<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration file no. 033-82882-01
Registration file no. 033-99336-01
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS
SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 15, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 15, 1996)
CIRCUIT CITY CREDIT CARD MASTER TRUST
$162,000,000 CLASS A FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1996-1
$22,500,000 CLASS B FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1996-1
FIRST NORTH AMERICAN NATIONAL BANK
TRANSFEROR AND SERVICER
---------------------
Each Class A Floating Rate Asset Backed Certificate (collectively, the
"Class A Certificates") and each Class B Floating Rate Asset Backed Certificate
(collectively, the "Class B Certificates" and, together with the Class A
Certificates, the "Certificates") will represent an undivided interest in the
Circuit City Credit Card Master Trust (the "Trust") created pursuant to a master
pooling and servicing agreement between First North American National Bank
("FNANB") and Bankers Trust Company, as trustee (the "Trustee"). In addition, a
Collateral Indebtedness Interest having an initial principal amount of
$29,250,000 and Class D Certificates having an initial principal amount of
$11,250,000 (each as defined herein) will be issued as part of Series 1996-1 and
will be subordinated to the Certificates as described herein. The Collateral
Indebtedness Interest and the Class D Certificates are not offered hereby. The
property of the Trust includes receivables (the "Receivables") generated from
time to time in a portfolio of consumer revolving credit card accounts (the
"Accounts"), all monies due or to become due in payment of the Receivables, and
certain other property, as more fully described herein. FNANB has offered and
sold and from time to time may offer and sell other Series that evidence
undivided interests in certain assets of the Trust, which may have terms
significantly different from the Certificates. The issuance of such other Series
may affect the amount or timing of payments on the Certificates. FNANB will own
the remaining undivided interest in the Trust not represented by the
Certificates, the Collateral Indebtedness Interest or the Class D Certificates
or by other outstanding Series issued by the Trust. FNANB will also service the
Receivables.
Interest will accrue on the Class A Certificates from , 1996 (the
"Closing Date") through the day preceding the December 1996 Distribution Date
and with respect to each Interest Period (as defined herein) thereafter at a
rate of 0. % per annum above the London interbank offered rate for one-month
United States dollar deposits ("LIBOR"), determined as described herein,
prevailing on the related LIBOR Determination Date (as defined herein) with
respect to such period (the "Class A Certificate Rate"). Interest will accrue on
the Class B Certificates from the Closing Date through the day preceding the
December 1996 Distribution Date and with respect to each Interest Period
thereafter at a rate of 0. % per annum above LIBOR, determined as
described herein, prevailing on the related LIBOR Determination Date with
respect to such period (the "Class B Certificate Rate"). The initial LIBOR
Determination Date with respect to the Certificates is , 1996.
Interest with respect to the Certificates will be distributed on the 15th day of
each month (or, if such 15th day is not a business day, the next succeeding
business day,
(Continued on the following page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS NO
ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH IN "RISK FACTORS" ON PAGE 15 IN THE
PROSPECTUS, WHICH INCLUDES INFORMATION ABOUT THE TRANSFER OF THE RECEIVABLES,
THE COMMINGLING OF COLLECTIONS, THE EFFECTS OF THE INSOLVENCY OF FNANB, CONSUMER
LAWS AND LITIGATION, DEBTOR RELIEF LAWS AND THE DEPENDENCE OF FNANB ON CIRCUIT
CITY STORES, INC.
---------------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST NORTH AMERICAN
NATIONAL BANK, CIRCUIT CITY STORES, INC. OR ANY AFFILIATE THEREOF. A
CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THE CERTIFICATES NOR THE
UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT TRANSFEROR(1)(2)
- --------------------------------------------------------------------------------------------------------------------
Per Class A Certificate.............................. % % %
- --------------------------------------------------------------------------------------------------------------------
Per Class B Certificate.............................. % % %
- --------------------------------------------------------------------------------------------------------------------
Total................................................ $ $ $
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from , 1996.
(2) Before deduction of expenses estimated to be $ .
---------------------
The Certificates are offered by the Underwriters when, as and if issued by
the Trust and accepted by the Underwriters and subject to the Underwriters'
right to reject orders in whole or in part. It is expected that the Certificates
will be delivered in book-entry form on or about , 1996, through the
facilities of The Depository Trust Company, Cedel Bank, societe anonyme, and the
Euroclear System.
---------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
CS FIRST BOSTON
GREENWICH CAPITAL MARKETS, INC.
UNDERWRITER OF THE CLASS B CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
, 1996
<PAGE> 2
(Continued from the cover page)
each, a "Distribution Date"), commencing with the December 1996 Distribution
Date. Principal on the Class A Certificates is scheduled to be paid on the
November 2001 Distribution Date, but may be paid earlier or later under certain
circumstances described herein. Principal on the Class B Certificates is
scheduled to be paid on the January 2002 Distribution Date, but may be paid
earlier or later under certain circumstances described herein. Principal on the
Class B Certificates will not be paid until the Class A Certificates have been
paid in full. See "Maturity Assumptions."
The Class B Certificates will be subordinated to the Class A Certificates
as described herein. The Collateral Indebtedness Interest and the Class D
Certificates will be subordinated to the Class A Certificates and the Class B
Certificates as described herein. The Certificates will also be entitled to the
benefits of the Interest Rate Caps (as defined herein) and the funds, if any, on
deposit in a cash collateral account (the "Cash Collateral Account"), as
described herein. See "Description of the Certificates -- Cash Collateral
Account."
Application will be made to list the Class A Certificates and the Class B
Certificates on the Luxembourg Stock Exchange.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
The Certificates constitute a separate Series of certificates being offered
by the Transferor from time to time pursuant to its Prospectus dated November
15, 1996. This Prospectus Supplement does not contain complete information about
the offering of the Certificates. Additional information is contained in the
Prospectus, and purchasers are urged to read both this Prospectus Supplement and
the Prospectus in full. Non-U.S. investors are also urged to read the Global
Prospectus Supplement. Sales of the Certificates may not be consummated unless
the purchaser has received both this Prospectus Supplement and the Prospectus.
PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS
<TABLE>
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PAGE
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Summary of Terms....................... S-3
FNANB's Credit Card Portfolio.......... S-11
Assessment of Finance and Other
Charges........................... S-11
Delinquency and Loss Experience...... S-11
The Receivables........................ S-14
Maturity Assumptions................... S-17
Receivable Yield Considerations........ S-18
First North American National Bank and
Circuit City Stores, Inc. ........... S-19
Description of the Certificates........ S-19
Interest Payments.................... S-19
The Interest Rate Caps............... S-21
The Interest Rate Cap Provider....... S-21
Principal Payments................... S-22
Postponement of Accumulation
Period............................ S-23
Book-Entry Registration.............. S-23
Subordination of the Class B
Certificates, the Collateral
Indebtedness Interest and the
Class D Certificates.............. S-23
<CAPTION>
PAGE
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<S> <C>
Invested Percentages................. S-23
Principal Funding Account............ S-26
Reserve Account...................... S-27
Reallocation of Cash Flows........... S-28
Application of Collections........... S-30
Cash Collateral Account.............. S-35
Allocation of Investor Default
Amount; Adjustment Amount;
Investor Charge-Offs.............. S-36
Allocation of Adjustment Amounts..... S-38
Early Amortization Events............ S-39
Servicing Compensation............... S-41
Amendments to the Agreement Relating to
FASIT Election....................... S-42
Underwriting........................... S-43
Legal Matters.......................... S-44
Index of Terms for Prospectus
Supplement........................... S-45
Annex I: Prior Series Issued........... S-48
</TABLE>
S-2
<PAGE> 3
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus Supplement and the accompanying Prospectus.
A listing of the pages on which some of such terms are defined is found in the
"Index of Terms for Prospectus Supplement" and the "Index of Terms for
Prospectus."
Type of Securities......... $162,000,000 aggregate principal amount of Class A
Floating Rate Asset Backed Certificates, Series
1996-1 (the "Class A Certificates") and
$22,500,000 aggregate principal amount of Class B
Floating Rate Asset Backed Certificates, Series
1996-1 (the "Class B Certificates").
Overview of the
Transaction................ The Trust was formed for the purpose of holding the
Receivables and to provide for the issuance of
the Certificates and other similar securities.
Each Certificate will represent the right to
receive a portion of the collections on the
Receivables. Such collections will be used to pay
interest and principal due on such Certificate on
the applicable payment date. The Class A
Certificates will also have the benefits of
excess collections of finance charges, the
Interest Rate Caps, amounts on deposit in the
Cash Collateral Account, if any, and the
subordination of the Class B Certificates, the
Collateral Indebtedness Interest and the Class D
Certificates. The Class B Certificates will also
have the benefits of excess collections of
finance charges not needed to cover shortfalls in
respect of the Class A Certificates, the Interest
Rate Caps, amounts on deposit in the Cash
Collateral Account, if any, not needed to cover
shortfalls in respect of the Class A Certificates
and the subordination of the Collateral
Indebtedness Interest and the Class D
Certificates.
Trust...................... The Circuit City Credit Card Master Trust (the
"Trust") was formed pursuant to a master pooling
and servicing agreement, dated as of October 4,
1994, as amended (the "Agreement"), between First
North American National Bank, a national banking
association ("FNANB"), as transferor (in such
capacity, the "Transferor") and as servicer (in
such capacity, the "Servicer"), and Bankers Trust
Company, as trustee (the "Trustee"). The Trust,
as a master trust, has previously issued three
other Series of certificates, and may issue
additional Series from time to time, each
pursuant to a series supplement to the Agreement
(each, a "Series Supplement"). See "Annex I" for
a description of certain terms of the previously
issued Series. The Certificates are part of
Series 1996-1 of the Trust ("Series 1996-1").
Series 1996-1 is part of Group One. The
Certificates will be issued pursuant to the
Agreement as supplemented by the Series 1996-1
Supplement (the "Series 1996-1 Supplement") (the
term "Agreement," unless the context requires
otherwise, refers to the Agreement as
supplemented by the Series 1996-1 Supplement). An
interest referred to as the "Collateral
Indebtedness Interest" and deemed to be a class
of investor certificates and a class of investor
certificates referred to as the "Class D
Certificates" will also be issued pursuant to the
Agreement as part of Series 1996-1. The Class D
Certificates will be held by the Transferor and
will not be transferable without the delivery of
a tax opinion to the effect that such transfer
would not adversely affect the tax
characterization of the Trust. The Transferor
may, at its option during the Revolving Period,
and subject
S-3
<PAGE> 4
to the satisfaction of certain conditions set
forth in the Series 1996-1 Supplement, cause the
issuance of additional Class D Certificates.
There can be no assurance as to whether the
Transferor will elect to issue any such
additional Class D Certificates. As used herein,
the term "Certificates" refers only to the Class
A Certificates and the Class B Certificates.
As used in this Prospectus Supplement, the term
"Certificateholders" refers to holders of the
Certificates, the term "Class A
Certificateholders" refers to holders of the
Class A Certificates, the term "Class B
Certificateholders" refers to holders of the
Class B Certificates, the term "Collateral
Indebtedness Holder" refers to the holder of the
Collateral Indebtedness Interest and the term
"Class D Certificateholders" refers to holders of
the Class D Certificates.
Trust Assets............... The property of the Trust includes and will include
receivables (the "Receivables") arising under
certain consumer revolving credit card accounts
(the "Accounts"), including any Additional
Accounts following their designation and any
Automatic Additional Accounts following their
creation, selected by the Transferor from the
portfolio of consumer revolving credit card
accounts owned or acquired by the Transferor, all
monies due or to become due in payment of the
Receivables (including recoveries on charged-off
Receivables), all proceeds of the Receivables and
proceeds of credit insurance policies relating to
the Receivables, all monies on deposit in certain
bank accounts of the Trust (excluding investment
earnings on such amounts, unless otherwise
specified in the Agreement or the related Series
Supplement), the benefit of funds, if any, on
deposit in the Cash Collateral Account, the right
to payment under an interest rate cap agreement
for the exclusive benefit of the Class A
Certificateholders (the "Class A Interest Rate
Cap") and the right to payment under an interest
rate cap agreement for the exclusive benefit of
the Class B Certificateholders (the "Class B
Interest Rate Cap" and, together with the Class A
Interest Rate Cap, the "Interest Rate Caps"),
each provided by NationsBanc Financial Products,
Inc. (the "Interest Rate Cap Provider"), and any
Enhancement with respect to any particular Series
or Class. The term "Enhancement" has the meaning
assigned to such term in the Prospectus, except
that in this Prospectus Supplement with respect
to the Series 1996-1 Certificates, the term
"Enhancement" does not include the Interest Rate
Caps. The Transferor is currently designating
Automatic Additional Accounts; however, the
Transferor may discontinue the inclusion of
Automatic Additional Accounts at any time, in its
sole discretion.
Interest and Principal..... Each of the Certificates offered hereby represents
an undivided interest in the Trust. Each Class A
Certificate represents the right to receive
payments of (i) interest at the rate of 0. %
per annum above LIBOR determined as set forth
under "Description of the
Certificates -- Interest Payments" (the "Class A
Certificate Rate"), accruing from ,
1996 (the "Closing Date") and (ii) principal on
the November 2001 Distribution Date (the "Class A
Expected Final Distribution Date") or, under
certain limited circumstances, during the Early
Amortization Period, funded from a percentage of
the payments received with respect to the
Receivables and certain other
S-4
<PAGE> 5
funds (including, under the circumstances
specified herein, funds, if any, on deposit in
the Reserve Account, the Cash Collateral Account
and the Principal Funding Account) as described
herein.
Each Class B Certificate represents the right to
receive payments of (i) interest at the rate of
0. % per annum above LIBOR (the "Class B
Certificate Rate"), accruing from the Closing
Date and (ii) principal on the January 2002
Distribution Date (the "Class B Expected Final
Distribution Date") or, under certain limited
circumstances, during the Early Amortization
Period, funded from a percentage of the payments
received with respect to the Receivables and
certain other funds (including, under the
circumstances specified herein, funds, if any, on
deposit in the Reserve Account, the Cash
Collateral Account and the Principal Funding
Account) as described herein.
The aggregate undivided interest in the Principal
Receivables represented by the Class A
Certificates (the "Class A Invested Amount")
initially will equal $162,000,000 (the "Class A
Initial Invested Amount") and will decline as
principal with respect to the Class A
Certificates is deposited in the Principal
Funding Account (or, without duplication, paid to
the Class A Certificateholders) or as Class A
Investor Charge-Offs occur.
The aggregate undivided interest in the Principal
Receivables represented by the Class B
Certificates (the "Class B Invested Amount")
initially will equal $22,500,000 (the "Class B
Initial Invested Amount") and will decline as
principal with respect to the Class B
Certificates is deposited in the Principal
Funding Account (or, without duplication, paid to
the Class B Certificateholders), as collections
of Principal Receivables allocable to the Class B
Certificates are reallocated for the benefit of
the Class A Certificates, as Class A Allocable
Amounts are allocated to the Class B
Certificates, or as Class B Investor Charge-Offs
occur.
The final distribution of principal and interest on
the Certificates will be made no later than the
October 2006 Distribution Date (the "Stated
Series Termination Date"). After the Stated
Series Termination Date, the Trust will have no
further obligation to pay principal or interest
on the Certificates.
The Certificates will include the right to receive
varying percentages of the collections of Finance
Charge Receivables and Principal Receivables
received during each calendar month (each, a "Due
Period"). See "Description of the
Certificates -- Invested Percentages" herein.
Receivables................ The aggregate amount of Receivables in the Accounts
as of September 30, 1996 was $1,005,233,957
comprised of $989,342,991 of Principal
Receivables and $15,890,966 of Finance Charge
Receivables. The Finance Charge Receivables will
not affect the Invested Amount or the Transferor
Amount, which are determined on the basis of the
amount of Principal Receivables in the Trust. The
aggregate undivided interest in the Principal
Receivables in the Trust evidenced by the
Certificates, the Collateral Indebtedness
Interest and the Class D Certificates will never
exceed the Invested Amount regardless of the
total amount of Principal Receivables in the
Trust at any time.
S-5
<PAGE> 6
Servicing Fee.............. The Servicer will receive a monthly fee as
servicing compensation from the Trust. The
portion of the monthly servicing fee allocable to
Series 1996-1 is equal to one-twelfth of the
product of 2.00% per annum and the Invested
Amount. The portion of the monthly servicing fee
allocable to the Class A Certificates is equal to
one-twelfth of the product of 2.00% per annum and
the Class A Invested Amount. The portion of the
monthly servicing fee allocable to the Class B
Certificates is equal to one-twelfth of the
product of 2.00% per annum and the Class B
Invested Amount. See "Description of the
Certificates -- Servicing Compensation" herein
and in the Prospectus.
Interest Payments.......... Interest on the Class A Certificates will be
distributed on each Distribution Date in an
amount equal to the product of (i) a fraction,
the numerator of which is the actual number of
days in the related Interest Period and the
denominator of which is 360, (ii) the Class A
Certificate Rate for the related Interest Period
and (iii) the principal amount of the Class A
Certificates as of the preceding Record Date (or,
in the case of the first Distribution Date, as of
the Closing Date).
Interest on the Class B Certificates will be
distributed on each Distribution Date in an
amount equal to the product of (i) a fraction,
the numerator of which is the actual number of
days in the related Interest Period and the
denominator of which is 360, (ii) the Class B
Certificate Rate for the related Interest Period
and (iii) the principal amount of the Class B
Certificates as of the preceding Record Date (or,
in the case of the first Distribution Date, as of
the Closing Date).
Interest on the Class A Certificates or the Class B
Certificates for any Distribution Date due but
not paid on such Distribution Date will be
payable on the next succeeding Distribution Date,
together with additional interest on such amount
at the Class A Certificate Rate or the Class B
Certificate Rate, as applicable, plus 2.00% per
annum. "Interest Period" means, with respect to
any Distribution Date, the period from the
previous Distribution Date through the day
preceding such Distribution Date, except that the
initial Interest Period will be the period from
the Closing Date through the day preceding the
initial Distribution Date.
Revolving Period and
Accumulation Period...... The Revolving Period with respect to the
Certificates (the "Revolving Period") is
scheduled to end and the Accumulation Period with
respect to the Certificates (the "Accumulation
Period") is scheduled to commence at the close of
business on the last day of the October 2000 Due
Period. Subject to the conditions set forth under
"Description of the Certificates -- Postponement
of Accumulation Period" herein, the day on which
the Revolving Period ends and the Accumulation
Period commences may be delayed to no later than
the close of business on the last day of the
September 2001 Due Period. Unless an Early
Amortization Event has occurred, (i) the Class A
Accumulation Period (the "Class A Accumulation
Period") will commence at the close of business
on the last day of the Revolving Period and end
on the earliest of (a) the commencement of the
Early Amortization Period, (b) the payment in
full to the Class A Certificateholders of the
Class A Invested Amount or (c) the Stated Series
Termination Date, and (ii) the Class B
Accumulation Period (the
S-6
<PAGE> 7
"Class B Accumulation Period") will commence on
the Distribution Date on which the Class A
Invested Amount is paid in full or, if the Class
A Invested Amount is paid in full on the Class A
Expected Final Distribution Date, at the close of
business on the Class A Expected Final
Distribution Date and end on the earliest of (a)
the commencement of the Early Amortization
Period, (b) the payment in full to the Class B
Certificateholders of the Class B Invested Amount
or (c) the Stated Series Termination Date.
No principal will be payable to the Class A
Certificateholders until the Class A Expected
Final Distribution Date or, upon the occurrence
of an Early Amortization Event, the first
Distribution Date with respect to the Early
Amortization Period. No principal will be payable
to the Class B Certificateholders until the Class
B Expected Final Distribution Date or, upon the
occurrence of an Early Amortization Event, until
the Class A Invested Amount is paid in full (the
"Class B Principal Commencement Date"). No
principal will be payable to the Class B
Certificateholders until the Class A Certificates
have been paid in full. For the period beginning
on the Closing Date and ending with the
commencement of the Accumulation Period or the
Early Amortization Period, collections of
Principal Receivables otherwise allocable to the
Certificateholders (other than any portion of
such collections applied as Reallocated Principal
Collections) will, subject to certain
limitations, be treated as Shared Principal
Collections and applied to cover principal
payments due to or for the benefit of
certificateholders of other Series, if so
specified in the Series Supplements for such
other Series, be deposited in the Excess Funding
Account, be paid to the Transferor as holder of
the Exchangeable Transferor Certificate, or, in
certain limited circumstances, be paid to the
Collateral Indebtedness Holder or the Class D
Certificateholders. See "Description of the
Certificates -- Early Amortization Events" herein
and in the Prospectus for a discussion of the
events which might lead to the termination of the
Revolving Period prior to the scheduled
commencement of the Accumulation Period.
Subordination of the Class
B Certificates, the
Collateral
Indebtedness Interest and
the Class D
Certificates............. The Class B Certificates, the Collateral
Indebtedness Interest and the Class D
Certificates will be subordinated as described
herein to the extent necessary to fund certain
payments with respect to the Class A
Certificates. In addition, the Collateral
Indebtedness Interest and the Class D
Certificates will be subordinated as described
herein to the extent necessary to fund certain
payments with respect to the Class B
Certificates. If the amount on deposit in the
Cash Collateral Account is zero and the
Collateral Indebtedness Amount and the Class D
Invested Amount are reduced to zero, the Class B
Certificateholders will bear directly the credit
and other risks associated with their undivided
interest in the Trust. To the extent the Class B
Invested Amount is reduced, the percentage of
collections of Finance Charge Receivables
allocable to the Class B Certificateholders with
respect to subsequent Due Periods will be
reduced. Moreover, to the extent the amount of
such reduction in the Class B Invested Amount is
not reimbursed, the amount of principal
distributable to the Class B
S-7
<PAGE> 8
Certificateholders will be reduced. See
"Description of the Certificates -- Invested
Percentages" and "-- Subordination of the Class B
Certificates, the Collateral Indebtedness
Interest and the Class D Certificates" herein.
Amounts Available as
Enhancement.............. On each Distribution Date, the amount of
Enhancement available to the Certificateholders
will equal the lesser of (i) the sum of the
Collateral Indebtedness Amount, the Class D
Invested Amount and the amount, if any, on
deposit in the Cash Collateral Account (the
"Available Cash Collateral Amount")
(collectively, the "Available Enhancement
Amount") and (ii) the Required Enhancement
Amount. The "Required Enhancement Amount" means,
with respect to any Distribution Date, subject to
certain limitations more fully described herein,
the product of the Invested Amount and 18%, but
not less than $6,750,000; provided, however, that
if an Early Amortization Event occurs, then the
Required Enhancement Amount shall equal the
Required Enhancement Amount on the Distribution
Date immediately preceding the occurrence of such
Early Amortization Event. If on any Distribution
Date, the Available Enhancement Amount (after
giving effect to any issuance of additional Class
D Certificates on such Distribution Date, which
issuance will be at the sole option of the
Transferor and subject to the satisfaction of
certain conditions) is less than the Required
Enhancement Amount, certain Excess Spread and
Shared Excess Finance Charge Collections
allocable to Series 1996-1 will be used to
increase the Available Enhancement Amount to the
extent of such shortfall. If on any Distribution
Date the Available Enhancement Amount exceeds the
Required Enhancement Amount, such excess may be
applied in accordance with the Loan Agreement and
may not be available to the Certificateholders.
Cash Collateral Account.... A cash collateral account (the "Cash Collateral
Account") will be held in the name of the Trustee
for the benefit of the Certificateholders, the
Collateral Indebtedness Holder and the Class D
Certificateholders. The Cash Collateral Account
will have a beginning balance of zero, which may
be increased to the extent collections of Excess
Spread and Shared Excess Finance Charge
Collections allocable to Series 1996-1 are
required to be or are otherwise deposited
therein. At the Transferor's election, subject to
the provisions of the Loan Agreement, any funding
of the Cash Collateral Account may result in a
reduction of the Collateral Indebtedness Amount
or the Class D Invested Amount, provided that,
after giving effect to such reduction on any
Distribution Date, the Available Enhancement
Amount equals or exceeds the Required Enhancement
Amount. See "Description of the
Certificates -- Cash Collateral Account" herein.
Withdrawals may be made from the Cash Collateral
Account to fund the amounts described under
"Description of the Certificates -- Cash
Collateral Account."
Interest Rate Caps......... On the Closing Date, the Transferor will enter into
the Class A Interest Rate Cap and the Class B
Interest Rate Cap with the Interest Rate Cap
Provider for the exclusive benefit of the Class A
Certificateholders and the Class B
Certificateholders, respectively. The Transferor
will assign to the Trustee, for the benefit of
the Class A Certificateholders and the Class B
Certificateholders, the right to payment under
the Class A Interest Rate Cap and the Class B
Interest
S-8
<PAGE> 9
Rate Cap, respectively. On each Distribution Date
on which the Class A Certificate Rate or the
Class B Certificate Rate for the related Interest
Period exceeds the Class A Cap Rate or the Class
B Cap Rate, respectively, the Interest Rate Cap
Provider will make a payment to the Trustee, on
behalf of the Trust, based on the amount of such
excess and the notional amount of the applicable
Interest Rate Cap, and such payment will be
included in Class A Available Funds or Class B
Available Funds, respectively. The Class A
Notional Amount will at all times prior to the
termination of the Class A Interest Rate Cap
equal the Class A Invested Amount plus the
Principal Funding Account Balance, and the Class
B Notional Amount will at all times prior to the
termination of the Class B Interest Rate Cap
equal the Class B Invested Amount plus, after the
Class A Invested Amount has been paid in full,
the Principal Funding Account Balance. The Class
A Interest Rate Cap will terminate on the earlier
of the day the Class A Certificates are paid in
full and the day following the Stated Series
Termination Date. The Class B Interest Rate Cap
will terminate on the earlier of the day the
Class B Certificates are paid in full and the day
following the Stated Series Termination Date;
provided, however, that either of the Interest
Rate Caps may be terminated at an earlier date if
the Servicer has obtained a Replacement Interest
Rate Cap or a Qualified Substitute Arrangement
with respect thereto.
Optional Repurchase........ The Class A Certificates and the Class B
Certificates will be subject to optional
repurchase by the Transferor on any Distribution
Date after the Invested Amount is reduced to an
amount less than or equal to 5% of the highest
Invested Amount prior to such repurchase, if
certain conditions set forth in the Agreement are
met. The repurchase price of the Certificates
will be equal to the Invested Amount thereof plus
accrued and unpaid interest thereon. See
"Description of the Certificates -- Final Payment
of Principal; Termination" in the Prospectus.
Tax Status................. McGuire, Woods, Battle & Boothe, L.L.P., special
tax counsel to the Transferor, is of the opinion
that under existing law the Certificates will be
characterized as indebtedness for Federal income
tax purposes. Under the Agreement, the Transferor
will agree, and the Certificate Owners will be
deemed to agree, to treat the Certificates as
debt for Federal, state and local income and
franchise tax purposes. See "Certain Federal
Income Tax Consequences" in the Prospectus for
additional information concerning the application
of Federal income tax laws.
ERISA Considerations....... If the Trust's assets were deemed to be "plan
assets" of a Benefit Plan investor, it is
uncertain whether existing exemptions from the
"prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code would apply to
all transactions involving the Trust's assets.
Accordingly, Class A Certificates and Class B
Certificates may not be acquired by Benefit Plan
investors, including but not limited to an
insurance company general account. Each
Certificate Owner of a Class A Certificate or a
Class B Certificate, by its acceptance thereof,
will be deemed to have represented that it is not
a Benefit Plan investor. See "ERISA
Considerations" in the Prospectus.
S-9
<PAGE> 10
Class A Certificate
Rating..................... It is a condition to the issuance of the Class A
Certificates that they be rated in the highest
rating category by at least one nationally
recognized Rating Agency. The rating of the Class
A Certificates is based primarily on the value of
the Receivables as determined by the applicable
Rating Agency and the terms of the Interest Rate
Caps, the Class B Certificates, the Collateral
Indebtedness Interest and the Class D
Certificates. See "Description of the
Certificates -- The Interest Rate Caps" and
"-- Subordination of the Class B Certificates,
the Collateral Indebtedness Interest and the
Class D Certificates" herein and "Risk
Factors -- Certificate Rating" in the Prospectus.
Class B Certificate
Rating..................... It is a condition to the issuance of the Class B
Certificates that they be rated in one of the
three highest rating categories by at least one
nationally recognized Rating Agency. The rating
of the Class B Certificates is based primarily on
the value of the Receivables as determined by the
applicable Rating Agency and the terms of the
Interest Rate Caps, the Collateral Indebtedness
Interest and the Class D Certificates. See
"Description of the Certificates -- The Interest
Rate Caps" and "-- Subordination of the Class B
Certificates, the Collateral Indebtedness
Interest and the Class D Certificates" herein and
"Risk Factors -- Certificate Rating" in the
Prospectus.
S-10
<PAGE> 11
FNANB'S CREDIT CARD PORTFOLIO
ASSESSMENT OF FINANCE AND OTHER CHARGES
FNANB offers several private label credit cards which can be used to
purchase merchandise, repair services and service contracts at Circuit City
stores, including a "regular" card (the "Regular Card") and an "extended payment
plan" card (the "EPP Card"). Credit insurance premiums related to these accounts
are also financed through the cards. In general, the EPP Card is issued to
applicants who meet FNANB's underwriting standards but, due to their limited
credit histories, require terms and conditions that are different from the
Regular Card.
The current monthly periodic rate finance charge applicable to the Regular
Card program is equal to one-twelfth of the sum of the prime rate as of the 15th
day of each month plus 13.8%. The Regular Card carries a maximum annual
percentage rate of 24% and a minimum annual percentage rate of 20.5%. The EPP
Card is a fixed rate credit card, with a current annual percentage rate of 24%.
Monthly periodic rate finance charges assessed on new purchases posted to
an account during a billing cycle accrue on such new purchases beginning on the
date of the transaction or the first day of the billing cycle, whichever is
later. If a finance charge is imposed, it is calculated by multiplying the
monthly periodic rate by the average daily balance of the account during the
billing cycle. The average daily balance is determined by summing the daily
balances for the account for each day in the billing cycle, and dividing by the
number of the days in the billing cycle. The daily balance outstanding on an
account for any day during the monthly billing cycle is equal to the sum of the
beginning balance of the account during any day, increased by purchases and
unpaid finance charges posted to the account that day, decreased by any payments
and credits posted to the account that day.
Monthly periodic rate finance charges can be avoided if the entire new
balance shown on the billing statement is paid within 25 days of the statement
closing date. Payments are applied first to finance charges assessed with
respect to the preceding billing period, then to any fees billed to the account
and then to the principal balance outstanding at the end of such billing period.
The minimum monthly payment for cardholders in the Regular Card program is
currently equal to the greater of $20 and 4% of the highest new balance shown on
the billing statement. The EPP Card minimum payment is currently equal to the
greater of $15 and 3.5% of the highest new balance. All accounts are subject to
certain additional fees and charges, including a late payment fee of $15 for the
Regular Card and $18 for the EPP Card. Other charges include returned check fees
and overlimit fees.
There can be no assurance that periodic rate finance charges, fees and
other charges on accounts which are included in the Trust will remain at current
levels.
FNANB periodically offers interest free promotions whereby accountholders
are able to make specific purchases on an interest free basis. The interest free
period is usually 90 or 180 days. Regular monthly principal payments are still
required, and finance charges are reinstated (retroactive to the date of the
transaction or the first day of the billing cycle, whichever is later) if the
accountholder does not meet the terms and conditions of the offering.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for each
of the periods shown for FNANB's portfolio of Regular Card and EPP Card accounts
(the "Bank Portfolio"). Because the Transferor will have the right, and, in some
circumstances, the obligation, to designate Additional Accounts and to convey to
the Trust all Receivables in such Additional Accounts, actual delinquency and
loss experience with respect to the Receivables may be different from that set
forth below for the Bank Portfolio. There can be no assurance that the
delinquency and loss experience for the Receivables in the future will be
similar to the historical experience of the Bank Portfolio set forth below.
S-11
<PAGE> 12
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF FEBRUARY 28 OR 29,
----------------------------------------------------- ----------------------------------------
1996 1995 1996 1995
------------------------- ------------------------- ------------------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
------------ ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Receivables Outstanding(1)... $ 1,005,885 100.00% $855,602 100.00% $ 1,068,145 100.00% $864,232
========= ====== ======= ====== ========= ====== =======
Delinquent 31 to 60 Days(2)........ $ 26,031 2.59% $ 7,354 0.86% $ 11,461 1.07% $ 13,144
Delinquent 61 to 90 Days(2)........ 15,005 1.49 9,463 1.11 11,681 1.09 7,446
Delinquent 91 or More Days(2)...... 25,515 2.54 16,616 1.94 19,276 1.80 11,467
--------- ------ ------- ------ --------- ------ -------
Total.............................. $ 66,551 6.62% $ 33,433 3.91% $ 42,418 3.96% $ 32,057
========= ====== ======= ====== ========= ====== =======
<CAPTION>
AS OF FEBRUARY 28 OR 29,
---------------------------------------
1995 1994
----------- -------------------------
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES
----------- ------------ -----------
<S> <C> <C> <C>
Total Receivables Outstanding(1)... 100.00% $683,375 100.00%
====== ======= ======
Delinquent 31 to 60 Days(2)........ 1.52% $ 8,500 1.25%
Delinquent 61 to 90 Days(2)........ 0.86 4,736 0.69
Delinquent 91 or More Days(2)...... 1.33 7,383 1.08
------ ------- ------
Total.............................. 3.71% $ 20,619 3.02%
====== ======= ======
</TABLE>
- ---------------
(1) Total Receivables Outstanding consists of all amounts due from cardholders
as posted to the accounts as of the date shown.
(2) The delinquency rates are the amount of delinquent receivables as of the
date shown divided by the Total Receivables Outstanding as of such date.
S-12
<PAGE> 13
LOSS EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, FEBRUARY 28 OR 29,
----------------------- ----------------------------------
1996 1995 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Principal Receivables
Outstanding(1)............... $994,698 $817,747 $882,157 $690,134 $515,412
Gross Principal
Charge-Offs(2)............... 51,121 30,847 49,977 27,274 22,827
Recoveries..................... 8,967 5,608 9,384 5,691 4,272
Net Principal Charge-Offs...... 42,154 25,239 40,593 21,583 18,555
Net Principal Charge-Offs as a
percentage of Average
Principal Receivables
Outstanding.................. 5.65%(3) 4.12%(3) 4.60% 3.13% 3.60%
</TABLE>
- ---------------
(1) Average Principal Receivables Outstanding for a particular period is the
average of the principal balance outstanding at the beginning and end of
each month during such period.
(2) Gross Principal Charge-Offs does not include fraud losses.
(3) The percentages reflected for the nine months ended September 30, 1996 and
1995 are annualized figures, which are not necessarily indicative of
results for the entire year.
Losses for the Bank Portfolio measured as a percentage of average principal
receivables outstanding increased during 1995 and 1996 due, in part, to growing
consumer debt levels coupled with a record high number of bankruptcy filings.
Losses are also affected by other factors, including industry conditions and
general economic and social conditions. Delinquencies as a percentage of total
receivables outstanding reflect a pattern similar to loss rates as a result of
the same factors discussed above for Loss Experience.
S-13
<PAGE> 14
THE RECEIVABLES
The Receivables included in the Trust Portfolio, as of September 30, 1996,
included $989,342,991 of Principal Receivables and $15,890,966 of Finance Charge
Receivables. As of September 30, 1996, Accounts with debit balances had an
average Receivables balance of $867.00. The average credit limit of all Accounts
was $2,290.63. The average Receivables balance for Accounts with debit balances
divided by the average credit limit of all Accounts expressed as a percentage
was 37.85%. As of September 30, 1996, accountholders whose Accounts were
included in the Trust Portfolio had billing addresses in 50 states, the District
of Columbia and certain United States territories and possessions.
Account balances are created by private label credit card purchases at
Circuit City stores. The Trust will consequently depend on the continued ability
of Circuit City stores to generate private label credit card sales. Because
Circuit City also accepts other credit cards, the Trust will also be dependent
upon decisions of customers to use credit cards issued by FNANB rather than
other credit cards. See "Risk Factors -- Dependence on Circuit City,"
"-- Competition" and "-- Use of Other Credit Cards" in the Prospectus.
The following table sets forth the private label credit card purchases at
Circuit City stores as a percentage of total retail sales for each of the
periods shown. There can be no assurance that private label credit card use in
the future will be similar to the historical experience set forth below.
PRIVATE LABEL CREDIT CARD PURCHASES
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, FEBRUARY 28 OR 29,
----------------- -----------------------
1996 1995 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Percent of Total Retail Sales................... 14.90% 17.68% 17.75% 19.20% 18.74%
</TABLE>
The following tables summarize the Receivables included in the Trust
Portfolio by various criteria as of September 30, 1996. Because the composition
of the Trust Portfolio will change over time, these tables are not indicative of
the composition of the Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Credit Balance......................... 25,068 0.69% $ (860,988.69) (0.09)%
Zero Balance........................... 2,430,592 67.22 0.00 0.00
$0.01 to $1,500.00..................... 968,624 26.79 578,789,630.61 57.59
$1,500.01 to $3,000.00................. 169,352 4.68 345,525,167.07 34.37
$3,000.01 to $4,500.00................. 20,340 0.56 70,474,702.26 7.01
$4,500.01 to $10,000.00................ 2,101 0.06 11,136,696.42 1.11
$10,000.01 +........................... 14 0.00 168,749.61 0.01
--------- ------ ----------------- ------
TOTAL........................ 3,616,091 100.00% $1,005,233,957.28 100.00%
========= ====== ================= ======
</TABLE>
S-14
<PAGE> 15
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------- --------- --------- ----------------- ------------
<S> <C> <C> <C> <C>
Zero Limit............................. 1,143 0.03% $ 5,317.57 0.00%
$0.01 to $1,500.00..................... 1,411,309 39.04 314,670,372.11 31.30
$1,500.01 to $3,000.00................. 1,176,066 32.52 358,186,142.37 35.63
$3,000.01 to $4,500.00................. 780,662 21.59 205,052,142.63 20.40
$4,500.01 to $10,000.00................ 246,907 6.82 127,316,382.26 12.67
$10,000.01 to $15,000.00............... 4 0.00 3,600.34 0.00
--------- ------ ----------------- ------
TOTAL........................ 3,616,091 100.00% $1,005,233,957.28 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- -------------------------------------- --------- ---------- ----------------- ------------
<S> <C> <C> <C> <C>
Not Delinquent........................ 3,450,404 95.42% $ 831,752,170.88 82.75%
Up to 30 Days......................... 110,291 3.05 107,272,990.98 10.67
31 to 60 Days......................... 23,523 0.65 25,938,318.36 2.58
61 to 90 Days......................... 12,199 0.34 14,885,593.86 1.48
91 to 120 Days........................ 7,986 0.22 10,083,427.11 1.00
121 to 150 Days....................... 6,691 0.18 8,627,736.52 0.86
151 or More Days...................... 4,997 0.14 6,673,719.57 0.66
--------- ------ ----------------- ------
TOTAL....................... 3,616,091 100.00% $1,005,233,957.28 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------- --------- --------- ----------------- ------------
<S> <C> <C> <C> <C>
0 to 3 Months.......................... 148,525 4.11% $ 123,044,205.46 12.24%
4 to 6 Months.......................... 122,572 3.39 72,191,073.81 7.18
7 to 9 Months.......................... 126,154 3.49 66,992,514.52 6.66
10 to 12 Months........................ 251,566 6.96 134,708,172.98 13.40
13 to 24 Months........................ 648,901 17.94 243,766,640.20 24.25
25 to 36 Months........................ 761,515 21.06 143,091,899.15 14.24
37 or More Months...................... 1,556,858 43.05 221,439,451.16 22.03
--------- ------ ----------------- ------
TOTAL........................ 3,616,091 100.00% $1,005,233,957.28 100.00%
========= ====== ================= ======
</TABLE>
S-15
<PAGE> 16
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
STATES, TERRITORIES AND POSSESSIONS ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------------------------------------------ --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Alabama............................................... 79,814 2.21% $ 18,514,111.39 1.84%
Alaska................................................ 697 0.02 168,129.85 0.02
Arizona............................................... 76,741 2.12 22,830,206.31 2.27
Arkansas.............................................. 10,469 0.29 4,544,263.25 0.45
California............................................ 972,211 26.89 272,361,083.77 27.08
Colorado.............................................. 14,558 0.40 7,581,475.74 0.75
Connecticut........................................... 8,271 0.23 4,073,316.28 0.41
Delaware.............................................. 3,163 0.09 1,317,829.08 0.13
District of Columbia.................................. 15,542 0.43 4,260,635.75 0.42
Florida............................................... 346,340 9.58 94,933,701.27 9.44
Georgia............................................... 160,636 4.44 42,115,409.74 4.19
Hawaii................................................ 1,421 0.04 290,841.19 0.03
Idaho................................................. 841 0.02 193,387.24 0.02
Illinois.............................................. 141,692 3.92 47,102,267.88 4.69
Indiana............................................... 25,358 0.70 7,952,245.79 0.79
Iowa.................................................. 867 0.02 171,727.44 0.02
Kansas................................................ 5,570 0.15 2,033,143.96 0.20
Kentucky.............................................. 75,646 2.09 16,016,170.27 1.59
Louisiana............................................. 30,329 0.84 11,395,276.87 1.13
Maine................................................. 3,622 0.10 880,080.09 0.09
Maryland.............................................. 142,552 3.94 30,618,465.07 3.05
Massachusetts......................................... 63,468 1.76 18,769,585.12 1.87
Michigan.............................................. 10,203 0.28 6,157,787.62 0.61
Minnesota............................................. 34,765 0.96 9,957,015.99 0.99
Mississippi........................................... 5,157 0.14 1,368,855.93 0.14
Missouri.............................................. 85,288 2.36 20,420,451.27 2.03
Montana............................................... 498 0.01 97,366.97 0.01
Nebraska.............................................. 596 0.02 133,168.02 0.01
Nevada................................................ 43,030 1.19 13,851,059.68 1.38
New Hampshire......................................... 16,102 0.45 4,843,842.40 0.48
New Jersey............................................ 41,951 1.16 11,541,788.40 1.15
New Mexico............................................ 2,603 0.07 955,002.22 0.10
New York.............................................. 12,515 0.35 5,201,571.63 0.52
North Carolina........................................ 165,187 4.57 39,866,414.89 3.97
North Dakota.......................................... 260 0.01 58,014.50 0.01
Ohio.................................................. 56,444 1.56 14,717,275.20 1.46
Oklahoma.............................................. 40,282 1.11 10,254,734.11 1.02
Oregon................................................ 14,343 0.40 6,099,878.48 0.61
Other................................................. 10,983 0.30 3,289,488.82 0.33
Pennsylvania.......................................... 81,666 2.26 19,472,780.59 1.94
Rhode Island.......................................... 14,577 0.40 4,764,315.01 0.47
South Carolina........................................ 76,419 2.11 17,380,190.12 1.73
South Dakota.......................................... 227 0.01 41,246.03 0.00
Tennessee............................................. 112,117 3.10 28,587,982.34 2.84
Texas................................................. 347,937 9.62 109,945,399.93 10.94
Utah.................................................. 14,006 0.39 6,008,177.87 0.60
Vermont............................................... 406 0.01 102,824.06 0.01
Virginia.............................................. 210,757 5.83 48,105,344.00 4.79
Washington............................................ 16,901 0.47 7,815,734.66 0.78
West Virginia......................................... 13,002 0.36 2,311,204.73 0.23
Wisconsin............................................. 7,706 0.21 3,620,741.93 0.36
Wyoming............................................... 355 0.01 140,946.53 0.01
--------- ------ ----------------- ------
TOTAL........................................ 3,616,091 100.00% $1,005,233,957.28 100.00%
========= ====== ================= ======
</TABLE>
Since the largest number of accountholders (based on billing addresses)
whose Accounts were included in the Trust Portfolio as of September 30, 1996
were located in California, Florida, Texas and Virginia, adverse changes in the
economic conditions in these areas could have a direct impact on the ability of
Circuit City to generate Receivables and the timing and amount of payments on
the Certificates. See "Risk Factors -- Social, Legal and Economic Factors" in
the Prospectus.
S-16
<PAGE> 17
MATURITY ASSUMPTIONS
The Class A Certificateholders will not receive payments of principal until
the November 2001 Distribution Date (the "Class A Expected Final Distribution
Date"), or earlier in the event of an Early Amortization Event which results in
the commencement of the Early Amortization Period. The Class A
Certificateholders will receive payments of principal on each Distribution Date
following the Due Period in which an Early Amortization Event occurs until the
Class A Invested Amount has been paid in full or the Stated Series Termination
Date has occurred. The Class B Certificateholders will not receive payments of
principal until the January 2002 Distribution Date (the "Class B Expected Final
Distribution Date"), or earlier in the event of an Early Amortization Event
which results in the commencement of the Early Amortization Period; provided,
however, that the Class B Certificateholders will in no event begin to receive
payments of principal until the final principal payment on the Class A
Certificates has been made.
Should an Early Amortization Event occur with respect to the Certificates
and the Early Amortization Period commence, any amount on deposit in the
Principal Funding Account will be paid to the Certificateholders on the first
Distribution Date with respect to the Early Amortization Period, first to the
Class A Certificateholders until the Class A Certificates have been paid in full
and then to the Class B Certificateholders until the Class B Certificates have
been paid in full. Thereafter, collections of Principal Receivables allocable to
Series 1996-1 will be paid to the Certificateholders on each Distribution Date
with respect to such Early Amortization Period (other than Reallocated Principal
Collections required to be used on such Distribution Date), first to the Class A
Certificateholders until the Class A Invested Amount has been paid in full and
then to the Class B Certificateholders until the Class B Invested Amount has
been paid in full, or until the Stated Series Termination Date occurs. See
"Description of the Certificates -- Early Amortization Events" herein and in the
Prospectus.
The ability of Certificateholders to receive payments of principal on the
Class A Expected Final Distribution Date or the Class B Expected Final
Distribution Date, as applicable, depends on the payment rates on the
Receivables, the amount of outstanding Receivables, delinquencies, charge-offs
and new borrowings on the Accounts, the potential issuance by the Trust of
additional Series and the availability of Shared Principal Collections. Monthly
payment rates on the Receivables may vary because, among other things,
accountholders may fail to make required minimum payments, may only make
payments as low as the minimum required amount or may make payments as high as
the entire outstanding balance. Monthly payment rates may also vary due to
seasonal purchasing and payment habits of accountholders and to changes in any
terms of promotional programs in which accountholders participate. The
Transferor cannot predict, and no assurance can be given as to, the
accountholder monthly payment rates that will actually occur in any future
period, the actual rate of payment of principal of the Certificates or whether
the terms of any subsequently issued Series might have an impact on the amount
or timing of any such payment of principal.
The amount of outstanding Receivables and the delinquencies, charge-offs
and new borrowings on the Accounts may vary from month to month due to seasonal
variations, the availability of other sources of credit, legal factors, general
economic conditions and spending and borrowing habits of individual
accountholders. There can be no assurance that collections of Principal
Receivables with respect to the Trust Portfolio, and thus the rate at which
Certificateholders could expect to receive payments of principal on their
Certificates during the Early Amortization Period or the rate at which the
Principal Funding Account could be funded during the Accumulation Period, will
be similar to the historical experience set forth below.
In addition, since the Trust, as a master trust, has previously issued
three Series and may issue additional Series from time to time, there can be no
assurance that the terms of any such Series might not have an impact on the
timing or amount of payments received by Certificateholders. Further, if an
Early Amortization Event occurs, the average life and maturity of the Class A
Certificates and the Class B Certificates, respectively, could be significantly
reduced.
For the reasons set forth above, there can be no assurance that deposits in
the Principal Funding Account will be made in accordance with the applicable
Controlled Accumulation Amount or that the actual number of months elapsed from
the date of issuance of the Class A Certificates and the Class B Certificates to
their respective final Distribution Dates will equal the expected number of
months.
S-17
<PAGE> 18
The following table sets forth the highest and lowest accountholder monthly
payment rates for the Bank Portfolio during any month in the period shown and
the average accountholder monthly payment rates for all months during the
periods shown, in each case calculated as a percentage of the average
receivables balance during the periods shown. Payment rates shown in the table
are based on amounts which would be deemed payments of Principal Receivables and
Finance Charge Receivables with respect to the Accounts.
ACCOUNTHOLDER MONTHLY PAYMENT RATE
BANK PORTFOLIO(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, FEBRUARY 28 OR 29,
------------------- -----------------------------
1996 1995 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Lowest Month..................... 9.40% 11.35% 9.50% 11.02% 10.83%
Highest Month.................... 12.49% 15.23% 15.23% 15.23% 13.44%
Monthly Average.................. 10.86% 12.88% 12.06% 13.33% 11.83%
</TABLE>
- ---------------
(1) The monthly payment rates are calculated with the numerator as the total
amount of collections received during the month (including recoveries on
charged-off accounts) and the denominator as the average receivables balance
for the month.
RECEIVABLE YIELD CONSIDERATIONS
The following table sets forth the yield from finance charges and fees
billed to accounts in the Bank Portfolio for each of the periods shown.
The historical yield figures in the following table are calculated on an
accrual basis. Collections of receivables included in the Trust will be on a
cash basis and may not reflect the historical yield experience in the table. The
yield on both an accrual and a cash basis will be affected by numerous factors,
including the monthly periodic finance charges on the receivables and any fees,
changes in the delinquency rate on the receivables and the percentage of
accountholders who pay their balances in full each month and do not incur
monthly periodic finance charges. See "Risk Factors" in the Prospectus.
PORTFOLIO YIELD
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, FEBRUARY 28 OR 29,
------------------------- --------------------------------------
1996 1995 1996 1995 1994
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Total
Receivables
Outstanding(1)... $1,015,600 $834,456 $900,626 $702,275 $523,857
Finance Charges
Billed........... 175,220 153,506 217,195 150,518 111,926
Yield from Finance
Charges.......... 23.00%(2) 24.53%(2) 24.12% 21.43% 21.37%
</TABLE>
- ---------------
(1) Average Total Receivables Outstanding for a particular period is the average
of the balance outstanding at the beginning and end of each month during
such period.
(2) The percentages reflected for the nine months ended September 30, 1996 and
1995 are annualized figures, which are not necessarily indicative of results
for the entire year.
The yield for the Bank Portfolio shown in the above table is comprised of
monthly periodic finance charges and other service charges, such as late fees
and returned check fees. As payment rates decline, the balances subject to
monthly periodic finance charges tend to grow, assuming no change in the level
of purchasing activity. Accordingly, under these circumstances, the yield
related to periodic finance charges
S-18
<PAGE> 19
normally increases. The yield related to service charges varies with the type
and volume of activity in and the amount of each account. As account balances
increase, annual cardholder fees, which remain constant, represent a smaller
percentage of the aggregate account balances. See "Credit Card Activities at
First North American National Bank" in the Prospectus.
FIRST NORTH AMERICAN NATIONAL BANK AND CIRCUIT CITY STORES, INC.
As of September 30, 1996, FNANB had assets of approximately $311 million
and equity of approximately $149 million.
As of September 30, 1996, Circuit City had consolidated assets of
approximately $2,969 million and equity of approximately $1,114 million.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement and the Series
1996-1 Supplement. Pursuant to the Agreement, the Transferor and the Trustee may
execute further Series Supplements in order to issue additional Series. The
following summary of the Certificates does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions of the Agreement and the Series 1996-1 Supplement. See "Description
of the Certificates" in the Prospectus for additional information concerning the
Certificates and the Agreement.
INTEREST PAYMENTS
Interest on the principal amount of the Class A Certificates and the
principal amount of the Class B Certificates will accrue from the Closing Date
at the applicable Class A Certificate Rate and the applicable Class B
Certificate Rate, respectively. Interest will be distributed on the December
1996 Distribution Date, and on each Distribution Date thereafter, to
Certificateholders in whose names the Certificates were registered at the close
of business on the last day of the calendar month preceding the date of such
distribution (a "Record Date").
The Class A Certificates will bear interest for the period from the Closing
Date through the day preceding the December 1996 Distribution Date and with
respect to each Interest Period thereafter at the rate of 0. % above
LIBOR prevailing on the related LIBOR Determination Date with respect to such
period (the "Class A Certificate Rate"). Interest on the Class A Certificates
will be distributed on each Distribution Date in an amount equal to the product
of (i) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, (ii) the Class A
Certificate Rate for such Interest Period and (iii) the principal amount of the
Class A Certificates as of the preceding Record Date (or, in the case of the
first Distribution Date, as of the Closing Date).
The Class B Certificates will bear interest for the period from the Closing
Date through the day preceding the December 1996 Distribution Date and with
respect to each Interest Period thereafter at the rate of 0. % above
LIBOR prevailing on the related LIBOR Determination Date with respect to such
period (the "Class B Certificate Rate"). Interest on the Class B Certificates
will be distributed on each Distribution Date in an amount equal to the product
of (i) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, (ii) the Class B
Certificate Rate for such Interest Period and (iii) the principal amount of the
Class B Certificates as of the preceding Record Date (or, in the case of the
first Distribution Date, as of the Closing Date).
Interest on the Certificates for any Distribution Date due but not paid on
such Distribution Date will be payable on the next succeeding Distribution Date,
together with additional interest on such amount at the Class A Certificate Rate
or the Class B Certificate Rate, as applicable, plus 2.00% per annum.
The Trustee will determine LIBOR with respect to the Certificates on
, 1996 for the period from the Closing Date through the day preceding
the December 1996 Distribution Date, and for each Interest Period thereafter, on
the second business day prior to the Distribution Date on which such Interest
Period
S-19
<PAGE> 20
commences (each, a "LIBOR Determination Date"). For purposes of calculating
LIBOR, a business day is any business day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a one-month period which appears on Telerate Page 3750
as of 11:00 a.m., London time, on such LIBOR Determination Date. If such rate
does not appear on Telerate Page 3750, the rate for that LIBOR Determination
Date will be determined on the basis of the rates at which deposits in United
States dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on that day to prime banks in the London interbank market for a
one-month period. The Trustee will request the principal London office of each
of the Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that LIBOR Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are provided,
the rate for that LIBOR Determination Date will be the arithmetic mean of the
rates quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a one-month period.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means the principal London offices of four major banks in
the London interbank market selected by the Servicer upon notice to the Trustee.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Periods may be obtained by
telephoning the Trustee at its Corporate Trust Office at (212) 250-6599.
Payments of Class A Monthly Interest and any overdue Class A Monthly
Interest on any Distribution Date will be funded from Class A Available Funds
for the related Due Period. To the extent Class A Available Funds are
insufficient to pay such interest, Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1996-1, amounts on deposit in the Cash
Collateral Account, if any, and Reallocated Principal Collections will be used
to make such payments. "Class A Available Funds" means, with respect to any Due
Period, an amount equal to the sum of (i) the Class A Floating Percentage of
collections of Finance Charge Receivables with respect to such Due Period, (ii)
the Class A Cap Payment, if any, deposited in the Collection Account on the
Distribution Date immediately following the last day of such Due Period, (iii)
if such Due Period immediately precedes a Distribution Date that occurs prior to
the Class B Principal Commencement Date, the Principal Funding Investment
Proceeds, if any, with respect to such Distribution Date, (iv) the amount, if
any, to be withdrawn from the Reserve Account and included in Class A Available
Funds pursuant to the Series 1996-1 Supplement with respect to such Distribution
Date and (v) the amount, if any, of excess investment earnings on amounts
deposited in the Reserve Account required to be included in Class A Available
Funds pursuant to the Series 1996-1 Supplement with respect to such Distribution
Date.
Payments of Class B Monthly Interest and any overdue Class B Monthly
Interest on any Distribution Date will be funded from Class B Available Funds
for the related Due Period. To the extent Class B Available Funds are
insufficient to pay such interest, Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1996-1, amounts on deposit in the Cash
Collateral Account, if any, and Reallocated Principal Collections (in each case
after application of such amounts in respect of the Class A Certificates), other
than Class B Subordinated Principal Collections, will be used to make such
payments. "Class B Available Funds" means, with respect to any Due Period, an
amount equal to the sum of (i) the Class B Floating Percentage of collections of
Finance Charge Receivables with respect to such Due Period, (ii) the Class B Cap
Payment, if any, deposited in the Collection Account on the Distribution Date
immediately following the last day of such Due Period, (iii) if such Due Period
immediately precedes a Distribution Date that occurs on or after the Class B
Principal Commencement Date, the Principal Funding Investment Proceeds, if any,
with respect to such Distribution Date, (iv) the amount, if any, to be withdrawn
from the Reserve Account and included in Class B Available Funds pursuant to the
Series 1996-1 Supplement with respect to such Distribution Date and (v) the
amount, if any, of excess investment earnings on amounts
S-20
<PAGE> 21
deposited in the Reserve Account required to be included in Class B Available
Funds pursuant to the Series 1996-1 Supplement with respect to such Distribution
Date.
THE INTEREST RATE CAPS
On the Closing Date, the Transferor will enter into the Interest Rate Caps
with the Interest Rate Cap Provider. The Class A Interest Rate Cap and the Class
B Interest Rate Cap will be for the exclusive benefit of the Class A
Certificateholders and the Class B Certificateholders, respectively. The
Transferor will assign to the Trustee, for the benefit of the Class A
Certificateholders and the Class B Certificateholders, the right to payment
under the Class A Interest Rate Cap and the Class B Interest Rate Cap,
respectively.
The notional amount of the Class A Interest Rate Cap (the "Class A Notional
Amount") will at all times prior to the termination of the Class A Interest Rate
Cap equal the Class A Invested Amount plus the Principal Funding Account
Balance. Pursuant to the Class A Interest Rate Cap, on each Distribution Date on
which the Class A Certificate Rate for the related Interest Period exceeds 6.75%
(the "Class A Cap Rate"), the Interest Rate Cap Provider will make a payment
(the "Class A Cap Payment") to the Trustee, on behalf of the Trust, in an amount
equal to the product of (i) such excess, (ii) the Class A Notional Amount as of
such Distribution Date and (iii) a fraction, the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360. Such payment will be included in Class A Available Funds on such
Distribution Date. The Class A Interest Rate Cap will terminate on the earlier
of the day the Class A Certificates are paid in full and the day following the
Stated Series Termination Date; provided, however, that the Class A Interest
Rate Cap may be terminated at an earlier date if the Servicer has obtained a
substitute interest rate cap or an alternative arrangement satisfactory to the
Rating Agencies, which in each case will not result in the reduction or
withdrawal of the rating of the Certificates (such substitute interest rate cap,
a "Replacement Interest Rate Cap"; such alternative arrangement, a "Qualified
Substitute Arrangement").
The notional amount of the Class B Interest Rate Cap (the "Class B Notional
Amount") will at all times prior to the termination of the Class B Interest Rate
Cap equal the Class B Invested Amount plus, after the Class A Invested Amount
has been paid in full, the Principal Funding Account Balance. Pursuant to the
Class B Interest Rate Cap, on each Distribution Date on which the Class B
Certificate Rate for the related Interest Period exceeds 6.75% (the "Class B Cap
Rate"), the Interest Rate Cap Provider will make a payment (the "Class B Cap
Payment") to the Trustee, on behalf of the Trust, in an amount equal to the
product of (i) such excess, (ii) the Class B Notional Amount as of such
Distribution Date and (iii) a fraction, the numerator of which is the actual
number of days in such Interest Period and the denominator of which is 360. Such
payment will be included in Class B Available Funds on such Distribution Date.
The Class B Interest Rate Cap will terminate on the earlier of the day the Class
B Certificates are paid in full and the day following the Stated Series
Termination Date; provided, however, that the Class B Interest Rate Cap may be
terminated at an earlier date if the Servicer has obtained a Replacement
Interest Rate Cap or a Qualified Substitute Arrangement.
In the event that the rating of the Interest Rate Cap Provider is reduced
or withdrawn, as specified in the Interest Rate Caps, the Servicer will use its
best efforts either to obtain for each such Interest Rate Cap a Replacement
Interest Rate Cap, at the expense of the Interest Rate Cap Provider, or to enter
into a Qualified Substitute Arrangement.
THE INTEREST RATE CAP PROVIDER
The following information has been obtained from the Interest Rate Cap
Provider and has not been verified by the Transferor or the Underwriters. No
representation or warranty is made by the Transferor or the Underwriters with
respect thereto.
The interest rate cap provider is NationsBanc Financial Products, Inc. (the
"Interest Rate Cap Provider"), a bankruptcy remote derivative product company
based in Chicago, Illinois that has been established as a wholly-owned
subsidiary of NationsBank, N.A. The Interest Rate Cap Provider was established
in May 1996 and is capitalized with an initial $300 million from NationsBank,
N.A. The Interest
S-21
<PAGE> 22
Rate Cap Provider is in the business of providing interest rate and currency
derivatives, including swaps, caps, collars, floors, and swaptions, and is an
affiliate of NationsBanc Capital Markets, Inc., one of the Underwriters.
NationsBank, N.A. is a wholly-owned subsidiary of NationsBank Corporation.
Requests for further information regarding the Interest Rate Cap Provider
should be directed to William Fall, President of NationsBanc Financial Products,
Inc. at (312) 234-5737. Further information concerning NationsBank, N.A. and
NationsBank Corporation is set forth in the annual report of NationsBank
Corporation. Written requests for such report should be directed to NationsBank
Corporation, Corporate Communications Department, 100 North Tryon Street, 18th
Floor, Charlotte, North Carolina 28255.
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the Accumulation Period or, if earlier, the
Early Amortization Period), no principal payments will be made to
Certificateholders. During the Accumulation Period (on or prior to the Class A
Expected Final Distribution Date or Class B Expected Final Distribution Date, as
applicable), principal will be deposited in the Principal Funding Account and
paid to the Certificateholders as described below. During the Early Amortization
Period, which will begin upon the occurrence of an Early Amortization Event, and
until the Stated Series Termination Date occurs, principal will be paid to the
Certificateholders as described below.
On each Distribution Date with respect to the Class A Accumulation Period,
the Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) the Fixed Allocation Percentage of collections of Principal
Receivables with respect to the preceding Due Period plus the amount of Shared
Principal Collections allocable to Series 1996-1 minus the amount of Reallocated
Principal Collections required to be used with respect to such Distribution Date
(such amount, "Available Principal Collections"), (b) the applicable Controlled
Deposit Amount for such Distribution Date and (c) the Class A Invested Amount on
such Distribution Date (before giving effect to such deposit). Unless an Early
Amortization Event has occurred, amounts on deposit in the Principal Funding
Account will be paid to the Class A Certificateholders on the Class A Expected
Final Distribution Date. After the Class A Certificates have been paid in full,
on each Distribution Date with respect to the Class B Accumulation Period, the
Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Principal Collections (minus the portion thereof applied
to Class A Monthly Principal on such Distribution Date), (b) the applicable
Controlled Deposit Amount for such Distribution Date and (c) the Class B
Invested Amount on such Distribution Date (before giving effect to such
deposit). Unless an Early Amortization Event has occurred, amounts on deposit in
the Principal Funding Account in respect of the Class B Certificates will be
paid to the Class B Certificateholders on the Class B Expected Final
Distribution Date. If an Early Amortization Event occurs with respect to the
Certificates during the Accumulation Period, the Early Amortization Period will
commence and any amount on deposit in the Principal Funding Account will be paid
to the Class A Certificateholders on the first Distribution Date with respect to
the Early Amortization Period or, to the extent the Class A Invested Amount has
been paid in full, to the Class B Certificateholders.
On each Distribution Date during the Early Amortization Period, Available
Principal Collections will be paid to the Class A Certificateholders until the
Class A Invested Amount has been paid in full or the Stated Series Termination
Date occurs. On each Distribution Date during the Early Amortization Period
after payment in full of the Class A Invested Amount, Available Principal
Collections will be paid to the Class B Certificateholders until the Class B
Invested Amount has been paid in full or the Stated Series Termination Date
occurs.
S-22
<PAGE> 23
POSTPONEMENT OF ACCUMULATION PERIOD
The Accumulation Period is scheduled to commence at the close of business
on the last day of the October 2000 Due Period. Upon written notice to the
Trustee, the Servicer may elect to postpone the commencement of the Accumulation
Period and extend the length of the Revolving Period, subject to certain
conditions, including those set forth below. The Servicer may make such election
only if the Accumulation Period Length (determined as described below) is less
than twelve months. On each Determination Date, until the Accumulation Period
begins, the Servicer will determine the "Accumulation Period Length," which is
the number of months expected to be required to fund the Principal Funding
Account up to the Class A Initial Invested Amount no later than the Class A
Expected Final Distribution Date, based on (a) the monthly collections of
Principal Receivables expected to be distributable to the certificateholders of
all Series (excluding certain other Series), assuming a principal payment rate
no greater than the lowest monthly principal payment rate on the Receivables for
the preceding twelve months and (b) the amount of principal expected to be
distributable to certificateholders of all Series (excluding certain other
Series) which are not expected to be in their revolving periods during the
Accumulation Period. If the Accumulation Period Length is less than 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 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 scheduled to be in their revolving periods during the Accumulation Period
and on increases in the principal payment rate occurring after the Closing Date.
The length of the Accumulation Period will not be less than one month.
BOOK-ENTRY REGISTRATION
The Certificates will be issued in book-entry form. Certificateholders may
hold their Certificates through DTC (in the United States) or Cedel or Euroclear
(in Europe).
SUBORDINATION OF THE CLASS B CERTIFICATES, THE COLLATERAL INDEBTEDNESS INTEREST
AND THE CLASS D CERTIFICATES
The Class B Certificates, the Collateral Indebtedness Interest and the
Class D Certificates will be subordinated to the extent necessary to fund
certain payments with respect to the Class A Certificates. In addition, the
Collateral Indebtedness Interest and the Class D Certificates will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain collections of Principal Receivables otherwise
allocable to the Class B Certificateholders ("Class B Subordinated Principal
Collections") may be reallocated to the Class A Certificateholders and the Class
B Invested Amount may be reduced. Similarly, certain collections of Principal
Receivables allocable to the Class D Certificates and the Collateral
Indebtedness Interest may be reallocated to the Class A Certificateholders and
the Class B Certificateholders and the Class D Invested Amount and the
Collateral Indebtedness Amount may be reduced. To the extent the Class B
Invested Amount is reduced, the percentage of collections of Finance Charge
Receivables allocated to the Class B Certificateholders in subsequent Due
Periods will be reduced. Moreover, to the extent the amount of such reduction in
the Class B Invested Amount is not reimbursed, the amount of principal
distributable to the Class B Certificateholders will be reduced. See
"-- Invested Percentages," "-- Reallocation of Cash Flows," and "-- Application
of Collections -- Excess Spread; Shared Excess Finance Charge Collections"
herein.
INVESTED PERCENTAGES
The Servicer will allocate among Series 1996-1, the interests of all other
Series issued and outstanding, the interest of any Enhancement Providers, if
applicable, and the Transferor Interest all collections of Finance Charge
Receivables and Principal Receivables and all Defaulted Receivables with respect
to each Due Period.
Collections of Finance Charge Receivables and Defaulted Receivables with
respect to any Due Period will be allocated to Series 1996-1 based on the
Floating Allocation Percentage. The "Floating Allocation Percentage" means, with
respect to any Due Period, the sum of the Class A Floating Percentage, the Class
B Floating Percentage, the Collateral Floating Percentage and the Class D
Floating Percentage.
S-23
<PAGE> 24
"Class A Floating Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the Class
A Invested Amount as of the last day of the immediately preceding Due Period (or
the Class A Initial Invested Amount, in the case of the first Due Period
applicable to Series 1996-1) and the denominator of which is equal to the
greater of (i) the sum of (a) the Aggregate Principal Receivables in the Trust
("Aggregate Principal Receivables") as of the last day of the immediately
preceding Due Period and (b) the principal amount on deposit in the Excess
Funding Account at the end of such day and (ii) the sum of the numerators used
to calculate the invested percentages with respect to Finance Charge Receivables
and Defaulted Receivables for all Series outstanding as of the date on which
such determination is being made; provided, however, that with respect to any
Due Period in which Additional Accounts are designated, the denominator in
clause (i) above will be increased by the amount of Principal Receivables in
such Additional Accounts as of the last day of the immediately preceding Due
Period on and after the date of such designation.
"Class B Floating Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the Class
B Invested Amount as of the last day of the immediately preceding Due Period (or
the Class B Initial Invested Amount, in the case of the first Due Period
applicable to Series 1996-1) and the denominator of which is equal to the
greater of (i) the sum of (a) the Aggregate Principal Receivables as of the last
day of the immediately preceding Due Period and (b) the principal amount on
deposit in the Excess Funding Account at the end of such day and (ii) the sum of
the numerators used to calculate the invested percentages with respect to
Finance Charge Receivables and Defaulted Receivables for all Series outstanding
as of the date on which such determination is being made; provided, however,
that with respect to any Due Period in which Additional Accounts are designated,
the denominator in clause (i) above will be increased by the amount of Principal
Receivables in such Additional Accounts as of the last day of the immediately
preceding Due Period on and after the date of such designation.
"Collateral Floating Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the
Collateral Indebtedness Amount as of the last day of the immediately preceding
Due Period (or the initial Collateral Indebtedness Amount, in the case of the
first Due Period applicable to Series 1996-1) and the denominator of which is
equal to the greater of (i) the sum of (a) the Aggregate Principal Receivables
as of the last day of the immediately preceding Due Period and (b) the principal
amount on deposit in the Excess Funding Account at the end of such day and (ii)
the sum of the numerators used to calculate the invested percentages with
respect to Finance Charge Receivables and Defaulted Receivables for all Series
outstanding as of the date on which such determination is being made; provided,
however, that with respect to any Due Period in which Additional Accounts are
designated, the denominator in clause (i) above will be increased by the amount
of Principal Receivables in such Additional Accounts as of the last day of the
immediately preceding Due Period on and after the date of such designation.
"Class D Floating Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the Class
D Invested Amount as of the last day of the immediately preceding Due Period (or
the initial Class D Invested Amount, in the case of the first Due Period
applicable to Series 1996-1) and the denominator of which is equal to the
greater of (i) the sum of (a) the Aggregate Principal Receivables as of the last
day of the immediately preceding Due Period and (b) the principal amount on
deposit in the Excess Funding Account at the end of such day and (ii) the sum of
the numerators used to calculate the invested percentages with respect to
Finance Charge Receivables and Defaulted Receivables for all Series outstanding
as of the date on which such determination is being made; provided, however,
that with respect to any Due Period in which Additional Accounts are designated,
the denominator in clause (i) above will be increased by the amount of Principal
Receivables in such Additional Accounts as of the last day of the immediately
preceding Due Period on and after the date of such designation.
Collections of Principal Receivables with respect to any Due Period during
the Revolving Period will be allocated to Series 1996-1 based on the Floating
Allocation Percentage. Collections of Principal Receivables with respect to any
Due Period during the Accumulation Period or the Early Amortization Period will
be allocated to Series 1996-1 based on the Fixed Allocation Percentage. The
"Fixed Allocation Percentage" means, with respect to any Due Period, the sum of
the Class A Fixed Percentage, the Class B Fixed Percentage, the Collateral Fixed
Percentage and the Class D Fixed Percentage.
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<PAGE> 25
"Class A Fixed Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the Class
A Invested Amount as of the last day of the Revolving Period and the denominator
of which is equal to the greater of (i) the sum of (a) the Aggregate Principal
Receivables as of the last day of the immediately preceding Due Period and (b)
the principal amount on deposit in the Excess Funding Account at the end of such
day and (ii) the sum of the numerators used to calculate the invested
percentages with respect to Principal Receivables for all Series outstanding as
of the date on which such determination is being made; provided, however, that
with respect to any Due Period in which Additional Accounts are designated, the
denominator in clause (i) above will be increased by the amount of Principal
Receivables in such Additional Accounts as of the last day of the immediately
preceding Due Period on and after the date of such designation.
"Class B Fixed Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the Class
B Invested Amount as of the last day of the Revolving Period and the denominator
of which is equal to the greater of (i) the sum of (a) the Aggregate Principal
Receivables as of the last day of the immediately preceding Due Period and (b)
the principal amount on deposit in the Excess Funding Account at the end of such
day and (ii) the sum of the numerators used to calculate the invested
percentages with respect to Principal Receivables for all Series outstanding as
of the date on which such determination is being made; provided, however, that
with respect to any Due Period in which Additional Accounts are designated, the
denominator in clause (i) above will be increased by the amount of Principal
Receivables in such Additional Accounts as of the last day of the immediately
preceding Due Period on and after the date of such designation.
"Collateral Fixed Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the
Collateral Indebtedness Amount as of the last day of the Revolving Period and
the denominator of which is equal to the greater of (i) the sum of (a) the
Aggregate Principal Receivables as of the last day of the immediately preceding
Due Period and (b) the principal amount on deposit in the Excess Funding Account
at the end of such day and (ii) the sum of the numerators used to calculate the
invested percentages with respect to Principal Receivables for all Series
outstanding as of the date on which such determination is being made; provided,
however, that with respect to any Due Period in which Additional Accounts are
designated, the denominator in clause (i) above will be increased by the amount
of Principal Receivables in such Additional Accounts as of the last day of the
immediately preceding Due Period on and after the date of such designation.
"Class D Fixed Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the Class
D Invested Amount as of the last day of the Revolving Period and the denominator
of which is equal to the greater of (i) the sum of (a) the Aggregate Principal
Receivables as of the last day of the immediately preceding Due Period and (b)
the principal amount on deposit in the Excess Funding Account at the end of such
day and (ii) the sum of the numerators used to calculate the invested
percentages with respect to Principal Receivables for all Series outstanding as
of the date on which such determination is being made; provided, however, that
with respect to any Due Period in which Additional Accounts are designated, the
denominator in clause (i) above will be increased by the amount of Principal
Receivables in such Additional Accounts as of the last day of the immediately
preceding Due Period on and after the date of such designation.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" means, on any date of determination, an amount
equal to (a) the Class A Initial Invested Amount, minus (b) the Principal
Funding Account Balance on such date, minus (c) the aggregate amount of
principal payments made to the Class A Certificateholders prior to such date,
minus (d) the excess, if any, of the aggregate amount of Class A Investor
Charge-Offs for all prior Distribution Dates over the sum of the aggregate
amount of reimbursed Class A Investor Charge-Offs and, without duplication,
reductions of the Series Adjustment Amount allocable to the Class A
Certificates; provided, however, that the Class A Invested Amount may not be
reduced below zero.
"Class B Invested Amount" means, on any date of determination, an amount
equal to (a) the Class B Initial Invested Amount, minus (b) after the Class A
Invested Amount has been paid in full, the Principal
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Funding Account Balance on such date, minus (c) the aggregate amount of
principal payments made to the Class B Certificateholders prior to such date,
minus (d) the aggregate amount of Class B Investor Charge-Offs for all prior
Distribution Dates, minus (e) the amount of Reallocated Principal Collections
used to make payments in respect of the Class A Certificates on all prior
Distribution Dates that have not resulted in a reduction of the Class D Invested
Amount or the Collateral Indebtedness Amount, minus (f) an amount equal to the
amount by which the Class B Invested Amount has been reduced on all prior
Distribution Dates in respect of the Class A Allocable Amount, plus (g) the sum
of the amount of Excess Spread and Shared Excess Finance Charge Collections
allocated and available on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (d), (e) and (f)
and, without duplication, reductions of the Series Adjustment Amount allocable
to the Class B Certificates; provided, however, that the Class B Invested Amount
may not be reduced below zero.
"Collateral Indebtedness Amount" means, on any date of determination, an
amount equal to (a) the initial Collateral Indebtedness Amount equal to
$29,250,000, minus (b) the aggregate amount of principal payments made to the
Collateral Indebtedness Holder prior to such date, minus (c) the amount of
Reallocated Principal Collections used to make payments in respect of the
Certificates on all prior Distribution Dates that have not resulted in a
reduction of the Class D Invested Amount, minus (d) an amount equal to the
amount by which the Collateral Indebtedness Amount has been reduced on all prior
Distribution Dates in respect of the Class A Allocable Amount, the Class B
Allocable Amount and the Collateral Allocable Amount, plus (e) the sum of the
amount of Excess Spread and Shared Excess Finance Charge Collections allocated
and available on all prior Distribution Dates for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c) and (d) and, without
duplication, reductions of the Series Adjustment Amount allocable to the
Collateral Indebtedness Interest; provided, however, that the Collateral
Indebtedness Amount may not be reduced below zero.
"Class D Invested Amount" means, on any date of determination, an amount
equal to (a) the initial Class D Invested Amount equal to $11,250,000 (plus the
initial principal amount of any additional Class D Certificates issued during
the Revolving Period, at the sole option of the Transferor), minus (b) the
aggregate amount of principal payments made to the Class D Certificateholders
prior to such date, minus (c) the amount of Reallocated Principal Collections
used to make payments in respect of the Certificates and the Collateral
Indebtedness Interest on all prior Distribution Dates, minus (d) an amount equal
to the amount by which the Class D Invested Amount has been reduced on all prior
Distribution Dates in respect of the Class A Allocable Amount, the Class B
Allocable Amount, the Collateral Allocable Amount and the Class D Allocable
Amount, plus (e) the sum of the amount of Excess Spread and Shared Excess
Finance Charge Collections allocated and available on all prior Distribution
Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c) and (d) and, without duplication, reductions of the Series
Adjustment Amount allocable to the Class D Certificates; provided, however, that
the Class D Invested Amount may not be reduced below zero.
"Invested Amount" means, on any date of determination, the sum of the Class
A Invested Amount, the Class B Invested Amount, the Collateral Indebtedness
Amount and the Class D Invested Amount.
PRINCIPAL FUNDING ACCOUNT
The Servicer will establish and maintain, in the name of the Trustee, for
the benefit of the Certificateholders, a segregated trust account (the
"Principal Funding Account"). During the Accumulation Period, the Servicer will
transfer Available Principal Collections from the Collection Account to the
Principal Funding Account as described under "-- Application of
Collections -- Payments of Principal" herein.
The principal amount on deposit in the Principal Funding Account (the
"Principal Funding Account Balance") on any Distribution Date (after giving
effect to any deposits to, or withdrawals from, the Principal Funding Account to
be made on such Distribution Date) will be invested by the Trustee at the
direction of the Servicer in Eligible Investments that mature prior to the
following Distribution Date. On each Distribution Date with respect to the
Accumulation Period (on or prior to the Class B Expected Final Distribution
Date), the interest and other investment income (net of investment expenses and
losses) earned on such investments
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<PAGE> 27
during the related Interest Period (the "Principal Funding Investment Proceeds")
will be withdrawn from the Principal Funding Account and will be treated as a
portion of Class A Available Funds, until the Class A Certificates have been
paid in full, and, thereafter, Class B Available Funds. If such investments
during any Interest Period yield less than the Class A Certificate Rate or the
Class B Certificate Rate, as applicable, for such Interest Period, the Principal
Funding Investment Proceeds with respect to the following Distribution Date will
be less than the Covered Amount for such Distribution Date. It is intended that
any such shortfall will be funded from Class A Available Funds or Class B
Available Funds, as the case may be (including a withdrawal from the Reserve
Account, if necessary, as described herein under "-- Reserve Account"), from
Excess Spread and Shared Excess Finance Charge Collections allocated to Series
1996-1 (to the extent available as described below under "-- Application of
Collections"), from a withdrawal from the Cash Collateral Account as described
below under "-- Cash Collateral Account" or from Reallocated Principal
Collections to the extent available therefor. The Available Reserve Account
Amount and the Available Cash Collateral Amount at any time will be limited and
may be zero, and there can be no assurance that sufficient funds will be
available to fund any such shortfall. The "Covered Amount" means (a) for any
Distribution Date with respect to the Class A Accumulation Period or the first
Distribution Date of the Early Amortization Period, if such Distribution Date
occurs prior to the Class B Principal Commencement Date, an amount equal to the
product of (i) a fraction, the numerator of which is the actual number of days
in the related Interest Period and the denominator of which is 360 and (ii) the
Class A Certificate Rate for such Interest Period and (iii) the Principal
Funding Account Balance, if any, as of the preceding Distribution Date and (b)
for any Distribution Date with respect to the Class B Accumulation Period or the
first Distribution Date of the Early Amortization Period, if such Distribution
Date occurs after the Class A Certificates have been paid in full, an amount
equal to the product of (i) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which is
360 and (ii) the Class B Certificate Rate for such Interest Period and (iii) the
Principal Funding Account Balance, if any, as of the preceding Distribution
Date.
RESERVE ACCOUNT
The Servicer will establish and maintain, in the name of the Trustee, for
the benefit of the Certificateholders, a segregated trust account (the "Reserve
Account"). The Reserve Account is intended to help assure the distribution of
interest on the Certificates as described in this Prospectus Supplement during
the Accumulation Period. On each Distribution Date from and after the Reserve
Account Funding Date, but prior to the termination of the Reserve Account, the
Trustee, acting pursuant to the Servicer's instructions, will apply Excess
Spread and Shared Excess Finance Charge Collections allocated to Series 1996-1
(to the extent available as described below under "-- Application of
Collections") to increase the amount on deposit in the Reserve Account (to the
extent such amount is less than the Required Reserve Account Amount). The
"Reserve Account Funding Date" will be the Distribution Date with respect to the
Due Period which commences three months prior to the commencement of the Class A
Accumulation Period (or earlier, under certain circumstances relating to the
yield on the Receivables). The "Required Reserve Account Amount" for any
Distribution Date on or after the Reserve Account Funding Date will be equal to
.50% of the sum of the Class A Invested Amount and the Principal Funding Account
Balance or any other amount designated by the Transferor provided that, if such
designation is of a lesser amount, the Rating Agency Condition shall have been
satisfied and the Transferor shall have delivered to the Trustee a certificate
of an authorized officer to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of such officer, such designation
will not cause an Early Amortization Event or an event that, after the giving of
notice or the lapse of time, would constitute an Early Amortization Event to
occur with respect to Series 1996-1. On each Distribution Date, after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Distribution Date, the Trustee will withdraw from the Reserve Account an
amount equal to the excess, if any, of the amount on deposit in the Reserve
Account over the Required Reserve Account Amount and shall apply such excess in
accordance with the Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Distribution Date (after
giving effect to any deposits to, or withdrawals from, the Reserve Account to be
made on such Distribution Date) will be invested by the Trustee at the direction
of the Servicer in Eligible Investments that mature prior to the following
Distribution Date. The interest and other
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<PAGE> 28
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 treated as
Class A Available Funds, until the Class A Certificates have been paid in full,
or, thereafter, Class B Available Funds, as applicable.
On or before each Distribution Date with respect to the Accumulation Period
(on or prior to the Class A Expected Final Distribution Date) and on the first
Distribution Date of the Early Amortization Period, a withdrawal will be made
from the Reserve Account, and the amount of such withdrawal will be deposited in
the Collection Account and included in Class A Available Funds, until the Class
A Invested Amount has been paid in full, and, thereafter, in Class B 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
Covered Amount with respect to such Distribution Date over the Principal Funding
Investment Proceeds with respect to such Distribution Date. On each Distribution
Date, the amount available to be withdrawn from the Reserve Account (the
"Available Reserve Account Amount") will be equal to the lesser of the amount on
deposit in the Reserve Account (before giving effect to any deposit or
withdrawal 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 earlier to occur of
(a) the termination of the Trust pursuant to the Agreement, (b) the date on
which the Certificates are paid in full and (c) if the Accumulation Period has
not commenced, the occurrence of an Early Amortization Event with respect to the
Certificates or, if the Accumulation Period has commenced, the earlier of the
first Distribution Date of the Early Amortization Period and the Class B
Expected Final Distribution Date. Upon the termination of the Reserve Account,
all amounts on deposit therein (after giving effect to any withdrawal from the
Reserve Account on such date as described above) will be applied in accordance
with the Loan Agreement.
REALLOCATION OF CASH FLOWS
On or before each Distribution Date, the Servicer will determine the amount
(the "Class A Required Amount"), if any, by which (a) the sum of (i) Class A
Monthly Interest for such Distribution Date, (ii) any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders on a prior
Distribution Date, (iii) any Class A Additional Interest for such Distribution
Date and any Class A Additional Interest previously due but not paid to the
Class A Certificateholders on a prior Distribution Date, (iv) the Class A
Allocable Amount, if any, for such Distribution Date and (v) if FNANB is no
longer the Servicer, the Class A Servicing Fee for such Distribution Date and
any unpaid Class A Servicing Fee for a prior Distribution Date exceeds (b) the
Class A Available Funds for the related Due Period. If the Class A Required
Amount is greater than zero, Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1996-1 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 Shared Excess Finance Charge Collections available
with respect to such Distribution Date are insufficient to fund the Class A
Required Amount, amounts, if any, on deposit in the Cash Collateral Account will
then be used to fund the remaining Class A Required Amount. If such Excess
Spread and Shared Excess Finance Charge Collections and amounts, if any, on
deposit in the Cash Collateral Account are insufficient to fund the Class A
Required Amount, collections of Principal Receivables allocable first to the
Class D Certificates, then to the Collateral Indebtedness Interest and then to
the Class B Certificates for the related Due Period ("Reallocated Principal
Collections") will then be used to fund the remaining Class A Required Amount.
If such Reallocated Principal Collections with respect to the related Due Period
are insufficient to fund the remaining Class A Required Amount, then the Class D
Invested Amount will be reduced by the amount of such insufficiency (but not by
more than the Class A Allocable Amount for such Distribution Date). In the event
that such reduction would cause the Class D Invested Amount to be a negative
number, the Class D Invested Amount will be reduced to zero, and the Collateral
Indebtedness Amount will be reduced by the amount by which the Class D Invested
Amount would have been reduced below zero. In the event that such reduction
would cause the Collateral Indebtedness Amount to be a negative number, the
Collateral Indebtedness Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the Collateral Indebtedness Amount
would have been reduced below zero. In the event that such reduction would cause
the Class B
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<PAGE> 29
Invested Amount to be a negative number, the Class B Invested Amount will be
reduced to zero, and the Class A Invested Amount will be reduced by the amount
by which the Class B Invested Amount would have been reduced below zero. Any
such reduction in the Class A Invested Amount will have the effect of slowing or
reducing the return of principal and interest to the Class A Certificateholders.
In such case, the Class A Certificateholders will bear directly the credit and
other risks associated with their undivided interest in the Trust. See
"-- Allocation of Investor Default Amount; Adjustment Amount; Investor
Charge-Offs" herein.
On or before each Distribution Date, the Servicer will determine the amount
(the "Class B Required Amount"), if any, by which (a) the sum of (i) Class B
Monthly Interest for such Distribution Date, (ii) any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a prior
Distribution Date, (iii) any Class B Additional Interest for such Distribution
Date and any Class B Additional Interest previously due but not paid to the
Class B Certificateholders on a prior Distribution Date and (iv) if FNANB is no
longer the Servicer, the Class B Servicing Fee for such Distribution Date and
any unpaid Class B Servicing Fee for a prior Distribution Date exceeds (b) the
Class B Available Funds for the related Due Period, plus the amount, if any, by
which the Class B Allocable Amount, if any, for such Distribution Date exceeds
the amount of Excess Spread and Shared Excess Finance Charge Collections
allocable to Series 1996-1 available on such Distribution Date as specified in
clause (d) under "-- Application of Collections -- Excess Spread; Shared Excess
Finance Charge Collections" herein. If the Class B Required Amount is greater
than zero, Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1996-1 not required to fund the Class A Required Amount or reimburse
Class A Investor Charge-Offs will be used to fund the Class B Required Amount
with respect to such Distribution Date. If such Excess Spread and Shared Excess
Finance Charge Collections available with respect to such Distribution Date are
insufficient to fund the Class B Required Amount, amounts, if any, on deposit in
the Cash Collateral Account not required to fund the Class A Required Amount
will then be used to fund the remaining Class B Required Amount. If such Excess
Spread and Shared Excess Finance Charge Collections and amounts, if any,
available in the Cash Collateral Account are insufficient to fund the Class B
Required Amount, Reallocated Principal Collections allocable first to the Class
D Certificates and then to the Collateral Indebtedness Interest not required to
fund the Class A Required Amount will then be used to fund the remaining Class B
Required Amount. If such Reallocated Principal Collections with respect to the
related Due Period are insufficient to fund the remaining Class B Required
Amount, then the Class D Invested Amount remaining after any adjustments made
thereto for the benefit of Class A Certificateholders will be reduced by the
amount of such insufficiency (but not by more than the Class B Allocable Amount
for such Distribution Date). In the event that such reduction would cause the
Class D Invested Amount to be a negative number, the Class D Invested Amount
will be reduced to zero, and the Collateral Indebtedness Amount remaining after
any adjustments made thereto for the benefit of Class A Certificateholders will
be reduced by the amount by which the Class D Invested Amount would have been
reduced below zero. In the event that such reduction would cause the Collateral
Indebtedness Amount to be a negative number, the Collateral Indebtedness Amount
will be reduced to zero, and the Class B Invested Amount will be reduced by the
amount by which the Collateral Indebtedness Amount would have been reduced below
zero, and the Class B Certificateholders will bear directly the credit and other
risks associated with their undivided interest in the Trust. See "-- Allocation
of Investor Default Amount; Adjustment Amount; Investor Charge-Offs" herein.
Reductions of the Class A Invested Amount or Class B Invested Amount will
thereafter be reimbursed and the Class A Invested Amount or Class B Invested
Amount, as applicable, increased to the extent of Excess Spread and Shared
Excess Finance Charge Collections allocable to Series 1996-1 available for such
purposes on each Distribution Date. In addition, to the extent that such
reductions are due to the allocation of Series Adjustment Amounts, such
reductions may be reimbursed as a result of deposits in the Excess Funding
Account, increases in the amount of Principal Receivables in the Trust or
certain decreases in the aggregate invested amount of the Trust.
On or before each Distribution Date, the Servicer will determine the amount
(the "Collateral Required Amount"), if any, by which (a) the sum of (i)
Collateral Monthly Interest for such Distribution Date, (ii) any Collateral
Monthly Interest previously due but not paid to the Collateral Indebtedness
Holder on a prior Distribution Date, (iii) any Collateral Additional Interest
for such Distribution Date and any Collateral
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Additional Interest previously due but not paid to the Collateral Indebtedness
Holder on a prior Distribution Date and (iv) if FNANB is no longer the Servicer,
the Collateral Servicing Fee for such Distribution Date and any unpaid
Collateral Servicing Fee for a prior Distribution Date exceeds (b) the
Collateral Available Funds and Excess Spread and Shared Excess Finance Charge
Collections for the related Due Period available to make payments with respect
thereto, plus the amount, if any, by which the Collateral Allocable Amount, if
any, for such Distribution Date exceeds the amount of Excess Spread and Shared
Excess Finance Charge Collections allocable to Series 1996-1 available on such
Distribution Date as specified in clause (h) under "-- Application of
Collections -- Excess Spread; Shared Excess Finance Charge Collections" herein.
If the Collateral Required Amount is greater than zero, Excess Spread and Shared
Excess Finance Charge Collections allocable to Series 1996-1 not required to
fund the Class A Required Amount or the Class B Required Amount or reimburse
Class A Investor Charge-Offs or Class B Investor Charge-Offs or pay certain
other amounts will be used to fund the Collateral Required Amount with respect
to such Distribution Date. If such Excess Spread and Shared Excess Finance
Charge Collections available with respect to such Distribution Date are
insufficient to fund the Collateral Required Amount, amounts, if any, on deposit
in the Cash Collateral Account not required to fund the Class A Required Amount
or the Class B Required Amount or pay certain other amounts will then be used to
fund the remaining Collateral Required Amount. If such Excess Spread and Shared
Excess Finance Charge Collections and amounts, if any, available in the Cash
Collateral Account are insufficient to fund the Collateral Required Amount,
Reallocated Principal Collections allocable to the Class D Certificates and not
required to fund the Class A Required Amount or the Class B Required Amount will
then be used to fund the remaining Collateral Required Amount. If such
Reallocated Principal Collections with respect to the related Due Period are
insufficient to fund the remaining Collateral Required Amount, then the Class D
Invested Amount remaining after any adjustments made thereto for the benefit of
Class A Certificateholders or Class B Certificateholders will be reduced by the
amount of such insufficiency (but not by more than the Collateral Allocable
Amount for such Distribution Date). In the event that such reduction would cause
the Class D Invested Amount to be a negative number, the Class D Invested Amount
will be reduced to zero, and the Collateral Indebtedness Amount will be reduced
by the amount by which the Class D Invested Amount would have been reduced below
zero.
APPLICATION OF COLLECTIONS
Payment of Interest, Fees and Other Items. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds, Collateral Available Funds and Class D
Available Funds as follows:
(A) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to 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 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) if FNANB is no longer the Servicer, an amount equal to the
Class A Servicing Fee for such Distribution Date, plus the amount of any
Class A Servicing Fee previously due but not distributed to the Servicer
on a prior Distribution Date, will be distributed to the Servicer;
(iii) an amount equal to the Class A Allocable Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payments
of Principal" below; and
(iv) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections" below.
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(B) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to Class B Certificateholders on a
prior Distribution Date at a rate equal to the Class B Certificate Rate
plus 2% per annum ("Class B Additional Interest"), will be distributed
to the Class B Certificateholders;
(ii) if FNANB is no longer the Servicer, an amount equal to the
Class B Servicing Fee for such Distribution Date, plus the amount of any
Class B Servicing Fee previously due but not distributed to the Servicer
on a prior Distribution Date, will be distributed to the Servicer; and
(iii) the balance, if any, will constitute Excess Spread and will
be allocated and distributed as described under "-- Excess Spread;
Shared Excess Finance Charge Collections" below.
(C) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) if FNANB is no longer the Servicer, an amount equal to the
Collateral Servicing Fee for such Distribution Date, plus the amount of
any Collateral Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, will be distributed to the
Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections" below.
(D) On each Distribution Date, an amount equal to the Class D
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) if FNANB is no longer the Servicer, an amount equal to the
Class D Servicing Fee for such Distribution Date, plus the amount of any
Class D Servicing Fee previously due but not distributed to the Servicer
on a prior Distribution Date, will be distributed to the Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections" below.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class A Certificate Rate for the related
Interest Period, (ii) the outstanding principal amount of the Class A
Certificates as of the preceding Record Date (or, in the case of the first
Distribution Date, as of the Closing Date) and (iii) a fraction, the numerator
of which is the actual number of days in the related Interest Period and the
denominator of which is 360.
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class B Certificate Rate for the related
Interest Period, (ii) the outstanding principal amount of the Class B
Certificates as of the preceding Record Date (or, in the case of the first
Distribution Date, as of the Closing Date) and (iii) a fraction, the numerator
of which is the actual number of days in the related Interest Period and the
denominator of which is 360.
"Collateral Available Funds" means, with respect to any Due Period, an
amount equal to the Collateral Floating Percentage of the collections of Finance
Charge Receivables with respect to such Due Period (and any other amounts that
are to be treated as collections of Finance Charge Receivables in accordance
with the Agreement).
"Class D Available Funds" means, with respect to any Due Period, an amount
equal to the Class D Floating Percentage of the collections of Finance Charge
Receivables with respect to such Due Period (and any other amounts that are to
be treated as collections of Finance Charge Receivables in accordance with the
Agreement).
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"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clauses (A)(iv), (B)(iii), (C)(ii)
and (D)(ii) above plus net investment earnings on funds on deposit in the Cash
Collateral Account received during the preceding Due Period.
Excess Spread; Shared Excess Finance Charge Collections. On each
Distribution Date, the Trustee, acting pursuant to the Servicer's instructions,
will apply Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1996-1 with respect to the related Due Period to make the following
distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Distribution Date will be used to fund any deficiency
pursuant to clauses (A)(i), (ii) and (iii) above under "-- Payment of
Interest, Fees and Other Items," in that order of priority;
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Available Principal Collections for such Distribution Date as
described under "-- Payments of Principal" below;
(c) an amount up to the Class B Required Amount, if any, with respect
to such Distribution Date will be used to fund any deficiency pursuant to
clauses (B)(i) and (ii) above under "-- Payment of Interest, Fees and Other
Items," in that order of priority;
(d) an amount equal to any remaining portion of the Class B Required
Amount for such Distribution Date will be treated as a portion of Available
Principal Collections for such Distribution Date as described under
"-- Payments of Principal" below;
(e) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (d), (e) and (f) of
the definition of "Class B Invested Amount" under "-- Invested Percentages"
above (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) will be treated as a portion of
Available Principal Collections for such Distribution Date as described
under "-- Payments of Principal" below;
(f) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of Collateral Monthly Interest
previously due but not paid to the Collateral Indebtedness Holder on a
prior Distribution Date, plus any additional interest with respect to
interest amounts that were due but not paid to the Collateral Indebtedness
Holder on a prior Distribution Date at a rate equal to the Collateral Rate
plus 2% per annum ("Collateral Additional Interest") will be distributed to
the Collateral Indebtedness Holder;
(g) an amount equal to the Class A Servicing Fee, the Class B
Servicing Fee and the Collateral Servicing Fee for such Distribution Date
(or, if FNANB is no longer the Servicer, the portion thereof remaining
unpaid) plus the amount of any Class A Servicing Fee, Class B Servicing Fee
or Collateral Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, will be distributed to the Servicer;
(h) an amount equal to the Collateral Allocable Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payments of
Principal" below;
(i) an amount equal to the aggregate amount by which the Collateral
Indebtedness Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Collateral Indebtedness Amount" under "-- Invested
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be treated as a
portion of Available Principal Collections for such Distribution Date as
described under "-- Payments of Principal" below;
(j) an amount equal to the excess, if any, of the Required Cash
Collateral Amount over the Available Cash Collateral Amount (without giving
effect to any deposit made on such date under the Agreement) will be
deposited into the Cash Collateral Account;
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(k) an amount equal to Class D Monthly Interest for such Distribution
Date, plus the amount of Class D Monthly Interest previously due but not
paid to the Class D Certificateholders on a prior Distribution Date, plus
any additional interest with respect to interest amounts that were due but
not paid to the Class D Certificateholders on a prior Distribution Date at
a rate equal to the Class D Certificate Rate plus 2% per annum ("Class D
Additional Interest") will be distributed to the Class D
Certificateholders;
(l) an amount equal to the Class D Servicing Fee for such Distribution
Date (or, if FNANB is no longer the Servicer, the portion of the Class D
Servicing Fee for such Distribution Date remaining unpaid), plus the amount
of any Class D Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, will be distributed to the Servicer;
(m) an amount equal to the Class D Allocable Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payments of
Principal" below;
(n) an amount equal to the aggregate amount by which the Class D
Invested Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Class D Invested Amount" under "-- Invested Percentages"
above (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) will be treated as a portion of
Available Principal Collections for such Distribution Date as described
under "-- Payments of Principal" below;
(o) an amount equal to the aggregate of any other amounts then due to
the Collateral Indebtedness Holder pursuant to the Loan Agreement will be
applied in accordance with the Loan Agreement;
(p) an amount equal to the excess, if any, of the Required Reserve
Account Amount over the amount on deposit in the Reserve Account will be
deposited into the Reserve Account; and
(q) the balance, if any, will constitute "Shared Excess Finance Charge
Collections" with respect to Group One to be applied with respect to other
Series in Group One or deposited in the Excess Funding Account in
accordance with the Agreement.
"Class D Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class D Certificate Rate for the related
Interest Period, (ii) the outstanding principal amount of the Class D
Certificates as of the preceding Record Date (or, in the case of the first
Distribution Date, as of the Closing Date) and (iii) a fraction, the numerator
of which is the actual number of days in the related Interest Period and the
denominator of which is 360.
"Class D Certificate Rate" means a rate equal to LIBOR plus 1.00% per
annum, or a lesser rate.
"Collateral Monthly Interest" means, with respect to any Distribution Date,
an amount equal to the product of (i) the Collateral Rate for the related
Interest Period, (ii) the outstanding principal amount of the Collateral
Indebtedness Interest as of the preceding Record Date (or, in the case of the
first Distribution Date, as of the Closing Date) and (iii) a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360.
"Collateral Rate" means a rate equal to LIBOR, plus 1.00% per annum, or
such lesser rate designated pursuant to the Loan Agreement.
Payments of Principal. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Principal
Collections in the following priority:
(A) On each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections, less any portion thereof
allocated at the option of the Transferor as part of Collateral Monthly
Principal or Class D Monthly Principal to make a payment with respect to
the Collateral Indebtedness Interest or the Class D Invested Amount
(subject to maintaining the Required Enhancement Amount and subject to any
other restrictions specified in the Loan Agreement), will be treated as
Shared Principal Collections with respect to other Series and applied as
described under "Description of the Certificates -- Shared Principal
Collections" in the Prospectus; and
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<PAGE> 34
(B) On each Distribution Date with respect to the Accumulation Period
or the Early Amortization Period, all such Available Principal Collections
will be deposited or distributed in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date will, during the Class A Accumulation Period, be
deposited in the Principal Funding Account for payment to the Class A
Certificateholders on the earlier to occur of the Class A Expected Final
Distribution Date and the first Distribution Date with respect to the
Early Amortization Period or, during the Early Amortization Period, be
distributed to the Class A Certificateholders;
(ii) an amount equal to Class B Monthly Principal for such
Distribution Date will, during the Class B Accumulation Period, be
deposited in the Principal Funding Account for payment to the Class B
Certificateholders on the earlier to occur of the Class B Expected Final
Distribution Date and the first Distribution Date with respect to the
Early Amortization Period or, during the Early Amortization Period, be
distributed to Class B Certificateholders;
(iii) an amount equal to Collateral Monthly Principal for such
Distribution Date will be applied in accordance with the Loan Agreement;
(iv) an amount equal to Class D Monthly Principal for such
Distribution Date will be distributed to the Class D Certificateholders;
and
(v) the balance, if any, will be treated as Shared Principal
Collections with respect to other Series and applied as described under
"Description of the Certificates -- Shared Principal Collections" in the
Prospectus.
"Class A Monthly Principal" with respect to any Distribution Date relating
to the Accumulation Period or the Early Amortization Period will equal the least
of (i) the Available Principal Collections on deposit in the Collection Account
with respect to such Distribution Date, (ii) for each Distribution Date with
respect to the Accumulation Period, the Controlled Deposit Amount for such
Distribution Date and (iii) the Class A Invested Amount on such Distribution
Date.
"Class B Monthly Principal" with respect to any Distribution Date relating
to the Accumulation Period or the Early Amortization Period, after the Class A
Certificates have been paid in full, will equal the least of (i) the Available
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date (minus the portion of such Available Principal Collections
applied to any Class A Monthly Principal on such Distribution Date), (ii) for
each Distribution Date with respect to the Accumulation Period, the Controlled
Deposit Amount for such Distribution Date and (iii) the Class B Invested Amount
on such Distribution Date.
"Class D Monthly Principal" with respect to any Distribution Date after the
Collateral Indebtedness Interest has been paid in full, or prior thereto subject
to the requirements of the Loan Agreement, will equal the least of (i) the
Available Principal Collections on deposit in the Collection Account with
respect to such Distribution Date (minus the portion of such Available Principal
Collections applied to any Class A Monthly Principal, Class B Monthly Principal
or Collateral Monthly Principal on such Distribution Date), (ii) the Enhancement
Surplus on such Distribution Date and (iii) the Class D Invested Amount on such
Distribution Date.
"Collateral Monthly Principal" with respect to any Distribution Date prior
to the payment in full of the Class B Certificates will equal the lesser of (i)
the Available Principal Collections on deposit in the Collection Account with
respect to such Distribution Date (minus the portion of such Available Principal
Collections applied to any Class A Monthly Principal or Class B Monthly
Principal on such Distribution Date) and (ii) the Enhancement Surplus on such
Distribution Date, provided that the Transferor shall have elected to pay such
Collateral Monthly Principal, and with respect to each Distribution Date
beginning with the Distribution Date on which the Class B Certificates have been
paid in full, the lesser of (i) the Available Principal Collections on deposit
in the Collection Account with respect to such Distribution Date (minus the
portion of such Available Principal Collections applied to any Class A Monthly
Principal or Class B Monthly Principal on such Distribution Date) and (ii) the
Collateral Indebtedness Amount on such Distribution Date.
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<PAGE> 35
"Controlled Accumulation Amount" means (a) for any Distribution Date with
respect to the Class A Accumulation Period, $13,500,000; provided, however, that
if the commencement of the Accumulation Period is delayed as described above
under "-- Postponement of Accumulation Period," the Controlled Accumulation
Amount will be higher and (b) for any Distribution Date with respect to the
Class B Accumulation Period, $11,250,000.
"Controlled Deposit Amount" means, for any Distribution Date with respect
to the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.
"Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the applicable Controlled
Accumulation Amount for such Distribution Date over the amount deposited into
the Principal Funding Account as Class A Monthly Principal or Class B Monthly
Principal, as the case may be, for such Distribution Date and (b) on each
subsequent Distribution Date with respect to the Class A Accumulation Period or
the Class B Accumulation Period, the excess, if any, of the applicable
Controlled Deposit Amount for such subsequent Distribution Date over the amount
deposited into the Principal Funding Account as Class A Monthly Principal or
Class B Monthly Principal, as the case may be, for such subsequent Distribution
Date.
"Enhancement Surplus" means, with respect to any Distribution Date, the
excess, if any, of (a) the sum of the amount on deposit in the Cash Collateral
Account (after giving effect to deposits or withdrawals from the Cash Collateral
Account on such Distribution Date), the Collateral Indebtedness Amount and the
Class D Invested Amount over (b) the Required Enhancement Amount.
"Required Enhancement Amount" means, with respect to any Distribution Date,
an amount equal to the product of the Invested Amount and 18%, but not less than
$6,750,000; provided, however, that (i) if an Early Amortization Event occurs,
then the Required Enhancement Amount shall equal the Required Enhancement Amount
on the Distribution Date immediately preceding such Early Amortization Event,
(ii) in no event shall the Required Enhancement Amount exceed the sum of the
Class A Invested Amount and the Class B Invested Amount on such date and (iii)
the Required Enhancement Amount may be reduced without the consent of the
Certificateholders if (x) the Transferor 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 the Certificates, (y) the Transferor
shall have delivered to the Trustee an officer's certificate to the effect that,
based on the facts known to such officer at such time, in the reasonable belief
of the Transferor, such reduction will not cause an Early Amortization Event, or
an event that, after the giving of notice or the lapse of time, would constitute
an Early Amortization Event, to occur with respect to Series 1996-1 and (z) the
Transferor shall have delivered an opinion of counsel, acceptable to the
Trustee, to the effect that such reduction will not (a) adversely affect the tax
characterization as debt of certificates of any outstanding Series or Class with
respect to which an opinion of counsel was delivered at the time of their
issuance that such certificates would be characterized as debt, (b) cause the
Trust to be classified, for Federal income tax purposes, as an association (or
publicly traded partnership) taxable as a corporation and (c) cause or
constitute an event in which gain or loss would be recognized by any
Certificateholder.
CASH COLLATERAL ACCOUNT
The Cash Collateral Account will be held for the benefit of the
Certificateholders, the Collateral Indebtedness Holder and the Class D
Certificateholders, as their interests appear in the Series 1996-1 Supplement,
and in the case of the Collateral Indebtedness Holder, in the loan agreement
among the Trustee, FNANB and the Collateral Indebtedness Holder (the "Loan
Agreement") (which interest, in the case of the Collateral Indebtedness Holder
and the Class D Certificateholders, will be subordinated to the interests of the
Certificateholders as provided in the Series 1996-1 Supplement). Funds on
deposit in the Cash Collateral Account will be invested in Eligible Investments.
On each Distribution Date, all interest and earnings (net of losses and
investment expenses) received during the preceding Due Period on funds on
deposit in the Cash Collateral Account will be treated as a portion of Excess
Spread.
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<PAGE> 36
On each Distribution Date, one or more withdrawals may be made from the
Cash Collateral Account in an amount up to the amount on deposit therein to fund
the amounts specified in clauses (a) through (f) and clause (h) under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections" above in the order of priority specified therein.
On each Distribution Date, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1996-1 (to the extent available as
described above under "-- Application of Collections -- Excess Spread; Shared
Excess Finance Charge Collections") to increase the amount on deposit in the
Cash Collateral Account up to the Required Cash Collateral Amount. The "Required
Cash Collateral Amount" will be determined in accordance with the Loan
Agreement.
ALLOCATION OF INVESTOR DEFAULT AMOUNT; ADJUSTMENT AMOUNT; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Due Period. The term "Investor Default Amount"
means, for any Due Period, the product of (i) the Floating Allocation Percentage
with respect to such Due Period and (ii) the Default Amount for such Due Period.
A portion of the Investor Default Amount will be allocated to the Class A
Certificateholders (the "Class A Investor Default Amount") on each Distribution
Date in an amount equal to the product of (i) the Class A Floating Percentage
applicable during the related Due Period and (ii) the Default Amount for such
Due Period. A portion of the Investor Default Amount will be allocated to the
Class B Certificateholders (the "Class B Investor Default Amount") on each
Distribution Date in an amount equal to the product of (i) the Class B Floating
Percentage applicable during the related Due Period and (ii) the Default Amount
for such Due Period. A portion of the Investor Default Amount will be allocated
to the Collateral Indebtedness Holder (the "Collateral Default Amount") on each
Distribution Date in an amount equal to the product of (i) the Collateral
Floating Percentage applicable during the related Due Period and (ii) the
Default Amount for such Due Period. A portion of the Investor Default Amount
will be allocated to the Class D Certificateholders (the "Class D Investor
Default Amount") on each Distribution Date in an amount equal to the product of
(i) the Class D Floating Percentage applicable during the related Due Period and
(ii) the Default Amount of such Due Period.
On each Determination Date, the Servicer will also calculate the Series
Adjustment Amount, as described below under "Allocation of Adjustment Amounts."
A portion of the Series Adjustment Amount will be allocated to the Class A
Certificateholders (the "Class A Adjustment Amount") on each Distribution Date
in an amount equal to the product of (i) the Series Adjustment Amount as of the
end of the related Due Period and (ii) the percentage equivalent of a fraction
the numerator of which is the Class A Invested Amount and the denominator of
which is the Invested Amount, each as of the last day of the Due Period
preceding the related Due Period. A portion of the Series Adjustment Amount will
be allocated to the Class B Certificateholders (the "Class B Adjustment Amount")
on each Distribution Date in an amount equal to the product of (i) the Series
Adjustment Amount as of end of the related Due Period and (ii) the percentage
equivalent of a fraction the numerator of which is the Class B Invested Amount
and the denominator of which is the Invested Amount, each as of the last day of
the Due Period preceding the related Due Period. A portion of the Series
Adjustment Amount will be allocated to the Collateral Indebtedness Holder (the
"Collateral Adjustment Amount") on each Distribution Date in an amount equal to
the product of (i) the Series Adjustment Amount as of the end of the related Due
Period and (ii) the percentage equivalent of a fraction the numerator of which
is the Collateral Indebtedness Amount and the denominator of which is the
Invested Amount, each as of the last day of the Due Period preceding the related
Due Period. A portion of the Series Adjustment Amount will be allocated to the
Class D Certificateholders (the "Class D Adjustment Amount") on each
Distribution Date in an amount equal to the product of (i) the Series Adjustment
Amount as of the end of the related Due Period and (ii) the percentage
equivalent of a fraction the numerator of which is the Class D Invested Amount
and the denominator of which is the Invested Amount, each as of the last day of
the Due Period preceding the related Due Period.
The sum of the Class A Investor Default Amount and the Class A Adjustment
Amount with respect to a Distribution Date is referred to as the "Class A
Allocable Amount." The sum of the Class B Investor Default
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<PAGE> 37
Amount and the Class B Adjustment Amount with respect to a Distribution Date is
referred to as the "Class B Allocable Amount." The sum of the Collateral Default
Amount and the Collateral Adjustment Amount with respect to a Distribution Date
is referred to as the "Collateral Allocable Amount." The sum of the Class D
Investor Default Amount and the Class D Adjustment Amount with respect to a
Distribution Date is referred to as the "Class D Allocable Amount."
An amount equal to the Class A Allocable Amount for each Due Period will be
funded with Class A Available Funds, Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1996-1, amounts, if any, on deposit in
the Cash Collateral Account and Reallocated Principal Collections applied as
described above in "-- Application of Collections -- Payment of Interest, Fees
and Other Items" and "-- Reallocation of Cash Flows." An amount equal to the
Class B Allocable Amount for each Due Period will be funded with Class B
Available Funds, Excess Spread and Shared Excess Finance Charge Collections
allocable to Series 1996-1, amounts, if any, on deposit in the Cash Collateral
Account and Reallocated Principal Collections applied as described above in
"-- Application of Collections -- Payment of Interest, Fees and Other Items" and
"-- Reallocation of Cash Flows."
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1996-1, amounts, if any, on deposit in
the Cash Collateral Account and Reallocated Principal Collections, then the
Class D Invested Amount will be reduced by the amount of such excess, but not by
more than the Class A Allocable Amount for such Distribution Date. In the event
that such reduction would cause the Class D Invested Amount to be a negative
number, the Class D Invested Amount will be reduced to zero, and the Collateral
Indebtedness Amount will be reduced by the amount by which the Class D Invested
Amount would have been reduced below zero. In the event that such reduction
would cause the Collateral Indebtedness Amount to be a negative number, the
Collateral Indebtedness Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the Collateral Indebtedness Amount
would have been reduced below zero. In the event that such reduction would cause
the Class B Invested Amount to be a negative number, the Class B Invested Amount
will be reduced to zero, and the Class A Invested Amount will be reduced by the
amount by which the Class B Invested Amount would have been reduced below zero
(a "Class A Investor Charge-Off"), 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 Class A Investor Charge-Offs) by the
amount of Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1996-1 and available for such purpose as described above in
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections". In addition, to the extent that such reduction is due to the
allocation of Series Adjustment Amounts, such reduction may be reimbursed as a
result of deposits in the Excess Funding Account, increases in the amount of
Principal Receivables in the Trust or certain decreases in the aggregate
invested amount of the Trust.
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1996-1 not required to pay the Class A
Required Amount or reimburse Class A Investor Charge-Offs, amounts, if any, on
deposit in the Cash Collateral Account not required to pay the Class A Required
Amount and Reallocated Principal Collections (exclusive of Class B Subordinated
Principal Collections) not required to pay the Class A Required Amount, then the
Class D Invested Amount will be reduced by the amount of such excess, but not by
more than the Class B Allocable Amount for such Distribution Date. In the event
that such reduction would cause the Class D Invested Amount to be a negative
number, the Class D Invested Amount remaining after any reduction for the
benefit of the Class A Certificates will be reduced to zero, and the Collateral
Indebtedness Amount remaining after any reduction for the benefit of the Class A
Certificates will be reduced by the amount by which the Class D Invested Amount
would have been reduced below zero. In the event that such reduction would cause
the Collateral Indebtedness Amount to be a negative number, the Collateral
Indebtedness Amount will be reduced to zero, and the Class B Invested Amount
will be reduced by the amount by which the Collateral Indebtedness Amount would
have been reduced below zero (a "Class B Investor Charge-Off"), which will have
the effect of slowing or reducing the return of principal to the Class B
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<PAGE> 38
Certificateholders. If the Class B Invested Amount has been reduced by the
amount of any Class B Investor Charge-Offs, it will thereafter be increased on
any Distribution Date (but not by an amount in excess of the aggregate Class B
Investor Charge-Offs) by the amount of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1996-1 and available for such purpose as
described above in "-- Application of Collections -- Excess Spread; Shared
Excess Finance Charge Collections." In addition, to the extent that such
reduction is due to the allocation of Series Adjustment Amounts, such reduction
may be reimbursed as a result of deposits in the Excess Funding Account,
increases in the amount of Principal Receivables in the Trust or certain
decreases in the aggregate invested amount of the Trust.
On each Distribution Date, if the Collateral Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1996-1 not required to pay the Class A
Required Amount or the Class B Required Amount, to reimburse Class A Investor
Charge-Offs or Class B Investor Charge-Offs or to pay certain other amounts,
amounts, if any, on deposit in the Cash Collateral Account not required to pay
the Class A Required Amount or the Class B Required Amount or to pay certain
other amounts and Reallocated Principal Collections (exclusive of Class B
Subordinated Principal Collections and collections of Principal Receivables
allocated to the Collateral Indebtedness Holder) not required to pay the Class A
Required Amount or the Class B Required Amount, then the Class D Invested Amount
remaining after any reduction for the benefit of the Class A Certificates or the
Class B Certificates will be reduced by the amount of such excess, but not by
more than the Collateral Allocable Amount for such Distribution Date. In the
event that such reduction would cause the Class D Invested Amount to be a
negative number, the Class D Invested Amount will be reduced to zero, and the
Collateral Indebtedness Amount will be reduced by the amount by which the Class
D Invested Amount would have been reduced below zero.
On each Distribution Date, if the Class D Allocable Amount exceeds the
amount of Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1996-1 available on such Distribution Date as specified in clause (m)
under " -- Application of Collections -- Excess Spread; Shared Excess Finance
Charge Collections" above, then the Class D Invested Amount will be reduced by
the amount of such excess.
ALLOCATION OF ADJUSTMENT AMOUNTS
The "Minimum Transferor Interest Percentage" applicable to Series 1996-1
will initially be 0%; provided, however, that (a) the Transferor may, at its
option and in its sole discretion, designate a higher percentage as the Minimum
Transferor Interest Percentage so long as, after giving effect to such
designation, the Transferor Amount equals or exceeds the Minimum Transferor
Amount and (b) if on any Distribution Date during the Amortization Period (after
giving effect to all distributions and adjustments to be made on such
Distribution Date), the Class D Invested Amount is less than 2% of the Invested
Amount and the Minimum Transferor Interest Percentage is then less than 2%, the
Transferor will be required, on or before the last day of the second Due Period
following the Due Period in which such Distribution Date occurs (unless the
Class D Invested Amount then equals or exceeds 2% of the Invested Amount), to
(i) repurchase or otherwise repay certificates (to the extent permitted) or
designate Additional Accounts to the extent necessary to permit the designation
of a Minimum Transferor Interest Percentage of 2% without causing the Transferor
Amount to be less than the Minimum Transferor Amount and (ii) upon compliance
with clause (i), designate 2% as the Minimum Transferor Interest Percentage. In
the event that the Transferor has designated a Minimum Transferor Interest
Percentage in excess of 0%, the Transferor may, during the Revolving Period,
designate a lower percentage (not less than 0%) if the Class D Invested Amount
as a percentage of the Invested Amount averaged over the three Distribution
Dates preceding such designation (after giving effect to all distributions and
adjustments made on each such Distribution Date) equals or exceeds 4%; provided,
however, that such lower percentage may not be less than 2% if the Class D
Invested Amount as a percentage of the Invested Amount on the Distribution Date
preceding such designation (after giving effect to all distributions and
adjustments made on such Distribution Date) does not equal or exceed
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2%. The "Series Minimum Transferor Amount" applicable to Series 1996-1 will
generally be calculated as follows:
<TABLE>
<C> <C> <S>
Invested Amount*
- ----------------------------------------- - Invested Amount*
1-Minimum Transferor Interest Percentage
</TABLE>
- ---------------
* without giving effect to any adjustments to the Invested Amount as a result of
the allocation of any Series Adjustment Amount.
If as a result of an Adjustment as described in "Description of the
Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs" in the Prospectus (i) the Aggregate Principal Receivables plus the
Excess Funding Account balance is less than (ii) the aggregate invested amount
of all Series plus the Minimum Transferor Amount (after giving effect to any
required transfer of Receivables in Additional Accounts to the Trust and any
amounts deposited in the Excess Funding Account), and the Transferor fails to
make any payment required by the Agreement in respect thereof, then the amount
of such deficiency will be allocated among all Series in the proportion that the
sum of the invested amount and the series minimum transferor amount for each
Series bears to the aggregate invested amount and aggregate Minimum Transferor
Amount for all Series. If such allocation for any Series exceeds the series
minimum transferor amount of such Series, the invested amount of such Series
will be reduced. Any such reduction for any Due Period with respect to Series
1996-1 (a "Series Adjustment Amount") will be allocated as described above under
"-- Allocation of Investor Default Amount; Adjustment Amount; Investor
Charge-Offs." A Series Adjustment Amount will be reduced and the Invested Amount
increased to the extent that the amount of Principal Receivables in the Trust
increases, certificates are repaid, amounts are deposited in the Excess Funding
Account or the Transferor subsequently makes a payment allocable to Series
1996-1 in respect of an Adjustment. Reductions in a Series Adjustment Amount
will be allocated first to the Class A Certificates, then to the Class B
Certificates, then to the Collateral Indebtedness Interest and finally to the
Class D Certificates, in each case to the extent of any reductions in the Class
A Invested Amount, the Class B Invested Amount, the Collateral Indebtedness
Amount or the Class D Invested Amount, as applicable, attributable to a Series
Adjustment Amount.
The "Minimum Aggregate Principal Receivables" applicable to Series 1996-1
is the Initial Invested Amount plus the principal amount of any additional Class
D Certificates that may be issued or, subject to satisfaction of the Rating
Agency Condition, such lesser amount designated by the Transferor.
EARLY AMORTIZATION EVENTS
The Revolving Period will continue through the October 2000 Due Period (or
such later date determined as described above under "-- Postponement of
Accumulation Period") unless an Early Amortization Event occurs prior to such
date. An "Early Amortization Event" refers to any of the following events
(subject to certain notice requirements described in the following paragraph):
(a) failure on the part of the Transferor (i) to make any payment or
deposit on the date required under the Agreement or within five business
days thereafter, (ii) to observe or perform in any material respect any
other covenants or agreements of the Transferor in the Agreement, which
continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Transferor by the Trustee, or to the Transferor and
the Trustee by the holders of not less than 25% of the Invested Amount, and
as a result of which the interests of the Certificateholders are materially
and adversely affected;
(b) any representation or warranty made by the Transferor in the
Agreement 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 the date on which written notice of such breach, requiring the
same to be remedied, shall have been given to the Transferor by the
Trustee, or to the Transferor and the Trustee by the holders of not less
than 25% of the Invested Amount, and as a result of which the interests of
the Certificateholders are materially and adversely affected; provided,
however, that if the representation or
S-39
<PAGE> 40
warranty which was breached relates to any particular Receivable or group
of Receivables an Early Amortization Event shall not be deemed to have so
occurred if the Transferor has accepted retransfer of the related
Receivable or all such Receivables, if applicable, during such period (or
such longer period not to exceed a total of 90 days as the Trustee may
specify) in accordance with the provisions of the Agreement;
(c) certain events of insolvency, conservatorship or receivership
relating to the Transferor or Circuit City;
(d) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders;
(e) failure on the part of the Transferor to transfer Receivables in
Additional Accounts to the Trust when required pursuant to the Agreement;
(f) the average of the Portfolio Yields for any three consecutive Due
Periods is less than the average of the Base Rates for such period;
(g) (i) the Class D Invested Amount held by the Transferor as a
percentage of the Invested Amount averaged over the three most recent
Distribution Dates (after giving effect to all distributions and
adjustments made on each such Distribution Date) is less than 4% and (ii)
the Minimum Transferor Interest Percentage on the last day of the Due
Period in which the last of such Distribution Dates occurred is less than
2%;
(h) (i) the Class D Invested Amount held by the Transferor as a
percentage of the Invested Amount on any Distribution Date (after giving
effect to all distributions and adjustments made on such Distribution Date)
is less than 2% and (ii) the Minimum Transferor Interest Percentage on the
last day of the Due Period in which such Distribution Date occurred is less
than 4%;
(i) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(j) failure of the Interest Rate Cap Provider to make any payment
under the Class A Interest Rate Cap or the Class B Interest Rate Cap within
five days of the date on which such payment was due; or
(k) the Class A Invested Amount shall not be paid in full on the Class
A Expected Final Distribution Date or the Class B Invested Amount shall not
be paid in full on the Class B Expected Final Distribution Date.
In the case of any event described in clause (a), (b) or (d) above, an
Early Amortization Event will be deemed to have occurred with respect to the
Certificates only if, after any applicable grace period, either the Trustee or
holders of more than 50% of the Invested Amount, by written notice to the
Transferor and the Servicer (and to the Trustee, if given by the
Certificateholders), declare that an Early Amortization Event has occurred with
respect to the Certificates as of the date of such notice. In the case of any
event described in clause (c) or (i) above, an Early Amortization Event with
respect to all Series then outstanding, and in the case of any event described
in clause (e), (f), (g), (h), (j) or (k) above, an Early Amortization Event with
respect to only the Certificates, will be deemed to have occurred without any
notice or other action on the part of the Trustee or the Certificateholders or
all certificateholders, as appropriate, immediately upon the occurrence of such
event. On the date on which an Early Amortization Event is deemed to have
occurred, the Early Amortization Period will commence.
For purposes of the Early Amortization Event described in clause (f) above,
the terms "Base Rate" and "Portfolio Yield" will be defined as follows with
respect to the Certificates:
"Base Rate" means, with respect to any Due Period, the sum of (a) the
annualized percentage equivalent of a fraction, the numerator of which is equal
to the sum of Class A Monthly Interest, Class B Monthly Interest, Collateral
Monthly Interest and Class D Monthly Interest with respect to the related
Distribution Date and the denominator of which is the sum of the Invested Amount
and the Principal Funding Account Balance as of the last day of the preceding
Due Period and (b) the product of (i) 2.00% per annum and (ii) a
S-40
<PAGE> 41
fraction, the numerator of which is an amount equal to the Invested Amount and
the denominator of which is the Invested Amount plus the Principal Funding
Account Balance, in each case determined as of the last day of the preceding Due
Period.
"Portfolio Yield" means, with respect to any Due Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to (a) an
amount equal to the amount of collections of Finance Charge Receivables that are
allocated to Series 1996-1 with respect to such Due Period (including interest
and other investment earnings of funds on deposit in the Excess Funding Account
applied as collections of Finance Charge Receivables), plus (b) any Shared
Excess Finance Charge Collections that are allocated to Series 1996-1 with
respect to such Due Period, plus (c) Principal Funding Investment Proceeds and
the amounts withdrawn from the Reserve Account and deposited in the Collection
Account to be included as part of Class A Available Funds or Class B Available
Funds with respect to such Due Period plus (d) the amount of any payment made by
the Interest Rate Cap Provider under the Interest Rate Caps deposited in the
Collection Account on the Distribution Date immediately following the last day
of such Due Period minus (e) the Investor Default Amount for the Distribution
Date with respect to such Due Period, and the denominator of which is the sum of
the Invested Amount and the Principal Funding Account Balance as of the last day
of the preceding Due Period.
See "Description of the Certificates -- Early Amortization Events" in the
Prospectus for an additional discussion of the consequences of an insolvency,
conservatorship or receivership of the Transferor.
SERVICING COMPENSATION
The share of the Servicing Fee allocable to Series 1996-1 with respect to
any Distribution Date (the "Investor Monthly Servicing Fee") will be equal to
one-twelfth of the product of (a) 2.00% and (b) the Invested Amount as of the
last day of the immediately preceding Due Period; provided, however, that with
respect to the first Distribution Date, the Investor Monthly Servicing Fee will
be equal to $ . The share of the Investor Monthly Servicing Fee allocable
to the Class A Certificateholders with respect to any Distribution Date (the
"Class A Servicing Fee") will be equal to the product of (a) the Class A
Floating Percentage divided by the Floating Allocation Percentage and (b) the
Investor Monthly Servicing Fee; provided, however, that with respect to the
first Distribution Date, the Class A Servicing Fee will be equal to $ .
The share of the Investor Monthly Servicing Fee allocable to the Class B
Certificateholders with respect to any Distribution Date (the "Class B Servicing
Fee") will be equal to the product of (a) the Class B Floating Percentage
divided by the Floating Allocation Percentage and (b) the Investor Monthly
Servicing Fee; provided, however, that with respect to the first Distribution
Date, the Class B Servicing Fee will be equal to $ . The share of the
Investor Monthly Servicing Fee allocable to the Collateral Indebtedness Holder
with respect to any Distribution Date (the "Collateral Servicing Fee") will be
equal to the product of (a) the Collateral Floating Percentage divided by the
Floating Allocation Percentage and (b) the Investor Monthly Servicing Fee;
provided, however, that with respect to the first Distribution Date, the
Collateral Servicing Fee will be equal to $ . The share of the Investor
Monthly Servicing Fee allocable to the Class D Certificateholders with respect
to any Distribution Date (the "Class D Servicing Fee") will be equal to the
product of (a) the Class D Floating Percentage divided by the Floating
Allocation Percentage and (b) the Investor Monthly Servicing Fee; provided,
however, that with respect to the first Distribution Date, the Class D Servicing
Fee will be equal to $ . The Class A Servicing Fee, the Class B Servicing
Fee, the Collateral Servicing Fee and the Class D Servicing Fee will be payable
solely to the extent amounts are available for distribution in respect thereof
as described above in "-- Application of Collections." The remainder of the
Servicing Fee will be paid by the Transferor or from amounts allocable to other
Series (as provided in the Agreement and the Series Supplements relating to such
other Series) and in no event will the Trust, the Trustee or the
Certificateholders be liable for the share of the Servicing Fee to be paid by
the Transferor or from amounts allocable to any other Series.
S-41
<PAGE> 42
AMENDMENTS TO THE AGREEMENT RELATING TO FASIT ELECTION
Each Certificateholder, by acquiring an interest in a Certificate, is
deemed to consent to any amendment to the Agreement or the Series 1996-1
Supplement necessary for FNANB to elect FASIT status for the Trust or any
portion thereof, provided that, such election may not be made unless FNANB
delivers to the Trustee an opinion of counsel to the effect that (i) the
issuance of FASIT regular interests will not adversely affect the tax
characterization as debt of certificates of any outstanding Series or Class with
respect to which an opinion of counsel was delivered at the time of their
issuance that such certificates would be characterized as debt, (ii) following
such issuance the Trust will not be classified for Federal income tax purposes
as an association (or publicly traded partnership) taxable as a corporation and
(iii) such issuance will not cause or constitute an event in which gain or loss
would be recognized by any Certificateholder.
S-42
<PAGE> 43
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") between the Transferor and the underwriters named
below (the "Underwriters"), the Transferor has agreed to sell to the
Underwriters, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Class A Certificates and Class B Certificates set forth
opposite its name.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OF CLASS A
UNDERWRITERS CERTIFICATES
----------------------------------------------------------------------- ------------
<S> <C>
NationsBanc Capital Markets, Inc. ..................................... $ 54,000,000
CS First Boston Corporation............................................ 54,000,000
Greenwich Capital Markets, Inc. ....................................... 54,000,000
------------
Total........................................................ $162,000,000
===========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OF CLASS B
CERTIFICATES
------------
<S> <C>
NationsBanc Capital Markets, Inc. ..................................... $ 22,500,000
===========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates
offered hereby if any of the Certificates are purchased.
The Underwriters propose initially to offer the Class A Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of % of the principal amount
of the Class A Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of % of the principal amount of the
Class A Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms may be changed by
the Underwriters.
The Underwriter of the Class B Certificates proposes initially to offer the
Class B Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in excess of
% of the principal amount of the Class B Certificates. The Underwriter
may allow, and such dealers may reallow, concessions not in excess of
% of the principal amount of the Class B Certificates to certain
brokers and dealers. After the initial public offering, the public offering
price and other selling terms may be changed by the Underwriter.
The Transferor will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and/or commercial banking
transactions with Circuit City, the Transferor, the Trust and their respective
affiliates.
Each Underwriter has represented and agreed that (a) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Class A Certificates to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or who is a person to
whom the document may otherwise lawfully be issued or passed on, (b) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 of Great Britain with respect to anything done by it in
relation to the Class A Certificates in, from or otherwise involving the United
Kingdom and (c) if that Underwriter is an authorized person under the Financial
Services Act 1986, it has only promoted and will only promote (as that term is
defined in Regulation 1.02 of the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991) to any person in the United Kingdom the scheme
described herein if that person is of a kind described either
S-43
<PAGE> 44
in Section 76(2) of the Financial Services Act 1986 or in Regulation 1.04 of the
Financial Services (Promotion of Unregulated Schemes) Regulations 1991.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates, and the
Federal tax consequences of such issuance, will be passed upon for FNANB by
McGuire, Woods, Battle & Boothe, L.L.P. Certain legal matters relating to the
issuance of the Certificates will be passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP.
S-44
<PAGE> 45
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----------------
<S> <C>
Accounts................................................................... S-1, S-4
Accumulation Period........................................................ S-6
Accumulation Period Length................................................. S-23
Aggregate Principal Receivables............................................ S-24
Agreement.................................................................. S-3
Available Cash Collateral Amount........................................... S-8
Available Enhancement Amount............................................... S-8
Available Principal Collections............................................ S-22
Available Reserve Account Amount........................................... S-28
Bank Portfolio............................................................. S-11
Base Rate.................................................................. S-40
Cash Collateral Account.................................................... S-2, S-8
Certificateholders......................................................... S-4
Certificates............................................................... S-1, S-4
Class A Accumulation Period................................................ S-6
Class A Additional Interest................................................ S-30
Class A Adjustment Amount.................................................. S-36
Class A Allocable Amount................................................... S-36
Class A Available Funds.................................................... S-20
Class A Cap Payment........................................................ S-21
Class A Cap Rate........................................................... S-21
Class A Certificate Rate................................................... S-1, S-4, S-19
Class A Certificateholders................................................. S-4
Class A Certificates....................................................... S-1, S-3
Class A Expected Final Distribution Date................................... S-4, S-17
Class A Fixed Percentage................................................... S-25
Class A Floating Percentage................................................ S-24
Class A Initial Invested Amount............................................ S-5
Class A Interest Rate Cap.................................................. S-4
Class A Invested Amount.................................................... S-5, S-25
Class A Investor Charge-Off................................................ S-37
Class A Investor Default Amount............................................ S-36
Class A Monthly Interest................................................... S-31
Class A Monthly Principal.................................................. S-34
Class A Notional Amount.................................................... S-21
Class A Required Amount.................................................... S-28
Class A Servicing Fee...................................................... S-41
Class B Accumulation Period................................................ S-7
Class B Additional Interest................................................ S-31
Class B Adjustment Amount.................................................. S-36
Class B Allocable Amount................................................... S-37
Class B Available Funds.................................................... S-20
Class B Cap Payment........................................................ S-21
Class B Cap Rate........................................................... S-21
Class B Certificate Rate................................................... S-1, S-5, S-19
Class B Certificateholders................................................. S-4
Class B Certificates....................................................... S-1, S-3
Class B Expected Final Distribution Date................................... S-5, S-17
Class B Fixed Percentage................................................... S-25
Class B Floating Percentage................................................ S-24
</TABLE>
S-45
<PAGE> 46
<TABLE>
<CAPTION>
PAGE
-----------------
<S> <C>
Class B Initial Invested Amount............................................ S-5
Class B Interest Rate Cap.................................................. S-4
Class B Invested Amount.................................................... S-5, S-25
Class B Investor Charge-Off................................................ S-37
Class B Investor Default Amount............................................ S-36
Class B Monthly Interest................................................... S-31
Class B Monthly Principal.................................................. S-34
Class B Notional Amount.................................................... S-21
Class B Principal Commencement Date........................................ S-7
Class B Required Amount.................................................... S-29
Class B Servicing Fee...................................................... S-41
Class B Subordinated Principal Collections................................. S-23
Class D Additional Interest................................................ S-33
Class D Adjustment Amount.................................................. S-36
Class D Allocable Amount................................................... S-37
Class D Available Funds.................................................... S-31
Class D Certificate Rate................................................... S-33
Class D Certificateholders................................................. S-4
Class D Certificates....................................................... S-3
Class D Fixed Percentage................................................... S-25
Class D Floating Percentage................................................ S-24
Class D Invested Amount.................................................... S-26
Class D Investor Default Amount............................................ S-36
Class D Monthly Interest................................................... S-33
Class D Monthly Principal.................................................. S-34
Class D Servicing Fee...................................................... S-41
Closing Date............................................................... S-1, S-4
Collateral Additional Interest............................................. S-32
Collateral Adjustment Amount............................................... S-36
Collateral Allocable Amount................................................ S-37
Collateral Available Funds................................................. S-31
Collateral Default Amount.................................................. S-36
Collateral Fixed Percentage................................................ S-25
Collateral Floating Percentage............................................. S-24
Collateral Indebtedness Amount............................................. S-26
Collateral Indebtedness Holder............................................. S-4
Collateral Indebtedness Interest........................................... S-3
Collateral Monthly Interest................................................ S-33
Collateral Monthly Principal............................................... S-34
Collateral Rate............................................................ S-33
Collateral Required Amount................................................. S-29
Collateral Servicing Fee................................................... S-41
Controlled Accumulation Amount............................................. S-35
Controlled Deposit Amount.................................................. S-35
Covered Amount............................................................. S-27
Deficit Controlled Accumulation Amount..................................... S-35
Distribution Date.......................................................... S-2
Due Period................................................................. S-5
Early Amortization Event................................................... S-39
Enhancement................................................................ S-4
Enhancement Surplus........................................................ S-35
EPP Card................................................................... S-11
ERISA...................................................................... S-9
</TABLE>
S-46
<PAGE> 47
<TABLE>
<CAPTION>
PAGE
-----------------
<S> <C>
Excess Spread.............................................................. S-32
Fixed Allocation Percentage................................................ S-24
Floating Allocation Percentage............................................. S-23
FNANB...................................................................... S-1, S-3
Group One.................................................................. S-48
Interest Period............................................................ S-6
Interest Rate Cap Provider................................................. S-4
Interest Rate Caps......................................................... S-4
Invested Amount............................................................ S-26
Investor Default Amount.................................................... S-36
Investor Monthly Servicing Fee............................................. S-41
LIBOR...................................................................... S-1, S-20
LIBOR Determination Date................................................... S-20
Loan Agreement............................................................. S-35
Minimum Aggregate Principal Receivables.................................... S-39
Minimum Transferor Interest Percentage..................................... S-38
Portfolio Yield............................................................ S-41
Principal Funding Account.................................................. S-26
Principal Funding Account Balance.......................................... S-26
Principal Funding Investment Proceeds...................................... S-27
Qualified Substitute Arrangement........................................... S-21
Reallocated Principal Collections.......................................... S-28
Receivables................................................................ S-1, S-4
Record Date................................................................ S-19
Reference Banks............................................................ S-20
Regular Card............................................................... S-11
Replacement Interest Rate Cap.............................................. S-21
Required Cash Collateral Amount............................................ S-36
Required Enhancement Amount................................................ S-8, S-35
Required Reserve Account Amount............................................ S-27
Reserve Account............................................................ S-27
Reserve Account Funding Date............................................... S-27
Revolving Period........................................................... S-6
Series Adjustment Amount................................................... S-39
Series 1996-1.............................................................. S-3
Series 1996-1 Supplement................................................... S-3
Series Minimum Transferor Amount........................................... S-39
Series Supplement.......................................................... S-3
Servicer................................................................... S-3
Shared Excess Finance Charge Collections................................... S-33
Stated Series Termination Date............................................. S-5
Telerate Page 3750......................................................... S-20
Transferor................................................................. S-3
Trust...................................................................... S-1, S-3
Trustee.................................................................... S-1, S-3
Underwriters............................................................... S-43
Underwriting Agreement..................................................... S-43
</TABLE>
S-47
<PAGE> 48
ANNEX I
PRIOR SERIES ISSUED
The table below sets forth the principal characteristics of the three
Series heretofore issued by the Trust, the Series 1994-1 Certificates, the
Series 1994-2 Certificates and the Series 1995-1 Certificates, all of which are
in the same group of Series ("Group One") as Series 1996-1. For more specific
information with respect to any Series, any prospective investor should contact
FNANB at (770) 423-7900.
<TABLE>
<S> <C>
SERIES 1994-1
Initial Invested Amount........................... $457,000,000
Invested Amount as of October 31, 1996............ $220,000,000
Expected Invested Amount at end of Closing Date... $50,000,000
Certificate Rate.................................. Resettable
Enhancement....................................... Letter of Credit
Series Servicing Fee Percentage................... 2% per annum
Stated Series Termination Date.................... October 2009 Distribution Date
Issuance Date..................................... October 4, 1994
SERIES 1994-2
1. Class A Certificates
Initial Invested Amount........................... $308,000,000
Invested Amount as of October 31, 1996............ $308,000,000
Expected Invested Amount at end of Closing Date... $308,000,000
Certificate Rate.................................. 8.00%
Controlled Accumulation Amount.................... $25,666,667
Commencement of Accumulation Period............... October 31, 1998
Expected Final Distribution Date.................. November 1999 Distribution Date
Enhancement....................................... Subordination of Class B
Certificates, Collateral
Indebtedness Interest and Class D
Certificates
Series Servicing Fee Percentage................... 2% per annum
Stated Series Termination Date.................... November 2003 Distribution Date
Issuance Date..................................... November 17, 1994
2. Class B Certificates
Initial Invested Amount........................... $36,000,000
Invested Amount as of October 31, 1996............ $36,000,000
Expected Invested Amount at end of Closing Date... $36,000,000
Certificate Rate.................................. 8.20%
Controlled Accumulation Amount.................... $18,000,000
Commencement of Accumulation Period............... Following payment of Class A
Certificates
Expected Final Distribution Date.................. January 2000 Distribution Date
Enhancement....................................... Subordination of Collateral
Indebtedness Interest and Class D
Certificates
Series Servicing Fee Percentage................... 2% per annum
Stated Series Termination Date.................... November 2003 Distribution Date
Issuance Date..................................... November 17, 1994
</TABLE>
S-48
<PAGE> 49
<TABLE>
<S> <C>
SERIES 1995-1
1. Class A Certificates
Initial Invested Amount........................... $216,000,000
Invested Amount as of October 31, 1996............ $216,000,000
Expected Invested Amount at end of Closing Date... $216,000,000
Certificate Rate.................................. 6.375%
Controlled Accumulation Amount.................... $18,000,000
Commencement of Accumulation Period............... August 31, 1999
Expected Final Distribution Date.................. September 2000 Distribution Date
Enhancement....................................... Subordination of Class B
Certificates, Collateral
Indebtedness Interest and Class D
Certificates
Series Servicing Fee Percentage................... 2% per annum
Stated Series Termination Date.................... August 2005 Distribution Date
Issuance Date..................................... September 7, 1995
2. Class B Certificates
Initial Invested Amount........................... $30,000,000
Invested Amount as of October 31, 1996............ $30,000,000
Expected Invested Amount at end of Closing Date... $30,000,000
Certificate Rate.................................. 6.625%
Controlled Accumulation Amount.................... $15,000,000
Commencement of Accumulation Period............... Following payment of Class A
Certificates
Expected Final Distribution Date.................. November 2000 Distribution Date
Enhancement....................................... Subordination of Collateral
Indebtedness Interest and Class D
Certificates
Series Servicing Fee Percentage................... 2% per annum
Stated Series Termination Date.................... August 2005 Distribution Date
Issuance Date..................................... September 7, 1995
</TABLE>
S-49
<PAGE> 50
PROSPECTUS
CIRCUIT CITY CREDIT CARD MASTER TRUST
ASSET BACKED CERTIFICATES
FIRST NORTH AMERICAN NATIONAL BANK
TRANSFEROR AND SERVICER
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement"). The
Certificates of each Series will represent an undivided interest in the Circuit
City Credit Card Master Trust (the "Trust"). The Trust has been formed pursuant
to a master pooling and servicing agreement between First North American
National Bank, a national banking association ("FNANB"), as transferor and
servicer, and Bankers Trust Company, as trustee (the "Trustee"). The property of
the Trust will include receivables (the "Receivables") generated from time to
time in a portfolio of consumer revolving credit card accounts (the "Accounts"),
all monies due or to become due in payment of the Receivables and certain other
property, as more fully described herein and, with respect to any Series offered
hereby, in the related Prospectus Supplement. FNANB will own the remaining
undivided interest in the Trust not represented by outstanding Series issued by
the Trust and will service the Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate Certificates, floating rate
Certificates or other types of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest in
the Trust, and the interest of the Certificateholders of each Class or Series
will include the right to receive a varying percentage of each month's
collections with respect to the Receivables at the time, in the manner and to
the extent described herein and, with respect to any Series offered hereby, in
the related Prospectus Supplement. Interest and principal payments with respect
to each Series offered hereby will be made as specified in the related
Prospectus Supplement. One or more Classes of a Series offered hereby may be
entitled to the benefits of a cash collateral account or guaranty, letter of
credit, surety bond, insurance policy or other form of enhancement as specified
in the Prospectus Supplement relating to such Series. In addition, any Series
offered hereby may include one or more Classes or other interests in the Trust
which are subordinated in right and priority to payment of principal of, and/or
interest on, one or more other Classes of such Series or another Series, in each
case to the extent described in the related Prospectus Supplement. Each Series
of Certificates or Class thereof offered hereby will be rated in one of the four
highest rating categories by at least one nationally recognized statistical
rating organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of, the
holders of the Certificates of any previously issued Series.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST NORTH AMERICAN NATIONAL
BANK, CIRCUIT CITY STORES, INC. OR ANY AFFILIATE THEREOF. A CERTIFICATE IS NOT A
DEPOSIT, AND NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES
ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" ON PAGE 15. BENEFIT PLAN INVESTORS SHOULD CONSIDER,
AMONG OTHER THINGS, THE INFORMATION SET FORTH IN "ERISA CONSIDERATIONS."
Certificates may be sold by FNANB directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or more
managing underwriters or through one or more underwriters acting alone. If
underwriters or agents are involved in the offering of the Certificates of any
Series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement. If an
underwriter, agent or dealer is involved in the offering of the Certificates of
any Series offered hereby, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to FNANB from such offering
will be the public offering price of such Certificates less such discount in the
case of an underwriter, the purchase price of such Certificates less such
commission in the case of an agent or the purchase price of such Certificates in
the case of a dealer, and less, in each case, the other expenses of FNANB
associated with the issuance and distribution of such Certificates. Any
underwriter of the Certificates will be indemnified by FNANB against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE CERTIFICATES OF
ANY SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
The date of this Prospectus is November 15, 1996.
<PAGE> 51
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a) the
initial aggregate principal amount of each Class of such Series; (b) the
interest rate (or method for determining it) of each Class of such Series; (c)
certain information concerning the Receivables allocated to such Series; (d) the
expected date or dates on which the principal amount of the Certificates will be
paid to holders of the Certificates (the "Certificateholders"); (e) the extent
to which any Class of such Series or any other Series is subordinated to any
other Class of such Series or any other Series; (f) the identity of each Class
of floating rate Certificates and fixed rate Certificates included in such
Series, if any, or such other type of Class of Certificates; (g) the
Distribution Dates for the respective Classes;(h) relevant financial information
with respect to the Receivables; (i) additional information with respect to any
Enhancement relating to such Series; and (j) the plan of distribution of such
Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual reports, containing information concerning the Trust and
prepared by the Servicer, will be sent on behalf of the Trust to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the related Certificates, pursuant to the Agreement. See "Description
of the Certificates -- Book-Entry Registration," " -- Reports to
Certificateholders" and " -- Evidence as to Compliance." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Transferor is not required and does not intend to
send any of its financial reports to Certificateholders or to the owners of
beneficial interests in the Certificates ("Certificate Owners"). The Servicer
will file with the Securities and Exchange Commission (the "Commission") such
periodic reports with respect to the Trust as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein by
reference as described below under "Incorporation of Certain Documents by
Reference," which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a public
access site on the Internet through a World Wide Web site at which reports,
information statements and other information, including all electronic filings,
regarding the Transferor may be viewed. The Internet address of such World Wide
Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed document which
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
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<PAGE> 52
The Servicer will provide without charge to each person, including any
beneficial owner of Certificates, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any of
or all the documents incorporated by reference herein (other than exhibits to
such documents). Written requests for such copies should be directed to First
North American National Bank, 1800 Parkway Place, Marietta, Georgia 30067.
Telephone requests for such copies should be directed to (770) 423-7900.
3
<PAGE> 53
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus and in the accompanying Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms for Prospectus." Unless the context requires
otherwise, capitalized terms used in this Prospectus and in the accompanying
Prospectus Supplement refer only to the particular Series being offered by such
Prospectus Supplement.
Type of Securities......... Asset Backed Certificates (the "Certificates")
evidencing an undivided ownership interest in the
assets of the Circuit City Credit Card Master
Trust (the "Trust") may be issued from time to
time in one or more series (each, a "Series")
which will consist of one or more classes of
Certificates (each, a "Class").
Trust...................... The Trust has been formed pursuant to a master
pooling and servicing agreement dated as of
October 4, 1994, as amended (the "Agreement")
between First North American National Bank, a
national banking association ("FNANB"), as
transferor (in such capacity, the "Transferor")
and as servicer (in such capacity, the
"Servicer"), and Bankers Trust Company, a New
York banking corporation, as trustee (the
"Trustee"). The Trust has been created as a
master trust under which one or more Series may
be issued pursuant to a series supplement to the
Agreement (a "Series Supplement"). Any Series
issued by the Trust may or may not be a Series
offered pursuant to this Prospectus. Each
Prospectus Supplement will identify all then
outstanding Series previously issued by the
Trust.
Trust Assets............... The property of the Trust includes and will include
receivables (the "Receivables") arising under
certain consumer revolving credit card accounts
(the "Accounts") selected by the Transferor from
the portfolio of consumer revolving credit card
accounts owned or acquired by the Transferor and
all monies due or to become due in payment of the
Receivables (including recoveries on charged-off
Receivables), all proceeds of the Receivables and
proceeds of credit insurance policies relating to
the Receivables, and all monies on deposit in
certain bank accounts of the Trust (including any
eligible investments in which any such monies are
invested, but excluding investment earnings on
such amounts unless otherwise specified in the
related Prospectus Supplement), and any
Enhancement with respect to any particular Series
or Class, as described in the related Prospectus
Supplement. The Accounts will initially consist
of accounts established under a private label
credit card program for customers of Circuit City
Stores, Inc. and its subsidiaries, which sell
brand-name consumer electronics and major
appliances. The term "Enhancement" means, with
respect to any Series or Class thereof, any
letter of credit, guaranteed rate agreement,
maturity guaranty facility, liquidity facility,
cash collateral account, cash collateral
guaranty, collateral indebtedness amount,
collateral interest, surety bond, insurance
policy, interest rate cap agreement, interest
rate swap agreement, spread account, reserve
account or other similar arrangement for the
benefit of the Certificateholders of such Series
or Class. Enhancement may also take the form of
subordination of one or more Classes of a Series
or other interests in the Trust to any other
Class or Classes of a Series or a cross-support
feature which requires collections on Receivables
of
4
<PAGE> 54
one Series to be paid as principal and/or
interest with respect to another Series.
At the time of formation of the Trust, the
Transferor conveyed to the Trustee all
Receivables existing under certain Accounts owned
by the Transferor as of September 30, 1994 (the
"Cut Off Date") based on criteria provided in the
Agreement and all Receivables arising under such
Accounts from time to time thereafter until
termination of the Trust. In addition, the
Agreement provides that the Transferor may from
time to time (subject to certain limitations and
conditions), and in some circumstances will be
obligated to, designate additional eligible
revolving credit card accounts to be included as
Accounts (the "Additional Accounts") the
Receivables of which will be included in the
Trust. The Transferor may also, at its option,
designate eligible revolving credit card accounts
to be included automatically as Accounts upon
their creation. See "The Receivables" and
"Description of the Certificates -- Addition of
Accounts."
Securities Offered......... Each Series will represent an undivided interest in
the assets of the Trust. Each Certificate of a
Series will represent the right to receive (i)
payments of interest at the specified rate or
rates per annum (each, a "Certificate Rate"),
which may be fixed, floating or another type of
rate and (ii) payments of principal during or at
the end of the Controlled Amortization Period,
Principal Amortization Period, Accumulation
Period, Early Amortization Period or other type
of amortization period (each, an "Amortization
Period"), all as specified in the related
Prospectus Supplement.
Each Series will consist of one or more Classes,
one or more of which may be Senior Certificates
("Senior Certificates") and one or more of which
may be Subordinated Certificates ("Subordinated
Certificates"). Each Class of a Series may
evidence the right to receive a specified portion
of each distribution of principal or interest or
both. The Certificates of a Class may also differ
from Certificates of other Classes of the same
Series in, among other things, the amounts
allocated to principal payments, priority of
payments, payment dates, maturity, interest rate
computation, and availability and form of
Enhancement. A Series may also include other
interests in the Trust, which may be held by
Enhancement Providers or others.
The assets of the Trust will be allocated among the
Certificateholders of each Series, the holder of
the Exchangeable Transferor Certificate and, in
certain circumstances, Enhancement Providers. The
interest of the Certificateholders of a Series in
Receivables is based on the aggregate amount of
Principal Receivables in the Trust allocated to
such Series (the "Invested Amount"). The interest
of the holder of the Exchangeable Transferor
Certificate in Receivables is referred to herein
as the "Transferor Interest" and is based on the
aggregate amount of Principal Receivables in the
Trust not allocated to the Certificateholders or
any Enhancement Provider (plus the principal
amount on deposit in the Excess Funding Account)
(the "Transferor Amount"). See "Description of
the Certificates -- General."
The Certificateholders of each Series will have the
right to receive (but only to the extent needed
to make required payments under the
5
<PAGE> 55
Agreement and related Series Supplement and
subject to any reallocation of such amounts if
the related Series Supplement so provides)
varying percentages of the collections of Finance
Charge Receivables and Principal Receivables for
each month and will be allocated a varying
percentage of the amount of Receivables in
Accounts which are written off as uncollectible
("Defaulted Accounts") for such month (each such
percentage, an "Invested Percentage"). The
related Prospectus Supplement will specify the
Invested Percentages with respect to the
allocation of collections of Principal
Receivables, Finance Charge Receivables and
Receivables in Defaulted Accounts during the
Revolving Period and any Amortization Period. If
the Certificates of a Series offered hereby
include more than one Class, or if a Series
includes an interest held by an Enhancement
Provider, the assets of the Trust allocable to
such Series may be further allocated among each
Class in such Series and the interest held by the
Enhancement Provider as described in the related
Prospectus Supplement. See "Description of the
Certificates -- Invested Percentage and
Transferor Percentage."
The Certificates of each Series will represent
interests in the Trust only and will not
represent interests in or recourse obligations of
FNANB, Circuit City Stores, Inc. or any affiliate
thereof. A Certificate is not a deposit and
neither the Certificates nor the underlying
Accounts or Receivables are insured or guaranteed
by the Federal Deposit Insurance Corporation (the
"FDIC") or any other governmental agency.
Receivables................ The Receivables will consist of amounts charged by
cardholders to purchase or obtain merchandise,
repair services, service contracts, other
services and/or cash advances or to finance
credit insurance premiums related to the Accounts
(the "Principal Receivables"), plus the related
periodic finance charges and any amounts charged
to the Accounts in respect of cash advance fees,
annual cardholder fees, late fees, overlimit
fees, returned check fees or other fees and
charges (the "Finance Charge Receivables");
provided, however, that if the Transferor
exercises the Discount Option, an amount equal to
the product of the Discount Percentage and the
amount of Receivables arising in the Accounts on
and after the date such option is exercised that
otherwise would be Principal Receivables will be
treated as Finance Charge Receivables. See
"Description of the Certificates -- Discount
Option." In addition, if MasterCard(R) or
VISA(R)* credit card accounts are included in the
Accounts at any time and if so specified in the
related Prospectus Supplement, certain
interchange fees ("Interchange") attributed to
cardholder charges in the Accounts may be
allocated to a Series or any Class thereof and
treated as collections of Finance Charge
Receivables for purposes of such Series or Class
thereof or may be applied in such other manner as
described in the related Prospectus Supplement.
During the term of the Trust, all new Receivables
arising in the Accounts will be transferred
automatically to the Trust by the Transferor. The
total amount of Receivables in the Trust will
fluctuate from day to
- ---------------
* MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Inc. and VISA U.S.A., Inc., respectively.
6
<PAGE> 56
day, because the amount of new Receivables
arising in the Accounts and the amount of
payments collected on existing Receivables
usually differ each day.
Pursuant to the Agreement, the Transferor has the
right (subject to certain limitations and
conditions), and in some circumstances will be
obligated, to designate Additional Accounts and
to convey to the Trust all of the Receivables in
the Additional Accounts, whether such Receivables
are then existing or thereafter created. The
Transferor also has the right to designate
eligible revolving credit card accounts to be
included automatically as Accounts upon their
creation. See "Description of the
Certificates -- Addition of Accounts."
Pursuant to the Agreement, the Transferor has the
right (subject to certain limitations and
conditions) to designate certain Accounts and to
accept the reconveyance of all of the Receivables
in such Accounts (the "Removed Accounts"),
whether such Receivables are then existing or
thereafter created. See "Description of the
Certificates -- Removal of Accounts."
Exchanges.................. The Agreement authorizes the Trustee to issue two
types of certificates: (i) one or more Series of
Certificates which may be in one or more Classes
and which will be transferable and have the
characteristics described below and (ii) a
certificate evidencing an undivided interest in
the assets of the Trust not allocated to the
Certificateholders or any Enhancement Provider or
other investor (the "Exchangeable Transferor
Certificate"), which initially will be held by
the Transferor and which generally will not be
transferable. Additional interests in the Trust
relating to a Series may also be issued to
Enhancement Providers or other investors. The
Agreement also provides that, pursuant to any one
or more Series Supplements to the Agreement, the
Transferor may tender the Exchangeable Transferor
Certificate or, if permitted by the applicable
Series Supplement, certificates or other
interests representing any Series and the
Exchangeable Transferor Certificate, to the
Trustee in exchange for one or more new Series
and a reissued Exchangeable Transferor
Certificate (any such tender, an "Exchange").
Under the Agreement, the Transferor may define,
with respect to any Series, the Principal Terms
of the Series. See "Description of the
Certificates -- Exchanges." The Transferor may
offer any Series to the public or other investors
under a prospectus or other disclosure document
(a "Disclosure Document") in transactions either
registered under the Securities Act of 1933, as
amended (the "Act"), or exempt from registration
thereunder, directly or through one or more
underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or
otherwise.
Under the Agreement and pursuant to a Series
Supplement, an Exchange may occur only upon
delivery to the Trustee of the following: (i) a
Series Supplement specifying the principal terms
of such Series (the "Principal Terms"), (ii) an
opinion of counsel to the effect that the
Certificates of such Series under existing law
will be characterized either as indebtedness or
an interest in a partnership (that is not taxable
as a corporation) for Federal income tax purposes
and that the issuance of such Series will not
materially adversely affect the Federal income
tax characterization of any outstanding Series or
result in the
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<PAGE> 57
Trust being subject to Federal or certain state
taxes at the entity level, (iii) if required by
the related Series Supplement, a form of
Enhancement and any related agreement, (iv)
written confirmation from the applicable Rating
Agency that the Exchange will not result in the
Rating Agency reducing or withdrawing its rating
on any then outstanding Series rated by it, and
(v) the existing Exchangeable Transferor
Certificate and, if applicable, the certificates
or other interests representing the Series to be
exchanged.
Denominations.............. Unless otherwise specified in the related
Prospectus Supplement, beneficial interests in
the Certificates will be offered for purchase in
denominations of $1,000 and integral multiples
thereof.
Registration of
Certificates............... Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each
Series offered hereby initially will be
represented by Certificates registered in the
name of Cede, as the nominee of DTC. No
Certificate Owner will be entitled to receive a
definitive certificate representing such person's
interest, except in the event that Definitive
Certificates (as defined herein) are issued under
the limited circumstances described herein. See
"Description of the Certificates -- Definitive
Certificates."
Clearance and Settlement... Unless otherwise provided in the related Prospectus
Supplement, Certificate Owners of each Series
offered hereby may elect to hold their
Certificates through any of DTC (in the United
States) or Cedel or Euroclear (in Europe).
Transfers within DTC, Cedel or Euroclear, as the
case may be, will be made in accordance with the
usual rules and operating procedures of the
relevant system. Cross-market transfers between
persons holding directly or indirectly through
DTC in the United States, on the one hand, and
counterparties holding directly or indirectly
through Cedel or Euroclear, on the other, will be
effected in DTC through the relevant Depositaries
of Cedel or Euroclear. See "Description of the
Certificates -- Book-Entry Registration."
Transferor and Servicer.... First North American National Bank ("FNANB"). The
principal executive offices of FNANB are located
at 1800 Parkway Place, Marietta, Georgia 30067,
telephone number (770) 423-7900. FNANB is a
wholly owned subsidiary of Circuit City Stores,
Inc. ("Circuit City"). The Servicer will receive
a fee as servicing compensation from the Trust in
respect of each Series in the amounts and at the
times specified in the related Prospectus
Supplement (the "Investor Servicing Fee"). The
Investor Servicing Fee may be payable from
Finance Charge Receivables, Interchange or other
amounts as specified in the related Prospectus
Supplement. In certain limited circumstances,
FNANB may resign or be removed as Servicer, in
which event the Trustee or a third party servicer
may be appointed as successor servicer (FNANB, in
its capacity as servicer, or any such successor
servicer, is referred to herein as the
"Servicer"). See "First North American National
Bank."
Collections................ Unless otherwise specified in the related
Prospectus Supplement, with
respect to each Series, the Servicer will deposit
collections of Receivables allocable to such
Series (subject to certain exceptions) in an
account required to be established for such
purposes by the Agreement (the "Collection
Account"). All amounts deposited in the
Collection
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<PAGE> 58
Account will be allocated by the Servicer between
collections of Principal Receivables and
collections of Finance Charge Receivables. If so
specified in the related Prospectus Supplement,
Principal Receivables and/or Finance Charge
Receivables may be otherwise characterized. See
"Description of the Certificates -- Discount
Option." All such amounts will then be allocated
in accordance with the respective interests of
the Certificateholders of such Series or any
Class thereof or any other interest in the Trust
included in such Series. See "Description of the
Certificates -- Invested Percentage and
Transferor Percentage."
Interest................... Interest on each Series of Certificates or Class
thereof for each interest accrual period (each,
an "Interest Period") specified in the related
Prospectus Supplement will be distributed in the
amounts and on the dates (which may be monthly,
quarterly, semiannually or otherwise as specified
in the related Prospectus Supplement) (each, a
"Distribution Date") specified in the related
Prospectus Supplement. Interest payments on each
Distribution Date will generally be funded from
the collections of Finance Charge Receivables
allocated to the Invested Amount during the
preceding monthly period or periods (each, a "Due
Period"), as described in the related Prospectus
Supplement, and may be funded from certain
investment earnings on funds in certain accounts
of the Trust, from any applicable Enhancement or
from other sources specified in the related
Prospectus Supplement. If the Distribution Dates
for payment of interest for a Series or Class
occur less frequently than monthly, such
collections or other amounts allocable to such
Series or Class may be deposited in one or more
trust accounts pending distribution to the
Certificateholders of such Series or Class, all
as described in the related Prospectus
Supplement. See "Description of the
Certificates -- Application of Collections,"
"Enhancement" and "Risk Factors -- Enhancement."
Revolving Period........... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Series and any Class thereof, no principal will
be payable to Certificateholders until the
Principal Commencement Date or the Scheduled
Payment Date with respect to such Series or
Class. For the period beginning on the date of
issuance of the related Series (the "Closing
Date") and ending with the commencement of an
Amortization Period (the "Revolving Period"),
collections of Principal Receivables otherwise
allocable to the Invested Amount will, subject to
certain limitations, be paid from the Trust to
the holder of the Exchangeable Transferor
Certificate or, under certain circumstances and
if so specified in the related Prospectus
Supplement, will be treated as Shared Principal
Collections and paid to the holders of other
Series of Certificates issued by the Trust, as
described herein and in the related Prospectus
Supplement. See "Description of the
Certificates -- Early Amortization Events" for a
discussion of the events which might lead to
early termination of the Revolving Period.
Principal Payments;
Amortization Period........ The principal of the Certificates of each Series
offered hereby will be scheduled to be paid
either in installments commencing on a
Distribution Date specified in the related
Prospectus Supplement (the "Principal
Commencement Date"), in which case such Series
will have
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<PAGE> 59
either a Controlled Amortization Period or a
Principal Amortization Period, as described
below, or on an expected date specified in the
related Prospectus Supplement (the "Scheduled
Payment Date"), in which case such Series will
have an Accumulation Period, as described below,
or in such other manner specified in the related
Prospectus Supplement with respect to any other
type of Amortization Period. If a Series has more
than one Class of Certificates, a different
method of paying principal, Principal
Commencement Date or Scheduled Payment Date may
be assigned to each Class. The payment of
principal with respect to the Certificates of a
Series or Class may commence earlier than the
applicable Principal Commencement Date or
Scheduled Payment Date, and the final principal
payment with respect to the Certificates of a
Series or Class may be made later than the
applicable expected payment date, Scheduled
Payment Date or other expected date, if an Early
Amortization Event occurs and the Early
Amortization Period commences with respect to
such Series or Class or under certain other
circumstances described herein or in the
Prospectus Supplement. See "Description of the
Certificates -- Early Amortization Events."
Controlled Amortization
Period..................... If the Prospectus Supplement relating to a Series
so specifies, unless an Early Amortization Period
with respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an amortization period (the "Controlled
Amortization Period") during which collections of
Principal Receivables allocable to such Series
(and certain other amounts if so specified in the
related Prospectus Supplement) will be used on
each Distribution Date to make principal
distributions in scheduled amounts to the
Certificateholders of such Series or any Class of
such Series then scheduled to receive such
distributions. The amount to be distributed on
any Distribution Date during the Controlled
Amortization Period will be limited to an amount
(the "Controlled Distribution Amount") equal to
an amount specified in the related Prospectus
Supplement (the "Controlled Amortization Amount")
plus the amount of any shortfalls arising from
the failure to pay the Controlled Amortization
Amount on any prior Distribution Dates. If a
Series has more than one Class of Certificates,
each Class may have a separate Controlled
Amortization Amount. In addition, the related
Prospectus Supplement may describe certain
priorities among such Classes with respect to
such distributions. The Controlled Amortization
Period will commence at the close of business on
the Principal Commencement Date and continue
until the earliest of (a) the commencement of the
Early Amortization Period, (b) payment in full of
the Invested Amount of such Series or Class and
(c) the Stated Series Termination Date with
respect to such Series.
Principal Amortization
Period..................... If the Prospectus Supplement relating to a Series
so specifies, unless an Early Amortization Period
with respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an amortization period (the "Principal
Amortization Period") during which collections of
Principal Receivables allocable to such Series
(and certain other amounts if so specified in the
related Prospectus Supplement) will be used on
each Distribution Date to make principal
distributions in the amount of such collections
to the Certificate-
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<PAGE> 60
holders of such Series or any Class of such
Series then scheduled to receive such
distributions. If a Series has more than one
Class of Certificates, the related Prospectus
Supplement may describe certain priorities among
such Classes with respect to such distributions.
The Principal Amortization Period will commence
at the close of business on the Principal
Commencement Date and continue until the earliest
of (a) the commencement of the Early Amortization
Period, (b) payment in full of the Invested
Amount of such Series or Class and (c) the Stated
Series Termination Date with respect to such
Series.
Accumulation Period........ If the Prospectus Supplement relating to a Series
so specifies, unless an Early Amortization Period
with respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an accumulation period (the
"Accumulation Period") during which collections
of Principal Receivables allocable to such Series
(and certain other amounts if so specified in the
related Prospectus Supplement) will be deposited
prior to each Distribution Date in a trust
account established for the benefit of the
Certificateholders of such Series or Class (a
"Principal Funding Account") and used to make
principal distributions to the Certificateholders
of such Series or any Class of such Series on the
Scheduled Payment Date. The amount to be
deposited in the Principal Funding Account on any
date may be limited to an amount (the "Controlled
Deposit Amount") equal to an amount specified in
the related Prospectus Supplement (the
"Controlled Accumulation Amount") plus the amount
of any shortfalls arising from the failure to
deposit the Controlled Accumulation Amount into
the Principal Funding Account with respect to any
prior Distribution Dates. If a Series has more
than one Class of Certificates, each Class may
have a separate Principal Funding Account and
Controlled Accumulation Amount. In addition, the
related Prospectus Supplement may describe
certain priorities among such Classes with
respect to deposits of principal into such
Principal Funding Accounts. The Accumulation
Period will commence at the close of business on
a date specified in or determined in the manner
specified in the related Prospectus Supplement
and continue until the earliest of (a) the
commencement of the Early Amortization Period,
(b) payment in full of the Invested Amount of
such Series or Class and (c) the Stated Series
Termination Date with respect to such Series.
Funds on deposit in any Principal Funding Account
may be invested in eligible investments or
subject to a guaranteed rate or investment
agreement or other arrangement intended to assure
a specified return on the investment of such
funds. Investment earnings on such funds may be
applied to pay interest on the related Series of
Certificates. In order to enhance the likelihood
of payment in full of principal at the end of an
Accumulation Period with respect to a Series of
Certificates, such Series may be subject to a
principal guaranty or other similar arrangement.
Early Amortization
Period..................... During the period from the day on which an Early
Amortization Event has occurred with respect to a
Series to the earlier of the date on which the
Invested Amount of such Series has been paid in
full or the related Stated Series Termination
Date (the "Early Amortization
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<PAGE> 61
Period"), unless otherwise provided in the
related Prospectus Supplement, collections of
Principal Receivables allocable to the Invested
Amount of such Series (and certain other amounts
if so specified in the related Prospectus
Supplement) will be distributed as principal
payments to the Certificateholders of such Series
monthly on each Distribution Date with respect to
such Series in the manner and order of priority
set forth in the related Prospectus Supplement.
During the Early Amortization Period with respect
to a Series, distributions of principal to
Certificateholders will not be limited by any
Controlled Distribution Amount or Controlled
Deposit Amount. In addition, upon the
commencement of the Early Amortization Period
with respect to a Series, unless otherwise
specified in the related Prospectus Supplement,
any funds on deposit in a Principal Funding
Account with respect to such Series or any Class
thereof will be paid to the Certificateholders of
such Series or Class on the first Distribution
Date in the Early Amortization Period. See
"Description of the Certificates -- Early
Amortization Events" for a discussion of the
events which might lead to commencement of the
Early Amortization Period.
Shared Excess Finance
Charge Collections......... Any Series may be included in a group of Series (a
"Group"). Subject to certain limitations
described under "Description of the
Certificates -- Shared Excess Finance Charge
Collections," Shared Excess Finance Charge
Collections, if any, with respect to a Series
included in a Group will be applied to cover any
shortfalls with respect to amounts payable from
collections of Finance Charge Receivables
allocable to any other Series in such Group, pro
rata based upon the amount of the shortfall, if
any, with respect to each Series in such Group.
See "Description of the Certificates -- Shared
Excess Finance Charge Collections."
Shared Principal
Collections................ Collections of Principal Receivables and certain
other amounts otherwise allocable to a Series
included in a Group, to the extent such
collections are not needed to make payments to or
deposits for the benefit of the
Certificateholders of such Series, may be applied
to cover principal payments due to or for the
benefit of the Certificateholders of other Series
in such Group. See "Description of the
Certificates -- Shared Principal Collections."
Funding Period............. The Prospectus Supplement relating to a Series of
Certificates may specify that for a period
beginning on the Closing Date and ending on a
specified date before the commencement of an
Amortization Period with respect to such Series
(the "Funding Period"), 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 and that the amount of such deficiency
(the "Pre-Funded Amount") will be held in a trust
account established with the Trustee for the
benefit of such Series (the "Pre-Funding
Account") pending the transfer of additional
Principal Receivables to the Trust or pending the
reduction of the Invested Amounts of other
Series. The related Prospectus Supplement will
specify the initial Invested Amount on the
Closing Date with respect to such Series, the
aggregate principal amount of such Series (the
"Full Invested Amount") and the date by
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which the Invested Amount is expected to equal
the Full Invested Amount. The Invested Amount of
such Series will increase as Principal
Receivables are created or as the Invested
Amounts of other Series are reduced. The Invested
Amount may also decrease due to Investor
Charge-Offs.
During the Funding Period, funds on deposit in the
Pre-Funding Account for a Series will be
withdrawn and paid to the Transferor or its
assignees to the extent of any increases in the
Invested Amount. 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
and any additional amounts specified in the
related Prospectus Supplement will be payable to
such Series in a manner and at such time as set
forth in the related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, moneys in the Pre-Funding Account
with respect to any Series will be invested by
the Trustee in eligible investments or will be
subject to a guaranteed rate or investment
agreement or other similar arrangement, and
investment earnings and any applicable payment
under any such investment arrangement will be
applied to pay interest on the Certificates of
such Series.
Companion Series........... If so specified in the related Prospectus
Supplement, a Series of Certificates may be
paired with another Series (a "Companion
Series"). The Prospectus Supplement for such
Series and the Prospectus Supplement for the
Companion Series will each specify the
relationship between the Series.
Enhancement................ Enhancement with respect to a Series or any Class
thereof may be provided as specified in the
related Prospectus Supplement.
The type, characteristics and amount of the
Enhancement will be determined based on several
factors, including the characteristics of the
Receivables and Accounts underlying or comprising
the Trust Portfolio as of the Closing Date with
respect to any Series, and will be established on
the basis of requirements of each Rating Agency
rating the Certificates of such Series. If so
specified in the related Prospectus Supplement,
any such Enhancement will apply only in the event
of certain types of losses and the protection
against losses provided by such Enhancement will
be limited. See "Enhancement" and "Risk
Factors -- Certificate Rating."
Optional Repurchase........ With respect to each Series of Certificates, the
Invested Amount of such Series will be subject to
optional repurchase by the Transferor on any
Distribution Date after such Invested Amount is
reduced to an amount less than or equal to 5% of
the initial Invested Amount (the "Initial
Invested Amount"), or such other amount specified
in the related Prospectus Supplement, if certain
conditions set forth in the Agreement are met.
Unless otherwise specified in the related
Prospectus Supplement, the repurchase price will
be equal to the Invested Amount of such Series
plus accrued and unpaid interest thereon. See
"Description of the Certificates -- Final Payment
of Principal; Termination."
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Defeasance................. The Transferor may, at its option and subject to
the conditions specified in "Description of the
Certificates -- Defeasance," terminate its
substantive obligations in respect of a Series or
all Series (the "Defeased Series") by irrevocably
depositing with the Trustee monies or Eligible
Investments sufficient to pay and discharge all
remaining scheduled interest and principal
payments on all Defeased Series on the dates
scheduled for such payments and all amounts owing
to any provider of Enhancement with respect to
the Defeased Series. See "Description of the
Certificates -- Defeasance."
Tax Status................. Except to the extent otherwise specified in the
related Prospectus Supplement, special tax
counsel to the Transferor will render an opinion
in connection with the issuance of each Series
that under existing law the Certificates of such
Series will be characterized as indebtedness for
Federal income tax purposes. Except to the extent
otherwise specified in the related Prospectus
Supplement, the Certificate Owners will agree to
treat the Certificates as indebtedness for
Federal, state and local income and franchise tax
purposes. See "Certain Federal Income Tax
Consequences" for additional information
concerning the application of Federal income tax
laws.
ERISA Considerations....... Under regulations issued by the Department of
Labor, the Trust's assets would not be deemed
"plan assets" of any employee benefit plan
holding interests in the Certificates of a Series
if certain conditions are met. If the Trust's
assets were deemed to be "plan assets" of an
employee benefit plan, there is uncertainty as to
whether existing exemptions from the "prohibited
transaction" rules of the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), would apply to all transactions
involving the Trust's assets. No assurance can be
made with respect to any offering of the
Certificates of any Series that the conditions
which would allow the Trust assets not to be
deemed "plan assets" will be met, although the
intention of the Underwriters (but not their
assurance) as to whether the Certificates of a
particular Series will be "publicly-offered
securities", and therefore eligible for an ERISA
exemption, will be set forth in the related
Prospectus Supplement. Accordingly, employee
benefit plans contemplating purchasing interests
in Certificates should consult their counsel
before making a purchase. See "ERISA
Considerations."
Certificate Rating......... It will be a condition to the issuance of each
Series of Certificates or Class thereof offered
hereby that they be rated in one of the four
highest rating categories by at least one
nationally recognized statistical rating
organization (each such rating organization
rating any Series, a "Rating Agency"). The rating
or ratings applicable to the Certificates of each
Series or Class thereof offered hereby will be
set forth in the related Prospectus Supplement.
A rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or
withdrawal at any time by the assigning Rating
Agency. Each rating should be evaluated
independently of any other rating. See "Risk
Factors -- Certificate Rating."
Listing.................... If so specified in the Prospectus Supplement
relating to a Series, application will be made to
list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg
Stock Exchange or any other specified exchange.
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RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates.
LIMITED LIQUIDITY. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market in
such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will develop
with respect to the Certificates of any Series offered hereby, or if it does
develop, that it will provide Certificateholders with liquidity of investment or
that it will continue for the life of such Certificates.
NON-RECOURSE OBLIGATION. No Certificateholder will have recourse for
payment of its Certificates to any assets of any of the Transferor, the
Servicer, Circuit City or any affiliate of any of them. Consequently,
Certificateholders must rely solely upon payments on the Receivables and the
Enhancement, if any, applicable to the Series for the payment of principal of
and interest on the Certificates of any Series. Furthermore, under the
Agreement, the Certificateholders have an interest in the Receivables and
collections on the Receivables only to the extent of the Invested Amount. Should
the Certificates of any Series not be paid in full on a timely basis,
Certificateholders may not look to any assets of any of the Transferor, the
Servicer, Circuit City or any affiliate thereof to satisfy their claims.
TRANSFER OF RECEIVABLES. The Transferor has represented and warranted in
the Agreement that the transfer of the Receivables to the Trust is either a
valid transfer and assignment of the Receivables to the Trust or the grant to
the Trust of a security interest in the Receivables. The Transferor has taken
and will take all actions as are required under Georgia law to perfect the
Trust's interest in the Receivables and has represented and warranted that if
the transfer of the Receivables by the Transferor to the Trust is the grant to
the Trust of a security interest in the Receivables, such security interest
constitutes a first priority perfected security interest therein and, to the
extent provided under the applicable Uniform Commercial Code (the "UCC"), in the
proceeds thereof (except for liens for local taxes and government charges not
due and payable or being contested in good faith by the Transferor).
Nevertheless, if the transfer of the Receivables to the Trust is deemed to
create a security interest therein under the UCC, a tax or government lien on
property of the Servicer or the Transferor arising before any Receivable comes
into existence may have priority over the Transferor's or the Trust's interest
in such Receivable. See "Certain Legal Aspects of the Receivables -- Transfer of
Receivables."
COMMINGLING OF COLLECTIONS. While FNANB is the Servicer, collections held
by FNANB may, during periods when certain conditions specified in the Agreement
are satisfied, be commingled and used for FNANB's own benefit prior to each
Distribution Date and, in the event of the insolvency or receivership of FNANB
or, in certain circumstances, the lapse of certain time periods as provided
under the UCC, the Trust may not have a perfected interest in such collections.
During periods when FNANB fails to maintain the certificate of deposit rating or
meet other criteria required by the applicable Rating Agency, FNANB will be
required to deposit a portion of the collections directly into the Collection
Account no later than the second business day after the date of processing of
such collections.
INSOLVENCY RELATED MATTERS. To the extent that the Transferor has granted
a security interest in the Receivables to the Trust and that security interest
was validly perfected before any insolvency of the Transferor and was not
granted or taken in contemplation of insolvency or with the intent to hinder,
delay or defraud the Transferor or its creditors, that security interest should
not be subject to avoidance in the event of insolvency and receivership, and
payments to the Trust with respect to the Receivables should not be subject to
recovery by a conservator or receiver for the Transferor. If, however, the
conservator or 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 established under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), or if the
conservator or receiver were to request a stay of proceedings with respect to
the Transferor as provided under FIRREA, delays in payments on the Certificates
and possible reductions in the amount of those payments could occur. In the
event of a Servicer Default, if a conservator or receiver is appointed for the
Servicer, and no Servicer Default other than such conservatorship or
receivership or insolvency of the Servicer exists, the conservator or receiver
may have the
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power to prevent either the Trustee or Certificateholders from effecting a
transfer of servicing to a successor Servicer. If a conservator or receiver were
appointed for the Transferor, pursuant to the Agreement, new Principal
Receivables would not be transferred to the Trust and the Trustee would sell the
portion of the Receivables allocable in accordance with the Agreement to each
Series (subject to certain limited rights of holders of interests in the Trust
to instruct otherwise as described under "Description of the Certificates --
Early Amortization Events"), thereby causing early termination of the Trust and
a pro rata loss to the Certificateholders if the net proceeds of such sale were
insufficient to pay such Certificateholders in full. Upon the occurrence of an
Early Amortization Event, if a conservator or receiver were appointed for the
Transferor and no Early Amortization Event other than the conservatorship,
receivership or insolvency of the Transferor existed, the conservator or
receiver might have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of the Early Amortization
Period. In addition, a conservator or receiver for the Transferor may have the
power to cause early payment of the Certificates.
CONSUMER PROTECTION LAWS AND LITIGATION. The Accounts and the Receivables
are subject to numerous Federal and state consumer protection laws which impose
requirements on the making, enforcement and collection of consumer loans. Such
laws, as well as any new laws or rulings which may be adopted, may adversely
affect the Servicer's ability to collect on the Receivables or maintain previous
levels of finance charges, annual cardholder fees and other charges and fees
with respect to the Accounts. In addition, failure by the Servicer to comply
with such requirements also could adversely affect the Servicer's ability to
collect on the Receivables. In October 1987, November 1991 and March 1994,
members of Congress attempted unsuccessfully to limit the maximum annual
percentage rate that may be assessed on credit card accounts. If Federal
legislation were enacted which contained an interest rate cap substantially
lower than the annual percentage rates currently assessed on the Accounts, it is
possible that the average yield on the portfolio of Accounts in the Trust would
be reduced and therefore an Early Amortization Event could occur with respect to
the Certificates of a Series, if the related Supplement for such Series so
provides. See "Description of the Certificates -- Early Amortization Events." In
addition, during recent years, there has been increased consumer awareness with
respect to the level of finance charges and fees and other practices of credit
card issuers and other consumer revolving loan providers. As a result of these
developments and other factors, there can be no assurance as to whether any
Federal or state legislation will be promulgated which would impose additional
limitations on the monthly periodic rate finance charges or other fees or
charges relating to the Accounts.
Certain jurisdictions may attempt, and private parties are attempting, to
require out-of-state credit card issuers to comply with such jurisdictions'
consumer protection laws. There can be no assurance that FNANB will not be named
as a defendant in future lawsuits or administrative actions challenging the
terms of its credit card programs offered to residents of such jurisdictions or
otherwise asserting violations of such consumer protection laws. Such lawsuits
or actions, if resolved adversely to bank credit card issuers, could have the
effect of limiting FNANB's credit card programs with respect to residents of
such jurisdictionsand could require credit card issuers such as FNANB to pay
refunds and civil penalties with respect to cardholders in such states.
Consequently, such lawsuits or actions could have an adverse impact on FNANB's
credit card operations. One potential effect of any such lawsuit or action
involving FNANB, if successful, would be to reduce the yield on the Trust
Portfolio. If such a reduction were to occur, an Early Amortization Event with
respect to one of more Series might result.
Pursuant to the Agreement, the Transferor or, in some circumstances, the
Servicer, has covenanted to accept the transfer of each Receivable that does not
comply with all requirements of applicable law the failure to comply with which
would have a material adverse effect on Certificateholders if such Receivable is
charged off as uncollectible or if the proceeds of such Receivable are not
available to the Trust. The Transferor has also made certain other
representations and warranties relating to the validity and enforceability of
the Accounts and the Receivables. The sole remedy if any such representation or
warranty is breached and such breach continues beyond the applicable cure
period, if any, and such Receivables are charged off as uncollectible or the
proceeds of such Receivables are not available to the Trust is that the
Transferor will generally be obligated to accept the reassignment of such
Receivables. In addition, in the event of a breach of certain representations
and warranties, the Transferor may be obligated to accept the reassignment and
transfer of the
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interest in the Trust of the holders of all Series. See "Description of the
Certificates -- Representations and Warranties" and "Certain Legal Aspects of
the Receivables -- Consumer Protection Laws."
DEBTOR RELIEF LAWS. Application of Federal and state bankruptcy and debtor
relief laws would affect the interests of the Certificateholders in the
Receivables, if such laws result in any Receivables being written off as
uncollectible. See "Description of the Certificates -- Defaulted Receivables;
Rebates and Fraudulent Charges; Investor Charge-Offs."
PAYMENTS AND MATURITY. The Receivables may be paid at any time, and there
can be no assurance that there will be additional Receivables created in the
Accounts or that any particular pattern of cardholder repayments will occur. The
continuation of the Revolving Period and the commencement and continuation of an
Amortization Period for a Series or Class thereof will be dependent upon the
continued generation of new Receivables to be conveyed to the Trust. A
significant decline in the amount of Receivables generated could result in the
occurrence of an Early Amortization Event for one or more Series and
commencement of the Early Amortization Period for each such Series. In addition,
changes in periodic finance charges can alter the monthly payment rates of
cardholders. A significant decrease in the monthly payment rate could slow the
return or accumulation of principal during an Amortization Period. See "Maturity
Assumptions."
DEPENDENCE ON CIRCUIT CITY. Because the Accounts will initially consist
solely of accounts established under a private label credit card program for
customers of Circuit City stores, the Transferor's ability to generate new
Receivables will, at least initially, be completely dependent upon Circuit
City's ability to generate private label credit card sales which are charged to
Accounts.
COMPETITION. The business of marketing consumer electronics and appliances
is highly competitive. Many considerations enter into the competition for the
consumer's patronage, including price, quality, style, service, product mix,
convenience and credit availability and terms. There can be no assurance that
Circuit City will continue to expand or experience sales growth at the same rate
as in prior years.
USE OF OTHER CREDIT CARDS. The credit card market is highly competitive
and is experiencing increasing use of advertising, target marketing and pricing
competition as traditional and new credit card issuers seek to expand or enter
the market. Because Circuit City and its subsidiaries accept, in addition to
FNANB credit cards, other credit cards, including American Express, VISA,
MasterCard and Discover credit cards, credit sales at Circuit City stores may
not generate Receivables. There can be no assurance that Circuit City and its
subsidiaries will continue to maintain their historic percentage of private
label credit card sales against competition from such other credit cards.
SOCIAL, LEGAL AND ECONOMIC FACTORS. Changes in use of credit and payment
patterns by customers may result from a variety of social, legal and economic
factors. Economic factors include the rate of inflation, unemployment levels and
relative interest rates. Cardholders whose accounts are included in the Bank
Portfolio have addresses in 50 states, the District of Columbia and certain
United States territories and possessions. Adverse economic changes in certain
states in which the largest number of such cardholders have billing addresses
(for instance, California, Florida, Texas and Virginia) could have a direct
impact on the ability of Circuit City to generate Receivables or the timing and
amount of payments on the Certificates. The Transferor is unable to determine
and has no basis to predict whether, or to what extent, social, legal or
economic factors will affect use of credit or repayment patterns.
EFFECT OF SUBORDINATION. With respect to Certificates of a Series having a
Class or Classes of Subordinated Certificates, unless otherwise specified in the
related Prospectus Supplement, payments of principal in respect of the
Subordinated Certificates of a Series will not commence until after the final
principal payment with respect to the Senior Certificates of such Series. In
addition, if so specified in the related Prospectus Supplement, if collections
of Finance Charge Receivables or other amounts allocable to the Certificates of
a Series are insufficient to cover required amounts due with respect to the
Senior Certificates of such Series, the Invested Amount with respect to the
Subordinated Certificates will be reduced, resulting in a reduction of the
portion of collections of Finance Charge Receivables allocable to the
Subordinated Certificates in future periods and a possible delay or reduction in
principal and interest payments on the Subordinated Certificates. Moreover, if
so specified in the related Prospectus Supplement, in the event of a
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sale of Receivables in the Trust due to the insolvency of the Transferor or the
appointment of a conservator or receiver for the Transferor, the portion of the
net proceeds of such sale allocable to pay principal to the Certificates of a
Series will be used first to pay amounts due to the Senior Certificateholders
and any remainder will be used to pay amounts due to the Subordinated
Certificateholders.
ABILITY TO CHANGE TERMS OF THE RECEIVABLES. Pursuant to the Agreement, the
Transferor does not transfer to the Trust the Accounts but only the Receivables
arising in the Accounts. As owner of the Accounts, the Transferor retains the
right to determine the monthly periodic finance charges and other charges and
fees which will be applicable from time to time to the Accounts, to alter the
minimum monthly payment required on the Accounts and to change various other
terms with respect to the Accounts. A decrease in the monthly periodic finance
charge and other charges and fees would decrease the effective yield on the
Accounts and could result in the occurrence of an Early Amortization Event with
respect to a Series and the commencement of the Early Amortization Period with
respect to each such Series. Under the Agreement, the Transferor will agree not
to change the terms of the Accounts unless the change is also made applicable to
the comparable segment of its portfolio of accounts with characteristics similar
to the Accounts. In servicing the Accounts, the Servicer will be required to
exercise the same care and apply the same policies that it exercises in handling
similar matters for its own and other comparable accounts. Except as specified
above or in any Prospectus Supplement, there will be no restrictions on the
Transferor's ability to change the terms of the Accounts. The Rating Agency will
not be asked to reassess its rating of the Certificates in the event the
Transferor changes the terms of the Accounts. There can be no assurance that a
change made in the terms of the Accounts would not result in a downgrade of the
rating of the Certificates. There can be no assurance that changes in applicable
law, changes in the marketplace or prudent business practice might not result in
a determination by the Transferor to take actions which would change Account
terms.
MASTER TRUST CONSIDERATIONS. The Trust, as a master trust, may issue
Series from time to time. While the principal terms of any Series (the
"Principal Terms") will be specified in a Series Supplement, the provisions of a
Series Supplement and, therefore, the terms of any additional Series, will not
be subject to prior review by, or consent of, holders of the Certificates of any
previously issued Series. Such Principal Terms may include methods for
determining applicable Invested Percentages and allocating collections,
provisions creating different or additional security or other Enhancement,
provisions subordinating such Series to another Series or other Series (if the
Series Supplement relating to such Series so permits) to such Series, and any
other amendment or supplement to the related Agreement which is made applicable
only to such Series. It will be a condition precedent to the issuance of any
additional Series by the Trust that each Rating Agency that has rated any
outstanding Series issued by the Trust deliver written confirmation to the
Trustee that such issuance will not result in such Rating Agency reducing or
withdrawing its rating on any outstanding Series. There can be no assurance,
however, that the Principal Terms of any other Series, including any Series
issued from time to time hereafter, might not have an impact on the timing and
amount of payments received by a Certificateholder of any other Series or
otherwise adversely effect any other Series. See "Description of the
Certificates -- Exchanges."
CONTROL. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the Agreement or the related Series Supplement. However, the Agreement or
related Series Supplement may provide that under certain circumstances the
consent or approval of a specified percentage of the aggregate Invested Amount
or of the Invested Amount of each Series will be required to direct certain
actions, including amending the Agreement in certain circumstances.
Certificateholders of a Series or the provider of any Enhancement with respect
thereto may have interests which do not coincide in any way with the interests
of Certificateholders of other Series.
CERTIFICATE RATING. Any rating assigned to the Certificates of a Series or
a Class by a Rating Agency will reflect such Rating Agency's assessment of the
likelihood that Certificateholders of such Series or Class will receive the
payments of interest and principal required to be made under the Agreement and
will be based primarily on the value of the Receivables in the Trust and the
availability of any Enhancement with respect to such Series or Class. However,
any such rating will not, unless otherwise specified in the related Prospectus
Supplement with respect to any Class or Series offered hereby, address the
likelihood that the principal of, or interest on, any Certificates of such Class
or Series will be paid on a scheduled date. In addition, any such
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rating will not address the possibility of the occurrence of an Early
Amortization Event with respect to such Class or Series or the possibility of
the imposition of United States withholding tax with respect to non-U.S.
Certificateholders. The rating will not be a recommendation to purchase, hold or
sell Certificates of such Series or Class, and such rating will not comment as
to the marketability of such Certificates, any market price or suitability for a
particular investor. There can be no assurance that any rating will remain for
any given period of time or that any rating will not be lowered or withdrawn
entirely by a Rating Agency if in such Rating Agency's judgment circumstances so
warrant.
ENHANCEMENT. Although Enhancement may be provided with respect to a Series
of Certificates or any Class thereof, the amount available will be limited and
will be subject to certain reductions. If the amount available under any
Enhancement is reduced to zero, or if the provider of any Enhancement fails or
is unable to make the payments required thereby, Certificateholders of the
Series or Class thereof covered by such Enhancement will bear directly the
credit and other risks associated with their undivided interest in the Trust.
See "Enhancement."
BOOK-ENTRY REGISTRATION. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series initially will be
represented by one or more Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Unless and until Definitive Certificates are issued
for a Series, Certificate Owners relating to such Series will not be recognized
by the Trustee as Certificateholders, as that term will be used in the
Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Certificateholders indirectly through DTC, Cedel or
Euroclear and their participating organizations. Because DTC can only act on
behalf of individuals who are Participants in DTC's system (or participate
indirectly through a Participant), the ability of a Certificate Owner to pledge
its Certificates to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such Certificates, may be
limited due to the lack of a physical certificate representing such
Certificates. See "Description of the Certificates -- Book-Entry Registration"
and " -- Definitive Certificates."
THE TRUST
The Trust has been formed in accordance with the laws of the State of New
York pursuant to the Agreement. The Trust will not engage in any activity other
than acquiring and holding Receivables, issuing Series of Certificates and any
related interest in the Trust and the Exchangeable Transferor Certificate,
making payments thereon and engaging in related activities (including, with
respect to any Series, obtaining any Enhancement and entering into an
Enhancement agreement relating thereto). As a consequence, the Trust is not
expected to have any need for, or sources of, additional capital resources other
than the assets of the Trust.
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CREDIT CARD ACTIVITIES AT FIRST NORTH AMERICAN NATIONAL BANK
GENERAL
FNANB offers several private label credit cards which can be used to
purchase merchandise, repair services and service contracts at Circuit City
stores, including a "regular" card (the "Regular Card") and an "extended payment
plan" card (the "EPP Card"). Credit insurance premiums related to these accounts
are also financed through the cards. In general, the EPP Card is issued to
applicants who meet FNANB's underwriting standards but, due to their limited
credit histories, require terms and conditions that are different from the
Regular Card. FNANB also offers MasterCard and VISA credit cards that can be
used to purchase goods or services or to obtain cash advances.
The Transferor has conveyed to the Trust pursuant to the Agreement certain
Receivables that have arisen or will arise under Accounts established under the
private label credit card program. The Transferor may, in the future, subject to
approval by the Rating Agencies and certain other conditions set forth in the
Agreement, designate MasterCard and VISA credit card accounts or other consumer
revolving credit card accounts it owns or acquires to be included as Accounts.
NEW ACCOUNT UNDERWRITING
FNANB private label credit card applications are currently available in
Circuit City stores. Store personnel offer applications and information about
the credit program to customers exclusively through the use of a proprietary
distributed point of sales terminal which is linked directly to the Automated
Credit Evaluation ("ACE") system at Total System Services, Inc. ("TSYS").
ACE is an application evaluation system and account processing system
developed by TSYS. All new accounts must first be processed by ACE in order to
be booked onto TSYS. The ACE system processes applications in accordance with
the terms specified by FNANB as described further below.
Credit applications for the FNANB private label credit cards are evaluated
through credit risk scores derived from proprietary scoring models developed for
FNANB by an outside consultant. These application scorecards are heavily
weighted to consider credit bureau information in addition to data on the credit
application. No accounts are opened unless the applicant (or co-applicant) has
an active credit bureau file with satisfactory credit history.
Applicants who do not qualify for the Regular Card are then evaluated for
the EPP Card. This tiered approach to extending credit allows FNANB to reach a
broader universe of customers.
Once a customer's application is accepted, an account is established and an
order for a new card is automatically transmitted to the card production service
department. When the order is received, special equipment embosses the
applicant's name, card account number, and expiration date on the face of the
card and the card is mailed directly to the customer via first class mail. When
the credit card is physically presented for use for the first time, the point of
sale terminal prompts the sales associate to request picture identification from
the cardholder. This feature reduces fraud due to credit cards being stolen out
of the mail system.
Each grant of credit by FNANB to an accountholder is subject to the terms
and conditions contained in the account agreement with FNANB in effect at that
time. FNANB reserves the right to change or terminate certain terms, conditions,
services, or features of the account (including increasing or decreasing
periodic finance charges, late fees, returned check charges and any other
charges requiring minimum payment), subject to the conditions set forth in the
account agreement. FNANB may elect, at anytime and without prior notice to the
accountholder, to preclude or restrict further credit card use by the
accountholder, usually as a result of poor payment performance or FNANB's
concern over the creditworthiness of the accountholder. FNANB has the ability to
code such accounts within the credit operating systems which will prevent the
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<PAGE> 70
accountholder from utilizing his or her credit card to make purchases at Circuit
City stores until the reason for such restriction has been satisfactorily
resolved.
BILLING AND PAYMENTS
The average daily balance computation method is employed by FNANB to
determine the appropriate amount of finance charge to be assessed to an account.
The average daily balance is determined by summing the daily balances for the
account for each day in the billing cycle, divided by the number of the days in
the billing cycle. The daily balance outstanding on an account for any day
during the monthly billing cycle is equal to the sum of the beginning balance of
the account during any day, increased by purchases and unpaid finance charges
posted to the account that day, decreased by any payments and credits posted to
the account that day.
FNANB periodically offers interest free promotions whereby accountholders
are able to make specific purchases on an interest free basis. The interest free
period is usually 90 or 180 days. Regular monthly principal payments are still
required, and finance charges are reinstated (retroactive to the date of the
transaction or the first day of the billing cycle, whichever is later) if the
accountholder does not meet the terms and conditions of the offering.
DELINQUENCIES AND COLLECTIONS
An account is considered delinquent when the minimum payment due is not
received by the payment due date specified in the accountholder's billing
statement. FNANB's collections staff located in Richmond, Virginia, is
segregated into teams specializing by delinquency categories. Collection efforts
are initiated as early as the second day of delinquency, but no later than the
21st day of delinquency, when collectors attempt to establish telephone contact.
Behavioral risk scoring of all accounts enables the collection effort to be
timed and tailored to the potential risk of an account and the dollars at risk.
Collection efforts escalate in intensity as an account is cycled into a more
advanced category.
FNANB's collection strategies begin with an early delinquency calling
program using state-of-the-art technology that includes predictive dialing for
accounts in the delinquency levels of 1-30 and 31-60 days past due. Statement
messaging and automatic letter dunning are also employed during the first 60
days of delinquency.
Accounts that continue to roll into a 61-90 day level of delinquency are
assigned to specific collectors for accelerated collection tactics, including
demands for balance in full, correspondence from one or more of the national
credit bureaus describing the impact that delinquent credit obligations has upon
the cardholder's credit history, and preparatory actions to place accounts with
attorneys for legal action. Accounts are automatically closed as early as the
91st day of delinquency. Late bucket collectors pursue aggressive collection
activities through the 180th day of delinquency. Accounts are written-off as
uncollectible at 181 days past due and within 30 days of when notice of death or
bankruptcy of accountholders has been received. In the event that the cardholder
does not repay the obligation, FNANB holds a security interest in all
merchandise applied to the Circuit City private label credit card, an additional
leverage mechanism available to account management personnel.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for each
of the periods shown for FNANB's portfolio of Regular Card and EPP Card accounts
(the "Bank Portfolio"). Because the Transferor will have the right, and, in some
circumstances, the obligation, to designate Additional Accounts and to convey to
the Trust all Receivables in such Additional Accounts, actual delinquency and
loss experience with respect to the Receivables may be different from that set
forth below for the Bank Portfolio. There can be no
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<PAGE> 71
assurance that the delinquency and loss experience for the Receivables in the
future will be similar to the historical experience of the Bank Portfolio set
forth below.
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF FEBRUARY 28 OR 29,
----------------------------------------------------- ----------------------------------------
1996 1995 1996 1995
------------------------- ------------------------- ------------------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
------------ ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Receivables
Outstanding(1)....... $ 1,005,885 100.00% $855,602 100.00% $ 1,068,145 100.00% $864,232
========= ====== ======= ====== ========= ====== =======
Delinquent 31 to 60
Days(2).............. $ 26,031 2.59% $ 7,354 0.86% $ 11,461 1.07% $ 13,144
Delinquent 61 to 90
Days(2).............. 15,005 1.49 9,463 1.11 11,681 1.09 7,446
Delinquent 91 or More
Days(2).............. 25,515 2.54 16,616 1.94 19,276 1.80 11,467
--------- ------ ------- ------ --------- ------ -------
Total.................. $ 66,551 6.62% $ 33,433 3.91% $ 42,418 3.96% $ 32,057
========= ====== ======= ====== ========= ====== =======
<CAPTION>
AS OF FEBRUARY 28 OR 29,
---------------------------------------
1994
-------------------------
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES
----------- ------------ -----------
<S> <C> <C> <C>
Total Receivables
Outstanding(1)....... 100.00% $683,375 100.00%
====== ======= ======
Delinquent 31 to 60
Days(2).............. 1.52% $ 8,500 1.25%
Delinquent 61 to 90
Days(2).............. 0.86 4,736 0.69
Delinquent 91 or More
Days(2).............. 1.33 7,383 1.08
------ ------- ------
Total.................. 3.71% $ 20,619 3.02%
====== ======= ======
</TABLE>
- ---------------
(1) Total Receivables Outstanding consists of all amounts due from cardholders
as posted to the accounts as of the date shown.
(2) The delinquency rates are the amount of delinquent receivables as of the
date shown divided by the Total Receivables Outstanding as of such date.
LOSS EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30, FEBRUARY 28 OR 29,
----------------------- ----------------------------------
1996 1995 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Principal Receivables
Outstanding(1)............... $994,698 $817,747 $882,157 $690,134 $515,412
Gross Principal
Charge-Offs(2)............... 51,121 30,847 49,977 27,274 22,827
Recoveries..................... 8,967 5,608 9,384 5,691 4,272
Net Principal Charge-Offs...... 42,154 25,239 40,593 21,583 18,555
Net Principal Charge-Offs as a
percentage of Average
Principal Receivables
Outstanding.................. 5.65%(3) 4.12%(3) 4.60% 3.13% 3.60%
</TABLE>
- ---------------
(1) Average Principal Receivables Outstanding for a particular period is the
average of the principal balances outstanding at the beginning and end of
each month during such period.
(2) Gross Principal Charge-Offs does not include fraud losses.
(3) The percentages reflected for the nine months ended September 30, 1996 and
1995 are annualized figures, which are not necessarily indicative of
results for the entire year.
Losses for the Bank Portfolio measured as a percentage of average principal
receivables outstanding increased during 1995 and 1996 due, in part, to growing
consumer debt levels coupled with a record high number of bankruptcy filings.
Losses are also affected by other factors, including industry conditions and
general economic and social conditions. Delinquencies as a percentage of total
receivables outstanding reflect a pattern similar to loss rates as a result of
the same factors discussed above for Loss Experience.
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<PAGE> 72
CUSTOMER SERVICE AND ACCOUNT MANAGEMENT
FNANB's customer service department is located principally in Richmond,
Virginia, with an additional office in Marietta, Georgia. An automated voice
response unit handles a substantial percentage of in-coming calls.
Customer service representatives are authorized to correct mistakes that
may be made with regard to a customer's account. The ability to change data on a
customer's file is restricted by system security clearance requirements. Each
customer service representative is assigned access initially by an independent
systems security department.
FNANB uses both a credit bureau risk model developed by an outside
consultant and a credit risk monitoring system to adjust credit lines either up
or down, as necessary. These systems evaluate credit bureau risk scores and
historical experience to develop a composite risk score for each account.
Increases in credit lines are usually granted in conjunction with a purchase
which is outside of a customer's line availability. The decision to increase the
credit line is currently based on a real time point of sale review of the
customer's creditworthiness through a review of the customer's past payment
behavior and credit bureau risk score.
DESCRIPTION OF TOTAL SYSTEM SERVICES, INC.
Certain data processing and ministerial functions associated with the
servicing of the credit card accounts are performed on behalf of FNANB by TSYS
from its facilities in Columbus, Georgia. The majority of TSYS's common stock is
owned by Synovus Financial, Inc. A minority portion of TSYS's common stock is
publicly traded on the New York Stock Exchange. TSYS is a bankcard and bank data
processing company. TSYS provides a variety of data processing services to
FNANB, including processing and settlement of transactions, maintenance of
individual cardholder accounts, processing of cardholder statements and issuance
of plastic cards. TSYS is the second largest third-party bankcard processor
behind First Data Resources Inc.
THE RECEIVABLES
The Receivables conveyed to the Trust will arise in Accounts selected from
the consumer revolving credit card accounts owned or acquired by FNANB on the
basis of criteria set forth in the Agreement as applied on the Cut Off Date and,
with respect to Additional Accounts and Automatic Additional Accounts, as of the
related date of their designation (the "Trust Portfolio"). The Accounts will
initially consist solely of accounts established under a private label credit
card program for customers of Circuit City stores; however, the Transferor may
in the future designate any other consumer revolving credit card accounts it
owns or acquires that are Eligible Accounts to be included as Accounts. See
"Description of the Certificates -- Addition of Accounts."
The Transferor will have the right (subject to certain limitations and
conditions set forth therein), and in some circumstances will be obligated, to
designate from time to time Additional Accounts and to transfer to the Trust all
Receivables of such Additional Accounts, whether such Receivables are then
existing or thereafter created. Such Additional Accounts may be accounts
originated in connection with the private label credit card program for
customers of Circuit City and its subsidiaries or other consumer revolving
credit card accounts (including MasterCard or VISA credit card accounts)
originated or acquired by FNANB. Any Additional Accounts designated pursuant to
the Agreement must be Eligible Accounts as of the date the Transferor designates
such accounts as Additional Accounts. The Transferor will also have the right to
designate Eligible Accounts to be included automatically as Accounts upon their
creation ("Automatic Additional Accounts") subject to certain limitations set
forth in the Agreement. The Transferor may discontinue the inclusion of
Automatic Additional Accounts at any time, in its sole discretion. The
Transferor will also have the right (subject to certain limitations and
conditions) to designate certain Accounts as Removed Accounts and to require the
Trustee to reconvey all Receivables in such Removed Accounts to the Transferor.
Throughout the term of the Trust, the Accounts from which the Receivables arise
will be the
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<PAGE> 73
Accounts designated by the Transferor on the Cut Off Date plus any Additional
Accounts and Automatic Additional Accounts minus any Removed Accounts.
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the Trust Portfolio as of the date specified
therein. Such information will include, but not be limited to, the amount of
Principal Receivables, the amount of Finance Charge Receivables, the range of
principal balances of the Accounts and the average thereof, the range of credit
limits of the Accounts and the average thereof, the range of ages of the
Accounts and the average thereof, the geographic distribution of the Accounts,
the types of Accounts and delinquency and loss statistics relating to the
Accounts.
MATURITY ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement, for each
Series, following the Revolving Period, collections of Principal Receivables are
expected to be distributed to 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 the Accumulation Period and distributed on a
Scheduled Payment Date; provided, however, that, if the Early Amortization
Period commences, collections of Principal Receivables will be paid to
Certificateholders in the manner described herein and in the related Prospectus
Supplement. The related Prospectus Supplement will specify the date on which or
the manner of determining the date on which the Controlled Amortization Period,
the Principal Amortization Period or the Accumulation Period, as applicable,
will commence, the principal payments expected or available to be received or
accumulated during such Controlled Amortization Period, Principal Amortization
Period or Accumulation Period, or on the Scheduled Payment Date, as applicable,
the manner and priority of principal accumulations and payments among the
Classes of a Series of Certificates and the Early Amortization Events which, if
any were to occur, would lead to the commencement of an Early Amortization
Period.
The related Prospectus Supplement will provide certain historical data
relating to payments by cardholders, total charge-offs and other related
information relating to the Bank Portfolio. There can be no assurance that
future events will be consistent with such historical data.
The amount of collections of 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 Trust Portfolio, and thus the rate at which the
related Certificateholders could expect to receive or accumulate payments of
principal on their Certificates during an Amortization Period, or on any
Scheduled Payment Date, as applicable, will be similar to any historical
experience set forth in a related Prospectus Supplement. If an Early
Amortization Event occurs, the average life and maturity of such Series of
Certificates could be significantly reduced.
The generation and collection of Receivables will also be affected by the
operations of Circuit City and its subsidiaries. See "Risk Factors -- Dependence
on Circuit City," " -- Competition" and " -- Use of Other Credit Cards."
Because, for any Series of Certificates, there may be a slowdown in the
payment rate below the payment rate used to determine the amount of collections
of Principal Receivables scheduled or available to be distributed or accumulated
for later payment to Certificateholders or a specified Class thereof during the
Controlled Amortization Period, the Principal Amortization Period or the
Accumulation Period or on the Scheduled Payment Date, as applicable, or an Early
Amortization Event may occur which would initiate the Early Amortization Period,
there can be no assurance that the actual number of months elapsed from the date
of issuance of such Series of Certificates to the final Distribution Date with
respect to the Certificates will equal the expected number of months.
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<PAGE> 74
USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates offered
hereby will be paid to the Transferor. The Transferor will use such proceeds for
its general corporate purposes.
FIRST NORTH AMERICAN NATIONAL BANK
First North American National Bank ("FNANB"), a wholly owned subsidiary of
Circuit City, is a limited purpose credit card national bank headquartered in
Marietta, Georgia, which was chartered by the Office of the Comptroller of the
Currency in October 1990 and commenced operations in November 1990. FNANB
provides a private label credit card program under which customers of certain
stores operated by Circuit City may charge purchases of merchandise, repairs
and/or service contracts and finance credit insurance premiums related to their
accounts. The FNANB program replaced a third party program previously made
available to the Circuit City customers by unaffiliated financial institutions.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the Trust other than the interests represented by any other Series
issued by the Trust (which may include Series offered pursuant to this
Prospectus) and the Exchangeable Transferor Certificate. Each Series will be
issued pursuant to the Agreement entered into by FNANB, as Transferor and
Servicer, and the Trustee and a Series Supplement to the Agreement, a copy of
the form of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The Prospectus Supplement for each Series will
describe any provisions of the Agreement relating to such Series which may
differ materially from the Agreement filed as an exhibit to the Registration
Statement. The following summaries describe certain provisions common to each
Series of Certificates. The summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Agreement and the related Series Supplement.
GENERAL
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable Invested
Percentage of all cardholder payments on the Receivables. For each Series of
Certificates, unless otherwise specified in the related Prospectus Supplement,
the Invested Amount on any date will be equal to the Initial Invested Amount as
of the related Closing Date for such Series minus the amount of principal paid
in respect of such Series prior to such date and minus the amount of
unreimbursed Investor Charge-Offs with respect to such Series prior to such
date. If so specified in the Prospectus Supplement relating to any Series of
Certificates, under certain circumstances the Invested Amount may be further
adjusted by the amount of principal allocated to Certificateholders, the funds
on deposit in any specified account, and any other amount specified in the
related Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be Subordinated
Certificates. 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, Certificate Rate and the availability of
Enhancement.
For each Series of Certificates, payments of interest and principal will be
made on Distribution Dates specified in the related Prospectus Supplement to
Certificateholders in whose names the Certificates were registered on the record
dates (each, a "Record Date") specified in the related Prospectus Supplement.
Interest will be distributed to Certificateholders in the amounts, for the
periods and on the dates specified in the related Prospectus Supplement.
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<PAGE> 75
For each Series of Certificates, the Transferor initially will own the
Exchangeable Transferor Certificate. The Exchangeable Transferor Certificate
will represent the undivided interest in the Trust not represented by the
Certificates issued and outstanding under the Agreement, any other interests in
the Trust relating to any Series or the rights, if any, of any Enhancement
Providers to receive payments from the Trust. The holder of the Exchangeable
Transferor Certificate will have the right to a percentage (the "Transferor
Percentage") of all cardholder payments from the Receivables in the Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the
Invested Amount will remain constant except under certain limited circumstances.
See "Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs." The amount of Principal Receivables in the Trust, however, will
vary each day as new Principal Receivables are created and others are paid. The
amount of the Transferor Interest will fluctuate each day, therefore, to reflect
the changes in the amount of the Principal Receivables in the Trust. When a
Series is amortizing, the Invested Amount of such Series will generally decline
as payments of principal are distributed or accumulated pending distribution to
the Certificateholders. As a result, the Transferor Interest will generally
increase each month during an Amortization Period for any Series to reflect the
reductions in the Invested Amount of such Series and will also change to reflect
the variations in the amount of Principal Receivables in the related Trust. The
Transferor Interest may also be reduced as the result of an Exchange. See
" -- Exchanges."
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 DTC (together with any successor
depository selected by the Transferor, 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 Transferor has been informed by
DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be the
holder of record of each Series of Certificates. No Certificate Owner acquiring
an interest in the Certificates will be entitled to receive a certificate
representing such person's interest in the Certificates unless Definitive
Certificates are issued. Unless and until Definitive Certificates are issued 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 Participants (as defined below), and all references herein
to distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC procedures. See " -- Book-Entry
Registration" and " -- Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Series of 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 issued in book-entry form,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe), which in turn hold through DTC, if
they are participants of such systems, or indirectly through organizations that
are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("Participants") and
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<PAGE> 76
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (who may
include the underwriters of any Series), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits or securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal of
and interest on the Certificates from the Trustee through the Participants who
in turn will receive them from DTC. Under a book-entry format, Certificate
Owners may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will
forward such payments to its Participants which thereafter will forward them to
Indirect Participants or Certificate Owners. It is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificate Owners will not
be recognized by the Trustee as Certificateholders, as such term is used in the
Agreement, and Certificate Owners will only be permitted to exercise the rights
of Certificateholders indirectly through the Participants who in turn will
exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess Certificates, Certificate Owners will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Certificates to persons or entities that do not
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<PAGE> 77
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under any related Agreement only at the direction
of one or more Participants to whose account with DTC the Certificates are
credited. Additionally, DTC has advised the Transferor that it will take such
actions with respect to specified percentages of the Invested Amount only at the
direction of and on behalf of Participants whose holdings include undivided
interests that satisfy such specified percentages. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Participants whose holdings include such
undivided interests.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled by Cedel in any of 36 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulations by the Luxembourg Monetary Institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any Series
of Certificates. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System (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 of any Series of Certificates. Indirect access to the Euroclear
System is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of
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Euroclear Participants and has no record of or relationship with persons holding
through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
Cedel or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the related Agreement on
behalf of a Cedel Participant or a Euroclear Participant only in accordance with
its relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
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 ("Definitive Certificates"), rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to such Series of Certificates, and
the Trustee or the Transferor is unable to locate a qualified successor, (ii)
the Transferor, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through DTC or (iii) after the occurrence of a
Servicer Default, Certificate Owners representing not less than 50% (or such
other percentage specified in the related Prospectus Supplement) of the Invested
Amount advise the Trustee and DTC through Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
re-registration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments and any
principal payments on each Distribution Date will be made to Holders in whose
names the Definitive Certificates were registered at the close of business on
the related Record Date. Distributions will be made by check mailed to the
address of such Holder as it appears on the register maintained by the Trustee.
The final payment on any Certificate (whether Definitive Certificates or the
Certificates registered in the name of Cede representing the Certificates),
however, will be made only upon presentation and surrender of such Certificate
at the office or agency specified in the notice of final distribution to
Certificateholders. The Trustee will provide such notice to registered
Certificateholders not later than the fifth day of the month of such final
distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer or
exchange, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
INTEREST PAYMENTS
For each Series of Certificates and Class thereof, interest will accrue
from the relevant Closing Date on the applicable Certificate amount (or other
amount specified in the related Prospectus Supplement), at the applicable
Certificate Rate, which may be a fixed, floating or other type of rate as
specified in the related Prospectus Supplement. Interest will be distributed to
Certificateholders on the Distribution Dates specified in
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the related Prospectus Supplement. Interest payments on any Distribution Date
will generally be funded from collections of Finance Charge Receivables
allocated to the Invested Amount during the preceding monthly period or periods
(each, a "Due Period"), as described in the related Prospectus Supplement, and
may be funded from certain investment earnings on funds held in certain accounts
of the Trust, from any applicable Enhancement, if necessary, or from certain
other sources 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 (including any
penalty interest on overdue interest), the Certificate Rate, and, for a Series
or Class thereof bearing interest at a floating Certificate Rate, the initial
Certificate Rate, the dates and the manner for determining subsequent
Certificate Rates, and the formula, index or other method by which such
Certificate Rates are determined.
PRINCIPAL PAYMENTS
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period for each Series (which begins on the Closing Date relating to
such Series and ends on the day before an Amortization 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 Early Amortization Period, which will begin upon the
occurrence of an Early Amortization 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 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 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 or investment agreement 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.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
The Transferor has transferred and assigned to the Trust all of its right,
title and interest in and to Receivables in certain Accounts selected from its
portfolio of consumer revolving credit card accounts, all of the Receivables
created under such Accounts and the proceeds of all of the foregoing.
In connection with the transfer of the Receivables by the Transferor to the
Trust, the Transferor has indicated in its records, including any computer
files, that the Receivables have been transferred from the Transferor to the
Trust. In addition, the Transferor has provided to the Trustee a computer file
or a microfiche list containing a true and complete list showing for each
Account (i) its account number and (ii) the amount of Receivables in such
Account. FNANB, as initial Servicer, will retain and will not deliver to the
Trustee any other records or agreements relating to the Accounts or the
Receivables. Except as set forth above, the records and agreements relating to
the Accounts and the Receivables will not be segregated from those relating to
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other credit card accounts and receivables and neither the computer files nor
the physical documentation relating to the Accounts or Receivables will be
stamped or marked to reflect the transfer of Receivables to the Trust. The
Trustee will have reasonable access to such records and agreements as required
by applicable law or to enforce the rights of the Certificateholders. The
Transferor has filed UCC-1 financing statements in accordance with Georgia state
law to perfect the Trust's interest in the Receivables. See "Risk Factors --
Certain Legal Aspects" 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) the Exchangeable Transferor
Certificate, a certificate which evidences the Transferor Interest, which will
be held by the Transferor and generally will not be transferable. The Agreement
will also provide that, pursuant to any one or more Series Supplements, the
Transferor may tender the Exchangeable Transferor Certificate, or the
Exchangeable Transferor Certificate and the Certificates evidencing any Series
of Certificates, to the Trustee in exchange for one or more newly issued Series
and a reissued Exchangeable Transferor Certificate. Under the Agreement, the
Transferor 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 Certificate Rate (or formula for the determination thereof),
(iv) the interest payment date or dates and the date or dates from which
interest shall accrue, (v) the method for allocating collections and Defaulted
Receivables to Certificateholders, (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 servicing fees, (viii) the minimum transferor
interest percentage (the "Minimum Transferor Interest Percentage") and the
series minimum transferor amount (the "Series Minimum Transferor Amount")
applicable to such Series, (ix) the minimum amount of Principal Receivables
required to be maintained with respect to such Series, (x) the issuer and terms
of any Enhancement with respect thereto, (xi) the base rate for such Series, if
applicable, (xii) the terms on which the Certificates of such Series may be
repurchased at the Transferor's option or remarketed to other investors, (xiii)
the Stated Series Termination Date, (xiv) any deposit into any account
maintained for the benefit of Certificateholders, (xv) the number of Classes of
such Series, and any other interests in the Trust relating to such Series, and
if more than one Class, the rights and priorities of each such Class, and the
rights and priorities of any holder of any related interest, (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) the priority
of any Series with respect to any other Series, if applicable, (xix) the rights
of the holder of the Exchangeable Transferor Certificate that have been
transferred to Certificateholders of such Series and (xx) any other relevant
terms (all such terms, the "Principal Terms" of such Series). None of the
Transferor, the Servicer, the Trustee or the Trust is required or intends to
obtain the consent of any Certificateholder to issue any additional Series.
However, as a condition of an Exchange, the Transferor will deliver to the
Trustee written confirmation that the Exchange will not result in the applicable
Rating Agency reducing or withdrawing its rating of any outstanding Series. The
Transferor may offer any Series of Certificates to the public under a Disclosure
Document in transactions either registered under the Act or exempt from
registration thereunder directly, through one or more underwriters or placement
agents, in fixed-price offerings or in negotiated transactions or otherwise. Any
such Series of Certificates may be issued in fully registered or book-entry form
in minimum denominations determined by the Transferor. The Transferor intends to
offer additional Series.
The Agreement provides that the Transferor may perform Exchanges and define
Principal Terms such that each Series has a period during which amortization 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 Revolving Periods while other Series
are not. Thus, certain Series may not be amortizing, while other Series are
amortizing. Each Series may have the benefits of a form of Enhancement issued by
issuers different from the issuers of the form of Enhancement with respect to
any other Series.
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Under the Agreement, the Trustee will hold any such Enhancement only on behalf
of the Series to which it relates. Likewise, with respect to each such
Enhancement, the Transferor may deliver a different form of Enhancement
agreement. The Agreement also provides that the Transferor may specify different
Certificate Rates and Investor Servicing Fees with respect to each Series. The
Transferor also has the option under the Agreement to vary between Series the
terms upon which Series may be repurchased at the Transferor's option or
remarketed to other investors. Additionally, certain Series may be subordinated
to other Series, or Classes within a Series may have different priorities. There
is no limit to the number of Exchanges that the Transferor may perform under the
Agreement. The Trust will terminate only as provided in the Agreement.
Under the Agreement and pursuant to a Series Supplement, an Exchange may
only occur upon the satisfaction of certain conditions provided in the
Agreement. Under the Agreement, the Transferor may perform an Exchange by
notifying the Trustee at least three business days in advance of the date upon
which the Exchange is to occur. Under the Agreement, the notice will state the
designation of any Series to be issued on the date of the Exchange and, with
respect to each such Series: (i) its Initial Invested Amount and Pre-Funded
Amount, if applicable (or the method for calculating such amount) and (ii) its
Certificate Rate or Rates (or the method for allocating interest payments or
other cash flow to such Series). On the date of the Exchange, the Trustee will
issue any such Series only upon delivery to it of the following: (i) a Series
Supplement in form satisfactory to the Trustee signed by the Transferor and
specifying the Principal Terms of such Series, (ii) the Enhancement agreement,
if any, with respect thereto executed by the Transferor, if applicable, and the
provider of the Enhancement, (iii) an opinion of counsel to the effect that
Certificates of such Series (other than any Class required to be retained by the
Transferor) will be characterized either as indebtedness or an interest in a
partnership (that is not taxable as a corporation) under existing law for
Federal income tax purposes and that the issuance of such Series will not have a
material adverse impact on the Federal income tax characterization of any
outstanding Series that have been the subject of a previous opinion of tax
counsel or result in the Trust being taxable as an association for Federal or
applicable state tax purposes, (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 Transferor 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 Transferor Certificate and the
Certificates of the exchanged Series, if applicable, and issue the new Series
and new Exchangeable Transferor Certificate.
COVENANTS, REPRESENTATIONS AND WARRANTIES
The Transferor has represented and warranted 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) as of the Cut Off Date or creation date, as
applicable, and, in the case of Receivables in Additional Accounts, as of the
related cut off date for any such Additional Accounts (the "Additional Account
Cut Off Date"), each Receivable then existing is an Eligible Receivable and (ii)
as of the initial Closing Date, and as of the applicable Additional Account
Closing Date with respect to Additional Accounts, and as of the applicable
creation date with respect to Automatic Additional Accounts, the computer file
or list of Accounts, Additional Accounts or Automatic Additional Accounts, as
the case may be, provided by the Transferor to the Trustee was an accurate and
complete listing of all such Accounts in all material respects and the
information contained therein with respect to the identity of such Accounts and
the Receivables existing thereunder was true and correct in all material
respects as of the Cut Off Date, the Additional Account Cut Off Date or creation
date, as applicable. In the event that any of the representations and warranties
described in clauses (i) and (ii) above is not true and correct and, as a
result, any Receivable is charged off as uncollectible or the Trust's rights in,
to or under such Receivable or its proceeds are materially impaired, then,
unless such breach is cured within 60 days or any longer period agreed upon by
the Trustee (not to exceed an additional 90 days) from the earlier to occur of
the discovery of any such event by the Transferor or the Servicer or receipt by
the Transferor or the Servicer of written notice of any such event given by the
Trustee, the Transferor shall accept the transfer of such Receivable (an
"Ineligible Receivable") by directing the Servicer to deduct the principal
balance of such Ineligible Receivable from the aggregate amount of Principal
Receivables. In the event that the exclusion of an Ineligible Receivable from
the calculation of the Transferor Amount would cause the Transferor Amount
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to be reduced below zero (after giving effect to the addition of any Principal
Receivables to the Trust), the Transferor will make a deposit into the Excess
Funding Account in an amount equal to the amount by which the Transferor Amount
would be reduced below zero. Any deposit into the Excess Funding Account in
connection with the reassignment of an Ineligible Receivable shall be deemed a
payment in full of the Ineligible Receivable. Any amounts so paid by the
Transferor shall be allocated in respect of Principal Receivables and Finance
Charge Receivables as provided in the Agreement. Additionally, the Transferor
has covenanted in the Agreement to accept, under certain conditions, the
transfer of each Receivable which is subject to certain specified liens
immediately upon the discovery of such liens.
The obligation of the Transferor to accept reassignment of any Ineligible
Receivable as described above is the sole remedy with respect to such Receivable
available to the Trustee or the Certificateholders.
The Transferor will represent and warrant as of each Closing Date, to the
Trustee for the benefit of Certificateholders of all Series which from time to
time may have an interest in the Trust, that (i) the Transferor is duly
organized and validly existing in good standing under the laws of the United
States of America, has the full power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under the Agreement and any Series Supplement and to execute and
deliver to the Trustee the Certificates pursuant to the Agreement, (ii) the
Agreement and any Series Supplement constitute legal, valid, binding and
enforceable obligations of the Transferor, and (iii) the Agreement constitutes a
valid transfer to the Trust of all right, title and interest of the Transferor
in and to the Receivables, whether then existing or thereafter created in the
Accounts, and the proceeds thereof, or the grant of a first priority perfected
security interest in such Receivables and, with certain exceptions made for
certain limited time periods, the proceeds thereof, which is effective as to
each Receivable upon the transfer thereof to the Trust or upon its creation, as
the case may be. In the event that (x) any of the representations and warranties
described in clauses (i) through (iii) above is not true and correct or (y) a
material amount of Receivables are not Eligible Receivables, and in either case
such event has a material adverse effect on the interest of holders of the
Certificates of all Series (without regard to the amount of any Enhancement),
either the Trustee or the holders of Certificates or other interests in the
Trust evidencing undivided interests in the Trust aggregating more than 50% of
the aggregate Invested Amount of all Series, by written notice to the Transferor
(and to the Trustee and the Servicer, if given by the Certificateholders), may
direct the Transferor to accept reassignment of all Receivables within 60 days
of such notice or any longer period agreed upon by the Trustee (not to exceed an
additional 90 days). The Transferor will be obligated to accept reassignment of
all such Receivables on a Distribution Date occurring within such applicable
period, unless the representations and warranties shall then be true and correct
in all material respects or there shall no longer be a material amount of such
Receivables which are not Eligible Receivables, as the case may be. The price
for such transfer of Receivables shall be equal to the sum of the aggregate
Invested Amounts of all Series on the Record Date related to the applicable
Distribution Date on which the transfer is scheduled to be made (less the
aggregate principal amount on deposit in any Principal Funding Account) plus an
amount equal to all interest accrued but unpaid on all Series at the applicable
Certificate Rates through the end of the Interest Periods of such Series plus
certain amounts payable to Enhancement Providers, if applicable. The payment of
such amount into the Collection Account in immediately available funds will be
considered a prepayment in full of all such Receivables and will be paid in full
to the Certificateholders and, if applicable, to Enhancement Providers. The
obligations described above are 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, (ii) which was created in compliance with all
applicable requirements of law and pursuant to a cardholder agreement which
complies with all applicable requirements of law in either case the failure to
comply with which would have a material adverse effect upon Certificateholders,
(iii) with respect to which all material consents, licenses, approvals or
authorizations of, or registrations with, any governmental authority required to
be obtained or given by the Transferor in connection with the creation of such
Receivable or the execution, delivery and performance by the Transferor of the
related cardholder agreement have been duly obtained or given and are in full
force and effect as of such date of creation, (iv) as to which at the time of
the
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transfer of such Receivable to the Trust, the Trust will have good and
marketable title, free and clear of all liens, encumbrances, charges and
security interests (except those permitted by the Agreement), (v) which has been
the subject of either a valid transfer and assignment from the Transferor to the
Trust of all of the Transferor's right, title and interest therein or the grant
of a first priority perfected security interest therein (and in the proceeds
thereof), effective until the termination of the Trust, (vi) which will at all
times be the legal, valid and binding payment obligation of the cardholder
thereof enforceable against such cardholder in accordance with its terms,
subject to certain bankruptcy and equity related exceptions, (vii) which
constitutes "chattel paper," an "account" or a "general intangible" under and as
defined in Article 9 of the UCC, (viii) which, at the time of its transfer to
the Trust, has not been waived or modified except in accordance with the
policies and procedures of the Transferor relating to the operation of its
consumer credit card business, (ix) which is not subject to any setoff, right of
rescission, counterclaim or other defense (including the defense of usury),
other than certain bankruptcy and equity related defenses, (x) as to which the
Transferor has satisfied all obligations to be fulfilled at the time it is
transferred to the Trust and (xi) as to which the Transferor has done nothing,
at the time of its transfer to the Trust, to impair the rights of the Trust or
Certificateholders therein. In order to qualify as an "Eligible Account," each
such Account must, as of the date of its selection, (i) be in existence and
owned by the Transferor, (ii) be payable in United States dollars, (iii) not
have the related credit card reported lost or stolen or be designated as
fraudulent, (iv) not be identified in the Transferor's computer files as
cancelled due to the obligor's bankruptcy, insolvency or death, (v) not have the
receivables in such Account written off as uncollectible, (vi) not have the
receivables in such Account assigned, pledged or sold, (vii) have an obligor who
has provided a billing address in the United States or its territories or
possessions and (viii) not be an account with respect to which the Transferor or
any affiliate of the Transferor is the obligor.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of the Receivables or any records relating to the
Receivables for the purpose of establishing the presence or absence of defects,
compliance with the Transferor's representations and warranties or for any other
purpose. In addition, it is not required or anticipated that the Trustee will
make any initial or periodic general examination of the Servicer for the purpose
of establishing the compliance by the Servicer with its representations or
warranties or the performance by the Servicer of its obligations under the
Agreement or for any other purpose. The Servicer, however, is required to
deliver to the Trustee on or before June 30 of each calendar year, beginning
with June 30, 1996, an opinion of counsel with respect to the validity of the
security interest of the Trust in and to the Receivables.
ADDITION OF ACCOUNTS
Subject to the conditions set forth below, the Transferor has the right to
designate from time to time Additional Accounts to be included as Accounts and
to convey to the Trust on designated dates all Receivables in such Additional
Accounts (each such date, an "Additional Account Closing Date"), whether such
Receivables are then existing or thereafter created. In addition, the Transferor
is required to designate Additional Accounts (to the extent available) and to
transfer the Receivables in such Additional Accounts to the Trust if, as of the
end of any Due Period, the Transferor Amount (after giving effect to any amounts
deposited into the Excess Funding Account) is less than the sum of the Series
Minimum Transferor Amounts (the "Minimum Transferor Amount") or if, as of the
end of any Due Period, the aggregate Principal Receivables is less than the
minimum amount of Principal Receivables (the "Minimum Aggregate Principal
Receivables"), which shall be the Initial Invested Amount of each such Series
unless otherwise specified in the Supplement therefor, required by the
Agreement. Failure to make any such required designation when required or within
10 business days thereafter will result in an Early Amortization Event with
respect to the related Series. The Transferor will in each case convey to the
Trust its interest in all Receivables in such Additional Accounts, whether such
Receivables are then existing or thereafter created, subject to the following
conditions, among others: (i) each such Additional Account at the time of its
selection must be an Eligible Account; (ii) the selection of the Additional
Accounts by the Transferor will be made in a manner which it believes will not
materially adversely affect the interests of the Certificateholders or any
provider of Enhancement; and (iii) the Transferor shall have delivered prior
written notice of the addition to the applicable Rating Agency, the Trustee and
the Servicer, and, if required by the Agreement, shall have been
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notified in writing that such addition will not result in a reduction or
withdrawal of the rating of any Series of Certificates.
In addition, the Transferor has the right to designate Eligible Accounts to
be included automatically as Accounts upon their creation ("Automatic Additional
Accounts") subject to certain limitations set forth in the Agreement. The
Transferor may generally discontinue the inclusion of Automatic Additional
Accounts at any time, in its sole discretion.
Although each Additional Account or Automatic Additional Account must
satisfy certain criteria set forth in the Agreement at the time of its
selection, Additional Accounts and Automatic Additional Accounts may not be of
the same credit quality as the initial Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the second succeeding sentence, the
Transferor has the right to designate certain Accounts, the Receivables in which
are to be removed from the Trust (the "Removed Accounts") and to accept the
conveyance of all the Receivables in the Removed Accounts, without notice to the
Certificateholders. The Transferor is permitted to designate and require
reassignment to it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions: (i) the Transferor shall have
delivered to the Trustee for execution a written instrument of reassignment and
a computer file or microfiche list containing a true and complete list of the
Removed Accounts identified by account number and aggregate amount of
Receivables; (ii) the Transferor shall represent and warrant that no selection
procedure believed by the Transferor to be materially adverse to the interests
of the Certificateholders or any provider of Enhancement 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 Transferor, cause an
Early Amortization Event to occur or cause the Transferor Amount to be less than
the Minimum Transferor Amount; (iv) the Transferor shall have delivered prior
written notice of the removal to each Rating Agency which has rated any
outstanding Series and prior to the date on which such Receivables are to be
removed shall have received notice from each Rating Agency that such removal
will not cause the reduction or withdrawal of its rating of any Series of
Certificates (the "Rating Agency Condition"); and (v) the Transferor shall have
delivered to the Trustee and each Rating Agency an officer's certificate
confirming the items set forth in clauses (i) through (iv) above.
DISCOUNT OPTION
The Transferor may at any time designate a specified percentage (the
"Discount Percentage") of the amount of Receivables arising in the Accounts on
and after the date such option is exercised that otherwise would be treated as
Principal Receivables to be treated as Finance Charge Receivables (the "Discount
Option Receivables"). 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 of each outstanding Series of
Certificates. 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. The use of such discount option may be discontinued by
the Transferor upon satisfaction of the requirements set forth in the Agreement,
including written confirmation by each Rating Agency of its then current rating
of each outstanding Series of Certificates.
COLLECTION ACCOUNT
The Trustee has established and will maintain or cause to be maintained, in
the name of the Trustee, on behalf of the Trust, a segregated trust account (the
"Collection Account") for the benefit of the Certificateholders with an Eligible
Institution. An "Eligible Institution" means (i) a depositary institution, which
may include the Trustee, organized under the laws of the United States or any
one of the States thereof including the District of Columbia (or any domestic
branch or agency of any foreign bank), which at all times has a
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short-term unsecured debt or certificate of deposit rating of at least A-1+ and
P-1 by the applicable Rating Agency or a long-term unsecured debt rating of at
least AAA or Aa2 by the applicable Rating Agency or (ii) a depository
institution, which may include the Trustee, otherwise acceptable to each Rating
Agency; provided, however, that no such rating shall be required of an
institution which shall have corporate trust powers and which maintains the
Collection Account, any Principal Funding Account, any Interest Funding Account
or any other account maintained for the benefit of Certificateholders as a fully
segregated trust account with the trust department of such institution. Funds in
the Collection Account may be invested, at the direction of the Servicer, in (i)
obligations of or fully guaranteed by the United States of America or its
agencies, (ii) time deposits, demand deposits, certificates of deposit or
banker's acceptances of certain depository institutions or trust companies
having the highest rating from the applicable Rating Agency, (iii) commercial
paper having, at the time of the Trust's investment, a rating in the highest
rating category from the applicable Rating Agency, (iv) money market funds which
have a rating in the highest category from the applicable Rating Agency, (v)
Eurodollar time deposits having, at the time of the Trust's investment or
contractual commitment to invest therein, a rating in the highest rating
category from the applicable Rating Agency, (vi) repurchase agreements involving
certain of the above-listed investments so long as the counterparty thereto has
at the time of the Trust's investment therein, a rating in the highest rating
category from the applicable Rating Agency and (viii) any other investments as
may be approved in writing by the applicable Rating Agency prior to the Trust's
investment therein (collectively, the "Eligible Investments"). Any such
investment shall be held to maturity. Any earnings (net of losses and investment
expenses) on funds in the Collection Account shall be paid monthly to the
Transferor unless an Early Amortization Event occurs, in which event such funds
will remain on deposit in the Collection Account. The Servicer will have the
revocable power to withdraw funds from the Collection Account and to instruct
the Trustee to make withdrawals and payments from the Collection Account for the
purpose of carrying out the Servicer's or the Trustee's duties under the
Agreement. So long as no Servicer Default has occurred and FNANB or an affiliate
of FNANB maintains certain short-term credit ratings, or obtains written
confirmation of the ratings on the Certificates from each Rating Agency, the
Servicer need not deposit funds into the Collection Account until the business
day preceding the following Distribution Date and may use such funds for its own
purposes. See " -- Allocation of Collections; Deposits in Collection Account."
ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT
No later than the second business day following each date of processing,
the Servicer will, subject to certain exceptions specified in the related Series
Supplement and except as described below, deposit collections on the Receivables
and payments made by the Transferor in respect of Ineligible Receivables
allocable to the Invested Amount into the Collection Account. So long as a
Servicer Default has not occurred, FNANB or an affiliate of FNANB is the
Servicer and FNANB (i) maintains a short-term certificate of deposit rating or
meets other criteria required by the applicable Rating Agency, or (ii) obtains a
written notification from each Rating Agency to the effect that such Rating
Agency does not intend to downgrade or withdraw its then current rating of any
outstanding Series of Certificates despite the Servicer's inability to satisfy
the rating requirement specified in clause (i), and for the two business day
period following any reduction of such rating or failure to satisfy the
conditions of clause (ii), the Servicer need not deposit collections on the
Receivables and payments made by the Transferor in respect of Ineligible
Receivables allocable to the Certificateholders' interest into the Collection
Account on the date indicated in the preceding sentence but may use for its own
benefit all such collections and payments until the business day preceding the
Distribution Date at which time the Servicer must deposit such amounts (net of
the Investor Servicing Fee and net of any amounts to be distributed to the
Transferor) into the Collection Account. Until such collections and payments are
deposited in the Collection Account, such amounts will not be segregated from
the assets of the Servicer, and the proceeds of any short term investment of
such proceeds will accrue to the Servicer. While the Servicer holds collections
on the Receivables and payments made by the Transferor in respect of Ineligible
Receivables and is permitted to use such collections and payments for its own
benefit, the Certificateholders are subject to risk of loss, including risk
resulting from the insolvency of the Servicer. The Servicer will pay no fee to
the Trust or the Certificateholders for use of collections on the Receivables
and
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payments made by the Transferor in respect of Ineligible Receivables.
Collections on Receivables allocable to the Transferor Interest will be remitted
by the Servicer on each business day to the Transferor.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that for a period beginning on the Closing Date and ending on a
specified date before the commencement of an Amortization Period with respect to
such Series (the "Funding Period"), 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 and that the amount of such
deficiency (the "Pre-Funded Amount") will be held in a trust account established
with 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 other Series. The
related Prospectus Supplement will specify the Initial Invested Amount with
respect to such Series, the aggregate principal amount 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
delivered to the Trust or as the Invested Amounts of other Series are reduced.
The Invested Amount may also decrease due to Investor Charge Offs as provided in
the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding Account for
a Series of Certificates will be withdrawn and paid to the Transferor to the
extent of any increases in the Invested Amount. 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 and any
additional amounts specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, moneys in the
Pre-Funding Account will be invested by the Trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, on each Distribution Date during the Funding Period,
investment earnings on funds in the Pre-Funding Account during the related Due
Period will be withdrawn from the Pre-Funding Account and deposited, together
with any applicable payment under a guaranteed rate or investment agreement or
other similar arrangement, into the Collection Account for distribution in
respect of interest on the Certificates of the related Series in the manner
specified in the related Prospectus Supplement.
INVESTED PERCENTAGE AND TRANSFEROR PERCENTAGE
The Servicer will allocate between the Invested Amount of each Series (and
between each Class of or other interest in the Trust in respect of each Series)
and the Transferor Interest and, in certain circumstances, to Enhancement
Providers all collections of Finance Charge Receivables, all collections of
Principal Receivables and all Receivables in Defaulted Accounts. The Servicer
will make each allocation by reference to the applicable Invested Percentage of
each Series and the Transferor Percentage in each case. The Prospectus
Supplement relating to a Series will specify the Invested Percentage with
respect to the allocations of collections of Principal Receivables, collections
of Finance Charge Receivables and Receivables in Defaulted Accounts during the
Revolving Period and any Amortization Period. The Invested Percentage for a
Series may be based on an amount other than the Invested Amount. In addition,
for each Series of Certificates having more than one Class, the related
Prospectus Supplement will specify the method of allocation between Classes.
The Transferor Percentage will, in all cases, be equal to 100% minus the
aggregate Invested Percentages for all Series then outstanding.
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APPLICATION OF COLLECTIONS
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will apply or cause the Trustee to apply funds deposited in the
Collection Account with respect to each Distribution Date to make the following
distributions:
(a) an amount equal to the applicable Invested Percentage of the
aggregate amount of such deposits in respect of Finance Charge Receivables
will be allocated and distributed as described in the related Prospectus
Supplement;
(b) during the Revolving Period, an amount equal to the applicable
Invested Percentage of the aggregate amount of such deposits in respect of
Principal Receivables will be paid to the holder of the Exchangeable
Transferor Certificate, unless the Transferor Amount would be reduced below
zero, or to other amortizing Series, as described in the related Prospectus
Supplement;
(c) during the Controlled Amortization Period or Accumulation Period,
as applicable, an amount equal to the applicable Invested Percentage of the
aggregate amount of such deposits in respect of Principal Receivables up to
the amount, if any, as specified in the related Prospectus Supplement will
be allocated and distributed to Certificateholders or deposited in the
Principal Funding Account as described in the related Prospectus
Supplement, provided that if collections of Principal Receivables exceed
the principal payments which are to be distributed to Certificateholders or
deposited in the Principal Funding Account, the amount of such excess will
be paid to the holder of the Exchangeable Transferor Certificate, unless
the Transferor Amount would be reduced below the Minimum Transferor Amount,
or to other amortizing Series, as described in the related Prospectus
Supplement; and
(d) during the Principal Amortization Period, if applicable, and the
Early Amortization Period, an amount equal to the applicable Invested
Percentage of the aggregate amount of such deposits in respect of Principal
Receivables will be allocated and distributed to Certificateholders as
described in the related Prospectus Supplement.
In the case of a Series of Certificates having more than one Class, the
amounts in the Collection Account will be allocated and applied to each Class in
the manner and order of priority described in the related Prospectus Supplement.
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables and certain other amounts for any Due
Period allocated to any Series in a Group will first be used to cover certain
amounts described in the related Series Supplements (including any required
deposits into a Principal Funding Account or required distributions to
Certificateholders of such Series). The Servicer will determine the amount of
collections of Principal Receivables for any Due Period (plus certain other
amounts required by the related Series Supplement) allocated to such Series
remaining after covering such required deposits and distributions and any
similar amount remaining for any other Series in such Group (collectively,
"Shared Principal Collections"), and will allocate the Shared Principal
Collections to cover any principal distributions to Certificateholders and
deposits to Principal Funding Accounts for any Series in such Group which are
either scheduled or permitted and which have not been covered out of collections
of Principal Receivables and certain other amounts for such Series, provided
that the Series Supplement for such Series so provides ("Principal Shortfalls").
If Principal Shortfalls exceed Shared Principal Collections for any Due Period,
Shared Principal Collections will be allocated pro rata among the Series in a
Group entitled to the benefits thereof based on the respective Principal
Shortfalls of such Series. To the extent that Shared Principal Collections
exceed Principal Shortfalls, the balance will be distributed to the holder of
the Exchangeable Transferor Certificate; provided, however, that (a) such Shared
Principal Collections will be distributed to the holder of the Exchangeable
Transferor Certificate only to the extent the Transferor Amount is greater than
the Minimum Transferor Amount and (b) in certain circumstances described below
under " -- Excess Funding Account," such Shared Principal Collections will be
deposited in the Excess Funding Account. Any such reallocation of collections of
Principal Receivables and
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other amounts will not result in a reduction in the Invested Amount of the
Series to which such collections were initially allocated.
EXCESS FUNDING ACCOUNT
If on any date the Transferor Amount is less than the Minimum Transferor
Amount (after giving effect to any addition of Principal Receivables to the
Trust), the Servicer shall not distribute to the holder of the Exchangeable
Transferor Certificate any collections of Principal Receivables that otherwise
would be distributed to the holder of the Exchangeable Transferor Certificate,
but shall deposit such funds in a deposit account (which may be a sub-account of
the Collection Account) established and maintained by the Servicer for the
benefit of the Certificateholders entitled to the benefits thereof, in the name
of the Trustee, on behalf of the Trust, with the Trustee or an Eligible
Institution and bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of such Certificateholders (the
"Excess Funding Account"). Funds on deposit in the Excess Funding Account will
be withdrawn and paid to the holder of the Exchangeable Transferor Certificate
on any date to the extent that the Transferor Amount exceeds the Minimum
Transferor Amount on such date; provided, however, that if an Accumulation
Period, Controlled Amortization Period, Principal Amortization Period or Early
Amortization Period commences with respect to any Series in a Group entitled to
the benefits of Shared Principal Collections, any funds on deposit in the Excess
Funding Account will be released and treated as Shared Principal Collections to
the extent needed to cover principal payments due to or for the benefit of such
Series, if the Series Supplement with respect to such Series so provides.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Eligible Investments. Any earnings
(net of losses and investment expenses) earned on amounts on deposit in the
Excess Funding Account during any Due Period will be withdrawn from the Excess
Funding Account and treated as collections of Finance Charge Receivables with
respect to such Due Period.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series may be included in a Group of Series. Each Series in a Group
will be entitled to share Shared Excess Finance Charge Collections in the
manner, and to the extent, described below with each other Series, if any, in
such Group. Collections of Finance Charge Receivables and certain other amounts
allocable to any Series which is included in such Group in excess of the amounts
necessary to make required payments with respect to such Series (including
payments to the provider of any related Enhancement) that are payable out of
collections of Finance Charge Receivables ("Shared Excess Finance Charge
Collections") will be applied to cover any shortfalls with respect to amounts
payable from collections of Finance Charge Receivables allocable to any other
Series included in such Group, pro rata based upon the amount of the shortfall,
if any, with respect to each other Series in such Group, provided, however, that
the sharing of Shared Excess Finance Charge Collections among Series in a Group
will continue only until such time, if any, at which the Transferor shall
deliver to the Trustee a certificate of an authorized officer to the effect
that, in the reasonable belief of the Transferor or its counsel, the continued
sharing of Shared Excess Finance Charge Collections among Series in any Group
would have adverse regulatory implications with respect to the Transferor.
Following the delivery by the Transferor of any such certificate to the Trustee
there will not be any further sharing of Shared Excess Finance Charge
Collections among the Series in a Group. In all cases, any Shared Excess Finance
Charge Collections remaining after covering shortfalls with respect to all
outstanding Series in a Group will be paid to the holder of the Exchangeable
Transferor Certificate. While the Transferor believes that, based upon
applicable rules and regulations as currently in effect, the sharing of Shared
Excess Finance Charge Collections among Series in a Group will not have adverse
regulatory implications for it, there can be no assurance that this will
continue to be true in the future.
COMPANION SERIES
If so provided in the Prospectus Supplement relating to a Series, such
Series is subject to being paired with another Series (in such case, a
"Companion Series"). The Prospectus Supplement for such Series and the
Prospectus Supplement for the Companion Series will each specify the
relationship between the Series.
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DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
"Defaulted Receivables" for any Due Period are Principal Receivables in
Accounts which were charged off as uncollectible in such Due Period ("Defaulted
Accounts"). Receivables in an Account will be considered charged off for the
purposes of the Agreement on the date on which such Account is charged off in
accordance with the customary and usual servicing procedures of the Servicer,
but in any event no later than the earlier of (i) the last day of the calendar
month in which such Account becomes 180 days delinquent on a contractual basis
and (ii) 30 days after receipt of notice by the Servicer that the related
obligor has died or has become the subject of a bankruptcy petition. The default
amount (the "Default Amount") for any Due Period will be an amount (not less
than zero) equal to (a) the amount of the Principal Receivables that were
charged off in such Due Period less (b) the amount of recoveries received by the
Servicer with respect to Defaulted Accounts during such Due Period. A portion of
all Defaulted Receivables (the "Investor Default Amount") will be allocated to
the Invested Amount for each Distribution Date in an amount equal to the product
of (a) the Invested Percentage applicable during the immediately preceding Due
Period and (b) the Default Amount for such Due Period. In the case of a Series
of Certificates having more than one Class, the Investor Default Amount will be
allocated among the Classes in the manner described in the related Prospectus
Supplement. If so described 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 any Enhancement, and may be applied to pay principal to
Certificateholders or the holder of the Exchangeable Transferor Certificate, 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 by paid to the Senior Certificateholders to make up any
Investor Default Amount allocable to such Senior Certificateholders.
With respect to each Series of Certificates, if the amount payable on a
Distribution Date or other specified date in respect of interest on the
Certificates, the Investor Servicing Fee (unless otherwise specified in the
related Prospectus Supplement), the Investor Default Amount and other required
fees exceeds the amount on deposit in the Collection Account available therefor
(including Shared Excess Finance Charge Collections, if applicable), available
Enhancement amounts, if any, available reallocated collections of Principal
Receivables, if any, and amounts available from other specified sources, then
the Invested Amount with respect to such Series will be reduced by the amount of
such excess, but not more than the Investor Default Amount (an "Investor
Charge-Off"). Investor Charge-Offs will be reimbursed on any Distribution Date
to the extent amounts on deposit in the Collection Account and otherwise
available therefor exceed such interest, fees and any aggregate Investor Default
Amount payable on such date. Such reimbursement of Investor Charge-Offs will
result in an increase in the Invested Amount with respect to such Series. 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 thereof.
If the Servicer makes a downward adjustment of the amount of any Receivable
because of a rebate, refund, unauthorized charge, billing error or certain other
noncash items, or if the Servicer otherwise adjusts downward the amount of any
Receivable without receiving collections therefor or charging off such amount as
uncollectible, or any Receivable is discovered as having been created through a
fraudulent or counterfeit charge (each, an "Adjustment"), the aggregate
Principal Receivables will be reduced by the amount of such Adjustments. To the
extent that such reduction in the aggregate Principal Receivables would cause
(i) the aggregate Principal Receivables (as reduced) plus the Excess Funding
Account balance to be less than (ii) the aggregate Invested Amount of all Series
plus the Minimum Transferor Amount, then the amount of such deficiency will be
allocated among all Series. If such allocation for a Series exceeds the Series
Minimum Transferor Amount of such Series, a reduction in the Invested Amount of
such Series would occur unless the Transferor deposits sufficient amounts into
the Excess Funding Account. Any such deposit into the Excess Funding Account
shall be deemed a collection of Principal Receivables.
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DEFEASANCE
Pursuant to the Agreement, the Transferor may terminate its substantive
obligations in respect of a Series (the "Defeased Series") by depositing with
the Trustee, under the terms of an irrevocable trust agreement satisfactory to
the Trustee, from amounts representing or acquired with collections on the
Receivables (allocable to the Defeased Series and available to purchase
additional Receivables), monies or Eligible Investments sufficient to make all
remaining scheduled interest and principal payments on the Defeased Series on
the dates scheduled for such payments and to pay all amounts owing to any
provider of Enhancement with respect to the Defeased Series. To achieve that
end, the Transferor has the right to use collections on Receivables to purchase
Eligible Investments rather than additional Receivables. Prior to its exercise
of its right to substitute monies or Eligible Investments for Receivables, the
Transferor shall deliver to the Trustee an opinion of counsel that such deposit
and termination of obligations will not be treated for Federal income tax
purposes as a sale or exchange by the holders of the Defeased Series and to the
Servicer and the Trustee written notice from each Rating Agency that such
transaction will not result in a withdrawal or downgrading of the rating of any
outstanding Series. In addition, the Transferor must comply with certain other
requirements set forth in the Agreement, including requirements that the
Transferor deliver to the Trustee an opinion of counsel to the effect that the
deposit and termination of obligations will not require the Trust to register as
an "investment company" within the meaning of the Investment Company Act of
1940, as amended, and that the Transferor deliver to the Trustee and certain
providers of Enhancement a certificate of an authorized officer stating that,
based on the facts known to such officer at the time, in the reasonable opinion
of the Transferor, such deposit and termination of obligations will not at the
time of its occurrence cause an Early Amortization Event or an event that, after
the giving of notice or the lapse of time, would constitute an Early
Amortization Event to occur with respect to any Series. If the Transferor
discharges its substantive obligations in respect of the Defeased Series, any
Enhancement for the affected Series might no longer be available to make
payments with respect thereto.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
With respect to each Series, the Certificates will be subject to optional
repurchase by the Transferor on any Distribution Date after the Invested Amount
(and any other amount specified in the related Series Supplement) is reduced to
an amount less than or equal to 5% (or such other amount specified in the
related Prospectus Supplement) of the initial outstanding principal amount of
the Certificates, if certain conditions set forth in the related Series
Supplement are met. Unless otherwise specified in the related Prospectus
Supplement, the repurchase price will be equal to the Invested Amount plus
accrued and unpaid interest on the Certificates and any other amounts specified
in the related Series Supplement.
The Certificates of each Series will be retired on the day following the
Distribution Date on which the final payment of principal is scheduled to be
made to the Certificateholders, whether as a result of optional reassignment to
the Transferor or otherwise. Each Prospectus Supplement will specify the final
date on which principal and interest with respect to the related Series of
Certificates will be scheduled to be distributed (the "Stated Series Termination
Date"); provided, however, that the Certificates may be subject to prior
termination as provided above. If the Invested Amount is greater than zero on
the Stated Series Termination Date, the Trustee will sell or cause to be sold
certain Receivables allocable to such Series (in an amount up to 110% of the
Invested Amount and any other amount specified in the related Series Supplement)
in the manner provided in the Agreement and Series Supplement and pay the net
proceeds of such sale and any collections on the Receivables, up to an amount
equal to the Invested Amount plus accrued and unpaid interest on the
Certificates and any other amounts specified in the related Series Supplement,
to the Certificateholders of such Series on such Stated Series Termination Date
as final payment of the Certificates.
Unless the Transferor instructs the Trustee otherwise, the Trust will only
terminate on the earlier to occur of: (i) the day following the date on which
funds shall have been deposited in the Collection Account sufficient to pay the
aggregate Invested Amount and any Enhancement Invested Amount plus applicable
Certificate Interest accrued through the last day of the interest accrual period
preceding such Distribution Date in full on all Series of Investor Certificates
and (ii) September 1, 2094 and (iii) the expiration of 21 years from the death
of the last survivor of the descendants of George Herbert Walker Bush, former
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President of the United States, living on the date hereof (the "Final
Termination Date"). Upon the termination of the Trust and the surrender of the
Exchangeable Transferor Certificate, the Trustee shall convey to the Transferor
all right, title and interest of the Trust in and to the Receivables and other
funds of the Trust (other than amounts in the accounts maintained by the Trust
for the final payment of principal and interest to Certificateholders).
EARLY AMORTIZATION EVENTS
Unless otherwise specified in the related Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the related Prospectus Supplement unless an Early Amortization Event occurs
prior to such date. An "Early Amortization Event" occurs with respect to all
Series issued by the Trust upon the occurrence of either of the following
events:
(a) certain events of insolvency, conservatorship or receivership
relating to the Transferor (such events include the appointment (voluntary
or involuntary) of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings relating to the Transferor or all or substantially all of its
property; the Transferor admitting in writing its inability to pay its
debts as they become due, filing a petition to take advantage of an
insolvency or reorganization statute, making an assignment for the benefit
of its creditors or voluntarily suspending payment of its obligations; and
the Transferor being unable to transfer Receivables to the Trust in
accordance with the Agreement); or
(b) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In addition, an Early Amortization Event may occur with respect to any
specific Series upon the occurrence of any other event specified in the related
Prospectus Supplement. On the date on which an Early Amortization Event is
deemed to have occurred, the Early Amortization Period will commence. If,
because of the occurrence of an Early Amortization Event, the Early Amortization
Period begins earlier than the scheduled commencement of an Amortization Period
or prior to a Scheduled Payment Date, Certificateholders will begin receiving
distributions of principal earlier than they otherwise would have, which may
shorten the average life of the Certificates.
If the only Early Amortization Event to occur is either the insolvency of
the Transferor or the appointment of a receiver or conservator for the
Transferor, the receiver or conservator for the Transferor may have the power to
delay or prevent commencement of the Early Amortization Period.
In addition to the consequences of an Early Amortization Event discussed
above, if the Transferor voluntarily enters liquidation or any person is
appointed a receiver or conservator of the Transferor, on the day of such
liquidation or appointment the Transferor will immediately cease to transfer
Receivables to the Trust and the Transferor will 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. With respect to Series issued prior to
Series 1996-1 (each, a "Pre-existing Series"), unless otherwise instructed
within a specified period by the holders representing undivided interests
aggregating more than 50% of the interests in each Class of a Pre-existing
Series, the Trustee will sell, dispose of or otherwise liquidate the portion of
the Receivables allocated to such Pre-existing Series in accordance with the
Agreement in a commercially reasonable manner and on commercially reasonable
terms. With respect to each Series other than a Pre-existing Series, unless
otherwise instructed within a specified period by holders representing undivided
interests aggregating more than 50% of the interests in each Class of each such
Series (including a majority in interest in each collateral indebtedness
interest) and holders of more than 50% of the invested amount of each Class of
each Pre-existing Series, each holder of an interest in the Transferor Interest
(other than the Transferor) and any other person specified in any Series
Supplement, the Trustee will sell, dispose of, or otherwise liquidate the
portion of the Receivables allocable to all Series other than the Pre-existing
Series in a commercially reasonable manner and on commercially reasonable terms.
The proceeds from the sale, disposition or liquidation of the Receivables will
be treated as collections allocable to such Certificateholders
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and such proceeds will be distributed to the applicable Certificateholders and
other holders of interests in the Trust, if applicable, in the manner provided
in the related Prospectus Supplement. If the Trustee is instructed not to sell a
portion of the Receivables allocable to a Series, as described above, then the
Trust shall continue with respect to such Series pursuant to the terms of the
Agreement and the applicable Series Supplement. See "Certain Legal Aspects of
the Receivables -- Certain Matters Relating to Receivership."
INDEMNIFICATION
The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of Certificateholders, and the Trustee, including its officers,
directors and employees, from and against any loss, liability, expense,damage or
injury arising out of or relating to any claims, actions or proceedings brought
or asserted by third parties which are suffered or sustained by reason of any
acts or omissions of the Servicer pursuant to the Agreement or any Series
Supplement; provided, however, that the Servicer shall not indemnify the Trust,
for the benefit of Certificateholders, or the Trustee or its officers, directors
or employees for any liabilities, costs or expenses with respect to (i) any
action taken by the Trustee at the request of Certificateholders, (ii) any U.S.
Federal, state or local taxes required to be paid by the Trust, the Trustee or
the Certificateholders, (iii) with respect to the Trustee and its officers,
directors and employees, any wrongful actions taken by or omissions of the
Trustee or (iv) market or investment risks of Certificateholders.
Under the Agreement, the Transferor will be liable directly to an injured
party for the entire amount of any losses, claims, damages or liabilities (other
than those incurred by a Certificateholder in the capacity of an investor in the
Certificates) arising out of or based on the arrangement created by the
Agreement or the actions of the Servicer taken pursuant to the Agreement as
though the Agreement created a partnership under the Uniform Partnership Act.
The Transferor will also pay, indemnify and hold harmless each Certificateholder
for any such losses, claims, damages or liabilities (other than those incurred
by a Certificateholder in the capacity of an investor in the Certificates)
except to the extent that they arise from any action by any Certificateholder.
In the event of a Service Transfer, the successor Servicer will indemnify the
Transferor for any losses, claims, damages and liabilities of the Transferor as
described in this paragraph arising from the actions or omissions of such
successor Servicer.
Except as provided in the preceding paragraph, the Agreement provides that
none of the Transferor, the Servicer or any of their directors, officers,
employees or agents will be under any other liability to the Trust, the Trustee,
the Certificateholders, any Enhancement provider or any other person for any
action taken, or for refraining from taking any action, in good faith pursuant
to the Agreement. However, none of the Transferor, the Servicer or any of their
directors, officers, employees or agents will be protected against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence of any such person in the performance of their duties.
In addition, the Agreement provides that the Servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Agreement. The Servicer
may, in its sole discretion, undertake any such legal action which it may deem
necessary or desirable for the benefit of Certificateholders with respect to the
Agreement and the rights and duties of the parties thereto and the interest of
the Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Agreement, the Servicer, whether acting itself or through
one or more subservicers, will be responsible for servicing, collecting,
enforcing and administering the Receivables in accordance with the policies and
procedures and the degree of skill and care applied or exercised with respect to
credit card receivables owned by the Servicer or any subservicer. The Servicer
and any subservicer will be required to maintain fidelity bond coverage insuring
against losses through wrongdoing of its officers and employees who are involved
in the servicing of receivables covering such actions and in such amounts as the
Servicer believes to be reasonable from time to time.
Servicing activities performed by the Servicer with respect to the Accounts
include collecting and recording payments, communicating with cardholders,
investigating payment delinquencies, providing billing
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records to cardholders and maintaining internal records. Managerial and
custodial services performed by the Servicer on behalf of the Trust include
providing assistance in any inspections of the documents and records relating to
the Accounts and Receivables by the Trustee pursuant to the Agreement,
maintaining the agreements, documents and files relating to the Accounts and
Receivables as custodian for the Trust and providing related data processing and
reporting services for Certificateholders and on behalf of the Trustee.
SERVICER COVENANTS
In the Agreement, the Servicer has covenanted to the Certificateholders and
the Trustee as to each Receivable and related Account that: (i) it will duly
fulfill in all material respects all obligations on its part to be fulfilled
under or in connection with the Receivable or Account, will maintain in effect
all material qualifications required in order to service the Receivable or
Account and will comply with all applicable requirements of law in connection
with servicing the Receivable or the Account the failure to comply with which
would have a material adverse effect on Certificateholders (without regard to
the amount of any Enhancement); (ii) it will not permit any rescission or
cancellation of the Receivable, except as ordered by a court of competent
jurisdiction or except in accordance with the Servicer's usual and customary
servicing practices; and (iii) it will do nothing to impair the rights of the
Certificateholders in the Receivable and will not reschedule, revise or defer
payments due on the Receivable, except in accordance with the Servicer's usual
and customary 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 any covenant of the Servicer set forth above has not been complied
with in respect of such Receivable, and such breach has a material adverse
effect on the interest of the Certificateholders in such Receivable, and such
noncompliance has not been cured within 60 days thereafter (or such longer
period not to exceed an additional 90 days). Such assignment and transfer will
be made when the Servicer deposits an amount equal to the amount of such
Receivable into the Collection Account on the business day preceding the
Distribution Date following the Due Period during which such obligation arises.
The amount of such deposit shall be deemed a payment in respect of the related
Receivable and will be treated under the Agreement in the same manner as are
payments received by the Servicer from cardholders under the Accounts. Any
amounts so paid by the Servicer shall be allocated in respect of Principal
Receivables and Finance Charge Receivables as provided in the Agreement. This
transfer and assignment to the Servicer constitutes the sole remedy available to
the Certificateholders if such covenant of the Servicer is not satisfied and the
Trust's interest in any such reassigned Receivables shall be automatically
assigned to the Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer is entitled to receive, as compensation for its servicing
activities under the Agreement, a monthly servicing fee (the "Servicing Fee") in
an amount, on any Distribution Date, equal to, with respect to each Series,
one-twelfth of the product of (a) the applicable servicing fee percentages with
respect to such Series and (b) the sum of an allocable portion of the amount of
the Transferor Amount and the Invested Amount with respect to such Series with
respect to the related Due Period. The Servicing Fee will be allocated among the
Transferor Interest and Certificateholders of all Series. The portion of the
Servicing Fee allocable to the Certificateholders' interest on each Distribution
Date (the "Investor Servicing Fee"), which may include all or a portion of the
Interchange allocable to a Series, will be as specified in the related
Prospectus Supplement. The remainder of the Servicing Fee, which will be
allocable to the Transferor Interest, will be paid directly by the holder of the
Exchangeable Transferor Certificate from collections allocated to the Transferor
Interest and neither the Trust nor the Certificateholders will have any
obligations to pay such portion of the Servicing Fee. The Investor Servicing Fee
will be paid with respect to each Due Period from the Collection Account (unless
such amount has been netted against deposits to the Collection Account).
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Accounts and the Receivables
including, without limitation, expenses related to enforcement of the
Receivables, payment of fees and disbursements of the Trustee and independent
accountants and all other
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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 AND THE TRANSFEROR
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that such duties are impermissible under
applicable law, regulation or order. 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.
FNANB, as Servicer, is permitted under the Agreement to delegate certain of
its servicing obligations. Notwithstanding any such delegation, FNANB, as
Servicer, will continue to be liable for all of its obligations as Servicer
under the Agreement.
Any person into which, in accordance with the Agreement, either of the
Transferor or the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which either of the Transferor or the
Servicer is a party, or any person succeeding to the business of either of the
Transferor or the Servicer, will be the successor to the Transferor or the
Servicer, as the case may be, under the Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below) that has not been
remedied, 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, with respect to all
of the Receivables held by the Trust with respect to all Series, and the
proceeds thereof, and the Trustee shall thereafter appoint a new Servicer (a
"Service Transfer"). The rights and interests of the Transferor under the
Agreement in the Transferor Interest will not be affected by any Service
Transfer. The Transferor shall have the right to nominate to the Trustee a
potential successor Servicer. The Trustee shall as promptly as possible appoint
the entity nominated by the Transferor if such entity meets certain eligibility
criteria set forth in the Agreement. If the Transferor does not nominate an
entity to be successor Servicer, the Trustee shall as promptly as possible
appoint a successor Servicer, and if no successor Servicer has been appointed by
the Trustee and has accepted such appointment by the time the Servicer ceases to
act as Servicer, all authority, power and obligations of the Servicer under the
Agreement will pass to, and be vested in, the Trustee. Prior to any Service
Transfer, the Trustee 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 related Servicer Default, then the Trustee will under certain
circumstances offer the Transferor the right to accept the retransfer of all of
the Receivables. The deposit amount of such a retransfer shall be equal to the
sum of the aggregate Invested Amount (less the aggregate principal amount on
deposit in the Excess Funding Account and any principal funding account with
respect to any Series) plus accrued and unpaid interest on the Certificates of
all Series plus certain amounts payable to Enhancement Providers, if applicable.
A "Servicer Default" refers to any of the following events:
(i) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Trustee to make such payment, transfer or
deposit, on the date the Servicer is required to do so under the Agreement
or any Series Supplement (upon expiration of a five business day grace
period), provided, however, that any such failure caused by circumstances
beyond the Servicer's control shall not constitute a Servicer Default if
the Servicer promptly remedies such failure within five business days after
receiving notice thereof;
(ii) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Agreement or any
Series Supplement which has a material adverse effect on the
Certificateholders (without regard to the amount of any Enhancement), which
continues unremedied for
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a period of 60 days after written notice and which continues to materially
adversely affect the rights of the Certificateholders of any Series then
outstanding for such period, or the Servicer delegates its duties under the
Agreement, except as specifically permitted thereunder;
(iii) any representation, warranty or certification made by the
Servicer in the Agreement or any Series Supplement or in any certificate
delivered pursuant to the Agreement or any Series Supplement proves to have
been incorrect when made, which has a material adverse effect on the rights
of the Certificateholders of any Series outstanding (without regard to the
amount of any Enhancement), and which continues to be incorrect for a
period of 60 days after written notice and which continues to materially
adversely affect the rights of the Certificateholders of any Series
(without regard to the amount of any Enhancement) then outstanding for such
period; or
(iv) the occurrence of certain events of bankruptcy or insolvency
relating to the Servicer (such events include the appointment (voluntary or
involuntary) of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings relating to the Servicer or all or substantially all of its
property and the Servicer admitting in writing its inability to pay its
debts as they become due, filing a petition to take advantage of an
insolvency or reorganization statute, making an assignment for the benefit
of its creditors or voluntarily suspending payment of its obligations).
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of 10 business days after the
applicable grace period or a delay in or failure of performance referred to
under clauses (ii) or (iii) for a period of 60 business days after the
applicable grace period shall not constitute a Servicer Default, if such delay
or failure could not have been prevented by the exercise or reasonable diligence
by the Servicer and such delay or failure was caused by an act of God or other
similar occurrence. Upon the occurrence of any such event, the Servicer shall
not be relieved from using its best reasonable efforts to perform its
obligations in a timely manner in accordance with the terms of the Agreement or
any Series Supplement and the Servicer shall provide the Trustee and the
provider of Enhancement, if any, applicable to any Series, the Transferor and
the Certificateholders prompt notice of such failure or delay by it, 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
Prior to each Distribution Date, the Servicer will forward to the Trustee a
statement (the "Monthly Servicer Report") prepared by the Servicer (as
determined on the eighth day prior to such Distribution Date or, if such day is
not a business day, the next succeeding business day (the "Determination Date"))
setting forth certain information with respect to the Trust and the Certificates
of each Series, including: (a) the aggregate amount of collections, the
aggregate amount of collections of Finance Charge Receivables and the aggregate
amount of collections of Principal Receivables processed during the immediately
preceding Due Period; (b) the Invested Percentage for such Due Period; (c) the
aggregate outstanding balance of the Accounts which were delinquent by 31 days,
61 days and 91 days or more as of the billing date for each such Account
occurring in the Due Period immediately preceding such Distribution Date; (d)
the Investor Default Amount for such Distribution Date; (e) the amount of
Investor Charge-Offs and the amount of reimbursements thereof for such
Distribution Date; (f) the amount of the Investor Servicing Fee for such
Distribution Date; (g) the aggregate amount of Receivables in the Trust at the
close of business on the last day of the Due Period preceding such Distribution
Date; (h) the Invested Amount at the close of business on the last day of the
Due Period immediately preceding such Distribution Date; (i) whether an Early
Amortization Event shall have occurred; and (j) certain information relating to
the floating or variable Certificate Rates, if applicable, for the immediately
preceding Due Period. The Trustee will make such statement available to the
Certificateholders or Certificate Owners upon request.
On each Distribution Date with respect to each Series the Paying Agent, on
behalf of the Trustee, will forward to each Certificateholder of record a
statement (the "Payment Date Statement") prepared by the Servicer setting forth
the information with respect to the Certificates of such Series set forth in the
Monthly Servicer Report supplied to the Trustee as described in the preceding
paragraph since the immediately
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preceding Distribution Date and the following additional information (which, in
the case of (a), (b) and (c) below, will be stated on the basis of an original
principal amount of $1,000 per Certificate): (a) the total amount distributed;
(b) the amount of such distribution allocable to principal; (c) the amount of
such distribution allocable to interest; and (d) the amount, if any, by which
the principal balance of the Certificates exceeds the Invested Amount as of the
Record Date with respect to such Distribution Date.
The fiscal year of the Trust ends on February 28 or 29 in each year. On or
before January 31 of each calendar year, the Paying Agent, on behalf of the
Trustee, will furnish or cause to be furnished to each person who at any time
during the preceding calendar year was a Certificateholder of record (or, if so
provided in applicable Treasury regulations, make available to Certificate
Owners) a statement prepared by the Servicer containing the information required
to be provided by an issuer of indebtedness under the Code for such calendar
year or the applicable portion thereof during which such person was a
Certificateholder, together with such other customary information as the
Servicer deems necessary or desirable to enable the Certificateholders to
prepare their tax returns.
EVIDENCE AS TO COMPLIANCE
The Agreement provides that on or before June 30 of each calendar year, the
Servicer will cause a firm of nationally recognized independent accountants to
furnish (i) a report, prepared in accordance with standards established by the
American Institute of Certified Public Accountants, to the effect that, in their
opinion, the Monthly Servicer's Reports are, in all material respects, in
conformity with the Agreement and (ii) a report to the effect that such firm has
applied procedures, as agreed upon between such firm and the Servicer, to
certain documents and records relating to the administration and servicing of
the Receivables during the preceding year ended February 28 or 29 and that,
based upon such agreed-upon procedures, no matters came to their attention that
caused them to believe that such servicing was not conducted in compliance with
certain applicable terms and conditions set forth in the Agreement except for
such exceptions or errors as shall be set forth in such report. In addition, on
or before June 30 of each calendar year, such accountants will compare the
mathematical calculations of the amounts contained in the Monthly Servicer
Reports delivered during the preceding year ended February 28 or 29 with the
computer reports of the Servicer and statements of any agents engaged by the
Servicer to perform servicing activities which were the source of such amounts
and deliver a report to the Trustee stating that such amounts are in agreement
except for such exceptions as shall be set forth in such report.
The Agreement provides for delivery to the Trustee on or before June 30 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 ended February 28 or 29 or, if there has been a default in the
performance of any such obligation, specifying the nature and status of the
default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by any Certificateholder or Certificate Owner by a request in
writing delivered to the Trustee.
AMENDMENTS
The Agreement and any Series Supplement may be amended by the Transferor,
the Servicer and the Trustee, without 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 arising under the Agreement or any Series
Supplement which are not inconsistent with the provisions of the Agreement or
any Series Supplement, provided that such action shall not adversely affect in
any material respect the interest of any of the Certificateholders. In addition,
the Agreement and any Series Supplement may be amended from time to time by the
Transferor, the Servicer and the Trustee, without Certificateholder consent, for
the purpose of adding any provisions to, changing in any manner or eliminating
any of the provisions of the Agreement or any Series Supplement or of modifying
in any manner the rights of Certificateholders of any Series then issued and
outstanding provided that (i) the Servicer must provide an opinion of counsel to
the Trustee to the effect that such amendment will not
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materially and adversely affect the interests of the Certificateholders of any
outstanding Series, which opinion of counsel may rely as to any rated Series
solely on the rating confirmation referred to in clause (iii) below (or 100% of
the Class of Certificateholders so affected shall have consented), (ii) such
amendment shall not, as evidenced by an opinion of counsel, cause the Trust to
be characterized for Federal income tax purposes as an association taxable as a
corporation or otherwise have any material adverse impact on the Federal income
tax characterization of any outstanding Series of Certificates or the Federal
income taxation of any Certificateholder or Certificate Owner and (iii) the
Rating Agency Condition is satisfied. Any Series Supplement and any amendments
regarding the addition or removal of Receivables from the Trust will not require
Certificateholder consent under the provisions of the Agreement or any Series
Supplement.
The Agreement and any Series Supplement may also be amended by the
Transferor, the Servicer and the Trustee with the consent of the holders of
Certificates evidencing undivided interests aggregating not less than 66 2/3% of
the Invested Amounts of all Series adversely affected for the purpose of adding
any provisions to, changing in any manner or eliminating any of the provisions
of the Agreement or any Series Supplement or modifying in any manner the rights
of Certificateholders of any Series then issued and outstanding. Any such
amendment shall require that the applicable Rating Agency confirm that such
amendment will not cause a reduction or withdrawal of the rating of any
outstanding Series of Certificates. No such amendment, however, may (i) reduce
in any manner the amount of, or delay the timing of, distributions required to
be made on such Series, (ii) change the definition or the manner of calculating
the Invested Amount, the Invested Percentage, the applicable available amount
under any Enhancement or the Investor Default Amount of such Series, or (iii)
reduce the aforesaid percentage of undivided interests the holders of which are
required to consent to any such amendment, in each case without the consent of
all Certificateholders of all Series adversely affected.
Promptly following the execution of any amendment to the Agreement or any
Series 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 Series Supplement, to the applicable Series).
LIST OF CERTIFICATEHOLDERS
Upon written request of any Certificateholder or group of
Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% of the Invested Amount of a Series, the Trustee,
after having been adequately indemnified for its costs and expenses, will afford
such Certificateholders access during business hours to the current list of
Certificateholders of such Series for purposes of communicating with such 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
Bankers Trust Company will be Trustee under the Agreement. The Transferor,
the Servicer and their respective affiliates may from time to time enter into
normal banking and trustee relationships with the Trustee and its affiliates.
The Trustee, the Transferor, the Servicer and any of their respective affiliates
may hold Certificates in their own names; 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
Four Albany Street, New York, New York 10006, 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 a successor Trustee will
be appointed as provided in the Agreement. The Servicer may also remove the
Trustee, if the Trustee ceases to be eligible to continue as
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such under the Agreement or if the Trustee becomes insolvent. In such
circumstances, a successor Trustee will be appointed as provided in the
Agreement. Any resignation or removal of the Trustee and appointment of a
successor Trustee does not become effective until acceptance of the appointment
by the successor Trustee.
ENHANCEMENT
GENERAL
For any Series, Enhancement may be provided with respect to one or more
Classes thereof. Enhancement may be in the form of the subordination of one or
more Classes of the Certificates of such Series, the establishment of a cash
collateral guaranty or account, a letter of credit, a surety bond, insurance,
spread account, reserve account, the use of cross-support features or another
method of Enhancement described in the related Prospectus Supplement, or any
combination of the foregoing. 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 the issuer of any third party Enhancement
(the "Enhancement Provider"), including (i) a brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (iii) if applicable, the identity of regulatory agencies which
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, its stockholders' or policyholders' surplus, if applicable, and
other appropriate financial information as of the date specified in the
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 or specified Certificates of another Series. The rights of the
holders of any such 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 information
concerning the amount of subordination of a Class or Classes of Subordinated
Certificates of a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, and the conditions under which amounts available from
payments that would otherwise be made to holders of such Subordinated
Certificates will be distributed to holders of Senior Certificates. If
collections of Receivables otherwise distributable to holders of a Subordinated
Class of a Series will be used as support for a Class of another Series, the
related Prospectus Supplement will specify the manner and conditions for
applying such a cross-support feature.
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CASH COLLATERAL GUARANTY OR ACCOUNT
If 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 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.
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 (the "L/C Bank") 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 an L/C Bank under its 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 distributions of
interest or principal with respect to such Series or Class 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 a Series or one or more Classes
thereof to assure distributions of interest or principal with respect to such
Series or Class in the manner and amount 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 assure the subsequent distribution of interest or
principal with respect to such Series or Class in the manner and amount
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 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 otherwise payable to one or more Classes of Certificates, including the
Subordinated Certificates, or both, or the provision of a letter of credit,
guarantee, insurance policy or other form of credit or any combination thereof.
The Reserve Account will be established to assure the subsequent distribution of
interest or principal with respect to such Series or Class in the manner and
amount specified in the related Prospectus Supplement.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Transferor has represented and warranted in the Agreement that the
transfer of Receivables by it to the Trust constitutes either a valid transfer
and assignment to the Trust of all right, title and interest of the Transferor
in and to the Receivables, except for the interest of the Transferor as holder
of the Exchangeable Transferor Certificate, or a grant of a security interest to
the Trust in and to the Receivables. The Transferor has also represented and
warranted in the Agreement that, in the event the transfer of Receivables by the
Transferor to the Trust is deemed to create a security interest under the UCC
and assuming that the Transferor is not at the time the subject of any
insolvency proceedings, there exists a valid, subsisting and enforceable first
priority perfected security interest in the Receivables in existence since the
time of the formation of the Trust in favor of the Trust and there will exist a
valid, subsisting and enforceable first priority perfected security interest in
the Receivables created thereafter and, with certain exceptions, and for certain
limited time periods, the proceeds thereof, in favor of the Trust on and after
their creation, subject in each case to certain tax and other governmental
liens. UCC searches have been and will be conducted in certain relevant counties
in Georgia to determine what UCC financing statements have been filed in such
counties with respect to the Transferor as debtor. Because of the effects of
certain Georgia legislation, it is possible that a secured party could
potentially file a UCC financing statement effective against the Transferor in
any county in Georgia; however, UCC searches will not be conducted in other
Georgia counties in reliance on certain certifications by the Transferor.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after the date on
which such Receivables are transferred to the Trust could have an interest in
such Receivables with priority over the Trust's interest. A tax or other
government lien on property of the Transferor arising prior to the time a
Receivable comes into existence may also have priority over the interest of the
Trust in such Receivables. Under the Agreement, the Transferor will covenant to
accept the reassignment of the Receivables in any Account containing a
Receivable transferred to the Trust that is not free and clear of the lien of
any third party, except certain permitted tax liens. In addition, the Transferor
covenants that it will not sell, pledge, assign, transfer or grant any lien on
any Receivable (or any interest therein) other than to the Trust.
Unless continuation statements are filed within the time specified in the
UCC in respect of the security interest of the Trust in the Receivables, the
perfection of such interest will lapse.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), which
became effective August 9, 1989, sets forth certain powers that the FDIC could
exercise if it were appointed as receiver or conservator for the Transferor.
To the extent that (i) the Transferor has granted a security interest in
the Receivables to the Trust, (ii) that interest is validly perfected before the
Transferor's insolvency and is not taken in contemplation of insolvency or with
the intent to hinder, delay or defraud the Transferor or its creditors, (iii)
the Pooling and Servicing Agreement is continuously a record of the Transferor
and (iv) the Pooling and Servicing Agreement represents a bona fide and arm's
length transaction undertaken for adequate consideration in the ordinary course
of business and the Trustee is not an insider or affiliate of the Transferor,
such valid perfected security interest of the Trustee would be enforceable (to
the extent of the Trust's "actual direct compensatory damages") notwithstanding
the insolvency of, or the appointment of a receiver or conservator for, the
Transferor and payments to the Trust with respect to the Receivables (up to the
amount of such damages) should not be subject to recovery by the FDIC as
conservator or receiver of the Transferor. If, however, the FDIC 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 established under FIRREA, delays in payments on the Certificates and
possible reductions in the amount of those payments could occur. The FDIA does
not define the term "actual direct compensatory damages." On April 10, 1990, the
Resolution Trust Corporation (the "RTC"), which administered the resolution of
failed savings associations under the FDIA and which is no longer in existence,
adopted a statement
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of policy with respect to the payment of interest on collateralized borrowings.
The RTC policy statement states that interest on such borrowings will be payable
at the contract rate up to the date of the redemption or payment by the
conservator, receiver, or trustee of an amount equal to the principal owed plus
the contract rate of interest up to the date of such payment or redemption, plus
any expenses of liquidation if provided for in the contract, to the extent
secured by the collateral. In a 1993 case involving zero-coupon bonds, however,
a federal district court held that the RTC was instead obligated to pay
bondholders the fair market value of repudiated bonds as of the date of
repudiation. The FDIC itself has not adopted a policy statement on payment of
interest on collateralized borrowings.
The Agreement provides that, upon the insolvency of the Transferor or the
appointment of a receiver or conservator for the Transferor, the Transferor will
promptly give notice thereof to the Trustee and an Early Amortization Event with
respect to all Series will occur. Under the Agreement no new Receivables will be
transferred to the Trust and, unless otherwise instructed within a specified
period by the holders of interests in the Trust as described under "Description
of the Certificates -- Early Amortization Events," or unless otherwise required
by the receiver or conservator for the Transferor, the Trustee will proceed to
sell, dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from the
sale of the Receivables would then be treated by the Trustee as collections on
the Receivables and would be distributed to the Certificateholders as described
in the Agreement. If the only Early Amortization Event to occur is either the
insolvency of the Transferor or the appointment of a receiver or conservator for
the Transferor, such receiver or conservator may have the power to require the
Transferor to continue to transfer new Receivables to the Trust and to prevent
the early sale, liquidation or disposition of the Receivables and the
commencement of the Early Amortization Period.
CONSUMER 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 Transferor the most significant Federal
laws include the Federal Truth-In-Lending and Equal Credit Opportunity Acts.
These statutes and certain state laws impose disclosure requirements before and
when an Account is opened, at the end of monthly billing cycles and at year-end
and, in addition, limit cardholder liability for unauthorized use, prohibit
certain discriminatory practices in extending credit, impose certain limitations
on the type of account-related charges that may be issued and regulate
collection practices. In addition, cardholders are entitled under these laws to
have payments and credits applied to the credit card account promptly and to
require billing errors to be resolved promptly. The Trust may be liable for
certain violations of consumer protection laws that apply to the Receivables,
either as assignee from the Transferor with respect to obligations arising
before transfer of the Receivables to the Trust or as the party directly
responsible for obligations arising after the transfer. In addition, a
cardholder may be entitled to assert such violations by way of set off against
the obligation to pay the amount of Receivables owing. The Transferor has agreed
to accept the transfer of all Receivables that were not created in compliance in
all material respects with the requirements of such laws. The Servicer has also
agreed in the Agreement to indemnify the Trust, among other things, for any
liability arising from such violations. For a discussion of the Trust's rights
if the Receivables were not created in compliance in all material respects with
applicable laws, see "Description of the Certificates -- Covenants,
Representations and Warranties."
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.
Application of Federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders, if such laws result in any
Receivables being charged off as uncollectible when there are not funds
available under any Credit Enhancement. See "Description of the
Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing the material 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"), the Treasury regulations promulgated
thereunder, and published rulings and court decisions in effect as of the date
hereof, all of which are subject to change, possibly retroactively. This
discussion 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). PROSPECTIVE INVESTORS ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN CERTIFICATES, AS WELL AS
THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY, FOREIGN
COUNTRY, OR OTHER TAXING JURISDICTION.
The discussion assumes that the Certificates will be issued in registered
form, will have all payments denominated in U.S. dollars and will have a term
that exceeds one year. Moreover, the discussion assumes that the interest
formula for the Certificates meets the requirements for "qualified stated
interest" under Treasury regulations (the "OID Regulations") relating to
original issue discount ("OID"), and that any OID on the Certificates (i.e., any
excess of the principal amount of the Certificates over their issue price) does
not exceed a de minimis amount (i.e., 1/4% of the principal amount multiplied
by the number or full years until maturity), all within the meaning of the OID
Regulations. If any of those assumptions are not met with regard to a particular
Series of Certificates, additional tax considerations will be disclosed in the
applicable Prospectus Supplement.
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Unless otherwise specified in the related Prospectus Supplement, special
tax counsel to FNANB ("Special Tax Counsel") specified in such Prospectus
Supplement will, upon issuance of a Series of Certificates, render an opinion
that the Certificates of such Series will be treated as indebtedness for Federal
income tax purposes. However, opinions of counsel are not binding on the
Internal Revenue Service (the "IRS") and there can be no assurance that the IRS
could not successfully challenge this conclusion.
FNANB expresses in the Agreement its intent that for Federal, state and
local income and franchise tax purposes, the Certificates of each Series will be
indebtedness secured by the Receivables. FNANB agrees and each Certificateholder
and Certificate Owner, by acquiring an interest in a Certificate of a Series,
will be deemed to agree to treat the Certificates of such Series as indebtedness
of FNANB for Federal, state and local income and franchise tax purposes (except
to the extent that different treatment is explicitly required under state or
local tax statutes). However, because different criteria are used to determine
the non-tax accounting characterization of the transactions contemplated by the
Agreement, FNANB expects to treat such transaction, for regulatory and financial
accounting purposes, as a sale of an ownership interest in the Receivables and
not as a debt obligation of FNANB.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the IRS and the courts have set forth several factors
to be taken into account in determining whether the substance of a transaction
is a sale of property or a secured indebtedness for Federal income tax purposes,
the primary factors in making this determination are whether FNANB 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 Special Tax Counsel will express the
opinion that the ownership of the Receivables has not been transferred for
Federal income tax purposes to the Certificate Owners.
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In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. Unless otherwise specified in a
Prospectus Supplement, it is expected that Special Tax Counsel will advise that
the rationale of those cases will not apply to the transaction evidenced by a
Series of Certificates.
TREATMENT OF THE TRUST
The Trust could be viewed for Federal income tax purposes either as (1) a
collateral arrangement for debt issued directly by FNANB and other holders of
equity interests in the Trust or (2) a separate entity issuing its own debt and
owned by FNANB and all other holders of equity interests in the Trust. However,
in the opinion of Special Tax Counsel, in the former event the Trust will be
disregarded for Federal income tax purposes and in the latter event the Trust
would be a partnership rather than an association (or publicly traded
partnership) taxable as a corporation. Therefore, in the opinion of Special Tax
Counsel, the Trust will not be subject to Federal income tax.
POSSIBLE CLASSIFICATION OF THE TRANSACTION AS A PARTNERSHIP
OR AS AN ASSOCIATION TAXABLE AS A CORPORATION
It is possible that the IRS could assert that, for purposes of the Code,
some or all of the Certificates of a Series are not debt obligations for Federal
income tax purposes and that the proper classification of the legal relationship
between FNANB, any other holders of equity interests in the Trust, and the
Certificate Owners of such Series resulting from the transaction is that of a
partnership, a publicly traded partnership taxable as a corporation, or an
association taxable as a corporation.
If some or all of the Certificates were treated as equity interests in a
partnership (other than a "publicly traded partnership"), the partnership itself
would not be subject to Federal income tax; rather, the partners of such
partnership, including the Certificate Owners 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 Certificates of
such Series were held to constitute partnership interests, rather than
indebtedness. Moreover, an individual's share of expenses of the partnership
would be miscellaneous itemized deductions that, in the aggregate, are allowed
as deductions only to the extent they exceed two percent of the individual's
adjusted gross income, and would be subject to reduction under Section 68 of the
Code if the individual's adjusted gross income exceeded certain limits. As a
result, the individual might be taxed on a greater amount of income than the
stated rate on the Certificates. Furthermore, if any Certificates were treated
as equity interests in a partnership, all or a portion of such income in
subsequent years allocated to a Certificate Owner that is a pension, profit
sharing or employee benefit plan or other tax-exempt entity (including an
individual retirement account) might constitute "unrelated business taxable
income" generally taxable to such investor under the Code. Finally, if any
Certificates were treated as equity interests in a partnership in which other
interests were debt, all or part of a tax-exempt investor's share of income from
the Certificates that were treated as equity would be treated under the Code as
unrelated debt-financed income taxable to the investor.
If the Trust were treated in whole or in part as a partnership in which
some or all Certificate Owners of one or more Series were partners, that
partnership could be classified as a publicly traded partnership taxable as a
corporation. A partnership will be classified as a publicly traded partnership
taxable as a corporation if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent" unless certain exceptions apply. One
such exception would apply if the Trust is not engaged in a "financial business"
and 90% or more of its income consists of interest and certain other types of
passive income. Because Treasury Regulations do not clarify the meaning of a
"financial business" for this purpose, it is unclear whether this exception
applies. FNANB has taken and intends to take measures designed to reduce the
risk that the Trust could be classified as a publicly traded partnership taxable
as a corporation. However, there can be no assurance that the Trust could not
become a publicly traded partnership, because certain of the actions necessary
to comply with such exceptions are not fully within the control of FNANB.
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If it were determined that a transaction created an entity classified as a
corporation (including a publicly traded partnership taxable as a corporation),
the Trust would be subject to Federal income tax at corporate income tax rates
on the income it derives from the Receivables, which would reduce the amounts
available for distribution to the Certificate Owners, possibly including
Certificate Owners of a Series that is treated as indebtedness. Such
classification might also have adverse state and local tax consequences that
would further reduce amounts available for distribution to Certificate Owners.
Cash distributions to the Certificate Owners (except any Class not
recharacterized as an equity interest in an association) generally would be
treated as dividends for tax purposes to the extent of such deemed corporation's
earnings and profits, and in the case of Certificate Owners that are non-United
States persons, would be subject to withholding tax.
Since Special Tax Counsel, unless otherwise specified in the related
Prospectus Supplement, will advise that the Certificates of a Series will be
treated as indebtedness in the hands of the Certificate Owners of a Series for
Federal income tax purposes, FNANB generally will not attempt to comply with the
Federal income tax reporting requirements that would apply if Certificates were
treated as interests in a partnership or corporation (unless, as is permitted by
the Agreement, an interest in the Trust is issued or sold that is intended to be
classified as an interest in a partnership).
TAXATION OF INTEREST INCOME OF CERTIFICATEHOLDERS
As set forth above, it is expected that, unless otherwise specified in a
Prospectus Supplement, Special Tax Counsel will render an opinion, upon
issuance, that the Certificates of a Series will be treated as indebtedness for
Federal income tax purposes. Except as discussed below or in a Prospectus
Supplement, the Certificates will not be issued with OID and, accordingly,
interest thereon will be includable in income by Certificate Owners as ordinary
income when received (in the case of a cash basis taxpayer) or accrued (in the
case of an accrual basis taxpayer) in accordance with their respective methods
of tax accounting. Under the OID Regulations, a holder of a Certificate issued
with a de minimis amount of OID must include any such OID in income, on a pro
rata basis, as principal payments are made on the Certificate. Interest received
on the Certificates of a Series may also constitute "investment income" for
purposes of certain limitations of the Code concerning the deductibility of
investment interest expense.
A subsequent holder who purchases a Certificate at a discount may be
subject to the "market discount" rules of the Code. These rules provide, in
part, for the treatment of gain attributable to accrued market discount as
ordinary income upon the receipt of partial principal payments or on the sale or
other disposition of the Certificate, and for the deferral of certain interest
deductions with respect to debt incurred to acquire or carry the market discount
Certificate.
A subsequent holder who purchases a Certificate at a premium may elect to
amortize and deduct this premium over the remaining term of the 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 a Certificate measured by
the difference between (i) the amount of cash and the fair market value of any
property received (other than amounts attributable to, and taxable as, accrued
interest) and (ii) the Certificate Owner's tax basis in the Certificate (as
increased by any OID or market discount previously included in income by the
holder and decreased by any deductions previously allowed for amortizable bond
premium and by any payments reflecting principal or OID received with respect to
such Certificate). Subject to the market discount rules discussed above and to
the one-year holding requirement for long-term capital gain treatment, any such
gain or loss generally will be long-term capital gain, provided that the
Certificate was held as a capital asset. The maximum ordinary income rate for
individuals, estates, and trusts exceeds the maximum long-term capital gains
rate for such taxpayers. In addition, capital losses generally may be used only
to offset capital gains.
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RECENT LEGISLATION
Recently enacted provisions of the Code provide for the creation of a new
type of entity for Federal income tax purposes, the "financial asset
securitization trust" ("FASIT"). However, these provisions are not effective
until September 1, 1997, and many technical issues concerning FASITs must be
addressed by Treasury regulations that have yet to be drafted. Although
transition rules permit an entity in existence on August 31, 1997, such as the
Trust, to elect FASIT status, at the present time it is not clear how
outstanding interests of such an entity would be treated subsequent to such an
election. In particular, it is not clear whether Certificates of any Series
outstanding on August 31, 1997 would be treated as "regular interests" in a
FASIT if FNANB were to elect FASIT status for the Trust after that date.
FOREIGN INVESTORS
As set forth above, it is expected that, unless otherwise specified in a
Prospectus Supplement, Special Tax Counsel will render an opinion, upon
issuance, that the Certificates of a Series will be treated as indebtedness for
Federal income tax purposes. The following information describes the Federal
income tax treatment of investors that are not U.S. persons if the Certificates
are treated as indebtedness. The term "Foreign Investor" means any person other
than (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity organized in or under the laws of the United States
or any political subdivision thereof or (iii) an estate or trust the income of
which is includable in gross income for U.S. Federal income tax purposes,
regardless of its source.
Interest, including OID, paid to a Foreign Investor will be subject to U.S.
withholding taxes at a rate of 30% unless (i) the income is "effectively
connected" with the conduct by such Foreign Investor of a trade or business
carried on in the United States and the investor evidences this fact by
delivering an IRS Form 4224 or (ii) the Foreign Investor and each securities
clearing organization, bank, or other financial institution that holds the
Certificates on behalf of such Foreign Investor in the ordinary course of its
trade or business, in the chain between the Certificate Owner and the U.S.
person otherwise required to withhold the U.S. tax, complies with applicable
identification requirements (and the Certificate Owner does not actually or
constructively own 10% or more of the voting stock of FNANB (or, upon the
issuance of an interest in the Trust that is treated as a partnership interest,
any holder of such interest) and is not a controlled foreign corporation with
respect to FNANB (or the holder of such an interest). Applicable identification
requirements generally will be satisfied if there is delivered to a securities
clearing organization (i) IRS Form W-8 signed under penalties of perjury by the
Certificate Owner, stating that the Certificate Owner is not a U.S. person and
providing such Certificate Owner's name and address or (ii) IRS Form 1001,
signed by the Certificate Owner or such Certificate Owner's agent, claiming
exemption from withholding under an applicable tax treaty; provided that in any
such case (x) the applicable form is delivered pursuant to applicable procedures
and is properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the Certificate Owner is a U.S. person.
Recently proposed Treasury regulations (the "Proposed Regulations") could
affect the procedures to be followed by a Foreign Investor in complying with
United States Federal withholding, backup withholding and information reporting
rules. The Proposed Regulations are not currently effective and could be altered
before being adopted in final form but, if finalized in their current form,
would be effective for payments made after December 31, 1997. Prospective
investors are urged to consult their tax advisors regarding the effect, if any,
of the Proposed Regulations on the purchase, ownership, and disposition of the
Certificates.
A Certificate Owner that is a nonresident alien or foreign corporation will
not be subject to U.S. Federal income tax on gain realized upon the sale,
exchange, or redemption of a Certificate, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States, (ii) in the case of a Certificate Owner that is an individual, such
Certificate Owner is not present in the United States for 183 days or more
during the taxable year in which such sale, exchange, or redemption occurs, and
(iii) in the case of gain representing accrued interest, the conditions
described in the immediately preceding paragraph are satisfied.
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If the interests of the Certificate Owners of a Series were reclassified as
interests in a partnership (not taxable as a corporation), such
recharacterization could cause a Foreign Investor to be treated as engaged in a
trade or business in the United States. In such event the Certificate Owner of
such Series would be required to file a Federal income tax return and, in
general, would be subject to Federal income tax, including branch profits tax in
the case of a Certificateholder that is a corporation (unless eliminated under
an applicable tax treaty), on its net income from the partnership. Further, the
partnership would be required, on a quarterly basis, to pay withholding tax
equal to the sum, for each foreign partner, of such foreign partner's
distributive share of "effectively connected" income of the partnership
multiplied by the highest rate of tax applicable to that foreign partner. The
tax withheld from each foreign partner would be credited against such foreign
partner's U.S. income tax liability.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an applicable
tax treaty.
BACKUP WITHHOLDING
Certain Certificateholders may be subject to backup withholding at the rate
of 31% with respect to interest paid on the Certificates of a Series if the
Certificateholder, upon issuance, fails to supply the Trustee or his broker with
his taxpayer identification number, furnishes an incorrect taxpayer
identification number, fails to report interest, dividends, or other "reportable
payments" (as defined in the Code) properly, or, under certain circumstances,
fails to provide the Trustee or his broker with a certified statement, under
penalty of perjury, that he is not subject to backup withholding. Information
returns will be sent annually to the IRS and to each Certificateholder of a
Series setting forth the amount of interest paid on the Certificates of such
Series and the amount of tax withheld thereon.
STATE AND LOCAL TAX CONSEQUENCES
An investment in the Certificates will have state and local tax
consequences. The state and local tax consequences will depend in part upon the
tax laws of jurisdictions where the Certificateholders reside or are doing
business. Certain Georgia tax implications of an investment in the Certificates
are described below. The tax consequences arising to the Certificateholders
under the laws of other jurisdictions are not discussed in this summary.
Potential investors should consult their own tax advisers as to the state and
local tax consequences of an investment in the Certificates in their particular
circumstances.
The discussion of Georgia tax consequences set forth below is based upon
present provisions of the Georgia statutes and the regulations promulgated
thereunder, and applicable judicial or ruling authority, all of which are
subject to change, which change may be retroactive. No ruling on any of the
issues discussed below will be sought from any Georgia taxing authority. Certain
activities to be undertaken by FNANB on behalf of the Trust pursuant to the
Agreement will take place in Georgia.
If the Certificates are treated for Federal income tax purposes as debt
issued by FNANB, this treatment should also apply for Georgia income tax
purposes. Under such treatment, Certificateholders not otherwise subject to
Georgia income tax would not become subject to such tax solely because of their
ownership of Certificates. Interest on the Certificates generally would be
taxable to an individual Certificateholder in his state of residence and would
be taxed to a corporate Certificateholder in accordance with the laws of the
jurisdictions in which the corporate Certificateholder is subject to tax.
In the alternative, if the Certificates were treated for Federal income tax
purposes as interests in a partnership (not taxable as a corporation), the same
treatment should also apply for Georgia income tax purposes. In such case, the
Georgia Department of Revenue could view the partnership as doing business in
Georgia. In this circumstance, the partnership would not be an entity subject to
income taxation in Georgia. However, the partnership's items of income and
deduction would be passed through to resident and nonresident partners, who
would be responsible for any income tax imposed at the partner level.
Consequently, nonresident individual partners could be required to file Georgia
income tax returns and pay Georgia income
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tax on their distributive share of the partnership's income attributable to
Georgia. Similarly, corporate partners not otherwise doing business in Georgia
could be required to file Georgia income tax returns and pay tax on their
corporate income attributable to Georgia. Nonetheless, Georgia tax counsel to
FNANB is unaware of any circumstances in which the Georgia Department of Revenue
has sought to require the filing of Georgia income tax returns or pay such tax
solely as a consequence of the acquisition or holding by such persons of
instruments comparable to the Certificates.
If the Certificates are instead treated for Federal income tax purposes as
ownership interests in either a publicly traded partnership taxable as a
corporation or an entity classified as an association taxable as a corporation,
the Georgia treatment should be the same. Assuming this is the case, the entity
would be subject to the Georgia income tax. The entity-level taxes could result
in reduced distributions to Certificateholders. The Certificateholders would be
taxed on distributions from the Trust in the same manner as they are taxed on
regular corporate dividends and other distributions. If corporate treatment were
to apply, Certificateholders not otherwise subject to Georgia tax should not
become subject to such tax on distributions from the Trust solely as a result of
their ownership of the Certificates.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on (a) employee benefit
plans (as defined in Section 3(3) of ERISA), (b) plans described in section
4975(e)(1) of the Code, including individual retirement accounts or Keogh plans,
(c) any entities whose underlying assets include plan assets by reason of a
plan's investment in such entities and (d) persons who have certain specified
relationships to such plans. Section 406 of ERISA prohibits plans described in
Section 401 of ERISA from engaging in certain transactions with persons who are
"parties in interest" unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code prohibits plans described in Section
4975(e)(1) of the Code from engaging in certain transactions with persons who
are "disqualified persons" unless a statutory or administrative exemption
applies. Moreover, based on the reasoning of the United States Supreme Court in
John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86 (1993), an
insurance company's general account may be deemed to include assets of the
employee benefit plans investing in the general account (e.g., through the
purchase of an annuity contract), and the insurance company might be treated as
a party in interest with respect to a plan by virtue of such investment. In
addition, ERISA imposes certain duties on persons who are fiduciaries of plans
subject to ERISA. Under ERISA, a person who exercises discretionary authority or
control respecting the management or disposition of the assets of a plan,
renders investment advice or has the authority to render investment advice to a
plan for a fee or other compensation, or has any discretionary authority or
responsibility with respect to the administration of a plan is generally
considered to be a fiduciary of such plan. Fiduciaries, parties in interest and
disqualified persons with respect to employee benefit plans described in Section
401 of ERISA and Section 4975(e)(1) of the Code (collectively, "Benefit Plans"),
may be subject to excise taxes, civil fines and other liabilities for violating
the fiduciary responsibility and prohibited transaction rules of Section 406 of
ERISA and Section 4975 of the Code.
Benefit Plan fiduciaries should determine whether the acquisition and
holding of the Certificates of a Series and the operations of the Trust would
result in direct or indirect prohibited transactions under ERISA and the Code.
The operations of the Trust could result in prohibited transactions if Benefit
Plans that purchase the Certificates of a Series are deemed to own an interest
in the underlying assets of the Trust. There may also be an improper delegation
of the fiduciary responsibility to manage Benefit Plan assets if Benefit Plans
that purchase the Certificates are deemed to own an interest in the underlying
assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of a Benefit Plan, the assets and properties of certain entities
in which a Benefit Plan makes an equity investment could be deemed to be assets
of the Benefit Plan in certain circumstances. Accordingly, if Benefit Plans
purchase Certificates of a Series, the Trust could be deemed to hold plan assets
unless one of the exceptions under the Final Regulation is applicable to the
Certificates of a Series and the Trust.
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The Final Regulation applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that interests in Certificates of a
Series are equity interests for purposes of the Final Regulation, the Final
Regulation contains an exception that may apply to the purchase of Certificates
of a Series by a Benefit Plan. Under this exception, the issuer of a security is
not deemed to hold plan assets of a Benefit Plan that purchases the security so
long as the security qualifies as a "publicly-offered security" for purposes of
the Final Regulation. A publicly-offered security is a security that is (i)
freely transferable, (ii) part of a class of securities that is owned by 100 or
more investors independent of the issuer and of one another and (iii) either is
(A) part of a class of securities registered under Section 12(b) or 12(g) of the
Exchange Act or (B) sold to the Benefit Plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the 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 generally provides that if at all times more than 75% of the
value of all classes of equity interests in Certificates of a Series are held by
investors other than "benefit plan investors", the assets of a Benefit Plan
holding Certificates of a Series will not include any of the underlying assets
of the Trust. For purposes of the Final Regulation, a "benefit plan investor"
includes any employee benefit plan within the meaning of Section 3(3) of ERISA
(whether or not it is subject to ERISA), a plan described in Section 4975(e)(1)
of the Code, and any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity.
Unless otherwise specified in the related Prospectus Supplement, it is
anticipated that interests in the Certificates of a Series will meet the
criteria of publicly-offered securities as set forth above. The underwriters
expect (although no assurances can be given) that interests in the Certificates
of each Series will be held by at least 100 investors independent of the issuer
and one another at the conclusion of the offering for such Series, that there
will be no restrictions imposed on the transfer of interests in the Certificates
of such Series, and that interests in the Certificates of such Series 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 Certificates of a Series fail to meet the criteria of
publicly-offered securities and the Trust's assets are deemed to include assets
of Benefit Plans that are Certificateholders, transactions involving the Trust
and parties in interest or disqualified persons with respect to such Benefit
Plans might be prohibited under Section 406 of ERISA and Section 4975 of the
Code unless an exemption is applicable. In addition, the Transferor or any
underwriter of such Series may be considered to be a party in interest,
disqualified person or fiduciary with respect to an investing Benefit Plan.
Accordingly, an investment by a Benefit Plan in Certificates may be a prohibited
transaction under ERISA and the Code unless such investment is subject to a
statutory or administrative exemption. Thus, for example, if a participant in
any Benefit Plan is a cardholder of one of the Accounts, under DOL
interpretations the purchase of interests in Certificates by such Benefit Plan
could constitute a prohibited transaction.
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) and 95-60 (Class Exemption
for Certain Transactions Involving Insurance Company General Accounts) and 96-23
(Class Exemption for Certain Transactions Determined by In-House Asset
Managers). There is no assurance that these exemptions, even if all of the
conditions specified therein are satisfied, or any other exemption will apply to
all transactions involving the Trust's assets.
As discussed above, while it is expected that, unless otherwise specified
in the related Prospectus Supplement, the Certificates of a Series offered
hereby will be treated as indebtedness for Federal income tax purposes, if any
Certificates were instead treated as equity interests in a partnership, a
Benefit Plan could have its share of income from the partnership treated as
"unrelated business taxable income" under the Code and thus taxable to the
Benefit Plan. Furthermore, if any Certificates were treated as equity interests
in a partnership in which other interests were debt, all or part of a tax-exempt
investor's share of income from the Certificates that were treated as equity
probably would be treated under the Code as unrelated debt-financed income
taxable to the investor.
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In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of interests in Certificates of any Series should consult their own
counsel as to whether the acquisition of such Certificates would be a prohibited
transaction, whether the assets of the Trust which are represented by such
interests would be considered plan assets, and whether, under the general
fiduciary standards of investment prudence and diversification, an investment in
Certificates of any Series is appropriate for the Benefit Plan taking into
account the overall investment policy of the Benefit Plan and the composition of
the Benefit Plan's investment portfolio. In addition, fiduciaries should
consider the consequences that would apply if the Trust's assets were considered
plan assets, the applicability of exemptive relief from the prohibited
transaction rules, and, whether all conditions for such exemptive relief would
be satisfied.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(an "Underwriting Agreement") to be entered into with respect to a Series of
Certificates, the Transferor 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 Transferor, the principal
amount of Certificates set forth therein and in the related Prospectus
Supplement (subject to proportional adjustment on the terms and conditions set
forth in the related Underwriting Agreement in the event of an increase or
decrease in the aggregate amount of Certificates offered hereby and by the
related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any of
such Certificates are purchased. In the event of a default by any underwriter,
each Underwriting Agreement will provide that, in certain circumstances,
purchase commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Prospectus Supplement will set forth the price at which each Series of
Certificates or Class being offered thereby initially will be offered to the
public and any concessions that may be offered to certain dealers participating
in the offering of such Certificates. After the initial public offering, the
public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that the Transferor will indemnify
the related underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. The place and time of delivery for
any Series of Certificates in respect of which this Prospectus is delivered will
be set forth in the accompanying Prospectus Supplement.
LEGAL MATTERS
It is anticipated that certain legal matters relating to the issuance of
the Certificates of any Series will be passed upon for FNANB by McGuire, Woods,
Battle & Boothe, L.L.P., and, with respect to the Federal tax consequences of
such issuance, by Special Tax Counsel. Certain legal matters relating to the
issuance of the Certificates of a Series will be passed upon for the
underwriters by the counsel named in the Prospectus Supplement.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
ACE.............................................................................. 20
Accounts......................................................................... 1, 4
Accumulation Period.............................................................. 11
Act.............................................................................. 7
Additional Account Closing Date.................................................. 34
Additional Account Cut Off Date.................................................. 32
Additional Accounts.............................................................. 5
Adjustment....................................................................... 40
Agreement........................................................................ 4
Amortization Period.............................................................. 5
Automatic Additional Accounts.................................................... 23, 35
Bank Portfolio................................................................... 21
Benefit Plans.................................................................... 58
Cash Collateral Account.......................................................... 50
Cash Collateral Guaranty......................................................... 50
Cede............................................................................. 2
Cedel............................................................................ 28
Cedel Participants............................................................... 28
Certificate Owners............................................................... 2
Certificate Rate................................................................. 5
Certificateholders............................................................... 2, 27
Certificates..................................................................... 1, 4
Circuit City..................................................................... 8
Class............................................................................ 1, 4
Closing Date..................................................................... 9
Code............................................................................. 53
Collection Account............................................................... 8, 35
Commission....................................................................... 2
Companion Series................................................................. 13, 39
Controlled Accumulation Amount................................................... 11
Controlled Amortization Amount................................................... 10
Controlled Amortization Period................................................... 10
Controlled Deposit Amount........................................................ 11
Controlled Distribution Amount................................................... 10
Cooperative...................................................................... 28
Cut Off Date..................................................................... 5
Default Amount................................................................... 40
Defaulted Accounts............................................................... 6, 40
Defaulted Receivables............................................................ 40
Defeased Series.................................................................. 14, 41
Definitive Certificates.......................................................... 29
Depositaries..................................................................... 26
Depository....................................................................... 26
Determination Date............................................................... 46
Disclosure Document.............................................................. 7
Discount Option Receivables...................................................... 35
Discount Percentage.............................................................. 35
Distribution Date................................................................ 9
DOL.............................................................................. 58
DTC.............................................................................. 2, 64
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
Due Period....................................................................... 9, 30
Early Amortization Event......................................................... 42
Early Amortization Period........................................................ 11
Eligible Account................................................................. 34
Eligible Institution............................................................. 35
Eligible Investments............................................................. 36
Eligible Receivable.............................................................. 33
Enhancement...................................................................... 4
Enhancement Provider............................................................. 49
EPP Card......................................................................... 20
ERISA............................................................................ 14
Euroclear........................................................................ 28
Euroclear Operator............................................................... 28
Euroclear Participants........................................................... 28
Euroclear System................................................................. 28
Excess Funding Account........................................................... 39
Exchange......................................................................... 7
Exchange Act..................................................................... 2
Exchangeable Transferor Certificate.............................................. 7
FASIT............................................................................ 56
FDIA............................................................................. 51
FDIC............................................................................. 6
Final Regulation................................................................. 58
Final Termination Date........................................................... 42
Finance Charge Receivables....................................................... 6
FIRREA........................................................................... 15, 51
FNANB............................................................................ 1, 4, 8, 25
Foreign Investor................................................................. 56
Full Invested Amount............................................................. 12, 37
Funding Period................................................................... 12, 37
Global Securities................................................................ 64
Group............................................................................ 12
Holders.......................................................................... 29
Indirect Participants............................................................ 27
Ineligible Receivable............................................................ 32
Initial Invested Amount.......................................................... 13
Interchange...................................................................... 6
Interest Funding Account......................................................... 30
Interest Period.................................................................. 9
Invested Amount.................................................................. 5
Invested Percentage.............................................................. 6
Investor Charge-Off.............................................................. 40
Investor Default Amount.......................................................... 40
Investor Servicing Fee........................................................... 8, 44
IRS.............................................................................. 53
L/C Bank......................................................................... 50
Minimum Aggregate Principal Receivables.......................................... 34
Minimum Transferor Amount........................................................ 34
Minimum Transferor Interest Percentage........................................... 31
Monthly Servicer Report.......................................................... 46
OID.............................................................................. 53
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
OID Regulations.................................................................. 53
Participants..................................................................... 26
Payment Date Statement........................................................... 46
Pre-existing Series.............................................................. 42
Pre-Funded Amount................................................................ 12, 37
Pre-Funding Account.............................................................. 12, 37
Principal Amortization Period.................................................... 10
Principal Commencement Date...................................................... 9
Principal Funding Account........................................................ 11
Principal Receivables............................................................ 6
Principal Shortfalls............................................................. 38
Principal Terms.................................................................. 7, 18, 31
Proposed Regulations............................................................. 56
Prospectus Supplement............................................................ 1
Rating Agency.................................................................... 14
Rating Agency Condition.......................................................... 35
Receivables...................................................................... 1, 4
Record Date...................................................................... 25
Regular Card..................................................................... 20
Removed Accounts................................................................. 7, 35
Reserve Account.................................................................. 50
Revolving Period................................................................. 9
RTC.............................................................................. 51
Scheduled Payment Date........................................................... 10
Senior Certificates.............................................................. 5
Series........................................................................... 1, 4, 64
Series Minimum Transferor Amount................................................. 31
Series Supplement................................................................ 4
Service Transfer................................................................. 45
Servicer......................................................................... 4, 8
Servicer Default................................................................. 45
Servicing Fee.................................................................... 44
Shared Excess Finance Charge Collections......................................... 39
Shared Principal Collections..................................................... 38
Special Tax Counsel.............................................................. 53
Spread Account................................................................... 50
Stated Series Termination Date................................................... 41
Subordinated Certificates........................................................ 5
Terms and Conditions............................................................. 28
Transferor....................................................................... 4
Transferor Amount................................................................ 5
Transferor Interest.............................................................. 5
Transferor Percentage............................................................ 26
Trust............................................................................ 1, 4
Trust Portfolio.................................................................. 23
Trustee.......................................................................... 1, 4
TSYS............................................................................. 20
UCC.............................................................................. 15
Underwriting Agreement........................................................... 60
U.S. Person...................................................................... 66
</TABLE>
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Circuit City
Credit Card Master Trust Asset Backed Certificates (the "Global Securities") to
be issued in Series from time to time (each, a "Series") will be available only
in book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing corporation
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
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Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary to receive the Global Securities against
payment. Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date (on
the basis of actual days elapsed and a 360 day year). Payment will then be made
by the respective Depositary to the DTC Participant's account against delivery
of the Global Securities. After settlement has been completed, the Global
Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedel
Participant's or Euroclear Participant's account. The Global Securities credit
will appear the next day (European time) and the cash debit will be back-valued
to, and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Cedel or Euroclear cash debit will be valued instead as of the actual
settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during the
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date (on the basis of actual days elapsed and a
360 day year). The payment will then be reflected in the account of the Cedel
Participant or Euroclear Participant the following day, and receipt of the cash
proceeds in the Cedel Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Cedel Participant or Euroclear Participant
have a line of credit with its respective clearing system and elect to be in
debit in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would
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automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
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- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRANSFEROR OR ANY AGENT OR UNDERWRITER. NEITHER
THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER
OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE TRANSFEROR OR THE RECEIVABLES OR THE ACCOUNTS SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary of Terms.......................... S-3
FNANB's Credit Card Portfolio............. S-11
The Receivables........................... S-14
Maturity Assumptions...................... S-17
Receivable Yield Considerations........... S-18
First North American National Bank and
Circuit City Stores, Inc................ S-19
Description of the Certificates........... S-19
Amendments to the Agreement Relating to
FASIT Election.......................... S-42
Underwriting.............................. S-43
Legal Matters............................. S-44
Index of Terms for Prospectus
Supplement.............................. S-45
Annex I................................... S-48
PROSPECTUS
Prospectus Supplement..................... 2
Reports to Certificateholders............. 2
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
Prospectus Summary........................ 4
Risk Factors.............................. 15
The Trust................................. 19
Credit Card Activities at First North
American National Bank.................. 20
The Receivables........................... 23
Maturity Assumptions...................... 24
Use of Proceeds........................... 25
First North American National Bank........ 25
Description of the Certificates........... 25
Enhancement............................... 49
Certain Legal Aspects of the
Receivables............................. 51
Certain Federal Income Tax Consequences... 53
State and Local Tax Consequences.......... 57
ERISA Considerations...................... 58
Plan of Distribution...................... 60
Legal Matters............................. 60
Index of Terms for Prospectus............. 61
Annex I................................... 64
</TABLE>
---------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT
AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
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- ------------------------------------------------------
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CIRCUIT CITY
CREDIT CARD MASTER TRUST
$162,000,000 CLASS A
FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1996-1
$22,500,000 CLASS B
FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1996-1
FIRST NORTH AMERICAN
NATIONAL BANK
Transferor and Servicer
------------------------
PROSPECTUS SUPPLEMENT
------------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
CS FIRST BOSTON
GREENWICH CAPITAL MARKETS, INC.
UNDERWRITER OF THE CLASS B CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
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