lower than those being assessed on
many of the Accounts. The use of affinity (gift
awards for card use) or incentive programs may
also affect card usage. Certain of the Accounts
are in such programs and offer benefits not
available to the Seller's other cardholders. A
change or termination of benefits in such a
program could make the Seller's credit card less
attractive to cardholders. In addition, changes
in periodic charges can alter the monthly payment
rates of cardholders. A significant decrease in
monthly payment rates could slow the return or
accumulation of principal during an Amortization
Period or Accumulation Period. A significant
increase in monthly payment rates could hasten
the return or accumulation of principal during a
Principal Amortization Period, a Rapid
Accumulation Period or a Rapid Amortization
Period. See "Maturity and Principal Payment
Considerations" in this Prospectus.
EFFECT OF SUBORDINATION ON
SUBORDINATED Where one or more Classes in a Series are
CERTIFICATEHOLDERS........ subordinated, principal payments on the
subordinated Class or Classes generally will not
begin until the senior Class or Classes are
repaid. Additionally, if collections of Finance
Charge Receivables allocated to a Series are
insufficient to cover amounts due for that
Series's senior Certificates, the Invested Amount
for the subordinated Certificates might be
reduced. This would reduce the amount of
collections of Finance Charge Receivables
available to the subordinated Certificates in
future periods and could cause a possible delay
or reduction in principal and interest payments
on the subordinated Certificates. If Receivables
had to be sold, the net proceeds of that sale
available to pay principal would be paid first to
senior Certificateholders and any remaining net
proceeds would be paid to subordinated
Certificateholders.
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<PAGE>
RISKS RELATING TO
RECEIVABLES IN DEFAULTED The Trust includes delinquent Receivables and
ACCOUNTS.................. Receivables of cardholders who may become subject
to bankruptcy or insolvency. The Servicer
generally will write off as uncollectible the
Receivables of a bankrupt or insolvent cardholder
and Receivables which are delinquent beyond a
certain time limit. Each Class of Certificates
will be allocated a portion of Receivables
written off as uncollectible. See "Description of
the Certificates and the Agreement--Allocation
Percentages" in this Prospectus and "The Bank's
Credit Card Portfolio--Loss and Delinquency
Experience" in the accompanying Prospectus
Supplement. If the written off amounts allocated
to any Certificates exceed the amounts available
to cover them, which could occur if the limited
amount of Enhancement is reduced to zero, those
Certificateholders may not receive the full
amount of principal and interest due to them. See
"Description of the Class A Certificates and the
Agreement--Allocation Percentages," "--
Application of Collections," "--Reallocation of
Collections," "--Allocation of Funds," and "--
Defaulted Receivables; Rebates and Fraudulent
Charges" in the accompanying Prospectus
Supplement.
BASIS RISK................. Substantially all of the Accounts have periodic
charges set at a variable rate based currently on
the prime rate. A Series of Certificates may bear
interest at either a fixed rate or at a floating
rate based on a different rate index. If the
rates charged on the Accounts decline,
collections of Finance Charge Receivables may be
reduced without a corresponding reduction in the
amounts payable as interest on the Certificates
and other amounts paid from collections of
Finance Charge Receivables.
EFFECT ON
CERTIFICATEHOLDERS OF
ISSUANCE OF ADDITIONAL
SERIES BY THE TRUST....... The Trust has issued other Series of Certificates
and is expected to issue additional Series from
time to time. The Trust may issue additional
Series with terms that are different from your
Series without the prior review or consent of any
Certificateholders. It is a condition to the
issuance of each new Series that each Rating
Agency that has rated an outstanding Series
confirm in writing that the issuance of the new
Series will not result in a reduction or
withdrawal of its rating. However, the terms of a
new Series could affect the timing and amounts of
payments on any other outstanding Series.
ECONOMIC FACTORS AFFECTING
CERTIFICATES.............. General economic factors including the rate of
inflation, unemployment and relative interest
rates may affect card use and cardholder payment
patterns. Historically, a substantial number of
Accounts have billing addresses in California,
Illinois, New York and Texas. Adverse changes in
the economic condition in those areas could have
a direct effect on the timing and the amounts of
payments on the Certificates. See "The Accounts"
in the accompanying Prospectus Supplement.
ADDITION OF ACCOUNTS....... In addition to the Accounts already designated
for the Trust, the Seller is permitted to
designate additional accounts and to transfer the
receivables in those accounts to the Trust. Under
certain circumstances,
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<PAGE>
the Seller may be required to designate new
accounts to maintain a certain amount of
Receivables in the Trust. These new accounts and
receivables may have different terms and
conditions than the Accounts and Receivables
already in the Trust. The new accounts and
receivables may perform differently over time
than the Accounts and Receivables. If the Seller
is required to add accounts, it may not have any
accounts suitable for such addition. If the
Seller fails to add accounts when required, a
Liquidation Event will occur and you could
receive payment of principal sooner than
expected. See "The Accounts" and "Description of
the Certificates and the Agreement--Addition of
Accounts" in this Prospectus.
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THE TRUST
First Chicago Master Trust II (the "Trust") was formed for this and like
transactions pursuant to a Pooling and Servicing Agreement (as amended and
supplemented from time to time, the "Agreement") between FCC National Bank, as
seller and servicer (the "Bank" or the "Seller"), and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"). Prior to formation, the
Trust had no assets or obligations. Since its formation, the Trust has not
engaged in any business activity but rather (i) acquires and holds receivables
existing from time to time (the "Receivables") in certain consumer revolving
credit card accounts owned by the Bank (the "Accounts") and other assets of
the Trust and proceeds therefrom, (ii) has issued and expects to issue from
time to time one or more series (each, a "Series") of asset backed
certificates (the "Certificates") which have consisted and may consist of one
or more classes (each, a "Class") and (iii) makes payments on Certificates and
engages in related activities (including, with respect to any Series,
obtaining limited payment or credit support (such support, "Enhancement") and
entering into an Enhancement agreement relating thereto). As a consequence,
the Trust is not expected to have any need for, or source of, capital
resources other than the assets of the Trust. Under the Agreement, the Bank,
as servicer, is responsible for servicing, managing and making collections on
all the Receivables in the Trust. In certain limited circumstances, the Bank
may resign or be removed as servicer, in which event either the Trustee or a
third party servicer may be appointed as successor servicer (the Bank or any
successor servicer is referred to as the "Servicer"). As described herein, the
Servicer receives a monthly fee as servicing compensation which is payable
from Interchange, allocations of Finance Charge Receivables and certain other
amounts. The Trust has issued and outstanding the Series identified in the
accompanying Prospectus Supplement. The Trust's fiscal year ends December 31.
THE BANK'S CREDIT CARD BUSINESS
GENERAL
The interests in Receivables which the Seller has conveyed or will convey to
the Trust pursuant to the Agreement are generated from transactions made by
holders of certain Classic VISA, VISA Gold and Platinum VISA credit card
accounts and certain Standard MasterCard, Gold MasterCard and Platinum
MasterCard credit card accounts. These accounts were generated under the VISA
U.S.A., Inc. ("VISA") or MasterCard International Incorporated ("MasterCard
International") programs and were either originated by the Bank or The First
National Bank of Chicago, an affiliate of the Bank ("FNBC"), or purchased by
the Bank or FNBC from other credit card issuers. Effective as of July 1, 1987,
FNBC transferred its credit card operation and all its credit card accounts to
the Bank, although FNBC retained ownership of all receivables comprising the
existing balances in such accounts. Subsequently, such receivables also were
transferred to the Bank. The Bank is a member of MasterCard International, and
First Chicago NBD Corporation, the parent corporation of the Bank ("First
Chicago NBD"), and the Bank are members of VISA. The Bank currently offers
other VISA and MasterCard credit card accounts with various program features,
charges and rate structures. The Bank services these accounts at its
headquarters located in Wilmington, Delaware and its operations center located
in Elgin, Illinois and retains two affiliated credit card servicing companies,
First Card Services, Inc. ("FCSI"), located in Uniondale, New York, and
Springfield, Missouri, and NBD Service Corp., located in Indianapolis,
Indiana, to perform collection and customer service activities.
The VISA and MasterCard credit cards are issued as part of the worldwide
VISA and MasterCard International systems and transactions creating the
receivables through the use of the credit cards are processed through the VISA
and MasterCard International systems. Should either system materially curtail
its activities, or should the Bank cease to be a member of MasterCard
International or First Chicago NBD and the Bank cease to be members of VISA,
for any reason, a Liquidation Event could occur, and delays in payments on the
Receivables and possible reductions in the amounts thereof could also occur.
The VISA and MasterCard credit cards of the type pursuant to which the
Accounts were established may be used for two types of transactions: purchases
and cash advances (including balance transfers). Cardholders make purchases
when using a credit card to buy goods or services. A cash advance is made when
a credit card is used to obtain cash from a financial institution, from an
automated teller machine or by writing a check on an account; a balance
transfer occurs when a cardholder transfers a credit card balance with another
credit card issuer to an account with the Seller. Amounts due with respect to
each type of transaction will be included in the Receivables.
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<PAGE>
The Receivables consist of amounts charged by cardholders for goods and
services and amounts advanced to cardholders as cash advances (the "Principal
Receivables") and all related periodic charges, annual fees, late charges,
over-limit fees and all other fees billed to cardholders on the Accounts for a
Due Period (the "Finance Charge Receivables") and unpaid Finance Charge
Receivables for prior Due Periods. In addition, certain Interchange
attributable to cardholder charges for merchandise and services in the
Accounts may be treated as Finance Charge Receivables for purposes of a
particular Series.
The VISA and MasterCard credit card accounts owned by the Bank were
principally generated through: (i) direct mail solicitations for accounts on a
prequalified credit basis; (ii) applications made available to prospective
cardholders at FNBC, the Bank and their affiliates, at retail outlets, at
other financial institutions with which arrangements have been made, on
college campuses and in magazines; (iii) affinity marketing; and (iv)
purchases of accounts from other credit card issuers.
If an account is opened in response to a direct mail prequalfied
solicitation, the prospective cardholder's name has previously been screened
through a credit bureau to ensure that the person meets certain standards of
creditworthiness and fiscal responsibility. In the case of prequalified
solicitations, the credit limit is based upon the prospective cardholder's
creditworthiness as measured by the Seller's risk evaluation process, length
and depth of credit experience and usage of credit. In the case of
prequalified solicitations where an offer is made for a credit card with a
credit line "up to" a predetermined amount, credit line assignment is based on
similar criteria at the time of the response.
Before an account is opened in response to an application, the prospective
cardholder's application is reviewed for completeness and creditworthiness. A
credit report issued by an independent credit reporting agency is generally
obtained and information on such report regarding the applicant may be
verified. The ability of the applicant to repay credit card balances is
generally evaluated by applying a credit score card, which is intended to
provide a general indication, based on the information available, of the
applicant's willingness and ability to repay his obligations. If an
application is approved, an initial credit limit is established for the
account based on the applicant's credit score, credit history and payment
ability.
Affinity marketing involves the solicitation of prospective cardholders from
identifiable groups with a common interest and/or common cause. Affinity
marketing is conducted through two approaches: the first relies on the
solicitation of organized membership groups with the written endorsement of
the group's leadership and the second utilizes solicitation of prospective
cardholders through the use of purchased lists. Solicitation activities used
in connection with affinity marketing also include: solicitation in
appropriate magazines, telemarketing and applications made available to
prospective cardholders in appropriate locations. In certain cases,
preapproved solicitations will be used in the same manner as described in the
preceding paragraph.
Credit card accounts that have been purchased by FNBC and the Bank were
originally opened using criteria established by the institution from which the
accounts were purchased or by the institution from which the selling
institution originally purchased the accounts. Purchased accounts are screened
against criteria which are set at the time of acquisition to determine whether
any of the purchased accounts should be closed immediately. Any accounts
failing the criteria are closed. All other such accounts remain open. The
credit limits on such accounts are based initially on the limits established
or maintained by the selling institution.
Each cardholder is subject to an agreement governing the terms and
conditions of the accounts. Pursuant to such cardholder agreement, the Bank
reserves the right to change or terminate any terms, conditions, services or
features of the accounts (including increasing or decreasing periodic charges,
other charges or minimum payments). Credit limits may be adjusted periodically
based upon the Bank's continuing evaluation of the cardholder's payment
behavior.
COLLECTION EFFORTS
Efforts to collect delinquent credit card receivables are made by the Bank
and FCSI personnel and collection agencies and attorneys retained by the Bank.
Under current practice, the Bank includes a request for payment of overdue
amounts on all billing statements subsequent to a delinquency. Collection
personnel generally initiate
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telephone contact with cardholders whose credit card accounts have become 30
days or more delinquent. Certain cardholders whom the Bank considers higher
risk may be contacted when their accounts first become delinquent. In the
event that initial telephone contact fails to resolve the delinquency, the
Bank continues to contact the cardholder by telephone and by mail. The Bank
may also enter into arrangements with cardholders to extend or otherwise
change payment schedules. The current policy of the Bank is to recognize
losses no later than the 180th day of delinquency (i.e., 210 days after the
date of the billing statement), although charge-offs may be made earlier in
some circumstances. The credit evaluation, servicing and charge-off policies
and collection practices of the Bank may change over time in accordance with
the Bank's business judgment and applicable law. Under the terms of the
Agreement, any recoveries (including insurance proceeds) received on charged-
off Accounts are retained by the Bank and are not included in the assets of
the Trust.
LOSS AND DELINQUENCY EXPERIENCE
The Prospectus Supplement relating to each Series sets forth the loss and
delinquency experience with respect to payments by cardholders for
substantially all VISA and MasterCard consumer revolving credit card accounts
owned by the Bank (excluding certain accounts not originated by the Bank or
FNBC) (the "Bank's Portfolio") during the periods shown in the Prospectus
Supplement. There can be no assurance, however, that the loss and delinquency
experience for the Receivables in the future will be similar to the historical
experience set forth in the Prospectus Supplement for the Bank's Portfolio.
The Bank has policies to allow delinquent accounts whose cardholders are
making good faith efforts to repay overdue amounts to be deemed current
("reaged") provided certain conditions are satisfied. If an account is 90 days
delinquent or greater, it qualifies for reaging treatment if the sum of the
payments received during the preceding five months (or in certain
circumstances the lesser of (a) five months or (b) the number of months since
the account was last current) is generally equal to the sum of the three
oldest minimum payments. The reaging process permits only one reaging of an
account from 90 days delinquent or greater categories in a 12-month period.
With respect to accounts that are 30 to 90 days delinquent, reaging treatment
occurs pursuant to a process which uses criteria that are more liberal than
the criteria described above. An account 30 to 90 days delinquent can be
reaged so long as these criteria are met. The entire process is system
controlled. In addition to automatic reaging, account closure and usage
restrictions are system controlled. When an account is 30 days delinquent,
charge privileges are suspended. Account closure occurs automatically when an
account is 60 days delinquent. Reinstatement of closed accounts requires a
full credit review; only a minimal number of closed accounts qualify for
reinstatement. The Bank may terminate, alter or modify its reaging process at
any time. Currently, the Bank is evaluating various collection strategies
which, if implemented, would alter the reaging process for certain accounts.
The delinquency information set forth in the Prospectus Supplement reflects
the application of the Bank's current reaging process.
REVENUE EXPERIENCE
The gross revenues from periodic charges and fees billed to cardholders on
the Bank's Portfolio are set forth in the Prospectus Supplement for the
periods indicated in the Prospectus Supplement.
The Seller has the right to determine periodic charges (which may be
computed on a monthly or daily basis) and other fees which will be 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. Under the Agreement, the Seller has agreed that unless required
by law or unless, in its good faith judgment, necessary to maintain on a
competitive basis its credit card business, it will not reduce the annual
percentage rate of periodic charge assessed on the Receivables or other fees
on the Accounts if, as a result of such reduction, its reasonable expectation
of the Portfolio Yield is a rate less than the Base Rate of any Series. The
terms "Portfolio Yield" and "Base Rate" for each Series (or Class thereof)
have the meanings set forth in the Prospectus Supplement relating to such
Series. The Servicer also has covenanted that it will change other terms
relating to the Accounts only if, in the reasonable judgment of the Servicer,
(x) if the Seller owns a comparable segment of the consumer revolving credit
card accounts, such change is made applicable to any such comparable segment
owned by the
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Seller which has characteristics the same or substantially similar to the
Accounts, or (y) if the Seller does not own such a comparable segment, such
change is not made with the intent to benefit materially the Seller over
Certificateholders. Except as specified above, there are no restrictions on
the Servicer's ability to change the terms of the Accounts.
The revenues for the Bank's Portfolio shown in the Prospectus Supplement are
related to periodic charges and other fees billed to cardholders but do not
include revenue attributable to Interchange. The revenues related to periodic
charges and fees depend in part upon the collective preference of cardholders
to use their credit cards as revolving debt instruments for purchases and cash
advances and paying off account balances over several months as opposed to
convenience use, where the cardholders prefer instead to pay off their entire
balance each month, thereby avoiding periodic charges on purchases, fees and
finance charges. Revenues related to periodic charges and fees also depend on
the types of charges and fees assessed by the Bank on the accounts. The
Servicer has instituted programs to waive annual fees on certain accounts, has
from time to time changed the minimum monthly payment on Accounts, has allowed
cardholders to elect a variable rate option and has lowered the spread
applicable to certain variable rate Accounts. The Bank introduced a variable
rate card in 1987. From 1989 through 1994, the Bank emphasized the origination
of variable rate accounts and substantially all new accounts originated during
that time were variable rate accounts. Depending upon fluctuations in interest
rates, the variable rate periodic charge (which is based on the prime rate)
assessed on variable rate accounts may change from month to month and could be
less than the fixed charge applicable to most standard fixed rate accounts.
Commencing in 1994, the Bank began offering certain new non-affinity accounts,
for purchase transactions, a fixed rate periodic charge for an initial period
which then converts into a variable rate. The initial fixed rate offered on
such accounts is substantially lower than that currently assessed on the
variable rate accounts or the standard fixed rate accounts. The total yield on
such accounts during the initial fixed rate period is therefore lower than
that of a variable rate account or standard fixed rate account. From time to
time, the Bank has introduced certain changes to the terms of the Accounts,
including increased fees, a reduced minimum monthly payment in those months
when a fee is charged to an Account and performance-based pricing whereby
certain delinquent accounts are assessed a higher periodic charge.
Fluctuations in the prime interest rate, and/or the continued use of the
initial fixed/variable rate pricing for certain new accounts, may affect
future revenue experience.
There can be no assurance that changes in applicable law, changes in the
marketplace or prudent business practice might not result in a determination
by the Servicer to take other actions which would otherwise change Account
terms.
INTERCHANGE
Members participating in the VISA and MasterCard International associations
receive certain fees ("Interchange") as partial compensation for taking credit
risk, absorbing fraud losses, funding full payer receivables and servicing
cardholders for a limited period prior to initial billing. Under the VISA and
MasterCard International systems, a portion of this Interchange in connection
with cardholder charges for merchandise and services is passed from banks
which clear the transactions for merchants to credit card-issuing banks.
Interchange ranges from approximately 1% to 2% of the transaction amount,
although VISA and MasterCard International may from time to time change the
amount of Interchange reimbursed to banks issuing their credit cards.
Interchange will be allocated to the Trust on the basis of the percentage
equivalent of the ratio which the amount of cardholder sales charges in the
Accounts bears to the total amount of cardholder sales charges for all
accounts in the Seller's entire portfolio. This percentage is an estimate of
the actual Interchange and may be greater or less than the actual amount of
the Interchange relating to the Accounts from time to time. Unless otherwise
specified in the related Prospectus Supplement, Interchange will be included
in Finance Charge Receivables for purposes of calculating the Portfolio Yield
for a Series.
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. New credit card issuers have been entering the market while
other issuers have been seeking to expand market share through increased
advertising, portfolio acquisitions, target marketing and pricing competition.
Certain credit card issuers assess periodic charges at rates
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significantly lower than the rate currently being assessed on a significant
number of the Accounts. Additionally, the use of incentive or affinity
programs (e.g., gift awards for card usage) may affect card usage patterns.
Certain of the Accounts (generally those in affinity programs) provide
benefits to cardholders of such Accounts which may not be offered to other
cardholders. Benefits provided under certain Accounts, including benefits
under cardholder affinity programs, could be modified or terminated in the
future by the Bank (or in the case of benefits available under affinity
programs, the other parties to such programs) which could make the Bank's
credit card product less attractive to cardholders. If cardholders choose to
use competing sources of credit or alternative accounts of the Bank, the rate
at which new Receivables are generated in the Accounts may be reduced and
payment patterns with respect to Receivables may be affected. If the rate at
which the Bank generates new Receivables decreases significantly at a time
when any Series of Certificates are scheduled to receive principal, such
Certificateholders might receive principal more slowly than planned.
THE ACCOUNTS
GENERAL
The Accounts currently consist of substantially all of the VISA(R) and
MasterCard(R) consumer revolving credit card accounts existing in all of the
Seller's ten billing cycles (billing cycles 0, 1, 2, 3, 4, 5, 6, 7, 8 and 9),
excluding certain accounts not originated by either the Seller or FNBC.
Additional accounts added to each of the foregoing billing cycles in the
normal operation of the Seller's credit card business will generally be added
on a daily basis as a category of Additional Accounts. See "Description of the
Certificates and the Agreement--Addition of Accounts."
The Seller's VISA and MasterCard accounts are grouped into billing cycles
for the purpose of administrative convenience. Each billing cycle has a
separate monthly billing date at which time the activity in the related
accounts during the month ending on such billing date are processed and billed
to cardholders. The Accounts include VISA and MasterCard accounts in billing
cycles ending at the close of business on ten separate days in each month. The
Seller transferred to the Trust all Receivables existing in the Accounts on
the billing date for such Account in either May 1990, September 1990, May
1991, July 1991, May 1992, or June 1996 (each, a "Cut Off Date") and all
Receivables generated in each such Account after the applicable Cut Off Date.
All monthly calculations with respect to each Account are computed based on
the activity during the applicable billing cycle for that Account (the monthly
billing cycle periods for the Accounts ending in the same month during the
term of the Trust being collectively referred to herein as a "Due Period").
Thus, in the case of the May 1998 Distribution Date, for example, monthly
collections would be based on the April 1998 Due Period and would reflect
collection activity for billing cycles commencing at the opening of business
on the 2nd, 4th, 7th, 10th, 13th, 16th, 19th, 22nd, 25th and 28th days of
March 1998, and ending at the close of business of the 1st, 3rd, 6th, 9th,
12th, 15th, 18th, 21st, 24th and 27th days of April 1998, respectively, with
respect to the Accounts in each of such billing cycles.
Accounts were previously assigned to billing cycles based on the month in
which they were opened. More recently, new accounts have been assigned to
billing cycles in a manner which is intended, for purposes of administrative
convenience, to equalize the number of accounts in the billing cycles. Because
the Accounts include substantially all the accounts existing in the Seller's
ten billing cycles (except for certain accounts not originated by either the
Seller or FNBC), and because the Receivables include all amounts payable by
cardholders under the Accounts, the Receivables of some of the Accounts
include delinquent or reaged Receivables and may include obligations of
cardholders who are or are about to become bankrupt or insolvent.
Pursuant to the Agreement, the Seller has the right (subject to certain
limitations and conditions described below) to designate from time to time
additional qualifying VISA and MasterCard consumer revolving credit card
accounts of the Bank to be included as Accounts (the "Additional Accounts")
and to convey to the Trust all Receivables in such Additional Accounts,
whether such Receivables are then existing or thereafter created. The Seller
currently adds all new accounts opened in the ordinary course of business in
the ten billing cycles as
a category of Additional Accounts on a daily basis and currently intends to
continue the addition of such new accounts. In addition, the Seller is
required to designate Additional Accounts (x) to maintain the First Chicago
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Amount equal to Aggregate Principal Receivables minus the sum of the Invested
Amounts for all Series, so that the First Chicago Amount for the related Due
Period equals or exceeds 7% of the Aggregate Principal Receivables for the
same Due Period, or such lower percentage as is acceptable to the Rating
Agencies, subject to certain conditions (the "Minimum First Chicago Interest
Percentage") and (y) to maintain, for so long as the Certificates remain
outstanding, Aggregate Principal Receivables in an amount equal to or greater
than the sum of the initial Invested Amounts (or other amounts, if applicable)
of all outstanding Series and (the "Minimum Aggregate Principal Receivables").
The aggregate amount of the interest represented by the Exchangeable Seller's
Certificate in the Principal Receivables of the Trust is referred to herein as
the "First Chicago Amount." The term "Aggregate Principal Receivables" means,
for any Due Period, the aggregate amount of Principal Receivables at the end
of the prior Due Period. The Seller will convey the Receivables then existing
or thereafter created under any such Additional Accounts to the Trust. In lieu
of transferring new Receivables to the Trust when the Bank is required to
designate Additional Accounts or when the Bank so chooses to do so, the Bank
may transfer Participations to the extent permitted by the Agreement.
Further, pursuant to the Agreement, the Seller has the right (subject to
certain limitations and conditions discussed herein) to accept the removal of
certain Accounts designated by the Seller from the Trust (the "Removed
Accounts") and to require the Trustee to convey all Receivables in such
Removed Accounts to the Seller, whether such Receivables are then existing or
thereafter created. Throughout the term of the Trust, the Accounts from which
the Receivables arise will be the same Accounts designated by the Seller on
the applicable Cut Off Dates (to the extent such Accounts continue to exist)
plus any Additional Accounts and minus any Removed Accounts. See "Description
of the Certificates and the Agreement--Conveyance of Receivables."
The Prospectus Supplement includes tables summarizing the Accounts by
various criteria as well as certain other information relating to the
Accounts, including information supplementing the foregoing description of the
Accounts. Such information includes the amount of Principal Receivables and
Finance Charge Receivables in the Accounts, the average Receivables balance of
the Accounts, the average credit limit of the Accounts and the aggregate total
Receivables balance as a percentage of the aggregate total credit limit of the
Accounts.
BILLING AND PAYMENTS
The credit card accounts owned by the Bank include accounts originated or
purchased by the Bank or FNBC. These accounts have various billing and payment
structures, including varying annual fees and periodic charges. The Prospectus
Supplement contains information on the current billing and payment
characteristics of the Accounts.
The Bank has the right to determine the periodic charges applicable to the
Accounts, including the right to alter or defer minimum monthly payments
required under the Accounts or to change various other terms with respect to
the Accounts, subject to certain limitations contained in the Agreement. See
"Description of the Certificates and the Agreement--Collection and Other
Servicing Procedures."
Payments by cardholders to the Bank on the Accounts are processed and
applied first to any fees billed to the Accounts, next to billed and unpaid
periodic charges and then to billed and unpaid transactions in the order
determined by the Bank. Any excess is applied to unbilled periodic charges.
There can be no assurance that periodic rates, fees and other charges will
remain at current levels in the future. See "Description of the Certificates
and the Agreement--Collection and Other Servicing Procedures."
THE SELLER
The primary business of the Seller, a wholly-owned subsidiary of First
Chicago NBD, is the processing and issuance of VISA and MasterCard credit
cards. The Seller, which was acquired by First Chicago NBD as of July 1, 1987,
from Beneficial Corporation, was named Beneficial National Bank USA prior to
its acquisition by First Chicago NBD. The Prospectus Supplement contains
additional information relating to the Seller.
The principal executive offices of the Seller are located at One Gateway
Center, 300 King Street, Wilmington, Delaware 19801 (telephone 302-594-8606).
The principal executive offices of First Chicago NBD are located at One First
National Plaza, Chicago, Illinois 60670 (telephone 312-732-4000).
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USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to the
Seller. The Seller intends to use such proceeds for general corporate
purposes.
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
Unless otherwise specified in the accompanying Prospectus Supplement, for
each Series, following its Revolving Period, collections of Principal
Receivables are expected to be distributed to holders of each Class of
Certificates (the "Certificateholders") of such Series or any specified Class
thereof on each specified Distribution Date during the Controlled Amortization
Period or the Principal Amortization Period, or are expected to be accumulated
for payment to Certificateholders of such Series or any specified Class
thereof during a Controlled Accumulation Period and distributed on a Scheduled
Payment Date; provided, however, that, if a Rapid Amortization Period or a
Rapid Accumulation Period commences, collections of Principal Receivables will
be paid to Certificateholders or accumulated in the manner described herein
and in the related Prospectus Supplement. The related Prospectus Supplement
specifies when the Controlled Amortization Period, the Principal Amortization
Period or Controlled Accumulation Period, as applicable, will commence, the
principal payments expected or available to be received or accumulated during
such Controlled Amortization Period, Principal Amortization Period or
Controlled Accumulation Period, or a Rapid Accumulation Period, as applicable,
the manner and priority of principal payments and accumulations among the
Classes of a Series of Certificates, the payment rate assumptions on which
such expected principal accumulations and payments are based and the
Liquidation Events which, if any were to occur, would lead to the commencement
of a Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, a Rapid Accumulation Period.
The Prospectus Supplement includes a table setting forth the highest and
lowest cardholder monthly payment rates for the Bank's Portfolio during any
month in each period shown in such table and the average cardholder monthly
payment rates for all months during such periods shown, in each case
calculated as a percentage of total opening monthly account balances during
the periods shown.
The amount of collections on Receivables may vary from month to month due to
seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to the Accounts will be similar to the
historical experience set forth in the Prospectus Supplement. Further, if a
Liquidation Event occurs with respect to a Series, the average life and
maturity of the Certificates of such Series could be significantly reduced.
Likewise, the sharing of collections of Principal Receivables allocated to
other Series with a Series during a Rapid Amortization Period or Rapid
Accumulation Period with respect to that Series could significantly reduce the
duration of such a period.
The amount of outstanding Receivables and the rates of payments,
delinquencies, charge-offs and new borrowings on the Accounts depend upon a
variety of factors, including seasonal variations, the availability of other
sources of credit, general economic conditions and consumer spending and
borrowing patterns. Accordingly, there can be no assurance that future
cardholder monthly payment rate experience will be similar to historical
experience.
DESCRIPTION OF THE CERTIFICATES AND THE AGREEMENT
The Certificates of each Series will be issued pursuant to the Agreement and
a Series supplement (each, a "Supplement") entered into between the Bank, as
transferor of interests in the Receivables and as Servicer of the Accounts and
the Receivables, and Norwest Bank Minnesota, National Association, as Trustee
for the Certificateholders. Pursuant to the Agreement, the Seller may execute
further Supplements thereto between the Seller and the Trustee in order to
issue additional Series. See "--Exchanges." The Trustee will provide a copy of
the Agreement (without exhibits or schedules), including any Supplements, to
Certificateholders without
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charge upon written request. The following summary describes certain terms of
the Agreement common to each Series of Certificates. The summary does not
purport to be complete and is qualified in its entirety by reference to the
Agreement and the related Supplement.
GENERAL
The Certificates will represent an undivided interest in the Trust,
including the right to receive, in the aggregate, the applicable Invested
Percentage of all collections received with respect to the Receivables in the
Trust. The property of the Trust consists of the Receivables generated under
the Accounts and under any Additional Accounts hereinafter added to the Trust,
all funds to be collected from cardholders in respect of Receivables (other
than recoveries with respect to previously charged-off Receivables, unless
such recoveries are made available to one or more Series as specified in the
related Prospectus Supplement, and insurance proceeds), all moneys on deposit
in the Collection Account and any other account established for the benefit of
any Series (which account may not be for the benefit of any other Series), the
right to receive certain Interchange fees attributable to the Accounts (which
right may not be afforded to a Series) and any Enhancement issued with respect
to any particular Series (the drawing on or payment of which may not be
available to the Certificateholders of any other Series). The Trust will not
include the Receivables from any Removed Accounts which may be removed from
the Trust from time to time pursuant to the terms of the Agreement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be senior to other Classes of Certificates (such senior Classes,
"Senior Certificates") and one or more of which may be subordinated to other
Classes of Certificates (such subordinated Classes, "Subordinated
Certificates"). Each Class of a Series will evidence the right to receive a
specified portion of each distribution of principal or interest or both. The
Invested Amount with respect to a Series with more than one Class will be
allocated among the Classes as described in the related Prospectus Supplement.
The Certificates of a Class may differ from Certificates of other Classes of
the same Series in, among other things, the amounts allocated to principal
payments, maturity date, interest rate per annum (the "Certificate Rate") and
the availability of Enhancement.
The assets of the Trust will be allocated among the Certificateholders of
each Series and the holder of the Exchangeable Seller's Certificate (and, in
certain circumstances, the Enhancement Provider with respect to a Series). The
aggregate amount of the interest of the Certificateholders of a Series in the
Principal Receivables of the Trust is referred to herein as the "Invested
Amount." If specified in any Prospectus Supplement, the term "Invested Amount"
with respect to the related Series includes the Collateral Interest with
respect to such Series.
For each Series of Certificates, payments of interest and principal will be
made on Distribution Dates specified in the related Prospectus Supplement to
Certificateholders in whose names the Certificates of such Series were
registered on the record dates (each, a "Record Date") specified in the
related Prospectus Supplement. Interest will be distributed to
Certificateholders in the amounts, for the periods and on the dates specified
in the related Prospectus Supplement.
For each Series of Certificates, the Seller initially will own the
Exchangeable Seller's Certificate. The Exchangeable Seller's Certificate
represents the undivided interest in the Trust not represented by the
Certificates or the rights, if any, of any Enhancement Providers to receive
payments from the Trust. The holder of the Exchangeable Seller's Certificate
will have the right to a percentage (the "First Chicago Percentage") of all
cardholder payments from the Receivables in the Trust.
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period for a Series, the Invested Amount of such Series will remain
constant except under certain limited circumstances. The amount of Principal
Receivables in the Trust, however, will vary each day as new Principal
Receivables are created and
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others are paid. The amount of the First Chicago Amount will fluctuate each
day, to reflect the changes in the amount of the Principal Receivables in the
Trust. When a Series is amortizing, or when principal with respect thereto is
accumulating in the Principal Funding Account for such Series, the Invested
Amount of such Series will decline as customer payments of Principal
Receivables are collected and distributed to or accumulated for distribution
to the Certificateholders. As a result, the First Chicago Amount will
generally increase to reflect reductions in the Invested Amount for such
Series and will also change to reflect the variations in the amount of
Principal Receivables in the Trust. The First Chicago Amount may also be
reduced as the result of an Exchange.
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of The Depository Trust Company ("DTC")
(together with any successor depository selected by the Seller, the
"Depository"), except as set forth below. Unless otherwise specified in the
related Prospectus Supplement, with respect to each Series of Certificates,
beneficial interests in the Certificates will be available for purchase in
minimum denominations of $1,000 and integral multiples thereof in book-entry
form only. The Seller has been informed by DTC that DTC's nominee will be Cede
& Co. ("Cede"). Accordingly, Cede is expected to be the holder of record of
each Series of Certificates offered hereby. No owner of beneficial interests
in the Certificates (a "Certificate Owner") will be entitled to receive a
certificate representing such person's interest in the Certificates. Unless
and until Definitive Certificates are issued for any Series under the limited
circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
its participating organizations ("Participants"), and all references herein to
distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC procedures. See "--Book-Entry
Registration" and "--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificate Owners may hold their
interests in the Certificates offered hereby through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations which are participants in such
systems.
Cede, as nominee for DTC, will be the registered holder of the global
Certificates. Cedel and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in Cedel's and
Euroclear's names on the books of their respective Depositaries which in turn
will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC. Citibank, N.A. ("Citibank"), will act
as depositary for Cedel and Morgan Guaranty Trust Company of New York
("Morgan") will act as depositary for Euroclear (in such capacities, the
"Depositaries").
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules. Transfers between Cedel Participants and Euroclear
Participants will occur in the ordinary way in accordance with their
applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel 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
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by delivering or receiving securities in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement applicable
to DTC. Cedel Participants and Euroclear Participants may not deliver
instructions directly to the Depositaries.
Because of time zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participant on such business day. Cash received in Cedel or
Euroclear as a result of sales of securities by or through a Cedel Participant
or a Euroclear Participant to a DTC Participant will be received with value on
the DTC settlement date but will be available in the relevant Cedel or
Euroclear cash account only as of the business day following settlement in
DTC. For additional information regarding clearance and settlement procedures
for the Certificates, see Annex I hereto and for information with respect to
tax documentation procedures relating to the Certificates, see Annex I hereto
and "Tax Matters--Foreign Investors."
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code (the "UCC"), and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC was
created to hold securities for its Participants and facilitate the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions
of principal of and interest on the Certificates from FNBC, as paying agent,
or its successor in such capacity (the "Paying Agent"), through the
Participants who in turn will receive them from DTC. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Paying Agent to Cede,
as nominee for DTC. DTC will forward such payments to its Participants which
thereafter will forward them to Indirect Participants or Certificate Owners.
Certificate Owners will not be recognized by the Trustee as
Certificateholders, as such term is used in the Agreement or any Supplement,
and Certificate Owners will only be permitted to exercise the rights of
Certificateholders indirectly through the Participants who in turn will
exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal of and interest on
the Certificates. Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Certificates, Certificate Owners
will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
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DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under the Agreement or any Supplement only at the
direction of one or more Participants to whose account with DTC the
Certificates are credited. Additionally, DTC has advised the Seller that it
will take such actions with respect to specified percentages of the Invested
Amount of a Series only at the direction of and on behalf of Participants
whose holdings include undivided interests that satisfy such specified
percentages. DTC may take conflicting actions with respect to other undivided
interests to the extent that such actions are taken on behalf of Participants
whose holdings include such undivided interests.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled in Cedel in any of 36 currencies, including United
States dollars. Cedel provides to its Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulation by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriters. Indirect access to Cedel is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Cedel Participant, either directly
or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 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 Morgan Guaranty Trust Company of New York, Brussels, Belgium
office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the United States 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,
withdrawals of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants, and has no record of or relationship with persons holding
through Euroclear Participants.
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Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Tax Matters." 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 or any Supplement on behalf of a Cedel
Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Depositary's ability to effect such
actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued in fully registered, certificated
form to Certificate Owners or their nominees (the "Definitive Certificates"),
rather than to DTC or its nominee, only if (i) the Seller advises the Trustee
in writing that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to the Certificates of such
Series, and the Trustee or the Seller is unable to locate a qualified
successor, (ii) the Seller, at its option, elects to terminate the book-entry
system through DTC, or (iii) after the occurrence of a Servicer Default,
Certificate Owners representing in the aggregate not less than 50% of the
aggregate Invested Amount of all Series then issued and outstanding advise DTC
through Participants in writing that the continuation of a book-entry system
through any 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, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the affected Certificates and
instructions for re-registration, the Trustee will issue the affected
Certificates as Definitive Certificates, and thereafter the Trustee will
recognize the holders of such Definitive Certificates as holders under the
Agreement (the "Holders").
Distribution of principal and interest on the Certificates will be made by
the Paying Agent directly to Holders of Definitive Certificates in accordance
with the procedures set forth herein, in the related Prospectus Supplement and
in the Agreement. Interest and principal payments on a Distribution Date will
be made to Holders in whose names the Definitive Certificates were registered
at the close of business on the related Record Date. Distributions will be
made by check mailed to the address of such Holder as it appears on the
certificate register. The final payment on any Certificate (whether a
Definitive Certificates or a certificate registered in the name of Cede
representing the Certificates of a Series), 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 of such
Series. The Trustee will provide such notice to registered Certificateholders
not later than the fifth day of the month of such final distribution.
Unless otherwise specified in the related Prospectus Supplement, Definitive
Certificates will be transferable and exchangeable at the offices of the
Transfer Agent and Registrar, which shall initially be FNBC. No service charge
will be imposed for any registration of transfer or exchange, but the Transfer
Agent and Registrar may require payment of a sum sufficient to cover any tax
or other governmental charge imposed in connection therewith. The Transfer
Agent and Registrar, as the case may be, shall not be required to register the
transfer or exchange of Definitive Certificates for a period of 15 days
preceding the due date for any payment with respect to such Definitive
Certificates.
INTEREST PAYMENTS
For each Series of Certificates and Class thereof, interest will accrue from
the relevant issuance date of the Certificates (the "Series Closing Date") on
the applicable Invested Amount at the applicable Certificate Rate, which may
be a fixed, a floating or any other type of interest rate as specified in the
related Prospectus
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Supplement. Interest for each accrual period (each an "Interest Period") will
be distributed to Certificateholders on the dates (which may be monthly,
quarterly, semi-annually or otherwise) specified in the related Prospectus
Supplement (each, a "Distribution Date"). Interest payments on any
Distribution Date will be funded from collections of Finance Charge
Receivables allocated to the Invested Amount during the preceding Due Period
or Due Periods and may be funded from certain investment earnings on funds
held in accounts of the Trust and from any applicable Enhancement, if
necessary, or certain other amounts as specified in the related Prospectus
Supplement. If the Distribution Dates for payment of interest for a Series or
Class occur less frequently than monthly, such collections or other amounts
(or the portion thereof allocable to such Class) may be deposited in one or
more trust accounts (each, an "Interest Funding Account") pending distribution
to the Certificateholders of such Series or Class, as described in the related
Prospectus Supplement. If a Series has more than one Class of Certificates,
each such Class may have a separate Interest Funding Account. The Prospectus
Supplement relating to each Series of Certificates and each Class thereof will
describe the amounts and sources of interest payments to be made, the
Certificate Rate, and, for a Series or Class thereof bearing interest at a
floating Certificate Rate, the dates and the manner for determining
Certificate Rates, and the formula, index or other method by which such
Certificate Rates are determined.
PRINCIPAL PAYMENTS
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period for each Series of Certificates (which begins on the related
Series Closing Date and ends on the day before an Amortization Period or
Accumulation Period begins), no principal payments will be made to the
Certificateholders of such Series. During the Controlled Amortization Period,
Principal Amortization Period or Accumulation Period, as applicable, which
will be scheduled to begin on the date specified in, or determined in the
manner specified in, the related Prospectus Supplement, and during the Rapid
Amortization Period or Rapid Accumulation Period, which will begin upon the
occurrence of a Liquidation Event, principal will be paid to the
Certificateholders in the amounts and on Distribution Dates specified in the
related Prospectus Supplement or will be accumulated in one or more trust
accounts (each, a "Principal Funding Account") for later distribution to
Certificateholders on the Scheduled Payment Date in the amounts specified in
the related Prospectus Supplement. Principal payments for any Series or Class
thereof will be funded from collections of Principal Receivables received
during the related Due Period or Due Periods as specified in the related
Prospectus Supplement and allocated to such Series or Class and from certain
other sources specified in the related Prospectus Supplement. In the case of a
Series with more than one Class of Certificates, the Certificateholders of one
or more Classes may receive payments of principal at different times. The
related Prospectus Supplement will describe the manner, timing and priority of
payments of principal to Certificateholders of each Class.
Funds on deposit in any Principal Funding Account applicable to a Series may
be subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement specified in the related Prospectus Supplement intended to
assure a minimum rate of return on the investment of such funds. In order to
enhance the likelihood of the payment in full of the principal amount of a
Series of Certificates or Class thereof at the end of an Accumulation Period,
such Series of Certificates or Class thereof may be subject to a principal
guaranty or other similar arrangement specified in the related Prospectus
Supplement.
CONVEYANCE OF RECEIVABLES
As of each of June 28, 1990, October 25, 1990, June 12, 1991, August 1,
1991, June 1, 1992, and July 1, 1996, the Seller transferred and assigned to
the Trust the Receivables in the applicable portion of the Accounts
outstanding as of the relevant Cut Off Date, all of the Receivables thereafter
created under the Accounts and the proceeds of all of the foregoing (other
than recoveries with respect to previously charged-off Receivables and
insurance proceeds).
In connection with the transfer of the Receivables to the Trust, and the
sale of the previously issued Series of Certificates and the Certificates
offered hereby, the Seller has reflected and will reflect the transfer of a
portion of the Receivables in an amount equal to the sum of the initial
Invested Amounts of the previously issued Series
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of Certificates and the initial Invested Amount of the Series of Certificates
offered hereby to the Trust on its books and records. In addition, the Seller
has provided or will provide to the Trustee a computer file or a microfiche
list containing a true and complete list showing for each Account, as of the
applicable Cut Off Date, (i) its account number and billing cycle, (ii) its
collection status, (iii) the aggregate amount outstanding in such Account and
(iv) the aggregate amount of Principal Receivables in such Account. The Bank,
as initial Servicer, is retaining and is not delivering to the Trustee any
other records or agreements relating to the Accounts or the Receivables. The
records and agreements relating to the Accounts and the Receivables are not
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 Receivables are stamped or marked to reflect the transfer of
Receivables to the Trust. The Seller has filed or will file UCC financing
statements with respect to the Receivables meeting the requirements of New
York, Illinois and Delaware state law. See "Risk Factors" and "Certain Legal
Aspects of the Receivables."
EXCHANGES
The Agreement provides for the Trustee to issue two types of certificates:
(i) one or more Series of Certificates which are transferable and have the
characteristics described below and (ii) a certificate which evidences the
principal amount of the Seller interest in the Trust (the "First Chicago
Interest"), which initially is held by the Seller and which generally is not
transferable (the "Exchangeable Seller's Certificate"). The Agreement also
provides that, pursuant to any one or more Supplements, the Seller may tender
the Exchangeable Seller's Certificate, or the Exchangeable Seller's
Certificate and the certificates evidencing any Series of Certificates, to the
Trustee in exchange for one or more new Series and a reissued Exchangeable
Seller's Certificate (any such tender, an "Exchange"). Under the Agreement,
the Seller may define, with respect to any newly issued Series: (i) its name
or designation; (ii) its initial principal amount (or method for calculating
such amount); (iii) its coupon rate (or formula for the determination
thereof); (iv) the interest payment date or dates and the date or dates from
which interest shall accrue; (v) the method for allocating to
Certificateholders of such Series collections; (vi) the names of any accounts
to be used by such Series and the terms governing the operation of any such
accounts; (vii) the percentage used to calculate monthly servicing fees;
(viii) the Minimum First Chicago Interest Percentage; (ix) the minimum amount
of Aggregate Principal Receivables required to be maintained through the
designation by the Seller of Additional Accounts; (x) the issuer and terms of
a letter of credit or other form of Enhancement with respect thereto; (xi) the
Base Rate applicable to such Series; (xii) the terms on which the Certificates
of such Series may be repurchased by the Seller or remarketed to other
investors; (xiii) the Series Termination Date; (xiv) any deposit into any
account maintained for the benefit of Certificateholders of such Series; (xv)
the number of Classes of such Series, and if more than one Class, the rights
and priorities of each such Class; (xvi) the extent to which the Certificates
of such Series will be issuable in temporary or permanent global form (and, in
such case, the Depositary for such global certificate or certificates, the
terms and conditions, if any, upon which such global certificate may be
exchanged, in whole or in part, for definitive certificates, and the manner in
which any interest payable on a temporary or global certificate will be paid);
(xvii) whether the Certificates of such Series may be issued in bearer form
and any limitations imposed thereon; (xviii) whether Interchange will be
included in funds available to Certificateholders of such Series; (xix) the
priority of any Series with respect to any other Series; (xx) the rights of
the holders of the Exchangeable Seller's Certificate that have been
transferred to the holders of such Series; and (xxi) any other relevant terms
(all such terms, the "Principal Terms" of such Series). None of the Seller,
the Servicer, the Trustee or the Trust is required or intends to obtain the
consent of any Certificateholder to issue any additional Series. However, as a
condition of an Exchange, the Seller will deliver to the Trustee written
confirmation that the Exchange will not result in the applicable Rating Agency
reducing or withdrawing its rating of any outstanding Series. The Seller may
offer any Series to the public under a prospectus or other disclosure document
in transactions either registered under the Securities Act of 1933, as
amended, or exempt from registration thereunder directly, through one or more
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise. Any such Series may be issued in fully registered
or book-entry form in minimum denominations determined by the Seller. A chart
set forth in the Prospectus Supplement provides the Principal Terms and other
relevant characteristics of the other outstanding Series which have been
issued or are proposed to be issued by the Trust. The Seller intends to offer,
from time to time, additional Series.
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The Agreement provides that the Seller may perform Exchanges and define
Principal Terms such that each Series has a period during which amortization
or accumulation of the principal amount thereof is intended to occur which may
have a different length and begin on a different date than such period for any
other Series. Further, one or more Series may be in their Controlled
Amortization Period, Principal Amortization Period or Rapid Amortization
Period (each, an "Amortization Period") or Controlled Accumulation Period or
Rapid Accumulation Period (each, an "Accumulation Period") while other Series
are not. Thus, certain Series may not be amortizing, or accumulating principal
for ultimate payment to Certificateholders, while other Series are in such
Amortization Period or Accumulation Period. Moreover, each Series may have the
benefits of a letter of credit, Cash Collateral Account, Collateral Interest,
interest rate swap or other form of Enhancement provided by entities different
from those providing the letters of credit, Cash Collateral Accounts,
Collateral Interests, interest rate swaps or other form of Enhancement with
respect to any other Series. Under the Agreement, any such letter of credit,
Cash Collateral Account, Collateral Interest, interest rate swap or other form
of Enhancement shall only be available for the Series to which it relates.
Likewise, with respect to each such letter of credit, Cash Collateral Account,
Collateral Interest, interest rate swap or other form of Enhancement, the
Seller may deliver a different letter of credit, loan, collateral, swap or
other form of Enhancement agreement. The Agreement also provides that the
Seller may specify different coupon rates and monthly servicing fees with
respect to each Series. Collections allocated to Finance Charge Receivables
not used to pay interest on the Certificates, the Monthly Servicing Fee, the
Investor Default Amount, Investor Charge-Offs or other amounts payable with
respect to any Series will be allocated as provided in such letter of credit,
loan, collateral, swap or other form of Enhancement agreement, if applicable.
The Seller also has the option under the Agreement to vary between Series the
terms upon which a Series may be repurchased by the Seller or remarketed to
other investors. Additionally, certain Series may be subordinated to other
Series, or Classes within a Series may have different priorities. There is no
limit to the number of Exchanges that the Seller may perform under the
Agreement. The Trust will terminate only as provided in the Agreement.
Under the Agreement and pursuant to a Supplement, an Exchange may only occur
upon the satisfaction of certain conditions provided in the Agreement. Under
the Agreement, the Seller may perform an Exchange by notifying the Trustee at
least three days in advance of the date upon which the Exchange is to occur.
Under the Agreement, the notice will state the designation of any Series to be
issued on the date of the Exchange and, with respect to each such Series: (i)
its initial principal amount (or method for calculating such amount), (ii) its
Certificate Rate and (iii) the provider of a letter of credit, Cash Collateral
Account, Collateral Interest, interest rate swap or other form of Enhancement,
if any, with respect to such Series. On the date of the Exchange, the
Agreement provides that the Trustee will issue any such Series only upon
delivery to it of the following: (i) a Supplement in form satisfactory to the
Trustee signed by the Seller and specifying the Principal Terms of such
Series, (ii) an opinion of counsel to the effect that, unless otherwise
specified in the related Supplement, the Certificates of such Series will be
characterized as debt under existing law for Federal income tax purposes and
that the issuance of such Series will not materially adversely impact the
Federal income tax characterization of any outstanding Series, (iii) the
letter of credit, Cash Collateral Account, funds for the purchase of the
Collateral Interest, interest rate swap or other form of Enhancement, if any,
and a letter of credit, loan, collateral, swap or other form of Enhancement
agreement with respect thereto executed by the Seller and the provider of the
letter of credit, Cash Collateral Account, Collateral Interest, interest rate
swap or other form of Enhancement, (iv) written confirmation from the
applicable Rating Agency that the Exchange will not result in such Rating
Agency reducing or withdrawing its rating on any outstanding Series and (v)
the existing Exchangeable Seller's Certificate and the applicable Certificates
of the Series to be exchanged, if applicable. Upon satisfaction of such
conditions, the Trustee will cancel the existing Exchangeable Seller's
Certificate and the Certificates of the exchanged Series, if applicable, and
issue the new Series and a new Exchangeable Seller's Certificate.
COVENANTS, REPRESENTATIONS AND WARRANTIES
The Seller has covenanted to the Trustee for the benefit of all
Certificateholders of all Series which from time to time may have an interest
in the Trust that, as to the Receivables and the Accounts, unless cured within
60 days from receipt of notice from the Trustee, the Seller will accept the
transfer of any Receivable which is
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written off as uncollectible or any Receivable the proceeds of which are
unavailable to the Trust, if (i) such Receivable is not an Eligible Receivable
or (ii) the Agreement does not constitute either (a) a valid transfer and
assignment to the Trust of all right, title and interest of the Seller in and
to such Receivable, whether then existing or thereafter created, and of all
proceeds thereof (including amounts in the Collection Account) or (b) a grant
of a first priority perfected security interest in such Receivable and, with
certain exceptions and for certain limited periods of time, the proceeds
thereof (including amounts in the Collection Account), which security interest
is effective as to each Receivable upon the creation thereof. Additionally,
under certain conditions, the Seller covenants in the Agreement to accept the
transfer of each Receivable which is subject to certain specified liens
immediately upon the discovery of such liens.
The Seller shall accept the transfer of any Receivable, as described above,
by deducting the principal balance of such Receivable from the aggregate
amount of Principal Receivables used to calculate the First Chicago Interest;
provided, however, that if such deduction would reduce the First Chicago
Interest below zero or would otherwise not be permitted by law, the Seller
will be obligated to make a deposit in the Collection Account in immediately
available funds equal to the principal amount of such Receivables (plus
periodic charges through the end of the related Due Period to the extent not
included in the amount of the Receivable) (the "Transfer Deposit Amount").
Such deposit shall be considered a payment in full of the ineligible
Receivable. Any amounts so paid by the Seller shall be allocated in respect of
Finance Charge Receivables and Principal Receivables as provided in the
Agreement.
The Seller represented and warranted as of the issuance dates for all
previous Series, and will represent and warrant as of the issuance date of the
Certificates offered hereby, to the Trustee for the benefit of all
Certificateholders of all Series which from time to time may have an interest
in the Trust, that (i) the Agreement constitutes a legal, valid, binding and
enforceable obligation of the Seller, (ii) all material information with
respect to the Accounts and the Receivables in the list provided to the
Trustee was true and correct in all material respects as of the applicable Cut
Off Dates and (iii) any Additional Accounts conformed as of the applicable
date to the computer file or list of Additional Accounts provided by the
Seller to the Trustee on or prior to the date the Receivables in such
Additional Accounts were added to the Trust (or in the case of Automatic
Additional Accounts, to the computer file or list of Additional Accounts
provided by the Seller to the Trustee on the applicable Determination Date as
described in "--Addition of Accounts" below). In the event that (x) any of the
representations and warranties described in clause (i), (ii) or (iii) above
are not true and correct or (y) a material amount of Receivables are not
Eligible Receivables, and such event has a material adverse effect on the
interests of holders of the Certificates, then either the Trustee or the
holders of Certificates evidencing undivided interests in the Trust
aggregating more than 50% of the aggregate Invested Amount of all Series, by
written notice to the Seller (and to the Trustee and the Servicer, if given by
the Certificateholders), may direct the Seller to purchase all Series
outstanding within 60 days of such notice. The Seller is obligated to purchase
all Series on a Distribution Date occurring within such applicable period,
unless the representations and warranties shall then be true and correct in
all material respects or there shall no longer be a material amount of
Receivables which are not Eligible Receivables, as the case may be. The
purchase price is equal to the aggregate Invested Amount of all Series on the
Record Date related to the applicable payment date on which the purchase is
scheduled to be made plus an amount equal to all interest accrued but unpaid
on all Series at the applicable Certificate Rates through the end of the
Interest Periods of such Series. The payment of such purchase price into the
Collection Account in immediately available funds will be considered a
prepayment in full of all Receivables and will be paid in full to the
Certificateholders upon presentation and surrender of their Certificates. The
obligations described above shall be the sole remedies respecting the
foregoing representations, warranties and events available to the Trustee or
the Certificateholders.
An "Eligible Receivable" is defined to mean each Receivable (i) which has
arisen under an Eligible Account or an Eligible Additional Account, (ii) which
was created in compliance with all requirements of law and pursuant to a
credit card agreement which complies with all 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 consents or
authorizations of, or registrations with, any governmental authority required
to be obtained or given
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by the Seller in connection with the creation of such Receivable or the
execution, delivery and performance by the Seller of the related credit card
agreement have been duly obtained or given and are in full force and effect as
of such date of creation, (iv) as to which the Trust will at all times have
good and marketable title, free and clear of all liens, encumbrances, charges
and security interests (except those permitted by the Agreement), (v) which
will at all times be the legal, valid and binding payment obligation of the
cardholder thereof enforceable against such cardholder in accordance with its
terms, subject to certain bankruptcy and equity related exceptions, (vi) which
constitutes either an "account" or a "general intangible" under and as defined
in Article 9 of the UCC as then in effect in the States of Delaware, Illinois
and New York, (vii) which, at the time of its transfer to the Trust, has not
been waived or modified except as permitted by the Agreement, (viii) which is
not subject to any right of rescission, setoff, counterclaim or other defense
(including the defense of usury), other than certain bankruptcy and equity
related defenses and adjustments permitted by the Agreement to be made by the
Servicer, (ix) as to which the Seller has satisfied all obligations to be
fulfilled at the time it is transferred to the Trust and (x) as to which the
Seller has done nothing, at the time of its transfer to the Trust, to impair
the rights of the Trust or certificateholders therein. An "Eligible Account"
is defined to mean an account (i) which is a VISA or MasterCard consumer
revolving credit card account and was in existence and owned by the Bank at
the close of business on its Cut Off Date, (ii) which is payable in United
States dollars, (iii) the credit card or cards for which have not been
reported lost or stolen, (iv) the receivables in which have not been written
off, (v) which was not originated or originally purchased by Beneficial
National Bank USA, (vi) which is not part of certain affinity programs and
(vii) which was not originated by The Society for Savings, Hartford,
Connecticut.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of the Receivables or any records relating to the
Receivables for the purpose of establishing the presence or absence of
defects, compliance with the Seller's representations and warranties or for
any other purpose. The Servicer, however, is required to deliver to the
Trustee on or before March 31 of each year an opinion of counsel with respect
to the validity of the security interest of the Trust in and to the
Receivables.
ADDITION OF ACCOUNTS
As described above under "The Accounts," the Seller has the right and, in
some circumstances is obligated, to designate from time to time Additional
Accounts to be included as Accounts and to convey to the Trust all Receivables
in such Additional Accounts, whether such Receivables are then existing or
thereafter created. The Seller is required to add Additional Accounts if, on a
Determination Date, the First Chicago Amount for the related Due Period is
less than the Minimum First Chicago Interest Percentage of the Aggregate
Principal Receivables for the same Due Period or if, on any Determination
Date, Aggregate Principal Receivables are less than the Minimum Aggregate
Principal Receivables (or such higher amount established pursuant to a
Supplement). Each such Additional Account must be an "Eligible Additional
Account." An "Eligible Additional Account" is either: (i) an account (a) which
is a VISA or MasterCard consumer revolving credit card account which was in
existence and owned by the Bank on the date on which such account is to be
added to the Trust, (b) which is payable in United States dollars, (c) the
credit card or cards for which have not been reported lost or stolen and (d)
the receivables in which have not been charged off; (ii) any Automatic
Additional Account; or (iii) any other consumer revolving credit card account
which the applicable Rating Agency permits to be added to the Trust. The
Seller is required to give prior written notice of such additions to the
Rating Agency and prior to the date of such addition shall not have received
notice from any Rating Agency of its intention to reduce or withdraw the
rating of any Series of Certificates.
Accounts opened during the normal operation of the Seller's credit card
business in the billing cycles the Receivables of which are included in the
Trust (or any other billing cycle of the Seller of which a substantial portion
of the Receivables have been transferred to the Trust in the future) may also
be added to the Trust automatically on a daily basis ("Automatic Additional
Accounts"). Automatic Additional Accounts will not include those accounts
purchased by the Seller from another credit card issuer or accounts included
in any affinity program or other special program, the accounts of which are
not then currently included in the Trust. The Seller, at its option, may
terminate or suspend the inclusion of Automatic Additional Accounts at any
time. The Seller
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will provide to the Trustee on each Determination Date a computer file or a
microfiche list containing a true and complete list showing each Automatic
Additional Account included during the Due Period relating to such
Determination Date and indicating for each such Automatic Additional Account
as of its first billing date (i) its account number and billing cycle, (ii)
its collection status, (iii) the aggregate amount outstanding in such
Automatic Additional Account and (iv) the aggregate amount of Principal
Receivables in such Automatic Additional Account.
If so specified in the Prospectus Supplement relating to a Series, in
addition to or in lieu of Additional Accounts, the Seller, to the extent
permitted under the Agreement, may add to the Trust participations
representing interests in a pool of assets primarily consisting of receivables
arising under consumer revolving credit card accounts owned by the Seller and
collections thereon ("Participations"). Participations may be evidenced by one
or more certificates of ownership issued under a separate pooling and
servicing agreement or similar agreement (a "Participation Agreement") entered
into by the Seller which entitles the certificateholder to receive percentages
of collections generated by the pool of assets subject to such Participation
Agreement from time to time and to certain other rights and remedies specified
therein. Participations may have their own credit enhancement, liquidation or
pay out events, servicing obligations and servicer defaults, all of which may
be enforceable by a separate trustee under the Participation Agreement and may
be different from those specified in this Prospectus. The rights and remedies
of the Trust as the holder of a Participation (and therefore the
Certificateholders) will be subject to all the terms and provisions of the
related Participation Agreement. The Agreement may be amended to permit the
addition of a Participation in the Trust without the consent of the related
Certificateholders if (i) the Seller delivers to the Trustee a legal opinion
to the effect that such amendment will not as of the date of such amendment
adversely affect in any material respect the interest of any
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the Trust.
A transfer of Participations to the Trust would be subject to similar
conditions as the designation of Additional Accounts. The Seller would be
required to give prior written notice of such transfer to the Rating Agency
and prior to the date of such transfer the Seller would not have received
notice from any Rating Agency of its intention to reduce or withdraw the
rating of any Series of Certificates.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding sentence, on each
Determination Date on which the First Chicago Amount exceeds 15% of Aggregate
Principal Receivables with respect to such Determination Date, the Seller may,
but shall not be obligated to, accept all Receivables and proceeds thereof
from certain Accounts offered to it by the Trustee, without notice to the
Certificateholders. The Seller may, at its sole discretion, accept such offer
in an aggregate amount equal to an amount not greater than the excess of the
First Chicago Amount over the amount of Aggregate Principal Receivables
required to be maintained pursuant to the Agreement and any Supplement for
deletion and removal from the Trust. The Seller is permitted to designate and
require reassignment to it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions: (i) the Seller shall have delivered
to the Trustee for execution a written reassignment and a computer file or
microfiche list containing a true and complete list of all Accounts in the
Trust after such removal, the Accounts to be identified by, among other
things, account number and their aggregate amount of Principal Receivables;
(ii) the Seller shall represent and warrant that no selection procedure used
by the Seller which is adverse to the interests of the Certificateholders was
utilized in selecting the Removed Accounts; (iii) the removal of any
Receivables of any Removed Accounts shall not, in the reasonable belief of the
Seller, cause a Liquidation Event to occur; (iv) the Seller shall have
delivered prior written notice of the removal to each Rating Agency which has
rated any outstanding Series and prior to the date on which such Receivables
are to be removed shall not have received notice from any Rating Agency of its
intention to reduce or withdraw the rating of any Series of Certificates; and
(v) the Seller shall have delivered to the Trustee an officer's certificate
confirming the items set forth in clauses (i) through (iv) above.
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COLLECTION ACCOUNT
The Trustee has established and maintains in the name of the Trustee, on
behalf of the Trust, a segregated trust account for the benefit of the
Certificateholders (the "Collection Account"). The Collection Account has been
established and is maintained with the trust department of The First National
Bank of Chicago, an Eligible Institution. An "Eligible Institution" is defined
as a depository institution organized under the laws of the United States or
any one of the States thereof, which is a member of the FDIC and which has a
short-term unsecured debt rating of at least A-1 and P-1 by the applicable
Rating Agency; provided, however, that no such rating shall be required of an
institution which maintains the Collection Account as a fully segregated trust
account with the trust department of such institution. The Trustee, the Seller
or the Servicer, or any affiliate of either of them, may qualify as an
Eligible Institution. Funds in the Collection Account may be invested, at the
direction of the Servicer, in: (i) obligations fully guaranteed by the United
States of America; (ii) demand deposits, time deposits, certificates of
deposit or bankers' acceptances of certain depository institutions or trust
companies having the highest rating from the applicable Rating Agency; (iii)
commercial paper having, at the time of the Trust's investment, a rating in
the highest rating category from the applicable Rating Agency; (iv) money
market funds which have the highest rating from the applicable Rating Agency;
or (v) any other investment if the applicable Rating Agency confirms in
writing that such investment will not adversely affect its rating on any
Series (collectively, the "Eligible Investments"). Any earnings (net of losses
and investment expenses) on funds in the Collection Account are paid monthly
to the Seller. The Servicer has 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.
OTHER TRUST ACCOUNTS
If so specified in the Prospectus Supplement relating to a Series, the
Trustee shall have the power to establish one or more accounts for such
Series, including an Interest Funding Account, a Principal Funding Account, a
Pre-Funding Account or such other account specified in the related Prospectus
Supplement, each of which series accounts shall be held for the benefit of
Certificateholders of the related Series and for the purposes set forth in the
related Prospectus Supplement. Such series account will be established at an
Eligible Institution (which may be the Trustee or an affiliate of the Seller,
Servicer or Trustee) unless otherwise specified in the related Prospectus
Supplement. Funds in any series account established by a Series Supplement may
be invested in Eligible Investments or otherwise as provided in the related
Prospectus Supplement. Any earnings (net of losses and investment expenses) on
funds in such series accounts will be paid to, or for the account of, the
Seller or as otherwise specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, the Servicer will
have revocable power to withdraw funds from the series accounts for the
purpose of carrying out the Servicer's duties under the Agreement and related
Supplement.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that for a period beginning on the Series Closing Date of such Series
and ending on a date specified before the commencement of an Amortization
Period or an Accumulation Period with respect to such Series (the "Funding
Period"), which period is expected to be less than a year, the aggregate
amount of Principal Receivables in the Trust allocable to such Series may be
less than the aggregate principal amount of the Certificates of such Series.
The amount of such deficiency (the "Pre-Funding Amount") will be placed in a
trust account held in the name of the Trustee for the benefit of the
Certificateholders of such Series (the "Pre-Funding Account") pending the
transfer of additional Receivables to the Trust or pending the reduction of
the Invested Amounts of one or more other Series issued by the Trust. The
related Prospectus Supplement will specify the initial Invested Amount with
respect to such Series, the aggregate principal amount of the Certificates of
such Series (the "Full Invested Amount") and the date by which the Invested
Amount is expected to equal the Full Invested Amount. The Invested Amount will
increase as Receivables are added to the Trust or as the Invested Amounts of
the other Series of the Trust are reduced. If the Invested Amount does not
equal the Full Invested Amount by the end of the Funding Period,
Certificateholders of the affected Series will receive principal repayments
prior to the expected date of receipt.
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During the Funding Period, funds on deposit in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the holder of the
Exchangeable Seller's Certificate to the extent of any increases in the
Invested Amount of such Series. In the event that the Invested Amount does not
for any reason equal the Full Invested Amount by the end of the Funding
Period, any amount remaining in the Pre-Funding Account will be payable to the
Certificateholders of such Series in the manner and at such time as set forth
in the related Prospectus Supplement. Such payment will reduce the aggregate
principal amount of such Certificates. In addition, if so specified in the
related Prospectus Supplement, a prepayment premium or penalty or similar
amount may be payable to the Certificateholders of such Series.
Monies in the Pre-Funding Account will be invested by the Trustee in
Eligible Investments and, if so specified in the related Prospectus
Supplement, will be subject to a guaranteed rate or investment agreement or
other similar arrangement, and, in connection with each Distribution Date
during the Funding Period, investment earnings on funds in the Pre-Funding
Account will be withdrawn from the Pre-Funding Account and deposited, together
with any applicable payment under a guaranteed rate or investment agreement or
other similar arrangement, into the Collection Account for distribution in
respect of interest on the Certificates of the related Series in the manner
specified in the related Prospectus Supplement.
PAIRED SERIES
If specified in the Prospectus Supplement relating to a Series, such Series
may be paired with another Series (each, a "Paired Series"), such that a
reduction in the Invested Amount of one such Series generally results in an
increase in the Invested Amount of the other such Series. The effects of this
feature will be described in the related Prospectus Supplements of the Paired
Series.
ALLOCATION PERCENTAGES
Pursuant to the Agreement, during each Due Period the Servicer will allocate
between the Series issued by the Trust and the First Chicago Interest all
amounts collected on Finance Charge Receivables and all amounts collected on
Principal Receivables and the amount of all Defaulted Receivables. Collections
of Finance Charge Receivables (including the applicable portion of
Interchange) and Defaulted Receivables will be allocated at all times to a
Series, and collections of Principal Receivables will be allocated during the
Revolving Period with respect to a Series and generally paid to the Seller or,
in certain circumstances, to the Enhancement Provider or to other Series,
based on the percentage equivalent of a fraction, the numerator of which is
the Invested Amount for such Distribution Date, and the denominator of which
is Aggregate Principal Receivables for the related Due Period (the "Floating
Allocation Percentage"). During an Amortization Period or Accumulation Period
with respect to a Series (or Class thereof), collections of Principal
Receivables will be allocated thereto based on the percentage equivalent of a
fraction, the numerator of which is the Invested Amount as of the end of the
day on the last Distribution Date relating to the Revolving Period (or such
other amount determined in the manner specified in the related Prospectus
Supplement) and the denominator of which is the greater of (a) Aggregate
Principal Receivables for the Due Period related to the current Distribution
Date and (b) the sum of the numerators used to calculate the Invested
Percentages with respect to Principal Receivables for all Series outstanding
for the current Distribution Date (the "Fixed Allocation Percentage").
"Invested Percentage" means, on any date of determination with respect to
any Distribution Date: (a) when used with respect to Principal Receivables
during an Amortization Period or Accumulation Period with respect to a Series
(or Class thereof), the Fixed Allocation Percentage; and (b) when used with
respect to Principal Receivables during the Revolving Period with respect to a
Series (or Class thereof) and Finance Charge Receivables and Defaulted
Receivables at any time, the Floating Allocation Percentage.
"First Chicago Percentage" means when used with respect to allocations of
collections of Finance Charge Receivables and Principal Receivables and the
amount of Defaulted Receivables, 100% minus the sum of the applicable Invested
Percentages with respect to all Series then issued and outstanding.
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APPLICATION OF COLLECTIONS
The Bank, as Servicer, uses for its own benefit all collections received
with respect to the Receivables in each Due Period until the business day
immediately prior to the related Distribution Date (each, a "Transfer Date")
at which time such collections are applied as described below. Under the
Agreement, collections on the Receivables for any Due Period are allocated
such that all collections up to the amount of Finance Charge Receivables
billed at the beginning of such Due Period are deemed collections of Finance
Charge Receivables and the remaining amount of such collections are deemed
collections of Principal Receivables. If the short-term deposit ratings of the
Seller are reduced below A-1 or P-1 by the applicable Rating Agency, then the
Seller will, within five business days, commence the deposit of collections
directly into the Collection Account within one business day of the date of
processing and will move the Collection Account, if then held by the Seller,
to an Eligible Institution other than the Seller, which Eligible Institution
may be an affiliate of the Seller. In addition, if at any time the Seller is
not the Servicer, the Servicer will, within five business days, commence the
deposit of all collections received with respect to the Receivables in each
Due Period into the Collection Account within one business day of the date of
processing, and, in such event, the Collection Account, if then held by the
Seller, will be moved to an Eligible Institution other than the Seller. Should
the Seller be required to make daily deposits into the Collection Account as
described above, the Seller, upon the approval of each Rating Agency, may make
an estimated allocation of collections between Finance Charge Receivables and
Principal Receivables.
Throughout the existence of the Trust, on or about the 8th day preceding
each Distribution Date (each, a "Determination Date"), the Servicer allocates
to the Seller, as holder of the Exchangeable Seller's Certificate, an amount
equal to the First Chicago Percentage of the aggregate amount of collections
allocable to Principal Receivables and Finance Charge Receivables in respect
of such Due Period. On each Determination Date with respect to the Revolving
Period for a Series, the Servicer will allocate to the Seller or, in certain
circumstances, to the Enhancement Provider for such Series or to other Series,
from collections, an amount equal to the Floating Allocation Percentage of the
aggregate amount of collections in respect of Principal Receivables for the
related Distribution Date, except that the amount of such allocation with
respect to Principal Receivables shall not exceed the amount of the First
Chicago Interest in Principal Receivables (after giving effect to any new
Receivables transferred to the Trust for the Due Period relating to such
Determination Date).
On each Determination Date with respect to a Controlled Amortization Period
or a Controlled Accumulation Period for a Series, the Servicer will allocate
to the Seller or, in certain circumstances, to the Enhancement Provider for
such Series or to other Series, from collections, an amount equal to the
excess of the Fixed Allocation Percentage for the related Distribution Date of
the aggregate amount of collections in respect of Principal Receivables over
the amount required to be distributed or accumulated as principal with respect
to such Series, except that the amount of such allocation with respect to
Principal Receivables shall not exceed the amount of the First Chicago
Interest in Principal Receivables (after giving effect to any new Receivables
transferred to the Trust for the Due Period relating to such Determination
Date).
On each Distribution Date with respect to a Principal Amortization Period, a
Rapid Amortization Period or a Rapid Accumulation Period for a Series, the
Servicer will distribute, or accumulate, collections of Principal Receivables
allocable to the Certificateholders of such Series in payment of principal, or
as accumulation of principal, on the Certificates of such Series.
The Servicer need not deposit amounts allocable to the Seller as holder of
the Exchangeable Seller's Certificate into the Collection Account and instead
may pay, or be deemed to pay, to the Seller such amounts as collected.
Any amounts in respect of Principal Receivables not distributed to the
Seller because such Principal Receivables would exceed the First Chicago
Interest in Principal Receivables (after giving effect to any new Receivables
transferred to the Trust for the Due Period relating to such Determination
Date) ("Unallocated Principal Collections") will be held in the Collection
Account until distributable to the Seller or to one or more Series. Any
Transfer Deposit Amounts, any Adjustment Payments, any proceeds from any
repurchase of the
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Certificates occurring in connection with a Service Transfer and the proceeds
of any sale, disposition or liquidation of Receivables following the
occurrence of a Liquidation Event caused by the appointment of a receiver or
conservator for the Seller or in connection with a Series Termination Date
will also be deposited into the Collection Account immediately upon receipt
and will be allocated as collections of Principal Receivables or Finance
Charge Receivables, as applicable.
Payments to Certificateholders will be made from the Collection Account. In
addition to the amounts deposited in the Collection Account, as described
above, from payments on the Receivables, amounts required for any optional
repurchase or other purchase of the Certificates by the Seller or the proceeds
of any sale of the Receivables will be deposited in the Collection Account.
In the case of a Series of Certificates having more than one Class, the
amounts in the Collection Account will be allocated and applied to each Class
in the manner and order of priority described in the related Prospectus
Supplement.
The Paying Agent will initially be FNBC. The Paying Agent shall have the
revocable power to withdraw funds from the Collection Account for the purposes
of making distributions to the Certificateholders.
DISCOUNT OPTION
If so specified in the Prospectus Supplement for a Series, the Seller may at
any time designate a specified fixed or variable percentage as specified in
such Prospectus Supplement (the "Discount Percentage") of the amount of
Receivables arising in the Accounts on and after the date such option is
exercised that otherwise would have been treated as Principal Receivables to
be treated as Finance Charge Receivables. Such designation may be applicable
to one or more Series. Such designation will become effective upon
satisfaction of the requirements set forth in the Agreement, including written
confirmation by each Rating Agency of its then current rating on each
outstanding Series affected thereby. On the date of processing of any
collections, the product of the Discount Percentage and collections of
Receivables that arise in the Accounts on such day on or after the date such
option is exercised that otherwise would be Principal Receivables will be
deemed collections of Finance Charge Receivables and will be applied
accordingly, unless otherwise provided in the related Prospectus Supplement.
SHARED COLLECTIONS OF FINANCE CHARGE RECEIVABLES
To the extent that collections of Finance Charge Receivables allocated to a
Series are not needed to make payments to Certificateholders of such Series or
other payments required in respect of such Series, such collections ("Excess
Finance Charge Collections") may be applied to cover shortfalls in amounts
payable from collections of Finance Charge Receivables allocable to one or
more other Series. There can be no assurance, however, that such Excess
Finance Charge Collections will be available to cover such shortfalls.
SHARED COLLECTIONS OF PRINCIPAL RECEIVABLES
To the extent that collections of Principal Receivables allocated to a
Series are not needed to make payments to or for the benefit of the
Certificateholders of such Series, such collections ("Excess Principal
Collections") may be applied to cover principal payments due to or for the
benefit of one or more other Series. Any such application of collections will
not result in a reduction of the Invested Amount of the Series to which such
collections were initially allocated. There can be no assurance, however, that
such Excess Principal Collections will be available to cover any shortfall of
principal due on any Distribution Date for any Series.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
The term "Investor Default Amount" means, with respect to any Series and for
any Due Period, the product of the Floating Allocation Percentage for such
Distribution Date times the amount of Defaulted Receivables; the term
"Defaulted Receivables" means, for any Due Period, Receivables which in such
Due Period were written
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off as uncollectible in accordance with the Servicer's policies and procedures
for servicing credit card receivables comparable to the Receivables. Under
existing policies of the Servicer, Receivables which are unpaid will be
written off by the last day of the Due Period in which they become 180 days
delinquent (210 days after the date of the billing statement) unless the
cardholder cures such default by making a partial payment which qualifies
under the standards customarily applied by the Servicer.
In the case of a Series of Certificates having more than one Class, the
Investor Default Amount will be allocated among the Classes in the manner
described in the related Prospectus Supplement. If so provided in the related
Prospectus Supplement, an amount equal to the Investor Default Amount for any
Due Period may be paid from other amounts, including from collections of
Finance Charge Receivables available therefor or from Enhancement, and applied
to pay principal to Certificateholders or the holder of the Exchangeable
Seller's Certificates, as appropriate. In the case of a Series of Certificates
having one or more Classes of Subordinated Certificates, the related
Prospectus Supplement may provide that all or a portion of amounts otherwise
allocable to such Subordinated Certificates may be paid to the Senior
Certificates to make up any Investor Default Amount allocable to such Senior
Certificates. Any portion of the Investor Default Amount allocable to a Class
of Certificates and not covered by collections of Finance Charge Receivables,
Enhancement or subordination (or any other source specified in the related
Prospectus Supplement) will result in a reduction in the Invested Amount of
such Class (such reduction, an "Investor Charge-Off"). An Investor Charge-Off
for a Class of Certificates will slow down or reduce the return of principal
to the Certificateholders of the affected Class. Investor Charge-Offs will be
reimbursed on any Distribution Date to the extent Finance Charge Receivables,
Enhancement or subordination (or any other source specified in the related
Prospectus Supplement) is allocable to such affected Class in excess of other
required payments to be made to or in respect of such affected Class on such
Distribution Date. Any such reimbursement will result in an increase in the
Invested Amount with respect to such Class. In the case of a Series of
Certificates having more than one Class, the related Prospectus Supplement
will describe the manner and priority of allocating Investor Charge-Offs and
reimbursements thereof among the Classes of such Series.
If the Servicer adjusts the amount of any Receivable because of a rebate,
refund or billing error to a cardholder, or because such Receivable was
created in respect of merchandise which was refused or returned by a
cardholder, the amount of the First Chicago Interest for any Due Period will
be reduced by the amount of the adjustment. In addition, the amount of the
First Chicago Interest in the Trust will be reduced by the principal amount of
any Receivable which was discovered as having been created through a
fraudulent or counterfeit charge. After the Due Period in which any such
reduction in the amount of the First Chicago Interest occurred, the principal
amount of such Receivable described above will not be included in the
calculation of any Invested Percentage. Furthermore, to the extent that the
reduction in the First Chicago Interest in Principal Receivables would reduce
such interest below zero, the Seller will deposit an offsetting amount of cash
into the Collection Account (an "Adjustment Payment") on the related
Distribution Date for such Due Period.
DEFEASANCE
If so specified in the Prospectus Supplement relating to a Series, the
Seller may terminate its substantive obligations in respect of such Series by
depositing with the Trustee, from amounts representing, or acquired with,
collections of Receivables, money or certain Eligible Investments as described
in the related Prospectus Supplement sufficient to make all remaining
scheduled interest and principal payments on such Series, on the dates
scheduled for such payments, and to pay all amounts owing to any Enhancement
Provider with respect to such Series, if such action would not result in a
Liquidation Event for any Series. Prior to its first exercise of its right to
substitute money or Eligible Investments for Receivables, the Seller will
deliver to the Trustee (i) an opinion of counsel to the effect that such
deposit and termination of obligations will not result in the Trust being
required to register as an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and (ii) an opinion of counsel to
the effect that, unless otherwise specified in the related Supplement, the
defeasance will not materially adversely impact the Federal income tax
characterization of the Series or any other outstanding Series.
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FINAL PAYMENT OF PRINCIPAL; TERMINATION OF TRUST
The Certificates of each Series will be subject to optional repurchase by
the Seller on any Distribution Date on or after which the Invested Amount of
such Series is reduced to an amount less than or equal to 5% of the initial
Invested Amount thereof (or such other amount specified in the related
Prospectus Supplement), unless certain events of bankruptcy, insolvency or
receivership have occurred with respect to the Seller. The repurchase price of
the Certificates of a Series will be equal to the Invested Amount plus accrued
and unpaid interest on the Certificates through, and including, the day
preceding the Distribution Date with respect to which the repurchase occurs
(or such other amount specified in the related Prospectus Supplement). In any
event, the last payment of principal and interest on the Certificates of a
Series will be due and payable no later than the Series Termination Date for
such Series. In the event that the Invested Amount of a Series is greater than
zero on the applicable Series Termination Date, the Trustee will sell or cause
to be sold interests in the Receivables or certain Receivables, as specified
in the Agreement and the related Supplement, in an amount up to 110% of the
Invested Amount of such Series at the close of business on such date (but not
more than the total amount of Receivables allocable to such Series). The net
proceeds of such sale and any collections on the Receivables will be paid to
the Certificateholders of such Series in the priority specified in the related
Prospectus Supplement on the Series Termination Date as final payment of the
Certificates of such Series.
Unless the Seller instructs the Trustee otherwise, the Trust will only
terminate on the earlier of: (a) the day following the day on which funds
shall have been deposited in the Collection Account sufficient to pay in full
the aggregate Invested Amounts of all Series outstanding plus accrued interest
thereon at the applicable Certificate Rates through the applicable Interest
Period or (b) June 1, 2100. Upon the termination of the Trust and the
surrender of the Exchangeable Seller's Certificate, the Trustee shall convey
to the Seller all right, title and interest of the Trust in and to the
Receivables and other funds of the Trust (other than funds on deposit in the
Collection Account).
LIQUIDATION EVENTS
Unless otherwise specified in the related Prospectus Supplement, the
Revolving Period for a Series will continue through the date specified in the
related Prospectus Supplement, unless a Liquidation Event with respect to such
Series occurs. A Rapid Amortization Period or Rapid Accumulation Period will
commence at the beginning of the Due Period during which a Liquidation Event
occurs or is deemed to occur. A "Liquidation Event" occurs with respect to all
Series issued by the Trust upon the occurrence of any of the following events:
(i) certain events of insolvency, conservatorship or receivership
relating to the Seller; or
(ii) the Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In the case of any event described in clause (i) or (ii), a Liquidation
Event with respect to all Series will be deemed to have occurred without any
notice or other action on the part of the Trustee or the Certificateholders
immediately upon the occurrence of such event. In addition, a Liquidation
Event may occur with respect to any Series upon the occurrence of any other
event specified in the related Prospectus Supplement. If a Liquidation Event
occurs and the FDIC is appointed as the receiver for the Bank and no
Liquidation Event other than such receivership or insolvency exists, the FDIC
may have the power to prevent commencement of a Rapid Amortization Period or a
Rapid Accumulation Period.
In addition to the consequences of a Liquidation Event discussed above, if
pursuant to certain provisions of Federal law, the Seller voluntarily goes
into liquidation or the FDIC or any other person is appointed a receiver or
conservator of the Seller, on the day of such appointment the Seller will
immediately cease to transfer Principal Receivables to the Trust and promptly
give notice to the Trustee of such appointment. Within 15 days, the Trustee
will publish a notice of the liquidation or the appointment stating that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables in
a commercially reasonable manner and to the best of its ability. Unless
otherwise instructed within a specified period by certificateholders
representing undivided
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interests aggregating more than 50% of the Invested Amount of any outstanding
Series issued prior to April 19, 1995 (each, a "Preexisting Series"), the
Trustee will sell, dispose of or otherwise liquidate the Receivables of all
Series in a commercially reasonable manner and on commercially reasonable
terms. Furthermore, even if the Receivables are not sold pursuant to the
preceding sentence, with respect to Series issued on or after April 19, 1995
(except as otherwise may be specified in the related Supplement), unless
otherwise instructed within a specified period by holders representing
undivided interests aggregating more than 50% of the Invested Amount of each
Class of each such Series (including a majority in interest in each Collateral
Interest), each holder of an interest in the First Chicago Interest, the
holders of more than 50% of the Invested Amount of each Preexisting Series and
any other person specified in any Supplement, the Trustee will sell, dispose
of or otherwise liquidate the portion of the Receivables allocable to all
Series other than the Preexisting Series in a commercially reasonable manner
and on commercially reasonable terms in accordance with the Agreement. The
proceeds from the sale, disposition or liquidation of the Receivables will be
treated as collections on the Receivables and such proceeds will be
distributed to the applicable Certificateholders. See "Certain Legal Aspects
of the Receivables--Certain Matters Relating to Receivership" for a discussion
of how Federal legislation may affect the Trustee's ability to liquidate the
Receivables.
INDEMNIFICATION
The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of Certificateholders and the Trustee, from and against any loss,
liability, expense, damage or injury suffered or sustained arising out of the
activities of the Trust or the Trustee pursuant to the Agreement, including
those arising from acts or omissions of the Servicer; provided, however, that
the Servicer will not indemnify (i) the Trust or the Certificateholders for
any liabilities, costs and expenses with respect to Federal, state or local
income or franchise taxes required to be paid by the Trust or the
Certificateholders or (ii) the Trust, the Certificateholders or the Trustee
for liabilities imposed by reason of any wrongful actions taken by or
omissions of the Trustee.
Under the Agreement, the Seller will indemnify an injured party for the
entire amount of any losses, claims, damages or liabilities (other than those
incurred by a Certificateholder in the capacity of an investor in the
Certificates) arising out of or based on the Agreement as though the Agreement
created a partnership under the Uniform Partnership Act. The Seller will also
indemnify each Certificateholder for any such losses, claims, damages or
liabilities except to the extent that they arise from any action by such
Certificateholder. In the event of a Service Transfer, the successor Servicer
will indemnify the Seller for any losses, claims, damages and liabilities of
the Seller as described in this paragraph arising from the actions or
omissions of such successor Servicer.
The Agreement provides that none of the Seller, the Servicer or any of their
directors, officers, employees or agents will be under any other liability to
the Trustee, the Certificateholders or any other person for any action taken,
or for refraining from taking any action, in good faith pursuant to the
Agreement. However, none of the Seller, the Servicer or any of their
directors, officers, employees or agents will be protected against any
liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence of any such person in the performance of their
duties or by reason of reckless disregard of their obligations and duties
thereunder.
In addition, the Agreement provides that the Servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Agreement. The Servicer
may, in its sole discretion, undertake any such legal action which it may deem
necessary or desirable for the benefit of Certificateholders with respect to
the Agreement and the rights and duties of the parties thereto and the
interest of the Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Agreement, the Servicer is responsible for servicing,
collecting, enforcing and administering the Receivables in accordance with the
policies and procedures for servicing credit card receivables and exercising a
degree of skill and care consistent with those of a reasonable and prudent
servicer of credit card
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receivables, but in any event at least comparable with the policies and
procedures and the degree of skill and care applied or exercised with respect
to its own credit card 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 credit card
receivables covering such actions and in such amounts as the Servicer believes
to be reasonable from time to time.
In the Agreement, the Servicer covenants that, except as otherwise required
by any requirement of law or as is deemed by the Servicer to be necessary in
order for the Servicer to maintain its credit card business on a competitive
basis based on a good faith assessment by the Servicer of the nature of the
competition in the credit card business, it will not reduce the annual
percentage rate of the periodic charge assessed on the Receivables or other
fees on the Accounts, if as a result of such reduction, its reasonable
expectation of the Portfolio Yield is a rate less than the Base Rate for any
Series. The Servicer also covenants that it may change the terms relating to
the Accounts, only if in the reasonable judgment of the Servicer, if the
Seller owns a comparable segment of accounts, such change is made applicable
to any comparable segment of consumer revolving credit card accounts owned by
the Seller which have characteristics the same as or substantially similar to
the Accounts and if the Seller does not own such a comparable segment, such
change is not made with the intent to benefit materially the Seller over the
Certificateholders.
Servicing activities performed by the Servicer include collecting and
recording payments, communicating with cardholders, investigating payment
delinquencies, evaluations in relation to increasing credit limits and issuing
credit cards, providing billing and tax records to cardholders and maintaining
internal records with respect to each Account. Managerial and custodial
services performed by the Servicer on behalf of the Trust include providing
assistance in any inspections of the documents and records relating to the
Accounts and Receivables by the Trustee pursuant to the Agreement, maintaining
the agreements, documents and files relating to the Accounts and Receivables
as custodian for the Trust and providing related data processing and reporting
services for Certificateholders and on behalf of the Trustee.
SERVICER COVENANTS
In the Agreement, the Servicer covenants to the Certificateholders and the
Trustee as to each Receivable and related Account that: (i) it will duly
fulfill all obligations on its part to be fulfilled under or in connection
with the Receivable or Account, and will maintain in effect all qualifications
required in order to service the Receivable or Account and will comply with
all requirements of law in connection with servicing the Receivables and the
Accounts the failure to comply with which would have a material adverse effect
on Certificateholders; (ii) it will not permit any rescission or cancellation
of the Receivable, except as ordered by a court of competent jurisdiction; and
(iii) it will do nothing to impair the rights of the Certificateholders in the
Receivables and will not reschedule, revise or defer payments due on the
Receivables, except that, in the case of clauses (ii) and (iii) above, the
Servicer may make customer service, curing and delinquency adjustments in the
ordinary course of business in accordance with prudent servicing practices.
Under the terms of the Agreement, the Servicer is obligated to accept the
transfer of any Receivable if it discovers, or receives written notice from
the Trustee, that (i) any covenant of the Servicer set forth above has not
been complied with or (ii) the Servicer has not complied in all material
respects with all requirements of law applicable to the Receivables or
Accounts, and in either case such noncompliance has not been cured within 60
days thereafter and the Receivable has been written off as uncollectible or
the proceeds of the Receivables are not available to the Trust. Such transfer
will be effected by the Servicer depositing the Transfer Deposit Amount of
such Receivable in the Collection Account. This transfer obligation
constitutes the sole remedy available to the Certificateholders, if such
covenant or warranty of the Servicer is not satisfied. The Trust's interest in
any such repurchased Receivable shall be automatically assigned to the
Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses is a monthly servicing fee (the "Servicing Fee") in an
amount, on any Distribution Date, equal to the sum of, with respect to all
Series, 1/12 of the product of (a) the applicable servicing fee percentages
with respect to each Series and (b)
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the sum of an allocable portion of the amount of the First Chicago Interest
and the aggregate Invested Amount of all Series with respect to the related
Due Period. The Servicing Fee will be allocated among the First Chicago
Interest and Certificateholders of all Series. The portion of the Servicing
Fee allocable to the Certificateholders of a Series on each Distribution Date
(the "Monthly Servicing Fee") generally will be equal to 1/12 of the product
of (a) the applicable servicing fee percentage with respect to such Series and
(b) the Invested Amount of such Series with respect to the related Due Period.
All or a portion of the Monthly Servicing Fee for a Series will be paid from
collections of Finance Charge Receivables allocable or otherwise available to
such Series. A portion of the Monthly Servicing Fee for a Series may be
payable from Interchange allocable to such Series. Amounts available from
Enhancement or other sources specified in the related Prospectus Supplement
may also be available to pay the Monthly Servicing Fee for a Series. The
remaining portion of the Servicing Fee will be allocable to the First Chicago
Interest. The Monthly Servicing Fee for each Series will be paid from the
Collection Account on each Distribution Date.
The Servicer pays from its servicing compensation certain expenses incurred
in connection with servicing the Accounts and the Receivables including,
without limitation, expenses related to enforcement of the Receivables,
payment of fees and disbursements of the Trustee and independent accountants
and all other fees and expenses which are not expressly stated in the
Agreement to be payable by the Trust or the Certificateholders other than
Federal, state and local income and franchise taxes, if any, of the Trust.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that such duties are no longer
permissible under applicable law. 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.
Any person into which, in accordance with the Agreement, the Seller or the
Servicer may be merged or consolidated or any person resulting from any merger
or consolidation to which the Seller or the Servicer is a party, or any person
succeeding to the business of the Seller or the Servicer, will be the
successor to the Seller or the Servicer, as the case may be, under the
Agreement.
SERVICER DEFAULT
In the event of any Servicer Default, either the Trustee or
Certificateholders evidencing undivided interests aggregating more than 50% of
the aggregate Invested Amount of all Series, by written notice to the Servicer
(and to the Trustee, if given by the Certificateholders), may terminate all of
the rights and obligations of the Servicer, in its capacity as servicer under
the Agreement, to all of the Receivables held by the Trust with respect to all
Series, and the proceeds thereof, and appoint a new Servicer (a "Service
Transfer"), subject to the right of Enhancement Providers, if applicable, to
approve such new Servicer. The rights and interests of the Seller under the
Agreement in the First Chicago Interest will not be affected by any Service
Transfer. The Trustee shall as promptly as possible appoint a successor
Servicer and if no successor Servicer has been appointed by the Trustee and
has accepted such appointment by the time the Servicer ceases to act as
Servicer, all authority, power and obligations of the Servicer under the
Agreement will pass to, and be vested in, the Trustee. Prior to any Service
Transfer, the Trustee will seek to obtain bids from potential Servicers
meeting certain eligibility requirements set forth in the Agreement to serve
as a successor Servicer for servicing compensation not in excess of the
Servicing Fee. If the Trustee is unable to obtain any bids from eligible
Servicers and the Servicer delivers an officer's certificate to the effect
that it cannot in good faith cure the Servicer Default which gave rise to a
Service Transfer, then the Trustee will offer the Servicer the right to accept
the transfer of all of the Receivables. The deposit amount for such a transfer
for each Series shall be equal to the greater of (i) the principal amount of
such Series, plus accrued interest thereon, at the applicable Certificate
Rate, through the end of the applicable Interest Period for such Series and
(ii) the average bid price quoted by at least two recognized securities
dealers for similar securities rated in the highest rating category by each
Rating Agency and having a remaining maturity approximately equal to the
remaining maturity of the Certificates of such Series. However, if the FDIC is
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appointed as the receiver or conservator for the Servicer, and no Servicer
Default other than such receivership, conservatorship or insolvency exists,
the FDIC may have the power to prevent either the Trustee or the majority of
the Certificateholders from effecting a Service Transfer.
A "Servicer Default" refers to any of the following events:
(i) failure by the Servicer or, for so long as the Seller is the
Servicer, the Seller to make any payment, transfer or deposit, or to give
instructions to the Trustee, or to give notice to the Trustee to make such
payment, transfer or deposit, or to give notice of any required withdrawal,
drawing or payment required to be made under any form of Enhancement, on
the date the Servicer or the Seller, as the case may be, is required to do
so under the Agreement or any Supplement (or within a five-day grace
period);
(ii) failure on the part of the Servicer or, for so long as the Seller is
the Servicer, the Seller duly to observe or perform any other covenants or
agreements of the Servicer or the Seller in the Agreement or any Supplement
which has a material adverse effect on the Certificateholders, which
continues unremedied for a period of 60 days after written notice, or the
Servicer assigns its duties under the Agreement, except as specifically
permitted thereunder;
(iii) any representation, warranty or certification made by the Servicer
in the Agreement or any Supplement or in any certificate delivered pursuant
to the Agreement or any Supplement proves to have been incorrect when made,
which has a material adverse effect on the rights of the
Certificateholders, and which material adverse effect continues for the
Certificateholders for a period of 60 days after written notice; or
(iv) the occurrence of certain events of bankruptcy, insolvency,
receivership or conservatorship of the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance referred
to under clause (i) above for a period of 10 business days or referred to
under clause (ii) or (iii) for a period of 60 business days 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 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 Supplement and the Servicer shall
provide the Trustee, the Enhancement Providers, if any, applicable to any
Series, the Seller and the Certificateholders prompt notice of such failure or
delay by the Servicer, 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.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, for each
Series, on each Distribution Date, there will be forwarded to each
Certificateholder of record a statement (the "Monthly Servicer Report")
prepared by the Servicer setting forth: (i) the total amount distributed with
respect to the Certificates of such Series; (ii) the amount of the
distribution on such Distribution Date allocable to principal; (iii) the
amount of such distribution allocable to interest; (iv) the amount of
collections processed during the preceding Due Period and allocated in respect
of the Certificates of such Series; (v) the Invested Amount of such Series and
the Invested Percentages with respect to such Series; (vi) the aggregate
outstanding balance of Accounts which are 30 days or more delinquent as of the
close of business at the end of the preceding Due Period; (vii) the Investor
Default Amount for such Distribution Date; (viii) the amount of Investor
Charge-Offs for such Distribution Date and the amount of reimbursements of
such Investor Charge-Offs; (ix) the amount of the Monthly Servicing Fee for
such Distribution Date; (x) the amount available under any Enhancement at the
close of business on such Distribution Date; (xi) the amount, if any, by which
the principal balance of the Certificates of such Series exceeds the Invested
Amount of such Series as of the end of the day on the Record Date; and (xii)
the "pool factor" as of the end of the related Record Date (consisting of an
eight-digit decimal expressing the ratio of the Invested Amount to the initial
Invested Amount). In the case of a Series having more than one Class, the
Monthly Servicer Report will provide information as to each Class of
Certificates.
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On or before January 31 of each calendar year, there will be furnished to
each person who at any time during the preceding calendar year was a
Certificateholder of record (or, if so provided in applicable Treasury
regulations, made available to Certificate Owners) a statement prepared by the
Servicer containing the information required to be provided by an issuer of
indebtedness under the Code for such calendar year or the applicable portion
thereof during which such person was a Certificateholder, together with such
other customary information as the Servicer deems necessary or desirable to
enable the Certificateholders to prepare their tax returns. See "Tax Matters."
EVIDENCE AS TO COMPLIANCE
The Agreement provides that on or before March 31 of each calendar year, the
Servicer will cause a firm of independent public accountants to furnish a
report to the effect that such firm has applied certain agreed-upon procedures
to certain documents and records relating to the servicing of the Receivables
and that, based upon such agreed-upon procedures, no matters came to their
attention that caused them to believe that such servicing was not conducted in
compliance with certain applicable terms and conditions set forth in the
Agreement except for such exceptions or errors as such firm shall believe to
be immaterial and such other exceptions as shall be set forth in such
statement. In addition, on or before March 31 of each calendar year, such
accountants will compare the mathematical calculations of the amounts
contained in the Monthly Servicer Reports and other certificates delivered
during such year with the computer reports of the Servicer and statements of
any agents engaged by the Servicer to perform servicing activities which were
the source of such amounts and deliver a certificate to the Trustee confirming
that such amounts are in agreement except for such exceptions as they believe
to be immaterial and such other exceptions which shall be set forth in such
report.
The Agreement provides for delivery to the Trustee on or before March 31 of
each calendar year of a statement signed by an officer of the Servicer to the
effect that the Servicer has, or has caused to be, fully performed its
obligations in all material respects under the Agreement throughout the
preceding year or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
CONVEYANCE OF ACCOUNTS
Subject to the conditions set forth in the succeeding sentence, the Seller
may transfer or otherwise convey its interest in Accounts, including the
Receivables in such Accounts (subject to the interest of the Trustee), in
whole or in part, and, in conjunction with such transfer will execute (and the
Trustee will authenticate and deliver to the transferee) a certificate
substantially in the form of the Exchangeable Seller's Certificate which
represents the transferred interest in such Accounts. The Seller will be
permitted to convey Accounts only upon satisfaction of the following
conditions: (i) the acquiring person will (a) be organized and existing under
the laws of the United States of America or any state or the District of
Columbia, and be a bank or other entity that is not subject to the Bankruptcy
Code of 1978, and (b) expressly assume by an agreement supplemental to the
Agreement the performance of the Seller's obligations with respect to such
Accounts; (ii) the Seller will deliver to the Trustee and, as required, any
Enhancement Provider of a Series, opinions of counsel (a) stating that all
conditions precedent to the conveyance have been complied with and (b) to the
effect that the conveyance will not adversely affect the treatment of the
Certificates as debt for Federal and applicable state income tax purposes or
materially adversely impact the Federal income tax consequences that affect
any Certificateholder; (iii) the Seller will obtain from each Rating Agency a
letter confirming that the rating of the Certificates, after such conveyance,
will not be lowered or withdrawn; and (iv) the Seller will obtain the consent
to the conveyance, as required, of any Enhancement Provider of a Series and of
more than 51% of the principal amount of Certificateholders of each Series.
AMENDMENTS
The Agreement and any Supplement may be amended by the Seller, the Servicer
and the Trustee, without Certificateholder consent, to cure any ambiguity, to
correct or supplement any provision therein which may be inconsistent with any
other provision therein and to add any other provisions with respect to
matters or questions
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arising under the Agreement or any Supplement which are not inconsistent with
the provisions of the Agreement or any Supplement. In addition, the Agreement
and any Supplement may be amended from time to time by the Seller, the
Servicer and the Trustee, without Certificateholder consent, to add to or
change any of the provisions of the Agreement to provide that bearer
certificates issued with respect to any Series may be registrable as to
principal, to change or eliminate any restrictions on the payment of principal
of or any interest on such bearer certificates, to permit such bearer
certificates to be issued in exchange for registered certificates or bearer
certificates of other authorized denominations or to permit the issuance of
uncertificated certificates. Moreover, any Supplement and any amendments
regarding the addition or removal of Receivables from the Trust will not be
considered amendments requiring Certificateholder consent under the provisions
of the Agreement or any Supplement.
The Agreement and any Supplement may be amended by the Seller, the Servicer
and the Trustee with the consent of the holders of Certificates evidencing
undivided interests aggregating not less than 66 2/3% of the Invested Amount
of all Series adversely affected for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of the Agreement
or any Supplement or of modifying in any manner the rights of
Certificateholders of any Series then issued and outstanding. 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 interest of any Certificateholder
of such Series, or (iii) reduce the aforesaid percentage of undivided
interests the holders of which are required to consent to any such amendment,
in each case without the consent of all Certificateholders of all Series
adversely affected. Promptly following the execution of any amendment to the
Agreement or any Supplement, the Trustee will furnish written notice of the
substance of such amendment to each Certificateholder of all Series (or with
respect to an amendment of a Supplement, to the applicable Series).
LIST OF CERTIFICATEHOLDERS
Upon written request of three or more Certificateholders of record of a
Series or any Certificateholder or group of Certificateholders of record
representing undivided interests in the Trust aggregating not less than 5% of
the Invested Amount of a Series, the Trustee will afford such
Certificateholders access during business hours to the current list of
Certificateholders of the Trust for purposes of communicating with other
certificateholders with respect to their rights under the Agreement.
The Agreement generally does not provide for any annual or other meetings of
Certificateholders.
THE TRUSTEE
Norwest Bank Minnesota, National Association, is Trustee under the
Agreement. The Seller, 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 Seller, the Servicer and any of
their respective affiliates may hold Certificates in their own names; however,
any Certificates so held shall not be entitled to participate in any decisions
made or instructions given to the Trustee by the Certificateholders as a
group. The Trustee's address is Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479, Attention: Corporate Trust Department.
For purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee will be conferred or imposed upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee will be incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee who
shall exercise and perform such rights, powers, duties and obligations solely
at the direction of the Trustee.
The Trustee may resign at any time, in which event the Seller will be
obligated to appoint a successor Trustee. The Trustee has agreed that it will
not resign, however, without written confirmation from each Rating Agency that
such resignation will not result in the Rating Agency reducing or withdrawing
its rating on any then
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outstanding Series rated by it. 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, the Servicer will be
obligated to appoint a successor Trustee. Any resignation or removal of the
Trustee and appointment of a successor Trustee does not become effective until
acceptance of the appointment by the successor Trustee.
ENHANCEMENT
GENERAL
For any Series, Enhancement may be provided with respect to one or more
Classes thereof. If so specified in the related Prospectus Supplement, any
form of Enhancement may be structured so as to be drawn upon by more than one
Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Enhancement will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur which exceed the amount
covered by the Enhancement or which are not covered by the Enhancement,
Certificateholders will bear their allocable share of deficiencies.
If Enhancement is provided with respect to a Series, the related Prospectus
Supplement will include a description of (a) the amount payable under such
Enhancement, (b) any conditions to payment thereunder not otherwise described
herein, (c) the conditions (if any) under which the amount payable under such
Enhancement may be reduced and under which such Enhancement may be terminated
or replaced and (d) any material provision of any agreement relating to such
Enhancement. Additionally, the related Prospectus Supplement may set forth
certain information with respect to any provider of Enhancement (an
"Enhancement Provider"), including (i) brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to
do business, (iii) if applicable, the identity of regulatory agencies which
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, and its stockholders' or policy holders' surplus, if applicable,
and other appropriate financial information as of the date specified in the
Prospectus Supplement. The Enhancement Provider may have an interest in
certain cash flows in respect of the Receivables to the extent described in
such Prospectus Supplement.
SUBORDINATION
If so specified in the related Prospectus Supplement, one or more Classes of
any Series will be subordinated as described in the related Prospectus
Supplement to the extent necessary to fund payments with respect to the Senior
Certificates. The rights of the holders of any Subordinated Certificates to
receive distributions of principal and/or interest on any Distribution Date
for such Series will be subordinate in right and priority to the rights of the
holders of Senior Certificates, but only to the extent set forth in the
related Prospectus Supplement. If so specified in the related Prospectus
Supplement, subordination may apply only in the event of certain types of
losses not covered by another Enhancement. The related Prospectus Supplement
will also set forth any applicable information concerning the amount of
subordination of a Class or Classes of Subordinated Certificates in a Series,
the circumstances in which such subordination will be applicable, the manner,
if any, in which the amount of subordination will decrease over time, and the
conditions under which amounts available from payments that would otherwise be
made to holders of such Subordinated Certificates will be distributed to
holders of Senior Certificates. If collections of Receivables otherwise
distributable to holders of Subordinated Certificates of a Series will be used
as support for a Class of another Series, the related Prospectus Supplement
will specify the manner and conditions for applying such a cross-support
feature.
CASH COLLATERAL GUARANTY OR ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain permitted
investments in an account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash
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Collateral Guaranty or by a Cash Collateral Account alone. The amount
available pursuant to the Cash Collateral Guaranty or the Cash Collateral
Account will be the lesser of amounts on deposit in the Cash Collateral
Account and an amount specified in the related Prospectus Supplement. The
related Prospectus Supplement will set forth the circumstances under which
payments are made to beneficiaries of the Cash Collateral Guaranty from the
Cash Collateral Account or from the Cash Collateral Account directly.
COLLATERAL INTEREST
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided initially by an undivided
interest in the Trust (the "Collateral Interest") in an amount initially equal
to a percentage of the Certificates of such Series as specified in the
Prospectus Supplement. Such Series may also have the benefit of a Cash
Collateral Guaranty or Cash Collateral Account with an initial amount on
deposit therein, if any, as specified in the Prospectus Supplement which may
be increased (i) to the extent the Seller elects, subject to certain
conditions specified in the related Prospectus Supplement, to apply
collections of Principal Receivables allocable to the Collateral Interest to
decrease the Collateral Interest, (ii) to the extent collections of Principal
Receivables allocable to the Collateral Interest are required to be deposited
into the Cash Collateral Account as specified in the related Prospectus
Supplement and (iii) to the extent excess collections of Finance Charge
Receivables are required to be deposited into the Cash Collateral Account as
specified in the related Prospectus Supplement. The total amount of the
Enhancement available pursuant to the Collateral Interest and, if applicable,
the Cash Collateral Guaranty or Cash Collateral Account, will be the lesser of
the sum of the Collateral Interest and the amount on deposit in the Cash
Collateral Account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement will set forth the circumstances
under which payments which otherwise would be made to holders of the
Collateral Interest will be distributed to the holders of Certificates offered
thereby and, if applicable, the circumstances under which payment will be made
under the Cash Collateral Guaranty or under the Cash Collateral Account.
LETTER OF CREDIT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain
losses in addition to, or in lieu of, other Enhancement. The issuer of the
letter of credit will be obligated to honor demands with respect to such
letter of credit, to the extent of the amount available thereunder, to provide
funds under the circumstances and subject to such conditions as are specified
in the related Prospectus Supplement.
The maximum liability of the issuer of the letter of credit under such
letter of credit will generally be an amount equal to a percentage specified
in the related Prospectus Supplement of the initial Invested Amount of a
Series or a Class of such Series. The maximum amount available at any time to
be paid under a letter of credit will be determined in the manner specified
therein and in the related Prospectus Supplement.
SURETY BOND OR INSURANCE POLICY
If so specified in the related Prospectus Supplement, insurance with respect
to a Series or one or more Classes thereof will be provided by one or more
insurance companies. Such insurance will guarantee, with respect to one or
more Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond will be
purchased for the benefit of the holders of any Series or Class of such Series
to assure distributions of interest or principal with respect to such Series
or Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
INTEREST RATE SWAP
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by an interest rate swap or
other similar hedging arrangement. Such interest rate swap or other
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arrangement will provide for the swapping of certain payments on the
Receivables for payments from the provider of the interest rate swap or other
arrangement in the manner and amounts specified in the related Prospectus
Supplement.
SPREAD ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by the periodic deposit of
certain available excess cash flow from the Trust assets into an account (the
"Spread Account") intended to assist with subsequent distribution of interest
and principal on the Certificates of such Class or Series in the manner
specified in the related Prospectus Supplement.
RESERVE ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof or any Enhancement related thereto will be
provided by the establishment of a reserve account (the "Reserve Account").
The Reserve Account may be funded, to the extent provided in the related
Prospectus Supplement, by an initial cash deposit, the retention of certain
periodic distributions of principal or interest or both otherwise payable to
one or more Classes of Certificates, including the Subordinated Certificates,
or the provision of a letter of credit, guarantee, insurance policy or other
form of credit support or any combination thereof. The Reserve Account will be
established to assist with the subsequent distribution of principal or
interest on the Certificates of such Series or Class thereof or such other
amount owing on any Enhancement thereto in the manner provided in the related
Prospectus Supplement.
CERTIFICATE RATINGS
Any rating of the Certificates by a Rating Agency will indicate:
. its view on the likelihood that Certificateholders will receive required
interest and principal payments; and
. its evaluation of the Receivables and the availability of any Enhancement
for the Certificates.
Among the things a rating will not indicate are:
. the likelihood that interest or principal payments will be paid on a
scheduled date;
. the likelihood that a Liquidation Event will occur;
. the likelihood that a United States withholding tax will be imposed on
non-U.S. Certificateholders;
. the marketability of the Certificates;
. the market price of the Certificates; or
. whether the Certificates are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the Certificates.
A rating may be lowered or withdrawn at any time by a Rating Agency.
The Seller will request a rating of the Certificates offered by this
Prospectus and the accompanying Prospectus Supplement from at least one Rating
Agency. Rating agencies other than those requested could assign a rating to
the Certificates and such a rating could be lower than any rating assigned by
a Rating Agency chosen by the Seller.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Seller has transferred interests in the Receivables to the Trust. The
Seller covenants and warrants that such transfer constitutes either a valid
transfer and assignment to the Trust of all right, title and interest of the
Seller in and to the Receivables, except for the interest of the Seller as
holder of the Exchangeable Seller's Certificate, or a grant of a security
interest to the Trust in and to the Receivables. The Seller has taken or will
take all actions as are required under New York, Illinois and Delaware law to
perfect the Trust's security interest
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in the Receivables. The Seller also covenants and warrants to the Trust in the
Agreement that, in the event the transfer of Receivables by the Seller to the
Trust is deemed to create a security interest under the UCC and assuming that
the Seller is not at the time of such transfer the subject of any insolvency
proceedings, there exists a valid, subsisting and enforceable first priority
perfected security interest in favor of the Trust in the Receivables contained
in the Accounts in existence since the time of the addition of such
Receivables to the Trust and a valid, subsisting and enforceable first
priority perfected security interest in favor of the Trust in the Receivables
created thereafter on and after their creation and, with certain exceptions,
and for certain limited time periods, the proceeds thereof. For a discussion
of the Trust's rights arising from these covenants and warranties not being
satisfied, see "Description of the Certificates and the Agreement--Covenants,
Representations and Warranties."
The Seller has represented that the Receivables are either "accounts" or
"general intangibles" for purposes of the UCC. Both the sale of accounts and
the transfer of accounts as security for an obligation are treated under the
UCC as creating a security interest therein and are subject to its provisions,
and the filing of an appropriate financing statement is required to perfect
the interest of the Trust in the Receivables. If a transfer of general
intangibles is deemed to create a security interest, the UCC applies and
filing an appropriate financing statement is also required in order to perfect
the Trust's security interest in the Receivables. A financing statement
covering the Receivables has been filed under the UCC to protect the Trust in
case the transfer by the Seller is deemed subject to the UCC as either a sale
of accounts or a transfer of accounts or general intangibles as security for
an obligation. If a transfer of general intangibles is deemed not to create a
security interest, the filing of a financing statement is not required to
protect the Trust's interest from third parties.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after the
applicable Cut Off Date could have an interest in such Receivables with
priority over the Trust's interest. A tax or other government lien on property
of the Seller arising prior to the time a Receivable comes into existence may
also have priority over the interest of the Trust in such Receivables.
Furthermore, if the FDIC were appointed as receiver of the Seller, the
receiver's administrative expenses may also have priority over the interest of
the Trust in such Receivables. Under the Agreement, however, the Seller has
warranted that it has transferred or will transfer the Receivables to the
Trust free and clear of the lien of any third party except for certain
permitted tax liens. In addition, the Seller 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.
While the Seller is the Servicer, cash collections held by the Seller may,
subject to certain conditions, be commingled and used for the Seller's own
benefit prior to each Distribution Date and, in the event of the insolvency or
receivership of the Seller or, in certain circumstances, the lapse of certain
time periods, the Trust may not have a perfected interest in such collections.
If the short term deposit rating of the Seller is reduced to below A-1 or P-1
by the applicable Rating Agency, the Seller will, within five business days,
commence the deposit of collections directly into the Collection Account
within one business day after the date of processing, and the Collection
Account will be moved to an Eligible Institution other than the Seller, which
Eligible Institution may be an affiliate of the Seller.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), which
became effective August 9, 1989, sets forth certain powers that the FDIC could
exercise if it were appointed as receiver or conservator of the Seller.
To the extent that the Seller has granted a security interest in the
Receivables to the Trust, and that interest is validly perfected before the
Seller's insolvency and is not taken in contemplation of insolvency or with
the intent to hinder, delay or defraud the Seller or its creditors, the
Agreement is continuously a record of the Seller, 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 the secured party and
is not an insider or affiliate of the Seller, that security interest should be
enforceable (to the extent of the Trust's "actual direct compensatory
damages") notwithstanding the insolvency of, or the appointment of a receiver
or conservator for, the Seller, and payments
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to the Trust with respect to the Receivables (up to the amount of such
damages) should not be subject to recovery by a receiver or conservator of the
Seller. If, however, a receiver were to assert a contrary position, or were to
require the Trustee to establish its right to those payments by submitting to
and completing the administrative claims procedure under the FDIA, as amended
by FIRREA, delays in payments on the Certificates and possible reductions in
the amount of those payments could occur. Generally, it is expected that in
most cases "actual direct compensatory damages" would include outstanding
principal plus interest accrued to the date of payment, but in one case a
United States Federal district court held that such damages should be measured
by the fair market value of the repudiated bonds as of the date of
repudiation. If this court's view were applied to determine the Trust's
"actual direct compensatory damages" in the event a conservator or receiver of
the Seller repudiated its obligations under the Agreement, the amount paid to
Certificateholders could, depending upon circumstances existing on the date of
the repudiation, be less than the principal of the Certificates and the
interest accrued thereon to the date of payment.
The Agreement provides that, upon the appointment of a receiver or
conservator for the Seller, the Seller will promptly give notice thereof to
the Trustee, and a Liquidation Event with respect to all Series will occur.
Under the Agreement, (x) with respect to any Preexisting Series, unless
otherwise instructed within a specified period by the holders of Certificates
representing undivided interests aggregating more than 50% of the Invested
Amount of any Preexisting Series or unless otherwise required by the FDIC as
receiver or conservator for the Seller, the Trustee will proceed to sell,
dispose of or otherwise liquidate the Receivables of all Series and (y) with
respect to Series issued on or after April 19, 1995 (except as otherwise may
be specified in the related Supplement), unless otherwise instructed within a
specified period of time by the holders of undivided interests aggregating
more than 50% of the Invested Amount of each Class of each such Series
(including a majority in interest in each Collateral Interest), each holder of
an interest in the First Chicago Interest, holders of more than 50% of the
Invested Amount of each Preexisting Series and any other person specified in
any Supplement, the Trustee will proceed to sell, dispose of or otherwise
liquidate the portion of the Receivables allocable to all Series other than
the Preexisting Series. Such sales, dispositions or other liquidations will be
conducted in a commercially reasonable manner and on commercially reasonable
terms in accordance with the Agreement. The proceeds from the sale of the
Receivables would then be treated by the Trustee as collections on the
Receivables. If the only Liquidation Event to occur is either the insolvency
of the Seller or the appointment of a conservator or receiver for the Seller,
the receiver or conservator for the Seller may have the power to continue to
require the Seller to transfer new Principal Receivables to the Trust and to
prevent the early sale, liquidation or disposition of the Receivables and the
early commencement of a Rapid Amortization Period or a Rapid Accumulation
Period. See "Description of the Certificates and the Agreement--Liquidation
Events."
CONSUMER PROTECTION LAWS
The relationship between the cardholder and credit card issuer is
extensively regulated by Federal and state consumer protection statutes. With
respect to credit cards issued by the Seller the most significant Federal laws
include the Federal Truth-In-Lending and Equal Credit Opportunity Acts. These
statutes impose disclosure requirements before and when an Account is opened
and at the end of monthly billing cycles, and, in addition, limit cardholder
liability for unauthorized use, prohibit certain discriminatory practices in
extending credit, may 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 Seller with respect to obligations arising before transfer of the
Receivables to the Trust or as the party directly responsible for obligations
arising after the transfer. In addition, a cardholder may be entitled to
assert such violations by way of set off against the obligation to pay the
amount of Receivables owing. The Seller has agreed to accept the transfer of
all Receivables that have been written off and that were not created in
compliance in all material respects with the requirements of such laws. The
Servicer has also agreed in the Agreement to indemnify the Trust, among other
things, for any liability arising from such violations. For a discussion of
the Trust's rights if the Receivables were not created in compliance in all
material respects with applicable laws, see "Description of the Certificates
and the Agreement--Covenants, Representations and Warranties."
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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.
Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdiction's consumer protection laws (including
laws limiting the charges imposed by such credit card issuers) in connection
with their operations in such jurisdictions. A successful challenge by such a
jurisdiction could have an adverse impact on the Seller's credit card
operations or the yield on the Receivables in the Trust.
If a cardholder sought protection under federal or state bankruptcy or
debtor relief laws, a court could reduce or discharge completely the
cardholder's obligations to repay amounts due on its Account and, as a result,
the related Receivables would be written off as uncollectible. The
Certificateholders could suffer a loss if no funds are available from
Enhancement or other sources. See "Description of the Certificates and the
Agreement--Defaulted Receivables; Rebates and Fraudulent Charges" in this
Prospectus.
TAX MATTERS
GENERAL
The following discussion, summarizing certain anticipated Federal income tax
aspects of the purchase, ownership and disposition of the Certificates of a
Series, is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), proposed, temporary and final Treasury regulations
thereunder, and published rulings and court decisions in effect as of the date
hereof, all of which are subject to change, possibly retroactively. This
discussion does not address every aspect of the Federal income tax laws that
may be relevant to Certificate Owners of a Series in light of their personal
investment circumstances or to certain types of Certificate Owners of a Series
subject to special treatment under the Federal income tax laws (for example,
banks and life insurance companies). Accordingly investors should consult
their own tax advisors regarding Federal, state, local, foreign and any other
tax consequences to them of any investment in the Certificates of a Series.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH
REGARD TO THE FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, OR
DISPOSITION OF INTERESTS IN CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, FOREIGN COUNTRY OR OTHER TAXING
JURISDICTION.
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Unless otherwise specified in the related Prospectus Supplement, Skadden,
Arps, Slate, Meagher & Flom LLP, special tax counsel to the Bank ("Tax
Counsel"), will, upon issuance of a Series of Certificates, advise the Bank,
based on the assumptions and qualifications set forth in its opinion, that the
Certificates of such Series offered pursuant to a Prospectus Supplement (the
"Offered 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.
The Seller expresses in the Agreement its intent that for Federal, state and
local income or franchise tax purposes, the Offered Certificates of each
Series will be indebtedness secured by the Receivables. The Seller agrees and
each Certificateholder and Certificate Owner, by acquiring an interest in an
Offered Certificate, agrees or will be deemed to agree to treat the Offered
Certificates of such Series as indebtedness for Federal, state and local
income or franchise tax purposes. However, because different criteria are used
to determine the non-tax accounting characterization of the transactions
contemplated by the Agreement, the Seller 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
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IRS and the courts have set forth several factors to be taken into account in
determining whether the substance of a transaction is a sale of property or a
secured indebtedness for Federal income tax purposes, the primary factor in
making this determination is whether the transferee has assumed the risk of
loss or other economic burdens relating to the property and has obtained the
benefits of ownership thereof. Unless otherwise set forth in a Prospectus
Supplement, it is expected that, as set forth in its opinion, Tax Counsel will
analyze and rely on several factors in reaching its opinion that the weight of
the benefits and burdens of ownership of the Receivables has not been
transferred to the Certificate Owners.
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. Unless otherwise specified in a Prospectus
Supplement, it is expected that Tax Counsel will advise that the rationale of
those cases will not apply to the transaction evidenced by a Series of
Certificates, because the form of the transaction, as reflected in the
operative provisions of the documents, either is not inconsistent with the
characterization of the Offered Certificates of such Series as debt for
Federal income tax purposes or otherwise makes the rationale of those cases
inapplicable to this situation.
TAXATION OF INTEREST INCOME OF CERTIFICATEHOLDERS
As set forth above, it is expected that, unless otherwise specified in a
Prospectus Supplement, Tax Counsel will advise the Bank that the Offered
Certificates will constitute indebtedness for Federal income tax purposes, and
accordingly, interest thereon will be includible in income by Certificate
Owners as ordinary income when received (in the case of a cash basis taxpayer)
or accrued (in the case of an accrual basis taxpayer) in accordance with their
respective methods of tax accounting. Interest received on the Offered
Certificates may also constitute "investment income" for purposes of certain
limitations of the Code concerning the deductibility of investment interest
expense.
While it is not anticipated that the Offered Certificates will be issued at
a greater than de minimis discount, under applicable Treasury regulations (the
"Regulations") the Offered Certificates may nevertheless be deemed to have
been issued with original issue discount ("OID"). This could be the case, for
example, if interest payments for a Series are not treated as "qualified
stated interest" because the IRS determines that (i) no reasonable legal
remedies exist to compel timely payment and (ii) the Offered Certificates do
not have terms and conditions that make the likelihood of late payment (other
than a late payment that occurs within a reasonable grace period) or
nonpayment a remote contingency. Applicable regulations provide that, for
purposes of the foregoing test, the possibility of nonpayment due to default,
insolvency, or similar circumstances, is ignored. Although this provision does
not directly apply to the Offered Certificates (because they have no actual
default provisions) the Seller intends to take the position that, because
nonpayment can occur only as a result of events beyond its control
(principally, loss rates and payment delays on the Receivables substantially
in excess of those anticipated), nonpayment is a remote contingency. Based on
the foregoing, and on the fact that interest will accrue on the Offered
Certificates at a "qualified floating rate," the Seller intends to take the
position that interest payments on the Offered Certificates constitute
qualified stated interest. If, however, interest payments for a Series were
not classified as "qualified stated interest," all of the taxable income to be
recognized with respect to the Offered Certificates would be includible in
income as OID but would not be includible again when the interest is actually
received.
If the Offered Certificates are in fact issued at a greater than de minimis
discount or are treated as having been issued with OID under the Regulations,
the following rules will apply. The excess of the "stated redemption price at
maturity" of an Offered Certificate over the original issue price (in this
case, the initial offering price at which a substantial amount of the Offered
Certificates are sold to the public) will constitute OID. A Certificate Owner
must include OID in income as interest over the term of the Offered
Certificate under a constant yield method. In general, OID must be included in
income in advance of the receipt of cash representing that income. In the case
of a debt instrument as to which the repayment of principal may be accelerated
as a result of the prepayment of other obligations securing the debt
instrument (a "Prepayable Instrument"), the periodic accrual of OID is
determined by taking into account both the prepayment assumptions used in
pricing the debt instrument
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and the prepayment experience. If this provision applies to a Class of
Certificates (which is not clear), the amount of OID which will accrue in any
given "accrual period" may either increase or decrease depending upon the
actual prepayment rate. Accordingly, each Certificate Owner should consult its
own tax advisor regarding the impact to it of the OID rules if the Offered
Certificates are issued with OID. Under the Regulations, a holder of a
Certificate issued with de minimis OID must include such OID in income
proportionately as principal payments are made on a Class of Certificates.
A holder who purchases an Offered Certificate at a discount from its
adjusted issue price may be subject to the "market discount" rules of the
Code. These rules provide, in part, for the treatment of gain attributable to
accrued market discount as ordinary income upon the receipt of partial
principal payments or on the sale or other disposition of the Offered
Certificate, and for the deferral of interest deductions with respect to debt
incurred to acquire or carry the market discount Offered Certificate.
A subsequent holder who purchases an Offered Certificate at a premium may
elect to amortize and deduct this premium over the remaining term of the
Offered Certificate in accordance with rules set forth in Section 171 of the
Code.
SALE OF A CERTIFICATE
In general, a Certificate Owner will recognize gain or loss upon the sale,
exchange, redemption or other taxable disposition of an Offered Certificate
measured by the difference between (i) the amount of cash and the fair market
value of any property received (other than amounts attributable to, and
taxable as, accrued interest) and (ii) the Certificate Owner's tax basis in
the Offered Certificate (as increased by any OID or market discount previously
included in income by the holder and decreased by any deductions previously
allowed for amortizable bond premium and by any payments reflecting principal
or OID received with respect to such Certificate). Subject to the market
discount rules discussed above and to the one-year holding requirement for
long-term capital gain treatment, any such gain or loss generally will be
long-term capital gain, provided that the Offered Certificate was held as a
capital asset; provided, however, that if the rules applicable to Prepayable
Instruments apply, any OID not previously accrued will be treated as ordinary
income. 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 only to offset capital gains.
TAX CHARACTERIZATION OF THE TRUST
The Agreement permits the issuance of Classes of Certificates that are
treated for Federal income tax purposes either as indebtedness or as an
interest in a partnership. Accordingly, the Trust could be characterized
either as (i) a security device to hold Receivables securing the repayment of
the Certificates of all Series or (ii) a partnership in which the Seller and
certain classes of Certificateholders are partners, and which has issued debt
represented by other Classes of Certificates (including, unless otherwise
specified in a Supplement, the Offered Certificates).
The opinion of Tax Counsel with respect to Offered Certificates will not be
binding on the courts or the IRS. It is possible that the IRS could assert
that, for purposes of the Code, the transaction contemplated by this
Prospectus and a related Prospectus Supplement constitutes a sale of the
Receivables (or an interest therein) to the Certificate Owners of one or more
Series or Classes and that the proper classification of the legal relationship
between the Bank and some or all of the Certificate Owners or
Certificateholders of one or more Series resulting from the transaction is
that of a partnership (including a publicly traded partnership), a publicly
traded partnership taxable as a corporation, or an association taxable as a
corporation. The Seller currently does not intend to comply with the Federal
income tax reporting requirements that would apply if any Classes of
Certificates were treated as interests in a partnership or corporation (unless
an interest in the Trust is issued or sold that is intended to be classified
as an interest in a partnership).
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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 tradeable" 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. The Seller has
taken and intends to take measures designed to enable the Trust to be eligible
for such exceptions; 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
the Seller. Furthermore, certain Series issued prior to May 2, 1995 may not be
able to be conformed to the measures taken by the Seller with respect to
Series issued on or after that date.
If a transaction were treated as creating a partnership between the Seller
and the Certificate Owners or Certificateholders of one or more Series, the
partnership itself would not be subject to Federal income tax (unless it were
to be characterized as a publicly traded partnership taxable as a
corporation); rather, the partners of such partnership, including the
Certificate Owners or Certificateholders of such Series, would be taxed
individually on their respective distributive shares of the partnership's
income, gain, loss, deductions and credits. The amount and timing of items of
income and deductions of a Certificate Owner could differ if the Offered
Certificates were held to constitute partnership interests, rather than
indebtedness. Moreover, unless the partnership were treated as engaged in a
trade or business, an individual's share of expenses of the partnership would
be miscellaneous itemized deductions that, in the aggregate, are allowed as
deductions only to the extent they exceed two percent of the individual's
adjusted gross income, and would be subject to reduction under Section 68 of
the Code if the individual's adjusted gross income exceeded certain limits. As
a result, the individual might be taxed on a greater amount of income than the
stated rate on the Offered Certificates. Finally, assuming the partnership is
a "publicly traded partnership" (as defined in Section 469(k)(2) of the Code),
even if it qualifies for exemption from taxation as a corporation, all or a
portion of any taxable income allocated to a Certificate Owner that is a
pension, profit-sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) may, under certain circumstances,
constitute "unrelated business taxable income" which generally would be
taxable to the holder under the Code. Partnership characterization also may
have adverse state and local income or franchise tax consequences for a
Certificate Owner.
If it were determined that a transaction created an entity classified as an
association or as a publicly traded partnership taxable as a corporation, the
Trust would be subject to Federal income tax at corporate income tax rates on
the income it derives from the Receivables, which would reduce the amounts
available for distribution to the Certificate Owners, possibly including
Certificate Owners of a Class that is treated as indebtedness. Such
classification may also have adverse state and local tax consequences that
would reduce amounts available for distribution to Certificate Owners. Cash
distributions to the Certificate Owners (except any Class not recharacterized
as an equity interest in an association) generally would be treated as
dividends for tax purposes to the extent of such deemed corporation's earnings
and profits.
RECENT LEGISLATION
Certain 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, although these provisions were effective
September 1, 1997, many technical issues concerning FASITs must be addressed
by Treasury regulations which have not yet been 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 of any Series outstanding
on August 31, 1997 would be treated as "regular interests" in a FASIT if the
Seller were to elect FASIT status for the Trust after that date. To the extent
otherwise permitted by the terms thereof,
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the Agreement may be amended in accordance with the provisions thereof to
provide that the Seller may cause a FASIT election to be made for the Trust if
the Seller delivers to the Trustee an opinion of counsel to the effect that,
for Federal income tax purposes, (i) such issuance will not adversely affect
the tax characterization as debt of Certificates of any outstanding Series or
Class that were characterized as debt at the time of their issuance, (ii)
following such issuance the Trust will not be deemed to be 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 Certificateholder or the Trust. If a Certificate were a
regular interest in a FASIT, a Certificate Owner, including a cash basis
Certificate Owner, would be required to report income thereon on the accrual
method.
FOREIGN INVESTORS
As set forth above, it is expected that Tax Counsel will render an opinion,
upon issuance, that the Offered Certificates will be treated as debt for U.S.
Federal income tax purposes. The following information describes the U.S.
Federal income tax treatment of investors that are not U.S. persons ("Foreign
Investors") if the Offered Certificates are treated as debt. The term "Foreign
Investor" means any person other than (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity organized in or under
the laws of the United States or any political subdivision thereof, (iii) an
estate the income of which is includible in gross income for U.S. Federal
income tax purposes, regardless of its source or (iv) a trust the income of
which is includible in gross income for U.S. Federal income tax purposes,
regardless of its source or, for tax years beginning after December 31, 1996
(and, if a trustee so elects, for tax years ending after August 20, 1996), a
trust if a United States court is able to exercise primary supervision over
the administration of such trust and one or more United States fiduciaries
have the authority to control all substantial decisions of such trust.
Interest, including OID, paid to a Foreign Investor will be subject to U.S.
withholding taxes at a rate of 30% unless (x) the income is "effectively
connected" with the conduct by such Foreign Investor of a trade or business in
the United States or (y) the Foreign Investor and each securities clearing
organization, bank, or other financial institution that holds the Offered
Certificates on behalf of the customer in the ordinary course of its trade or
business, in the chain between the Certificate Owner and the U.S. person
otherwise required to withhold the U.S. tax, complies with applicable
identification requirements and, in addition (i) the non-U.S. Certificate
Owner does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Seller entitled to vote
(or of a profits or capital interest of a trust characterized as a
partnership), (ii) the non-U.S. Certificate Owner is not a controlled foreign
corporation that is related to the Seller (or a trust treated as a
partnership) through stock ownership, (iii) the non-U.S. Certificate Owner is
not a bank receiving interest described in Code Section 881(c)(3)(A), (iv)
such interest is not contingent interest described in Code Section 871(h)(4),
and (v) the non-U.S. Certificate Owner does not bear certain relationships to
any holder of the Exchangeable Seller's Certificate other than the Seller or
any holder of the Certificates of any Series not properly characterized as
debt. Applicable identification requirements generally will be satisfied if
there is delivered to a securities clearing organization (i) IRS Form W-8
signed under penalties of perjury by the Certificate Owner, stating that the
Certificate Owner is not a U.S. person and providing such Certificate Owner's
name and address, (ii) IRS Form 1001, signed by the Certificate Owner or such
Certificate Owner's agent, claiming exemption from withholding under an
applicable tax treaty, or (iii) IRS Form 4224 signed by the Certificate Owner
or such owner's agent, claiming exemption from withholding of tax on income
effectively connected with the conduct of a trade or business in the United
States; provided that in any such case (x) the applicable form is delivered
pursuant to applicable procedures and is properly transmitted to the United
States entity otherwise required to withhold tax and (y) none of the entities
receiving the form has actual knowledge that the Certificate Owner is a U.S.
person.
Recently finalized Internal Revenue Service Treasury Regulations (the "Final
Foreign Investor Regulations") could affect the procedures to be followed by a
Foreign Investor in establishing such Foreign Investor's status as a Foreign
Investor for purposes of the withholding rules (including the back-up
withholding rules). The Final Foreign Investor Regulations are effective for
payments made after December 31, 1998. Prospective purchasers of the
Certificates should consult their tax advisors concerning the Final Foreign
Investor Regulations and their potential effect on the ownership of the
Certificates.
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A Certificate Owner that is a nonresident alien or foreign corporation will
not be subject to U.S. Federal income tax on gain realized upon the sale,
exchange, or redemption of an Offered Certificate, provided that (i) such gain
is not effectively connected with the conduct of a trade or business in the
United States, (ii) in the case of a Certificate Owner that is an individual,
such Certificate Owner is not present in the United States for 183 days or
more during the taxable year in which such sale, exchange, or redemption
occurs, and (ii) in the case of gain representing accrued interest, the
conditions described in the immediately preceding paragraph are satisfied.
If the interests of the Certificate Owners of a Series were reclassified as
interests in a partnership (not taxable as a corporation), such
recharacterization could cause a Foreign Investor to be treated as engaged in
a trade or business in the United States. In such event the Certificate Owner
of such Series would be required to file a Federal income tax return and, in
general, would be subject to Federal income tax, including branch profits tax
in the case of a Certificate Owner that is a corporation, on its net income
from the partnership. Further, the partnership would be required, on a
quarterly basis, to pay withholding tax equal to the sum, for each foreign
partner, of such foreign partner's distributive share of "effectively
connected" income of the partnership multiplied by the highest rate of tax
applicable to that foreign partner. The tax withheld from each foreign partner
would be credited against such foreign partner's U.S. Federal income tax
liability.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an applicable
tax treaty.
STATE AND LOCAL TAXATION
As a consequence of the issuance of a Collateral Interest or other interests
that could be issued by the Trust in the future, it is possible, as noted
above, that the Trust could be viewed as a partnership. If the arrangement
were treated as creating a partnership for Illinois state tax purposes, the
Trust could be subject to the Illinois personal property replacement tax with
respect to the portion of the Trust's taxable income, if any, apportioned to
Illinois. The imposition of any such tax on the Trust could reduce the amount
available for distribution to the Certificate Owners.
Except as described above, the discussion herein does not address the tax
treatment of the Trust, the Certificates or the Certificate Owners under any
state, local or foreign tax laws. Prospective investors are urged to consult
their own tax advisers regarding the state and local tax treatment of the
Trust, and the tax consequences relating to the purchase, ownership and
disposition of the Certificates under any applicable state, local or foreign
tax law.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan from engaging in certain transactions
involving "plan assets" with persons that are "parties in interest" under
ERISA or "disqualified persons" under the Code with respect to the plan. ERISA
also imposes certain duties on persons who are fiduciaries of plans subject to
ERISA and prohibits certain transactions between a plan and parties in
interest with respect to such plans ("Prohibited Transactions"). Under ERISA,
any person who exercises any authority or control respecting the management or
disposition of the assets of a plan is considered to be a fiduciary of such
plan (subject to certain exceptions not here relevant). A violation of these
"Prohibited Transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons.
Benefit Plan fiduciaries must also determine whether the acquisition and
holding of the Certificates and the operations of the Trust would result in
direct or indirect Prohibited Transactions. The operations of the Trust
56
<PAGE>
could result in Prohibited Transactions if Benefit Plans that purchase
Certificates are deemed to own an interest in the underlying assets of the
Trust. There may also be an improper delegation of the responsibility to
manage Benefit Plan assets if Benefit Plans that purchase Certificates are
deemed to own an interest in the underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of an employee benefit plan subject to ERISA or the Code, or an
individual retirement account ("IRA") (collectively referred to as "Benefit
Plans"), the assets and properties of certain entities in which a Benefit Plan
makes an equity investment could be deemed to be assets of the Benefit Plan in
certain circumstances. Accordingly, if Benefit Plans purchase Certificates,
the Trust could be deemed to hold plan assets unless one of the exceptions
under the Final Regulation is applicable to the Trust.
The Final Regulation only applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that interests in Certificates are
equity interests, the Final Regulation contains an exception that provides
that if a Benefit Plan acquires a "publicly-offered security," the issuer of
the security is not deemed to hold plan assets. A publicly-offered security is
a security that is (i) freely transferable, (ii) part of a class of securities
that is owned by 100 or more investors independent of the issuer and of one
another and (iii) either is (A) part of a class of securities registered under
section 12(b) or 12(g) of the Exchange Act or (B) sold to the plan as part of
an offering of securities to the public pursuant to an effective registration
statement under the Act and the class of securities of which such security is
a part is registered under the Exchange Act within 120 days (or such later
time as may be allowed by the Commission) after the end of the fiscal year of
the issuer during which the offering of such securities to the public
occurred. In addition, the Final Regulation provides that if a Benefit Plan
invests in an "equity interest" of an entity that is neither a "publicly-
offered security" nor a security issued by an investment company registered
under the Investment Company Act of 1940, the Benefit Plan's assets include
both the equity interest and an undivided interest in each of the entity's
underlying assets, unless it is established that equity participation by
"benefit plan investors" is not "significant" or that another exception
applies.
Under the Final Regulation, equity participation in an entity by "benefit
plan investors" is "significant" on any date if, immediately after the most
recent acquisition of any equity interest in the entity (other than a
publicly-offered class of equity), 25% or more of the value of any class of
equity interests in the entity (other than a publicly-offered class) is held
by "benefit plan investors." For purposes of this determination, the value of
equity interests held by a person (other than a benefit plan investor) that
has discretionary authority or control with respect to the assets of the
entity or that provides investment advice for a fee with respect to such
assets (or any affiliate of such person) is disregarded. The term "benefit
plan investor" is defined in the Final Regulation as (a) any employee benefit
plan (as defined in Section 3(3) of ERISA), whether or not it is subject to
the provisions of Title I of ERISA, (b) any plan described in Section
4975(e)(1) of the Code and (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity.
Unless otherwise specified in the related Prospectus Supplement, it is
anticipated that interests in the Certificates will meet the criteria of
publicly-offered securities as set forth above: the underwriters of a Series
expect (although no assurances can be given) that interests in each Class of
Certificates offered hereby will be held by at least 100 independent investors
at the conclusion of the offering thereof; there are no restrictions imposed
on the transfer of interests in the Certificates; and interests in the
Certificates will be sold as part of an offering pursuant to an effective
registration statement under the Act and then will be timely registered under
the Exchange Act.
If interests in the Class A Certificates fail to meet the criteria of
publicly-offered securities and the Trust's assets are deemed to include
assets of Benefit Plans that are Certificateholders, transactions involving
the Trust and "parties in interest" or "disqualified persons" with respect to
such plans might be prohibited under Section 406 of ERISA and Section 4975 of
the Code unless an exemption is applicable. Thus, for example, if a
57
<PAGE>
participant in any Benefit Plan is a cardholder of one of the Accounts, under
DOL interpretations the purchase of interests in Certificates by such plan
could constitute a prohibited transaction. In addition, the Seller or any
underwriter of a Series may be considered to be a party in interest,
disqualified person or fiduciary with respect to an investing Benefit Plan.
Accordingly, an investment by a Benefit Plan in Certificates may be a
prohibited transaction under ERISA and the Code unless such investment is
subject to a statutory or administrative exemption. There are five class
exemptions issued by the DOL that could apply in such event: 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 is no assurance that these exemptions, even if all of the conditions
specified therein are satisfied, will apply to all transactions involving the
Trust's assets.
In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of interests in Certificates should consult their own counsel as to
whether the assets of the Trust which are represented by such interests would
be considered plan assets, and whether, under the general fiduciary standards
of investment prudence and diversification, an investment in Certificates is
appropriate for the Benefit Plan taking into account the overall investment
policy of the Benefit Plan and the composition of the Benefit Plan's
investment portfolio. In addition, fiduciaries should consider the
consequences that would apply if the Trust's assets were considered plan
assets, the applicability of exemptive relief from the Prohibited Transaction
rules, and, whether all conditions for such exemptive relief would be
satisfied.
In particular, insurance companies considering the purchase of Certificates
of any Series should consult their own benefits or other appropriate counsel
with respect to the United States Supreme Court's decision in John Hancock
Mutual Life Insurance Co. v. Harris Trust & Savings Bank, 114 S. Ct. 517
(1993) ("John Hancock") and the applicability of DOL Prohibited Transaction
Exemption 95-60 ("PTE 95-60"). In John Hancock, the Supreme Court held that
assets held in an insurance company's general account may be deemed to be
"plan assets" under certain circumstances; however, PTE 95-60 may exempt some
or all of the transactions that could occur as the result of the acquisition
and holding of the Certificates of a Series by an insurance company general
account from the penalties normally associated with prohibited transactions.
Accordingly, investors should analyze whether John Hancock and PTE 95-60 or
any other exemption may have an impact with respect to their purchase of the
Certificates of any Series.
PLAN OF DISTRIBUTION
The Seller may sell Certificates (i) through underwriters or dealers; (ii)
directly to one or more purchasers; or (iii) through agents. The related
Prospectus Supplement in respect of a Series offered hereby sets forth the
terms of the offering of such Certificates, including the name or names of any
underwriters, the purchase price of such Certificates and the proceeds to the
Seller from such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial offering price and any discounts or
concessions allowed or reallowed or paid to dealers. Only underwriters so
named in such Prospectus Supplement shall be deemed to be underwriters in
connection with the Certificates offered thereby.
Subject to the terms and conditions set forth in an underwriting agreement
(an "Underwriting Agreement") to be entered into with respect to each Series
of Certificates, the Seller will agree to sell to each of the underwriters
named therein and in the related Prospectus Supplement, and each of such
underwriters will severally agree to purchase from the Seller, the principal
amount of Certificates set forth therein and in the related Prospectus
Supplement (subject to proportional adjustment on the terms and conditions set
forth in the related Underwriting Agreement in the event of an increase or
decrease in the aggregate amount of Certificates offered hereby and by the
related Prospectus Supplement).
58
<PAGE>
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any of
such Certificates are purchased. In the event of a default by any underwriter,
each Underwriting Agreement will provide that, in certain circumstances,
purchase commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Underwriting Agreement will provide that the Seller will indemnify the
related underwriters against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the several underwriters
may be required to make in respect thereof.
The place and time of delivery for any Series of Certificates in respect of
which this Prospectus is delivered are set forth in the accompanying
Prospectus Supplement.
First Chicago Capital Markets, Inc. ("FCCM"), an affiliate of the Seller,
may from time to time act as agent or underwriter in connection with the sale
of Certificates to the extent permitted by applicable law. Any obligations of
FCCM are the sole obligations of FCCM and do not create any obligations on the
part of any affiliate of FCCM.
This Prospectus and related Prospectus Supplements may be used by FCCM in
connection with offers and sales related to secondary market transactions in
the Certificates. FCCM, to the extent permitted by law, may act as principal
or agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Bank by Sherman I. Goldberg, Esq., Executive Vice President, General
Counsel and Secretary of First Chicago NBD, and by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York, Tax Counsel, and for the Underwriters
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
REPORTS TO CERTIFICATEHOLDERS
The Servicer will prepare monthly and annual reports that will contain
information about the Trust. The financial information contained in the
reports will not be prepared in accordance with generally accepted accounting
principles. Unless and until Definitive Certificates are issued, the reports
will be sent to Cede, which is the nominee of DTC and the registered holder of
the Certificates. No financial reports will be sent to you. See "Description
of the Certificates and the Agreement--Book-Entry Registration," "--Reports to
Certificateholders" and "--Evidence as to Compliance" in this Prospectus."
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Certificates with the
Securities and Exchange Commission (the "SEC"). This Prospectus is part of the
registration statement, but the registration statement includes additional
information.
The Servicer will file with the SEC all required annual, monthly and special
SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C., New York, New York or
Chicago, Illinois. You can request copies of these documents, upon payment of
a duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-
0330
59
<PAGE>
for further information on the operation of the public reference rooms. Our
SEC filings are also available to the public over the Internet at the SEC web
site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in
this Prospectus or the accompanying Prospectus Supplement. We incorporate by
reference the documents listed below, any future annual, monthly and special
SEC reports and proxy materials filed by or on behalf of the Trust under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until we terminate our
offering of the Certificates.
. Annual Report on Form 10-K for the year ended December 31, 1997; and
. Current Reports on Form 8-K dated January 12, 1998, February 11, 1998 and
March 12, 1998.
As a recipient of this Prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing
or calling us at: Investor Relations, First Chicago NBD Corporation, One First
National Plaza, Chicago, Illinois, 60670; (312) 732-4812.
60
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Accounts................................................................. 16
Accumulation Period...................................................... 30
Additional Accounts...................................................... 20
Adjustment Payment....................................................... 38
Aggregate Principal Receivables.......................................... 21
Agreement................................................................ 5,16
Amortization Period...................................................... 30
Automatic Additional Accounts............................................ 32
Bank..................................................................... 5,16
Bank's Portfolio......................................................... 18
Base Rate................................................................ 18
Benefit Plans............................................................ 57
Cash Collateral Account.................................................. 46
Cash Collateral Guaranty................................................. 46
Cede..................................................................... 24
Cedel.................................................................... 26
Cedel Participants....................................................... 26
Certificate Owner........................................................ 24
Certificate Rate......................................................... 23
Certificateholders....................................................... 22
Certificates............................................................. 5,16
Citibank................................................................. 24
Class.................................................................... 16
Code..................................................................... 51
Collateral Interest...................................................... 47
Collection Account....................................................... 34
Controlled Accumulation Period........................................... 7
Controlled Amortization Period........................................... 7
Cooperative.............................................................. 26
Cut Off Date............................................................. 20
Defaulted Receivables.................................................... 37
Definitive Certificates.................................................. 27
Depositaries............................................................. 24
Depository............................................................... 24
Determination Date....................................................... 36
Discount Percentage...................................................... 37
Distribution Date........................................................ 6,28
DOL...................................................................... 57
DTC...................................................................... 24
Due Period............................................................... 20
Eligible Account......................................................... 32
Eligible Additional Account.............................................. 32
Eligible Institution..................................................... 34
Eligible Investments..................................................... 34
Eligible Receivable...................................................... 31
Enhancement.............................................................. 5,8,16
Enhancement Provider..................................................... 46
ERISA.................................................................... 56
Euroclear................................................................ 26
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Euroclear Operator....................................................... 26
Euroclear Participants................................................... 26
Excess Finance Charge Collections........................................ 37
Excess Principal Collections............................................. 37
Exchange................................................................. 29
Exchange Act............................................................. 25
Exchangeable Seller's Certificate........................................ 6,29
FASIT.................................................................... 54
FCSI..................................................................... 16
FCCM..................................................................... 1,59
FDIA..................................................................... 10,49
FDIC..................................................................... 10
Final Foreign Investor Regulations....................................... 55
Final Regulation......................................................... 57
Finance Charge Receivables............................................... 5,17
FIRREA................................................................... 10,49
First Chicago NBD........................................................ 16
First Chicago Amount..................................................... 6,21
First Chicago Interest................................................... 29
First Chicago Percentage................................................. 23,35
Fixed Allocation Percentage.............................................. 35
Floating Allocation Percentage........................................... 35
FNBC..................................................................... 16
Foreign Investors........................................................ 55
Full Invested Amount..................................................... 34
Funding Period........................................................... 34
Holders.................................................................. 27
Indirect Participants.................................................... 25
Interchange.............................................................. 19
Interest Funding Account................................................. 28
Interest Period.......................................................... 28
Invested Amount.......................................................... 6,23
Invested Percentage...................................................... 35
Investor Charge-Off...................................................... 38
Investor Default Amount.................................................. 37
IRA...................................................................... 57
IRS...................................................................... 51
John Hancock............................................................. 58
Liquidation Event........................................................ 8,39
MasterCard International................................................. 16
Minimum Aggregate Principal Receivables.................................. 21
Minimum First Chicago Interest Percentage................................ 21
Monthly Servicer Report.................................................. 43
Monthly Servicing Fee.................................................... 42
Morgan................................................................... 24
Offered Certificates..................................................... 51
OID...................................................................... 52
Paired Series............................................................ 35
Participants............................................................. 24
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Participation.............................................................. 33
Participation Agreement.................................................... 33
Paying Agent............................................................... 25
Portfolio Yield............................................................ 18
Preexisting Series......................................................... 40
Pre-Funding Account........................................................ 34
Pre-Funding Amount......................................................... 34
Prepayable Instrument...................................................... 52
Principal Amortization Period.............................................. 7
Principal Funding Account.................................................. 28
Principal Receivables...................................................... 5,17
Principal Terms............................................................ 29
Prohibited Transactions.................................................... 56
PTE 95-60.................................................................. 58
Rapid Accumulation Period.................................................. 7
Rapid Amortization Period.................................................. 7
Rating Agency.............................................................. 9
Receivables................................................................ 16
Record Date................................................................ 23
Regulations................................................................ 52
Removed Accounts........................................................... 21
Reserve Account............................................................ 48
Revolving Period........................................................... 6
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Scheduled Payment Date..................................................... 7
SEC........................................................................ 59
Seller..................................................................... 5,16
Senior Certificates........................................................ 23
Series..................................................................... 16
Series Closing Date........................................................ 27
Series Termination Date.................................................... 7
Servicer................................................................... 16
Servicer Default........................................................... 43
Service Transfer........................................................... 42
Servicing Fee.............................................................. 41
Spread Account............................................................. 48
Subordinated Certificates.................................................. 23
Supplement................................................................. 22
Tax Counsel................................................................ 51
Terms and Conditions....................................................... 26
Transfer Date.............................................................. 36
Transfer Deposit Amount.................................................... 31
Trust...................................................................... 5,16
Trustee.................................................................... 5,16
UCC........................................................................ 25
Unallocated Principal Collections.......................................... 36
Underwriting Agreement..................................................... 58
VISA....................................................................... 16
</TABLE>
62
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Certificates
(the "Global Securities") 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.
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 Global Securities will be effected on a delivery-against-
payment basis through Citibank and Morgan as the respective depositaries of
Cedel and Euroclear and as participants in DTC.
Non-U.S. holders of Global Securities will be exempt from U.S. withholding
taxes, provided that such holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or
their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
depositaries, Citibank and Morgan, which in turn will hold such positions in
accounts as participants of DTC.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to conventional asset-backed securities.
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 conventional
asset-backed securities.
A-1
<PAGE>
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Participants and/or Euroclear Participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a participant at least one
business day prior to settlement. Cedel or Euroclear will instruct Citibank or
Morgan, respectively, as the case may be, to receive the Global Securities
against payment. Payment will include interest accrued on the Global
Securities from and including the last coupon payment date to and excluding
the settlement date. Payment will then be made by Citibank or Morgan 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 preposition 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, participants can elect not to preposition 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 that one-
day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each 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 Citibank or Morgan 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 and Euroclear Participants may employ
their customary procedures for transactions in which Global Securities are to
be transferred by the respective clearing system, through Citibank or Morgan,
to a DTC participant. The seller will send instructions to Cedel or Euroclear
through a participant at least one business day prior to settlement. In these
cases, Cedel or Euroclear will instruct Citibank or Morgan, 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. The payment will then be reflected in the account of the Cedel
Participant or Euroclear Participant the following day, and receipt of the
cash proceeds in the Cedel 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 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 or Euroclear
Participant's account would instead be valued as of the actual settlement
date.
A-2
<PAGE>
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(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
account 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 holder of Global Securities holding securities through Cedel or Euroclear
(or through DTC if the holder has an address outside the U.S.) will be subject
to the 30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. persons,
unless such holder takes one of the following steps to obtain an exemption or
reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Non-U.S. persons that are
beneficial owners can obtain a complete exemption from the withholding tax by
filing a signed Form W-8 (Certificate of Foreign Status).
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 beneficial 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. PERSONS (FORM W-9). U.S. persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Request for Taxpayer
Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The Global Securities holder,
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 he 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.
This summary does not deal with all aspects of foreign income tax
withholding that may be relevant to foreign holders of these Global
Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of these Global
Securities.
A-3
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder
other than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee....................................................... $295
Printing and Engraving................................................. *
Trustee's Fees......................................................... *
Legal Fees and Expenses................................................ *
Blue Sky Fees and Expenses............................................. *
Accountants' Fees and Expenses......................................... *
Rating Agency Fees..................................................... *
Miscellaneous Fees..................................................... *
----
Total................................................................ $ *
====
</TABLE>
- --------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Ninth of the Articles of Association of FCC National Bank (the
"Registrant") provides for indemnification of the directors, officers and
employees of the Registrant, or persons serving at the request of the
Registrant as a director, officer, employee or agent of another corporation or
other business entity, to the full extent permitted by the General Corporation
Law of Delaware, as such laws exist or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Registrant to provide broader indemnification rights than said law permitted
by the Registrant prior to such amendment). This indemnification applies to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.
Notwithstanding the foregoing, the Registrant may indemnify any of the
foregoing persons to the fullest extent permitted under the statutes
applicable to national banking associations and the rules, regulations and
interpretations promulgated thereunder by the primary regulator of national
banking associations in each case now or hereafter in effect.
Indemnification may include all expenses (including attorney's fees,
judgments, fines, penalties and amounts paid in settlement) actually and
reasonably incurred by such indemnified person. However, the Registrant is not
authorized to indemnify against expenses, penalties, or other payments
incurred in an administrative proceeding or action instituted by a bank
regulatory agency which proceeding or action results in a final order against
such person assessing civil money penalties or requiring payments to the
Registrant. The Registrant is authorized to advance expenses upon receipt of
an undertaking by or on behalf of such director, officer or employee to repay
the same if it shall ultimately be determined that he is not entitled to be
indemnified.
The rights of indemnification and advancement of expenses provided by the
Articles of Association of the Registrant are not exclusive of any other
rights to which a person seeking indemnification or advancement of expenses
may be entitled under any statute, by-law, agreement, vote of stockholders or
disinterested directors or otherwise. The Registrant also insures its officers
and directors.
Section 145 of the General Corporation Law of Delaware contains detailed
provisions on indemnification of directors and officers against expenses,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred in connection with litigation.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
<TABLE>
<C> <S>
1.1 --Underwriting Agreement.(1)
4.1 --Pooling and Servicing Agreement between FCC National Bank and the
Trustee, including certain exhibits thereto.(2)
4.2 --Supplement to Pooling and Servicing Agreement relating to the Series
1990-A Certificates between FCC National Bank and the Trustee.(2)
4.3 --Supplement to Pooling and Servicing Agreement relating to the Series
1990-B Certificates between FCC National Bank and the Trustee.(3)
4.4 --Supplement to Pooling and Servicing Agreement relating to the Series
1990-C Certificates between FCC National Bank and the Trustee.(4)
4.5 --Supplement to Pooling and Servicing Agreement relating to the Series
1991-D Certificates between FCC National Bank and the Trustee.(5)
4.6 --Supplement to Pooling and Servicing Agreement relating to the Series
1992-E Certificates between FCC National Bank and the Trustee.(6)
4.7 --Supplement to Pooling and Servicing Agreement relating to the Series
1993-F Certificates between FCC National Bank and the Trustee.(7)
4.8 --Supplement to Pooling and Servicing Agreement relating to the Series
1993-G Certificates between FCC National Bank and the Trustee.(7)
4.9 --Supplement to Pooling and Servicing Agreement relating to the Series
1993-H Certificates between FCC National Bank and the Trustee.(8)
4.10 --Supplement to Pooling and Servicing Agreement relating to the Series
1994-I Certificates between FCC National Bank and the Trustee.(9)
4.11 --Supplement to Pooling and Servicing Agreement relating to the Series
1994-J Certificates between FCC National Bank and the Trustee.(9)
4.12 --Supplement to Pooling and Servicing Agreement relating to the Series
1994-K Certificates between FCC National Bank and the Trustee.(10)
4.13 --Supplement to Pooling and Servicing Agreement relating to the Series
1995-L Certificates between FCC National Bank and the Trustee.(10)
4.14 --Supplement to Pooling and Servicing Agreement relating to the Series
1995-M Certificates between FCC National Bank and the Trustee.(11)
4.15 --Supplement to Pooling and Servicing Agreement relating to the Series
1995-N Certificates between FCC National Bank and the Trustee.(11)
4.16 --Supplement to Pooling and Servicing Agreement relating to the Series
1995-O Certificates between FCC National Bank and the Trustee.(12)
4.17 --Supplement to Pooling and Servicing Agreement relating to the Series
1995-P Certificates between FCC National Bank and the Trustee.(12)
4.18 --Amendments to Pooling and Servicing Agreement and Series Supplements
between FCC National Bank and the Trustee.(13)
4.19 --1995 Amendment to Pooling and Servicing Agreement between FCC National
Bank and Trustee.(14)
4.20 --Supplement to Pooling and Servicing Agreement relating to the Series
1996-Q Certificates between FCC National Bank and the Trustee.(1)
4.21 --Supplement to Pooling and Servicing Agreement relating to the Series
1996-R Certificates between FCC National Bank and the Trustee.(15)
4.22 --Supplement to Pooling and Servicing Agreement relating to the Series
1996-S Certificates between FCC National Bank and the Trustee.(15)
4.23 --Supplement to Pooling and Servicing Agreement relating to the Series
1997-T Certificates between FCC National Bank and the Trustee.(16)
4.24 --Supplement to Pooling and Servicing Agreement relating to the Series
1997-U Certificates between FCC National Bank and the Trustee.(16)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.25 --Form of Series Supplement.
4.26 --Form of Prospectus Supplement.
5.1 --Form of opinion of counsel of FCC National Bank.
8.1 --Opinion of special tax counsel to FCC National Bank.*
23.1 --Consent of counsel of FCC National Bank is included in opinion filed
as Exhibit 5.1.
23.2 --Consent of special tax counsel to FCC National Bank is included in
opinion filed as Exhibit 8.1.
24.1 --Power of Attorney.
</TABLE>
- --------
(1) Incorporated herein by reference to the Current Report on Form 8-K dated
October 1, 1996 of FCC National Bank.
(2) Incorporated herein by reference to Registration Statement No. 33-35084
of FCC National Bank.
(3) Incorporated herein by reference to Registration Statement No. 33-36078
of FCC National Bank.
(4) Incorporated herein by reference to Registration Statement No. 33-37021
of FCC National Bank.
(5) Incorporated herein by reference to Registration Statement No. 33-40126
of FCC National Bank.
(6) Incorporated herein by reference to Registration Statement No. 33-40135
of FCC National Bank.
(7) Incorporated herein by reference to Registration Statement No. 33-61950
of FCC National Bank.
(8) Incorporated herein by reference to Registration Statement No. 33-67056
of FCC National Bank.
(9) Incorporated herein by reference to Registration Statement No. 33-78032
of FCC National Bank.
(10) Incorporated herein by reference to Registration Statement No. 33-82466
of FCC National Bank.
(11) Incorporated herein by reference to Registration Statement No. 33-84880
of FCC National Bank.
(12) Incorporated herein by reference to Registration Statement No. 33-92358
of FCC National Bank.
(13) Incorporated herein by reference to the Current Report on Form 8-K dated
June 18, 1992 of FCC National Bank.
(14) Incorporated herein by reference to the Current Report on Form 8-K dated
May 5, 1995 of FCC National Bank.
(15) Incorporated by reference to the Current Report on Form 8-K dated
December 4, 1996 of FCC National Bank.
(16) Incorporated by reference to the Current Report on Form 8-K dated
November 10, 1997 of FCC National Bank.
* To be filed by amendment.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that (a)(i) and (a)(ii) will not
apply if the information
II-3
<PAGE>
required to be included in a post-effective amendment thereby is contained
in periodic reports filed pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(f) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(i) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS, ON APRIL 7, 1998.
FCC National Bank,
as originator of the Trust and
registrant
/s/ M. Eileen Kennedy
By: _________________________________
M. EILEEN KENNEDY ATTORNEY-IN-FACT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON APRIL 7, 1998 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Joseph M. Dudzinsky Director
- -------------------------------------
(JOSEPH M. DUDZINSKY)
/s/ Richard P. Eckman Director
- -------------------------------------
(RICHARD P. ECKMAN)
/s/ William J. Garner Director
- -------------------------------------
(WILLIAM J. GARNER)
/s/ Joyce D. Hunter Director
- -------------------------------------
(JOYCE D. HUNTER)
/s/ W.G. Jurgensen Director and
- ------------------------------------- Principal Executive
(W.G. JURGENSEN) Officer
/s/ Michael J. Majchrzak Director
- -------------------------------------
(MICHAEL J. MAJCHRZAK)
/s/ Anthony K. Metta Director
- -------------------------------------
(ANTHONY K. METTA)
II-5
<PAGE>
SIGNATURE TITLE
/s/ Timothy P. Moen Director
- -------------------------------------
(TIMOTHY P. MOEN)
/s/ Ralph R. Mueller Director
- -------------------------------------
(RALPH R. MUELLER)
/s/ Peter J. Nowak, Jr. Director, Principal
- ------------------------------------- Financial Officer
(PETER J. NOWAK, JR.) and Principal
Accounting Officer
/s/ Jeremiah P. Shea Director
- -------------------------------------
(JEREMIAH P. SHEA)
- --------
* The undersigned, by signing his name hereto, does hereby sign this
Registration Statement on behalf of each of the above-indicated officers and
directors of the registrant pursuant to the power of attorney signed by such
officers and directors.
/s/ M. Eileen Kennedy
By: _________________________________
M. EILEEN KENNEDY ATTORNEY-IN-FACT
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
1.1 --Underwriting Agreement.(1)
4.1 --Pooling and Servicing Agreement between FCC National Bank
and the Trustee, including certain exhibits thereto.(2)
4.2 --Supplement to Pooling and Servicing Agreement relating to
the Series 1990-A Certificates between FCC National Bank and
the Trustee.(2)
4.3 --Supplement to Pooling and Servicing Agreement relating to
the Series 1990-B Certificates between FCC National Bank and
the Trustee.(3)
4.4 --Supplement to Pooling and Servicing Agreement relating to
the Series 1990-C Certificates between FCC National Bank and
the Trustee.(4)
4.5 --Supplement to Pooling and Servicing Agreement relating to
the Series 1991-D Certificates between FCC National Bank and
the Trustee.(5)
4.6 --Supplement to Pooling and Servicing Agreement relating to
the Series 1992-E Certificates between FCC National Bank and
the Trustee.(6)
4.7 --Supplement to Pooling and Servicing Agreement relating to
the Series 1993-F Certificates between FCC National Bank and
the Trustee.(7)
4.8 --Supplement to Pooling and Servicing Agreement relating to
the Series 1993-G Certificates between FCC National Bank and
the Trustee.(7)
4.9 --Supplement to Pooling and Servicing Agreement relating to
the Series 1993-H Certificates between FCC National Bank and
the Trustee.(8)
4.10 --Supplement to Pooling and Servicing Agreement relating to
the Series 1994-I Certificates between FCC National Bank and
the Trustee.(9)
4.11 --Supplement to Pooling and Servicing Agreement relating to
the Series 1994-J Certificates between FCC National Bank and
the Trustee.(9)
4.12 --Supplement to Pooling and Servicing Agreement relating to
the Series 1994-K Certificates between FCC National Bank and
the Trustee.(10)
4.13 --Supplement to Pooling and Servicing Agreement relating to
the Series 1995-L Certificates between FCC National Bank and
the Trustee.(10)
4.14 --Supplement to Pooling and Servicing Agreement relating to
the Series 1995-M Certificates between FCC National Bank and
the Trustee.(11)
4.15 --Supplement to Pooling and Servicing Agreement relating to
the Series 1995-N Certificates between FCC National Bank and
the Trustee.(11)
4.16 --Supplement to Pooling and Servicing Agreement relating to
the Series 1995-O Certificates between FCC National Bank and
the Trustee.(12)
4.17 --Supplement to Pooling and Servicing Agreement relating to
the Series 1995-P Certificates between FCC National Bank and
the Trustee.(12)
4.18 --Amendments to Pooling and Servicing Agreement and Series
Supplements between FCC National Bank and the Trustee.(13)
4.19 --1995 Amendment to Pooling and Servicing Agreement between
FCC National Bank and Trustee.(14)
4.20 --Supplement to Pooling and Servicing Agreement relating to
the Series 1996-Q Certificates between FCC National Bank and
the Trustee.(1)
4.21 --Supplement to Pooling and Servicing Agreement relating to
the Series 1996-R Certificates between FCC National Bank and
the Trustee.(15)
4.22 --Supplement to Pooling and Servicing Agreement relating to
the Series 1996-S Certificates between FCC National Bank and
the Trustee.(15)
4.23 --Supplement to Pooling and Servicing Agreement relating to
the Series 1997-T Certificates between FCC National Bank and
the Trustee.(16)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
4.24 --Supplement to Pooling and Servicing Agreement relating to
the Series 1997-U Certificates between FCC National Bank and
the Trustee.(16)
4.25 --Form of Series Supplement.
4.26 --Form of Prospectus Supplement.
5.1 --Form of opinion of counsel of FCC National Bank.
8.1 --Opinion of special tax counsel to FCC National Bank.*
23.1 --Consent of counsel of FCC National Bank is included in
opinion filed as Exhibit 5.1.
23.2 --Consent of special tax counsel to FCC National Bank is
included in opinion filed as Exhibit 8.1.
24.1 --Power of Attorney.
</TABLE>
- --------
(1) Incorporated herein by reference to the Current Report on Form 8-K dated
October 1, 1996 of FCC National Bank.
(2) Incorporated herein by reference to Registration Statement No. 33-35084
of FCC National Bank.
(3) Incorporated herein by reference to Registration Statement No. 33-36078
of FCC National Bank.
(4) Incorporated herein by reference to Registration Statement No. 33-37021
of FCC National Bank.
(5) Incorporated herein by reference to Registration Statement No. 33-40126
of FCC National Bank.
(6) Incorporated herein by reference to Registration Statement No. 33-40135
of FCC National Bank.
(7) Incorporated herein by reference to Registration Statement No. 33-61950
of FCC National Bank.
(8) Incorporated herein by reference to Registration Statement No. 33-67056
of FCC National Bank.
(9) Incorporated herein by reference to Registration Statement No. 33-78032
of FCC National Bank.
(10) Incorporated herein by reference to Registration Statement No. 33-82466
of FCC National Bank.
(11) Incorporated herein by reference to Registration Statement No. 33-84880
of FCC National Bank.
(12) Incorporated herein by reference to Registration Statement No. 33-92358
of FCC National Bank.
(13) Incorporated herein by reference to the Current Report on Form 8-K dated
June 18, 1992 of FCC National Bank.
(14) Incorporated herein by reference to the Current Report on Form 8-K dated
May 5, 1995 of FCC National Bank.
(15) Incorporated by reference to the Current Report on Form 8-K dated
December 4, 1996 of FCC National Bank.
(16) Incorporated by reference to the Current Report on Form 8-K dated
November 10, 1997 of FCC National Bank.
* To be filed by amendment.
<PAGE>
EXHIBIT 4.25
FCC NATIONAL BANK,
Seller and Servicer
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
Trustee
on behalf of the Certificateholders
SERIES 1998 - SUPPLEMENT
Dated as of ________ __, 1998
to
POOLING AND SERVICING AGREEMENT
Dated as of June 1, 1990
$__________
FIRST CHICAGO MASTER TRUST II
SERIES 1998-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
SECTION 1. Designation...................................................... 1
SECTION 2. Definitions...................................................... 2
SECTION 3. Minimum First Chicago Interest
Percentage and Minimum Aggregate
Principal Receivables........................................... 19
SECTION 4. Reassignment and Transfer Terms.................................. 20
SECTION 5. Delivery and Payment for the Series
1998- Certificates............................................. 20
SECTION 6. Form of Delivery of the Series 1998-
Certificates.................................................... 20
SECTION 7. Article IV of Agreement.......................................... 20
Section 4.02 Rights of Series 1998-
Certificateholders............................... 21
Section 4.03 Collections and Allocations....................... 21
Section 4.04 Determination of Monthly Interest
for the Series 1998-
Certificates..................................... 23
Section 4.05 Determination of Monthly Principal
for the Series 1998-
Certificates..................................... 26
Section 4.06 Coverage of Required Amount for the
Class A Certificates............................. 28
Section 4.07 Application of Class A Available
Funds, Collateral Available Funds,
Class A Available Principal
Collections and Collateral Principal
Collections on Deposit in the
Collection Account for the
Series 1998- Certificates....................... 29
Section 4.08 Investor Charge-Offs.............................. 32
Section 4.09 Excess Spread..................................... 33
Section 4.10 Reallocated Principal Collections................. 35
Section 4.11 Cash Collateral Account........................... 35
Section 4.12 Interchange; Interchange Monthly
Servicing Fee.................................... 38
Section 4.13 Determination of LIBOR............................ 39
Section 4.14 Postponement of Accumulation
Period........................................... 40
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 4.15 Principal Funding Account......................... 41
Section 4.16 Reserve Account................................... 42
SECTION 8. Article V of the Agreement....................................... 45
Section 5.01 Distributions..................................... 45
Section 5.02 Statements to Certificateholders.................. 46
SECTION 9. Additional Liquidation Events.................................... 47
SECTION 10. Related Interest Periods........................................ 49
SECTION 11. Eligible Servicer............................................... 49
SECTION 12. Trustee Resignation............................................. 49
SECTION 13. Tax Opinion..................................................... 49
SECTION 14. Subordination of Certain Termination
Payments...................................................... 49
SECTION 15. Variable Accumulation Series.................................... 50
SECTION 16. Ratification of Pooling and Servicing
Agreement; Representations; Security
Interest...................................................... 50
SECTION 17. Counterparts.................................................... 51
SECTION 18. Governing Law................................................... 51
</TABLE>
EXHIBITS
- --------
EXHIBIT A Form of Class A Certificate
EXHIBIT B Form of Certificateholders' Payment Date
Statement
(ii)
<PAGE>
SERIES 1998-__ SUPPLEMENT dated as of _______ __, 1998 (this "Series
Supplement") between FCC NATIONAL BANK, a national bank, as Seller and Servicer,
and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a banking association
organized and existing under the laws of the United States of America (together
with its successors in trust thereunder as provided in the Agreement referred to
below, the "Trustee"), as trustee under the Pooling and Servicing Agreement
dated as of June 1, 1990 (as amended and supplemented, the "Agreement").
PRELIMINARY STATEMENT
Section 6.09 of the Agreement provides, among other things, that the
Seller and the Trustee may at any time and from time to time enter into a
supplement to the Agreement for the purpose of authorizing the issuance by the
Trustee to the Seller for execution and redelivery to the Trustee for
authentication one or more Series of Certificates. The Seller has tendered the
Exchange Notice required by subsection 6.09(b) of the Agreement and hereby
enters into this Series Supplement with the Trustee as required by subsection
6.09(c) of the Agreement to provide for the issuance of the Investor
Certificates of Series 1998-__ (the "Series 1998-__ Certificates"). 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.
All capitalized terms not otherwise defined herein are defined in the
Agreement. All Article, Section or subsection references herein shall mean
Article, Section 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 1998- Certificates and no other
Series of investor certificates issued by the Trust.
SECTION 1. Designation. The Series 1998-
-----------
Certificates shall be issued in two classes to be designated generally as the
Floating Rate Asset Backed Certificates Series 1998- (to be defined herein as
the Class A Certificates) and the Collateral Interest Series 1998- (to be
defined herein as the Collateral Interest). Each
<PAGE>
of the Class A Certificates and the Collateral Interest shall constitute a Class
of Investor Certificates; provided, however, that the
-------- -------
Collateral Interest shall be issued in uncertificated form and 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 thereto. In addition, solely for purposes
of subsection 9.02(a) of the Agreement, holders of interests in the Cash
Collateral Account (other than the Seller) shall be deemed to be a Class of
Investor Certificates.
SECTION 2. Definitions. The following words and phrases shall
-----------
have the following meaning with respect to the Series 1998- 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, with respect to the Series 1998-
-------------------
Certificates, and provided that a Rapid Amortization Period shall not have
commenced, a period commencing on the Controlled Accumulation Date, and
continuing to the earlier of (x) but not including, the first day of the Due
Period in which a Liquidation Event is deemed to have occurred, (y) and
including, the date on which the Invested Amount is paid in full, or (z) the
Series Termination Date.
"Accumulation Period Amount" shall mean, with respect to a Due Period,
--------------------------
an amount equal to the product of (i) Available Expected Principal for such Due
Period and (ii) a fraction, the numerator of which is the Initial Invested
Amount and the denominator of which is the sum of the Initial Invested Amount
and the initial invested amounts (as defined in the respective related
Supplements) of all other Variable Accumulation Series that are not scheduled to
be in their revolving periods as of such Due Period; provided that, for purposes
of this definition, the commencement date of the accumulation period of each
such Variable Accumulation Series shall be deemed to have been postponed to the
latest permissible date, determined as if the provisions hereof applied to each
such Series with such changes as may be specified in the applicable Supplement
with respect to such Series (applying such provisions first to the Variable
Accumulation Series with the latest scheduled pay-
2
<PAGE>
ment day and next to each Series with the next preceding scheduled payment
date).
"Accumulation Period Length" shall have the meaning specified in
--------------------------
Section 4.14 of the Agreement.
"Adjusted Available Cash Collateral Amount" shall mean, with respect
-----------------------------------------
to any Distribution Date, the Available Cash Collateral Amount for such
Distribution Date after giving effect to all withdrawals therefrom for such
Distribution Date pursuant to Section 4.06 of the Agreement.
"Adjusted Invested Amount" shall mean, with respect to any date of
------------------------
determination, an amount equal to the sum of (a) the Class A Adjusted Invested
Amount and (b) the Collateral Invested Amount.
"Available Funds" shall have the meaning specified in Section 4.06 of
---------------
the Agreement.
"Available Cash Collateral Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the amount on deposit in the Cash Collateral Account after
giving effect to all deposits therein and withdrawals therefrom with respect to
the immediately preceding Distribution Date, but before giving effect to any
deposits therein or withdrawals therefrom with respect to the related
Distribution Date.
"Available Enhancement Amount" shall mean, with respect to any
----------------------------
Distribution Date, the sum of (a) the Collateral Invested Amount on the related
Determination Date and (b) the Available Cash Collateral Amount.
"Available Expected Principal" shall mean, for any date of
----------------------------
determination with respect to a Due Period, an amount equal to the excess of (a)
the Expected Monthly Principal for such Due Period over (b) the sum of, without
duplication, (i) all scheduled amortizations or accumulations of principal,
including past due shortfalls as of such date of determination, for all non-
Variable Accumulation Series that are not scheduled to be in their revolving
periods as of such Due Period and (ii) all Expected Monthly Principal
collections projected by the Servicer to be allocable to any other Series with
respect to which a Liquidation Event shall have occurred on or prior to such
date of determination.
3
<PAGE>
"Available Reserve Account Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the lesser of (a) the amount on deposit in the Reserve
Account on such date (after taking into account any interest and earnings
retained in the Reserve Account pursuant to subsection 4.16(b) on such date, but
before giving effect to any deposit made or to be made into the Reserve Account
pursuant to subsection 4.09(h) on such date) and (b) the Required Reserve
Account Amount.
"Base Rate" shall mean, with respect to any Interest Period, the
---------
annualized percentage equivalent of a fraction, the numerator of which is the
sum of (i) the Class A Monthly Interest, (ii) the Collateral Monthly Interest
and (iii) one-twelfth of the product of ____% and the Adjusted Invested Amount
for such Interest Period, and the denominator of which is the Invested Amount
for such Interest Period.
"Cash Collateral Account" shall have the meaning specified in Section
-----------------------
4.11 of the Agreement.
"Cash Collateral Account Surplus" shall mean, upon the occurrence of a
-------------------------------
Conversion Deposit and after the reduction of the Collateral Invested Amount to
zero, the excess of the amount on deposit in the Cash Collateral Account over
the Required Cash Collateral Account.
"Class A Additional Interest" shall have the meaning specified in
---------------------------
Section 4.04 of the Agreement.
"Class A Adjusted Invested Amount" shall mean, on any date of
--------------------------------
determination, an amount equal to the Class A Invested Amount minus the
-----
Principal Funding Account Balance on such date of determination.
"Class A Available Funds" shall mean, with respect to any Due Period,
-----------------------
an amount equal to the sum of (i) the Class A Floating Percentage of the
Floating Allocation Percentage of Collections of Finance Charge Receivables
(including any amounts that are to be treated as Collections of Finance Charge
Receivables in accordance with the Agreement), (ii) Principal Funding Investment
Proceeds, up to the Covered Amount for such Due Period, and (iii) if applicable
for such Due Period, the Reserve Draw Amount, up to the Available Reserve
Account Amount.
4
<PAGE>
"Class A Available Principal Collections" shall mean, with respect to
---------------------------------------
any Distribution Date, the sum of (a) the Class A Principal Percentage of the
Invested Percentage of Collections of Principal Receivables, (b) the amount, if
any, of Unallocated Principal Collections on deposit in the Collection Account
allocated to the Series 1998- Certificates pursuant to subsection 4.01(f) of
the Agreement, (c) Excess Principal Collections allocated to the Series 1998-
Certificates pursuant to subsection 4.05(c) of the Agreement and (d) any other
amounts which are to be treated as Class A Available Principal Collections in
accordance with the provisions hereof (including, but not limited to, amounts
allocable pursuant to subsections 4.07(a)(iii), 4.07(d)(ii), 4.07(f)(ii),
4.07(g) and 4.09(b)).
"Class A Certificate" shall mean any one of the Certificates executed
-------------------
by the Seller and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A hereto.
---------
"Class A Certificate Rate" shall mean for the period from the Closing
------------------------
Date through, and including _______ __, 1998, ___% per annum, and for each
Interest Period thereafter, a per annum rate of ___% in excess of LIBOR
determined on the related LIBOR Determination Date, calculated on the basis of
actual days elapsed and a 360-day year.
"Class A Certificateholder" shall mean the Holder of record of a Class
-------------------------
A Certificate.
"Class A Covered Amount" shall have the meaning specified in
----------------------
subsection 4.06(a) of the Agreement.
"Class A Floating Percentage" shall mean, with respect to any
---------------------------
Distribution Date, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Class A Adjusted
Invested Amount for such Distribution Date and the denominator of which is the
Adjusted Invested Amount for such Distribution Date.
"Class A Initial Invested Amount" shall mean $______.
-------------------------------
"Class A Interest Shortfall Amount" shall have the meaning specified
---------------------------------
in Section 4.04 of the Agreement.
5
<PAGE>
"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 aggregate
-----
amount of principal payments made to the Class A Certificateholders prior to
such date, minus (c) the excess, if any, of the aggregate amount of Class A
-----
Investor Charge-Offs for all prior Distribution Dates over the aggregate amount
of Class A Investor Charge-Offs reimbursed pursuant to Section 4.09 of the
Agreement prior to such date.
"Class A Investor Charge-Offs" shall have the meaning specified in
----------------------------
Section 4.08 of the Agreement.
"Class A Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for such Distribution Date and (ii) the Class A Floating Percentage for
such Distribution Date.
"Class A Monthly Interest" shall have the meaning specified in Section
------------------------
4.04 of the Agreement.
"Class A Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.05 of the Agreement.
"Class A Principal Percentage" shall mean, with respect to any
----------------------------
Distribution Date (i) relating to the Revolving Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Class A Invested Amount for such Distribution Date,
and the denominator of which is the Invested Amount for such Distribution Date
and (ii) relating to the Accumulation Period or the Rapid Amortization Period,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is the Class A Invested Amount as of the end of
the day on the last Distribution Date relating to the Revolving Period, and the
denominator of which is the Invested Amount as of such day.
"Class A Required Amount" shall have the meaning specified in Section
-----------------------
4.06 of the Agreement.
"Class A Scheduled Payment Date" shall mean the _________ ____
------------------------------
Distribution Date.
"Closing Date" shall mean ________ __, 1998.
------------
"Collateral Additional Interest" shall have the meaning specified in
------------------------------
Section 4.04 of the Agreement.
6
<PAGE>
"Collateral Available Funds" shall mean, with respect to any Due
--------------------------
Period, an amount equal to the Collateral Floating Percentage of the Floating
Allocation Percentage of Collections of Finance Charge Receivables (including
any amounts that are to be treated as Collections of Finance Charge Receivables
in accordance with the Agreement).
"Collateral Default Amount" shall mean, with respect to each
-------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for such Distribution Date and (ii) the Collateral Floating Percentage
for such Distribution Date.
"Collateral Floating Percentage" shall mean, with respect to any
------------------------------
Distribution Date, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Collateral Invested
Amount for such Distribution Date, and the denominator of which is the Invested
Amount for such Distribution Date.
"Collateral Initial Invested Amount" shall mean $_________.
----------------------------------
"Collateral Invested Amount" shall mean, for any date of
--------------------------
determination, an amount equal to (a) the Collateral Initial Invested Amount,
minus (b) an amount equal to the amount by which the Collateral Invested Amount
- -----
has been reduced on all prior Distribution Dates pursuant to Section 4.08 of the
Agreement, minus (c) the aggregate amount of Collateral Monthly Principal
-----
applied in accordance with the Loan Agreement pursuant to Section 4.07 of the
Agreement or deposited into the Cash Collateral Account pursuant to subsection
4.11(e) of the Agreement prior to such date; provided, however, that the
-------- -------
Collateral Invested Amount may not be reduced below zero.
"Collateral 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 Interest Holder under this
Supplement, the portion of Collections allocable thereto under the Agreement and
funds on deposit in the Collection Account allocable thereto pursuant to the
Agreement.
"Collateral Interest Holder" shall mean the entity so designated in
--------------------------
the Loan Agreement.
7
<PAGE>
"Collateral Interest Shortfall Amount" shall have the meaning
------------------------------------
specified in Section 4.04 of the Agreement.
"Collateral Monthly Interest" shall have the meaning specified in
---------------------------
Section 4.04 of the Agreement.
"Collateral Monthly Principal" shall have the meaning specified in
----------------------------
Section 4.05 of the Agreement.
"Collateral Principal Collections" shall mean, with respect to any Due
--------------------------------
Period, the Collateral Principal Percentage of the Invested Percentage of
Collections of Principal Receivables, plus any other amounts which are to be
----
treated as Collateral Principal Collections in accordance with the provisions
hereof, minus the amount of Reallocated Principal Collections with respect to
-----
such Due Period.
"Collateral Principal Percentage" shall mean, with respect to any
-------------------------------
Distribution Date (i) relating to the Revolving Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Collateral Invested Amount for such Distribution Date,
and the denominator of which is the Invested Amount for such Distribution Date
and (ii) relating to the Accumulation Period or the Rapid Amortization Period,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is the Collateral Invested Amount as of the end
of the day on the last Distribution Date relating to the Revolving Period, and
the denominator of which is the Invested Amount as of such day.
"Collateral Rate" shall mean the rate designated as such in the Loan
---------------
Agreement.
"Controlled Accumulation Amount" shall mean one-twelfth of the Class A
------------------------------
Initial Invested Amount; provided, however, that if the Accumulation Period
-------- -------
Length is determined to be less than 12 months pursuant to Section 4.14 of the
Agreement, the Controlled Accumulation Amount shall mean the amount determined
in accordance with such Section.
"Controlled Accumulation Date" shall mean the first day of the Due
----------------------------
Period relating to the _______ ____ Distribution Date or such later date as is
determined in accordance with Section 4.14 of the Agreement.
8
<PAGE>
"Controlled Deposit Amount" shall mean, with respect to any
-------------------------
Distribution Date relating to the Accumulation Period, an amount equal to the
sum of the Controlled Accumulation Amount and any existing Deficit Controlled
Accumulation Amount.
"Conversion Deposit" shall have the meaning specified in subsection
------------------
4.11(e) of the Agreement.
"Conversion Event" shall mean any event that the Seller, in its sole
----------------
discretion, shall determine makes it advisable that the Collateral Invested
Amount no longer be Enhancement.
"Covered Amount" shall mean an amount, determined as of each
--------------
Distribution Date with respect to any Interest Period, equal to the product of
(i) a fraction, the numerator of which is the actual number of days in such
Interest Period and the denominator of which is 360, times (ii) the Class A
-----
Certificate Rate in effect with respect to such Interest Period, times (iii) the
-----
Principal Funding Account Balance as of the Record Date preceding such
Distribution Date.
"Deficit Controlled Accumulation Amount" shall mean, on the first
--------------------------------------
Distribution Date with respect to the Accumulation Period, the excess, if any,
of the Controlled Accumulation Amount over the amount of Class A Monthly
Principal for such Distribution Date and, on each subsequent Distribution Date
with respect to the Accumulation Period, the excess, if any, of the Controlled
Deposit Amount over the amount of Class A Monthly Principal for such
Distribution Date.
"Eligible Institution" shall have the meaning specified in Section
--------------------
1.01 of the Agreement, except that the reference therein to "First Chicago"
shall instead be to "the Servicer."
"Enhancement" shall mean the Cash Collateral Account and the
-----------
Collateral Invested Amount.
"Enhancement Provider" shall mean the Collateral Interest Holder.
--------------------
"Enhancement Surplus" shall mean, with respect to any Distribution
-------------------
Date, the amount by which the Collateral Invested Amount may be reduced on such
Distribution Date so that the sum of (i) the Adjusted Available Cash
9
<PAGE>
Collateral Amount (after giving effect to any deposits pursuant to subsection
4.09(f) for such Distribution Date), (ii) the Collateral Invested Amount (after
giving effect to any reductions thereof on such Distribution Date pursuant to
Section 4.08 of the Agreement) as reduced by such Enhancement Surplus and (iii)
the Optional Deposit for such Distribution Date, if any, equals the Required
Enhancement Amount (computed as if the Collateral Invested Amount was reduced by
such Enhancement Surplus and subject to the proviso contained in the definition
of Required Enhancement Amount).
Algebraically, if the Required Enhancement Amount for the Distribution
Date is computed pursuant to clause (i) of the definition thereof, the
Enhancement Surplus shall be represented as:
_____ (AIA + (CIA-X)) = ACCA + (CIA-X)
where,
X = the Enhancement Surplus;
AIA = the Class A Adjusted Invested Amount at the end of such
Distribution Date;
ACCA = the Adjusted Available Cash Collateral Amount (after giving
effect to any deposit pursuant to subsection 4.09(f) or Optional
Deposit on such Distribution Date); and
CIA = the Collateral Invested Amount on such Distribution Date (after
giving effect to any reductions thereof pursuant to Section
4.08).
Algebraically, if the Required Enhancement Amount for the Distribution
Date is computed pursuant to clause (ii) of the definition thereof, the
Enhancement Surplus shall be represented as:
$________ + 2($________ - ACCA) = ACCA + (CIA-X)
where,
X = the Enhancement Surplus;
ACCA = the Adjusted Available Cash Collateral Amount (after giving
effect to any deposit
10
<PAGE>
pursuant to Section 4.09(f) or Optional Deposit on such
Distribution Date); and
CIA = the Collateral Invested Amount on such Distribution Date (after
giving effect to any reductions thereof pursuant to Section
4.08).
"Excess Finance Charge Collections" shall have the meaning specified
---------------------------------
in subsection 4.04(c) of the Agreement.
"Excess Principal Collections" shall have the meaning specified in
----------------------------
subsection 4.05(c) of the Agreement.
"Excess Principal Funding Investment Proceeds" shall mean, with
--------------------------------------------
respect to each Distribution Date, the amount, if any, by which the Principal
Funding Investment Proceeds for such Distribution Date exceed the Covered Amount
determined for such Distribution Date.
"Excess Spread" shall mean, with respect to any Distribution Date, the
-------------
sum of the amounts, if any, specified in subsections 4.07(a)(iv) and 4.07(b).
"Expected Monthly Principal" shall mean, for a Due Period, an amount
--------------------------
equal to the product of (a) the lowest of the monthly principal payment rates
(determined by dividing Collections of Principal Receivables with respect to a
Due Period by the amount of Aggregate Principal Receivables as of the last day
of the immediately preceding Due Period), expressed as a decimal, for the 12 Due
Periods immediately preceding the Determination Date with respect to the
________ ____ Distribution Date (including the Due Period related to the
_________ ____ Distribution Date)(or such lower principal payment rate as the
Servicer may select) and (b) the sum of the initial invested amounts (as defined
in the respective related Supplements) of all then outstanding Series.
"Fixed Allocation Percentage" shall mean, with respect to any
---------------------------
Distribution Date relating to the Amortization Period or any Rapid Amortization
Period, the percentage equivalent of a fraction, the numerator of which is the
Invested Amount as of the end of the day on the last Distribution Date relating
to the Revolving Period and the denominator of which is the greater of (a)
Aggregate Principal Receivables for the Due Period related to the current
Distribution Date and (b) the sum of
11
<PAGE>
the numerators used to calculate the Invested Percentages with respect to
Principal Receivables for all Series of investor certificates outstanding for
the current Distribution Date.
"Floating Allocation Percentage" shall mean, with respect to any
------------------------------
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the Adjusted Invested Amount for such Distribution Date, and the
denominator of which is Aggregate Principal Receivables for the Due Period
related to such Distribution Date.
"Initial Invested Amount" shall mean the sum of the Class A Initial
-----------------------
Invested Amount and the Collateral Initial Invested Amount.
"Interchange" shall mean the interchange fees payable to the Seller,
-----------
in its capacity as credit card issuer, through VISA USA, Inc. and MasterCard
International Incorporated in connection with cardholder charges for goods and
services.
"Interchange Amount" shall mean, for any Distribution Date, the amount
------------------
of Interchange paid or payable to the Seller with respect to the second calendar
month preceding the month in which the Distribution Date occurs multiplied by a
fraction the numerator of which is the aggregate amount of cardholder sales
charges for goods and services in the Accounts with respect to the second
preceding Due Period and the denominator of which is the aggregate amount of
cardholder charges for goods and services in all the "MasterCard" and "VISA"
consumer revolving credit card accounts of the Seller with respect to such
second preceding Due Period.
"Interchange Monthly Servicing Fee" shall have the meaning specified
---------------------------------
in subsection 4.12(b) of the Agreement.
"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, with respect to any date of
---------------
determination, an amount equal to the sum of
12
<PAGE>
(a) the Class A Invested Amount and (b) the Collateral Invested Amount.
"Invested Percentage" shall mean, on any date of determination with
-------------------
respect to any Distribution Date: (a) when used with respect to Principal
Receivables during the Accumulation Period or the Rapid Amortization Period, the
Fixed Allocation Percentage; and (b) when used with respect to Principal
Receivables during the Revolving Period and Finance Charge Receivables and
Defaulted Receivables at any time, the Floating Allocation Percentage.
"Investor Default Amount" shall mean, with respect to each
-----------------------
Distribution Date, an amount equal to the product of the Defaulted Amount for
such Distribution Date and the Invested Percentage applicable for such
Distribution Date.
"LIBOR" shall mean, for any Interest Period other than the initial
-----
Interest Period from the Closing Date through, and including, ________ __, 1998,
the London interbank offered rate for one-month deposits of Dollars determined
by the Servicer for each Interest Period in accordance with the provisions of
Section 4.13 of the Agreement.
"LIBOR Determination Date" shall mean _______ __, 1998 for the period
------------------------
from ________ __, 1998 through, and including, ________ __, 1998; ________ __,
1998 for the period from ________ __, 1998 through, and including, ________ __,
1998; and the second London Business Day prior to the commencement of each
subsequent Interest Period.
"Loan Agreement" shall mean the Loan Agreement among the Seller, the
--------------
Servicer, the Trustee and the Collateral Interest Holder, dated the Closing
Date, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"London Business Day" shall mean any Business Day other than a
-------------------
Business Day on which banking institutions in London, England dealing in
deposits in United States Dollars are authorized or obligated by law or
executive order to be closed.
"Monthly Servicing Fee" shall mean the share of the Servicing Fee
---------------------
allocable to the Series 1998- Certifi-
13
<PAGE>
cates with respect to any Distribution Date, which shall be equal to one-twelfth
of the product of (a) the Servicing Fee Percentage and (b) the Adjusted Invested
Amount on the prior Distribution Date after giving effect to any payment or
deposit of principal on such prior Distribution Date (or, in the case of the
first Distribution Date, the Initial Invested Amount).
"Optional Deposit" shall have the meaning specified in subsection
----------------
4.11(d) of the Agreement.
"Payment Date" shall mean any Distribution Date, commencing ________
------------
__, 1998, and the Termination Payment Date.
"Portfolio Yield" shall mean, with respect to any Due Period, the
---------------
annualized percentage equivalent of a fraction the numerator of which is equal
to (a) the Floating Allocation Percentage of the Collections of Finance Charge
Receivables (including Interchange) during such Due Period, calculated on a cash
basis, plus (b) Principal Funding Investment Proceeds for such Due Period, plus
---- ----
(c) the amount, if any, withdrawn from the Reserve Account and included in Class
A Available Funds for the Distribution Date relating to such Due Period, minus
-----
(d) the Investor Default Amount for such Due Period, and the denominator of
which is the Invested Amount for the Distribution Date related to such Due
Period.
"Principal Funding Account" shall have the meaning specified in
-------------------------
subsection 4.15(a) of the Agreement.
"Principal Funding Account Balance" shall mean, with respect to any
---------------------------------
date of determination, the principal amount, if any, on deposit in the Principal
Funding Account on such date of determination as provided in Section 4.15(d).
"Principal Funding Investment Proceeds" shall mean, with respect to
-------------------------------------
each Distribution Date, the investment earnings on funds in the Principal
Funding Account (net of investment expenses and losses) for the period from and
including the Transfer Date relating to the immediately preceding Distribution
Date to but excluding the Transfer Date relating to such Distribution Date.
"Principal Funding Investment Shortfall" shall mean, with respect to
--------------------------------------
each Distribution Date relating to the Accumulation Period or the first
Distribution Date
14
<PAGE>
with respect to the Rapid Amortization Period, the amount, if any, by which the
Principal Funding Investment Proceeds for such Distribution Date are less than
the Covered Amount determined for such Distribution Date.
"Principal Shortfall" shall have the meaning specified in Section 4.03
-------------------
of the Agreement.
"Rapid Amortization Period" shall mean, with respect to the Series
-------------------------
1998- Certificates, a period beginning on the first day of the Due Period in
which a Liquidation Event is deemed to occur and continuing to and including the
earlier of (a) the date on which the Invested Amount is paid in full or (b) the
Series Termination Date.
"Rating Agency" shall mean, with respect to Series 1998-, the rating
-------------
agency or agencies rating any Class of the Series 1998- Certificates at the
request of the Seller, including Moody's, Standard & Poor's and Fitch IBCA, Inc.
"Rating Agency Condition" shall mean the notification in writing by
-----------------------
each Rating Agency to the Seller, the Servicer and the Trustee that an action
will not result in such Rating Agency reducing or withdrawing its then existing
rating of the Investor Certificates of any outstanding Series or Class of a
Series with respect to which it is a Rating Agency.
"Reallocated Principal Collections" shall mean, with respect to any
---------------------------------
Due Period, the Collateral Principal Percentage of the Invested Percentage of
Collections of Principal Receivables but only to the extent that such
Collections of Principal Receivables are actually distributed pursuant to
subsection 4.10(a) of the Agreement.
"Record Date" shall mean, with respect to any Distribution Date, the
-----------
last day of the calendar month immediately preceding such Distribution Date.
"Reference Banks" shall mean four major banks in the London interbank
---------------
market selected by the Servicer and identified in an Officer's Certificate
delivered to the Trustee on the Closing Date or in any subsequent Officer's
Certificate delivered no later than one Business Day prior to the then current
LIBOR Determination Date.
15
<PAGE>
"Required Cash Collateral Amount" shall mean, with respect to any
-------------------------------
Distribution Date, the Required Enhancement Amount, minus the Collateral
-----
Invested Amount after giving effect to all reductions of the Collateral Invested
Amount with respect to such Distribution Date pursuant to Section 4.08 and any
reductions of the Collateral Invested Amount with respect to such Distribution
Date pursuant to Section 4.07 other than as a result of any Enhancement Surplus
due to any Optional Deposit.
"Required Enhancement Amount" shall mean, with respect to any
---------------------------
Distribution Date, the greater of (i) the product of (a) the Adjusted Invested
Amount as of such Distribution Date after taking into account all distributions
and reductions to be made on such Distribution Date, and (b) ___% and (ii) the
sum of (A) $_________ and (B) the product of (I) two and (II) the excess, if
any, of $________ over the Adjusted Available Cash Collateral Amount; provided,
--------
however, that (i) if there are any withdrawals from the Cash Collateral Account
- -------
pursuant to Section 4.06 of the Agreement or any reductions in the Collateral
Invested Amount pursuant to clause (b) of the definition of such amount, or a
Liquidation Event occurs with respect to the Series 1998- Certificates, then
the Required Enhancement Amount for any Distribution Date shall equal the
Required Enhancement Amount on the Distribution Date immediately preceding such
withdrawal, reduction or Liquidation Event, (ii) in no event shall the Required
Enhancement Amount exceed the Class A Adjusted Invested Amount on any such
Distribution Date, and (iii) the Required Enhancement Amount may be reduced
without the consent of the Class A Certificateholders or the Collateral Interest
Holder, if the Seller shall have received written notice from each Rating Agency
(with a copy delivered to the Trustee) that such reduction will not result in
the reduction or withdrawal of the then current rating of any Class of Series
1998- Certificates rated by such Rating Agency and the Seller shall have
delivered to the Trustee an Officer's Certificate to the effect that, based on
the facts known to such officer at such time, in the reasonable belief of the
Seller, such reduction will not cause a Liquidation Event or an event that,
after the giving of notice or the lapse of time, would constitute a Liquidation
Event, to occur with respect to the Series 1998- Certificates.
"Required Reserve Account Amount" shall mean, with respect to any
-------------------------------
Distribution Date on or after the Reserve Account Funding Date, an amount equal
to (a)
16
<PAGE>
____% of the Class A Invested Amount or (b) any other amount designated by the
Seller; provided, however, that if such designation is of a lesser amount, the
-------- -------
Seller shall (i) provide the Servicer, the Collateral Interest Holder and the
Trustee with evidence that the Rating Agency Condition shall have been satisfied
and (ii) deliver to the Trustee an Officers' Certificate to the effect that,
based on the facts known to such officers at such time, in the reasonable belief
of the Seller, such designation will not cause a Liquidation Event or an event
that, after the giving of notice or the lapse of time, would cause a Liquidation
Event to occur with respect to Series 1998-.
"Reserve Account" shall have the meaning specified in subsection
---------------
4.16(a) of the Agreement.
"Reserve Account Funding Date" shall mean the ________ ____
----------------------------
Distribution Date.
"Reserve Account Surplus" shall mean, as of any Distribution Date
-----------------------
following the Reserve Account Funding Date, the amount, if any, by which the
amount on deposit in the Reserve Account exceeds the Required Reserve Account
Amount.
"Reserve Draw Amount" shall have the meaning specified in subsection
-------------------
4.16(c).
"Revolving Period" shall mean, with respect to the Series 1998-
----------------
Certificates, the period from and including the Closing Date up to and including
the day prior to the day on which the Accumulation Period or, if earlier, the
Rapid Amortization Period commences.
"Series E Certificates" or "Series 1992-E" shall mean the 6.25% Asset
--------------------- -------------
Backed Certificates Series 1992-E.
"Series I Certificates" or "Series 1994-I" shall mean the Floating
--------------------- -------------
Rate Asset Backed Certificates Series 1994-I.
"Series J Certificates" or "Series 1994-J" shall mean the Floating
--------------------- -------------
Rate Asset Backed Certificates Series 1994-J.
17
<PAGE>
"Series K Certificates" or "Series 1994-K" shall mean the Floating
--------------------- -------------
Rate Credit Card Certificates Series 1994-K.
"Series L Certificates" or "Series 1994-L" shall mean the 7.15% Credit
--------------------- -------------
Card Certificates Series 1994-L.
"Series M Certificates" or "Series 1995-M" shall mean the Floating
--------------------- -------------
Rate Credit Card Certificates Series 1995-M.
"Series N Certificates" or "Series 1995-N" shall mean the Floating
--------------------- -------------
Rate Credit Card Certificates Series 1995-N.
"Series O Certificates" or "Series 1995-O" shall mean the Floating
--------------------- -------------
Rate Credit Card Certificates Series 1995-O.
"Series P Certificates" or "Series 1995-P" shall mean the Floating
--------------------- -------------
Rate Credit Card Certificates Series 1995-P.
"Series Q Certificates" or "Series 1996-Q" shall mean the Floating
--------------------- -------------
Rate Asset Backed Certificates Series 1996-Q.
"Series R Certificates" or "Series 1996-R" shall mean the Floating
--------------------- -------------
Rate Asset Backed Certificates Series 1996-R.
"Series S Certificates" or "Series 1996-S" shall mean the Floating
--------------------- -------------
Rate Asset Backed Certificates Series 1996-S.
"Series T Certificates" or "Series 1997-T" shall mean the Floating
--------------------- -------------
Rate Asset Backed Certificates Series 1997-T.
"Series U Certificates" or "Series 1997-U" shall mean the Floating
--------------------- -------------
Rate Asset Backed Certificates Series 1997-U.
"Series 1998- Certificateholder" shall mean the Holder of record of a
-------------------------------
Class A Certificate or the Collateral Interest Holder.
18
<PAGE>
"Series 1998- Certificateholders' Interest" shall have the meaning
------------------------------------------
specified in Section 4.02 of the Agreement.
"Series Termination Date" shall mean the ________ ____ Distribution
-----------------------
Date.
"Servicing Fee Percentage" shall mean ___% per annum.
------------------------
"Shortfall Amount" shall have the meaning specified in Section 4.04 of
----------------
the Agreement.
"Telerate Page 3750" shall mean the display page currently so
------------------
designated on the Dow Jones Telerate Service (or such other page as may replace
such page on such service for the purpose of displaying comparable rates or
prices).
"Termination Payment Date" shall mean the earlier of (a) the
------------------------
Distribution Date on which final payment has been made on the Series 1998-
Certificates and (b) the Series Termination Date.
"Variable Accumulation Series" shall mean each then outstanding
----------------------------
Series, other than Series 1998-, for which, pursuant to the terms of the
related Supplement, the commencement date of its accumulation period or
amortization period may be changed.
"Withdrawal Amount" shall mean, with respect to the Class A
-----------------
Certificates, and with respect to any Distribution Date, the lesser of (a) the
Class A Required Amount calculated for such Distribution Date and (b) the
Available Cash Collateral Amount calculated for such Distribution Date.
SECTION 3. Minimum First Chicago Interest Percentage and Minimum
-----------------------------------------------------
Aggregate Principal Receivables. The Minimum First Chicago Interest Percentage
- -------------------------------
applicable to the Series 1998- Certificates shall be 7% (unless (a) the Rating
Agencies confirm in writing that a lower percentage will not cause a reduction
or withdrawal of the then rating of any Class of Series 1998- Certificates and
(b) the Seller receives an Opinion of Counsel that such reduction will not
adversely affect the Federal income tax characterization of the Series 1998-
Certificates or any other outstanding investor certificates, or be treated as an
exchange within the meaning of Section
19
<PAGE>
1001 of the Code). The Minimum Aggregate Principal Receivables shall be the sum
of (i) the Initial Invested Amount and (ii) the initial invested amounts of all
other Series then outstanding or, if any Series calculates the invested
percentage with respect to Principal Receivables by means of a numerator based
other than on the initial invested amount of such Series, then at least equal to
the sum of the initial invested amount of each Series then outstanding which
calculates such invested percentage on the basis of initial invested amount
plus, for each other Series then outstanding, the then current numerator used to
calculate the invested percentage with respect to Principal Receivables for such
Series.
SECTION 4. Reassignment and Transfer Terms. The Series 1998- Certi-
-------------------------------
ficates may be reassigned and transferred to the Seller on any Distribution Date
in the Amortization Period or the Rapid Amortization Period on or after the
Invested Amount is reduced to an amount less than or equal to 5% of the Initial
Invested Amount in accordance with the terms specified in subsection 12.02(a) of
the Agreement, subject to any limitation specified in the Loan Agreement. The
repurchase price of any such repurchase shall be equal to the Adjusted Invested
Amount plus accrued and unpaid interest on the Series 1998- Certificates through
the Distribution Date on which the repurchase occurs.
SECTION 5. Delivery and Payment for the Series 1998- Certificates.
------------------------------------------------------
The Trustee shall deliver the Class A Certificates when authenticated in
accordance with Section 6.02 of the Agreement. The Collateral Interest shall be
acquired in accordance with the Loan Agreement.
SECTION 6. Form of Delivery of the Series 1998- Certificates.
-------------------------------------------------
The Class A Certificates shall be delivered as Book Entry Certificates as
provided in Section 6.01 of the Agreement. The Collateral Interest shall be
delivered in uncertificated form as provided in the Loan Agreement.
SECTION 7. Article IV of Agreement. Any provision of Article IV of
-----------------------
the Agreement which distributes Collections to the Seller on the basis of the
Seller's Percentage shall continue to apply irrespective of the issuance of the
Series 1998- Certificates. With respect to the Series 1998- Certificates,
Article IV of the Agreement (except for Section 4.01 thereof) shall read as
follows:
20
<PAGE>
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.02 Rights of Series 1998- Certificateholders. The Investor
------------------------------------------
Certificates of Series 1998- shall represent fractional Undivided Interests in
the Trust, consisting of the right to receive, to the extent necessary to make
the required payments with respect to such Investor Certificates at the times
and in the amounts specified in this Agreement, (a) the related Invested
Percentage of Collections received with respect to the Receivables (including
the Interchange Amount allocable to the Series 1998- Certificateholders), (b)
funds on deposit in the Collection Account, (c) funds on deposit in the Cash
Collateral Account, (d) funds on deposit in the Principal Funding Account and
(e) funds on deposit in the Reserve Account (the "Series 1998-
Certificateholders' Interest"). The Exchangeable Seller's Certificate and any
other Series of investor certificates outstanding shall represent fractional
Undivided Interests in the Trust Assets not allocated pursuant to this
Agreement to the Series 1998- Certificateholders' Interest, including the right
to receive Collections with respect to the Receivables and other amounts at the
times and in the amounts specified in this Article IV to be paid to the Holder
of the Exchangeable Seller's Certificate; provided, however, such interests
-------- -------
shall not represent any interest in the Cash Collateral Account, the Principal
Funding Account or the Reserve Account or funds on deposit therein.
Section 4.03 Collections and Allocations
---------------------------
(a) Collections. The Trustee will apply or will instruct the
-----------
Servicer to apply all funds on deposit in the Collection Account as described in
this Article IV.
(b) Payments to the Holder of the Exchangeable Seller's
---------------------------------------------------
Certificate. On each Determination Date preceding a Distribution Date, the
- ------------
Servicer shall determine whether a Liquidation Event is deemed to have occurred
in the Due Period relating to such Determination Date with respect to the Series
1998-Certificates, and the Servicer shall allocate Collections with respect to
21
<PAGE>
the Due Period for such Distribution Date to the Holder of the Exchangeable
Seller's Certificate as follows:
(i) for Determination Dates with respect to the Revolving
Period, in addition to amounts allocated to the Holder of the Exchangeable
Seller's Certificate pursuant to subsection 4.01(d) of the Agreement, an
amount equal to the Invested Percentage for the Distribution Date of the
aggregate amount of such Collections in respect of Principal Receivables,
but not exceeding the First Chicago Amount (determined as of such
Determination Date after giving effect to any Principal Receivables
transferred to the Trust for the Due Period relating to such Determination
Date), and excluding any such Collections to be applied as Collateral
Monthly Principal pursuant to Section 4.07 and any Reallocated Principal
Collections;
(ii) for Determination Dates with respect to the Accumulation
Period, an amount equal to the excess of the Invested Percentage for the
Distribution Date of the aggregate amount of such Collections in respect of
Principal Receivables over the related Controlled Deposit Amount, but not
exceeding the First Chicago Amount (determined as of such Determination
Date after giving effect to any Principal Receivables transferred to the
Trust for the Due Period relating to such Determination Date), and
excluding any such Collections to be applied as Collateral Monthly
Principal pursuant to Section 4.07 and any Reallocated Principal
Collections; and
(iii) for Determination Dates with respect to any Rapid
Amortization Period, the amount of payments made to the Holder of the
Exchangeable Seller's Certificate shall be determined only as provided in
subsection 4.01(d) of the Agreement;
provided, however, that in the event that principal shall be payable to or for
- -------- -------
the benefit of other Series on such Distribution Date, and amounts allocable to
such Series are not sufficient to make the maximum principal payment which could
be made under the terms of the applicable
22
<PAGE>
Supplement to the certificateholders of such Series for such Distribution Date
(such deficiencies, "Principal Shortfalls"), amounts otherwise allocable to the
Holder of the Exchangeable Seller's Certificate pursuant to this subsection
4.03(b) shall instead be paid to or for the benefit of such other Series on a
pro rata basis (based on the numerator used in calculating the invested
percentage of Collections of Principal Receivables for such Series) if such
other Series provide for the sharing of Collections of Principal Receivables to
pay Principal Shortfalls.
The allocations to be made pursuant to this Section 4.03 also apply to
deposits into the Collection Account that are treated as Collections, including
Transfer Deposit Amounts, Excess Finance Charge Collections, Adjustment
Payments, proceeds from the sale, disposition or liquidation of the Receivables
pursuant to Section 9.02, 10.01, 12.01 or 12.02 of the Agreement and Section 4
of this Series Supplement and the Interchange Amount allocable to the Series
1998- Certificateholders. Such deposits to be treated as Collections will be
allocated as Finance Charge Receivables or Principal Receivables as indicated in
the Agreement. For purposes of this Series Supplement, the Interchange Amount
shall be treated as Finance Charge Receivables, except that a portion of the
Interchange Amount shall be available solely to pay the Servicer the Interchange
Monthly Servicing Fee pursuant to subsection 4.12(b) of the Agreement.
Section 4.04 Determination of Monthly Interest for the Series 1998-
-------------------------------------------------------
Certificates. (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 commencing with the ________ 1998
Distribution Date shall be an amount equal to the product of (i)(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, times (B) the Class A Certificate
Rate in effect with respect to the related Interest Period, and (ii) the Class A
Invested Amount determined as of the Record Date preceding such Distribution
Date (or in the case of the ________ 1998 Distribution Date, the
Class A Initial Invested Amount); provided, however, that Class A Monthly
-------- -------
Interest for the ________ 1998 Distribution Date shall be the sum of the amounts
calculated pursuant to clauses (i) and (ii) above for the Interest Period from
and including
23
<PAGE>
the Closing Date to but excluding the ________ 1998 Distribution Date and for
the Interest Period from and including the ________ 1998 Distribution Date to
but excluding the ________ 1998 Distribution Date.
On each Determination Date preceding a Distribution Date, commencing
with the ________ 1998 Distribution Date, the Servicer shall determine the
amount (the "Class A Interest Shortfall Amount"), if any, of the excess of Class
A Monthly Interest over the amount that will be on deposit in the Collection
----
Account on such Distribution Date and available for payment of Class A Monthly
Interest. An additional amount ("Class A Additional Interest") shall be payable
as provided herein with respect to Class A Certificates on each Distribution
Date following such Distribution Date, to and including the Distribution Date on
which such Class A Interest Shortfall Amount is paid in full, in an amount equal
to the product of (i)(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,
times (B) the Class A Certificate Rate in effect with respect to the related
Interest Period plus 2% per annum and (ii) the unpaid portion of such Class A
Interest Shortfall Amount.
(b) The amount of monthly interest ("Collateral Monthly Interest")
distributable from the Collection Account with respect to the Collateral
Interest on any Distribution Date commencing with the ________ 1998 Distribution
Date shall be an amount equal to the product of (i)(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, times (B) the Collateral Rate in effect with
respect to the related Interest Period and (ii) the Collateral Invested Amount
determined as of the Record Date preceding such Distribution Date (or in the
case of the ________ 1998 Distribution Date, the Collateral Initial Invested
Amount); provided, however, that Collateral Monthly Interest for the ________
-------- -------
1998 Distribution Date shall be the sum of the amounts calculated pursuant to
clauses (i) and (ii) above for the Interest Period from and including the
Closing Date to but excluding the _______ 1998 Distribution Date and for the
Interest Period from and including the _______ 1998 Distribution Date to but
excluding the ________ 1998 Distribution Date.
On each Determination Date preceding a Distribution Date, commencing
with the ________ 1998 Dis-
24
<PAGE>
tribution Date, the Servicer shall determine the amount (the "Collateral
Interest Shortfall Amount"), if any, of the excess of Collateral Monthly
Interest over the amount that will be on deposit in the Collection Account
----
on such Distribution Date and available for payment of Collateral Monthly
Interest. An additional amount ("Collateral Additional Interest") shall be
payable as provided herein with respect to the Collateral Interest on each
Distribution Date following such Distribution Date, to and including the
Distribution Date on which such Collateral Interest Shortfall Amount is paid in
full, in an amount equal to the product of (i)(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, times (B) the Collateral Rate in effect with
respect to the related Interest Period and (ii) the unpaid portion of such
Collateral Interest Shortfall Amount.
(c) Collections of Finance Charge Receivables allocable to any Series
issued on or after May 25, 1994 (including, but not limited to, the Series I
Certificates, the Series J Certificates, the Series K Certificates, the Series L
Certificates, the Series M Certificates, the Series N Certificates, the Series O
Certificates, the Series P Certificates, the Series Q Certificates, the Series R
Certificates, the Series S Certificates, the Series T Certificates, the Series U
Certificates and the Series 1998- Certificates) and the proceeds thereof that
would otherwise be payable to the Seller (whether pursuant to the Supplement
relating to such Series or an agreement relating to the Enhancement for such
Series), excluding any payments made to the Seller in its capacity as Servicer
or any payments made with respect to the Investor Default Amount, shall, unless
the Supplement with respect to any such Series specifies otherwise, be payable
on each Distribution Date on a pro rata basis (based on the numerator used in
calculating the invested percentage of Collections of Finance Charge
Receivables) to or for the benefit of other Series issued on or after May 25,
1994 (including, but not limited to, the Series I Certificates, the Series J
Certificates, the Series K Certificates, the Series L Certificates, the Series M
Certificates, the Series N Certificates, the Series O Certificates, the Series P
Certificates, the Series Q Certificates, the Series R Certificates, the Series S
Certificates, the Series T Certificates, the Series U Certificates and the
Series 1998- Certificates) experiencing shortfalls in amounts payable from
Collections of Finance Charge Receivables
25
<PAGE>
allocable to such other Series as provided for pursuant to the Supplement for
any such Series, so long as the Supplement for any such other Series permits and
provides for the payment of such excess Collections of Finance Charge
Receivables and the proceeds thereof ("Excess Finance Charge Collections") to
such Series. The shortfall payable from Excess Finance Charge Collections
allocable to the Series 1998- Certificates for any Distribution Date (the
"Shortfall Amount") shall equal the amount by which the sum of (i) the Class A
Monthly Interest, (ii) any Class A Monthly Interest previously due but not paid
to the Class A Certificateholders, (iii) any Class A Additional Interest, (iv)
the Class A Investor Default Amount, (v) to the extent payable to a Successor
Servicer that is not an Affiliate of the Seller, the Monthly Servicing Fee, (vi)
any unreimbursed Class A Investor Charge-Offs, (vii) the Collateral Monthly
Interest, (viii) any Collateral Monthly Interest previously due but not paid to
the Collateral Interest Holder, (ix) any Collateral Additional Interest, (x) the
Collateral Default Amount and (xi) the amounts, if any, payable pursuant to
subsections 4.09(e), 4.09(f), 4.09(g) and 4.09(h), exceeds the Floating
Allocation Percentage of Collections in respect of Finance Charge Receivables
allocable to the Series 1998- Certificates. Such Excess Finance Charge
Collections shall be available only to pay the amounts referred to in clauses
(i) through (xi) above.
The Seller hereby directs the Servicer to direct the Trustee to
deposit any amounts payable to FCCNB pursuant to Section 2.11 of the Loan
Agreement with respect to any Distribution Date, to the extent such amounts
constitute Excess Finance Charge Collections for other Series, into the
Collection Account for payment on such Distribution Date.
Section 4.05 Determination of Monthly Principal for the Series 1998-
-------------------------------------------------------
Certificates. (a) The amount of monthly principal ("Class A Monthly
- ------------
Principal") distributable from the Collection Account with respect to the Class
A Certificates on each Distribution Date beginning with the earlier to occur of
(i) the first Distribution Date to occur with respect to the Rapid Amortization
Period and (ii) the first Distribution Date to occur with respect to the
Accumulation Period shall be equal to Class A Available Principal Collections;
provided, however, that for each Distribution Date with respect to the
- -------- -------
Accumulation Period (unless and until a Liquidation Event
26
<PAGE>
is deemed to have occurred), Class A Monthly Principal shall not exceed the
Controlled Deposit Amount for such Distribution Date; provided, further, that
with respect to any Distribution Date, Class A Monthly Principal shall not
exceed the Class A Adjusted Invested Amount.
(b) The amount of monthly principal ("Collateral Monthly Principal")
distributable from the Collection Account with respect to the Collateral
Interest on each Distribution Date beginning with the ________ 1998 Distribution
Date shall be equal to an amount calculated as follows:
(i) on any Distribution Date prior to the Distribution Date on
which the Class A Invested Amount is paid in full, the lesser of (A) the
sum of (x) Collateral Principal Collections with respect to such
Distribution Date not applied to Class A Monthly Principal on such
Distribution Date and (y) Class A Available Principal Collections not
applied to Class A Monthly Principal on such Distribution Date and (B) the
Enhancement Surplus on such Distribution Date (including any Enhancement
Surplus which will result from the transfer of funds to the Cash Collateral
Account pursuant to Section 2.11(d) of the Loan Agreement and subsection
4.11(d) of the Agreement); and
(ii) on and after the Distribution Date on which the Class A
Invested Amount is paid in full, the sum of (A) Collateral Principal
Collections with respect to such Distribution Date not applied to Class A
Monthly Principal on such Distribution Date and (B) Class A Available
Principal Collections not applied to Class A Monthly Principal on such
Distribution Date;
(iii) notwithstanding the foregoing subsections (i) and (ii) of
this subsection 4.05(b), on any Distribution Date prior to the commencement
of a Rapid Amortization Period and after the determination by the Seller to
make a Conversion Deposit pursuant to, and in accordance with, subsection
4.11(e), the sum of (A) Collateral Principal Collections with respect to
such Distribution Date not applied to Class A Monthly Principal on such
Distribution
27
<PAGE>
Date and (B) Class A Available Principal Collections not applied to Class A
Monthly Principal on such Distribution Date; provided, however, that with
-------- -------
respect to any Distribution Date, Collateral Monthly Principal shall not
exceed the Collateral Invested Amount.
(c) Collections of Principal Receivables allocable to a Series
(other than Series 1992-E, and any other Series which specifically prohibits
sharing of Excess Principal Collections) with respect to any Distribution Date
but not payable to or for the benefit of such Series on such Distribution Date
("Excess Principal Collections") shall be payable on such Distribution Date on a
pro rata basis (based on the numerator used in calculating the invested
percentage of Collections of Principal Receivables) to or for the benefit of
other Series experiencing a Principal Shortfall for such Distribution Date,
provided that the Supplement for such other Series permits the payment of Excess
Principal Collections to such Series.
Section 4.06 Coverage of Required Amount for the Class A
-------------------------------------------
Certificates. (a) On each Determination Date, the Servicer shall determine the
- ------------
amount (the "Class A Required Amount"), if any, by which the sum of (i) Class A
Monthly Interest for the related Distribution Date payable with respect to the
Class A Invested Amount, (ii) any Class A Monthly Interest previously due but
not paid to the Class A Certificateholders, (iii) any Class A Additional
Interest, (iv) the Class A Investor Default Amount, if any, for such
Distribution Date and (v) to the extent payable to a Successor Servicer that is
not an Affiliate of the Seller, the Monthly Servicing Fee (the sum of (i)
through (v), the "Class A Covered Amount") exceeds the sum of (x) Class A
Available Funds for such Distribution Date which are available to pay (i)
through (v) (after taking into consideration the pro rata portion of the Monthly
Servicing Fee payable in accordance with the first proviso to subsection 4.07(a)
of the Agreement), (y) Excess Spread available pursuant to Section 4.09 of the
Agreement and (z) Excess Finance Charge Collections allocable to the Series
1998-Certificates pursuant to subsection 4.04(c) of the Agreement (up to the
Shortfall Amount). In the event that the Class A Required Amount is greater than
zero, the Servicer shall give written notice to the Trustee of such positive
Class A Required Amount, specifying therein the amount to be
28
<PAGE>
withdrawn pursuant to this subsection 4.06(a), on or after the Determination
Date but in no event later than three Business Days prior to such Distribution
Date. On the Transfer Date, the Trustee (or the Servicer on the Trustee's
behalf) shall withdraw the Withdrawal Amount from the Cash Collateral Account
and immediately deposit such amount into the Collection Account. In the event
that the Class A Required Amount exceeds the Available Cash Collateral Amount
with respect to such Distribution Date, Reallocated Principal Collections with
respect to such Distribution Date in an amount equal to such excess shall be
distributed from the Collection Account on such Distribution Date pursuant to
Section 4.10.
(b) If the Servicer fails to make any payment or deposit (other than
as required by Sections 2.07, 7.04, 8.04, 9.02 (upon receipt of sale proceeds
thereunder) and 10.01 of the Agreement) required to be made by the Servicer at
the time specified in the Agreement (including applicable grace periods), the
Trustee, without instruction from the Servicer, shall make such payment or
deposit from the Collection Account.
If the Servicer fails to give the notice of a positive Class A
Required Amount required to be given by the Servicer pursuant to subsection
4.06(a) of the Agreement, the Trustee shall make a withdrawal from the Cash
Collateral Account in accordance with the certificate delivered pursuant to
subsection 3.04(b) of the Agreement without instruction from the Servicer. In
the event that the Servicer fails to deliver the certificate required by
subsection 3.04(b) of the Agreement, no withdrawal from the Cash Collateral
Account shall be made; provided, however, that if the Trustee, in its sole
-------- -------
discretion, is able to determine and confirm the amount of interest payable
pursuant to subsection 4.07(a)(i) of the Agreement, the Trustee shall, if
necessary after application of the funds in the Collection Account, make a
withdrawal from the Cash Collateral Account in the amount of the interest
shortfall.
The Servicer shall, upon request of the Trustee, promptly provide the
Trustee with all information necessary to allow the Trustee to comply with the
provisions of this subsection 4.06(b).
Section 4.07 Application of Class A Available Funds, Collateral
--------------------------------------------------
Available Funds, Class A Available Principal Collections and Collateral
- -----------------------------------------------------------------------
Principal Collec-
- ----------------
29
<PAGE>
tions on Deposit in the Collection Account for the Series 1998-Certificates.
- ---------------------------------------------------------------------------
The Trustee shall apply or shall cause the Servicer to apply (provided FCCNB is
the Servicer and the Collection Account is maintained with FNBC) or shall cause
the Paying Agent, to the extent Section 6.06 of the Agreement is applicable, to
apply, on each Distribution Date, Class A Available Funds, Collateral Available
Funds, Class A Available Principal Collections and Collateral Principal
Collections on deposit in the Collection Account with respect to such
Distribution Date to make the following distributions.
(a) An amount equal to Class A Available Funds with respect to such
Distribution Date shall be distributed 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 on a prior Distribution Date, plus the
----
amount of any Class A Additional Interest for such Distribution Date, shall
be distributed by the Servicer or the Trustee to the Paying Agent for
payment to the Class A Certificateholders;
(ii) an amount equal to the Monthly Servicing Fee for such
Distribution Date shall be distributed to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount for
such Distribution Date, if any, shall be treated as a portion of Class A
Available Principal Collections; and
(iv) the balance shall constitute Excess Spread and shall be
distributed pursuant to Section 4.09;
provided, however, in the event that there are insufficient funds (before giving
- -------- -------
effect to any Withdrawal Amount payable from the Cash Collateral Account
pursuant to Section 4.06, Excess Spread payable pursuant to Section 4.09, Excess
Finance Charge Collections allocable to the Series 1998- Certificates pursuant
to subsection 4.04(c) or any Reallocated Principal Collections available
pursuant to subsection 4.10(a)) to pay in full the amounts distributable
pursuant to subsections 4.07(a)(i),
30
<PAGE>
4.07(a)(ii) and 4.07(a)(iii), such amounts shall be paid, to the extent of such
funds, on a pro rata basis.
(b) An amount equal to Collateral Available Funds with respect to
such Distribution Date shall constitute Excess Spread and shall be distributed
pursuant to Section 4.09
(c) On each Distribution Date with respect to the Revolving Period,
an amount equal to Class A Available Principal Collections, to the extent not
allocated in accordance with subsection 4.05(b), shall be applied as set forth
in subsection 4.03(b).
(d) On each Distribution Date with respect to the Revolving Period,
an amount equal to Collateral Principal Collections for the related Due Period
plus any amount of Class A Available Principal Collections available therefor in
accordance with subsection 4.05(b) shall be distributed and 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
or, if a Conversion Event shall have occurred, deposited in the Cash
Collateral Account pursuant to subsection 4.11(e); and
(ii) the balance shall be treated as a portion of Class A
Available Principal Collections for such Distribution Date.
(e) On each Distribution Date with respect to the Accumulation Period
or the Rapid Amortization Period, an amount equal to the Class A Available
Principal Collections for the related Due Period shall be distributed and
applied in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date shall be (x) during the Accumulation Period, deposited
into the Principal Funding Account to be distributed by the Servicer or the
Trustee to the Paying Agent for payment to Class A Certificateholders on
the earlier of the Class A Scheduled Payment Date or the first Distribution
Date with respect to the Rapid Amortization Period and (y) during the Rapid
Amortiza-
31
<PAGE>
tion Period, distributed by the Servicer or the Trustee to the
Paying Agent for payment to the Class A Certificateholders; and
(ii) the balance shall be included in Collateral Monthly
Principal to the extent permitted in accordance with subsection 4.05(b).
(f) On each Distribution Date with respect to the Accumulation
Period, an amount equal to Collateral Principal Collections for the related Due
Period plus any amount of Class A Available Principal Collections included in
Collateral Monthly Principal pursuant to subsection 4.07(e)(ii) shall be
distributed and 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
or, if a Conversion Event shall have occurred, deposited in the Cash
Collateral Account pursuant to subsection 4.11(e); and
(ii) the balance shall be treated as a portion of Class A
Available Principal Collections for such Distribution Date.
(g) On each Distribution Date with respect to the Rapid Amortization
Period, an amount equal to Collateral Principal Collections for the related Due
Period shall be treated as a portion of Class A Available Principal Collections
for such Distribution Date.
(h) The distributions to be made pursuant to this Section 4.07 are
subject to the provisions of Sections 2.07, 4.08, 9.02, 10.01, 12.01 and 12.02
of the Agreement and Section 4 of this Series Supplement.
Section 4.08 Investor Charge-Offs (a) On each Distribution Date,
--------------------
the Servicer shall calculate the Class A Investor Default Amount, if any, for
such Distribution Date. If on any Distribution Date, the Class A Investor
Default Amount exceeds the Available Cash Collateral Amount and the amount of
Reallocated Principal Collections with respect to such Due Period available
therefor, then the Collateral Invested Amount (after giving effect to any
reductions pursuant to subsections (b) and (c) below) shall be reduced by the
amount of such
32
<PAGE>
excess, but not by more than the Class A Investor Default Amount for such
Distribution Date. In the event that such reduction would cause the Collateral
Invested Amount to be a negative number, the Collateral Invested Amount shall be
reduced to zero and the Class A Invested Amount shall be reduced by the amount
by which the Collateral Invested Amount would have been reduced below zero, but
not by more than the Class A Investor Default Amount for such Distribution Date
(a "Class A Investor Charge-Off"). Class A Investor Charge-Offs shall thereafter
be reimbursed and the Class A Invested Amount increased (but not by an amount in
excess of the aggregate Class A Investor Charge-Offs) on any Distribution Date
by the amount of Excess Spread available for such purpose pursuant to Section
4.09.
(b) If, on any Distribution Date, Reallocated Principal Collections
for such Distribution Date are applied pursuant to subsection 4.10(a), then the
Collateral Invested Amount shall be reduced by the amount of such Reallocated
Principal Collections so applied.
(c) If, on any Distribution Date, the Collateral Default Amount
exceeds the amount of Excess Spread available in respect thereof pursuant to
Section 4.09 on such Distribution Date, then the Collateral Invested Amount
shall be reduced by the amount of such excess.
Section 4.09 Excess Spread. The Trustee shall apply or shall
-------------
cause the Servicer to apply, on each Distribution Date, Excess Spread to make
the following distributions in the following priority:
(a) an amount equal to the amount by which the Class A Covered
Amount with respect to such Distribution Date exceeds Class A Available
Funds with respect to such Distribution Date shall be distributed to fund
any such deficiency, in the order of priority of the enumerated items in
the definition of Class A Covered Amount;
(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 Class A Available Principal Collections for such Distribution
Date;
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<PAGE>
(c) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of any Collateral Monthly Interest
----
previously due but not distributed on a prior Distribution Date, plus the
----
amount of any Collateral Additional Interest for such Distribution Date,
shall be applied in accordance with the Loan Agreement;
(d) an amount equal to the Collateral Default Amount for such
Distribution Date shall be treated as a portion of Collateral Principal
Collections with respect to such Distribution Date;
(e) an amount equal to the aggregate amount by which the
Collateral Invested Amount has been reduced pursuant to clause (b) of the
definition of "Collateral Invested Amount" (but not in excess of the
aggregate amount of such reductions which have not been previously
reimbursed pursuant to this subsection 4.09(e) or Section 2.12(b) of the
Loan Agreement) shall be applied in accordance with the Loan Agreement;
(f) an amount up to the excess, if any, of the Required Cash
Collateral Amount over the Adjusted Available Cash Collateral Amount
(without giving effect to any deposit made on such date hereunder or any
deposit pursuant to subsection 4.11(d) or 4.11(e)) shall be deposited into
the Cash Collateral Account;
(g) an amount equal to any unpaid portion of the Monthly
Servicing Fee for such Distribution Date, plus the amount of any Monthly
----
Servicing Fee previously due but not distributed to the Servicer on a prior
Distribution Date, shall be distributed to the Servicer;
(h) on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the date on which the Reserve Account is
terminated as set forth in subsection 4.16(f), an amount up to the excess,
if any, of the Required Reserve Account Amount over the Available Reserve
Account Amount shall be deposited into the Reserve Account; and
(i) the balance shall be applied in accordance with the Loan
Agreement.
34
<PAGE>
Section 4.10 Reallocated Principal Collections.
---------------------------------
The Trustee shall apply or shall cause the Servicer to apply on each
Distribution Date, to the extent required hereunder, the Collateral Principal
Percentage of Collections of Principal Receivables with respect to such
Distribution Date, to make the following distributions in the following
priority:
(a) an amount equal to the amount by which the Class A Covered
Amount with respect to such Distribution Date exceeds the sum of (x) the
amount of Class A Available Funds, Excess Spread and Excess Finance Charge
Collections allocable to the Series 1998- Certificates with respect to
such Distribution Date and (y) the Available Cash Collateral Amount with
respect to such Distribution Date shall be distributed by the Trustee to
fund any such deficiency in the order of priority of the enumerated items
in the definition of Class A Covered Amount; and
(b) the balance of such Reallocated Principal Collections shall
be treated as a portion of Collateral Principal Collections to be applied
in accordance with Section 4.07.
Section 4.11 Cash Collateral Account
-----------------------
(a) Establishment of Cash Collateral Account. The Seller hereby
----------------------------------------
directs the Trustee, for the benefit of the Series 1998- Certificateholders, to
establish and maintain or cause to be established and maintained in the name of
the Trustee, on behalf of the Series 1998- Certificateholders, with an Eligible
Institution (which initially shall be FNBC) 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 1998-
Certificateholders. The Seller does hereby transfer, assign, set over and
otherwise convey to the Trustee for the benefit of the Series 1998-
Certificateholders, without recourse, all of its right, title and interest in,
to and under the Cash Collateral Account, any Eligible Investments on deposit
therein and any proceeds of the foregoing. The Seller, to the extent of any
interest it may have in the Cash Collateral Account, Eligible Investments or
other amounts on deposit therein and the proceeds thereof, hereby grants a
security interest in the Cash Collateral Account, Eligible Investments or other
amounts
35
<PAGE>
on deposit therein and proceeds thereof to the Trustee for the benefit of the
Series 1998- Certificateholders, and the parties intend that the grant contained
in this subsection 4.11(a) constitute a security agreement under the UCC to
secure the obligations of the Seller and the Trustee herein. The Trustee shall
possess all right, title and interest in all Eligible Investments or other
amounts 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 1998-
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 10 Business Days (or within 5 Business Days if such
institution is an Affiliate of First Chicago) establish a new Cash Collateral
Account meeting the conditions specified above with an Eligible Institution,
transfer any cash and/or any Eligible Investments or other amounts on deposit in
the Cash Collateral Account to such new Cash Collateral Account and from the
date such new Cash Collateral Account is established, it shall be the "Cash
Collateral Account." The Seller hereby directs the Trustee (or the Servicer on
the Trustee's behalf) to deposit $________ in the Cash Collateral Account on the
Closing Date, and the Trustee hereby acknowledges receipt of such deposit from
the Seller. Pursuant to the authority granted to the Servicer in subsection
3.01(b), the Servicer shall have the power, revocable by the Trustee, to
instruct the Trustee to make withdrawals and payments from the Cash Collateral
Account for the purposes of carrying out the Servicer's and the Trustee's duties
hereunder and under the Loan Agreement. Withdrawals from the Cash Collateral
Account shall be made only as provided herein.
(b) Administration of the Cash Collateral Account. Funds on deposit
---------------------------------------------
in the Cash Collateral Account shall at all times be invested by the Trustee in
Eligible Investments, which may be obligations of Affiliates of the Seller or
the Servicer and which may, with the written consent of Standard & Poor's, be
rated A-1 instead of A-1+. The Seller shall direct the Trustee as to the
selection of such Eligible Investments. Funds on deposit in the Cash Collateral
Account for any Distribution Date, after giving effect to any deposits to or
withdrawals from the Cash Collateral Account for such Distribution Date, shall
be invested in Eligible Investments that will mature so that such funds will be
available for withdraw-
36
<PAGE>
al on the following Transfer Date. The proceeds of any such investments shall at
all times be invested in Eligible Investments that will mature so that such
funds will be available for withdrawal on or prior to the Transfer Date
immediately following the date of such investment. The Seller shall furnish or
cause to be furnished to the Trustee a monthly statement reporting all activity
with respect to the Cash Collateral Account. The Trustee shall maintain for the
benefit of the Series 1998- Certificateholders possession, itself or through a
bailee, of the negotiable instruments or securities, if any, evidencing the
Eligible Investments described in clause (a) of the definition thereof from the
time of purchase thereof until the time of sale or maturity. On each Transfer
Date, all interest and other investment earnings (net of losses and investment
expenses) earned during the period since the preceding Transfer Date on funds on
deposit in the Cash Collateral Account shall be paid to, or upon the order of,
the Seller. In addition, after the occurrence of a Conversion Deposit, any Cash
Collateral Account Surplus shall be withdrawn on any Transfer Date for
application in accordance with the Loan Agreement. For purposes of determining
the availability of funds or the balances in the Cash Collateral Account for any
reason under this Agreement, all investment earnings on such funds shall be
deemed not to be available or on deposit.
(c) Final Payment of the Series 1998- Certificates. The Trustee
-----------------------------------------------
shall, no later than the Termination Payment Date, upon the prior payment of all
amounts owing to the Class A Certificateholders and the Servicer and payable
from the Cash Collateral Account as provided herein, withdraw from the Cash
Collateral Account all amounts on deposit in the Cash Collateral Account for
application in accordance with Section 2.11 of the Loan Agreement.
(d) Optional Deposit. Pursuant to the terms of and subject to the
----------------
limitation contained in the Loan Agreement, the Seller, at its option, may at
any time prior to the commencement of the Rapid Amortization Period elect to
cause one or more additional deposits to be made into the Cash Collateral
Account (each, an "Optional Deposit"). The Seller may cause any such deposit to
be made on a Distribution Date after forwarding notice of such deposit
(including the amount thereof) to the Trustee in accordance with Section 3.04
relating to the furnishing of monthly reports to the Trustee. Any such
37
<PAGE>
deposit shall be deemed to be available in the Cash Collateral Account for
purposes of calculating any Enhancement Surplus for such related Distribution
Date, but shall not be included in the Available Cash Collateral Amount for such
Distribution Date, but shall be included in the Available Cash Collateral Amount
for the subsequent Distribution Date.
(e) Conversion Deposit. The Seller, at its option, may at any time
------------------
following the occurrence of a Conversion Event and prior to the commencement of
the Rapid Amortization Period elect to cause Collateral Monthly Principal with
respect to a Distribution Date (in an amount calculated pursuant to subsection
4.05(b)(iii)) to be deposited into the Cash Collateral Account (each such
deposit, a "Conversion Deposit"); provided, however, that the Trustee shall have
-------- -------
received written confirmation from each Rating Agency which has rated any
outstanding Series that such Rating Agency will not reduce or withdraw its
rating on any outstanding Series rated by it as a result of the making of
Conversion Deposits. The Seller may cause any such deposit to be made on a
Distribution Date after forwarding notice of such deposit to the Trustee in
accordance with Section 3.04 relating to the furnishing of monthly reports to
the Trustee. Any such deposit shall not be included in the Available Cash
Collateral Amount for such Distribution Date, but shall be included in the
Available Cash Collateral Amount for the subsequent Distribution Date.
(f) Tax Reporting. The Seller shall report all investment earnings
-------------
on amounts from time to time on deposit in the Cash Collateral Account as its
income for applicable federal, state and local tax purposes.
Section 4.12 Interchange; Interchange Monthly Servicing Fee.
----------------------------------------------
(a) On or prior to each Determination Date, the Seller shall notify the Servicer
of the Interchange Amount to be included as Collections of Finance Charge
Receivables with respect to the related Distribution Date. Not later than 12:00
noon, Chicago, Illinois time, on each Transfer Date, the Seller shall deposit
into the Collection Account in immediately available funds the Interchange
Amount (less the Interchange Monthly Servicing Fee) to be included as Finance
Charge Receivables with respect to the preceding Due Period.
38
<PAGE>
(b) In addition to the Monthly Servicing Fee payable pursuant to
Section 4.07 of the Agreement and the remaining Monthly Servicing Fee payable
pursuant to Section 4.09 of the Agreement, the Servicer shall be entitled to
receive on each Transfer Date a servicing fee payable solely from the
Interchange Amount equal to the lesser of (a) the Interchange Amount with
respect to the related Distribution Date and (b) one-twelfth of the product of
___% per annum and the Adjusted Invested Amount as of the Record Date for such
Distribution Date (or, in the case of the first Distribution Date, the Initial
Invested Amount) (such servicing fee, the "Interchange Monthly Servicing Fee").
Section 4.13 Determination of LIBOR. (a) On each LIBOR Determination
----------------------
Date, the Servicer will determine LIBOR for the Interest Period following such
LIBOR Determination Date on the basis of the rate for deposits in United States
Dollars for the Interest Period following such LIBOR Determination Date which
appears on Telerate Page 3750 as of 11:00 A.M. (London time) on such LIBOR
Determination Date.
(b) If, on any LIBOR Determination Date, such rate does not appear on
Telerate Page 3750, LIBOR will be determined on the basis of the rates at which
deposits for United States Dollars are offered by at least two of the Reference
Banks at approximately 11:00 A.M. (London time) on such LIBOR Determination Date
to prime banks in the London interbank market for the Interest Period following
such LIBOR Determination Date. The Servicer 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, LIBOR for such LIBOR Determination Date
shall be the arithmetic mean of such quotations (rounded up, if necessary, to
the nearest multiple of 0.0625% per annum).
(c) If, on any LIBOR Determination Date, only one or none of the
Reference Banks provides such offered quotations, LIBOR will be the rate per
annum (rounded, as aforesaid) that the Servicer determines to be either (x) the
arithmetic mean of the offered quotations that leading banks in the City of New
York selected by the Servicer are quoting on the relevant LIBOR Determination
Date for one-month United States Dollar deposits to the principal London office
of each of the Reference Banks or those of them (being at least two in number)
to which such offered quotations are, in the opinion of the
39
<PAGE>
Servicer, being so quoted or (y) in the event that the Servicer can determine no
such arithmetic mean, the arithmetic mean of the offered quotations that leading
banks in the City of New York selected by the Servicer are quoting on such LIBOR
Determination Date to leading European banks for one-month United States Dollar
deposits; or
(d) If, on the LIBOR Determination Date, the banks selected as
aforesaid by the Servicer are not quoting as described in clause (c) above,
LIBOR for such Interest Period will be LIBOR as determined on the previous LIBOR
Determination Date (or ____%, in the case of the first LIBOR Determination
Date).
(e) The Class A Certificate Rate applicable to the then current and
the immediately preceding Interest Periods may be obtained by any Class A
Certificateholder by telephoning the Servicer at ________.
Section 4.14 Postponement of Accumulation Period. The Accumulation
-----------------------------------
Period is scheduled to commence on the first day of the Due Period relating to
the _____________ Distribution Date; provided, however, that, if the
-------- -------
Accumulation Period Length (determined as described below) is less than 12
monthly periods, upon notice to the Trustee, the Seller, each Rating Agency and
the Collateral Interest Holder, the Servicer, at its option, may elect to modify
the date on which the Accumulation Period actually commences to the first day of
the Due Period which ends in the month that is at least the number of calendar
months prior to the calendar month in which the Class A Scheduled Payment Date
occurs equal to the Accumulation Period Length; provided, however, that (i) the
length of the Accumulation Period shall not be less than one monthly period and
(ii) notwithstanding any other provision hereof to the contrary, no election to
postpone the commencement of the Accumulation Period shall be made after a
Liquidation Event shall have occurred and is continuing with respect to any
other Series. On the Determination Date with respect to the ______________
Distribution Date, the Servicer shall determine the "Accumulation Period
Length," which shall equal the number of monthly periods such that the
Accumulation Period Amount for the Due Period relating to the Class A Scheduled
Payment Date, when aggregated with the Accumulation Period Amounts for each
preceding Due Period, shall equal or exceed the Class A Initial Invested
Amount. Any notice by the Servicer electing to modify
40
<PAGE>
the commencement of the Accumulation Period pursuant to this Section shall
specify (i) the Accumulation Period Length, (ii) the commencement date of the
Accumulation Period and (iii) the Controlled Accumulation Amount with respect to
each Due Period preceding the Class A Scheduled Payment Date.
Section 4.15 Principal Funding Account. (a) The Seller hereby
-------------------------
directs the Trustee, for the benefit of the Series 1998- Certificateholders,
to establish and maintain or cause to be established and maintained in the name
of the Trustee, on behalf of the Series 1998- Certificateholders, with an
Eligible Institution (which initially shall be FNBC) a segregated trust account
(the "Principal Funding Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Series 1998-
Certificateholders. The Trustee shall possess all right, title and interest in
all Eligible Investments or other amounts 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 1998- 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 10 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 Eligible
Investments or other amounts to such new Principal Funding Account. Pursuant to
the authority granted to the Servicer in subsection 3.01(b), the Servicer shall
have the power, revocable by the Trustee, (i) to make withdrawals, or to
instruct the Trustee to make withdrawals, from the Principal Funding Account
from time to time, in the amounts and for the purposes set forth herein and (ii)
on each Distribution Date (from and after the commencement of the Accumulation
Period) prior to the termination of the Principal Funding Account, to make
deposits, or to instruct the Trustee to make deposits, into the Principal
Funding Account in the amounts specified in, and otherwise in accordance with,
subsection 4.07(e).
(b) Funds on deposit in the Principal Funding Account shall at all
times be invested by the Trustee in Eligible Investments, which may be
obligations of Affiliates of the Seller or the Servicer and which may, with
the written consent of Standard & Poor's, be rated A-1
41
<PAGE>
instead of A-1+. The Seller shall direct the Trustee as to the selection of such
Eligible Investments. Funds on deposit in the Principal Funding Account for any
Distribution Date, after giving effect to any withdrawals from the Principal
Funding 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 Transfer Date. The Trustee shall maintain for the benefit of
the Series 1998- Certificateholders possession, itself or through a bailee, of
the negotiable instruments or securities, if any, evidencing the Eligible
Investments described in clause (a) of the definition thereof from the time of
purchase thereof until the time of maturity.
(c) On each Transfer Date with respect to the Accumulation Period and
on the first Distribution Date with respect to the Rapid Amortization Period,
the Servicer shall transfer from the Principal Funding Account to the Collection
Account the Principal Funding Investment Proceeds on deposit in the Principal
Funding Account, but not in excess of the Covered Amount, for application as
Class A Available Funds.
(d) Any Excess Principal Funding Investment Proceeds shall be paid
to, or upon the direction of, the Seller on each Transfer Date. An amount equal
to any Principal Funding Investment Shortfall will be deposited into the
Collection Account from the Reserve Account to the extent funds are available
pursuant to subsection 4.16(d). Principal Funding Investment Proceeds
(including reinvested interest) shall not be considered part of the principal
amounts on deposit in the Principal Funding Account hereunder.
(e) On the earliest to occur of (i) the first Distribution Date with
respect to the Rapid Amortization Period and (ii) the Class A Scheduled Payment
Date, the Trustee shall pay, or cause the Servicer to pay, the Principal Funding
Account Balance to Class A Certificateholders in accordance with subsection
5.01(b).
Section 4.16 Reserve Account.
---------------
(a) The Seller hereby directs the Trustee, for the benefit of the
Series 1998- Certificateholders, to establish and maintain or cause to be
established and maintained in the name of the Trustee, on behalf of the Series
1998- Certificateholders, with an Eligible Insti-
42
<PAGE>
tution (which initially shall be FNBC) 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 1998- Certificateholders. The
Trustee shall possess all right, title and interest in all Eligible Investments
or other amounts 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 1998- 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
10 Business Days establish a new Reserve Account meeting the conditions
specified above with an Eligible Institution, and shall transfer any cash and/or
any Eligible Investments or other amounts to such new Reserve Account. Pursuant
to the authority granted to the Servicer in subsection 3.01(b), the Servicer
shall have the power, revocable by the Trustee (i) to make withdrawals, or to
instruct the Trustee to 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 herein and (ii) on each Distribution Date (from and after
the Reserve Account Funding Date) prior to termination of the Reserve Account,
to make a deposit, or to instruct the Trustee to make a deposit, into the
Reserve Account in the amount specified in, and otherwise in accordance with,
subsection 4.09 (h).
(b) Funds on deposit in the Reserve Account shall at all times be
invested by the Trustee in Eligible Investments, which may be obligations of
Affiliates of the Seller or the Servicer and which may, with the written consent
of Standard & Poor's, be rated A-1 instead of A-1+. The Seller shall direct the
Trustee as to the selection of such Eligible Investments. Funds on deposit in
the Reserve Account on any Distribution Date, after giving effect to any
withdrawals from the Reserve Account for 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 Transfer Date. The
Trustee shall maintain for the benefit of the Series 1998- Certificateholders
possession, itself or through a bailee, of the negotiable instruments or
securities, if any, evidencing the Eligible Investments described in clause (a)
of the definition thereof from the time of purchase thereof until the time of
maturity. On each Transfer Date, all interest and earn-
43
<PAGE>
ings (net of losses and investment expenses) accrued since the preceding
Distribution Date 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 paid to, or upon the direction, of the Seller. For purposes of determining
the availability of funds or the balance in the Reserve Account for any reason
hereunder, 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 or before each Distribution Date with respect to the
Accumulation Period, and on or before the first Distribution Date with respect
to the Rapid Amortization Period, the Servicer shall calculate the "Reserve Draw
Amount" which shall be equal to the Principal Funding Investment Shortfall with
respect to such Distribution Date; provided, however, that such amount will be
-------- -------
reduced to the extent that funds otherwise would be available for deposit in the
Reserve Account under subsection 4.09(h) with respect to such 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 the
Transfer Date by the Servicer or the Trustee (acting in accordance with the
instructions of the Servicer), and deposited into the Collection Account for
application as Class A Available Funds.
(e) In the event that the Reserve Account Surplus for 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 Servicer, or the Trustee, acting in accordance with the instructions
of the Servicer, shall withdraw from the Reserve Account on the Transfer Date,
and treat as Excess Spread to be applied in accordance with subsection 4.09(i),
an amount equal to such Reserve Account Surplus.
(f) Upon the earliest to occur of (i) the date on which the Class A
Invested Amount shall be paid in full, (ii) the first Distribution Date with
respect to the Rapid Amortization Period and (iii) the Scheduled Payment Date,
the Trustee, after the prior payment of all
44
<PAGE>
amounts owing to the Series 1998- Certificateholders that are payable from the
Reserve Account as provided herein, shall withdraw, or cause the Servicer to
withdraw, from the Reserve Account and treat as Excess Spread to be applied in
accordance with subsection 4.09(i), all amounts, if any, on deposit in the
Reserve Account, and the Reserve Account shall thereafter be deemed to have
terminated for all purposes hereunder.
[END OF ARTICLE IV]
SECTION 8. Article V of the Agreement. With respect to the Series
--------------------------
1998- Certificates, Article V of the Agreement shall read as follows:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
Section 5.01 Distributions (a) On each Payment Date for the Series
-------------
1998- Certificates, the Paying Agent shall distribute to each Class A
Certificateholder on the preceding Record Date (other than as provided in
Section 12.02 of the Agreement respecting a final distribution) such Class A
Certificateholder's pro rata share (based on the aggregate Undivided Interests
represented by related Class A Certificates held by such Class A
Certificateholder) of the funds on deposit in the Collection Account payable to
such Class A Certificateholders pursuant to the Agreement in respect of
interest.
(b) On the Scheduled Payment Date, on each Distribution Date with
respect to the Rapid Amortization Period and on the Termination Payment Date for
the Series 1998- Certificates, the Paying Agent shall distribute to each Class
A Certificateholder on the preceding Record Date (other than as provided in
Section 12.02 of the Agreement respecting a final distribution) such Class A
Certificateholder's pro rata share (based on the aggregate Undivided Interests
represented by related Class A Certificates held by such Class A
Certificateholder) of the funds on deposit in the Collection Account and, if
applicable, the Principal Funding Account, payable to such Class A
Certificateholders pursuant to the Agreement in respect of principal; provided,
--------
however, that no distribution pursuant to this subsection 5.01(b) may
- -------
45
<PAGE>
exceed the Class A Invested Amount before giving effect to such distribution.
(c) Distributions to Class A Certificateholders hereunder shall be
made by check mailed to each Class A Certificateholder, except that with respect
to Class A Certificates registered in the name of a Clearing Agency, such
distribution shall be made in immediately available funds.
(d) On each Payment Date for the Series 1998- Certificates, the
Paying Agent shall distribute to the Collateral Interest Holder on such Payment
Date the funds on deposit in the Collection Account payable to or with respect
to the Collateral Interest for application pursuant to the terms of the Loan
Agreement. Distributions to be made hereunder to or with respect to the
Collateral Interest shall be made in immediately available funds at the
direction of the Collateral Interest Holder.
Section 5.02 Statements to Certificateholders.
--------------------------------
(a) Certificateholders' Payment Date Statement. On each Payment Date, the
------------------------------------------
Paying Agent, on behalf of the Trustee, shall forward to each Class A
Certificateholder (or to the Clearing Agency to the extent Section 6.11 of the
Agreement applies), to the Collateral Interest Holder and to each Rating Agency
a statement substantially in the form of Exhibit B prepared by the Servicer
setting forth the information set forth in the Monthly Servicer's Certificate
furnished to the Trustee with respect to such Distribution Date.
(b) Annual Certificateholders' Tax Statement. On or before January
----------------------------------------
31 of each calendar year, beginning with calendar year 1999, the Servicer will
cause the Paying Agent, on behalf of the Trustee, to furnish or cause to be
furnished to each Person who at any time during the preceding calendar year was
a Class A Certificateholder, a statement prepared by the Servicer containing
information relating to the amounts distributed to such Person aggregated for
such calendar year or the applicable portion thereof during which such Person
was a Class A Certificateholder, together with such other information as is
required to be provided by an issuer of debt under the Internal Revenue Code and
such other customary information as is necessary to enable the Class A
Certificateholders to prepare their tax returns. Such obligation of the Servicer
shall be deemed to have been
46
<PAGE>
satisfied to the extent that substantially comparable information shall be
provided by the Paying Agent pursuant to any requirements of the Internal
Revenue Code as from time to time in effect. In addition, the Servicer shall
make available to Certificate Owners of Class A Certificates such information as
is required by the Code and the regulations thereunder to be made available to
holders of debt instruments having the characteristics of the Class A
Certificates.
[END OF ARTICLE V]
SECTION 9. Additional Liquidation Events. If any one of the events
-----------------------------
specified in Section 9.01 of the Agreement (after any grace periods or consents
applicable thereto) or any one of the following events shall occur during either
the Revolving Period or the Accumulation Period with respect to the Series
1998- Certificates:
(a) failure on the part of the Seller (i) to make any payment or
deposit required by the terms of the Agreement or this Series Supplement on or
before five Business Days after the date such payment or deposit is required to
be made therein or herein, or (ii) duly to observe or perform in any material
respect the covenant of the Seller set forth in subsection 2.08(b) of the
Agreement, or (iii) duly to observe or perform in any material respect any other
covenants or agreements of the Seller set forth in the Agreement or this Series
Supplement, which, in the case of clause (iii), 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 Seller by the
Trustee, or to the Seller and the Trustee by a Rating Agency, the Collateral
Interest Holder or the Holders of Class A Certificates evidencing Undivided
Interests aggregating not less than 10% of the Class A Invested Amount;
(b) any representation or warranty made by the Seller in the
Agreement or this Series Supplement or any information contained in a computer
file or microfiche list required to be delivered by the Seller pursuant to
Section 2.01 or 2.05 of the Agreement shall prove to have been incorrect in any
material respect when made or when delivered, which 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
47
<PAGE>
same to be remedied, shall have been given to the Seller
by the Trustee, or to the Seller and the Trustee by a Rating Agency, the
Collateral Interest Holder or the Holders of Class A Certificates evidencing
Undivided Interests aggregating not less than 10% of the Class A Invested Amount
and as a result of which the interests of the Series 1998- Certificateholders
are materially and adversely affected; provided, however, that a Liquidation
-------- -------
Event pursuant to this subparagraph 9(b) shall not be deemed to have occurred
hereunder with respect to the Series 1998- Certificates if the Seller has
accepted the transfer of the related Receivable, or all of such Receivables, if
applicable, during such period (or such longer period as the Trustee may
specify), in accordance with the provisions hereof;
(c) the average Portfolio Yield (the calculation of which shall
include, without limitation, the Interchange Amount as a component of Finance
Charge Receivables) for any three consecutive Due Periods shall be less than the
average of the Base Rates for the related Interest Periods;
(d) the Seller shall fail to convey Additional Accounts to the Trust,
as required by subsection 2.05(a) of the Agreement, (i) in the case of the
calculation provided in subsection 2.05(a)(1) of the Agreement 10 days after the
failure to meet such calculation or (ii) in the case of the calculation provided
in subsection 2.05(a)(2) of the Agreement immediately upon the occurrence of the
failure to meet such calculation;
(e) the Class A Invested Amount shall not be paid in full on the
Class A Scheduled Payment Date; or
(f) any Servicer Default shall occur which would have a material
adverse effect on the Series 1998- Certificateholders;
then, (y) in the case of any event described in subparagraph (a), (b) or (f),
after any applicable grace period set forth in or applicable to such
subparagraph, either the Trustee or the Holders of Series 1998- Certificates
evidencing Undivided Interests aggregating not less than 50% of the Invested
Amount of the Series 1998- Certificates by notice then given in writing to the
Seller and the Servicer (and to the Trustee if given by the Series 1998-
Certificateholders) may declare that a liquidation event (a "Liquidation Event")
has occurred with respect
48
<PAGE>
to the Series 1998- Certificates as of the date of such notice, and (z) in the
case of subparagraph (c), (d) or (e) (or any of the events specified in Section
9.01 of the Agreement), a Liquidation Event with respect to such Series 1998-
Certificates shall occur without any notice or other action on the part of the
Trustee or all investor certificateholders or the Series 1998-
Certificateholders, as applicable, immediately upon the occurrence of such
event.
SECTION 10. Related Interest Periods. For purposes of this Series
------------------------
Supplement, the Interest Period related to any Due Period shall be the Interest
Period ending on the day prior to the Distribution Date for such Due Period.
SECTION 11. Eligible Servicer. The Trustee hereby agrees that, in
-----------------
the event that it appoints an Eligible Servicer as Successor Servicer pursuant
to Section 10.02 of the Agreement, such Eligible Servicer shall have a long term
debt rating of at least A by Standard & Poor's and A2 by Moody's; provided,
--------
however, that if the Trustee has a long term debt rating of at least A by
- -------
Standard & Poor's and A2 by Moody's, such Eligible Servicer need have only a
long term debt rating of BBB- by Standard & Poor's and Baa3 by Moody's.
SECTION 12. Trustee Resignation. The Trustee shall not resign
-------------------
pursuant to Section 11.07 of the Agreement without written confirmation from
each Rating Agency that such resignation will not result in the Rating Agency's
reducing or withdrawing its rating on any Class of any then outstanding Series
rated by it.
SECTION 13. Tax Opinion. As permitted in subsection 6.09(b) of the
-----------
Agreement, it shall be a condition of the Exchange contemplated hereby and the
issuance of the Series 1998- Certificates that an Opinion of Counsel be
furnished pursuant to clause (c) of subsection 6.09(b) to the effect that the
Class A Certificates will be treated as debt for Federal income tax purposes and
that the issuance of the Series 1998- Certificates will not adversely affect
the Federal income tax characteristics of any outstanding Series of Investor
Certificates or any Certificate Owner.
SECTION 14. Subordination of Certain Termination Payments.
---------------------------------------------
Notwithstanding anything contained in subsection 12.02(c) of the Agreement, upon
the sale of
49
<PAGE>
Receivables or interests therein as provided in Section 12.02(c) of the
Agreement, the net proceeds of any such sale payable to the Series 1998-
Certificates shall be paid pro rata to the Class A Certificates and then to the
--- ----
Collateral Interest Holder for application pursuant to the terms of the Loan
Agreement.
SECTION 15. Variable Accumulation Series. For purposes of the
----------------------------
Supplement with respect to any other Series, Series 1998- Certificates may be
designated a "Variable Accumulation Series."
SECTION 16. Ratification of Pooling and Servicing Agreement;
------------------------------------------------
Representations; Security Interest.
- ----------------------------------
(a) 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 clause (D) of the fifth sentence
-------- -------
of subsection 9.02(a) of the Agreement, the required written instruction
pursuant to such fifth sentence of subsection 9.02(a) shall include the Holders
of Investor Certificates representing Undivided Interests aggregating more than
50% of the Invested Amount of each Series issued prior to April 19, 1995.
(b) The Seller hereby represents and warrants to the Trustee that all
approvals, authorizations, consents, orders or other actions of any person or of
any governmental body or official required in connection with the execution and
delivery by the Seller of the Agreement, any Supplement and the Certificates,
the performance by the Seller of the transactions contemplated by the Agreement
and any Supplement and the fulfillment by the Seller of the terms of the
Agreement, any Supplement and the Certificates have been obtained; provided,
--------
however, that the Seller makes no representation or warranty regarding state
- -------
securities or "Blue Sky" laws in connection with the distribution of the
Certificates.
(c) If the Agreement does not constitute a valid transfer and
assignment of all right, title and interest of the Seller in the Receivables and
the proceeds thereof (excluding Recoveries relating thereto), the parties hereto
intend that the Agreement, which constitutes a security agreement under the UCC,
is a grant of a security interest for the purposes of (i)
50
<PAGE>
securing the rights of the Trustee for the benefit of the Investor
Certificateholders and (ii) securing the right and ability of the Trustee to
make the distributions set forth in the Agreement.
SECTION 17. 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 18. Governing Law. THIS SERIES SUPPLEMENT SHALL BE
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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.
51
<PAGE>
IN WITNESS WHEREOF, the Seller, 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.
FCC NATIONAL BANK
By _____________________________
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By _____________________________
Name:
Title:
52
<PAGE>
EXHIBIT A
---------
REGISTERED FIRST CHICAGO MASTER TRUST II REGISTERED
Unless this certificate is presented by an authorized representative
of The Depository Trust Company 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 such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to Cede &
Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.
FLOATING RATE ASSET BACKED CERTIFICATES SERIES 1998-
No. _____ $_____________
Each $1,000 minimum denomination represents 1/______ Undivided Interest in
certain assets of the
FIRST CHICAGO MASTER TRUST II
Evidencing an Undivided Interest in a Trust, the corpus of which consists of
receivables generated from time to time in the ordinary course of business in a
portfolio of "Classic VISA", "Standard MasterCard", "VISA Gold", "Gold
MasterCard", "Platinum VISA" and "Platinum MasterCard" consumer revolving credit
accounts
by
FCC NATIONAL BANK
(Not an interest in or obligation of FCC National Bank or any affiliate thereof
except to the limited extent described herein)
CUSIP NO. ____________
A-1
<PAGE>
This certifies that
CEDE & CO.
(the "Certificateholder") is the registered owner of the Undivided Interest in
certain assets of a trust (the "Trust"), created pursuant to the Pooling and
Servicing Agreement, dated as of June 1, 1990, as supplemented by a Series
1998- Supplement, dated as of ________ __, 1998, by and between FCC National
Bank ("FCCNB"), a national bank, as Seller and Servicer, and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee") (collectively
referred to herein as the "Agreement"). The corpus of the Trust consists of (i)
a portfolio of all receivables (the "Receivables") existing in the consumer
revolving credit card accounts identified under the Agreement from time to time
(the "Accounts"), (ii) all Receivables generated under the Accounts from time to
time thereafter, (iii) funds collected or to be collected from cardholders in
respect of the Receivables (other than Recoveries), (iv) all funds which are
from time to time on deposit in the Collection Account and any other account or
accounts held for the benefit of investor certificateholders (the "Investor
Certificateholders"), (v) the benefits of funds on deposit in the Cash
Collateral Account and any other Enhancements to be issued by Enhancement
Providers with respect to one or more Series of investor certificates (the
"Investor Certificates") up to the amount available thereunder, and (vi) all
other assets and interests constituting the Trust. The holder of this
Certificate is entitled to the benefit of funds on deposit in the Cash
Collateral Account, and the benefits of the subordination of the Collateral
Interest Series 1998- (the "Collateral Interest"), and is not entitled to the
benefit of any other Enhancement which may be part of the Trust's assets.
Although a summary of certain provisions of the Agreement is set forth below,
this Certificate does not purport to summarize the Agreement, is qualified in
its entirety by the terms and provisions of the Agreement and reference is made
to the Agreement 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 may be requested
from the Trustee by writing to the Trustee at Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust Department. To the
extent not defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Agreement.
A-2
<PAGE>
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, as amended from time to time, to
which the Certificateholder, by virtue of the acceptance hereof, assents and is
bound.
It is the intent of FCCNB and the Class A Certificateholders that, for
federal, state and local income and franchise tax purposes only, the Class A
Certificates will be evidence of debt secured by the Receivables. FCCNB and the
Certificateholder, by the acceptance of this Certificate, agree to treat this
Certificate for federal, state and local income and franchise tax purposes as
debt.
Subject to the Agreement, payments of principal are limited to the
unpaid Class A Invested Amount of the Class A Certificates at the commencement
of the Rapid Amortization Period, which may be less than the unpaid balance of
the Class A Certificates pursuant to the terms of the Agreement. All principal
of and interest on the Class A Certificates is due and payable no later than the
________ ____ Distribution Date (the "Series Termination Date"). After the
Series Termination Date, neither the Trust nor FCCNB will have any further
obligation to distribute principal or interest on the Class A Certificates. In
the event that the Class A Invested Amount is greater than zero on the Series
Termination Date, the Trustee will sell or cause to be sold, and pay the
proceeds, to the extent necessary, to the Class A Certificateholders pro rata in
final payment of the Class A Invested Amount, an amount of interests in the
Receivables or certain of the Receivables up to 110% of the Adjusted Invested
Amount at the close of business on such date (but not more than the total amount
of Receivables allocable to the Certificates, including the Collateral
Interest).
The Receivables consist of Principal Receivables which arise generally
from the purchase of goods and services and amounts advanced to cardholders as
cash advances and Finance Charge Receivables which arise from the Periodic Rate
Finance Charges, Cash Advance Fees, Late Fees, Overlimit Fees, annual fees with
respect to the Accounts, Returned Check Fees and all other fees and charges
payable by Obligors with respect to the Accounts. Finance Charge Receivables
also include certain Interchange allocable to the Accounts. This Certificate is
one of a class of a series of Investor Certificates enti-
A-3
<PAGE>
tled "First Chicago Master Trust II Floating Rate Credit Card Certificates
Series 1998- (the "Class A Certificates" and together with the Collateral
Interest, the "Certificates"), each of which represents an Undivided Interest in
certain assets of the Trust. The Trust's assets are allocated in part to the
Class A Certificateholders and to the holder of the Collateral Interest (the
"Collateral Interest Holder"), with the remainder allocated to holders of other
Series of Investor Certificates issued by the Trust, if any, and to FCCNB (the
"Seller"). In addition to the Certificates, an Exchangeable Seller's
Certificate will be issued to the Seller pursuant to the Agreement which will
represent the Seller's interest in the Trust. The Exchangeable Seller's
Certificate will represent the interest in the Principal Receivables not
represented by the Investor Certificates. The Exchangeable Seller's Certificate
may be exchanged by the Seller pursuant to the Agreement for one or more Series
of Investor Certificates and a reissued Exchangeable Seller's Certificate upon
the conditions set forth in the Agreement. In addition, to the extent permitted
for any Series of Investor Certificates by the related Supplement, the Investor
Certificateholders of such Series may tender their Investor Certificates and the
Seller may tender the Exchangeable Seller's Certificate in exchange for one or
more Series of Investor Certificates and a reissued Exchangeable Seller's
Certificate.
The aggregate interest represented by the Certificates at any time in
the Principal Receivables in the Trust shall not exceed an amount equal to the
Invested Percentage with respect to Principal Receivables at such time. The
Invested Amount, for any date, will be an amount equal to the sum of the Class A
Invested Amount and the Collateral Invested Amount. The Initial Invested Amount
is $________. The Class A Initial Invested Amount is $________. The Class A
Invested Amount, for any date, will be an amount equal to (a) $________, minus
-----
(b) the aggregate amount of principal payments made to the Class A
Certificateholders prior to such date, minus (c) the excess, if any, of the
-----
aggregate amount of Class A Investor Charge-Offs for all Distribution Dates
preceding such date over the aggregate amount of Class A Investor Charge-Offs
reimbursed pursuant to Section 4.09 of the Agreement for all Distribution Dates
preceding such date. The Class A Adjusted Invested Amount, for any date, will
be an amount equal to the Class A Invested Amount, minus the Principal Funding
-----
Account Balance on such date. The Adjusted Invested Amount, for any date, will
be an amount
A-4
<PAGE>
equal to the sum of (a) the Class A Adjusted Invested Amount and (b) the
Collateral Invested Amount. The Invested Percentage, when used with respect to
Principal Receivables during the Revolving Period and Finance Charge Receivables
and Defaulted Receivables at any time, means the percentage equivalent of a
fraction the numerator of which is the Adjusted Invested Amount for such
Distribution Date and the denominator of which is the Aggregate Principal
Receivables for the Due Period relating to such Distribution Date. The Invested
Percentage, when used with respect to Principal Receivables during the
Accumulation Period or the Rapid Amortization Period, means the percentage
equivalent of a fraction the numerator of which is the Invested Amount as of the
end of the day on the last Distribution Date relating to the Revolving Period
and the denominator of which is the greater of (a) Aggregate Principal
Receivables for the Due Period related to the current Distribution Date and (b)
the sum of the numerators used to calculate the Invested Percentages with
respect to Principal Receivables for all Series of Investor Certificates
outstanding for the current Distribution Date. Collections of Finance Charge
Receivables and Principal Receivables will be further allocated between the
Class A Certificates and the Collateral Interest as described in the Agreement.
Interest will be distributed monthly on the fifteenth day of each
month (or, if such fifteenth day is not a Business Day, on the next succeeding
Business Day) (each a "Distribution Date"), commencing ________ __, 1998, at the
applicable rate on the Class A Invested Amount as of the preceding Record Date
to each Class A Certificateholder of record as of the Record Date. Interest
will accrue from ________ __, 1998 through ________ __, 1998 at the rate of ___%
per annum, and with respect to each Interest Period thereafter, at a rate of
___% per annum above LIBOR determined in the manner set forth in the Agreement.
Interest is derived from Collections of Finance Charge Receivables, Excess
Spread, Excess Finance Charge Collections, withdrawals from the Cash Collateral
Account and Reallocated Principal Collections (and, during the Accumulation
Period, from certain amounts withdrawn from the Principal Funding Account and
the Reserve Account), in each case to the extent funds are available from such
source in accordance with the Agreement. The Record Date with respect to any
Distribution Date shall be the last day of the calendar month preceding such
Distribution Date.
A-5
<PAGE>
No principal will be payable to Certificateholders until the _______
____ Distribution Date (the "Class A Scheduled Payment Date") or such earlier
date as may result from the occurrence of a Liquidation Event. During the
Revolving Period, Collections of Principal Receivables otherwise allocable to
Certificateholders will be paid to the Seller, to other amortizing or
accumulating Series or, in certain circumstances, to the Collateral Interest
Holder.
As described in the Agreement, Collections of Principal Receivables
with respect to any Due Period will be allocated to the Certificates on the
related Determination Date on the basis of the Invested Percentage with respect
to Principal Receivables. Such Collections will be further allocated between
the Class A Certificates and the Collateral Interest as described in the
Agreement. Such allocations will be performed during the Revolving Period, the
Accumulation Period and the Rapid Amortization Period. Under the Agreement,
such Collections will be paid to the Seller, to other amortizing or accumulating
Series or to the Collateral Interest Holder, as described above, during the
Revolving Period. During the Accumulation Period, Collections of Principal
Receivables allocable to the Class A Certificateholders up to the Controlled
Deposit Amount will be deposited into the Principal Funding Account for the
benefit of the Class A Certificateholders, with the excess paid to the Seller,
to other amortizing or accumulating Series or to the Collateral Interest Holder.
During the Rapid Amortization Period, all Collections of Principal Receivables
allocable to the Certificateholders will be paid to the Class A
Certificateholders on each Distribution Date. In each case, payments to the
Class A Certificateholders shall not exceed the Class A Invested Amount.
Unless or until a Liquidation Event (as described in the Agreement)
shall have occurred, during the period beginning on the first day of the Due
Period relating to the ________ ____ Distribution Date, subject to postponement
as described in the Agreement (the "Controlled Accumulation Date"), and ending
on the earlier of (a) but not including, the first day of the Due Period in
which a Liquidation Event occurs or is deemed to have occurred, (b) and
including, the date on which the Invested Amount is paid in full, or (c) the
Series Termination Date (the "Accumulation Period"), Collections of Principal
Receivables allocable to the Class A Certificates up to the Controlled Deposit
Amount will be depos-
A-6
<PAGE>
ited into the Principal Funding Account for the benefit of the Class A
Certificateholders monthly on each Distribution Date beginning with the
Distribution Date related to the Due Period in which the Controlled Accumulation
Date occurs. The amount of monthly principal ("Class A Monthly Principal")
allocable to Class A Certificateholders shall equal the sum of (i) an amount
equal to the Class A Principal Percentage of the Fixed Allocation Percentage of
all Collections with respect to Principal Receivables for such Due Period, (ii)
the amount, if any, of Unallocated Principal Collections on deposit in the
Collection Account allocable to the Certificates, (iii) a portion of the amount
of Collections of Principal Receivables allocable to certain other Series but
not needed to make payment to or for the benefit of such Series and (iv) certain
other amounts as described in the Agreement.
If Class A Monthly Principal for the related Due Period is equal to or
greater than the sum of the Controlled Accumulation Amount and the existing
Deficit Controlled Accumulation Amount (such sum, the "Controlled Deposit
Amount"), the amount of the Controlled Deposit Amount will be deposited into the
Principal Funding Account for the benefit of the Class A Certificateholders and
the excess of such sum over the Controlled Deposit Amount will be paid from the
Trust to the Seller, but not more than the First Chicago Amount, to other
amortizing Series or to the Collateral Interest Holder.
If Class A Monthly Principal for the related Due Period is less than
the Controlled Deposit Amount, the entire amount of Class A Monthly Principal
will be deposited into the Principal Funding Account for the benefit of the
Class A Certificateholders and the amount of the excess of the Controlled
Deposit Amount over the Class A Monthly Principal will be the Deficit Controlled
Accumulation Amount for the next succeeding Distribution Date.
During the period beginning on the first day of the Due Period in
which a Liquidation Event occurs or is deemed to occur and continuing to and
including the earlier of the date on which the Invested Amount has been paid in
full or the Series Termination Date (the "Rapid Amortization Period"),
Collections of Principal Receivables allocable to the Class A Certificates will
no longer be paid to the Seller, to other amortizing or accumulating Series, to
the Collateral Interest Holder,
A-7
<PAGE>
or to the Principal Funding Account for the benefit of the Class A
Certificateholders (to the extent of the Controlled Deposit Amount) as described
above, but instead will be distributed monthly on each Distribution Date to
Class A Certificateholders. During the Rapid Amortization Period, Class A
Monthly Principal will be paid to the Class A Certificateholders regardless of
the level of any Controlled Accumulation Amount or Controlled Deposit Amount.
On each Distribution Date, the Paying Agent shall distribute to each
Class A Certificateholder of record on the related Record Date such Class A
Certificateholder's pro rata share (based on the aggregate Undivided Interest
--- ----
represented by the Certificate held by such Class A Certificateholder) of
amounts on deposit in the Collection Account and, on the Class A Scheduled
Payment or, if earlier, the first Distribution Date with respect to the Rapid
Amortization Period, in the Principal Funding Account as are payable to the
Class A Certificateholders pursuant to the Agreement. The amount to be
distributed on each Distribution Date to the Certificateholder will be equal to
the product of the aggregate Undivided Interest represented by this Certificate
and the aggregate of all payments to be made to Class A Certificateholders on
such Distribution Date. Distributions with respect to this Certificate will be
made by the Paying Agent by check mailed to the address of the Certificateholder
of record appearing in the Certificate Register without the presentation or
surrender of this Certificate or the making of any notation (except for the
final distribution in respect of this Certificate) except that if all Class A
Certificates are registered in the name of CEDE & CO., the nominee registration
for The Depository Trust Company, distributions will be made in the form of
immediately available funds. Final payment of this Certificate will be made
only upon presentation and surrender of this Certificate at the office or agency
specified in the notice of final distribution delivered by the Trustee to the
Certificateholder in accordance with the Agreement.
On the Distribution Date occurring after the Adjusted Invested Amount
is reduced to 5% of the Initial Invested Amount or less, the Seller may
repurchase the Certificateholders' Interest in the Trust unless certain events
of bankruptcy, insolvency or receivership have occurred with respect to FCCNB.
The repurchase price
A-8
<PAGE>
will be equal to the Adjusted Invested Amount plus accrued and unpaid interest
thereon.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN INTEREST
IN, FCCNB, THE SERVICER (IF THE SERVICER IS NOT FCCNB) OR ANY AFFILIATE OF
EITHER OF THEM (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY. THIS CERTIFICATE IS LIMITED IN RIGHT OF PAYMENT TO CERTAIN
COLLECTIONS RESPECTING THE RECEIVABLES (AND CERTAIN OTHER AMOUNTS), ALL AS MORE
SPECIFICALLY SET FORTH HEREINABOVE AND IN THE AGREEMENT.
The Agreement may be amended by the Seller, the Servicer and the
Trustee, without Certificateholder consent, to cure any ambiguity, to correct or
supplement any provision therein which may be inconsistent with any other
provision therein, or to add any other provisions with respect to matters or
questions arising under the Agreement which are not inconsistent with the
provisions of the Agreement. Additionally, the Agreement may be amended from
time to time by the Servicer, the Seller and the Trustee, without the consent of
any of the Certificateholders, to add to or change any of the provisions of the
Agreement to provide that Bearer Certificates may be registrable as to
principal, to change or eliminate any restrictions on the payment of principal
of 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. No
such amendment, however, may adversely affect in any material respect the
interests of the Certificateholders unless such amendment is necessary to comply
with the Bearer Rules. Any Supplement and any amendments regarding the addition
to or removal of Receivables from the Trust as provided in Sections 2.05, 2.10
and 6.09 of the Agreement, respectively, shall not be considered amendments to
the Agreement.
A-9
<PAGE>
Subject to the preceding paragraph, the Agreement may be amended by
the Servicer, the Seller and the Trustee with the consent of the Investor
Certificateholders owning 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, changing in any manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of Investor
Certificateholders of any Series then issued and outstanding, provided, however,
that no such amendment shall (a) reduce in any manner the amount of, or delay
the timing of, distributions which are required to be made on any Investor
Certificate without the consent of such Investor Certificateholder, (b) change
the definition of or the manner of calculating the interest of any Investor
Certificateholder, without the consent of such Investor Certificateholder, or
(c) reduce the aforesaid percentage required to consent to any such amendment,
without the consent of such Investor Certificateholder. Any such amendment and
any such consent by the Holder of this Certificate shall be conclusive and
binding on such Certificateholder and upon all future Holders of this
Certificate and of any Certificate issued in exchange hereof or in lieu hereof
whether or not notation thereof is made upon this Certificate.
The Class A Certificates are issuable only in denominations of $1,000
and integral multiples of $1,000 in excess hereof. The transfer of this
Certificate shall be registered in the Certificate Register upon surrender of
this Certificate for registration of transfer at any office or agency maintained
by the Transfer Agent and Registrar 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 or the Certificateholder's
attorney, and duly authorized in writing with such signature guaranteed, and
thereupon one or more new Class A Certificates of authorized denominations and
for the same aggregate Undivided Interest will be issued to the designated
transferee or transferees.
As provided in the Agreement and subject to certain limitations
therein set forth, this Certificate is exchangeable for new Class A Certificates
evidencing a like aggregate Undivided Interest, as requested by the
Certificateholder surrendering this Certificate. No service charge may be
imposed for any such exchange but the Servicer, the Seller or the Transfer Agent
and Regis-
A-10
<PAGE>
trar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The Servicer, 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
Certificate is registered as the owner hereof for all purposes, and neither the
Servicer, nor 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 except
in certain circumstances described in the Agreement.
This Certificate shall be construed in accordance with and governed by
the laws of the State of Delaware.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, FCCNB has caused this Certificate to be duly
executed.
Dated:
FCC NATIONAL BANK
By:___________________________
Chairman of the Board
By:___________________________
Cashier
A-11
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates described in the within-
mentioned Pooling and Servicing Agreement.
NORWEST BANK MINNESOTA, NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION NATIONAL ASSOCIATION
as Trustee as Trustee
OR
By:
Authorized Officer By: THE FIRST NATIONAL
BANK OF CHICAGO
Authenticating Agent
By:
Authorized Officer
A-12
<PAGE>
_________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE(S)
++++++++++++++++++++++++++++++++++++++
+ +
++++++++++++++++++++++++++++++++++++++..........................................
(PLEASE PRINT OR TYPEWRITE
NAME AND ADDRESS OF ASSIGNEE)
................................................................................
................................................................................
the within certificate and all rights thereunder,
and hereby irrevocably constitutes and appoints
................................................................................
attorney, with full power of substitution in the
premises, to transfer said certificate on the books
kept for registration thereof.
Dated: ........................................................................
.................................
Note: The signature(s)
to this Assignment must
correspond with the
name(s) as written on
the face of the within
certificate in every
particular, without
alteration or enlargement
or any change whatever.
A Non-U.S. Person as defined in
the Code must certify to the
Trustee in writing as to its Non-
U.S. Person status and such further
information as may be required under
the Code or reasonably requested by
the Trustee.
A-13
<PAGE>
EXHIBIT B
---------
FORM OF CERTIFICATEHOLDERS' PAYMENT DATE STATEMENT
(To be delivered by the Payment Agent on each
Payment Date pursuant to Section 5.02(a) of
the Pooling and Servicing Agreement)
FCC NATIONAL BANK
_________________________________________________
FIRST CHICAGO MASTER TRUST II
SERIES 1998-
__________________________________________________
Under the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") dated as of June 1, 1990 by and between FCC National Bank, as Seller
and Servicer ("FCCNB"), and Norwest Bank Minnesota, National Association, as
Trustee (the "Trustee"), as amended and supplemented by the Series 1998-
Supplement dated as of ________ __, 1998 by and between FCCNB and the Trustee,
FCCNB, as Servicer, is required to prepare certain information for each Payment
Date regarding current distributions to Class A Certificateholders and the
performance of the First Chicago Master Trust II (the "Trust") during the
previous period. The information which is required to be prepared with respect
to the distribution on the _________________, 199_ Payment Date and with respect
to the performance of the Trust during the Due Period for such Payment Date is
set forth below. Certain of the information is presented on the aggregate
amounts for the Trust as a whole. All capitalized terms used herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
B-1
<PAGE>
A. Information Regarding the Current Distribution (Stated on the Basis of
----------------------------------------------------------------------
$1,000 Original Principal Amount).
---------------------------------
1. The total amount of the distri-
bution to Class A Certificate-
holders on the Payment Date
per $1,000 interest................. $________
2. The amount of the distribution
set forth in paragraph 1 above
in respect of principal on the
Class A Certificates, per
$1,000 interest..................... $________
3. The amount of the distribution
set forth in paragraph 1 above
in respect of interest on the
Class A Certificates, per
$1,000 interest..................... $________
B. Information Regarding the Performance of the Trust.
--------------------------------------------------
1. Collections of Receivables.
--------------------------
a. The aggregate amount of Collections
of Receivables processed for the Due
Period with respect to the current
Distribution Date which were allo-
cated in respect of the Investor
Certificates of all Series.......... $________
b. The aggregate amount of Collections
of Receivables processed for
the Due Period with respect to
the current Distribution Date which
were allocated in respect of the
Series 1998- Certificates.......... $________
c. The aggregate amount of Collections
of Receivables processed for
the Due Period with respect to
the current Distribution Date which
were allocated in respect of the
Class A Certificates................ $________
B-2
<PAGE>
d. The amount of Collections of
Receivables processed for the
Due Period with respect to the
current Distribution Date which
were allocated in respect of
Class A Certificates, per $1,000
interest............................ $________
e. The amount of Excess Spread for the
Due Period with respect to the cur-
rent Distribution Date.............. $________
f. The amount of Reallocated Principal
Collections for the Due Period with
respect to the current Distribution
Date allocated in respect of the Class
A Certificates...................... $________
g. The amount of Excess Finance Charge
Collections allocated in respect of
the Series 1998- Certificates, if
any................................. $________
h. The amount of Excess Principal Col-
lections allocated in respect of the
Series 1998- Certificates, if any $________
2. Receivables in Trust.
--------------------
a. Aggregate Principal Receivables for
the Due Period with respect to the
current Distribution Date (which
reflects the Principal Receivables
represented by the Exchangeable
Seller's Certificate and by the
Investor Certificates of all
Series)............................. $________
b. The amount of Principal Receivables
in the Trust represented by the
Series 1998- Certificates (the
"Adjusted Invested Amount")
for the Due Period with respect to
the current Distribution Date....... $________
B-3
<PAGE>
c. The amount of Principal Receivables
in the Trust represented by the
Class A Certificates (the "Class A
Adjusted Invested Amount") for the Due
Period with respect to the current -
Distribution Date................... $________
d. The Invested Amount for the Due
Period with respect to the current
Distribution Date................... $________
e. The Class A Invested Amount for
the Due Period with respect to the
current Distribution Date........... $________
f. The Invested Percentage with respect
to Finance Charge Receivables
(including Interchange) and Defaulted
Receivables for the Series 1998-
Certificates for the Due Period with
respect to the current Distribution
Date................................ ________%
g. The Invested Percentage with respect
to Principal Receivables for the
Series 1998- Certificates for the Due
Period with respect to the current
Distribution Date................... ________%
h. The Class A Floating Percentage
for the Due Period with respect
to the current Distribution Date.... ________%
i. The Class A Principal Percentage
for the Due Period with respect
to the current Distribution Date.... ________%
j. The Collateral Floating Percentage
for the Due Period with respect
to the current Distribution Date.... ________%
k. The Collateral Principal Percentage
for the Due Period with respect
to the current Distribution Date.... ________%
B-4
<PAGE>
3. Delinquent Balances.
-------------------
The aggregate amount of outstanding
balances in the Accounts which were 30
or more days delinquent as of the end
of the Due Period for the current
Distribution Date................... $________
4. Investor Default Amount.
-----------------------
a. The aggregate amount of all
Defaulted Receivables written off
as uncollectible during the Due Period
with respect to the current Distri-
bution Date allocable to the Series
1998- Certificates (the "Investor
Default Amount").................... $________
b. The Class A Investor Default
Amount.............................. $________
c. The Collateral Investor Default
Amount.............................. $________
5. Investor Charge-Offs.
--------------------
a. The amount of the Class A Investor
Charge-Offs per $1,000 interest
after reimbursement of any such
Class A Investor Charge-Offs for
the Due Period with respect to the
current Distribution Date........... $________
b. The amount attributable to Class A
Investor Charge-Offs, if any, by
which the principal balance of the
Class A Certificates exceeds the
Class A Adjusted Invested Amount
as of the end of the day on the
Record Date with respect to the
current Distribution Date........... $________
c. The amount of the Collateral Charge-
Offs, if any, for the Due Period with
respect to the current Distribution
Date................................ $________
B-5
<PAGE>
6. Monthly Servicing Fee.
---------------------
a. The amount of the Monthly Servicing
Fee payable by the Trust to the
Servicer with respect to the
current Distribution Date........... $________
b. The amount of the Interchange Monthly
Servicing Fee payable to the Servicer
with respect to the current
Distribution Date................... $________
7. Available Cash Collateral Amount.
--------------------------------
a. The amount, if any, withdrawn from
the Cash Collateral Account for the
current Distribution Date (the
"Withdrawal Amount")................ $________
b. The amount available to be withdrawn
from the Cash Collateral Account as of
the end of the day on the current
Distribution Date, after giving effect
to all withdrawals, deposits and payments
to be made on such Distribution Date
(the "Available Cash Collateral
Amount" for the next Distribution
Date)............................... $________
c. The amount as computed in 7.b as a
percentage of the Class A Adjusted
Invested Amount after giving effect
to all reductions thereof on the
current Distribution Date........... $________
8. Collateral Invested Amount.
--------------------------
a. The Collateral Invested Amount for
the current Distribution Date....... $________
b. The Collateral Invested Amount
after giving effect to all with-
drawals, deposits and payments on
the current Distribution Date....... $________
9. Total Enhancement.
-----------------
a. The total Enhancement for the current
Distribution Date................... $________
B-6
<PAGE>
b. The total Enhancement after giving
effect to all withdrawals, deposits
and payments on the current Distri-
bution Date......................... $________
C. The Pool Factor.
---------------
1. The Pool Factor (which represents
the ratio of the Class A Invested
Amount on the last day of the month
ending on the Record Date adjusted
for Class A Investor Charge-Offs
set forth in B.5.a above and for
the distributions of principal set
forth in A.2 above to the Class A
Initial Invested Amount). The
amount of a Class A Certificate-
holder's pro rata share of the
Class A Invested Amount can be
determined by multiplying the
original denomination of the
holder's Class A Certificate by
the Pool Factor..................... ________%
D. Principal Funding Account.
-------------------------
1. The Principal Funding Investment
Proceeds deposited in the Collection
Account for the current Distribu-
tion Date to be treated as Class A
Available Funds..................... $________
2. The Excess Principal Funding
Investment Proceeds for the
current Distribution Date........... $________
3. The Principal Funding Account
Balance as of the end of the
day on the current Distribution
Date................................ $________
4. The Deficit Controlled Accumulation
Amount for the preceding
Due Period.......................... $________
B-7
<PAGE>
E. Reserve Account.
---------------
1. The Reserve Draw Amount for
the current Distribution Date....... $________
2. The amount on deposit in the
Reserve Account as of the end
of the day on the current Dis-
tribution Date (the "Available
Reserve Account Amount" for
the next Distribution Date)......... $________
FCC NATIONAL BANK,
Servicer
By____________________________
Title:
B-8
<PAGE>
EXHIBIT 4.26
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS +
+IS NOT COMPLETE AND MAY BE AMENDED. WE MAY NOT SELL THESE SECURITIES UNTIL WE +
+DELIVER A FINAL PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS +
+PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO +
+SELL NOR ARE THEY SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE +
+THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 7, 1998
PROSPECTUS SUPPLEMENT
To Prospectus Dated , 1998
$
FIRST CHICAGO MASTER TRUST II
FLOATING RATE ASSET BACKED CERTIFICATES SERIES 1998-
FCC NATIONAL BANK, SELLER AND SERVICER
- --------------------------------------------------------------------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 10 IN THIS PROSPECTUS.
A Class A Certificate is not a deposit and neither the Class A Certificates nor
the underlying accounts or receivables are insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency.
The Class A Certificates will represent interests in the trust only and will not
represent interests in or obligations of FCC National Bank or any FCC National
Bank affiliate.
This prospectus supplement may be used to offer and sell the Class A
Certificates only if accompanied by the prospectus.
- --------------------------------------------------------------------------------
THE TRUST WILL ISSUE--
Class A Certificates
--------------------
Principal amount $
Certificate rate One-Month LIBOR
plus % annually
Interest paid [Monthly]
First interest payment date
Scheduled principal payment date
Series termination date
CREDIT ENHANCEMENT--
. The Trust is also issuing a Collateral Interest in the amount of $ that is
subordinated to the Class A Certificates. Subordination of the Collateral
Interest provides credit enhancement for the Class A Certificates.
. The Class A Certificates will also have the benefit of a Cash Collateral
Account in the initial amount of $ to provide additional credit support.
Funds in the account will be available to make certain payments to the Class A
Certificates.
This prospectus supplement and the accompanying prospectus relate to the
offering of the Class A Certificates only.
PER CLASS A
CERTIFICATE TOTAL
----------- ---------
Public Offering Price..................... $ $
Underwriting Discount and Commissions..... $ $
Proceeds to Bank.......................... $ $
First Chicago Capital Markets, Inc. ("FCCM"), an affiliate of FCC National
Bank, may buy and sell Certificates in the secondary market as part of its
ordinary business as a broker-dealer. FCCM may use this prospectus supplement
and the accompanying prospectus in such transactions. FCCM will make any such
sales at the prevailing market price at the time of the sale.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE CLASS A CERTIFICATES OR
DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriters
[LIST OF UNDERWRITERS]
[DATE OF PROSPECTUS SUPPLEMENT]
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the Class A Certificates in two separate
documents that progressively provide more detail: (a) the accompanying
Prospectus, which provides general information, some of which may not apply to
your Class A Certificates and (b) this Prospectus Supplement, which describes
the specific terms of your Class A Certificates.
IF THE TERMS OF YOUR CLASS A CERTIFICATES VARY BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION
IN THIS PROSPECTUS SUPPLEMENT.
We include cross-references in this Prospectus Supplement and the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying Prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement and the accompanying Prospectus are defined under the
caption "Index of Terms for Prospectus Supplement" beginning on page S-44 in
this document and under the caption "Index of Terms for Prospectus" beginning
on page 61 in the accompanying Prospectus.
----------------
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF SERIES TERMS.................................................... S-5
SUMMARY OF SERIES PROVISIONS............................................... S-6
Offered Securities........................................................ S-6
Interest Payments........................................................ S-6
Principal Payments....................................................... S-6
The Collateral Interest................................................... S-7
Enhancement............................................................... S-7
Other Interests in the Trust.............................................. S-7
Other Series of Certificates............................................. S-7
The Seller Certificate................................................... S-7
Information About the Receivables......................................... S-7
Collections by the Servicer............................................... S-8
Allocations and Payments to You and Your Series........................... S-8
Allocations of Collections of Finance Charge Receivables................. S-8
Allocations of Collections of Principal Receivables...................... S-10
Revolving Period........................................................ S-11
Accumulation Period..................................................... S-11
Rapid Amortization Period............................................... S-11
Liquidation Events...................................................... S-11
Shared Principal Collections.............................................. S-12
Denominations............................................................. S-12
Registration, Clearance and Settlement.................................... S-12
Tax Status................................................................ S-12
ERISA Considerations...................................................... S-13
Certificate Ratings....................................................... S-13
Exchange Listing.......................................................... S-13
THE BANK'S CREDIT CARD PORTFOLIO........................................... S-14
General................................................................... S-14
Loss and Delinquency Experience........................................... S-14
Revenue Experience........................................................ S-15
Interchange............................................................... S-16
THE ACCOUNTS............................................................... S-17
Billing and Payments...................................................... S-19
THE SELLER................................................................. S-22
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS.............................. S-22
DESCRIPTION OF THE CLASS A CERTIFICATES AND THE AGREEMENT.................. S-24
General................................................................... S-24
Interest Payments......................................................... S-24
Principal Payments........................................................ S-26
Allocation Percentages.................................................... S-27
Application of Collections................................................ S-28
Postponement of Accumulation Period....................................... S-29
Reallocation of Collections............................................... S-29
Allocation of Funds....................................................... S-30
Payment of Interest, Fees and Other Items................................ S-30
Excess Spread; Excess Finance Charge Collections......................... S-31
Payments of Principal.................................................... S-32
Shared Collections of Finance Charge Receivables.......................... S-34
Shared Collections of Principal Receivables............................... S-34
The Cash Collateral Account............................................... S-34
Principal Funding Account................................................. S-36
Reserve Account........................................................... S-36
Defaulted Receivables; Rebates and Fraudulent Charges..................... S-37
Final Payment of Principal; Termination of Trust.......................... S-38
Liquidation Events........................................................ S-38
Servicing Compensation and Payment of Expenses............................ S-40
Reports to Class A Certificateholders..................................... S-40
UNDERWRITING............................................................... S-42
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT................................... S-44
ANNEX I: PRIOR ISSUANCES OF CERTIFICATES................................... A-1
</TABLE>
S-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-4
<PAGE>
. THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE
CLASS A CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE
ACCOMPANYING PROSPECTUS.
. THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
SUMMARY OF SERIES TERMS
Trust..................... First Chicago Master Trust II.
Title of Security......... Floating Rate Asset Backed Certificates
Series 1998- (the "Class A Certificates").
Initial Invested Amount... $
Class A Initial Invested $
Amount...................
Collateral Initial $
Invested Amount..........
Class A Certificate LIBOR plus 0. % per annum.
Rate.....................
Distribution Dates........ The fifteenth day of each month (or, if that
day is not a business day, the next business
day); the first Distribution Date is .
Class A Scheduled Payment The Distribution Date.
Date.....................
Controlled Accumulation For each Distribution Date with respect to
Amount................... the Accumulation Period, $ .
However, if the commencement of the
Accumulation Period is delayed as described
under "Description of the Class A
Certificates and the Agreement--Postponement
of Accumulation Period", the Controlled
Accumulation Amount may be higher. The Bank
currently believes it is likely that the
start of the Accumulation Period will be
delayed.
Series Closing Date....... .
Series Termination Date... The Distribution Date.
S-5
<PAGE>
SUMMARY OF SERIES PROVISIONS
OFFERED SECURITIES
The Trust is offering the Class A Certificates as part of Series 1998- . The
Class A Certificates represent an interest in the assets of the Trust. The
initial aggregate principal amount of the Class A Certificates is $ .
INTEREST PAYMENTS
The Class A Certificates will accrue interest for each Interest Period at the
Class A Certificate Rate set on the related LIBOR Determination Date.
Interest accrued during each Interest Period will be due on each Distribution
Date. Any interest due but not paid on a Distribution Date will be payable on
the next Distribution Date together with additional interest at the Class A
Certificate Rate plus 2% per annum.
. Each "Interest Period" begins on and includes a Distribution Date and ends on
and excludes the next Distribution Date. However, the first Interest Period
will begin on and include , 1998 (the "Series Closing Date") and end on
and exclude , 1998, the first Distribution Date.
. LIBOR is the rate for deposits in U.S. dollars for a one-month period which
appears on the Dow Jones Telerate Page 3750 (or similar replacement page) as
of 11:00 a.m., London time, on the related LIBOR Determination Date. In
addition, see "Description of the Class A Certificates and the Agreement--
Interest Payments" in this Prospectus Supplement for a discussion of the
determination of LIBOR if that rate does not appear on Dow Jones Telerate
Page 3750 (or similar replacement page).
. ""LIBOR Determination Dates" are:
. , 1998, for the period beginning on and including the Series Closing
Date and ending on and excluding , 1998;
. , 1998 for the period beginning on and including , 1998 and ending
on and excluding , 1998; and
. the second London business day prior to the first day of each Interest
Period, for each Interest Period following the first Interest Period.
The following time line shows the relevant dates for the first two Interest
Periods.
[TIME LINE]
Other Interest Periods will follow sequentially after the second Interest
Period in the same manner as is shown in the time line.
See "Description of the Class A Certificates and the Agreement--Interest
Payments" in this Prospectus Supplement for a discussion of the determination
of amounts available to pay interest and for the definition of business day and
London business day.
You may obtain the Class A Certificate Rate for the current and immediately
preceding Interest Periods by telephoning FCC National Bank, the Servicer, at
(847) 488-3222.
PRINCIPAL PAYMENTS
You are expected to receive payment of principal in full on the "Class A
Scheduled Payment Date" which is , , or, if that date is not a business
day, the next business day. However, certain circumstances could cause
principal to be paid earlier or later, or in reduced amounts. See "Maturity and
Principal Payment Considerations" in this Prospectus Supplement and in the
Prospectus and "Description of the Class A Certificates and the Agreement--
Allocation Percentages" in this Prospectus Supplement.
The final payment of principal and interest on the Class A Certificates will be
made no later than , or, if that date is not a business day, the next
business day, called the "Series Termination Date."
S-6
<PAGE>
See "Description of the Class A Certificates and the Agreement--Principal
Payments" in this Prospectus Supplement for a discussion of the determination
of amounts available to pay principal.
THE COLLATERAL INTEREST
The Trust is also issuing an interest in the assets of the Trust that is
subordinated to the Certificates called the "Collateral Interest." The initial
size of the Collateral Interest is $ , representing % of the initial
aggregate principal amount of the Certificates and the Collateral Interest. As
a subordinated interest, the Collateral Interest is a form of Enhancement for
the Class A Certificates. The Collateral Interest Holder will have voting and
certain other rights as if the Collateral Interest were a subordinated class of
certificates.
THE COLLATERAL INTEREST IS NOT BEING OFFERED THROUGH THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS.
ENHANCEMENT
Enhancement for your Series is for your Series's benefit only, and you are not
entitled to the benefits of any credit enhancement available to other Series.
Subordination of the Collateral Interest provides Enhancement for the Class A
Certificates. The Collateral Interest must be reduced to zero before the Class
A Invested Amount will suffer any loss of principal or interest. Any funds on
deposit in the Cash Collateral Account will also provide Enhancement for the
Class A Certificates. Initially the Cash Collateral Account will hold $ .
The Cash Collateral Account must be reduced to zero before the Class A Invested
Amount will suffer any loss of principal or interest. For a description of the
events which may lead to a reduction of the Class A Invested Amount and the
Collateral Interest, see "Description of the Class A Certificates and the
Agreement--Reallocation of Collections," "--The Cash Collateral Account" and
"--Defaulted Receivables; Rebates and Fraudulent Charges" in this Prospectus
Supplement.
OTHER INTERESTS IN THE TRUST
OTHER SERIES OF CERTIFICATES
The Trust has issued other Series of certificates and expects to issue
additional Series of certificates. When issued by the Trust, the certificates
of each of
those Series also represent an interest in the assets of the Trust. You can
review a summary of each Series previously issued and currently outstanding
under the caption "Annex I: Prior Issuance of Certificates" included at the end
of this Prospectus Supplement. The Trust may issue additional Series with terms
that may be different from any other Series without prior review or consent by
any Certificateholders.
THE SELLER CERTIFICATE
FCC National Bank initially will own the "Exchangeable Seller's Certificate,"
which represents the remaining interest in the assets of the Trust not
represented by the Class A Certificates, the Collateral Interest and the other
interests issued by the Trust. The Seller's interest does not provide credit
enhancement for your Series or any other Series.
INFORMATION ABOUT THE RECEIVABLES
The Trust assets include Receivables in certain MasterCard(R) and VISA(R)*
revolving credit card accounts selected from the Seller's credit card account
portfolio.
The Receivables consist of both Principal Receivables and Finance Charge
Receivables.
"Principal Receivables" are, generally, (a) amounts charged by cardholders for
goods and services and (b) cash advances.
"Finance Charge Receivables" are (a) the related periodic charges, annual fees,
late charges, over-limit fees and all other fees billed to cardholders and (b)
for your Series, certain amounts of fees, called Interchange, collected through
MasterCard and VISA.
The Seller also expects that by the end of the second quarter of 1998,
recoveries on written off Receivables will also be included as Finance Charge
Receivables for your Series.
See "The Bank's Credit Card Portfolio--Interchange" and "--Loss and Delinquency
Experience" in this Prospectus Supplement and "The Bank's Credit Card
Business--Interchange" in the accompanying Prospectus.
- --------
* MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Inc. and VISA U.S.A., Inc., respectively.
S-7
<PAGE>
COLLECTIONS BY THE SERVICER
The Servicer, which is the Bank, initially, will collect payments on the
Receivables and will deposit those collections in a trust account. The Servicer
will keep track of those collections that are Finance Charge Receivables and
those collections that are Principal Receivables.
ALLOCATIONS AND PAYMENTS TO YOU AND YOUR SERIES
Each month, the Servicer will allocate collections and the amount of
Receivables that are not collected and are written off as uncollectible, called
the Investor Default Amount, among:
. your Series, based on the size of the Invested Amount (initially $ );
. other outstanding Series, based on the size of their respective interests in
the Trust; and
. the holder of the Exchangeable Seller's Certificate, based on the size of the
First Chicago Interest.
The Trust assets allocated to your Series will be allocated to the following,
based on varying percentages:
. holders of the Class A Certificates, based on the Class A Invested Amount
(initially $ ); and
. the holder of the Collateral Interest, based on the Collateral Invested
Amount (initially $ ).
See the following chart and " Description of the Class A Certificates and the
Agreement--Allocation Percentages" in this Prospectus Supplement.
The following chart illustrates the Trust's general allocation structure only
and does not reflect the relative percentages of collections or other amounts
allocated to the First Chicago Interest, to any Series, including your Series,
or to holders of the Class A Certificates or the Collateral Interest.
ALLOCATION OF TRUST ASSETS
[FLOWCHART APPEARS HERE]
You are entitled to receive payments of interest and principal based upon
allocations to your Series. The "Invested Amount," which is the basis for
allocations to your Series, is the sum of (a) the Class A Invested Amount and
(b) the Collateral Invested Amount. The "Class A Invested Amount" and the
"Collateral Invested Amount" will initially equal the outstanding principal
amount of the Class A Certificates and the Collateral Interest. The Invested
Amount will decline as a result of principal payments and may decline due to
the writing off of Receivables or other reasons. If the Invested Amount
declines, amounts allocated and available for payment to your Series and to you
will be reduced. For a description of the events which may lead to these
reductions, see "Description of the Class A Certificates and the Agreement--
Reallocation of Collections" in this Prospectus Supplement.
ALLOCATIONS OF COLLECTIONS OF FINANCE CHARGE RECEIVABLES
The following chart demonstrates the manner in which collections of Finance
Charge Receivables are allocated and applied to your Series. THE CHART IS A
SIMPLIFIED DEMONSTRATION OF CERTAIN ALLOCATION AND PAYMENT PROVISIONS AND IS
QUALIFIED BY THE FULL DESCRIPTIONS OF THESE PROVISIONS IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
Step 1: Collections of Finance Charge Receivables for your Series are
allocated, based on varying percentages, among the Class A Invested Amount and
the Collateral Invested Amount.
Step 2: Collections of Finance Charge Receivables allocated to the Class A
Certificates are applied to cover the interest payment due to the Class A
Certificates, the monthly servicing fee due to the Servicer and the Class A
Certificates' portion of the Investor Default Amount.
Collections of Finance Charge Receivables allocated to the Collateral Interest
are applied in Step 3 because of its subordinated status.
S-8
<PAGE>
Step 3: Collections of Finance Charge Receivables allocated to your Series and
not used in Step 2 are treated as Excess Spread and applied, in the following
priority, to cover:
. the interest payment due to the Class A Certificates, the monthly servicing
fee due to a successor Servicer and the Class A Certificates' portion of the
Investor Default Amount, each to the extent not covered in Step 2; and
. reimbursement of certain prior reductions of the Class A Invested Amount.
Remaining Excess Spread is then applied, in the following priority, to cover,
among other things:
. the interest payment due to the Collateral Interest;
. the Collateral Interest's portion of the Investor Default Amount;
. reimbursement of reductions of the Collateral Interest if it is below its
minimum required amount;
. funding, if necessary, of the Cash Collateral Account if it is below its
minimum required amount;
. the monthly servicing fee, plus any servicing fee previously due but still
unpaid, to the extent not previously covered;
. funding, if necessary, of a reserve account maintained to cover certain
interest payment shortfalls, if any; and
. other amounts owing to the Collateral Interest.
See "Description of the Class A Certificates and the Agreement--Application of
Collections" in this Prospectus Supplement.
ALLOCATIONS OF COLLECTIONS OF FINANCE CHARGE RECEIVABLES
[FLOWCHART APPEARS HERE]
S-9
<PAGE>
ALLOCATIONS OF COLLECTIONS OF PRINCIPAL RECEIVABLES
The following chart demonstrates the manner in which collections of Principal
Receivables are allocated and applied to your Series. THE CHART IS A SIMPLIFIED
DEMONSTRATION OF CERTAIN ALLOCATION AND PAYMENT PROVISIONS AND IS QUALIFIED BY
THE FULL DESCRIPTIONS OF THESE PROVISIONS IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS.
Step 1: Collections of Principal Receivables for your Series are allocated,
based on varying percentages, among the Class A Invested Amount and the
Collateral Interest.
Step 2: Collections of Principal Receivables allocated to the Collateral
Interest may be reallocated and made available to pay amounts due to the Class
A Invested Amount that have not been paid by either the Class A Certificates'
share of collections of Finance Charge Receivables or Excess Spread. Certain
such collections which are reallocated for the Class A Certificates will not
be made part of Class A Available Principal Collections.
Step 3: Collections of Principal Receivables allocated to your Series and not
used in Step 2 above are combined with shared principal collections from other
Series, to the extent necessary and available, and treated as Class A
Available Principal Collections as described in the following paragraph.
Class A Available Principal Collections may be paid, or accumulated and then
paid, to you as payments of principal. Alternatively, the Class A Available
Principal Collections may be paid to the Seller, the Collateral Interest or to
other Series. The amount, priority and timing of your principal payments, if
any, depend on whether your Series is in the Revolving Period, the Controlled
Accumulation Period or the Rapid Amortization Period, as described below.
As Class A Principal Collections are accumulated for the Class A Certificates,
the minimum required credit enhancement (i.e. the Collateral Interest) will
decrease, and Class A Available Principal Collections will be paid to the
holder of the Collateral Interest to the extent of this decrease.
See "Maturity and Principal Payment Considerations" and "Description of the
Class A Certificates and the Agreement--Application of Collections" and "--
Allocation of Funds" in this Prospectus Supplement.
Step 4: Collections of Principal Receivables allocated to your Series and not
used in Steps 2 and 3 above may be paid to other Series, to the extent
necessary, or to the Seller.
ALLOCATIONS OF COLLECTIONS OF PRINCIPAL RECEIVABLES
[FLOWCHART APPEARS HERE]
S-10
<PAGE>
REVOLVING PERIOD: The Certificates will have a period of time, called the
"Revolving Period," when the Trust will not pay, or accumulate, principal for
Certificateholders. In general, during the Revolving Period, the Trust will pay
available principal to other Series or the holder of the Exchangeable Seller's
Certificate. See "Description of the Class A Certificates and the Agreement--
Principal Payments" and "--Application of Collections" in this Prospectus
Supplement.
The Revolving Period starts on the Series Closing Date and ends on the
earlier to begin of:
. the Accumulation Period; or
. the Rapid Amortization Period.
ACCUMULATION PERIOD: During the period called the "Accumulation Period," each
month the Servicer will deposit a specified amount in the Principal Funding
Account to be used to pay the Class A Certificates on the Class A Scheduled
Payment Date.
Each month, the Trust will pay principal not required to be deposited in the
Principal Funding Account to other Series or the holder of the Exchangeable
Seller's Certificate. Each month, if the amount actually deposited in the
Principal Funding Account is less than the required deposit, the amount of this
deficiency will be carried forward as a shortfall and included in the next
month's required deposit.
See "Description of the Class A Certificates and the Agreement--Principal
Payments" and "--Application of Collections" in this Prospectus Supplement. For
information about the application of money on deposit in the Principal Funding
Account, including any net investment earnings, see "Description of the Class A
Certificates and the Agreement--Principal Funding Account" in this Prospectus
Supplement.
On the Class A Scheduled Payment Date, the Trust will use the money on deposit
in the Principal Funding Account to pay the Class A Invested Amount.
You should be aware that there may not be sufficient amounts available to pay
principal of the Class A
Invested Amount in full on the Class A Scheduled Payment Date. In addition, if
the money on deposit in the Principal Funding Account is insufficient to pay
these amounts on the Class A Scheduled Payment Date or if a Liquidation Event
occurs, the Rapid Amortization Period will begin, and the timing of your
principal payments could change. See "Maturity and Principal Payment
Considerations" in this Prospectus Supplement and in the accompanying
Prospectus.
The Accumulation Period is scheduled to begin on but in some cases may be
delayed to no later than . See "Description of the Class A Certificates and
the Agreement--Postponement of Accumulation Period" in this Prospectus
Supplement.
The Accumulation Period will end when any one of the following occurs:
. the Invested Amount is paid in full; or
. a Rapid Amortization Period begins.
RAPID AMORTIZATION PERIOD: If a period called the "Rapid Amortization Period"
begins, the Trust will use any available principal collections allocated to
your Series to pay (a) the Class A Invested Amount and (b) if the Class A
Invested Amount is paid in full, the Collateral Invested Amount. These payments
will begin on the first Distribution Date for the Rapid Amortization Period.
The Rapid Amortization Period will begin if a Liquidation Event occurs and will
end when any one of the following occurs:
. the Invested Amount is paid in full; or
. the Series Termination Date.
LIQUIDATION EVENTS: Certain adverse events called Liquidation Events might lead
to the start of a Rapid Amortization Period and the end of either the Revolving
Period or the Accumulation Period.
A Liquidation Event for your Series will include the following events:
. the Seller does not make any required payment or deposit;
S-11
<PAGE>
. the Seller materially violates any other obligation or agreement if the
Seller does not remedy the violation within 60 days after it has received
written notice;
. the Seller provides certain representations, warranties or other information
which were materially incorrect at the time they were provided causing you to
be adversely affected, if (a) they continue to be materially incorrect 60
days after the Seller has received written notice and (b) you continue to be
materially and adversely affected following such 60-day period;
. the average yield on the Receivables is below a minimum level called the Base
Rate for three consecutive monthly billing periods;
. the Seller fails to transfer additional assets to the Trust when required;
. certain defaults by the Servicer that have a material adverse effect on you;
. you are not paid in full on the Class A Scheduled Payment Date;
. certain events of insolvency or receivership relating to the Seller; or
. the Trust becomes an "investment company" under the Investment Company Act of
1940.
For a more detailed discussion of these Liquidation Events, see "Description of
the Class A Certificates and the Agreement--Liquidation Events" in this
Prospectus Supplement. In addition, see "Description of the Certificates and
the Agreement--Liquidation Events" in the accompanying Prospectus for a
discussion of the consequences of an insolvency, conservatorship or
receivership of the Seller.
SHARED PRINCIPAL COLLECTIONS
To the extent that collections of Principal Receivables allocated to your
Series are not needed to make payments or deposits to the Principal Funding
Account for your Series, these collections will be applied to cover principal
shortfalls for certain other Series. Any reallocation for this purpose will not
reduce your Series's Invested Amount. In addition, you may receive the benefits
of collections of Principal Receivables and certain other amounts allocated to
other Series to the extent those collections are not needed for those other
Series. See "Description of the Class A Certificates and the Agreement--Shared
Collections of Principal Receivables" in this Prospectus Supplement and in the
accompanying Prospectus.
DENOMINATIONS
Beneficial interests in the Class A Certificates will be offered in minimum
denominations of $1,000 and integral multiples of that amount.
REGISTRATION, CLEARANCE AND SETTLEMENT
Your Class A Certificates will be registered in the name of Cede & Co., as the
nominee of The Depository Trust Company ("DTC"). You will not receive a
definitive certificate representing your interest, except in limited
circumstances described in the accompanying Prospectus when Class A
Certificates in fully registered, certificated form are issued. See
"Description of the Certificates and the Agreement--Definitive Certificates" in
the accompanying Prospectus.
You may elect to hold your Class A Certificates through DTC, in the United
States, or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System
("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 those systems. Cross-market transfers between persons holding
directly or indirectly through DTC and counterparties holding directly or
indirectly through Cedel or Euroclear will be made in DTC through the relevant
depositaries of Cedel or Euroclear. See "Description of the Certificates and
the Agreement--Book-Entry Registration" in the accompanying Prospectus.
We expect that the Class A Certificates will be delivered in book-entry form
through the facilities of DTC, Cedel and Euroclear on or about , 1998.
TAX STATUS
Counsel to the Seller is of the opinion that under existing law your Class A
Certificates will be
S-12
<PAGE>
characterized as debt for Federal income tax purposes. Under the Agreement, you
and the Seller will agree to treat your Class A Certificates as debt for
Federal, state and local income tax purposes and franchise tax purposes. See
"Tax Matters" in the accompanying Prospectus for additional information
concerning the application of Federal income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
[this Prospectus Supplement and in] the accompanying Prospectus, the Class A
Certificates are eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts.
CERTIFICATE RATINGS
The Class A Certificates are required to be rated in the highest rating
category by at least one nationally recognized rating organization. See
"Certificate Ratings" in the accompanying Prospectus for a discussion of the
primary factors upon which the ratings are based.
[EXCHANGE LISTING
We will apply to list the Class A Certificates on the Luxembourg Stock
Exchange. We cannot guaranty that the application for the listing will be
accepted. You should consult with to determine whether or not the
Class A Certificates are listed on the Luxembourg Stock Exchange.]
S-13
<PAGE>
THE BANK'S CREDIT CARD PORTFOLIO
GENERAL
The interests in receivables (the "Receivables") conveyed or to be conveyed
to the Trust by FCC National Bank (the "Bank" or the "Seller") pursuant to the
Pooling and Servicing Agreement dated as of June 1, 1990 (as amended and
supplement from time to time, the "Agreement"), between the Bank, as seller
and servicer, and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee"), have been or will be generated from transactions made by
holders of certain Classic VISA, VISA Gold and Platinum VISA credit card
accounts and certain Standard MasterCard, Gold MasterCard and Platinum
MasterCard credit card accounts. These accounts were generated under the VISA
or MasterCard International programs and were either originated by the Bank or
FNBC, or purchased by the Bank or FNBC from other credit card issuers (the
"Accounts"). Effective as of July 1, 1987, FNBC transferred its credit card
operation and all its credit card accounts to the Bank, although FNBC retained
ownership of all receivables comprising the existing balances in such
accounts. Subsequently, such receivables also were transferred to the Bank.
For a further description of the Bank's credit card business, see "The Bank's
Credit Card Business" in the Prospectus.
LOSS AND DELINQUENCY EXPERIENCE
The following tables set forth the loss and delinquency experience with
respect to payments by cardholders for each of the periods shown for
substantially all VISA and MasterCard consumer revolving credit card accounts
owned at the dates indicated by the Bank (excluding certain accounts not
originated by the Bank or FNBC) (the "Bank's Portfolio") during the periods
shown. As of the end of the 1998 Due Period, the Receivables in the
Accounts represented substantially all Receivables in the Bank's Portfolio.
There can be no assurance, however, that the loss and delinquency experience
for the Receivables in the future will be similar to the historical experience
set forth below for the Bank's Portfolio.
LOSS EXPERIENCE FOR THE BANK'S PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
---- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average Receivables Outstanding(1).............. $15,817,914 $12,625,398
Gross Charge-offs(2)............................ 1,134,427 645,417
Gross Charge-offs as a Percentage of Average
Receivables Outstanding........................ 7.17% 5.11%
</TABLE>
- --------
(1) Average Receivables Outstanding is the arithmetic average of receivables
outstanding during the period indicated.
(2) Gross Charge-offs are charge-offs before recoveries and do not include the
amount of any reductions in Average Receivables Outstanding due to fraud,
returned goods or customer disputes.
Charge-offs for the Bank's Portfolio measured as a percentage of average
receivables outstanding increased during the periods shown above due, in part,
to certain strategies employed by the Bank to increase the cardholder base
which the Bank believes, in turn, will result in the increase of overall
revenues for the Bank's Portfolio in the future. In addition, during such
periods, consumer debt service burden and defaults increased as a result of
the growing consumer debt levels coupled with stagnant real wage growth. The
Bank believes that the current level of personal bankruptcy filings make
reductions in the loss rates unlikely in the immediate future and expects the
trend in charge-offs to continue in the near term. The timing of the peak
level of charge-offs is uncertain at this time. Losses are also affected by
other factors including competitive behavior and social conditions. The loss
rates for the Bank's Portfolio could increase in the future if economic
conditions were to worsen and could continue to increase for several months
even after such conditions begin to improve. The loss rates set forth above do
not reflect the reversal of unpaid fees and finance charges at the time a
charge-off occurs.
It is the current intention of the Seller to begin transferring recoveries
on charged off Accounts to the Trust by the end of the second quarter of 1998.
Any recoveries so transferred would generally be treated as Finance
S-14
<PAGE>
Charge Receivables. Had gross recovery amounts attributable to Accounts whose
Receivables were charged off while included in the Bank's Portfolio been
transferred to the Trust for the year ended December 31, 1997, the Seller
estimates that the "Gross Charge-Offs as a Percentage of Average Receivables
Outstanding" for the Trust for such period as set forth above would have been
reduced by approximately % to % (computed on an annualized basis). There can
be no assurance, however, that the recovery experience for Defaulted
Receivables in the future will be similar to such historical experience or
that the Seller will be able to begin to transfer recoveries to the Trust
within the anticipated time frame.
The Bank has policies to allow delinquent accounts whose cardholders are
making good faith efforts to repay overdue amounts to be deemed current
("reaged") provided certain conditions are satisfied. If an account is 90 days
delinquent or greater, it qualifies for reaging treatment if the sum of the
payments received during the preceding five months (or in certain
circumstances the lesser of (a) five months or (b) the number of months since
the account was last current) is generally equal to the sum of the three
oldest minimum payments. The reaging process permits only one reaging of an
account from 90 days delinquent or greater categories in a 12-month period.
With respect to accounts that are 30 to 90 days delinquent, reaging treatment
occurs pursuant to a process which uses criteria that are more liberal than
the criteria described above. An account 30 to 90 days delinquent can be
reaged so long as these criteria are met. The entire process is system
controlled. In addition to automatic reaging, account closure and usage
restrictions are system controlled. When an account is 30 days delinquent,
charge privileges are suspended. Account closure occurs automatically when an
account is 60 days delinquent. Reinstatement of closed accounts requires a
full credit review; only a minimal number of closed accounts qualify for
reinstatement. The Bank may terminate, alter or modify its reaging process at
any time. Currently, the Bank is evaluating various collection strategies
which, if implemented, would alter the reaging process for certain accounts.
The delinquency information in the following tables reflects the application
of the Bank's current reaging process.
AVERAGE DELINQUENCIES FOR THE BANK'S PORTFOLIO
<TABLE>
<CAPTION>
AVERAGE OF TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995
------------------------ ------------------------ ------------------------
DELINQUENT DELINQUENT DELINQUENT
PAYMENT STATUS AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1)
- -------------- ---------- ------------- ---------- ------------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
30-59 days delinquent... $269,088 1.70% $189,476 1.50%
60-89 days delinquent... 131,223 0.83 83,191 0.66
90 days delinquent or
more................... 251,258 1.59 148,808 1.18
--- --- -------- ---- -------- ----
Total................. $651,569 4.12% $421,475 3.34%
=== === ======== ==== ======== ====
</TABLE>
- --------
(1)The percentages are the result of dividing Delinquent Amount by Average
Receivables Outstanding for the applicable period.
Delinquencies as a percentage of average receivables outstanding reflect a
pattern similar to loss rates as a result of the same factors discussed with
respect to the table set forth above for Loss Experience for the Bank's
Portfolio.
REVENUE EXPERIENCE
The gross revenues from monthly periodic charges and fees billed to
cardholders on the Bank's Portfolio for each of the three years in the period
ended December 31, 1997, are set forth in the following table.
The historic gross revenue figures in the table are calculated on an as-
billed basis and represent amounts billed to cardholders in each billing cycle
before deduction of charge-offs, reductions due to fraud, returned goods and
customer disputes or other expenses. Cash collections on receivables may not
reflect the historical experience in the table. During periods of increasing
delinquencies, billings of periodic charges and fees may exceed cash as
amounts collected on credit card receivables lag behind amounts billed to
cardholders.
S-15
<PAGE>
Conversely, as delinquencies decrease, cash may exceed billings of periodic
charges and fees as amounts collected in a current period may include amounts
billed during prior periods. However, the Bank believes that, during the
periods shown, revenues on a billed basis closely approximated revenues on a
cash basis. Revenues from periodic charges and fees on both a billed and a
cash basis will be affected by numerous factors, including the periodic
charges on principal receivables, the amount of the annual membership fees,
the amount of other fees paid by cardholders, the percentage of cardholders
who pay off their balances in full each month and do not incur periodic
charges on purchases, fees and finance charges and changes in the delinquency
rate on the Receivables.
REVENUE EXPERIENCE FOR THE BANK'S PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
----- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average Receivables Outstanding(1)............. $15,817,914 $12,625,398
Finance Charges and Fees Billed................ 2,610,937 2,066,872
Average Finance Charges and Fees Billed(2)..... 16.51% 16.37%
</TABLE>
- --------
(1) Average Receivables Outstanding is the arithmetic average of receivables
outstanding during the period indicated.
(2) Average Finance Charges and Fees Billed is the result of dividing Finance
Charges and Fees Billed by Average Receivables Outstanding and does not
include revenue attributable to Interchange.
The revenues for the Bank's Portfolio shown in the Revenue Experience table
are related to periodic charges and other fees billed to cardholders but do
not include revenue attributable to Interchange. The revenues related to
periodic charges and fees depend in part upon the collective preference of
cardholders to use their credit cards as revolving debt instruments for
purchases and cash advances and paying off account balances over several
months as opposed to convenience use, where the cardholders prefer instead to
pay off their entire balance each month, thereby avoiding periodic charges on
purchases, fees and finance charges. Revenues related to periodic charges and
fees also depend on the types of charges and fees assessed by the Bank on the
accounts. The Bank introduced a variable rate card in 1987. From 1989 through
1994, the Bank emphasized the origination of variable rate accounts and
substantially all new accounts originated during that time were variable rate
accounts. Depending upon fluctuations in interest rates, the variable rate
periodic charge (which is based on the prime rate) assessed on variable rate
accounts may change from month to month and could be less than the fixed
charge applicable to most standard fixed rate accounts. Commencing in 1994,
the Bank began offering certain new non-affinity accounts, for purchase
transactions, a fixed rate periodic charge for an initial period (ranging from
6 to 15 months) which then converts into a variable rate. The initial fixed
rate offered on such accounts is generally 5.9% or 6.9% per annum, a rate
which is substantially lower than that currently assessed on the variable rate
accounts or the standard fixed rate accounts. The total yield on such accounts
during the initial fixed rate period is therefore lower than that of a
variable rate account or standard fixed rate account. As of the end of the
Due Period, Receivables assessed a variable periodic charge constituted
approximately % of the total Receivables balance of Accounts in the Trust.
Fluctuations in the prime interest rate and/or the continued use of the
initial fixed/variable rate pricing for certain new accounts, may affect
future revenue experience. Throughout the periods shown above, the Bank made
certain changes in the charges and fees assessed on the accounts. The Bank is
currently waiving annual fees and offering a lower variable interest rate on
certain selected accounts. Commencing in mid-1996, the Bank introduced certain
other pricing changes including increased fees and performance-based pricing
whereby certain delinquent accounts are assessed a higher variable periodic
rate. Also in 1996, the Bank reduced the minimum monthly payment required of
cardholders in those months when a fee is charged to their accounts. The Bank
has no basis to predict how these changes and any future changes in the terms
of accounts may affect the revenue for the Bank's Portfolio. See "The
Accounts--Billing and Payments" herein.
INTERCHANGE
Pursuant to the terms of the Series 1998- Supplement, the Seller will
transfer to the Trust the Floating Allocation Percentage of Interchange
attributable to cardholder charges for merchandise and services in the
S-16
<PAGE>
Accounts. Interchange allocable to Series 1998- in an amount equal to 1/12 of
the product of 1.25% per annum and the Adjusted Invested Amount with respect
to each Due Period will be used exclusively to pay the Servicer part of its
Monthly Servicing Fee. See "Description of the Class A Certificates and the
Agreement--Servicing Compensation and Payment of Expenses." Interchange in
excess of the portion thereof required to be used exclusively to pay the
Servicer part of such Monthly Servicing Fee will be included in Finance Charge
Receivables pursuant to the Series 1998- Supplement for purposes of
determining the amount of Finance Charge Receivables and allocating
collections and payments to the Certificateholders. Interchange (including the
portion used exclusively to pay the Servicer) will be included in Finance
Charge Receivables for purposes of calculating the Portfolio Yield.
THE ACCOUNTS
The Receivables arising from the Accounts as of the end of the 1998 Due
Period totaled $ and included $ of Principal Receivables. The
Accounts had an average Principal Receivables balance of $ and an average
credit limit of $ . The aggregate total Receivables balance as a percentage
of the aggregate total credit limit was %.
The Receivables arising from the Accounts as of the end of the 1998 Due
Period totaled $ and included $ of Principal Receivables.
The following tables summarize the Accounts by various criteria as of the
end of the 1998 Due Period. Approximately cardholder accounts
included in the Accounts as of the end of the 1998 Due Period are
accounts with respect to which the cardholder has been upgraded to a gold or
platinum account. The upgraded accounts may have certain additional features,
including higher credit limits, which are not generally included in the
original accounts. For some period of time (not exceeding three years), both
the original and upgraded accounts are active for a particular cardholder
although the original account is eventually closed. Upon any cardholder
upgrade, the receivables balance in the original account is transferred to the
upgraded account (which account is considered to have the same account opening
date as the original account) and any new receivables created on the original
account are immediately transferred to the upgraded account. In addition,
pursuant to the ordinary operating procedures of the Bank, accounts which
expire and have no outstanding balance are not removed immediately from the
Bank's Portfolio, but rather are removed periodically from the Bank's
Portfolio and therefore may still be included as an Account for some period of
time after expiration. As of the end of the 1998 Due Period,
approximately expired accounts with a credit balance or no balance were
included in the Accounts. Because the composition of the Accounts may change
in the future, these tables are not necessarily indicative of the
characteristics of the Trust at any time after the end of the 1998 Due
Period.
COMPOSITION OF ACCOUNTS BY ACCOUNT BALANCES
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT BALANCE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
--------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Credit Balance(1).................. % $ %
No Balance(2)......................
$0.01 to $1,499.99.................
$1,500.00 to $2,999.99.............
$3,000.00 to $4,499.99.............
$4,500.00 to $9,999.99.............
$10,000 or more....................
----- ------ ------- ------
Total............................ 100.00% 100.00%
===== ====== ======= ======
</TABLE>
- --------
(1) Credit Balances are a result of cardholder payments and credit adjustments
applied in excess of an Account's unpaid balance. Accounts currently with
a credit balance are included, as Receivables may be generated with
respect thereto in the future.
(2) Accounts currently with no balance are included, as Receivables may be
generated with respect thereto in the future.
S-17
<PAGE>
COMPOSITION OF ACCOUNTS BY CREDIT LIMIT
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NUMBER OF TOTAL OF TOTAL
OF NUMBER OF RECEIVABLES RECEIVABLES
CREDIT LIMIT ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
$0.01 to $1,499.99................. % $ %
$1,500.00 to $2,999.99.............
$3,000.00 to $4,499.99.............
$4,500.00 to $9,999.99.............
$10,000 or more(1).................
----- ------ ------- ------
Total.............................. 100.00% $ 100.00%
===== ====== ======= ======
</TABLE>
- --------
(1)Maximum current credit limit on an Account is $65,000.
COMPOSITION OF ACCOUNTS BY PAYMENT STATUS
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
PAYMENT STATUS ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
-------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Current(1)........................ % $ %
30-59 days delinquent.............
60-89 days delinquent.............
90 days delinquent or more........
----- ------ ------- ------
Total............................. 100.00% $ 100.00%
===== ====== ======= ======
</TABLE>
- --------
(1) Includes Accounts on which the minimum payment has not yet been received
prior to the second billing date following the issuance of the related
bill.
COMPOSITION OF ACCOUNTS BY AGE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
AGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
--- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Not more than 6 months............ % $ %
Over 6 months to 12 months........
Over 12 months to 24 months.......
Over 24 months to 48 months.......
Over 48 months....................
----- ------ ------- ------
Total............................. 100.00% $ 100.00%
===== ====== ======= ======
</TABLE>
S-18
<PAGE>
GEOGRAPHIC COMPOSITION OF THE ACCOUNTS
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF RECEIVABLES
STATE ACCOUNTS OUTSTANDING
- ----- ---------- -----------
<S> <C> <C>
California............................................... % %
Illinois.................................................
New York.................................................
Texas....................................................
Florida..................................................
New Jersey...............................................
Colorado.................................................
Pennsylvania.............................................
Ohio.....................................................
Michigan.................................................
Washington...............................................
Virginia.................................................
Massachusetts............................................
Indiana..................................................
Georgia..................................................
Maryland.................................................
Tennessee................................................
Minnesota................................................
Missouri.................................................
North Carolina...........................................
Oregon...................................................
Arizona..................................................
Connecticut..............................................
Hawaii...................................................
Louisiana................................................
Alabama..................................................
Iowa.....................................................
All Other(1).............................................
------ ------
Total................................................. 100.00% 100.00%
====== ======
</TABLE>
- --------
(1)States and foreign countries with less than 1.00% of Total Receivables
Outstanding.
BILLING AND PAYMENTS
The credit card accounts owned by the Bank include accounts originated or
purchased by the Bank or FNBC. These accounts have various billing and payment
structures, including varying annual fees and periodic charges. The following
is information on the current billing and payment characteristics of the
Accounts.
Monthly billing statements are sent by the Bank to cardholders. Commencing
with a cardholder's billing date in September 1996, a cardholder generally is
required to make a minimum payment equal to the sum of: (i) 1/48 of the new
balance (excluding any amount that is past due), but not less than the greater
of $10 or the amount of the finance charge (due to periodic rates) billed to
the Account for the billing period, plus (ii) any amount that is past due
(unless its inclusion in the minimum payment is waived in accordance with the
Servicer's guidelines). Prior to September 1996, each month, a cardholder
generally had to make a minimum payment equal to the sum of: (i) 1/48 of the
new balance (excluding any amount that was past due and any fees charged on
the Account by the Bank), but not less than the greater of $10 or the amount
of the finance charge (due to periodic rates) billed to the Account for the
billing period, plus (ii) any amount that was past due (unless its inclusion
in the minimum payment was waived in accordance with the Servicer's
guidelines), plus (iii) the amount of any fees charged to the Account.
S-19
<PAGE>
In either instance, balances under $10 must be paid in full. In addition, if
the new balance in the Account less the minimum payment amount computed as
described above exceeds the assigned credit limit, the difference between such
amounts may be added to the required minimum payment shown on the monthly
billing statement.
Commencing with a cardholder's billing date in September 1996, a daily
periodic charge is assessed on the Accounts. Finance charges due to periodic
rates for a billing cycle are computed by applying the applicable daily
periodic rates to the related daily balances and then adding the resulting
sums for each day in the billing cycle. The daily periodic rates are
determined by dividing the applicable annual percentage rates for such billing
cycle by 365. The daily balances of purchases, advances, and fees and finance
charges (on which finance charges at the applicable daily periodic rates are
computed) are determined separately by taking the beginning balance of
purchases, advances, or fees and finance charges, adding any new purchases,
advances, or fees and finance charges that accrued or were posted that day,
and subtracting any payments or credits applied that day to such purchases,
advances, or fees and finance charges. Effective for the June 1998 cardholder
billing statement, daily periodic charges are not assessed on purchases and
fees posted in a billing cycle if all balances shown on the billing statement
for the prior billing cycle are paid in full by the cardholder's payment due
date for such billing statement. Prior to September 1996, a monthly periodic
charge was assessed on the Accounts. The monthly periodic charge was
calculated by multiplying the finance charge balance in an Account by the
applicable monthly periodic rate. The finance charge balance was the average
daily balance owing on the Account during the billing period including in its
calculation any fees charged to the Account by the Bank and any billed but
unpaid finance charge. Monthly periodic charges were not assessed on
purchases, fees or finance charges if all balances shown on the billing
statement were paid in full by the cardholder's payment due date shown on the
cardholder's billing statement each month.
Under the current calculation method using a daily periodic charge for each
Account, the actual number of days in a billing cycle for an Account effects
the total finance charges billed for the Account for such billing cycle. Prior
to this change in calculation methodology, the actual number of days in any
billing cycle was not relevant to the amount billed since finance charges were
computed and billed based on a monthly periodic charge applied to the average
daily balance during the billing period. Thus, the amount of collections of
Finance Charge Receivables for any Due Period may be effected to some extent
by the actual number of days in the billing cycle related to such Due Period.
Generally, collections for a Due Period are related to the Account billing
cycles ending in the immediately preceding month. For example, the collections
for the 1998 Due Period which are paid to Certificateholders on the
1998 Distribution Date are based on billing cycles ending in 1998 (which
cycles commenced in 1998).
As of the end of the 1998 Due Period, the Receivables assessed a fixed
periodic rate and a variable periodic rate as a percentage of the total
Receivables balance of the Accounts was approximately % and %,
respectively. The current periodic rate assessed on Receivables arising in
most standard fixed rate Accounts is 19.8% per annum, although certain fixed
rate Accounts are assessed at lower rates. With respect to Receivables arising
in the variable rate Accounts, the periodic rate assessed is equal on a per
annum basis to the interest rate index plus a spread. The interest rate index
is determined on each billing date based on the prime rate listed in the money
rate section of The Wall Street Journal on the first day of the month in which
the beginning date of the billing period occurs (or if that day is a Saturday,
Sunday or holiday, the prior business day).
The spread on variable rate Accounts ranges generally from 4.9% to 12.9% per
annum. Commencing in 1994, the Bank began offering certain new non-affinity
Accounts a fixed rate monthly periodic charge on purchases for an initial
period (ranging from 6 to 15 months) which then converts into a variable rate.
The initial fixed rate offered on such Accounts is generally 5.9% or 6.9% per
annum. Upon conversion to a variable rate, the periodic charge is computed as
described above for variable rate Accounts.
Commencing in 1996, the Bank began assessing certain delinquent Accounts a
higher variable periodic rate equal to the greater of (i) the prime rate (as
determined as described above) plus a spread of 12.9% (or, commencing with the
June 1998 billing statement, 15.9%) or (ii) 19.8% per annum. If such an
Account
S-20
<PAGE>
subsequently makes all required minimum payments for six consecutive billing
periods, the variable periodic rate decreases to the prime rate plus a spread
of 9.9% except that the periodic rate for cash advances will not be less than
19.8% per annum.
By the terms of the most recent cardholder agreements governing the
Accounts, the Bank may change the periodic rate at any time upon written
notice to the cardholders. In addition, the cardholder agreements governing
most standard fixed rate Accounts give cardholders the option of electing a
variable periodic rate to be effective for transactions on or after the
election is processed, equal on a per annum basis to the interest rate index
plus 9.9% (with a minimum per annum rate of 19.8% for cash advances).
Substantially all preapproved Accounts, which are not part of an affinity
program, have not been assessed an annual membership fee; in addition, over
the last few years, the Bank generally with respect to non-affinity Accounts
has not assessed or has waived the annual fee for most other new Accounts and
also has waived the annual fee for certain other selected Accounts. The annual
membership fee when assessed on Accounts ranges generally from $12 to $100, in
the case of certain affinity Accounts. Annual fees, to the extent assessed on
the Accounts, will be included in the Receivables transferred to the Trust.
The Bank may expand or discontinue the fee waiver program or institute other
similar programs in the future.
The Bank generally charges Accounts miscellaneous additional fees,
including, effective with a cardholder's June 1998 billing statement: (i) a
late fee not to exceed $29, which generally is assessed on certain nonaffinity
accounts if the Bank does not receive the required minimum monthly payment by
the 25th day immediately following the billing date shown on the monthly
billing statement; (ii) a returned payment check fee not to exceed $29, for
each cardholder check received by the Bank and not paid by the cardholder's
bank; (iii) an over-limit fee not to exceed $29, if the new balance of an
Account (less new periodic charges and fees imposed on the current billing
statement) exceeds the cardholder's stated credit limit on the billing date;
(iv) a returned convenience check fee equal to $29, if a convenience check is
returned unpaid because it exceeds a cardholder's available credit at the time
it is presented to the Bank for payment or if the cardholder's account is
delinquent at the time the convenience check is presented to the Bank for
payment; and (v) a cash advance fee equal to 3.0% of the cash advance
transaction amount (with a minimum fee of $3.00) for cash advances obtained
from a financial institution or an automatic teller machine or for cash
advances obtained by writing a check on an Account. Previously, during the
time periods presented in the tables herein, the fees described in clauses
(i), (ii), (iii) and (iv) of the prior sentence were limited to no more than
$15 to $25, and cash advance fees were equal to 2% to 2.5% of the cash advance
transaction amount. The late fee was imposed during such periods, and
continues to be imposed for certain affinity accounts, if the Bank did not, or
does not, receive the required monthly minimum payment by the billing date
immediately following the payment due date shown on the monthly billing
statement. From time to time, the Bank has waived, and may continue to waive,
the cash advance fee for certain cash advance transactions including certain
balance transfers. Any of the fees described herein may be waived or modified
at any time. Currently, the above-described fees may not be charged on certain
Accounts or may be charged at lower rates or under different terms in certain
circumstances. See "Risk Factors--Certain Legal Aspects" in the Prospectus.
The Bank has offered and, in the future, may continue to offer a reduced
rate for purchases and cash advances to certain accounts for a limited period
of time. Commencing in 1994, the Bank also introduced an initial fixed
rate/variable rate Account described above. The Bank may expand or discontinue
any of these programs or institute other similar programs in the future.
S-21
<PAGE>
THE SELLER
As of December 31, 1997, and based on the Consolidated Reports of Condition
and Income (the "Call Report") of the Seller at such date, the Seller had
total deposits of approximately $1.0 billion, total assets of approximately
$10.2 billion, net income (for the fiscal year of 1997) of approximately $259
million and total equity capital of approximately $1.2 billion. The Call
Report is required to be prepared in accordance with regulatory accounting
principles, which differ in some respects from generally accepted accounting
principles.
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
The Series 1998- Supplement provides that the holders of Class A
Certificates ("Class A Certificateholders") will not receive payments of
principal until the Class A Scheduled Payment Date, or earlier in the event of
a Liquidation Event which results in the commencement of the Rapid
Amortization Period. Although it is anticipated that principal payments will
be made to the Class A Certificateholders in an amount equal to the Class A
Invested Amount on the Class A Scheduled Payment Date, no assurance can be
given in that regard. On each Distribution Date during the Accumulation Period
prior to the payment of the Class A Invested Amount, an amount equal to the
lesser of (a) the Controlled Deposit Amount, (b) an amount ("Class A Available
Principal Collections") equal to the sum of (i) the Class A Principal
Percentage of the Fixed Allocation Percentage of all collections of Principal
Receivables in respect of the applicable Due Period, (ii) the amount of any
Unallocated Principal Collections allocable to the Certificates on deposit in
the Collection Account on such Distribution Date, (iii) the amount of certain
collections of Principal Receivables otherwise allocable to other Series, to
the extent such collections are not needed to make payments in respect of such
other Series, and (iv) certain other amounts that are treated as Class A
Available Principal Collections in accordance with the Series 1998-
Supplement, and (c) the Class A Adjusted Invested Amount prior to the deposits
with respect to such Distribution Date, will be deposited into the Principal
Funding Account established by the Servicer until the amount on deposit in the
Principal Funding Account (the "Principal Funding Account Balance") equals the
Class A Invested Amount. Although the Seller expects that there will be
sufficient funds on each Distribution Date of the Accumulation Period to pay
the Controlled Deposit Amount on such date, no assurance can be given in this
regard. The actual rate of payment of principal will depend, among other
factors, on the rate of repayment and the rate of default by cardholders. If
the amount required to pay the Class A Invested Amount in full is not
available on the Class A Scheduled Payment Date, a Liquidation Event will
occur.
In the event of the occurrence of a Liquidation Event, the Rapid
Amortization Period will begin on the first day of the Due Period in which
such Liquidation Event occurs. If a Liquidation Event occurs during the
Accumulation Period, the Rapid Amortization Period will commence and any
amount on deposit in the Principal Funding Account will be paid to the Class A
Certificateholders on the first Distribution Date following the commencement
of the Rapid Amortization Period. In addition, to the extent that the Class A
Invested Amount has not been paid in full, the Class A Certificateholders will
be entitled to monthly payments of principal equal to the Class A Available
Principal Collections until the earlier date on which the Class A Certificates
have been paid in full and the Series Termination Date. Further, principal
payable to Class A Certificateholders on the Distribution Date following a
sale, disposition or other liquidation of the Receivables (or interests
therein) in the event of an insolvency event as described herein under
"Description of the Class A Certificates and the Agreement--Liquidation
Events" or in connection with the Series Termination Date as described herein
under "Description of the Class A Certificates and the Agreement--Final
Payment of Principal; Termination of Trust," will be equal to the Class A
Invested Amount. A "Liquidation Event" occurs, with respect to the
Certificates, either automatically or after a specified period after notice,
upon (i) failure of the Seller to make certain payments or transfers of funds
for the benefit of the Certificateholders within the time periods stated in
the Agreement, (ii) material breaches of certain representations, warranties
or covenants of the Seller, (iii) certain insolvency events involving the
Seller, (iv) the average Portfolio Yield for any three consecutive Due Periods
being less than the average of the Base Rates for the related Interest
Periods, (v) the Trust becoming an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, (vi) a failure by the Seller
to convey
S-22
<PAGE>
the Receivables in Additional Accounts to the Trust when required by the
Agreement, (vii) failure to pay the Class A Invested Amount on the Class A
Scheduled Payment Date, or (viii) the occurrence of a Servicer Default which
would have a material adverse effect on the Certificateholders. The term
"Portfolio Yield" means, with respect to any Due Period, the annualized
percentage equivalent of a fraction the numerator of which is equal to (a) the
Floating Allocation Percentage of the amount of the Finance Charge Receivables
(including Interchange) collected during such Due Period, calculated on a cash
basis, plus (b) Principal Funding Investment Proceeds for such Due Period,
plus (c) the amount, if any, withdrawn from the Reserve Account and included
in Class A Available Funds for the Distribution Date relating to such Due
Period, minus (d) the Investor Default Amount for such Due Period, and the
denominator of which is the Invested Amount for the Distribution Date related
to such Due Period. The Term "Base Rate" means, with respect to any Interest
Period, the annualized percentage equivalent of a fraction, the numerator of
which is equal to the sum of (i) Class A Monthly Interest, (ii) Collateral
Monthly Interest and (iii) the Monthly Servicing Fee, and the denominator of
which is the Invested Amount as of the end of the day on the first day of such
Interest Period. Although the Seller believes that the likelihood of a
Liquidation Event occurring is remote, there can be no assurance that a
Liquidation Event will not occur. See "Description of the Class A Certificates
and the Agreement--Liquidation Events" herein.
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Bank's Portfolio during any month in the period shown
and the average cardholder monthly payment rates for all months during the
periods shown, in each case calculated as a percentage of total opening
monthly account balances during the periods shown. Payments shown in the table
include amounts which would be deemed payments of Principal Receivables and
Finance Charge Receivables with respect to the Accounts but do not include
Interchange.
CARDHOLDER MONTHLY PAYMENT RATES FOR THE BANK'S PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
<S> <C> <C> <C>
1997 1996 1995
------- -------- --------
Lowest.............................................. 19.92% 21.08%
Highest............................................. 21.86 25.01
Monthly Average..................................... 20.99 22.58
</TABLE>
The amount of collections on Receivables may vary from month to month due to
seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to the Accounts, and thus the rate at which
Class A Certificateholders can expect principal allocated on the basis of the
Class A Principal Percentage of the Fixed Allocation Percentage to be paid
during the Accumulation Period into the Principal Funding Account, will be
similar to the historical experience set forth above. In addition, since the
Trust, as a master trust, may issue additional Series from time to time, there
can be no assurance that the issuance of additional Series or the Principal
Terms of any additional Series might not have an impact on the timing of
payments made into the Principal Funding Account or received by Class A
Certificateholders. Further, if a Liquidation Event occurs, the average life
and maturity of the Class A Certificates could be significantly reduced.
Likewise, the sharing of collections of Principal Receivables allocated to
other Series with this Series during a Rapid Amortization Period could
significantly reduce the duration of such period for the Class A Certificates.
See "Description of the Class A Certificates and the Agreement--Shared
Collections of Principal Receivables" herein.
Because there may be a slow-down in the payment rate with respect to the
Accounts or a Liquidation Event may occur which would initiate a Rapid
Amortization Period, there can be no assurance that the actual number of
months elapsed from the date of issuance of the Class A Certificates to the
final payment of the Class A Invested Amount will equal the expected number of
months. The amount of outstanding Receivables and the rates of payments,
delinquencies, charge-offs and new borrowings on the Accounts depend upon a
variety of factors, including seasonal variations, the availability of other
sources of credit, general economic conditions and consumer spending and
borrowing patterns. Accordingly, there can be no assurance that future
cardholder
S-23
<PAGE>
monthly payment rate experience will be similar to historical experience. As
described under "Description of the Class A Certificates and the Agreement--
Postponement of Accumulation Period," the Servicer may shorten the
Accumulation Period and, in such event, there can be no assurance that there
will be sufficient time to accumulate all amounts necessary to pay the Class A
Invested Amount on the Class A Scheduled Payment Date.
DESCRIPTION OF THE CLASS A CERTIFICATES AND THE AGREEMENT
The Class A Certificates and the Collateral Interest (collectively the
"Certificates") will be issued pursuant to the Agreement and the Supplement
relating thereto (the "Series 1998- Supplement") entered into between the
Bank, as transferor of interests in the Receivables and as Servicer of the
Accounts and the Receivables and Norwest Bank Minnesota, National Association,
as Trustee for the Certificateholders. Pursuant to the Agreement, the Seller
may execute further Supplements thereto between the Seller and the Trustee in
order to issue additional Series. See "Description of the Certificates and the
Agreement--Exchanges" in the Prospectus. As used herein, the term "Series
1998- " refers to the Class A Certificates and the Collateral Interest, and
the term "Certificateholders" refers to the holders of the Class A
Certificates and the holder of the Collateral Interest, while the term
"Series" refers to any series issued by the Trust, including Series 1998- .
The following summary describes certain terms of the Agreement and the Series
1998- Supplement and is qualified in its entirety by reference to the
Agreement and the Series 1998- Supplement. See "Description of the
Certificates and the Agreement" in the Prospectus for additional information
concerning the Class A Certificates and the Agreement. Only the Class A
Certificates are being offered hereby.
GENERAL
The Trust's assets will be allocated to either the interest of the Class A
Certificateholders, the interest of the holder of the Collateral Interest (the
"Collateral Interest Holder"), the interests of the holders of other
outstanding Series or the interest of the Seller (the last being referred to
as the "First Chicago Interest").
Each Class A Certificate evidences an undivided interest in the Trust assets
allocated to the Class A Certificateholders and represents the right to
receive from such Trust assets funds up to (but not in excess of) the amounts
required to make payments of interest at the Class A Certificate Rate for the
related Interest Period and payments of principal on the Class A Scheduled
Payment Date or, under certain limited circumstances, during the Rapid
Amortization Period, to the extent of the Class A Invested Amount. The Class A
Invested Amount will, except if there are unreimbursed Class A Investor
Charge-Offs, remain fixed at the Class A Initial Invested Amount during the
Revolving Period. The Class A Invested Amount is subject to reduction as a
result of allocating Defaulted Receivables to the Class A Certificates when
amounts available from Excess Spread, the Cash Collateral Account and
Reallocated Principal Collections have been exhausted and the Collateral
Invested Amount has been reduced to zero. During the Accumulation Period, for
the sole purpose of allocating collections of Finance Charge Receivables and
Defaulted Receivables for each Due Period, the Class A Invested Amount will be
further reduced by the amount on deposit in the Principal Funding Account from
time to time.
The Collateral Interest will be issued on the Series Closing Date to the
Collateral Interest Holder in the Collateral Initial Invested Amount (the
Collateral Initial Invested Amount, together with the Class A Initial Invested
Amount, is referred to herein as the "Initial Invested Amount"). The
Collateral Invested Amount will form a portion of the Enhancement available to
the Class A Certificateholders.
INTEREST PAYMENTS
Payments of interest and principal will be made on each related Distribution
Date to Class A Certificateholders in whose names the Class A Certificates
were registered on the last day of the calendar month preceding such
Distribution Date (each, a "Record Date"). Interest will be distributed to
Class A
S-24
<PAGE>
Certificateholders on the 15th day of each month (or, if such day is not a
business day, on the next succeeding business day) (each, a "Distribution
Date"), commencing , 1998. Class A Monthly Interest will be distributed to
Certificateholders in an amount equal to the product of (i)(a) the actual
number of days in the related Interest Period divided by 360, times (b) the
Class A Certificate Rate for the related Interest Period and (ii) the Class A
Invested Amount as of the preceding Record Date (or, in the case of the first
Distribution Date, as of the Series Closing Date). Interest will be calculated
on the basis of the actual number of days in the related Interest Period and a
360-day year. Class A Monthly Interest due but not paid on any Distribution
Date will be due on the next succeeding Distribution Date with additional
interest on such amount at the Class A Certificate Rate plus 2% per annum.
Interest payments will be derived from collections allocated to Finance Charge
Receivables available to the Class A Certificates (including Excess Spread and
Excess Finance Charge Collections allocable to Series 1998- ) and, if
necessary, withdrawals from the Cash Collateral Account and Reallocated
Principal Collections. Interest payments during the Accumulation Period will
also be derived from Principal Funding Investment Proceeds and, if necessary
as described herein, withdrawals from the Reserve Account. See "--Principal
Funding Account" and "--Reserve Account."
The Class A Certificate Rate will be % per annum above the rate for
deposits in United States dollar deposits ("LIBOR") determined as set forth
below.
The Servicer will determine LIBOR for the Interest Period from the Series
Closing Date through , 1998 on the second London business day prior to the
Series Closing Date. The Servicer will determine LIBOR on , 1998 for the
Interest Period from , 1998 through , 1998, and, for each Interest
Period thereafter, on the second London business day prior to the Distribution
Date on which such Interest Period commences (each, a "LIBOR Determination
Date"). For purposes of calculating LIBOR, a London business day is any day on
which banks in London and New York are open for the transaction of
international business. The Servicer will determine LIBOR in accordance with
the following provisions:
(i) On each LIBOR Determination Date, the Servicer will determine LIBOR
on the basis of the rate for deposits in United States dollars for the
Interest Period following the LIBOR Determination Date which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such date. "Telerate
Page 3750" means the display page currently so designated on the Dow Jones
Telerate Service (or such other page as may replace such page on such
service for the purpose of displaying comparable rates or prices); or
(ii) If, on the LIBOR Determination Date, such rate does not appear on
Telerate Page 3750, LIBOR will be determined on the basis of the rates at
which deposits in United States dollars are offered by at least two of the
Reference Banks at approximately 1:00 a.m., London time, on such day to
prime banks in the London interbank market for the Interest Period
following such LIBOR Determination Date. "Reference Banks" means four major
banks in the London interbank market selected by the Servicer. The Servicer
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 such LIBOR Determination Date will be the arithmetic
mean of such quotations (rounded, if necessary, to the nearest multiple of
0.0625% per annum); or
(iii) If, on the LIBOR Determination Date, only one or none of the
Reference Banks provides such offered quotations, LIBOR will be the rate
per annum (rounded as aforesaid) that the Servicer determines to be either
(x) the arithmetic mean of the offered quotations that leading banks in The
City of New York selected by the Servicer are quoting on the relevant LIBOR
Determination Date for one-month United States dollar deposits to the
principal London office of each of the Reference Banks or those of them
(being at least two in number) to which such offered quotations are, in the
opinion of the Servicer, being so made or (y) in the event the Servicer can
determine no such arithmetic mean, the arithmetic mean of the offered
quotations that leading banks in The City of New York selected by the
Servicer are quoting on such LIBOR Determination Date to leading European
banks for one-month United States dollar deposits; or
(iv) If, on the LIBOR Determination Date, the banks selected as aforesaid
by the Servicer are not quoting as described in paragraph (iii) above,
LIBOR for such Interest Period will be LIBOR as determined on the previous
LIBOR Determination Date (or LIBOR as determined with respect to the Series
Closing Date, in the case of the first LIBOR Determination Date).
S-25
<PAGE>
The Class A Certificate Rate applicable to the then current and immediately
preceding Interest Period may be obtained by telephoning the Servicer at (847)
488-3222.
PRINCIPAL PAYMENTS
No principal payments are scheduled to be made to the Class A
Certificateholders prior to the Class A Scheduled Payment Date. Monthly
principal distributions to either the Principal Funding Account or to Class A
Certificateholders will begin on the first Distribution Date following the Due
Period in which either the Accumulation Period or the Rapid Amortization
Period, respectively, commences. For each Due Period from and including the
Series Closing Date, up to and including the day prior to the day on which the
Accumulation Period or the Rapid Amortization Period commences (the "Revolving
Period"), collections of Principal Receivables allocable to the Class A
Certificateholders will be paid, subject to certain limitations, to the
Seller, to the Collateral Interest Holder or to other Series.
The accumulation period with respect to the Certificates (the "Accumulation
Period") is scheduled to begin on the first day of the Due Period relating to
the Distribution Date (subject to postponement as described below
under "--Postponement of Accumulation Period"). Unless a Liquidation Event has
occurred, the Accumulation Period will end on the earliest of (i) the
commencement of the Rapid Amortization Period and (ii) the date on which the
Invested Amount has been paid in full. On each Distribution Date relating to
the Accumulation Period, the Servicer will deposit into the Principal Funding
Account an amount equal to the least of (a) Class A Available Principal
Collections, (b) the applicable Controlled Deposit Amount and (c) the Class A
Adjusted Invested Amount prior to any deposits on such date. Amounts in the
Principal Funding Account will be paid to the Class A Certificateholders on
the Class A Scheduled Payment Date, or earlier upon the commencement of the
Rapid Amortization Period. During the period beginning on the earlier of the
first day of the Due Period in which a Liquidation Event occurs or is deemed
to occur and continuing to and including the earlier of (a) the date on which
the Invested Amount has been paid in full and (b) the Series Termination Date
(the "Rapid Amortization Period"), collections of Principal Receivables and
certain other amounts allocable to the Class A Certificateholders will no
longer be paid to the Seller, to the Collateral Interest Holder (except in
certain circumstances when an Enhancement Surplus exists) or to other Series
or deposited into the Principal Funding Account but instead will be
distributed to the Class A Certificateholders. On each Distribution Date
during the Rapid Amortization Period, the Class A Certificateholders will be
entitled to receive Class A Available Principal Collections for such
Distribution Date in an amount up to the Class A Invested Amount. See "--
Liquidation Events" below for a discussion of events which might lead to the
commencement of the Rapid Amortization Period.
The Class A Certificates will initially be represented by certificates
registered in the name of the nominee of The Depository Trust Company ("DTC").
The interests of holders of beneficial interests in the Class A Certificates
("Certificate Owners") will be available for purchase in denominations of
$1,000 and integral multiples thereof in book-entry form only. The Seller has
been informed by DTC that DTC's nominee will be Cede & Co. ("Cede").
Accordingly, Cede is expected to be the holder of record of the Class A
Certificates. Unless and until Definitive Certificates are issued under the
limited circumstances described under "Description of the Certificates and the
Agreement--Definitive Certificates" in the Prospectus, no Certificate Owner
will be entitled to receive a certificate representing such person's interest
in the Class A Certificates. All references herein to actions by Class A
Certificateholders shall refer to actions taken by DTC upon instructions from
its participating organizations (the "Participants") and all references herein
to distributions, notices, reports and statements to Class A
Certificateholders shall refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Class A
Certificates, as the case may be, for distribution to Certificate Owners in
accordance with DTC procedures.
Class A Certificateholders may hold their Certificates through DTC in the
United States or Cedel Bank, societe anonyme ("Cedel") or the Euroclear System
("Euroclear") in Europe if they are participants of such systems, or
indirectly through organizations that are participants in such systems. Cede,
as nominee for DTC, will hold the global Class A Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel
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Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective Depositaries which in turn will hold such positions in customers'
securities accounts in the Depositaries' names on the books of DTC. See
"Description of the Certificates and Agreement--General," "--Book-Entry
Registration" and "--Definitive Certificates" in the Prospectus.
ALLOCATION PERCENTAGES
Pursuant to the Agreement, during each Due Period the Servicer will allocate
between Series 1998- , any other Series issued by the Trust and the First
Chicago Interest all amounts collected on Finance Charge Receivables and all
amounts collected on Principal Receivables and the amount of all Defaulted
Receivables. Collections of Finance Charge Receivables (including the
applicable portion of Interchange) and Defaulted Receivables will be allocated
at all times to Series 1998- , and collections of Principal Receivables will
be allocated during the Revolving Period with respect to Series 1998- and
generally paid to the Seller or, in certain circumstances, to the Collateral
Interest Holder or to other Series, based on the percentage equivalent of a
fraction, the numerator of which is the Adjusted Invested Amount for such
Distribution Date, and the denominator of which is Aggregate Principal
Receivables for the related Due Period (the "Floating Allocation Percentage").
During the Accumulation Period or Rapid Amortization Period for Series 1998- ,
collections of Principal Receivables will be allocated to Series 1998- based
on the percentage equivalent of a fraction, the numerator of which is the
Invested Amount as of the end of the day on the last Distribution Date
relating to the Revolving Period for Series 1998- and the denominator of
which is the greater of (a) Aggregate Principal Receivables for the Due Period
related to the current Distribution Date and (b) the sum of the numerators
used to calculate the Invested Percentages with respect to Principal
Receivables for all Series outstanding for the current Distribution Date (the
"Fixed Allocation Percentage").
As used herein, the following terms have the following meanings:
"Adjusted Invested Amount" means, for any date of determination, an amount
equal to the sum of (a) the Class A Adjusted Invested Amount and (b) the
Collateral Invested Amount.
"Class A Adjusted Invested Amount" means, for any date of determination, an
amount equal to the Class A Invested Amount, minus the Principal Funding
Account Balance on such date.
"Class A Floating Percentage" means, with respect to any Distribution Date,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is the Class A Adjusted Invested Amount for
such Distribution Date and the denominator of which is the Adjusted Invested
Amount for such Distribution Date.
"Class A Invested Amount" means, for any date of determination, an amount
equal to (a) the Class A Initial Invested Amount, minus (b) the aggregate
amount of principal payments made to the Class A Certificateholders prior to
such date, minus (c) the excess, if any, of the aggregate amount of Class A
Investor Charge-Offs for all prior Distribution Dates over the aggregate
amount of Class A Investor Charge-Offs reimbursed prior to such date.
"Class A Principal Percentage" means, with respect to any Distribution Date
(i) relating to the Revolving Period for Series 1998- , the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Class A Invested Amount for such Distribution Date,
and the denominator of which is the Invested Amount for such Distribution Date
and (ii) relating to the Accumulation Period or the Rapid Amortization Period
for Series 1998- , the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Class A Invested
Amount as of the end of the day on the last Distribution Date relating to the
Revolving Period for Series 1998- , and the denominator of which is the
Invested Amount as of such day.
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"Collateral Floating Percentage" means, with respect to any Distribution
Date, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Collateral Invested Amount for such
Distribution Date, and the denominator of which is the Adjusted Invested
Amount for such Distribution Date.
"Collateral Invested Amount" means, for any date of determination, an amount
equal to (a) the Collateral Initial Invested Amount, minus (b) an amount equal
to the amount by which the Collateral Invested Amount has been reduced on all
prior Distribution Dates to avoid the occurrence of a Class A Investor Charge-
Off, minus (c) the amount of Collateral Charge-Offs for all prior Distribution
Dates, minus (d) the aggregate amount of principal payments made to the
Collateral Interest Holder prior to such date; provided, however, that the
Collateral Invested Amount may not be reduced below zero.
"Collateral Principal Percentage" means, with respect to any Distribution
Date (i) relating to the Revolving Period for Series 1998- , the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Collateral Invested Amount for such Distribution
Date, and the denominator of which is the Invested Amount for such
Distribution Date and (ii) relating to the Accumulation Period or the Rapid
Amortization Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Collateral Invested
Amount as of the end of the day on the last Distribution Date relating to the
Revolving Period for Series 1998- , and the denominator of which is the
Invested Amount as of such day.
"Invested Amount" means, with respect to any date of determination, an
amount equal to the sum of (a) the Class A Invested Amount and (b) the
Collateral Invested Amount.
"Invested Percentage" means, on any date of determination with respect to
any Distribution Date: (a) when used with respect to Principal Receivables
during the Accumulation Period or the Rapid Amortization Period for Series
1998- , the Fixed Allocation Percentage; and (b) when used with respect to
Principal Receivables during the Revolving Period for Series 1998- , and
Finance Charge Receivables and Defaulted Receivables at any time, the Floating
Allocation Percentage.
"First Chicago Percentage" means when used with respect to allocations of
collections of Finance Charge Receivables and Principal Receivables and the
amount of Defaulted Receivables, 100% minus the sum of the applicable Invested
Percentages with respect to all Series then issued and outstanding.
APPLICATION OF COLLECTIONS
The Bank, as Servicer, uses for its own benefit all collections received
with respect to the Receivables in each Due Period until the related Transfer
Date at which time such collections are applied as described below and under
"Description of the Certificates and the Agreement--Application of
Collections" in the Prospectus.
Throughout the existence of the Trust, the Servicer allocates to the Seller,
as holder of the Exchangeable Seller's Certificate, an amount equal to the
First Chicago Percentage of the aggregate amount of Collections allocable to
Principal Receivables and Finance Charge Receivables in respect of such Due
Period. On each Determination Date with respect to the Revolving Period for
Series 1998- , the Servicer will allocate to the Seller or, in certain
circumstances, to other Series, from collections an amount equal to the
Floating Allocation Percentage of the aggregate amount of collections in
respect of Principal Receivables for the related Distribution Date, except
that the amount of such allocation with respect to Principal Receivables shall
not exceed the amount of the First Chicago Interest in Principal Receivables
(after giving effect to any new Receivables transferred to the Trust for the
Due Period relating to such Determination Date) and will exclude any such
collections to be applied as Collateral Monthly Principal.
On each Determination Date with respect to the Accumulation Period for
Series 1998- , the Servicer will allocate to the Seller or, in certain
circumstances, to other Series, from collections an amount equal to the excess
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of the Fixed Allocation Percentage for the related Distribution Date of the
aggregate amount of collections in respect of Principal Receivables over the
related Controlled Deposit Amount, except that the amount of such allocation
with respect to Principal Receivables shall not exceed the amount of the First
Chicago Interest in Principal Receivables (after giving effect to any new
Receivables transferred to the Trust for the Due Period relating to such
Determination Date) and will exclude any such collections to be applied as
Collateral Monthly Principal.
On each Distribution Date with respect to a Rapid Amortization Period, the
Servicer will distribute all collections in respect of Principal Receivables
allocable to Series 1998- with respect to the related Due Period in payment
of principal on the Certificates (as more fully described below under "--
Allocation of Funds").
POSTPONEMENT OF ACCUMULATION PERIOD
The Accumulation Period is scheduled to commence on the first day of the Due
Period relating to the Distribution Date. However, the Servicer may elect
to postpone the commencement of the Accumulation Period and extend the length
of the Revolving Period, subject to the conditions set forth below. The
Servicer may make such election only if the Accumulation Period Length
(determined as described below) is less than twelve months and if no
Liquidation Event has occurred and is continuing with respect to any other
Series. On the Determination Date with respect to the Distribution Date,
the Servicer will determine the "Class A Accumulation Period Length," which is
the number of months expected to be required fully to fund the Class A Initial
Invested Amount no later than the Class A Scheduled Payment Date, based on (a)
the expected monthly collections of Principal Receivables allocated to all
outstanding Series (which may exclude certain other Series), assuming a
principal payment rate no greater than the lowest monthly principal payment
rate on Receivables for the preceding twelve months and (b) the amount of
principal expected to be distributable to the certificateholders of all
outstanding Series (which may exclude certain Series) that are not expected to
be in their revolving period during the Accumulation Period. If the Class A
Accumulation Period Length is less than twelve months, the Servicer may, at
its option, postpone the commencement of the Accumulation Period such that the
number of months included in the Accumulation Period will be equal to or
exceed the Class A Accumulation Period Length. The effect of the foregoing
calculation is to permit the reduction of the length of the Accumulation
Period based on the invested amounts of certain other Series which are
expected to be in their revolving periods during the Accumulation Period or on
increases in the principal payment rate occurring after the Series Closing
Date. The length of the Accumulation Period will not be less than one month.
REALLOCATION OF COLLECTIONS
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class A Required Amount"), if any, by
which the sum of (i) Class A Monthly Interest for such Distribution Date, (ii)
any Class A Monthly Interest previously due but not paid to Class A
Certificateholders on a prior Distribution Date, (iii) any Class A Additional
Interest and any Class A Additional Interest previously due but not paid to
Class A Certificateholders on a prior Distribution Date, (iv) if there is a
successor Servicer not affiliated with the Seller, the Monthly Servicing Fee
for such Distribution Date and (v) the Class A Investor Default Amount, if
any, for such Distribution Date exceeds the Class A Available Funds (as
defined below under "--Allocation of Funds"). If the Class A Required Amount
is greater than zero, Excess Spread and Excess Finance Charge Collections
allocated to Series 1998- and available for such purpose will be used to fund
the Class A Required Amount with respect to such Distribution Date. If such
Excess Spread and Excess Finance Charge Collections available with respect to
such Distribution Date are less than 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 Excess Finance
Charge Collections and amounts, if any, on deposit in the Cash Collateral
Account are insufficient to fund the Class A Required Amount, collections of
Principal Receivables allocable to the Collateral Interest for the related Due
Period ("Reallocated Principal Collections") will then be used to fund the
remaining Class A Required Amount which will have the effect of reducing the
Collateral Invested Amount. If Reallocated Principal Collections with respect
to the related Due Period, together with Excess Spread and Excess Finance
Charge Collections allocated to Series 1998- and amounts, if any, on
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deposit in the Cash Collateral Account are insufficient to fund the Class A
Required Amount, then the Collateral Invested Amount will be reduced by the
amount of such excess (but not by more than the Class A Investor Default
Amount for such Distribution Date). In the event that such reduction would
cause the Collateral Invested Amount to be a negative number, the Collateral
Invested Amount will be reduced to zero, and the Class A Invested Amount will
be reduced by the amount by which the Collateral Invested Amount would have
been reduced below zero. Any such reduction in the Class A Invested Amount
will have the effect of slowing or reducing the return of principal and
interest to the Class A Certificateholders. In such case, the Class A
Certificateholders will bear directly the credit and other risks associated
with their interest in the Trust. See "--Defaulted Receivables; Rebates and
Fraudulent Charges."
Reductions of the Class A Invested Amount will thereafter be reimbursed and
the Class A Invested Amount increased to the extent of Excess Spread and
Excess Finance Charge Collections and Reallocated Principal Collections
available for such purpose on each Distribution Date. See "--Allocation of
Funds--Excess Spread; Excess Finance Charge Collections."
ALLOCATION OF FUNDS
The Servicer shall apply, or shall instruct the Trustee (or the Paying
Agent, in the case of distributions to Class A Certificateholders) to apply,
Class A Available Funds, Collateral Available Funds, Class A Available
Principal Collections and Collateral Principal Collections on each
Distribution Date to make the following distributions from the Collection
Account for such Distribution Date.
Payment of Interest, Fees and Other Items.
(a) An amount equal to the Class A Available Funds with respect to such
Distribution Date will be distributed in the following order of 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 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 plus
2% per annum ("Class A Additional Interest"), will be distributed to
the Class A Certificateholders;
(ii) an amount equal to the Monthly Servicing Fee with respect to
Series 1998- , for such Distribution Date will be distributed to the
Servicer;
(iii) an amount equal to the Class A Investor Default Amount for such
Distribution Date will be treated as a portion of Class A Available
Principal Collections for such Distribution Date; and
(iv) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charges Collections" below;
provided, however, that in the event that there are insufficient funds to
pay in full the amounts distributable pursuant to clauses (i), (ii) and
(iii) above (before giving effect to any Excess Spread or withdrawal from
the Cash Collateral Account, application of Reallocated Principal
Collections or reduction in the Collateral Invested Amount for such
purpose), such amounts shall be paid on a pro rata basis.
(b) An amount equal to the Collateral Available Funds with respect to
such Distribution Date will constitute Excess Spread and will be allocated
and distributed as described under "--Excess Spread; Excess Finance Charge
Collections" below.
"Class A Available Funds" means, with respect to any Due Period, an amount
equal to the Class A Floating Percentage of the Floating Allocation Percentage
of collections of Finance Charge Receivables (including any amounts that are
to be treated as collections of Finance Charge Receivables in accordance with
the Series 1998- Supplement).
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"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i)(A) a fraction, the numerator of which is
the actual number of days in the Interest Period and the denominator of which
is 360, times (B) the Class A Certificate Rate and (ii) the Class A Invested
Amount as of the preceding Record Date; provided, however, with respect to the
first Distribution Date, Class A Monthly Interest shall be equal to the
interest accrued on the Class A Invested Amount at the applicable Class A
Certificate Rates for the Interest Periods from the Series Closing Date
through , 1998.
"Collateral Available Funds" means, with respect to any Due Period, an
amount equal to the Collateral Floating Percentage of the Floating Allocation
Percentage of Finance Charge Receivables (including any amounts that are to be
treated as collections of Finance Charge Receivables in accordance with the
Series 1998- Supplement).
"Collateral Monthly Interest" means, with respect to any Distribution Date,
an amount equal to the product of (i)(A) a fraction, the numerator of which is
the actual number of days in the Interest Period and the denominator of which
is 360, times (B) the Collateral Rate and (ii) the Collateral Invested Amount
as of the preceding Record Date; provided, however, with respect to the first
Distribution Date, Collateral Monthly Interest shall be equal to the interest
accrued on the initial Collateral Invested Amount at the applicable Collateral
Rates for the Interest Periods from the Series Closing Date through ,
1998.
"Collateral Rate" means a rate not greater than LIBOR plus 1.00% per annum.
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (a) (iv) and clause (b)
above under "--Payment of Interest, Fees and Other Items."
Excess Spread; Excess Finance Charge Collections. On each Distribution Date,
the Trustee will apply or cause the Servicer to apply Excess Spread and Excess
Finance Charge Collections allocated to Series 1998- with respect to the
related Due Period to make the following distributions in the following order
of priority:
(a) an amount equal to the Class A Required Amount, if any, with respect
to such Distribution Date will be used to fund any deficiency pursuant to
clauses (a) (i), (ii) and (iii) above under "--Payment of Interest, Fees
and Other Items," in that order of priority; provided, however, that no
payment shall be made to fund a deficiency pursuant to such clause (a) (ii)
unless there is a successor Servicer not affiliated with the Seller;
(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 Class A Available Principal Collections for such Distribution Date as
described under "--Payments of Principal" below;
(c) an amount equal to Collateral Monthly Interest for such Distribution
Date, plus the amount of any Collateral Monthly Interest previously due but
not paid to the Collateral Interest Holder on a prior Distribution Date,
plus any additional interest with respect to amounts that were due but not
paid to the Collateral Interest Holder on a prior Distribution Date at a
rate equal to the Collateral Rate ("Collateral Additional Interest") will
be distributed to the Collateral Interest Holder for application in
accordance with the agreement between the Collateral Interest Holder, the
Seller, the Servicer and the Trustee (the "Loan Agreement");
(d) an amount equal to the Collateral Default Amount for such
Distribution Date will be treated as a portion of Collateral Principal
Collections with respect to such Distribution Date;
(e) an amount equal to the aggregate amount by which the Collateral
Invested Amount has been reduced pursuant to clauses (b) and (c) of the
definition of "Collateral Invested Amount" under "--Allocation Percentages"
above (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed, including pursuant to the Loan
Agreement) will be applied in accordance with the Loan Agreement;
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(f) an amount up to the excess, if any, of the Required Cash Collateral
Amount over the remaining Available Cash Collateral Amount (without giving
effect to any deposit to the Cash Collateral Account made on such date)
will be deposited into the Cash Collateral Account;
(g) an amount equal to any unpaid portion of the Monthly Servicing Fee
with respect to Series 1998- for such Distribution Date, plus the amount
of any such Monthly Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date will be distributed to the Servicer;
(h) on each Distribution Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates
pursuant to the Series 1998- Supplement, an amount up to the excess, if
any, of the Required Reserve Account Amount over the Available Reserve
Account Amount will be deposited into the Reserve Account; and
(i) the balance will be applied in accordance with the Loan Agreement.
Payments of Principal. On each Distribution Date, the Trustee will apply or
cause the Servicer to apply Class A Available Principal Collections and
Collateral Principal Collections in the following order of priority:
(a) on each Distribution Date with respect to the Revolving Period for
Series 1998- , all such Class A Available Principal Collections which are
not allocated at the option of the Seller as part of Collateral Monthly
Principal to make a payment with respect to the Collateral Interest will be
allocated to the Seller or to other Series;
(b) on each Distribution Date with respect to the Accumulation Period or
the Rapid Amortization Period for Series 1998- , all such Class A
Available Principal Collections will be distributed or deposited in the
following order of priority:
(i) an amount equal to Class A Monthly Principal will be (x)
deposited into the Principal Funding Account during the Accumulation
Period to be distributed to the Class A Certificateholders on the Class
A Scheduled Payment Date (or, if applicable, the first Distribution
Date of the Rapid Amortization Period) or (y) distributed to the Class
A Certificateholders during the Rapid Amortization Period; and
(ii) the balance, if any, will be paid to the Collateral Interest
Holder, the Seller or to other Series;
(c) on each Distribution Date with respect to the Revolving Period for
Series 1998- , Collateral Principal Collections will be distributed or
deposited in the following order of priority:
(i) an amount equal to Collateral Monthly Principal for such
Distribution Date will be applied in accordance with the Loan
Agreement; and
(ii) balance, if any, will be treated as Class A Available Principal
Collections and applied as described in clause (a) above;
(d) on each Distribution Date with respect to the Accumulation Period for
Series 1998- , Collateral Principal Collections will be distributed or
deposited in the following priority:
(i) an amount equal to Collateral Monthly Principal will be applied
in accordance with the Loan Agreement; and
(ii) the balance, if any, will be treated as Class A Available
Principal Collections and applied as described in clause (b) above; and
(e) on each Distribution Date with respect to the Rapid Amortization
Period, Collateral Principal Collections will be treated as Class A
Available Principal Collections and applied as described in clause (b)
above.
"Class A Available Principal Collections" means, with respect to any
Distribution Date, the sum of (a) the Class A Principal Percentage of the
Invested Percentage of collections of Principal Receivables, (b) the amount,
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if any, of Unallocated Principal Collections on deposit in the Collection
Account allocated to the Certificates, (c) Excess Principal Collections
allocated to the Certificates and (d) any other amounts which are to be
treated as Class A Available Principal Collections in accordance with the
Series 1998- Supplement.
"Class A Monthly Principal" means, on each Distribution Date beginning with
the earlier to occur of (i) the first Distribution Date to occur with respect
to any Rapid Amortization Period for Series 1998- and (ii) the first
Distribution Date to occur with respect to the Accumulation Period for Series
1998- , an amount equal to Class A Available Principal Collections; provided,
however, that for each Distribution Date with respect to the Accumulation
Period (unless and until a Liquidation Event is deemed to have occurred),
Class A Monthly Principal shall not exceed the Controlled Deposit Amount for
such Distribution Date; provided, further, that with respect to any
Distribution Date, Class A Monthly Principal shall not exceed the Class A
Adjusted Invested Amount.
"Collateral Monthly Principal" means, on each Distribution Date, an amount
calculated as follows:
(i) on any Distribution Date prior to the Distribution Date on which the
Class A Invested Amount is paid in full, the lesser of (A) the sum of (x)
Collateral Principal Collections with respect to such Distribution Date and
(y) Class A Available Principal Collections not applied to Class A Monthly
Principal on such Distribution Date and (B) the Enhancement Surplus on such
Distribution Date; and
(ii) on the Distribution Date on which the Class A Invested Amount is
paid in full, the sum of (A) Collateral Principal Collections with respect
to such Distribution Date and (B) Class A Available Principal Collections
not applied to Class A Monthly Principal on such Distribution Date;
notwithstanding the foregoing, prior to the occurrence of a Liquidation
Event and under certain limited circumstances specified in the Series 1998-
Supplement, "Collateral Monthly Principal" shall mean for any applicable
Distribution Date, the sum of (I) Collateral Principal Collections with
respect to such Distribution Date and (II) Class A Available Principal
Collections not applied to Class A Monthly Principal on such Distribution
Date; provided, however, that an amount not less than the Collateral
Monthly Principal as so calculated is deposited into the Cash Collateral
Account on such Distribution Date.
"Collateral Principal Collections" means, with respect to any Due Period,
the Collateral Principal Percentage of the Invested Percentage of Collections
of Principal Receivables, plus any other amounts which are to be treated as
Collateral Principal Collections in accordance with the provisions of the
Series 1998- Supplement, minus the amount of Reallocated Principal
Collections with respect to such Due Period applied for the benefit of the
Class A Certificates.
"Controlled Accumulation Amount" means, for any Distribution Date with
respect to the Accumulation Period, $ ; provided, however, that if the
Servicer elects to postpone the commencement of the Accumulation Period as
described above under "--Postponement of Accumulation Period", the Controlled
Accumulation Amount for each Distribution Date with respect to the
Accumulation Period will be an amount determined by the Servicer such that the
sum of the Controlled Accumulation Amounts for all such Distribution Dates
will not be less than the Class A Initial Invested Amount.
"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 and any existing Deficit Controlled Accumulation Amount.
"Deficit Controlled Accumulation Amount" means, on the first Distribution
Date with respect to the Accumulation Period for Series 1998- , the excess, if
any, of the Controlled Accumulation Amount over the amount of Class A Monthly
Principal for such Distribution Date and, on each subsequent Distribution Date
with respect to the Accumulation Period for Series 1998- , the excess, if any,
of the Controlled Deposit Amount over the amount of Class A Monthly Principal
for such Distribution Date.
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Payments to Certificateholders will be made from the Collection Account. In
addition to the amounts deposited in the Collection Account, as described
above, from payments on the Receivables, amounts required for any optional
repurchase or other purchase of the Certificates by the Seller or the proceeds
of any sale of the Receivables will be deposited in the Collection Account.
The paying agent (the "Paying Agent") will initially be FNBC. The Paying
Agent shall have the revocable power to withdraw funds from the Collection
Account for the purposes of making distributions to the Certificateholders.
SHARED COLLECTIONS OF FINANCE CHARGE RECEIVABLES
To the extent that collections of Finance Charge Receivables allocated to
the Certificates are not needed to make payments to Certificateholders or
other payments required in respect of Series 1998- , such collections may be
applied to cover shortfalls in amounts payable from collections of Finance
Charge Receivables allocable to certain other Series (including Series 1994-J,
Series 1994-K, Series 1994-L, Series 1995-M, Series 1995-N, Series 1995-O,
Series 1995-P, Series 1996-Q, Series 1996-R, Series 1996-S, Series 1997-T,
Series 1997-U and certain subsequently issued Series). To the extent
collections of Finance Charge Receivables allocated to certain other Series
(including Series 1994-J, Series 1994-K, Series 1994-L, Series 1995-M, Series
1995-N, Series 1995-O, Series 1995-P, Series 1996-Q, Series 1996-R, Series
1996-S, Series 1997-T, Series 1997-U and certain subsequently issued Series)
are not needed to make payments required in respect of each such Series, such
collections ("Excess Finance Charge Collections") may be applied to cover
shortfalls in amounts payable from collections of Finance Charge Receivables
allocable to Series 1998- and to other Series experiencing shortfalls. There
can be no assurance that such Excess Finance Charge Collections will be
available to cover shortfalls in amounts payable from collections of Finance
Charge Receivables allocable to the Class A Certificates. To the extent Excess
Finance Charge Collections are also allocated to other Series, the pro rata
share of such Excess Finance Charge Collections available to the Class A
Certificates will be reduced.
SHARED COLLECTIONS OF PRINCIPAL RECEIVABLES
To the extent that collections of Principal Receivables allocated to the
Certificates are not needed to make payments to the Certificateholders or
deposits into the Principal Funding Account, such collections may be applied
to cover principal payments due to or for the benefit of any other Series. Any
such application of collections will not result in a reduction of the Invested
Amount of the Certificates.
Similarly, certain collections of Principal Receivables allocated to other
Series (including Series 1993-F, Series 1993-H, Series 1994-J, Series 1994-K,
Series 1994-L, Series 1995-M, Series 1995-N, Series 1995-O, Series 1995-P,
Series 1996-Q, Series 1996-R, Series 1996-S, Series 1997-T, Series 1997-U and
certain subsequently issued Series), to the extent such collections are not
needed to make payments to or for the benefit of such other Series ("Excess
Principal Collections"), will be applied, if necessary, to cover Class A
Monthly Principal due to Class A Certificateholders (and Collateral Monthly
Principal due to the Collateral Interest Holder). There can be no assurance
that such Excess Principal Collections will be available to cover Class A
Monthly Principal due on any Distribution Date. Such Excess Principal
Collections may also be allocated to other Series (including Series 1993-F,
Series 1993-H, Series 1994-J, Series 1994-K, Series 1994-L, Series 1995-M,
Series 1995-N, Series 1995-O, Series 1995-P, Series 1996-Q, Series 1996-R,
Series 1996-S, Series 1997-T, Series 1997-U and certain subsequently issued
Series). To the extent such Excess Principal Collections are also allocated to
other Series, the pro rata share of such Excess Principal Collections
allocated to the Certificates will be reduced.
THE CASH COLLATERAL ACCOUNT
The Trust will have the benefit of an account (the "Cash Collateral
Account"), which will be held with the trust department of The First National
Bank of Chicago for the benefit of the Certificateholders. Funds on deposit in
the Cash Collateral Account will be invested in Eligible Investments.
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<PAGE>
The Cash Collateral Account will have an initial Available Cash Collateral
Amount of $ . On each Distribution Date, the amount available to be
withdrawn from the Cash Collateral Account (the "Available Cash Collateral
Amount") will be equal to the lesser of (i) the amount on deposit in the Cash
Collateral Account (before giving effect to any deposit to, or withdrawal
from, the Cash Collateral Account on such Distribution Date) and (ii) the
Required Cash Collateral Amount. The "Required Cash Collateral Amount" means,
on any date of determination, the Required Enhancement Amount less the
Collateral Invested Amount. The "Required Enhancement Amount" with respect to
any Distribution Date means the greater of (i) the product of (a) the Adjusted
Invested Amount related to such Distribution Date and (b) % and (ii) the sum
of (a) $ and (b) the product of (I) two and (II) the excess, if any, of
$ over the amount on deposit in the Cash Collateral Account with respect
to such Distribution Date; provided, however, that (i) if any withdrawal is
made from the Cash Collateral Account in respect of the Class A Required
Amount or if a Liquidation Event occurs or if there are certain reductions in
the Collateral Invested Amount, the Required Enhancement Amount for such
Distribution Date shall equal the Required Enhancement Amount for the
Distribution Date immediately preceding the occurrence of such withdrawal,
such Liquidation Event or such reduction, (ii) in no event shall the Required
Enhancement Amount exceed the Class A Adjusted Invested Amount on any such
date, and (iii) the Required Enhancement Amount may be reduced without the
consent of the Certificateholders, if the Seller shall have received written
notice from each Rating Agency that such reduction will not result in the
reduction or withdrawal of the then current rating of any of the Certificates
for which such Rating Agency furnishes a rating and the Seller shall have
delivered to the Trustee a certificate of an authorized officer to the effect
that, based on the facts known to such officer at such time, in the reasonable
belief of the Seller, such reduction will not cause a Liquidation Event or an
event that, after the giving of notice or the lapse of time, would constitute
a Liquidation Event to occur.
For each Distribution Date, a withdrawal may be made from the Cash
Collateral Account in an amount up to the lesser of (i) the sum of the Class A
Required Amount and any unreimbursed Class A Investor Charge-Offs (to the
extent such sum has not been paid from Excess Spread and Excess Finance Charge
Collections allocated to Series 1998- ) and (ii) the Available Cash Collateral
Amount, to fund the unpaid portion of the Class A Required Amount and
unreimbursed Class A Investor Charge-Offs.
Under certain circumstances specified in the Loan Agreement, the Seller will
have the option to elect to deposit certain amounts held pursuant to the Loan
Agreement into the Cash Collateral Account, which will result in a reduction
of the Collateral Invested Amount. Any such election will have the effect of
converting all or a portion of the Enhancement in the form of the Collateral
Invested Amount into Enhancement in the form of amounts on deposit in the Cash
Collateral Account. The amount of such reduction of the Collateral Invested
Amount for any given Distribution Date will not exceed the Collateral Monthly
Principal.
In addition, under certain limited circumstances specified in the Series
1998- Supplement and prior to the occurrence of a Liquidation Event, the
Seller may elect to deposit Collateral Monthly Principal (as determined in
accordance with clauses (I) and (II) of the definition thereof appearing under
"--Allocation of Funds" above) into the Cash Collateral Account, which will
result in a reduction of the Collateral Invested Amount. Any such election
will have the effect of converting all or a portion of the Enhancement in the
form of the Collateral Invested Amount into Enhancement in the form of amounts
on deposit in the Cash Collateral Account.
On each Distribution Date, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread and Excess Finance
Charge Collections to the extent described above under "--Allocation of
Funds--Excess Spread; Excess Finance Charge Collections" to increase the
amount on deposit in the Cash Collateral Account to the extent such amount is
less than the Required Cash Collateral Amount. In addition, if on any
Distribution Date, after taking into account all distributions, deposits and
withdrawals to be made for such date, the amount on deposit in the Cash
Collateral Account and the Collateral Invested Amount exceeds the Required
Enhancement Amount for the next succeeding Distribution Date (such excess, the
"Enhancement Surplus"), the Collateral Invested Amount may be reduced. The
amount of such reduction will not exceed the Collateral Monthly Principal for
such Distribution Date.
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<PAGE>
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 1998- Supplement, the Servicer will establish and
maintain with an Eligible Institution, which initially shall be The First
National Bank of Chicago, the principal funding account as a segregated trust
account held for the benefit of the Class A Certificateholders (the "Principal
Funding Account"). Principal will be deposited in the Principal Funding
Account on each Distribution Date with respect to the Accumulation Period as
described above under "--Allocation of Funds--Payments of Principal." Funds on
deposit in the Principal Funding Account (the "Principal Funding Account
Balance") will be invested to the following Transfer Date in Eligible
Investments.
Investment earnings (net of investment losses and expenses) on funds on
deposit in the Principal Funding Account (the "Principal Funding Investment
Proceeds") will be included in Class A Available Funds and will be used to pay
interest on the Class A Certificates in amount equal to, for each Interest
Period, the product of (i) (a) the actual number of days in the related
Interest Period divided by 360, times (b) the Class A Certificate Rate for the
related Interest Period and (ii) the Principal Funding Account Balance
allocable to the Class A Invested Amount for the Due Period related to such
Interest Period (the "Class A Covered Amount"). If, for any Interest Period,
the Principal Funding Investment Proceeds are less that the Class A Covered
Amount, the amount of such deficiency (the "Class A Principal Funding
Investment Shortfall") will be withdrawn, to the extent available, from the
Reserve Account and such amount will be included in Class A Available Funds to
be applied to the payment of Class A Monthly Interest. If withdrawals from the
Reserve Account cannot cover the Class A Principal Funding Shortfall, then
Excess Spread, Reallocated Principal Collections and withdrawals from the Cash
Collateral Account will also be available as described herein to meet such
deficiency. Such available amounts at any time will be limited and there can
be no assurance that sufficient funds will be available to fund any such
shortfall.
The Principal Funding Account Balance, if any, will be distributed to the
Class A Certificateholders on the Class A Scheduled Payment Date or, if
earlier, on the first Distribution Date with respect to the Rapid Amortization
Period. If the Principal Funding Account Balance (including any deposits
thereto for such Distribution Date) is insufficient to pay the Class A
Invested Amount in full on the Class A Scheduled Payment Date, a Liquidation
Event will be deemed to have occurred and the Rapid Amortization Period will
commence.
RESERVE ACCOUNT
Pursuant to the Series 1998- Supplement, the Servicer will establish and
maintain with an Eligible Institution, which initially shall be The First
National Bank of Chicago, the reserve account as a segregated trust account
held for the benefit of the Class A Certificateholders (the "Reserve
Account"). The Reserve Account is established to assist with the subsequent
distribution of interest on the Class A Certificates during the Accumulation
Period and for the first Distribution Date during any Rapid Amortization
Period occurring after the Reserve Account Funding Date. On each Distribution
Date from and after the Reserve Account Funding Date, but prior to the
termination of the Reserve Account, the Servicer or the Trustee acting
pursuant to the Servicer's directions, will apply Excess Spread and Excess
Finance Charge Collections to the extent described above under "--Allocation
of Funds--Excess Spread; Excess Finance Charge Collections" to increase the
amount on deposit in the Reserve Account to the extent such amount on deposit
is less than the Required Reserve Account Amount. The "Reserve Account Funding
Date" will be the Distribution Date.
The "Required Reserve Account Amount" for any Distribution Date after the
Reserve Account Funding Date will be equal to (a) % of the Class A Invested
Amount or (b) any other amount designated by the Seller; provided that if such
designation is of a lesser amount, the Seller shall have provided the
Collateral Interest Holder and the Trustee with written notice from each
Rating Agency that such designation will not result in the reduction or
withdrawal of the then current rating of any of the Certificates for which
such Rating Agency furnishes a rating and the Seller shall then have delivered
to the Collateral Interest Holder and the Trustee a certificate of any
authorized officer to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of the Seller, such designation
will not cause a Liquidation Event or an event that after the
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<PAGE>
giving of notice or the lapse of time, would constitute a Liquidation Event to
occur. For each Distribution Date, after giving effect to any deposit to be
made to, and any withdrawal to be made from, the Reserve Account on such
Distribution Date, any excess of the amount on deposit in the Reserve Account
over the Required Reserve Account Amount will be withdrawn and will be
distributed to or at the direction of the Seller.
Provided that the Reserve Account has not been terminated as described
below, all amounts on deposit in the Reserve Account with respect to 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 to the next succeeding Transfer Date by the Servicer or the Trustee
at the direction of the Servicer, in Eligible Investments. The interest and
other investment income (net of investment expenses and losses) earned on such
investments will be retained in the Reserve Account (to the extent the amount
on deposit therein is less than the Required Reserve Account Amount) or
distributed to or at the direction of the Seller.
On or before each of the Distribution Dates with respect to the Accumulation
Period and the first Distribution Date with respect to a Rapid Amortization
Period, funds, if any, on deposit in the Reserve Account will be withdrawn
from the Reserve Account and included in Class A Available Funds, in an amount
equal to the lesser of (a) the Available Reserve Account Amount with respect
to such Distribution Date and (b) the excess, if any, of the Class A Covered
Amount with respect to such Distribution Date over the Principal Funding
Investment Proceeds with respect to such Distribution Date; provided, however,
that the amount of such withdrawal will be reduced to the extent that funds
otherwise would be available to be deposited in the Reserve Account on such
Distribution Date. The amount available to be withdrawn from the Reserve
Account for any Distribution Date (the "Available Reserve Account Amount")
will be equal to the lesser of the amount on deposit in the Reserve Account
(before giving effect to any deposit to be made to the Reserve Account on such
Distribution Date) and the Required Reserve Account Amount for such
Distribution Date.
The Reserve Account will be terminated following the earliest to occur of
(a) the date on which the Class A Certificates are paid in full, (b) the first
Distribution Date with respect to a Rapid Amortization Period, and (c) the
Class A Scheduled Payment Date. Upon the termination of the Reserve Account,
all amounts on deposits therein (after giving effect to any withdrawal from
the Reserve Account on such date as described above) will be distributed to or
at the direction of the Seller. Any amounts withdrawn from the Reserve Account
and distributed to or at the direction of the Seller at the termination of the
Reserve Account as described above will not be available for distribution to
the Class A Certificateholders.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
The term "Investor Default Amount" means, for any Due Period, the product of
the Floating Allocation Percentage for such Distribution Date and the amount
of Defaulted Receivables.
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 the Class A Floating
Percentage for such Distribution Date and the Investor Default Amount. An
amount equal to the Class A Investor Default Amount will be paid from Class A
Available Funds, Excess Spread and Excess Finance Charge Collections allocated
to Series 1998- or from amounts, if any, on deposit in the Cash Collateral
Account and Reallocated Principal Collections and applied as described above
under "--Allocation of Funds--Payments of Interest, Fees and Other Items" and
"--Reallocation of Collections."
On each Distribution Date, if the Class A Investor Default Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1998- , amounts, if any, on deposit in the
Cash Collateral Account and Reallocated Principal Collections, the Collateral
Invested Amount (to the extent not already reduced as a result of a Collateral
Charge-Off with respect to such Distribution Date) will be reduced by the
amount of such excess, but not by more than the Class A Investor Default
Amount for such Distribution Date. In the event that such reduction would
cause the Collateral Invested Amount to be a negative number, the Collateral
Invested Amount will be reduced to zero, and the Class A Invested Amount will
be
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<PAGE>
reduced by the amount by which the Collateral Invested Amount would have been
reduced below zero (a "Class A Investor Charge-Off"), which will have the
effect of slowing or reducing the return of principal 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
unreimbursed Class A Investor Charge-Offs) by the amount of Excess Spread and
Excess Finance Charge Collections allocated to Series 1998- and available for
such purpose as described under "--Allocation of Funds--Excess Spread; Excess
Finance Charge Collections."
A portion of the Investor Default Amount will be allocated to the Collateral
Interest Holder (the "Collateral Default Amount") on each Distribution Date in
an amount equal to the product of the Collateral Floating Percentage for such
Distribution Date and the Investor Default Amount. On each Distribution Date,
if the Collateral Default Amount exceeds the Excess Spread and Excess Finance
Charge Collections allocable to Series 1998- and available to cover such
amount as described above under "--Allocation of Funds--Excess Spread; Excess
Finance Charge Collections," the Collateral Invested Amount will be reduced by
the amount of such excess (a "Collateral Charge-Off"). If the Collateral
Invested Amount has been reduced by the amount of any Collateral Charge-Offs,
the Collateral Interest Holder will thereafter be reimbursed for such
Collateral Charge-Offs on any Distribution Date (but not by an amount in
excess of the aggregate unreimbursed Collateral Charge-Offs) by the amount of
Excess Spread and Excess Finance Charge Collections allocated to Series 1998-
and available for such purpose as described under "--Allocation of Funds--
Excess Spread; Excess Finance Charge Collections."
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF TRUST
The Class A Certificates will be subject to optional repurchase by the
Seller on any Distribution Date on or after which the Adjusted Invested Amount
is reduced to an amount less than or equal to 5% of the Initial Invested
Amount, unless certain events of bankruptcy, insolvency or receivership have
occurred with respect to the Seller. The repurchase price of the Certificates
will be equal to the Adjusted Invested Amount plus accrued and unpaid interest
on the Certificates through, and including, the day preceding the Distribution
Date with respect to which the repurchase occurs. In any event, the last
payment of principal and interest on the Certificates will be due and payable
no later than the Distribution Date. In the event that the Adjusted
Invested Amount is greater than zero on the Distribution Date, the
Trustee will sell or cause to be sold interests in the Receivables or certain
Receivables, as specified in the Agreement and the Series 1998- Supplement,
in an amount up to 110% of the Adjusted Invested Amount of the Certificates at
the close of business on such date (but not more than the total amount of
Receivables allocable to the Certificates). The net proceeds of such sale and
any collections on the Receivables will be paid, pro rata to the Class A
Certificateholders, then to the Collateral Interest Holder, on the Series
Termination Date, as final payment of the Certificates.
LIQUIDATION EVENTS
The Revolving Period for Series 1998- will continue through the end of the
Due Period relating to the Distribution Date and the Accumulation
Period will begin at such time, unless a Liquidation Event occurs or the
Servicer elects to postpone the commencement of the Accumulation Period as
described herein under "--Postponement of Accumulation Period." A Rapid
Amortization Period will commence at the beginning of the Due Period during
which a Liquidation Event occurs or is deemed to occur. A "Liquidation Event"
with respect to the Certificates refers to any of the following events:
(i) failure on the part of the Seller (a) to make any payment or deposit
on the date required under the Agreement or the Series 1998- Supplement
(or within the applicable grace period which will not exceed five business
days), (b) duly to observe or perform in any material respect the covenant
of the Seller not to sell, pledge, assign or transfer to any person, or
grant any unpermitted lien on, any Receivable, or (c) duly to observe or
perform in any material respect any other covenants or agreements of the
Seller, which in the case of subclause (c) hereof, continues unremedied for
a period of 60 days after written notice;
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<PAGE>
(ii) any representation or warranty made by the Seller in the Agreement
or the Series 1998- Supplement or any information required to be given by
the Seller to the Trustee to identify the Accounts proves to have been
incorrect in any material respect when made and continues to be incorrect
in any material respect for a period of 60 days after written notice and as
a result of which the interests of the Certificateholders are materially
and adversely affected; provided, however, that a Liquidation Event
described in this clause (ii) shall not be deemed to occur if the Seller
has accepted the transfer of the related Receivable or all such
Receivables, if applicable, during such period (or such longer period as
the Trustee may specify) in accordance with the provisions thereof;
(iii) certain events of insolvency, conservatorship or receivership
relating to the Seller;
(iv) the average Portfolio Yield for any three consecutive Due Periods is
less than the average of the Base Rates for the related Interest Periods;
(v) the Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(vi) after any applicable grace period, a failure by the Seller to convey
Additional Accounts to the Trust when required by the Agreement;
(vii) the Class A Invested Amount is not paid in full on the Class A
Scheduled Payment Date; or
(viii) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders.
In the case of any event described in clause (i), (ii) or (viii), a
Liquidation Event will be deemed to have occurred with respect to any Series
only if, after any applicable grace period described in such clauses, either
the Trustee or Certificateholders of such Series evidencing undivided
interests aggregating not less than 50% of the Invested Amount of such Series,
by written notice to the Seller and the Servicer (and to the Trustee, if given
by such Certificateholders) declare that a Liquidation Event has occurred as
of the date of such notice. In the case of any event described in clause (iii)
or (v), a Liquidation Event with respect to all Series, and in the case of any
event described in clause (iv), (vi) or (vii), a Liquidation Event with
respect to only Series 1998- , will be deemed to have occurred without any
notice or other action on the part of the Trustee or the applicable
Certificateholders immediately upon the occurrence of such event. The Rapid
Amortization Period for Series 1998- will commence on the first day of the
Due Period in which a Liquidation Event occurs or is deemed to occur. Monthly
distributions of principal to the Class A Certificateholders will begin on the
first Distribution Date following such Due Period in the manner described
herein. See "--Allocation of Funds." Thus, Class A Certificateholders may
begin receiving distributions of principal earlier than they otherwise would
have, which may shorten the final maturity of the Class A Certificates. If a
Liquidation Event occurs and the Federal Deposit Insurance Corporation (the
"FDIC") is appointed as the receiver for the Bank and no Liquidation Event
other than such receivership or insolvency exists, the FDIC may have the power
to prevent commencement of the Rapid Amortization Period.
In addition to the consequences of a Liquidation Event discussed above, if
pursuant to certain provisions of Federal law, the Seller voluntarily goes
into liquidation or the FDIC or any other person is appointed a receiver or
conservator of the Seller, on the day of such appointment the Seller will
immediately cease to transfer Principal Receivables to the Trust and promptly
give notice to the Trustee of such appointment. Within 15 days, the Trustee
will publish a notice of the liquidation or the appointment stating that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables in
a commercially reasonable manner and to the best of its ability. Unless
otherwise instructed within a specified period by certificateholders
representing undivided interests aggregating more than 50% of the invested
amount of any Preexisting Series, the Trustee will sell, dispose of or
otherwise liquidate the Receivables of all Series in a commercially reasonable
manner and on commercially reasonable terms. Furthermore, even if the
Receivables are not sold pursuant to the preceding sentence, with respect to
Series 1995-M, Series 1995-N, Series 1995-O, Series 1995-P, Series 1996-Q,
Series 1996-R, Series 1996-S, Series 1997-T, Series 1997-U, Series 1998- and
any subsequently or contemporaneously issued Series, unless otherwise
instructed within a specified period by holders representing undivided
interests
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<PAGE>
aggregating more than 50% of the invested amount of each Preexisting Series
and each class of each such Series (including a majority in interest in each
collateral interest) (unless otherwise specified in the related Supplement),
each holder of an interest in the First Chicago Interest and any other person
specified in any Supplement, the Trustee will sell, dispose of or otherwise
liquidate the portion of the Receivables allocable to all Series other than
the Preexisting Series in a commercially reasonable manner and on commercially
reasonable terms in accordance with the Agreement. The proceeds from the sale,
disposition or liquidation of the Receivables will be treated as collections
on the Receivables and such proceeds will be distributed to the applicable
certificateholders. See "Certain Legal Aspects of the Receivables--Certain
Matters Relating to Receivership" in the Prospectus for a discussion of how
Federal legislation may affect the Trustee's ability to liquidate the
Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The portion of the Servicing Fee allocable to Series 1998- on each
Distribution Date (the "Monthly Servicing Fee") generally will be equal to
1/12 of the product of (a) % per annum and (b) the Adjusted Invested
Amount with respect to the related Due Period. A portion of the Monthly
Servicing Fee equal to 1/12 of the product of % per annum and the Adjusted
Invested Amount with respect to the related Due Period will be paid solely
from Interchange allocable to Series 1998- , before such Interchange is used
for any other purpose. A portion of the Monthly Servicing Fee equal to 1/12 of
the product of % per annum and the Adjusted Invested Amount with respect
to the related Due Period will be paid from collections of Finance Charge
Receivables allocable to the Certificates. The remaining portion of the
Servicing Fee will be allocable to the First Chicago Interest or to other
Series. The Monthly Servicing Fee will be paid each month from the Collection
Account; provided, however, that in the event there are insufficient
collections of Finance Charge Receivables (excluding amounts payable from
Excess Spread or the Cash Collateral Account) available to make the
distribution of the Class A Monthly Interest, the Class A Investor Default
Amount and the portion of the Monthly Servicing Fee payable from such funds,
such Class A Monthly Interest, Class A Investor Default Amount and Monthly
Servicing Fee will be paid on a pro rata basis to the extent of such funds. If
a successor Servicer has been appointed, Excess Spread may be used, and
withdrawals from the Cash Collateral Account may be made, if there are
insufficient collections of Finance Charge Receivables available to the
Certificates to pay the portion of the Monthly Servicing Fee of such successor
Servicer payable from such funds.
REPORTS TO CLASS A CERTIFICATEHOLDERS
On each Distribution Date, there will be forwarded to each Class A
Certificateholder of record a statement (the "Monthly Servicer Report")
prepared by the Servicer setting forth: (i) the total amount distributed with
respect to the Class A Certificates; (ii) the amount of the distribution on
such Distribution Date allocable to principal; (iii) the amount of such
distribution allocable to interest; (iv) the amount of collections processed
during the preceding Due Period and allocated in respect of the Certificates;
(v) the Invested Amount, the Adjusted Invested Amount, the Class A Invested
Amount, the Class A Adjusted Invested Amount, the Collateral Invested Amount,
the Class A Floating Percentage, the Class A Principal Percentage and the
Invested Percentages; (vi) the aggregate outstanding balance of Accounts which
are 30 days or more delinquent as of the close of business at the end of the
preceding Due Period; (vii) the Investor Default Amount and the Class A
Investor Default Amount for such Distribution Date; (viii) the amount of Class
A Investor Charge-Offs for such Distribution Date and the amount of
reimbursements of such Class A Investor Charge-Offs; (ix) the amount of the
Monthly Servicing Fee for such Distribution Date; (x) the Available Cash
Collateral Amount and the Collateral Invested Amount at the close of business
on such Distribution Date; (xi) the Class A Required Amount, if any, for such
Distribution Date; (xii) the amount of Excess Spread and Reallocated Principal
Collections, if any, available with respect to such Distribution Date; (xiii)
the amount, if any, by which the principal balance of the Class A Certificates
exceeds the Class A Invested Amount as of the end of the day on the Record
Date; (xiv) the "pool factor" as of the end of the related Record Date
(consisting of an eight-digit decimal expressing the ratio of the Class A
Invested Amount to the Class A Initial Invested Amount); (xv) the existing
Deficit Controlled Accumulation Amount; and (xvi) the amount, if any,
withdrawn from the Principal Funding Account for such Distribution Date.
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<PAGE>
On or before January 31 of each calendar year, beginning with 1999, there
will be furnished to each person who at any time during the preceding calendar
year was a Class A Certificateholder of record (or, if so provided in
applicable Treasury regulations, made available to Certificate Owners) a
statement prepared by the Servicer containing the information required to be
provided by an issuer of indebtedness under the Code for such calendar year or
the applicable portion thereof during which such person was a Class A
Certificateholder, together with such other customary information as the
Servicer deems necessary or desirable to enable the Class A Certificateholders
to prepare their tax returns. See "Tax Matters" in the Prospectus.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated and a Terms Agreement dated (such agreements,
collectively, the "Underwriting Agreement") between the Seller and the
underwriters named below (collectively, the "Underwriters"), the Seller has
agreed to sell to each of the Underwriters named below, and each of the
Underwriters has severally agreed to purchase, the principal amount of Class A
Certificates as set forth opposite its name:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CLASS A
UNDERWRITERS CERTIFICATES
------------ ------------
<S> <C>
$
------
Total....................................................... $
======
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the Class A
Certificates offered hereby if any Class A Certificates are purchased. In the
event of a default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the nondefaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Seller has been advised by the several Underwriters that the several
Underwriters propose initially to offer the Class A Certificates to the public
at the public offering price set forth on the cover page of this Prospectus
Supplement, and to certain dealers at such price less a concession not in
excess of 0. % of the principal amount of the Class A Certificates.
Underwriters may allow and such dealers may reallow a concession not in excess
of % of such principal amount.
The Seller will receive proceeds of approximately $ from the sale of the
Class A Certificates (representing % of the principal amount of each Class A
Certificate) after paying the underwriting discount of $ (representing %
of the principal amount of each Class A Certificate). Additional offering
expenses are estimated to be $ .
The Underwriting Agreement provides that the Seller will indemnify the
several Underwriters against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the several Underwriters
may be required to make in respect thereof.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Class A Certificates in accordance with Regulation M under the Exchange
Act. Over-allotment transactions involve syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the Class A Certificates so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Class A 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 Class A 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
Class A Certificates to be higher than they would otherwise be in the absence
of such transactions. Neither the Seller nor the Underwriters represent that
the Underwriters will engage in any such transactions or that such
transactions, once commenced, will not be discontinued without notice at any
time.
First Chicago Capital Markets, Inc. ("FCCM") is an affiliate of the Seller.
Any obligations of FCCM are the sole obligations of FCCM and do not create any
obligations on the part of any affiliate of FCCM.
S-42
<PAGE>
FCCM may from time to time purchase or acquire a position in the Class A
Certificates and may, at its option, hold or resell such Class A Certificates.
FCCM expects to offer and sell previously issued Class A Certificates in the
course of its business as a broker-dealer. FCCM may act as a principal or
agent in such transactions. The accompanying Prospectus and this Prospectus
Supplement may be used by FCCM in connection with such transactions. Such
sales, if any, will be made at varying prices related to prevailing market
prices at the time of sale.
S-43
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Accounts............................................................. S-14
Accumulation Period.................................................. S-11, S-26
Adjusted Invested Amount............................................. S-27
Agreement............................................................ S-14
Available Cash Collateral Amount..................................... S-35
Available Reserve Account Amount..................................... S-37
Bank................................................................. S-14
Bank's Portfolio..................................................... S-14
Base Rate............................................................ S-23
Call Report.......................................................... S-22
Cash Collateral Account.............................................. S-34
Cede................................................................. S-26
Cedel................................................................ S-12, S-26
Certificate Owners................................................... S-26
Certificateholders................................................... S-24
Certificates......................................................... S-24
Class A Accumulation Period Length................................... S-29
Class A Additional Interest.......................................... S-30
Class A Adjusted Invested Amount..................................... S-27
Class A Available Funds.............................................. S-30
Class A Available Principal Collections.............................. S-22, S-32
Class A Certificateholders........................................... S-22
Class A Certificate Rate............................................. S-5
Class A Certificates................................................. S-5
Class A Covered Amount............................................... S-36
Class A Floating Percentage.......................................... S-27
Class A Initial Invested Amount...................................... S-5
Class A Invested Amount.............................................. S-27
Class A Investor Charge-Off.......................................... S-38
Class A Investor Default Amount...................................... S-37
Class A Monthly Interest............................................. S-31
Class A Monthly Principal............................................ S-33
Class A Principal Funding Investment Shortfall....................... S-36
Class A Principal Percentage......................................... S-27
Class A Required Amount.............................................. S-29
Class A Scheduled Payment Date....................................... S-5, S-6
Collateral Additional Interest....................................... S-31
Collateral Available Funds........................................... S-31
Collateral Charge-Off................................................ S-38
Collateral Default Amount............................................ S-38
Collateral Floating Percentage....................................... S-28
Collateral Initial Invested Amount................................... S-5
Collateral Interest.................................................. S-7
Collateral Interest Holder........................................... S-24
Collateral Invested Amount........................................... S-28
Collateral Monthly Interest.......................................... S-31
Collateral Monthly Principal......................................... S-33
Collateral Principal Collections..................................... S-33
Collateral Principal Percentage...................................... S-28
Collateral Rate...................................................... S-31
Controlled Accumulation Amount....................................... S-5, S-33
Controlled Deposit Amount............................................ S-33
Deficit Controlled Accumulation Amount............................... S-33
Distribution Date.................................................... S-5, S-25
</TABLE>
S-44
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
DTC.................................................................. S-12, S-26
Enhancement Surplus.................................................. S-35
[ERISA............................................................... ]
Euroclear............................................................ S-12, S-26
Excess Finance Charge Collections.................................... S-34
Excess Principal Collections......................................... S-34
Excess Spread........................................................ S-31
Exchangeable Seller's Certificate.................................... S-7
FCCM................................................................. S-1, S-42
FDIC................................................................. S-39
Finance Charge Receivables........................................... S-7
First Chicago Interest............................................... S-24
First Chicago Percentage............................................. S-28
Fixed Allocation Percentage.......................................... S-27
Floating Allocation Percentage....................................... S-27
Initial Invested Amount.............................................. S-5, S-24
Interest Period...................................................... S-6
Invested Amount...................................................... S-8, S-28
Invested Percentage.................................................. S-28
Investor Default Amount.............................................. S-37
LIBOR................................................................ S-25
LIBOR Determination Date............................................. S-6, S-25
Liquidation Event.................................................... S-22, S-38
Loan Agreement....................................................... S-31
Monthly Servicer Report.............................................. S-40
Monthly Servicing Fee................................................ S-40
Participants......................................................... S-26
Paying Agent......................................................... S-34
Portfolio Yield...................................................... S-23
Principal Funding Account............................................ S-36
Principal Funding Account Balance.................................... S-22, S-36
Principal Funding Investment Proceeds................................ S-36
Principal Receivables................................................ S-7
Rapid Amortization Period............................................ S-11, S-26
Reallocated Principal Collections.................................... S-29
Receivables.......................................................... S-14
Record Date.......................................................... S-24
Reference Banks...................................................... S-25
Required Cash Collateral Amount...................................... S-35
Required Enhancement Amount.......................................... S-35
Required Reserve Account Amount...................................... S-36
Reserve Account...................................................... S-36
Reserve Account Funding Date......................................... S-36
Revolving Period..................................................... S-11, S-26
Seller............................................................... S-14
Series............................................................... S-24
Series Closing Date.................................................. S-5
Series 1998- ....................................................... S-24
Series 1998- Supplement............................................. S-24
Series Termination Date.............................................. S-5, S-6
Telerate Page 3750................................................... S-25
Trust................................................................ S-5
Trustee.............................................................. S-14
Underwriters......................................................... S-42
Underwriting Agreement............................................... S-42
</TABLE>
S-45
<PAGE>
ANNEX I
PRIOR ISSUANCES OF CERTIFICATES
The table below sets forth the principal characteristics of the Series
heretofore issued by the Trust that are currently outstanding. [The table also
sets forth the proposed terms of the Series 1998- Certificates which are
expected to be issued concurrently with the issuance of the Certificates.] For
more specific information with respect to any Series, any prospective investor
should contact First Chicago NBD. First Chicago NBD will provide, without
charge, to any prospective purchaser of the Certificates, a copy of the
Disclosure Document for any previous publicly-issued Series. Requests should
be addressed to First Chicago NBD Corporation, One First National Plaza,
Chicago, Illinois 60670, Attention: Investor Relations (312) 732-4812.
SERIES 1993-F
Initial Principal Amount.......... $700,000,000
Certificate Rate.................. LIBOR plus a spread of 0.30% per
annum, but in no event in excess
of 12% per annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount..........
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Controlled Amortization Amount.... $58,333,333.33
Controlled Amortization Date...... First day of the Due Period
relating to the January 1998
Distribution Date
Monthly Servicing Fee............. 2.10% (of which 1.60% is payable
solely from Interchange
allocable to Series 1993-F)
Enhancement....................... Cash Collateral Account
Remaining Cash Collateral
Amount............................
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... February 2000 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $35,000,000
SERIES 1993-H
Initial Principal Amount.......... $700,000,000
Certificate Rate.................. LIBOR plus a spread of 0.20% per
annum, but in no event in excess
of 12% per annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount..........
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
A-1
<PAGE>
Controlled Amortization Amount.... $58,333,333.33
Controlled Amortization Date...... First day of the Due Period
relating to the March 1998
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1993-H)
Enhancement....................... Cash Collateral Account
Remaining Cash Collateral
Amount............................
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... April 2000 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $35,000,000
SERIES 1994-J
Initial Principal Amount.......... $500,000,000
Certificate Rate.................. LIBOR plus a spread of 0.22% per
annum, but in no event in excess
of 12% per annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount.......... $500,000,000
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Controlled Amortization Amount.... $41,666,666.67
Controlled Amortization Date...... First day of the Due Period
relating to the December 1998
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1994-J)
Enhancement....................... Cash Collateral Account
Remaining Cash Collateral $65,000,000
Amount............................
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... January 2001 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $25,000,000
SERIES 1994-K
Initial Principal Amount.......... $500,000,000
Certificate Rate.................. LIBOR plus a spread of 0.1875%
per annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount..........
$500,000,000
A-2
<PAGE>
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Controlled Amortization Amount.... $41,666,666.67
Controlled Amortization Date...... First day of the Due Period
relating to the March 1999
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1994-K)
Enhancement....................... Cash Collateral Account
Remaining Cash Collateral $72,500,000
Amount............................
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... April 2001 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $25,000,000
SERIES 1994-L
Initial Principal Amount.......... $500,000,000
Certificate Rate.................. 7.15% per annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount.......... $500,000,000
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Controlled Amortization Amount.... $41,666,666.67
Controlled Amortization Date...... First day of the Due Period
relating to the March 1999
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1994-L)
Enhancement....................... Cash Collateral Account
Remaining Cash Collateral $57,500,000
Amount............................
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... April 2001 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $25,000,000
SERIES 1995-M
Initial Principal Amount..........
$571,428,572 (including
Collateral Interest)
Class A Certificate Rate..........
LIBOR plus a spread of 0.24% per
annum
A-3
<PAGE>
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount.......... $571,428,572
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Amortization $41,666,666.67
Amount............................
Class A Controlled Amortization First day of the Due Period
Date.............................. relating to the November 2001
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1995-M)
Enhancement....................... Collateral Interest and Cash
Collateral Account
Initial Collateral Invested $71,428,572
Amount............................
Initial Cash Collateral Amount.... $5,714,286
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... December 2003 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $28,571,428
SERIES 1995-N
Initial Principal Amount.......... $571,428,572 (including
Collateral Interest)
Class A Certificate Rate.......... LIBOR plus a spread of 0.16% per
annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount.......... $571,428,572
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Amortization $41,666,666.67
Amount............................
Class A Controlled Amortization First day of the Due Period
Date.............................. relating to the November 1998
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1995-N)
Enhancement....................... Collateral Interest and Cash
Collateral Account
Initial Collateral Invested $71,428,572
Amount............................
Initial Cash Collateral Amount.... $5,714,286
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... December 2000 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $28,571,428
A-4
<PAGE>
SERIES 1995-O
Initial Principal Amount.......... $571,428,572 (including
Collateral Interest)
Class A Certificate Rate.......... LIBOR plus a spread of 0.23% per
annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount.......... $571,428,572
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Amortization $41,666,666.67
Amount............................
Class A Controlled Amortization First day of the Due Period
Date.............................. relating to the January 2002
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1995-O)
Enhancement....................... Collateral Interest and Cash
Collateral Account
Initial Collateral Invested $71,428,572
Amount............................
Initial Cash Collateral Amount.... $5,714,286
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... February 2004 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $28,571,428
SERIES 1995-P
Initial Principal Amount.......... $571,428,572 (including
Collateral Interest)
Class A Certificate Rate.......... LIBOR plus a spread of 0.18% per
annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount.......... $571,428,572
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Amortization $41,666,666.67
Amount............................
Class A Controlled Amortization First day of the Due Period
Date.............................. relating to the January 2000
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1995-P)
Enhancement....................... Collateral Interest and Cash
Collateral Account
Initial Collateral Invested $71,428,572
Amount............................
Initial Cash Collateral Amount.... $5,714,286
Minimum First Chicago Interest
Percentage........................ 7% (or such lower percentage
acceptable to the Rating
Agencies)
Series Termination Date...........
February 2002 Distribution Date
A-5
<PAGE>
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $28,571,428
SERIES 1996-Q
Initial Principal Amount.......... $1,028,571,429 (including
Collateral Interest)
Class A Certificate Rate.......... LIBOR plus a spread of 0.13% per
annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Current Principal Amount.......... $1,028,571,429
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Amortization $75,000,000
Amount............................
Class A Controlled Amortization First day of the Due Period
Date.............................. relating to the March 2001
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1996-Q)
Enhancement....................... Collateral Interest and Cash
Collateral Account
Initial Collateral Invested $128,571,429
Amount............................
Initial Cash Collateral Amount.... $10,285,714
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... April 2003 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $51,428,571
SERIES 1996-R
Initial Principal Amount.......... $457,142,858 (including
Collateral Interest)
Class A Certificate Rate.......... LIBOR plus a spread of 0.07% per
annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Amortization $33,333,333.33
Amount............................
Class A Controlled Amortization First day of the Due Period
Date.............................. relating to the June 1999
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely for Interchange allocable
to Series 1996-R)
Enhancement.......................
Collateral Interest and Cash
Collateral Account
Initial Collateral Invested
Amount............................ $57,142,858
A-6
<PAGE>
Initial Cash Collateral Amount.... $4,571,429
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... July 2001 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $22,857,142
SERIES 1996-S
Initial Principal Amount.......... $800,000,000 (including
Collateral Interest)
Class A Certificate Rate.......... LIBOR plus a spread of 0.125% per
annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Amortization $116,666,666.67
Amount............................
Class A Controlled Amortization First day of the Due Period
Date ............................. relating to the July 2002
Distribution Date
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1996-S)
Enhancement....................... Collateral Interest and Cash
Collateral Account
Initial Collateral Invested $100,000,000
Amount............................
Initial Cash Collateral Amount.... $8,000,000
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... August 2004 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Invested Amount is
reduced to an amount less than
or equal to $40,000,000
SERIES 1997-T
Initial Principal Amount.......... $685,714,286 (including
Collateral Interest)
Class A Certificate Rate.......... LIBOR plus a spread of 0.07% per
annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Accumulation $50,000,000, except that, if the
Amount............................ commencement of the Accumulation
Period is postponed, as
permitted for such series, the
Controlled Accumulation Amount
may be higher
A-7
<PAGE>
Accumulation Period Commencement First day of the Due Period
Date ............................. relating to the October 1999
Distribution Date, which may be
delayed to no later than the
first day of the Due Period
relating to the September 2000
Distribution Date.
Class A Scheduled Payment Date.... September 2000 Distribution Date.
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1997-T)
Enhancement....................... Collateral Interest and Cash
Collateral Account
Initial Collateral Invested $85,714,286
Amount............................
Initial Cash Collateral Amount.... $6,857,143
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... October 2002 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Adjusted Invested
Amount is reduced to an amount
less than or equal to
$34,285,715
SERIES 1997-U
Initial Principal Amount.......... $457,142,858 (including
Collateral Interest)
Class A Certificate Rate.......... LIBOR plus a spread of 0.115% per
annum
Scheduled Interest Payment The fifteenth day of each month
Dates............................. (or, if such day is not a
business day, the next
succeeding business day)
Invested Percentage of Principal Principal Amount at the end of
Receivables....................... the Revolving Period divided by
the greater of Aggregate
Principal Receivables or the sum
of all numerators specified for
all Series in respect of
Principal Receivables
Class A Controlled Accumulation $33,333,333.33, except that, if
Amount............................ the commencement of the
Accumulation Period is
postponed, as permitted for such
series, the Controlled
Accumulation Amount may be
higher
Accumulation Period Commencement First day of the Due Period
Date ............................. relating to the November 2001
Distribution Date, which may be
delayed to no later than the
first day of the Due Period
relating to the October 2002
Distribution Date
Class A Scheduled Payment Date....
Monthly Servicing Fee............. 2.00% (of which 1.25% is payable
solely from Interchange
allocable to Series 1997-U)
Enhancement....................... Collateral Interest and Cash
Collateral Account
Initial Collateral Invested $57,142,858
Amount............................
Initial Cash Collateral Amount.... $4,571,429
Minimum First Chicago Interest 7% (or such lower percentage
Percentage........................ acceptable to the Rating
Agencies)
Series Termination Date........... November 2004 Distribution Date
Repurchase Terms.................. Optional repurchase by the Seller
on any Distribution Date on or
after the Adjusted Invested
Amount is reduced to an amount
less than or equal to
$22,857,142
A-8
<PAGE>
$
FIRST CHICAGO MASTER TRUST II
FLOATING RATE ASSET BACKED CERTIFICATES
SERIES 1998-
FCC NATIONAL BANK
Seller and Servicer
---------------------
PROSPECTUS SUPPLEMENT
, 1998
---------------------
[LIST OF UNDERWRITERS]
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE CLASS A CERTIFICATES IN ANY STATE WHERE THE OFFER IS
NOT PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS AS OF ANY DATE OTHER THAN THE DATES STATED ON
THEIR RESPECTIVE COVERS.
DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS OF THE CLASS A CERTIFICATES AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THE CLASS A
CERTIFICATES WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL ,
1998.
<PAGE>
Exhibits 5.1 and 23.1
April 7, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: First Chicago Master Trust II
Form S-3 Registration Statement
-------------------------------
Ladies and Gentlemen:
I am Executive Vice President, General Counsel and Secretary of First
Chicago NBD Corporation, a Delaware corporation, which is the sole parent
corporation of FCC National Bank, a national banking association (the "Bank").
In the aforementioned capacities, I am, or members of my staff subject to my
supervision are, familiar with (i) the Articles of Association and By-Laws of
the Bank; (ii) the Registration Statement on Form S-3 of the Bank as registrant
concurrently being filed with the Securities and Exchange Commission (the
"Registration Statement") relating to the proposed issuance and sale of asset
backed certificates (the "Certificates") of First Chicago Master Trust II (the
"Trust"), a trust created by the Bank and to which the Bank has and will
transfer receivables generated in a portfolio of revolving credit cards
accounts; (iii) the Pooling and Servicing Agreement dated as of June 1, 1990, as
amended to the date hereof, between the Bank and Norwest Bank Minnesota,
National Association, as trustee, filed as an exhibit to the Registration
Statement (the "Pooling and Servicing Agreement"); (iv) the form of the Series
Supplement to the Pooling and Servicing Agreement filed concurrently as an
exhibit to the Registration Statement (the "Supplement"); and (v) such other
documents, proceedings and matters as I deem necessary in order to enable me to
render the opinion hereinafter expressed.
The Certificates will be sold or delivered from time to time as set forth
in the Registration Statement, any amendment thereto, the prospectus contained
therein (the "Prospectus") and supplements to the Prospectus (each, a
"Prospectus Supplement"). A form of Prospectus Supplement is an exhibit to the
Registration Statement.
Based upon the foregoing, it is my opinion that, assuming due execution of
the applicable Supplement relating to a series of Certificates, upon the
issuance, authentication and delivery of the Certificates in accordance with the
provisions of the Pooling and Servicing Agreement and such Supplement, against
payment therefor, the Certificates will be legally issued, fully paid and
nonassessable Certificates representing undivided interests in the Trust
enforceable in accordance with their terms, subject, as to enforcement of
remedies, to
<PAGE>
CONTINUING OUR LETTER OF APRIL 7, 1998
Sheet no. 2
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and to general
principles of equity, and will be entitled to the benefits of the Pooling and
Servicing Agreement and the Supplement.
I am a member of the Bar of the State of Illinois, and I do not express any
opinion herein concerning any law other than the law of the State of Illinois,
the federal law of the United States and the Delaware General Corporation Law.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name wherever it appears in the
Registration Statement, including the Prospectus and any Prospectus Supplement
constituting a part thereof, as originally filed or as subsequently amended.
Very truly yours,
/s/ Sherman I. Goldberg
Executive Vice President,
General Counsel and Secretary
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints W.G. Jurgensen, Sherman I. Goldberg, Robert A.
Rosholt, Peter J. Nowak, Jr., M. Eileen Kennedy and Sharon A. Renchof, jointly
and severally, his attorney-in-fact, each with power of substitution, for him in
any and all capacities to sign a Registration Statement on Form S-3 relating to
certificates or other securities of FCC National Bank (the "Bank") or any trust,
partnership, corporation or other entity established by the foregoing, to be
issued pursuant to resolutions adopted by the Board of Directors of the Bank on
December 9, 1997, and any amendments thereto (including any post-effective
amendments) and any subsequent registration statement filed by the Bank pursuant
to Rule 462(b) of the Securities Act of 1933, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission hereby ratifying and confirming all that each
of said attorneys-in-fact, or his substitute or substitutes, may do or cause to
be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Joseph M. Dudzinsky Director
- ------------------------
Joseph M. Dudzinsky
/s/ Richard P. Eckman Director
- ------------------------
Richard P. Eckman
/s/ William J. Garner Director
- ------------------------
William J. Garner
/s/ Joyce D. Hunter Director
- ------------------------
Joyce D. Hunter
/s/ W.G. Jurgensen Director and
- ------------------------ Principal Executive Officer
W. G. Jurgensen
/s/ Michael J. Majchrzak Director
- ------------------------
Michael J. Majchrzak
/s/ Anthony K. Metta Director
- ------------------------
Anthony K. Metta
/s/ Timothy P. Moen Director
- ------------------------
Timothy P. Moen
</TABLE>
<PAGE>
<TABLE>
<S> <C>
/s/ Ralph R. Mueller Director
- ------------------------
Ralph R. Mueller
/s/ Peter J. Nowak, Jr. Director, Principal Accounting
- ------------------------ Officer and Principal Financial Officer
Peter J. Nowak, Jr.
/s/ Jeremiah P. Shea Director
- ------------------------
Jeremiah P. Shea
</TABLE>
Dated: March 10, 1998
