As filed with the Securities and Exchange Commission on March 26, 1997
Registration No. 333-___
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
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FIRST NATIONAL BANK OF COMMERCE
(Originator of the Trust described herein)
(Exact name as specified in registrant's charter)
United States 72-0269760
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
210 Baronne Street
New Orleans, Louisiana 70112
(504) 623-1371
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Michael A. Flick
Chief Administrative Officer
First Commerce Corporation
201 Saint Charles Avenue, 29th Floor
New Orleans, Louisiana 70170
(504) 623-1492
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Robert F. Hugi, Esq. Ed DeSear, Esq.
MAYER, BROWN & PLATT ORRICK, HERRINGTON & SUTCLIFFE LLP
190 South LaSalle Street 666 Fifth Avenue
Chicago, Illinois 60603 New York, New York 10103
(312) 782-0600 (212) 506-5000
Approximate date of commencement of proposed sale to the public: From
time to time after this registration statement becomes effective as
determined by market conditions.
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act of 1933, please check the following
box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of securities Proposed maximum Proposed maximum
to be Amount to be offering price aggregate offering Amount of
registered registered per certificate * price * registration fee
Asset Backed
Certificates $1,000,000 100% $1,000,000 $344.83
* Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 26, 1997
PROSPECTUS
First NBC Credit Card Master Trust
Asset Backed Certificates
First National Bank of Commerce
Transferor and Servicer
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The Asset Backed Certificates (collectively, the "Certificates")
described herein may be sold from time to time in one or more series (each,
a "Series"), in amounts, at prices and on terms to be determined at the
time of sale and to be set forth in a supplement to this Prospectus (a
"Prospectus Supplement"). The Certificates in each Series will represent an
undivided interest in the First NBC Credit Card Master Trust (the "Trust").
The Trust will be formed pursuant to a pooling and servicing agreement
between First National Bank of Commerce ("First NBC" or the "Bank"), as
transferor and servicer, and ___________, as trustee. Certain capitalized
terms used in this Prospectus are defined elsewhere in this Prospectus and
in the accompanying Prospectus Supplement. Please refer to the "Index of
Defined Terms for Prospectus" for a listing of the pages on which some of
such terms are defined.
The property of the Trust will include receivables (the "Receivables")
generated from time to time in a portfolio of revolving credit accounts,
all monies due or to become due in payment of the Receivables, any
collateral securing the Receivables, all proceeds of the foregoing and
proceeds of credit life insurance policies relating to the Receivables and
all monies on deposit in certain bank accounts of the Trust, as more fully
described herein. Additionally, with respect to any Series or Class
offered hereby, the Trust assets also may include (i) the right to receive
Interchange and/or (ii) credit enhancement and interest rate protection
arrangements for such Series or Class, as described in the related
Prospectus Supplement. The Bank initially will own the remaining undivided
interest in the Trust not represented by the Certificates issued by the
Trust and will service the related Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate Certificates, floating
rate Certificates or other types of Certificates, as specified in the
related Prospectus Supplement. Each Certificate will represent an undivided
interest in the Trust, and the interest of the holders of each Class or
Series of Certificates will include the right to receive a varying
percentage of each month's collections with respect to the Receivables at
the times, in the manner and to the extent described herein and, with
respect to any Series offered hereby, in the related Prospectus Supplement.
Interest and principal payments with respect to each Series offered hereby
will be made as specified in the related Prospectus Supplement. One or more
Classes of a Series offered hereby may be entitled to the benefits of a
cash collateral account or guaranty, a collateral interest, a letter of
credit, a surety bond, an insurance policy or other form of enhancement as
specified in the Prospectus Supplement relating to that Series. In
addition, any Series offered hereby may include one or more Classes which
are subordinated in right and priority to payment of principal of, and/or
interest on, one or more other Classes of that Series or another Series, in
each case to the extent described in the related Prospectus Supplement.
Each Series of Certificates or Class offered hereby will be rated in one of
the four highest rating categories by at least one nationally recognized
rating organization.
While the specific terms of any Series in respect of which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such Series will not be subject to prior review
by, or consent of, the Certificateholders of any previously issued Series.
Potential investors should consider, among other things, the information
set forth in "Risk Factors" commencing on page __ of this Prospectus.
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THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST NBC OR ANY
AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THE
CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Certificates may be sold by the Bank or the Trust directly to
purchasers, through agents designated from time to time, through
underwriting syndicates led by one or more managing underwriters or through
one or more underwriters acting alone. If underwriters or agents are
involved in the offering of the Certificates of any Series offered hereby,
the name of the managing underwriter or underwriters or agents will be set
forth in the related Prospectus Supplement. If an underwriter, agent or
dealer is involved in the offering of the Certificates of any Series
offered hereby, the underwriter's discount, agent's commission or dealer's
purchase price will be set forth in, or may be calculated from, the related
Prospectus Supplement, and the net proceeds to the Bank from such offering
will be the public offering price of such Certificates less such discount
in the case of an underwriter, the purchase price of such Certificates less
such commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other
expenses of the Bank associated with the issuance and distribution of such
Certificates. See "Plan of Distribution."
This Prospectus may not be used to consummate sales of any Series of
Certificates unless accompanied by the related Prospectus Supplement.
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The date of this Prospectus is ___________ __, 1997.
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to that Series:
(a) the initial aggregate principal amount of each Class of that Series;
(b) the certificate interest rate (or method for determining it) of each
Class of that Series; (c) certain information concerning the Receivables
allocated to that Series; (d) the expected date or dates on which the
principal amount of the Certificates will be paid to holders of each Class
of Certificates (the "Certificateholders"); (e) the extent to which any
Class within a Series is subordinated to any other Class of that Series or
any other Series; (f) the identity of each Class of floating rate
Certificates and fixed rate Certificates included in that Series, if any,
or such other type of Class of Certificates; (g) the Distribution Dates for
the respective Classes; (h) relevant financial information with respect to
the Receivables; (i) additional information with respect to any Enhancement
relating to that Series; and (j) the plan of distribution of that Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning the Trust and prepared by the
Servicer, will be sent on behalf of the Trust to the registered holder(s)
of the related Certificates. Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") is generally expected to be the only
registered holder of the Certificates. The availability of copies of such
reports to DTC participants and ultimately to the owners of beneficial
interests in the Certificates ("Certificate Owners") will be governed by
arrangements among DTC and such parties, subject to any statutory or
regulatory requirements as may be in effect from time to time. See
"Description of the Certificates -- Book-Entry Registration," "-- Reports to
Certificateholders" and "-- Evidence as to Compliance." Such reports will
not constitute financial statements prepared in accordance with generally
accepted accounting principles. The Transferor does not intend to send any
of its financial reports to Certificateholders or to the Certificate
Owners. The Servicer will file with the Commission such periodic reports
with respect to the Trust as are required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations of
the Commission thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to
the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement (including any amendments
thereof and exhibits thereto) and any reports and other documents
incorporated herein by reference as described below under "Incorporation of
Certain Documents by Reference," which are available for inspection without
charge at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549; and the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of
the offering of the Certificates shall be deemed to be incorporated by
reference into this Prospectus and to be part hereof. Any statement
contained herein or in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy
of this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for
such copies should be directed to: Thomas L. Callicutt, Jr., Executive
Vice President, Controller and Principal Accounting Officer, First Commerce
Corporation, 201 Saint Charles Avenue, 19th Floor, New Orleans, Louisiana
70170, telephone number (504) 623-2913.
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
Defined 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 that Prospectus Supplement.
Type of Securities Asset Backed Certificates (the
"Certificates") evidencing an undivided
interest in the assets of the First NBC
Credit Card Master Trust (the "Trust") may
be issued from time to time in one or more
series (each, a "Series") which will consist
of one or more classes of Certificates
(each, a "Class").
The Trust The Trust will be formed pursuant to a
pooling and servicing agreement (the
"Agreement") between First National Bank of
Commerce ("First NBC" or the "Bank"), as
transferor and servicer, and
_______________, as trustee (the "Trustee").
Each Series issued by the Trust will be
issued pursuant to a series supplement to
the Agreement (a "Series Supplement";
references in this Prospectus to the
Agreement, as it relates to any Series,
shall include the Series Supplement entered
into in connection with such Series). Any
Series may or may not be a Series offered
pursuant to this Prospectus. Each Prospectus
Supplement will identify all outstanding
Series previously issued by the Trust.
Certificate Owners with respect to any
Series are not required to be notified of
the issuance of any subsequent Series.
However, it is a condition precedent to the
issuance of any additional Series that each
Rating Agency that has rated any outstanding
Series deliver written confirmation to the
Trustee that such issuance will not result
in the reduction or withdrawal of its rating
on any such outstanding Series.
Trust Assets The assets of the Trust will include
receivables (the "Receivables") arising
under certain revolving credit accounts (the
"Accounts"), initially comprised of a
portion of the MasterCard(R), VISA(R) *<F1>
and private label credit card accounts
included in the portfolio of Mastercard,
VISA and private label accounts owned by the
Bank (the "Bank Portfolio") and designated
for the Trust by the Bank, and all monies
due or to become due in payment of the
Receivables, including certain fees charged
on the Accounts and included as Finance
Charge Receivables, all proceeds of the
Receivables and proceeds of credit life
insurance policies relating to the
Receivables, and any collateral securing the
Receivables and proceeds of such collateral
and may include the right to receive
Interchange, if any, allocable to the
Certificates and all monies on deposit in
certain bank accounts of the Trust
(including any permitted investments made
with such monies and, to the extent
specified in the related Prospectus
Supplement, related investment earnings),
and any Enhancement with respect to any
particular Series or Class, as described in
the related Prospectus Supplement. The
private label accounts included in the Bank
Portfolio (the "Private Label Accounts")
relate to credit cards issued to military
personnel who are eligible to participate in
one of the Bank's military affinity programs
but do not meet the credit standards for
issuance of standard credit cards. Payments
due under Private Label Accounts are
guaranteed by United States Air Force
Services. " " "Interchange" consists of
certain fees received by the Bank from VISA
and MasterCard as partial compensation for
taking credit risk, absorbing fraud losses
and funding receivables for a limited period
prior to initial billing. The term
"Enhancement" means, with respect to any
Series or Class, any Credit Enhancement or
______________________
<F1>
* MasterCard(R) and VISA(R) are Federally registered
servicemarks of MasterCard International Inc. and Visa
U.S.A., Inc., respectively. </F1>
any derivative product such as a guaranteed
rate agreement, maturity liquidity facility,
interest rate cap agreement, interest rate
swap agreement or other similar arrangement
for the benefit of the Certificateholders of
that Series or Class. The term "Enhancement"
means, with respect to any Series or Class,
any cash collateral guaranty or account,
collateral interest, letter of credit,
surety bond, insurance policy, spread
account, reserve account or other similar
arrangement for the benefit of the
Certificateholders of that Series or Class.
Credit Enhancement may also take the form of
subordination of one or more Classes of a
Series to any other Class or Classes of a
Series or a cross-support feature which
requires collections on Receivables of one
Series to be paid as principal and/or
interest with respect to another Series.
At the time of formation of the Trust, the
Bank, as transferor (in such capacity, the
"Transferor"), will convey to the Trustee,
in trust for the benefit of the
Certificateholders, all Receivables existing
under certain Accounts selected from the
Bank Portfolio based on criteria provided in
the Agreement and all Receivables arising
under such Accounts from time to time
thereafter until termination of the Trust.
In addition, the Agreement will provide that
the Bank may, from time to time (subject to
certain limitations and conditions), and in
some circumstances will be obligated to,
designate additional eligible revolving
credit accounts to be included as Accounts
(the "Additional Accounts"), the Receivables
of which will be included in the Trust and
that in lieu of Additional Accounts or in
addition thereto, the Bank may include in
the Trust, participations or trust
certificates representing undivided
interests in a pool of assets primarily
consisting of receivables arising under
revolving credit accounts and collections
thereon ("Participations"). Any conveyance
by the Transferor to the Trust of
Receivables in Additional Accounts or
Participations is subject to the
satisfaction of several conditions. See "The
Receivables," "Risk Factors--Addition of
Trust Assets --Effect on Credit Quality" and
"Description of the Certificates -- Addition
of Trust Assets."
To the extent provided in any Series
Supplement, or in an amendment to the
Agreement, all or a portion of the
Receivables or Participations conveyed to
the Trust and all collections received with
respect thereto may be allocated to one or
more Series as long as each Rating Agency
confirms that such allocation will not
result in the reduction or withdrawal of its
rating on any outstanding Class of
Certificates, and the Servicer has delivered
an officer's certificate to the Trustee to
the effect that the Servicer reasonably
believes such allocation will not adversely
affect in any material respect the interests
of the Certificateholders of any Series
issued and outstanding.
Certificate Interest and
Principal Each Series of Certificates will represent
an undivided interest in the assets of the
Trust. Each Certificate of a Series will
represent the right to receive payments of
(i) interest at the specified rate or rates
per annum (each, a "Certificate Rate"),
which may be a fixed, floating or other type
of rate and (ii) principal at the times and
in the circumstances (if any) described in
the related Prospectus Supplement. Payments
of principal may be made during a Controlled
Amortization Period, Principal Amortization
Period, or, under certain limited
circumstances, Rapid Amortization Period
(each, an "Amortization Period") or, under
certain limited circumstances, in connection
with a Partial Amortization; or principal
may be payable on Scheduled Payment Dates,
in which case such Series will have a
Controlled Accumulation Period and, under
certain limited circumstances if so
specified in the related Prospectus
Supplement, a Rapid Accumulation Period
(each, an "Accumulation Period"), as well
as, under certain limited circumstances, a
Rapid Amortization Period, all as specified
in the related Prospectus Supplement.
Each Series of Certificates will consist of
one or more Classes, one or more of which
may be senior ("Senior Certificates") or
subordinated ("Subordinated Certificates")
to one or more other Classes. Each Class of
a Series may evidence the right to receive
a specified portion of each distribution of
principal, interest or both. The
Certificates of a Class may also differ from
Certificates of other Classes of the same
Series in, among other things, the amounts
allocated to principal payments, priority of
payments, payment dates, maturity, interest
rates, interest rate computation and
availability and form of Enhancement.
The assets of the Trust will be allocated
among the Certificateholders of each Series
and the holder of the Transferor
Certificate. A portion of the assets of the
Trust also will be allocated to a related
Credit Enhancement Provider which provides
Credit Enhancement in the form of a
Collateral Interest and may be allocated to
a provider of Credit Enhancement in another
form to the extent draws are made on the
Credit Enhancement to pay the principal of
the Certificates of the related Series. See
"Credit Enhancement--General" and "--
Collateral Interest." The aggregate
principal amount of the interest of the
Certificateholders of a Series is called the
"Investor Interest" and is based on the
Portion of the Aggregate Principal
Receivables allocated to that Series. If
specified in any Prospectus Supplement, the
term "Investor Interest" with respect to the
related Series will include the Collateral
Interest with respect to that Series. The
aggregate principal amount of the interest
of the holder of the Transferor Certificate
is called the "Transferor Interest," and is
based on the sum of the Portion of the
Aggregate Principal Receivables Trust not
allocated to the Certificateholders or any
provider of Credit Enhancement (each a
"Credit Enhancement Provider"), with respect
to Trust and the principal amount, if any,
on deposit in the Excess Funding Account.
See "Description of the Certificates --
General."
The Certificateholders of each Series will
have the right to receive (but only to the
extent needed to make required payments
under the Agreement and the related Series
Supplement and subject 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 Net Default Amount or any
Net Recoveries for that month (each such
percentage, an "Investor Percentage"). The
"Net Default Amount" for any month means the
excess (if any) of the amount of Receivables
in Accounts that were written off as
uncollectible by the Servicer ("Defaulted
Accounts") for that month over the amounts
received by the Servicer with respect to
Receivables in all Defaulted Accounts (net
of related expenses and allocated in
accordance with the Servicer's customary
procedures) (collectively, "Recoveries").
If the amount of Recoveries received by the
Servicer for a month exceeds the amount of
Receivables in Accounts that become
Defaulted Accounts in that month, the excess
Recoveries are referred to as "Net
Recoveries."
The related Prospectus Supplement will
specify the Investor Percentages with
respect to the allocation of collections of
Principal Receivables, Finance Charge
Receivables and Receivables in Defaulted
Accounts during the Revolving Period, any
Amortization Period and any Accumulation
Period, as applicable. If the Certificates
of a Series offered hereby include more than
one Class of Certificates, the assets of the
Trust allocable to the Certificates of that
Series may be further allocated among each
Class in that Series as described in the
related Prospectus Supplement. See
"Description of the Certificates --
Allocations."
The Certificates of each Series will
represent interests in the Trust only and
will not represent interests in or recourse
obligations of the Transferor or any
affiliate thereof. A Certificate is not a
deposit and neither the Certificates nor the
underlying Accounts or Receivables are
insured or guaranteed by the Federal Deposit
Insurance Corporation (the "FDIC") or any
other governmental agency.
Receivables The Receivables held in the Trust will arise
in Accounts selected from the Bank Portfolio
based on criteria provided in the Agreement
and described in the related Prospectus
Supplement as applied initially on
_____________ __, 1997 (the "Cut-Off Date"),
and, with respect to certain Additional
Accounts, if any, on subsequent dates.
The Receivables will consist of amounts
charged by accountholders for goods and
services, cash advances and balances
transferred from other credit accounts (the
"Principal Receivables"), plus the related
periodic finance charges and amounts charged
to the Accounts in respect of certain annual
account fees, cash advance fees, late fees,
overlimit fees, closed account maintenance
charges and similar fees and charges
(including fees which are not now but from
time to time may be assessed on the
Accounts) (the "Finance Charge
Receivables"). Net Recoveries also will be
treated as collections of Finance Charge
Receivables unless the related Prospectus
Supplement provides that Net Recoveries
shall not be treated as Finance Charge
Receivables for purposes of the related
Series. In addition, at the option of the
Transferor, an amount equal to the product
of the Discount Percentage and the amount of
Receivables arising in the related Accounts
on and after the date such option is
exercised (and, if the Transferor so elects,
Receivables arising in the related Accounts
before the date such option is exercised)
that otherwise would be Principal
Receivables will be treated as Finance
Charge Receivables. See "Description of the
Certificates -- Discount Option." Finally,
if so specified in the related Prospectus
Supplement, certain amounts of Interchange
attributed to cardholder charges for goods
and services in the Accounts may be
allocated to the Certificates of a Series or
any of its Classes and treated as
collections of Finance Charge Receivables
for purposes of that Series or Class or may
be applied in some other manner as described
in the related Prospectus Supplement. See
"First NBC's Credit Card Activities --
Interchange."
During the term of the Trust, the Transferor
will automatically transfer all new
Receivables arising in the Accounts to the
Trust. The total amount of Receivables in
the Trust will fluctuate from day to day,
because the amount of new Receivables
arising in the Accounts and the amount of
payments collected on existing Receivables
usually differ each day.
Pursuant to the Agreement, the Transferor
will have the right (subject to certain
limitations and conditions), and, to the
extent necessary to maintain the Transferor
Interest at or above a specified level (the
"Minimum Transferor Interest") and in
certain other circumstances, will be
obligated, to designate additional eligible
revolving credit accounts to be included as
Additional Accounts and to convey to the
Trust all of the Receivables in the
Additional Accounts, whether such
Receivables are then existing or thereafter
created or designate Participations to be
included in the Trust in lieu thereof or in
addition thereto. See "Risk Factors--Addition
of Trust Assets -- Effect on Credit Quality"
and "Description of the Certificates --
Addition of Trust Assets."
Pursuant to the Agreement, the Transferor
will have the right (subject to certain
limitations and conditions) to designate
certain Accounts as "Removed Accounts" and
stop transferring new Receivables arising in
the Removed Accounts to the Trust.
Pre-existing Receivables in Removed Accounts
may either be conveyed to the Transferor or
its designee or retained by the Trust. If
such pre-existing Receivables are retained
in the Trust, the Servicer and the
Transferor will agree to allocate principal
collections on the Removed Accounts on a
first-in, first-out basis, so that such
collections will be allocated to outstanding
advances in the order in which such advances
arose (beginning with the oldest outstanding
advance). Principal collections allocable to
Receivables retained by the Trust will be
applied as Collections in accordance with
the Agreement. Upon payment of all amounts
owing in respect of such Receivables, the
Trust will transfer the related Account to
the Transferor. See "Description of the
Certificates -- Removal of Accounts."
New Issuances The Agreement will authorize the Trustee to
issue three types of certificates: (i) one
or more Series of Certificates that will be
transferable and have the characteristics
described below; (ii) a certificate that
evidences the Transferor Interest (the
"Transferor Certificate"), which is not
offered hereby and which initially will be
held by the Transferor and will be
transferable only as provided in the
Agreement; and (iii) one or more
supplemental certificates ("Supplemental
Certificates"), evidencing partial interests
in the Transferor Interest, which are not
offered hereby and which will be
transferable only as provided in the
Agreement. Any Series of Certificates,
along with any outstanding Supplemental
Certificates, may be offered to the public
or other investors under a prospectus or
other disclosure document (a "Disclosure
Document") in offerings pursuant to this
Prospectus or in transactions either
registered under the Securities Act of 1933,
as amended (the "Securities Act") or exempt
from registration thereunder, directly or
through one or more other underwriters or
placement agents, in fixed-price offerings
or in negotiated transactions or otherwise.
To the extent provided in the related
Supplement (and subject to any applicable
requirements under the Exchange Act and the
rules and regulations thereunder, including
Rule 13e-4), a new Series may be issued
fully or partially in exchange for
certificates of one or more existing Series.
A new issuance of a Series of Certificates
(a "New Issuance") may occur only upon
delivery to the Trustee of the following:
(i) a Series Supplement specifying the terms
of the new Series, (ii) (a) an opinion of
counsel to the effect that the certificates
of that Series will be characterized as
indebtedness for Federal income tax
purposes, unless the related Series
Supplement indicates that such opinion will
not be provided and (b) an opinion of
counsel to the effect that, for Federal
income tax purposes, (1) such issuance will
not adversely affect the tax
characterization as debt of Certificates of
any outstanding Series or Class that were
characterized as debt at the time of their
issuance, (2) such issuance will not cause
the Trust to be classified as an association
(or publicly traded partnership) taxable as
a corporation and (3) such issuance will not
cause or constitute an event in which gain
or loss would be recognized by any
Certificateholder (an opinion of counsel to
this effect with respect to any action being
a "Tax Opinion"), (iii) if required by the
related Series Supplement, the form of
Credit Enhancement, (iv) if Credit
Enhancement is required by the Series
Supplement, an appropriate Credit
Enhancement agreement with respect thereto,
(v) written confirmation from each Rating
Agency that the New Issuance will not result
in that Rating Agency reducing or
withdrawing its rating on any then
outstanding Series rated by it, (vi) an
officer's certificate of the Transferor to
the effect that after giving effect to the
New Issuance the Transferor would not be
required to add the Receivables of any
Additional Accounts pursuant to the
Agreement and the Transferor Interest would
be at least equal to the Minimum Transferor
Interest and (vii) if applicable, the
Certificates representing the Series to be
exchanged. See "Description of the
Certificates -- New Issuances."
The Transferor also may from time to time
cause the Trustee to sell interests (each,
a "Purchased Interest") in the Receivables
and other assets of the Trust to one or more
purchasers. Any Purchased Interest will
represent an interest in the Trust's assets
similar to the interest of a Series of
Certificates. No Series will be subordinated
to any Purchased Interest, and no Purchased
Interest will have any interest in the
Series Accounts or Enhancement for any
Series, unless the Prospectus Supplement
relating to that Series so provides. Any
such sale will take place pursuant to one or
more agreements which will specify terms for
the applicable Purchased Interests and may
grant the purchasers of such interests
notice and consultation rights with respect
to rights or actions of the Trustee. Any
sale of Purchased Interests in the assets of
the Trust will be subject to the
satisfaction of the same conditions
(including Rating Agency confirmations) as
for a New Issuance, as appropriately
adjusted to apply to the relevant Purchased
Interest rather than a New Issuance.
Denominations Beneficial interests in the Certificates
will be offered for purchase in the
denominations specified in the related
Prospectus Supplement.
Registration of
Certificates The Certificates of each Series offered
hereby may or may not be represented by
Certificates registered in the name of Cede,
as the nominee of DTC, as specified in the
related Prospectus Supplement. If the
Certificates of a Series are so registered,
then no Certificate Owner will be entitled
to receive a definitive certificate
representing its interest, except in the
event that Certificates in fully registered,
certificated form ("Definitive
Certificates") are issued under the limited
circumstances described herein. See
"Description of the Certificates --
Definitive Certificates."
Clearance and
Settlement Certificate Owners of each Series offered
hereby may or may not be permitted to make
an election to hold their Certificates
through any of DTC (in the United States) or
Cedel or Euroclear (in Europe), as specified
in the related Prospectus Supplement. If
such election is available, then transfers
within DTC, Cedel or Euroclear, as the case
may be, will be made in accordance with the
usual rules and operating procedures of the
relevant system. Cross-market transfers
between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or
indirectly through Cedel or Euroclear, on
the other, will be effected in DTC through
the relevant Depositaries of Cedel or
Euroclear. See "Description of the
Certificates -- Book-Entry Registration."
Transferor and
Servicer First National Bank of Commerce ("First NBC"
or the "Bank"). The principal executive
offices of the Bank are located at New
Orleans, Louisiana, telephone number (504)
623-1371. The Servicer will receive a fee as
servicing compensation from the Trust in
respect of each Series in the amounts and at
the times specified in the related
Prospectus Supplement (the "Servicing Fee").
The Servicing Fee may be payable from
Finance Charge Receivables, Interchange or
other amounts as specified in the related
Prospectus Supplement. In certain limited
circumstances, the Bank may resign or be
removed as servicer, in which event the
Trustee or a third party servicer may be
appointed as successor servicer (the Bank,
in this capacity, or any successor servicer,
is called the "Servicer"). The Bank is a
wholly owned subsidiary of First Commerce
Corporation (the "Corporation"). See "First
NBC and First Commerce Corporation." In
addition, if the Bank elects to sell or
otherwise dispose of the Accounts, then the
new owner of the Accounts may be substituted
for the Bank as Transferor and Servicer upon
the satisfaction of certain conditions,
including the delivery of a Tax Opinion and
receipt of written confirmation from each
Rating Agency that such substitution will
not result in such Rating Agency's reducing
or withdrawing its rating on any then
outstanding Series rated by it.
Collections The Servicer will deposit all collections of
Receivables in an account required to be
established for such purpose by the
Agreement (the "Collection Account"). All
amounts deposited in the Collection Account
will be allocated by the Servicer between
amounts collected on Principal Receivables
and amounts collected on Finance Charge
Receivables. If so specified in the related
Prospectus Supplement, Principal Receivables
and/or Finance Charge Receivables may be
otherwise characterized. See "Description of
the Certificates -- Discount Option." All
such amounts will then be further allocated
in accordance with the respective interests
of the Certificateholders of each Series or
Class of Certificates and the holder of the
Transferor Certificate and, in certain
circumstances, certain providers of
Enhancement. See "Description of the
Certificates -- Allocations."
Interest Payments Interest on each Series of Certificates or
Class for each applicable period (each, an
"Interest Period") specified in the related
Prospectus Supplement will be distributed in
the amounts and on the dates (which may be
monthly, quarterly, semiannually or
otherwise as specified in the related
Prospectus Supplement) (each, a
"Distribution Date") specified in the
related Prospectus Supplement. Interest
payments on each Distribution Date will be
funded from collections of Finance Charge
Receivables allocated to the Investor
Interest during the preceding monthly period
or periods (each, a "Monthly Period"), as
described in the related Prospectus
Supplement, and may be funded from certain
investment earnings on funds in certain
accounts of the Trust and from any
applicable Enhancement, if necessary, or
certain other amounts as specified in the
related Prospectus Supplement. If the
Distribution Dates for payment of interest
for a Series or Class occur less frequently
than monthly, such collections or other
amounts allocable to such Series or Class
may be deposited in one or more trust
accounts pending distribution to the
Certificateholders of such Series or Class,
all as described in the related Prospectus
Supplement. See "Description of the
Certificates -- Application of Collections,"
"-- Shared Excess Finance Charge
Collections," "Credit Enhancement" and "Risk
Factors -- Limited Credit Enhancement."
Revolving Period Generally, no principal will be payable to
Certificateholders of any Series or Class
until the Principal Commencement Date or the
Scheduled Payment Date with respect to that
Series or Class, as described below.
However, if specified in the related
Prospectus Supplement for a Series or Class,
principal may be payable to
Certificateholders of such Series or Class
prior to either such date, in connection
with a Partial Amortization or otherwise.
For the period beginning on the date of
issuance of a Series (a "Closing Date") and
ending with the commencement of an
Amortization Period or an Accumulation
Period (the "Revolving Period"), collections
of Principal Receivables otherwise allocable
to that Series' Investor Interest will,
subject to certain limitations, be paid to
the holder of the Transferor Certificate or
deposited in the Excess Funding Account for
the Trust or, under certain circumstances
and if so specified in the related
Prospectus Supplement, treated as Shared
Principal Collections and paid to the
holders of certificates of other Principal
Sharing Series, as described herein and in
the related Prospectus Supplement. See
"Description of the Certificates -- Pay Out
Events" for a discussion of the events which
might lead to early termination of the
Revolving Period.
Principal Payments The principal of the Certificates of each
Series offered hereby will be scheduled to
be paid either in installments commencing on
a date specified in the related Prospectus
Supplement (the "Principal Commencement
Date"), in which case such Series will have
either a Controlled Amortization Period or
a Principal Amortization Period, as
described below, or on an expected date
specified in, or determined in the manner
specified in, the related Prospectus
Supplement (the "Scheduled Payment Date"),
in which case such Series will have an
Accumulation Period, as described below. If
a Series has more than one Class of
Certificates, a different method of paying
principal, Principal Commencement Date or
Scheduled Payment Date may be assigned to
each Class. The payment of principal with
respect to the Certificates of a Series or
Class may commence earlier than the
applicable Principal Commencement Date or
Scheduled Payment Date, and the final
principal payment with respect to the
Certificates of a Series or Class may be
made earlier or later than the applicable
expected payment date, Scheduled Payment
Date or other expected date, if a Pay Out
Event occurs and the Rapid Amortization
Period commences with respect to such Series
or Class or under certain other
circumstances described herein or in the
related Prospectus Supplement. See
"Description of the Certificates --
Principal Payments."
Controlled Amortization
Period A Series or any Class thereof may have a
"Controlled Amortization Period," as
specified in the related Prospectus
Supplement, in order to permit payment of
the principal balance of the applicable
Certificates in fixed installments over a
specified amortization period. Unless a
Rapid Amortization Period with respect to a
Series that has a Controlled Amortization
Period commences, collections of Principal
Receivables allocable to that Series'
Investor Interest during each Monthly Period
falling in its Controlled Amortization
Period (and certain other amounts if so
specified in the related Prospectus
Supplement) will be used on the related
Distribution Date to make principal
distributions in scheduled amounts to the
Certificateholders of such Series or any
Class of such Series then scheduled to
receive such distributions. The amount to be
distributed on any Distribution Date during
the Controlled Amortization Period will be
limited to an amount (the "Controlled
Distribution Amount") equal to an amount
specified in the related Prospectus
Supplement (the "Controlled Amortization
Amount"), plus any Controlled Amortization
Amount not paid on prior Distribution Dates.
If a Series has more than one Class of
Certificates, each Class may have a separate
Controlled Amortization Amount. In addition,
the related Prospectus Supplement may
describe priorities among such Classes with
respect to such distributions. The
Controlled Amortization Period will commence
at the close of business on a date specified
in the related Prospectus Supplement and
continue until the earliest of (a) the
commencement of the Rapid Amortization
Period, (b) payment in full of the Investor
Interest of the Certificates of such Series
or Class and, if so specified in the related
Prospectus Supplement, of any related
Collateral Interest or Enhancement Invested
Amount and (c) the related Series
Termination Date.
Principal Amortization
Period A Series or any Class thereof may have a
"Principal Amortization Period" as specified
in the related Prospectus Supplement, in
order to permit payment of the principal
balance of the applicable Certificates in
installments over a specified amortization
period. Such installment payments are not
limited by any Controlled Amortization
Amount during a Principal Amortization
Period. Unless a Rapid Amortization Period
with respect to a Series that has a
Principal Amortization Period commences,
collections of Principal Receivables
allocable to that Series' Investor Interest
during each Monthly Period falling in its
Principal Amortization Period (and certain
other amounts if so specified in the related
Prospectus Supplement) will be used on the
related Distribution Date to make principal
distributions to the Certificateholders of
that Series or any Class of that Series then
scheduled to receive such distributions. If
a Series has more than one Class of
Certificates, the related Prospectus
Supplement may describe certain priorities
among those Classes with respect to such
distributions. The Principal Amortization
Period will commence at the close of
business on a date specified in the related
Prospectus Supplement and continue until the
earlier of (a) the commencement of the Rapid
Amortization Period, (b) payment in full of
the Investor Interest of the Certificates of
such Series or Class and, if so specified in
the related Prospectus Supplement, of any
related Collateral Interest or Enhancement
Invested Amount and (c) the related Series
Termination Date.
Controlled Accumulation
Period A Series or any Class thereof may have a
"Controlled Accumulation Period," as
specified in the related Prospectus
Supplement, in order to allow for the
accumulation of principal collections in a
trust account established for the benefit of
the Certificateholders of that Series or
Class (a "Principal Funding Account") in
anticipation of a balloon payment on the
Scheduled Payment Date. During the
Controlled Accumulation Period, principal
collections in excess of a fixed amount will
not be so set aside in the Principal Funding
Account, which permits the Transferor to
continue to have access to collections which
are not then required to be set aside for
payment of the Certificates. Unless a Rapid
Amortization Period or, if so specified in
the related Prospectus Supplement, a Rapid
Accumulation Period with respect to a Series
that has a Controlled Accumulation Period
commences, collections of Principal
Receivables allocable to that Series'
Investor Interest during each Monthly Period
falling in its Controlled Accumulation
Period (and certain other amounts if so
specified in the related Prospectus
Supplement) will be deposited on the
business day immediately prior to the
related Distribution Date or other business
day specified in the related Prospectus
Supplement (each a "Transfer Date") in the
Principal Funding Account for that Series or
Class and used to make distributions of
principal to the Certificateholders of that
Series or Class on the Scheduled Payment
Date. The amount to be deposited in the
Principal Funding Account on any Transfer
Date will be limited to an amount (the
"Controlled Deposit Amount") equal to an
amount specified in the related Prospectus
Supplement (the "Controlled Accumulation
Amount"), plus any Controlled Accumulation
Amount not deposited on prior Transfer
Dates. If a Series has more than one Class
of Certificates, each Class may have a
separate Principal Funding Account and
Controlled Accumulation Amount. In addition,
the related Prospectus Supplement may
describe certain priorities among such
Classes with respect to deposits of
principal into such Principal Funding
Accounts. The Controlled Accumulation Period
will commence at the close of business on a
date specified in or determined in the
manner specified in the related Prospectus
Supplement and continue until the earliest
of (a) the commencement of the Rapid
Amortization Period or, if so specified in
the related Prospectus Supplement, the Rapid
Accumulation Period, (b) payment in full of
the Investor Interest of the Certificates of
that Series or Class and, if so specified in
the related Prospectus Supplement, any
related Collateral Interest or Enhancement
Invested Amount and (c) the related Series
Termination Date.
Funds on deposit in any Principal Funding
Account may be invested in permitted
investments or subject to a guaranteed rate
or investment contract or other arrangement
intended to assure a minimum return on the
investment of such funds. Investment
earnings on such funds may be applied to pay
interest on the related Series of
Certificates. In order to enhance the
likelihood of payment in full of principal
at the end of an Accumulation Period with
respect to a Series of Certificates, that
Series or any of its Classes may be subject
to a principal payment guaranty or other
similar arrangement.
Rapid Accumulation
Period A Series or any Class thereof having a
Controlled Accumulation Period may require
the commencement of a "Rapid Accumulation
Period" upon the occurrence of a Pay Out
Event in order to halt the Transferor's
access to principal collections allocable to
the Investor Interest of such Series and
require that all such principal collections
be set aside pending the balloon payment on
the related Scheduled Payment Date. A Rapid
Accumulation Period, if used, would commence
on the day on which a Pay Out Event has
occurred and end on the earliest of (a) the
commencement of the Rapid Amortization
Period, (b) payment in full of the Investor
Interest of the Certificates of such Series
and, if so specified in the related
Prospectus Supplement, of the Collateral
Interest or the Enhancement Invested Amount,
if any, with respect to such Series and (c)
the related Series Termination Date. During
the Rapid Accumulation Period for a Series,
collections of Principal Receivables
allocable to the Investor Interest of the
specified Series during each Monthly Period
(and certain other amounts if so specified
in the related Prospectus Supplement) will
be deposited on the related Transfer Date in
the Principal Funding Account and used to
make distributions of principal to the
Certificateholders of such Series or any
Class thereof on the Scheduled Payment Date.
The amount to be deposited in the Principal
Funding Account during the Rapid
Accumulation Period will not be limited to
the Controlled Deposit Amount.
The term "Pay Out Event" with respect to a
Series of Certificates means any of the
events identified as such in the related
Prospectus Supplement and any of the
following: (a) certain events of insolvency
or receivership relating to the Transferor,
(b) the Transferor being unable for any
reason to transfer Receivables to the Trust
in accordance with the provisions of the
Agreement or (c) the Trust becoming an
"investment company" within the meaning of
the Investment Company Act of 1940, as
amended. See "Description of the
Certificates -- Pay Out Events." Providing
for a Rapid Accumulation Period instead of
a Rapid Amortization Period in certain
circumstances would reduce the number of
events that could cause Certificateholders
to be repaid their principal investment
prior to their Scheduled Payment Date.
During the Rapid Accumulation Period, funds
on deposit in any Principal Funding Account
may be invested in permitted investments or
subject to a guaranteed rate or investment
contract or other arrangement intended to
assure a minimum return on the investment of
such funds. Investment earnings on such
funds may be applied to pay interest on the
related Series of Certificates or make other
payments as specified in the related
Prospectus Supplement. In order to enhance
the likelihood of payment in full of
principal at the end of the Rapid
Accumulation Period with respect to a Series
of Certificates, such Series or any Class
thereof may be subject to a principal
payment guaranty or other similar
arrangement.
Rapid Amortization
Period Each Series will be subject to early payment
following the occurrence of a Pay Out Event
(or a date following the occurrence of a Pay
Out Event in the case of a Series subject to
a Rapid Accumulation Period, as specified in
the related Prospectus Supplement) through
the monthly application of such Series'
allocable share of principal collections.
During the period from the day on which a
Pay Out Event has occurred with respect to
a Series or, if so specified in the
Prospectus Supplement relating to a Series
with a Controlled Accumulation Period, from
such time specified in the related
Prospectus Supplement after a Pay Out Event
has occurred and the Rapid Accumulation
Period has commenced, to the earlier of (a)
the date on which the Investor Interest of
the Certificates of such Series and the
Collateral Interest or the Enhancement
Invested Amount, if any, with respect to
such Series have been paid in full and (b)
the related Series Termination Date (the
"Rapid Amortization Period"), collections of
Principal Receivables allocable to the
Investor Interest of such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be
distributed as principal payments to the
Certificateholders of such Series and, in
certain circumstances, to the Credit
Enhancement Provider, monthly on each
Distribution Date with respect to such
Series in the manner and order of priority
set forth in the related Prospectus
Supplement. If a Rapid Amortization Period
commences, then such of the Revolving
Period, Controlled Amortization Period,
Principal Amortization Period, Controlled
Accumulation Period or Rapid Accumulation
Period which is then in effect with respect
to the applicable Series will terminate, and
no portion of such Series' allocable share
of principal collections will be paid to the
Transferor or the Holders of any other
outstanding Series or retained in the Excess
Funding Account. Rather, the entire amount
of such Series' share of principal
collections will be distributed to the
Certificateholders of such Series on each
Distribution Date during the Rapid
Amortization Period.
During the Rapid Amortization Period with
respect to a Series, distributions of
principal will not be limited by any
Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon the
commencement of the Rapid Amortization
Period with respect to a Series, any funds
on deposit in a Principal Funding Account
with respect to such Series or any Class
thereof will be paid to the
Certificateholders of such Series or Class
on the first Distribution Date in the Rapid
Amortization Period.
Partial
Amortization If so specified in the Prospectus Supplement
relating to a Series, one or more Classes of
Certificates in that Series may be subject
to a partial early amortization (a "Partial
Amortization") in the circumstances
described below. In the event that the
Transferor is required to add the
Receivables of Additional Accounts pursuant
to the Agreement and the Transferor is
unable to designate sufficient Eligible
Accounts for such purpose, then the
Transferor may elect to avoid a Pay Out
Event based on such inability by commencing
a Partial Amortization for the applicable
Series. During a Partial Amortization for
any Series or Class, a portion (as specified
in the related Prospectus Supplement) of
collections of Principal Receivables which
otherwise would be treated as Shared
Principal Collections will be payable to the
Certificateholders of such Series or Class,
commencing on a specified Distribution Date
following the commencement of such Partial
Amortization until the Transferor is no
longer required to add Receivables of
Additional Accounts to the Trust.
Allocations Among
Series Pursuant to the Agreement, during each
Monthly Period, the Servicer is required to
first allocate to each Series collections of
Principal Receivables and Finance Charge
Receivables and the Net Default Amount or
Net Recoveries with respect to such Monthly
Period based on the Investor Percentage for
such Series. See "Description of the
Certificates -- Allocations." Subject to
reallocation among Series in a Reallocation
Group, such amounts allocated to each Series
are then further allocated within each
Series to the Certificateholders, any Series
Enhancement and the holders of the
Transferor Certificates pursuant to the
terms of the related Series Supplement.
Shared Excess Finance Charge
Collections If so specified in the related Prospectus
Supplement, any Series offered hereby may be
designated as a Series that shares with
other Series similarly designated
collections of Finance Charge Receivables
which are in excess of the amounts then
required by such Series (an "Excess
Allocation Series"). The receiving Series
may then use such excess to cover any
shortfalls with respect to amounts payable
from collections of Finance Charge
Receivables allocable to such Series. By so
sharing such excess collections of Finance
Charge Receivables, the Transferor can more
efficiently use available investor funds to
cover required payments on all Series. See
"Description of the Certificates --
Application of Collections," "-- Shared
Excess Finance Charge Collections," "--
Defaulted Receivables; Incentive Payments
and Fraudulent Charges; Investor Charge-
Offs" and "Credit Enhancement."
Shared Principal
Collections If any Series is designated as a "Principal
Sharing Series" in the related Prospectus
Supplement, to the extent that collections
of Principal Receivables that are allocated
to the Investor Interest of such Series are
not needed to make payments or deposits with
respect to such Series, such collections
("Shared Principal Collections") will be
applied to cover principal payments due to
or for the benefit of Certificateholders of
other Principal Sharing Series and, if not
needed for that purpose, will generally be
distributed to the Transferor. Any such
reallocation will not result in a reduction
in the Investor Interest of the Series to
which such collections were initially
allocated.
Reallocations Among Series in
a Reallocation Group If so specified in the related
Prospectus Supplement, the Certificates of
a Series may be included in a group of
Series that will be subject to reallocations
of collections of Finance Charge Receivables
and other amounts among the Series in such
group (a "Reallocation Group"). Collections
of Finance Charge Receivables allocable to
each Series in a Reallocation Group will be
aggregated and made available for certain
required payments for all Series in such
Reallocation Group. Consequently, the
issuance of new Series in such Reallocation
Group may have the effect of reducing or
increasing the amount of collections of
Finance Charge Receivables allocable to the
Certificates of other Series in such
Reallocation Group. See "Risk Factors --
Issuance of New Series; Groups."
Paired Series If so specified in the Prospectus Supplement
relating to a Series, such Series may be
paired with all or a portion of one or more
Series (each, a "Paired Series"), such that
a reduction in the Investor Interest or the
Adjusted Investor Interest of one such
Series results in an increase in the
Investor Interest of the other such Series.
The effect of a Paired Series is to provide
for continuous investment in the Receivables
by Certificateholders, thereby reducing the
potential increase in the Transferor
Interest as the first of the Paired Series'
interest in the Trust is reduced through the
amortization or accumulation of principal.
If a Pay Out Event occurs with respect to a
Series having a Paired Series or with
respect to the Paired Series when such
Series is in a Controlled Amortization
Period or Controlled Accumulation Period,
the Investor Percentage for collections of
Principal Receivables for the Series and for
its Paired Series may be reset as specified
in the related Prospectus Supplements. See
"Description of the Certificates -- Paired
Series."
Excess Funding Account If on any date the Transferor
Interest is less than the Minimum Transferor
Interest, the Servicer will not distribute
to the holder of the Transferor Certificate
any Shared Principal Collections that
otherwise would be so distributed, but will
instead deposit such funds in an account
required to be established for such purpose
by the Agreement (the "Excess Funding
Account"), until the Transferor Interest
equals the Minimum Transferor Interest.
Funds on deposit in the Excess Funding
Account will be withdrawn and paid to the
holder of the Transferor Certificate on any
date to the extent that the Transferor
Interest exceeds the Minimum Transferor
Interest on such date, except that, if a
Controlled Accumulation Period, Controlled
Amortization Period, Principal Amortization
Period, Rapid Amortization Period or Rapid
Accumulation Period commences with respect
to any Series entitled to the benefits of
Shared Principal Collections, an amount of
funds on deposit in the Excess Funding
Account (after giving effect to the release
of funds to the holder of the Transferor
Certificate as described above) up to the
amount, if any, by which the Transferor
Interest would be less than zero if there
were no funds on deposit in the Excess
Funding Account on such date, will be
treated as Shared Principal Collections to
the extent needed to cover principal
payments due to or for the benefit of such
Series, if so provided by the related Series
Supplement. See "Description of the
Certificates -- Excess Funding Account."
Funding Period The Prospectus Supplement relating to a
Series of Certificates may specify that for
a period beginning on the Closing Date and
ending on a specified date before the
commencement of an Amortization Period or
Accumulation Period with respect to such
Series (the "Funding Period"), which period
is expected to be less than a year, the
Aggregate Principal Receivables in the Trust
allocable to such Series may be less than
the aggregate principal amount of the
Certificates of such Series and that the
amount of such deficiency (the "Pre-Funding
Amount") will be held in a trust account
established with the Trustee for the benefit
of Certificateholders of such Series (the
"Pre-Funding Account") pending the transfer
of additional Principal Receivables to the
Trust or pending the reduction of the
Investor Interests of other Series issued by
the Trust. The Pre-Funding Amount may be up
to 100% of the principal amount of the
Certificates of a Series. The related
Prospectus Supplement will specify the
initial Investor Interest on the Closing
Date with respect to such Series, the
aggregate principal amount of the
Certificates of such Series (the "Full
Investor Interest") and the date by which
the Investor Interest is expected to equal
the Full Investor Interest. The Investor
Interest will increase as Principal
Receivables are added to the Trust or as the
Investor Interests of other Series of the
Trust are reduced.
During the Funding Period, funds on deposit
in the Pre-Funding Account for a Series of
Certificates will be withdrawn and paid to
the holder of the Transferor Certificate or
its assigns to the extent of any increases
in the Investor Interest. In the event that
the Investor Interest does not for any
reason equal the Full Investor Interest by
the end of the Funding Period, any amount
remaining in the Pre-Funding Account and any
additional amounts specified in the related
Prospectus Supplement will be payable to the
Certificateholders of such Series in the
manner and at such time as set forth in the
related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, funds on deposit in the Pre-
Funding Account may be invested in Permitted
Investments or subject to a guaranteed rate
or investment agreement or other similar
arrangement, and investment earnings and any
applicable payment under any such investment
arrangement will be applied to pay interest
on the Certificates of such Series.
Credit Enhancement Credit Enhancement with respect to a Series
or any Class thereof may be provided in the
form or forms of subordination, a cash
collateral account or guaranty, a collateral
interest, a letter of credit, a surety bond,
an insurance policy, a spread account, a
reserve account or other form of support as
specified in the related Prospectus
Supplement. Credit Enhancement may also be
provided to a Class or Classes of different
Series by a cross-support feature which
requires that distributions of principal
and/or interest be made with respect to
Certificates of one or more Classes of a
particular Series before distributions are
made to one or more Classes of another
Series.
The type, characteristics and amount of the
Credit Enhancement will be determined based
on several factors, including the
characteristics of the Receivables and
Accounts included in the Trust Portfolio as
of the Closing Date with respect to any
Series, and will be established on the basis
of requirements of each Rating Agency rating
the Certificates of such Series. If so
specified in the related Prospectus
Supplement, any such Credit Enhancement will
apply only in the event of certain types of
losses and the protection against losses
provided by such Credit Enhancement will be
limited. The terms of the Credit
Enhancement with respect to a Series, and
the conditions under which the Credit
Enhancement may be increased, reduced or
replaced, will be described in the related
Prospectus Supplement. See "Credit
Enhancement" and "Risk Factors --
Limitations of Certificate Rating.
"Optional Repurchase With respect to each Series of
Certificates, the Investor Interest will be
subject to optional repurchase by the
Transferor on any Distribution Date after
the Investor Interest and the Enhancement
Invested Amount, if any, with respect to
such Series is reduced to an amount less
than or equal to 5% of the initial Investor
Interest, if any, or such other amount
specified in the related Prospectus
Supplement, if certain conditions set forth
in the Agreement are met. The repurchase
price will be as specified in the related
Prospectus Supplement. See "Description of
the Certificates -- Final Payment of
Principal; Termination."
Tax Status Special Tax Counsel will render an opinion
that the Offered Certificates of such Series
will be characterized as indebtedness for
Federal income tax purposes and that the
issuance of the Offered Certificates will
not cause the Trust to be treated as an
association (or publicly traded partnership)
taxable as a corporation. The Certificate
Owners will agree to treat the Offered
Certificates as debt for Federal income tax
purposes. See "U.S. Federal Income Tax
Consequences" for additional information
concerning the application of Federal income
tax laws.
ERISA Considerations Under regulations issued by the
Department of Labor, the Trust's assets
would not be deemed "plan assets" of any
employee benefit plan holding interests in
the Certificates of a Series if certain
conditions are met. If the Trust's assets
were deemed to be "plan assets" of an
employee benefit plan, there is uncertainty
as to whether existing exemptions from the
"prohibited transaction" rules of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), would apply to
all transactions involving the Trust's
assets. No assurance can be made with
respect to any offering of the Certificates
of any Series that the conditions which
would allow the Trust assets not to be
deemed "plan assets" will be met, although
the intention of the underwriters (but not
their assurance) as to whether the
Certificates of a particular Series will be
"publicly-offered securities", and therefore
eligible for an ERISA exemption, will be set
forth in the related Prospectus Supplement.
Accordingly, employee benefit plans
contemplating purchasing interests in
Certificates should consult their counsel
before making a purchase. See "ERISA
Considerations."
Certificate Rating It will be a condition to the issuance of
the Certificates of each Series or Class
thereof offered pursuant to this Prospectus
and the related Prospectus Supplement that
they be rated in one of the four highest
rating categories by at least one nationally
recognized rating organization (each such
rating organization selected by the
Transferor to rate any Series, a "Rating
Agency"). The rating or ratings applicable
to the Certificates of each Series or Class
thereof offered hereby will be set forth in
the related Prospectus Supplement.
A rating is not a recommendation to buy,
sell or hold securities and may be subject
to revision or withdrawal at any time by the
assigning Rating Agency. Each rating should
be evaluated independently of any other
rating. See "Risk Factors -- Limitations of
Certificate Rating."
Listing If so specified in the Prospectus Supplement
relating to a Series, application will be
made to list the Certificates of such
Series, or all or a portion of any Class
thereof, on the Luxembourg Stock Exchange or
any other specified exchange.
RISK FACTORS
Potential investors should consider, among other things, the following
considerations in connection with the purchase of the Certificates.
Potential Priority of Certain Liens. The Transferor will transfer
interests in Receivables to the Trust. A court could treat any such
transaction as an assignment of collateral as security for the benefit of
holders of Certificates issued by the Trust. The Transferor will represent
and warrant in the Agreement that the transfer of the Receivables to the
Trust is either a valid transfer and assignment of the related Receivables
to the Trust or the grant to the Trustee of a security interest in such
Receivables. The Transferor will take actions required to perfect the
Trust's security interest in the Receivables and will warrant that if the
transfer to the Trust is deemed to be a grant of a security interest in the
related Receivables, the Trustee will have a first priority perfected
security interest therein, except for certain tax and other governmental
liens and, with certain exceptions and for certain limited periods of time
provided for in Chapter 9 of the Louisiana Commercial Laws, in the proceeds
thereof. Nevertheless, if the transfer of Receivables to the Trust is
deemed to create a security interest therein, a tax or government lien or
other nonconsensual lien on property of the Transferor arising before
Receivables come into existence may have priority over the Trust's interest
in such Receivables, and if the FDIC were appointed receiver or conservator
of the Transferor, the FDIC's administrative expenses may also have
priority over the Trust's interest in such Receivables. The existence of
such liens or rights of the receiver of the Transferor could result in
possible delay or reductions in the amount of payments on the Certificates.
See "Certain Legal Aspects of the Receivables -- Transfer of Receivables."
In addition, while the Transferor is the Servicer, cash collections
held by the Transferor may, subject to certain conditions, be commingled
and used for the benefit of the Transferor prior to the date on which such
collections are required to be deposited in the Fi"Description of
Certificates -- Application of Collections." In the event of the
conservatorship or receivership of the Transferor or, in certain
circumstances, the lapse of certain time periods, the Trust may not have a
perfected interest in such collections and, in such event, the Trust may
suffer a loss of all or part of such collections which may result in a loss
to Certificateholders.
Receivership of Transferor. To the extent that the Transferor has
granted or will grant a security interest in Receivables to the Trust and
that security interest is validly perfected before the Transferor's
insolvency (and was not or will not be taken in contemplation of insolvency
of the Transferor, or with the intent to hinder, delay or defraud the
Transferor or the creditors of the Transferor), the Federal Deposit
Insurance Act ("FDIA"), as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended ("FIRREA"), provides that
such security interest should not be subject to avoidance by the FDIC, as
receiver for the Transferor. Positions taken by the FDIC staff prior to the
passage of FIRREA suggest that the FDIC, as receiver for the Transferor,
would not interfere with the timely transfer to the Trust of payments
collected on the related Receivables. If, however, the FDIC were to assert
a contrary position, such as requiring the Trustee to establish its right
to those payments by submitting to and completing the administrative claims
procedure under the FDIA, or the conservator or receiver were to request a
stay of proceedings with respect to the Transferor as provided under the
FDIA, delays in payments on the related Series of Certificates and possible
reductions in the amount of those payments could occur. In addition, the
FDIC, if appointed as the conservator or receiver for the Transferor has
the power under the FDIA to repudiate contracts, including secured
contracts of the Transferor. The FDIA provides that a claim for damages
arising from the repudiation of a contract is limited to "actual direct
compensatory damages." In the event the FDIC were to be appointed as
conservator or receiver of the Transferor and were to repudiate the
Agreement, then the amount payable out of available collections to the
Certificateholders could be lower than the outstanding principal and
accrued interest on the Certificates.
If a conservator or receiver were appointed for the Transferor, then a
Pay Out Event could occur with respect to all Series then outstanding and,
pursuant to the Agreement, new Principal Receivables would not be
transferred to the Trust. If a Pay Out Event occurs involving either the
insolvency of the Transferor or the appointment of a conservator or
receiver for the Transferor, the conservator or receiver may have the power
to prevent the commencement of the Rapid Amortization Period or, if
applicable with respect to a Series as specified in the related Prospectus
Supplement, the Rapid Accumulation Period, and may be able to require that
new Principal Receivables be transferred to the Trust. Such action could
cause delays or shortfalls in the amounts ultimately paid to
Certificateholders. A conservator or receiver may also have the power to
cause the early sale of the Receivables and the early retirement of the
Certificates of each Series or to prohibit the continued transfer of
Principal Receivables to the Trust. In addition, in the event of a Servicer
Default relating to the conservatorship or receivership of the Servicer, if
no Servicer Default other than such conservatorship or receivership exists,
the conservator or receiver for the Servicer may have the power to prevent
either the Trustee or the Certificateholders from appointing a successor
Servicer under the Agreement. See "Certain Legal Aspects of the Receivables
- -- Certain Matters Relating to Receivership."
Effects of Applicable Law
Limitations Imposed by Consumer Protection Laws. Federal and state
consumer protection laws, such as the Louisiana Consumer Credit Law,
Louisiana Collection Agency Regulation Act and Louisiana Equal Credit
Opportunity Law impose requirements on the making and enforcement of
consumer loans and extensions of credit to consumers. In addition, the
Soldiers' and Sailors' Civil Relief Act of 1940 (the "SSCRA") provides for
a stay of court proceedings against military personnel (including Air Force
personnel) on active duty if the ability of such person to defend against a
suit would be materially affected by reason of military service. The SSCRA
could adversely affect the Servicer's ability to collect on Receivables
generated under First NBC's USAF Club Card program and other military
programs, which make up a significant portion of the Trust Portfolio. See
"First NBC's Credit Card Activities -- General." In its experience to date
with the military programs, First NBC does not believe that the SSCRA has
had a material impact on its collection efforts, but there can be no
assurance that the SSCRA would not have an adverse effect in the future.
Congress and the states may enact new laws and amendments to existing
laws to regulate further the credit card and consumer credit industry or to
reduce finance charges or other fees or charges applicable to credit card
accounts. Such laws, as well as any new laws or rulings which may be
adopted, may adversely affect the Servicer's ability to collect on the
Receivables or maintain previous levels of monthly periodic finance charges
and other credit card fees. One effect of any legislation which regulates
the amount of interest and other charges that may be assessed on credit
card account balances could be to reduce the Portfolio Yield on the
Accounts. If such legislation were to result in a significant reduction in
the Portfolio Yield, a Pay Out Event could occur, in which case the Rapid
Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period would commence.
Certificateholders of an affected Series might then receive principal
payments earlier than expected. See "Description of the Certificates -- Pay
Out Events." If the resulting reduction in the Portfolio Yield were
significant enough, there could be reductions in payments to
Certificateholders of an affected Series.
Pursuant to the Agreement, the Transferor will covenant to accept
reassignment, subject to certain conditions described under "Description of
the Certificates -- Representations and Warranties," of each Receivable that
does not comply in all material respects with all requirements of
applicable law. The Transferor will make certain other representations and
warranties relating to the validity and enforceability of the Receivables.
However, it is not anticipated that the Trustee will make any examination
of the related Receivables or the records relating thereto for the purpose
of establishing the presence or absence of defects, compliance with such
representations and warranties, or for any other purpose. The sole remedy
if any such representation or warranty is breached and such breach
continues beyond the applicable cure period is that the Transferor will be
obligated to accept reassignment, subject to certain conditions described
under "Description of the Certificates -- Representations and Warranties,"
of the Receivables affected thereby. See "Description of the Certificates --
Representations and Warranties" and "Certain Legal Aspects of the
Receivables -- Consumer Protection Laws."
Application of Bankruptcy Law. Application of Federal and state
bankruptcy and debtor relief laws would affect the interests of the
Certificateholders in the Receivables if such laws result in any
Receivables being written off as uncollectible when there are no funds
available from any Credit Enhancement or other sources to cover any
resulting shortfalls in amounts payable to Certificateholders. See
"Description of the Certificates -- Defaulted Receivables; Incentive
Payments and Fraudulent Charges; Investor Charge-Offs."
Competition in the Credit Card Industry. The credit card industry is
highly competitive. As new credit card issuers enter the market and all
issuers seek to expand their share of the market, there is increased use of
advertising, target marketing and pricing competition. The Trust will be
dependent upon the Transferor's continued ability to generate new
Receivables. If the rate at which new Receivables are generated declines
significantly and the Transferor is unable to designate Additional
Accounts, a Partial Amortization for one or more Series could occur or a
Pay Out Event could occur with respect to each Series, in which case the
Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period with respect to each such Series
would commence. Certificateholders of an affected Series might then receive
principal payments earlier than expected.
Payments Other than at Expected Maturity. The Receivables may be paid
at any time and there is no assurance that there will be additional
Receivables created in the Accounts or that any particular pattern of
cardholder repayments will occur. The commencement and continuation of a
Controlled Amortization Period, a Principal Amortization Period, or a
Controlled Accumulation Period for a Series or Class thereof will be
dependent upon the continued generation of new Receivables to be conveyed
to the Trust. A significant decline in the amount of Receivables generated
could result in the occurrence of a Partial Amortization for one or more
Series or a Pay Out Event for one or more Series and the commencement of
the Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period for each such Series. If a Pay
Out Event occurs and the Rapid Amortization Period commences, or if a
Partial Amortization occurs, the average life to maturity of the affected
Series of Certificates could be significantly reduced.
In addition, the Transferor can give no assurance that the payment
rate assumptions for any Series will prove to be correct. The related
Prospectus Supplement will provide certain historical data relating to
payments by cardholders, total charge-offs and other related information
relating to the Trust Portfolio. There can be no assurance that future
events will be consistent with such historical data. In particular,
Certificateholders should be aware that the Transferor's ability to
continue to compete in the current industry environment will affect the
Transferor's ability to generate new Receivables to be conveyed to the
Trust and may also affect payment patterns.
Further, the amount of collections of Receivables may vary from month
to month due to seasonal variations, general economic conditions, changes
in periodic finance charges and payment habits of individual cardholders.
A significant decrease in such monthly payment rate could slow the return
or accumulation of principal during an Amortization Period or Accumulation
Period. No assurance can be given that payments of principal will be made
as expected during the Controlled Amortization Period or the Principal
Amortization Period, or with respect to an Accumulation Period, or on the
Scheduled Payment Date, as applicable. Further, there can be no assurance
that collections of Principal Receivables, and thus the rate at which the
related Certificateholders could expect to receive or accumulate payments
of principal on their Certificates during an Amortization Period or
Accumulation Period, or on any Scheduled Payment Date, as applicable, will
be similar to any historical experience set forth in a related Prospectus
Supplement. .
Effect of Social, Legal and Economic Factors on Credit Card Usage.
Changes in use of credit and payment patterns by customers may result from
a variety of social, legal and economic factors. Economic factors include
the rate of inflation, seasonal buying patterns, unemployment levels and
relative interest rates. Social factors also include unemployment rates as
well as changes in consumer confidence levels and attitudes toward
incurring debt. Legal factors include the application of usury and
consumer protection laws. Social, legal and economic factors in the State
of Louisiana and surrounding states may have a disproportionate effect on
the Trust because of the relatively large percentage of Accounts in such
States. See "The Receivables" in the related Prospectus Supplement. The
Transferor, however, is unable to determine and has no basis to predict
whether, or to what extent, social, legal or economic factors will affect
future use of credit or repayment patterns.
Affinity Programs. Some of the Accounts, the Receivables of which will
be conveyed to the Trust, were originated by First NBC under various
affinity agreements, including the agreements relating to First NBC's
United States Air Force Club program and other military programs. In the
future, Additional Accounts originated under these or other affinity
programs may be designated to the Trust (as may other Additional Accounts
not originated under affinity programs). Changes in the terms of such
programs or in First NBC's participation in the programs may affect the
rate at which new Receivables are generated in the related Accounts.
Prepayment Resulting from Pre-Funding Account. With respect to any
Series having a Pre-Funding Account, in the event that there is an
insufficient amount of Principal Receivables in the Trust at the end of the
applicable Funding Period, the Certificateholders of such Series will be
repaid principal from amounts on deposit in the Pre-Funding Account (to the
extent of such insufficiency) following the end of such Funding Period, as
described more fully in the Prospectus Supplement. Such repayment of
principal would be prior to the scheduled date of such repayment. As a
result of such repayment, Certificateholders would receive a principal
payment earlier than they expected. In addition, Certificateholders would
not receive the benefit of the applicable Certificate Rate for the period
of time originally expected on the amount of such early repayment. There
can be no assurance that a Certificateholder would be able to reinvest such
early repayment amount at a similar rate of return. If a Certificateholder
is not able to reinvest such early repayment amount at the same rate of
return or better, the Certificateholder's anticipated yield would be
adversely affected. However, a Series with a Pre-Funding Account feature
may also require the payment of a prepayment premium in such a
circumstance, which would mitigate the adverse effect to the
Certificateholder's anticipated yield.
Effect of Subordination. With respect to Certificates of a Series
having a Class or Classes of Subordinated Certificates, payments of
principal in respect of the Subordinated Certificates of a Series will
commence on the date specified in the related Prospectus Supplement, which
generally will be 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
allocable to the Certificates of a Series are insufficient to cover
required amounts due with respect to the Senior Certificates of such
Series, the Investor Interest 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 sale of Receivables in the
Trust due to the insolvency of the Transferor or the appointment of a
conservator or receiver for the Transferor, or due to the inability of the
Trustee to act as or find a successor Servicer after a Servicer Default,
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.
Transferor's Ability to Adversely Change Terms of the Receivables.
Pursuant to the Agreement, the Transferor does not transfer to the Trust
the Accounts but only the Receivables arising in the Accounts. As owner of
the Accounts, the Transferor retains the right to determine the monthly
periodic finance charges and other fees which will be applicable from time
to time to the Accounts, to alter the minimum monthly payment required on
the Accounts and to change various other terms with respect to the
Accounts, including changing the annual percentage rate from a fixed rate
to a variable rate or vice versa. A decrease in the periodic finance
charge or a reduction in credit card or other fees would decrease the
effective yield on the Accounts and could result in the occurrence of a Pay
Out Event with respect to each Series and the commencement of the Rapid
Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period with respect to each such Series.
Certificateholders of an affected Series might then receive principal
payments earlier than expected. If the resulting reduction reduced the
Portfolio Yield significantly, there could be reductions in payments to
Certificateholders of an affected Series. Under the Agreement, the
Transferor will agree that, except as otherwise required by law or as is
deemed by the Transferor to be necessary in order to maintain its revolving
credit business, based upon a good faith assessment by it, in its sole
discretion, of the nature of the competition in that business, the
Transferor will not reduce the annual percentage rate or the periodic
finance charges assessed on the related Receivables or other fees on the
related Accounts if, as a result of such reduction, the Portfolio Yield for
any Series as of such date would be less than the Base Rate for such
Series. The Transferor from time to time may offer special rates
(generally of limited duration) which may be less than the annual
percentage rates applicable Portfolio Yield" and "Base Rate" for each
Series will have the meanings set forth in the Prospectus Supplement
relating to each such Series. In addition, the Agreement will provide that
the Transferor may change the terms of the contracts relating to the
related Accounts or its servicing policies and procedures (including
changes that could reduce the required minimum monthly payment and change
the calculation of the amount or the timing of finance charges, credit card
fees and charge offs), if such change (i) would not, in the reasonable
belief of the Transferor, cause a Pay Out Event for any related Series to
occur, and (ii) is made applicable to the comparable segment of revolving
credit accounts owned and serviced by the Transferor which have
characteristics the same as or substantially similar to the related
Accounts which are subject to such change. In servicing the Accounts, the
Servicer will be required to exercise the same care and apply the same
policies that it exercises in handling similar matters for its own
comparable accounts. Except as specified above or in any Prospectus
Supplement, there will be no restrictions on the Transferor's ability to
change the terms of the Accounts. There can be no assurance that changes in
applicable law, changes in the marketplace or prudent business practice
might not result in a determination by the Transferor to take actions which
would change this or other Account terms or that such changes would not be
adverse to the interests of Certificateholders. See "Receivable Yield
Considerations" in the Prospectus Supplement.
Incentive Programs. First NBC has established incentive programs
applicable to certain accounts in the Bank Portfolio. These programs
permit a qualifying cardholder participating in the program to earn rights
to obtain airline tickets paid for by First NBC based upon use of the
account. The Trust will not assume the obligation to purchase airline
tickets or provide other benefits earned under this or any other incentive
program that may bo this or any similar incentive program are included in
the Trust Portfolio, a cardholder entitled to receive an incentive payment
from First NBC might assert that he or she could reduce the amount he or
she was required to pay on a Receivable if First NBC failed to provide a
ticket or other benefit that had been earned under the program. See
"Description of the Certificates -- Defaulted Receivables; Incentive
Payments and Fraudulent Charges; Investor Charge-Offs."
Basis Risk. If so specified in the related Prospectus Supplement, a
portion of the Accounts will have finance charges set at a variable rate
above a designated prime rate or other designated index. A Series of
Certificates may bear interest at a fixed rate or at a floating rate based
on an index other than such prime rate or other designated index. If there
is a decline in such prime rate or other designated index, the amount of
collections of Finance Charge Receivables on such Accounts may be reduced,
whereas the amounts payable as interest on such Series of Certificates and
other amounts required to be funded out of collections of Finance Charge
Receivables with respect to such Series may not be similarly reduced.
Conversely, to the extent that Accounts bear interest at a fixed rate and
there is an increase in such prime rate or other designated index, amounts
payable as interest on such Series of Certificates and other amounts
required to be funded out of collections of Finance Charge Receivables with
respect to such Series may be increased, whereas the amount of collections
of Finance Charge Receivables on such Accounts may not be similarly
increased.
Issuance of New Series; Groups. The Trust, as a master trust, may
issue Series and sell Purchased Interests from time to time. While the
terms of any Series will be specified in a Series Supplement, the
provisions of a Series Supplement and, therefore, the terms of any
additional Series, will not be subject to the prior review by, or consent
of, holders of the Certificates of any previously issued Series. Similarly,
the terms of any Purchased Interest will not be subject to the prior review
by, or consent of, holders of the Certificates of any previously issued
Series. The terms of any Series may include methods for determining
applicable investor percentages and allocating collections, provisions
creating different or additional security, provisions subordinating such
Series to another Series or other Series (if the Series Supplement relating
to such Series so permits) to such Series, and any other amendment or
supplement to the Agreement which is made applicable only to such Series.
The terms of any Purchased Interest may also cover all of the above-
mentioned matters. It is a condition precedent to the issuance of any
additional Series, or sale of a Purchased Interest, that each Rating Agency
that has rated any outstanding Series deliver written confirmation to the
Trustee that such issuance or sale will not result in such Rating Agency
reducing or withdrawing its rating on any such outstanding Series. See
"Description of the Certificates -- New Issuances." There can be no
assurance, however, that the terms of any other Series, including any
Series issued from time to time hereafter, or the terms of any Purchased
Interest might not have an impact on the timing and amount of payments
received by a Certificateholder of any other Series.
In addition, the Series Supplements relating to Series which are part
of a Reallocation Group as described herein may provide that collections of
Receivables allocable to such Series will be reallocated among all Series
in the Reallocation Group. Consequently, the issuance of new Series in a
Reallocation Group may have the effect of reducing the amount of
collections of Receivables which are reallocated to the Certificates of
existing Series in such Reallocation Group. For example, an additional
Series which is issued with a larger claim with respect to monthly interest
than that of previously issued Series in such Reallocation Group (due to a
higher certificate rate) will receive a proportionately larger reallocation
of collections of Finance Charge Receivables. Such issuance will reduce
the amount of collections of Finance Charge Receivables which are
reallocated to the existing Series in such Reallocation Group.
Furthermore, there can be no assurance that, for any Series in a
Reallocation Group, the Trust will issue any other Series in such
Reallocation Group. Accordingly, the anticipated benefits of reallocation
of collections of Receivables may not be realized. See "Description of the
Certificates -- Allocations" and "Reallocations Among Certificates of
Different Series within a Reallocation Group."
Addition of Trust Assets -- Effect on Credit Quality. The Transferor
expects, and in some cases will be obligated, to designate Additional
Accounts, the Receivables in which will be conveyed to the Trust.
In addition, the Agreement provides that the Transferor may add
Participations to the Trust. The designation of Additional Accounts
and Participations will be subject to the satisfaction
of certain conditions described herein under "Description of the
Certificates--Addition of Trust Assets." Additional Accounts may include
accounts originated using criteria different from those which were applied
to the Accounts designated on the Cut-Off Date or to previously-designated
Additional Accounts, because such accounts were originated at a different
date or were acquired from another institution. Consequently, there can be
no assurance that Additional Accounts designated in the future will be of
the same credit quality as previously-designated Accounts. The varying
quality of Trust assets could affect the payment patterns and default
experience of such portfolio. If such effect on payment patterns is
significant, a Partial Amortization for one or more Series could occur or a
Pay Out Event could occur with respect to each Series, in which case the
Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period, with respect to each such Series
would commence. Certificateholders of an affected Series might then
receive principal payments earlier than expected. In addition, if a
decline in the credit quality of the portfolio were significant enough, it
could result in reductions in payments to Certificateholders in an affected
Series.
Limited Certificateholder Control of Action under Agreement. The
Certificateholders will generally have limited control over the
administration of the Trust. Subject to certain exceptions, the
Certificateholders of each Series may take certain actions, or direct
certain actions to be taken, under the Agreement or Series Supplement.
However, the Agreement or Series Supplement may provide that under certain
circumstances the consent or approval of a specified percentage of the
aggregate Investor Interest of other Series or of the Investor Interest of
a specified Class of such other Series will be required to direct certain
actions, including requiring the appointment of a successor Servicer
following a Servicer Default, amending the Agreement in certain
circumstances and directing a repurchase of all outstanding Series upon the
breach of certain representations and warranties by the Transferor.
Certificateholders of other Series may have interests which do not coincide
in any way with the interests of Certificateholders of the subject Series.
In addition, Certificateholders of different Classes of the same Series may
have interests which do not coincide. In such instances, it may be
difficult for the Certificateholders of such Series to achieve the results
from the vote that they desire.
Limitations of Certificate Rating. Any rating assigned to the
Certificates of a Series or a Class by a Rating Agency will reflect such
Rating Agency's assessment of the likelihood that Certificateholders of
such Series or Class will receive the payments of interest and principal
required to be made under the Agreement and will be based primarily on the
value of the Receivables in the Trust and the availability of any
Enhancement with respect to such Series or Class. However, any such rating
will not, unless specifically so provided in the related Prospectus
Supplement with respect to any Class or Series offered hereby, address the
likelihood that the principal of any Certificates of such Class duled date.
In addition, any such rating will not address the possibility of the
occurrence of a Pay Out Event with respect to such Class or Series, the
financial condition or creditworthiness of the Transferor or the
possibility of the imposition of United States withholding tax with respect
to non-U.S. Certificateholders. The rating will not be a recommendation to
purchase, hold or sell Certificates of such Series or Class, and such
rating will not comment as to the marketability of such Certificates, any
market price or suitability for a particular investor. There is no
assurance that any rating will remain for any given period of time or that
any rating will not be lowered or withdrawn entirely by a Rating Agency if
in such Rating Agency's judgment circumstances so warrant. The Transferor
will request a rating of the Certificates of each Series offered hereby by
at least one Rating Agency. There can be no assurance as to whether any
rating agency not requested to rate the Certificates will nonetheless issue
a rating with respect to any Series of Certificates or Class thereof. A
rating assigned to any Series of Certificates or Class thereof by a rating
agency that has not been requested by the Transferor to do so may be lower
than the rating assigned by a Rating Agency pursuant to the Transferor's
request.
Limited Credit Enhancement. Although Credit Enhancement may be
provided with respect to a Series of Certificates or any of its Classes,
the amount available will generally be limited and subject to certain
reductions. If the amount available under any Credit Enhancement is reduced
to zero, Certificateholders of the Series or Class covered by such Credit
Enhancement will bear directly the credit and other risks associated with
their undivided interest in the Trust and will be more likely to suffer a
loss on their investment in the Certificates. See "Credit Enhancement."
Certificateholders' Direct Exercise of Rights Limited by Book-Entry
Registration. The Certificates of Series offered hereby initially will, if
so specified in the related Prospectus Supplement, be represented by one or
more Certificates registered in the name of Cede, the nominee for DTC, and
will not be registered in the names of the Certificate Owners or their
nominees. Unless and until Definitive Certificates are issued for such a
Series, Certificate Owners relating to such Series will not be recognized
by the Trustee as Certificateholders, as that term will be used in the
Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Certificateholders indirectly through DTC, Cedel or
Euroclear and their participating organizations. See "Description of the
Certificates--Book -- Entry Registration" and "-- Definitive Certificates."
Risks of Swaps. The Trustee, on behalf of the Trust, may enter into
interest rate swaps and related caps, floors and collars to reduce the risk
to Certificateholders from adverse changes in interest rates. However,
such transactions will not eliminate fluctuations in the value of the
Receivables or prevent such losses if the value of the Receivables decline.
The Trust's ability to hedge all or a portion of its portfolio of
Receivables through transactions in Swaps depends on the degree to which
interest rate movements in the market generally correlate with interest
rate movements in the Receivables.
The Trust's ability to engage in transactions involving Swaps will
depend on the degree to which the Trust can identify acceptable
Counterparties. There can be no assurance that acceptable Counterparties
will be available for a specific Swap at any specific time.
The costs to the Trust of hedging transactions vary among the various
hedging techniques and also depend on such factors as market conditions and
the length of the contract. Furthermore the Trust's ability to engage in
hedging transactions may be limited by tax considerations.
Swaps are not traded on markets regulated by the Commission or the
Commodity Futures Trading Commission, but are arranged through
financial institutions acting as principals or agents. In an over-the-
counter environment, many of the protections afforded to exchange
participants are not available. For example, there are no daily
fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Because the performance of
over-the-counter Swaps is not guaranteed by any settlement agency, there is
a risk of Counterparty default.
The Trust may consider taking advantage of investment opportunities in
Swaps that are not presently contemplated for use by the Trust or that are
not currently available but that may be developed, to the extent such
opportunities are both consistent with the Trust's objectives and legally
permissible investments for the Trust. Such opportunities, if they arise,
may involve risks that differ from or exceed those involved in the
activities described above and will be more fully described in the
applicable Prospectus Supplement.
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, 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.
Allocations. To the extent provided in any Series Supplement, or any
amendment to the Agreement, portions of the Receivables or Participations
conveyed to the Trust and all collections received with respect thereto may
be allocated to one or more Series as long as the Rating Agency Condition
shall have been satisfied with respect to such allocation and the Servicer
shall have delivered an officer's certificate to the Trustee to the effect
that the Servicer reasonably believes such allocation will not adversely
affect in any material respect the interests of the Certificateholders of
any Series issued and outstanding.
THE TRUST
The Trust will be formed in accordance with the laws of the State of
New York pursuant to the Agreement. The Trust will not be permitted to
engage in any business activity other than acquiring and holding
Receivables, issuing Series of Certificates and the related Transferor
Certificate, making payments thereon and engaging in related activities
(including, with respect to any Series, obtaining any Enhancement and
entering into a related Enhancement agreement).
FIRST NBC'S CREDIT CARD ACTIVITIES
General
First Bankcard Center ("First Bankcard"), a division of First NBC, was
one of the earliest BankAmericard issuers, entering the credit card
business in 1968. From that time through the early 1990's, First Bankcard
relied primarily on the branch networks of First NBC and its affiliated
banks, a network of correspondent banks ("agent banks"), affinity groups
and portfolio acquisitions to generate new accounts. In 1989 First
Bankcard began its relationship with the military sector and was awarded
the management contract for the Air Force Logistics Command's Club Card
Program. Beginning in 1994, First Bankcard's new account strategy has also
included pre-approved campaigns focused on the cross-selling of bankcard
products to customers and prospects of First NBC and its affiliated banks,
agent banks and affinity groups. In addition, these campaigns have been
augmented with a few regionally specific pre-approved prospect campaigns.
In December, 1994, the Club Card Program was expanded with United States
Air Force Services ("USAF") to include Club Card Program services at all
United States Air Force bases in the United States, including Alaska and
Hawaii. The USAF Club Card Program was again expanded in 1996 to provide
U. S. dollar-denominated Club Card Program services to military personnel
in bases outside the United States.
First Bankcard provides cardholder and/or merchant services to its
network of 202 agent banks, which have not chosen to become Class A members
of the VISA or MasterCard Associations. First Bankcard's 30 affinity
groups benefit from the value-added services provided by First Bankcard, as
well as from sharing in the on-going earnings generated by group members
through use of their cards. The USAF Club Card Program includes
centralized dues and account billing for both officers and enlisted clubs,
providing a diverse population for new account and account balance growth.
Certain data processing and administrative functions associated with the
servicing of the Bank Portfolio are performed by First Commerce Service
Corporation. See "The Trust -- Description of First Commerce Service
Corporation."
With respect to each Series of Certificates, the Receivables conveyed
or to be conveyed to the Trust by the Bank pursuant to the Agreement have
been or will be generated from transactions made by holders of selected
MasterCard, VISA and private label credit accounts, including premium
accounts and standard accounts,within the Bank Portfolio. Generally, both
premium and standard accounts undergo the same credit analysis, but premium
accounts carry higher credit limits and offer a wider variety of services
to the cardholders. The private label accounts included in the Bank
Portfolio (the "Private Label Accounts") relate to credit cards issued to
military personnel who do not meet the credit standards for issuance of
standard credit cards and are guaranteed by United States Air Force
Services. The Bank currently services the Bank Portfolio in the manner
described in the related Proors -- Transferor's Ability to Adversely Change
Terms of the Receivables" for a discussion of the effect of the Bank's
ability to modify terms of the Receivables after the initial issuance of
any Series.
The VISA and MasterCard credit accounts may be used for fous, cash
advances, balance transfers and convenience checks. Purchases occur when
cardholders use credit cards to buy goods and/or services. A cash advance
is made when a credit card is used to obtain cash from a financial
institution, an automated teller machine or in a cash equivalent
transaction. Cardholders (or accountholders) may also use convenience
checks to (i) transfer balances from other credit card accounts to their
First Bankcard accounts and (ii) draw against their VISA and MasterCard
credit card accounts at any time. Amounts due with respect to purchases,
cash advances and convenience checks are included in the Receivables.
Private Label Accounts may be used only for purchases at officer and
enlisted clubs.
In addition, MasterCard and VISA cardholders (or accountholders) in
certain states are able to purchase insurance against the inability to
repay all or a portion of their account balances for reasons such as
involuntary unemployment, death, disability or accidental
death/dismemberment. Premiums for this insurance are charged to the
account for each monthly billing cycle (each a "Billing Cycle"). Such
insurance premiums are included in the Receivables transferred to the Trust
and are treated as Principal Receivables.
Each cardholder (or accountholder) is subject to an agreement with
First Bankcard governing the terms and conditions of the related
MasterCard, VISA or private label credit card account. Pursuant to each
such agreement, except as described herein or in any related Prospectus
Supplement, First Bankcard reserves the right, subject to notice as may be
required by law or such agreement, to add to, change or terminate any
terms, conditions, services or features of its MasterCard, VISA or private
label credit card accounts at any time, including increasing or decreasing
the periodic finance charges, other charges or the minimum monthly payment
requirements. The agreement with each cardholder (or accountholder)
provides that First Bankcard may apply such changes, when applicable, to
current outstanding balances as well as to future transactions. The
foregoing notwithstanding, certain affinity agreements provide that the
terms and conditions of the agreement between First Bankcard and the
cardholder (or accountholder) may be changed only at the end of the
contract period of such affinity agreement.
Acquisition and Use of Credit Card Accounts
New credit card account marketing and solicitation is handled by the
First Bankcard Marketing Department. New credit card accounts are
originated through both customer inquiry and direct mail solicitation
programs. Customer inquiry originations are generally initiated by
applicants who pick up applications at a branch of the Bank, a First NBC
affiliated bank or an agent bank, from an affinity group or at any Club
Card Program location, or call First Bankcard and ask that an application
be sent to them. Direct mail solicitations are generally followed up by
telemarketing efforts.
First Bankcard believes that its network of affiliated banks, agent
banks, affinity groups and military relatiolusive right to market credit
cards bearing the name of the related financial institution or
organization, represents significant opportunities for growth in the
cardholder base. First Bankcard believes that these relationships
generally provide better credit quality and lower attrition than
non-relationship-based accounts. These relationships are generally governed
by agency or affinity agreements between First Bankcard and an agent bank,
affiliate bank or sponsoring institution, which are periodically subject to
renewal, renegotiation or cancellation by one or both parties (in some
cases as often as annually). Any changes in the terms of one of these
programs or in First NBC's participation in such program could affect the
rate at which new Receivables are generated in the related Accounts.
Credit applications are processed through an automated application
processing system that uses credit scorecards. A "score" is calculated for
each applicant, using information from the application and a credit bureau
report obtained through an independent credit reporting agency. The credit
scorecards are based upon credit scoring models developed with Fair, Isaac
and Company, Inc. Those applications that are flagged for further review
(i.e., those that are neither accepted nor rejected) by the automated
application processing system are reviewed by a First Bankcard credit
analyst who makes a credit and limit assignment decision based on a review
of (i) the score generated by the credit scorecard, (ii) information
contained in the application, (iii) the independent credit report referred
to above and (iv) an analysis of the applicant's capacity to repay. The
primary factors considered in the non-military credit scoring model include
(a) the presence or absence of existing credit references and checking and
savings account references, (b) the number of recently reported insdit
file, (c) revolving utilization reflected in the credit file and (d) the
number oactors considered in the military credit scoring model include (a)
occupation, (b) high credit card utilization reflected in the credit file,
(c) the number of major derogatory ratings reflected in the credit file and
(d) the number of inquiries.
First Bankcard also uses a prescreening process as a method of
acquiring new accounts. First Bankcard primarily identifies potential
prospects for pre-approved solicitations through lists obtained from (i)
First NBC and its affiliated banks, (ii) agent banks and (iii) affinity
groups. First Bankcard submits to the credit bureaus its credit criteria
and cutoff scores for those criteria to screen prospects. Lists of
individuals who meet the criteria are returned to the mailing list vendor,
and a pre-approved offer for a credit card is made to those individuals.
An offeree's response to the solicitation is reviewed and confirmed, and a
credit card is issued. Where an individual's creditworthiness undergoes
rapid and substantial change following the initial prescreening, First
Bankcard may refuse to extend any credit to that individual despite the
pre-approved offer. The primary factors considered in First Bankcard's
credit criteria are (a) the length and depth of the individual's credit
experience, (b) recency and severity of the delinquencies reflected in the
file, (c) the presence of derogatory public record information and (d) the
use of a generic credit bureau score model developed by Fair, Isaac and
Company, Inc.
If First Bankcard acquires credit card accounts originally opened by
another institution, those accounts may have been opened using criteria
different from those used by First Bankcard and may not have been subject
to the same level of credit review as accounts originally established by
First Bankcard. Portfolios of revolving credit accounts purchased by First
Bankcard from other credit card issuers may be added to the Trust from
time.
Description of First Commerce Service Corporation
Credit card processing services performed by First Commerce Service
Corporation ("FCSC"), a wholly owned subsidiary of the Corporation, include
statement rendering, payment processing, data processing, embossing,
research, accounting, purchasing, legal, audit, human resources and network
services and systems development. FCSC's data network provides an
interface to MasterCard International Incorporated and VISA USA, Inc. for
performing authorizations and funds transfers. Data processing and network
functions are performed in FCSC's facility in Harahan, Louisiana.
Interchange
Creditors participating in the VISA and MasterCard associations
receive Interchange as partial compensation for taking credit risk,
absorbing fraud losses and funding receivables for a limited period prior
to initial billing. Under the VISA and MasterCard systems, a portion of
this Interchange in connection with cardholder charges for goods and
services is passed from banks which clear the transactions for merchants to
credit card issuing banks. Interchange fees are set annually by MasterCard
and VISA and are based on the number of credit card transactions and the
amount charged per transaction. To the extent specified in any Prospectus
Supplement, the Transferor will be required to transfer to the Trust for
the benefit of the related Series the percentage of Interchange, determined
on the basis of the amount of cardholder charges for goods and services in
the Accounts designated for Trust relative to the total amount of charges
for goods and services in all MasterCard and VISA credit card accounts
owned by the Transferor (or on such other basis as the related Prospectus
Supplement may specify). If so required to be transferred, Interchange
arising under the Accounts will be allocated to the related Certificates of
any Series in the manner provided in the related Prospectus Supplement, and
will be (a) treated as collections of Finance Charge Receivables and used
to pay required monthly payments including interest on the related Series
of Certificates, (b) used to pay all or a portion of the Servicing Fee to
the Servicer, or (c) both, as specified in the related Prospectus
Supplement.
THE RECEIVABLES
The Receivables conveyed to the Trust will arise in Accounts selected
from the Bank Portfolio on the basis of criteria set forth in the Agreement
as applied on the Cut-Off Date and, with respect to Additional Accounts, as
of the related date of their designation (the "Trust Portfolio"). The
Transferor will have the right (subject to certain limitations and
conditions set forth therein), and in some circumstances will be obligated,
to designate from time to time Additional Accounts and to transfer to the
Trust all Receivables in such Additional Accounts, whether such Receivables
are then existing or thereafter created, or to transfer Participations in
lieu of such Receivables or in addition thereto. Any Additional Accounts
designated pursuant to the Agreement must be Eligible Accounts as of the
date the Transferor designates such accounts as Additional Accounts.
Furthermore, pursuant to the Agreement, the Transferor has the right
(subject to certain limitations and conditions) to designate certain
Accounts as Removed Accounts and to require the Trustee to reconvey all
Receivables in such Removed Accounts to the Transferor, whether such
Receivables are then existing or thereafter created. Throughout the term of
the Trust, the Accounts from which the Receivables arise will be the
Accounts designated by the Transferor on the Cut-Off Date plus any
Additional Accounts minus any Removed Accounts. With respect to each Series
of Certificates, the Transferor will represent and warrant to the Trust
that, as of the Closing Date and the date Receivables are conveyed to the
Trust, such Receivables meet certain eligibility requirements. See
"Description of the Certificates -- Representations and Warranties."
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the Trust Portfolio as of the date
specified. Such information will include, but not be limited to, the amount
of Principal Receivables, the amount of Finance Charge Receivables, the
range of balances of the Accounts and the average thereof, the range of
credit limits of the Accounts and the average thereof, the range of ages of
the Accounts and the average thereof, the geographic distribution of the
Accounts, the types of Accounts and delinquency statistics relating to the
Accounts.
MATURITY ASSUMPTIONS
Following the Revolving Period for each Series, collections of
Principal Receivables are expected to be distributed to the
Certificateholders of that Series or any specified Class thereof on each
specified Distribution Date during the Controlled Amortization Period or
the Principal Amortization Period, or are expected to be accumulated for
payment to Certificateholders of that Series or any specified Class thereof
during an Accumulation Period and distributed on a Scheduled Payment Date.
However, if the Rapid Amortization Period commences, collections of
Principal Receivables will be paid to Certificateholders in the manner
described herein and in the related Prospectus Supplement. Further, if a
Partial Amortization occurs, certain funds available in the Excess Funding
Account may be paid to Certificateholders in the manner described herein
and in the related Prospectus Supplement. The related Prospectus
Supplement will specify when the Controlled Amortization Period, the
Principal Amortization Period or an Accumulation Period, as applicable,
will commence, the principal payments expected or available to be received
or accumulated during such Controlled Amortization Period, Principal
Amortization Period or Accumulation Period, or on the Scheduled Payment
Date, as applicable, the manner and priority of principal accumulations and
payments among the Classes of a Series of Certificates, the payment rate
assumptions on which such expected principal accumulations and payments are
based and the Pay Out Events which, if any were to occur, would lead to the
commencement of a Rapid Amortization Period or, if so specified in the
related Prospectus Supplement, a Rapid Accumulation Period.
No assurance can be given, however, that collections on Principal
Receivables allocated to be paid to Certificateholders or the holders of
any specified Class thereof will be available for distribution or
accumulation for payment to Certificateholders on each Distribution Date
during the Controlled Amortization Period, the Principal Amortization
Period or an Accumulation Period, or on the Scheduled Payment Date, as
applicable. See "Risk Factors -- Payment Other than at Expected Maturity."
USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates offered
hereby will be paid to the Transferor as consideration for the transfer of
the Receivables to the Trust. The Transferor will use such proceeds for
its general corporate purposes.
FIRST NBC AND FIRST COMMERCE CORPORATION
First NBC is a national banking association and a wholly owned
subsidiary of First Commerce Corporation (the "Corporation"). The Bank's
main office is located at 210 Baronne Street, New Orleans, Louisiana 70112,
telephone (504) 623-1371. The New Orleans metropolitan area is the primary
market served by the Bank. The Bank and its subsidiaries offer a full
range of banking and related financial services to commercial and consumer
customers. First NBC issues credit cards both directly and as agent for
other banks.
The Corporation is a Louisiana corporation and a bank holding company
under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), and
maintains its headquarters in New Orleans, Louisiana. The Corporation has
six wholly owned bank subsidiaries, each in Louisiana: the Bank, City
National Bank of Baton Rouge, Central Bank (Monroe), The First National
Bank of Lafayette, Rapides Bank & Trust Company in Alexandria and The First
National Bank of Lake Charles. The Prospectus Supplement for each Series
of Certificates will provide additional information, including limited
financial information, relating to the Bank's credit card activities and
the Corporation.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent
an interest in the Trust other than the interests represented by any other
Series of Certificates issued by the Trust (which may include Series
offered pursuant to this Prospectus) and the Transferor Certificate. Each
Series will be issued pursuant to a Series Supplement. The Prospectus
Supplement for each Series will describe any provisions of the Agreement
relating to such Series which may differ materially from the Agreement
filed as an exhibit to the Registration Statement. The following summaries
describe certain provisions common to each Series of Certificates. The
summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Agreement and Series Supplement.
General
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable Investor
Percentage of all cardholder (or accountholder) payments on the Receivables
in the Trust. The Investor Interest for each Series of Certificates on any
date will generally be equal to the initial Investor Interest as of the
related Closing Date for such Series (increased by the principal balance of
any Certificates of such Series issued after the Closing Date for such
Series) minus the amount of principal paid to the related
Certificateholders prior to such date and minus the amount of unreimbursed
Investor Charge-Offs with respect to such Certificates prior to such date,
except that the Invested Amount of any pre-funded Series may increase upon
the transfer of additional Principal Receivables to the Trust or the
reduction of the Investor Interest or the Adjusted Investor Interest of
another Series. If so specified in the Prospectus Supplement relating to
any Series of Certificates, under certain circumstances the Investor
Interest may be further adjusted by the amount of principal allocated to
Certificateholders, the funds on deposit in any specified account, and any
other amount specified in the related Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or
more of which may be Senior Certificates or Subordinated Certificates. Each
Class of a Series will evidence the right to receive a specified portion of
each distribution of principal or interest or both. The Investor Interest
with respect to a Series with more than one Class will be allocated among
the Classes as described in the related Prospectus Supplement. The
Certificates of a Class may differ from Certificates of other Classes of
the same Series in, among other things, the amounts allocated to principal
payments, maturity date, Certificate Rate and the availability of
Enhancement.
For each Series of Certificates, payments of interest and principal
will be made on Distribution Dates specified in the related Prospectus
Supplement to Certificateholders in whose names the Certificates were
registered on the record dates (each, a "Record Date") specified in the
related Prospectus Supplement. Interest will be distributed to
Certificateholders in the amounts, for the periods and on the dates
specified in the related Prospectus Supplement.
The Transferor initially will own the Transferor Certificate. The
Transferor Certificate will represent the undivided interest in the Trust
not represented by the Certificates issued and outstanding under the Trust
or the rights, if any, of any Credit Enhancement Providers to receive
payments from the Trust. The holder of the Transferor Certificate will have
the right to a percentage (the "Transferor Percentage") of all cardholder
(or accountholder) payments from the Receivables in the Trust. The
Transferor Certificate may be transferred in whole or in part subject to
the limitations and conditions described therein. See "-- Certain Matters
Regarding the Transferor and the Servicer."
During the Revolving Period with respect to each Series of
Certificates offered hereby, the amount of the Investor Interest for that
Series will remain constant except as described in "-- Defaulted
Receivables; Incentive Payments and Fraudulent Charges; Investor Charge-
Offs" (which describes circumstances in which the Investor Interest will be
reduced during the Revolving Period) and "-- Funding Period" (which
describes circumstances in which the Investor Interest will be increased
during a Funding Period which would coincide with the Revolving Period for
the affected Series). The amount of Principal Receivables in the Trust,
however, will vary each day as new Principal Receivables are created and
others are paid. The amount of the Transferor Interest will fluctuate each
day, to reflect the changes in the amount of the Principal Receivables in
the Trust (and amounts, if any, on deposit in the Excess Funding Account).
When a Series is amortizing, the Investor Interest of such Series will
decline as customer payments of Principal Receivables are collected and
distributed to or accumulated for distribution to the Certificateholders.
As a result, the Transferor Interest will generally increase to reflect
reductions in the Investor Interest for such Series and will also change to
reflect the variations in the amount of Principal Receivables in the Trust.
The Transferor Interest in the Trust may also be reduced as the result of a
New Issuance. See "-- New Issuances."
Certificates of each Series initially will be represented by
certificates registered in the name of the nominee of DTC (together with
any successor depository selected by the Transferor, the "Depository")
except as set forth below. See "--Definitive Certificates." With respect to
each Series of Certificates, beneficial interests in the Certificates will
be available for purchase in minimum denominations as specified in the
related Prospectus Supplement (or, if not so specified, in minimum
denominations of $1,000 and integral multiples thereof). As to any Series
of Certificates issued in book-entry form, the Transferor has been informed
by DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be
the holder of record of each such Series of Certificates. No Certificate
Owner acquiring an interest in such Certificates will be entitled to
receive a certificate representing such person's interest in the
Certificates. Unless and until Definitive Certificates are issued for any
Series under the limited circumstances described herein, all references
herein to actions by Certificateholders shall refer to actions taken by DTC
upon instructions from DTC Participants, and all references herein to
distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as
the registered holder of the Certificates, as the case may be, for
distribution to Certificate Owners in accordance with DTC procedures. See
"-- Book-Entry Registration" and "-- Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or
a portion of any Class thereof, on the Luxembourg Stock Exchange or any
other specified exchange.
Book-Entry Registration
With respect to each Series of Certificates issued in book-entry form,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants
and the Euroclear Participants, respectively, through customers' securities
accounts in Cedel's and Euroclear's names on the books of their respective
depositories (collectively, the "Depositaries") which in turn will hold
such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities for its Participants ("DTC
Participants") and facilitates the clearance and settlement among DTC
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic book-entry changes in DTC
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to the DTC system is also available to
others such as securities brokers and dealers, banks, and trust companies
that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and DTC Participants are on file with the
Commission.
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in
DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established
deadlines (European time). The relevant European international clearing
system will, if the transaction meets its settlement requirements, deliver
instructions to its Depositary to take action to effect final settlement on
its behalf by delivering or receiving securities in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Cedel Participants and Euroclear Participants
may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and such credits or any transactions
in such securities settled during such processing will be reported to the
relevant Cedel Participant or Euroclear Participant on such business day.
Cash received in Cedel or Euroclear as a result of sales of securities by
or through a Cedel Participant or a Euroclear Participant to a DTC
Participant will be received with value on the DTC settlement date but will
be available in the relevant Cedel or Euroclear cash account only as of the
business day following settlement in DTC.
Purchases of Certificates under the DTC system must be made by or
through DTC Participants, which will receive a credit for the Certificates
on DTC's records. The ownership interest of each actual Certificate Owner
is in turn to be recorded on the DTC Participants' and Indirect
Participants' records. Certificate Owners will not receive written
confirmation from DTC of their purchase, but Certificate Owners are
expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the DTC
Participant or Indirect Participant through which the Certificate Owner
entered into the transaction. Transfers of ownership interests in the
Certificates are to be accomplished by entries made on the books of DTC
Participants acting on behalf of Certificate Owners. Certificate Owners
will not receive certificates representing their ownership interest in
Certificates, except in the event that use of the book-entry system for the
Certificates is discontinued.
To facilitate subsequent transfers, all Certificates deposited by DTC
Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Certificates with DTC and their registration in the name
of Cede & Co. effects no change in beneficial ownership. DTC has no
knowledge of the actual Certificate Owners of the Certificates; DTC's
records reflect only the identity of the DTC Participants to whose accounts
such Certificates are credited, which may or may not be the Certificate
Owners. The DTC Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC
Participants, by DTC Participants to Indirect Participants, and by DTC
Participants and Indirect Participants to Certificate Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to
Certificates. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date, which assigns Cede &
Co.'s consenting or voting rights to those DTC Participants to whose
accounts the Certificates are credited on the record date (identified in a
listing attached thereto).
Principal and interest payments on the Certificates will be made to
DTC. DTC's practice is to credit Participants' accounts on the applicable
Distribution Date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payment on such Distribution Date. Payments by DTC Participants to
Certificate Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and will be the
responsibility of such DTC Participant and not of DTC, the Trustee or the
Transferor, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal and interest to DTC is
the responsibility of the Trustee, disbursement of such payments to DTC
Participants shall be the responsibility of DTC, and disbursement of such
payments to Certificate Owners shall be the responsibility of DTC
Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository
with respect to the Certificates at any time by giving reasonable notice to
the Transferor or the Trustee. Under such circumstances, in the event that
a successor securities depository is not obtained, Definitive Certificates
are required to be printed and delivered. The Transferor may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, Definitive Certificates
will be delivered to Certificateholders. See "-- Definitive Certificates."
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Transferor believes to be
reliable, but the Transferor takes no responsibility for the accuracy
thereof.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws
of Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel
Participants through electronic book-entry changes in accounts of Cedel
Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedel in any of 32 currencies,
including United States dollars. Cedel provides to its Cedel Participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Cedel interfaces with domestic markets in several countries. As
a professional depository, Cedel is subject to regulation by the Luxembourg
Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the underwriters of any Series of
Certificates. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Cedel Participant, either directly or
indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to
clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk
from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 32 currencies, including United States
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in 25
countries generally similar to the arrangements for cross-market transfers
with DTC described above. The Euroclear System is operated by Morgan
Guaranty Trust Company of New York, Brussels, Belgium office (the
"Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System, Societe Cooperative, a Belgian cooperative corporation
(the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear
cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative Board establishes policy for the Euroclear
System. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial
intermediaries and may include the underwriters of any Series of
Certificates. Indirect access to the Euroclear System is also available to
other firms that maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments
with respect to securities in the Euroclear System. All securities in the
Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The
Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions
will be subject to tax reporting in accordance with relevant United States
tax laws and regulations. See "U.S. Federal Income Tax Consequences." Cedel
or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Agreement on behalf
of a Cedel Participant or Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Certificates
If so specified in the related Prospectus Supplement, the Certificates
of each Series will be initially issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees
rather than to DTC or its nominee. If the related Prospectus Supplement
states that a Series will be issued in book-entry form, then Definitive
Certificates will be issued to Certificate Owners or their nominees only if
(i) the Transferor advises the Trustee for such Series in writing that DTC
is no longer willing or able to discharge properly its responsibilities as
Depository with respect to such Series of Certificates, and the Trustee or
the Transferor is unable to locate a qualified successor, (ii) the
Transferor, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through DTC or (iii) after the occurrence
of a Servicer Default, Certificate Owners representing not less than 50%
(or such other percentage specified in the related Prospectus Supplement)
of the Investor Interest advise the Trustee and DTC through DTC
Participants in writing that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in the best interest of
the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all DTC Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC
of the definitive certificate representing the Certificates and
instructions for reregistration, the Trustee will issue the Certificates as
Definitive Certificates, and thereafter the Trustee will recognize the
holders of such Definitive Certificates as 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. The final
payment on any Certificate (whether Definitive Certificates or the
Certificates registered in the name of Cede representing the Certificates),
will be made only upon presentation and surrender of such Certificate at
the office or agency specified in the notice of final distribution to
Certificateholders. The Trustee will provide such notice to registered
Certificateholders not later than the fifth day of the month of such final
distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer
or exchange, but the Transfer Agent and Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith. The Transfer Agent and Registrar shall not be
required to register the transfer or exchange of Definitive Certificates
for a period of fifteen days preceding the due date for any payment with
respect to such Definitive Certificates.
Interest Payments
For each Series of Certificates and Class thereof, interest will
accrue from the date specified in the applicable Prospectus Supplement on
the applicable Investor Interest at the applicable Certificate Rate, which
may be a fixed, floating or other type of rate as specified in the related
Prospectus Supplement. Interest will be distributed to Certificateholders
on the Distribution Dates specified in the related Prospectus Supplement.
Interest payments on any Distribution Date will be funded from collections
of Finance Charge Receivables allocated to the Investor Interest during the
preceding Monthly Period or Periods and may be funded from certain
investment earnings on funds held in accounts of the Trust and from any
applicable Credit Enhancement, if necessary, or certain other amounts as
specified in the related Prospectus Supplement. If the Distribution Dates
for payment of interest for a Series or Class occur less frequently than
monthly, such collections or other amounts (or the portion thereof
allocable to such Class) may be deposited in one or more trust accounts
(each, an "Interest Funding Account") pending distribution to the
Certificateholders of such Series or Class, as described in the related
Prospectus Supplement. If a Series has more than one Class of Certificates,
each such Class may have a separate Interest Funding Account. The
Prospectus Supplement relating to each Series of Certificates will describe
the amounts and sources of interest payments to be made; the Certificate
Rate for each Class thereof; for a Series or Class thereof bearing interest
at a floating Certificate Rate, the initial Certificate Rate, the dates and
the manner for determining subsequent Certificate Rates, and the formula,
index or other method by which such Certificate Rates are determined; and
any limitations on any such Certificate Rate.
Principal Payments
Generally, during the Revolving Period for each Series of Certificates
(which begins on the related Closing Date and ends on the day before an
Amortization Period or Accumulation Period begins), no principal payments
will be made to the Certificateholders of such Series, although principal
payments may be made to Certificateholders of a Series during the Revolving
Period, in connection with a Partial Amortization or otherwise, if so
specified in the related Prospectus Supplement. During the Controlled
Amortization Period or Principal Amortization Period, as applicable, which
will be scheduled to begin on the date specified in, or determined in the
manner specified in, the related Prospectus Supplement, and during the
Rapid Amortization Period, which will begin upon the occurrence of a Pay
Out Event or, if so specified in the Prospectus Supplement, following the
Rapid Accumulation Period, principal will be paid to the Certificateholders
in the amounts and on Distribution Dates specified in the related
Prospectus Supplement. During an Accumulation Period, principal will be
accumulated in a Principal Funding Account for later distribution to
Certificateholders on the Scheduled Payment Date in the amounts specified
in the related Prospectus Supplement. Principal payments for any Series or
Class thereof will be funded from collections of Principal Receivables
received during the related Monthly Period or Periods as specified in the
related Prospectus Supplement and allocated to such Series or Class, in
certain circumstances from amounts on deposit in the Excess Funding Account
and from certain other sources specified in the related Prospectus
Supplement. In the case of a Series with more than one Class of
Certificates, the Certificateholders of one or more Classes may receive
payments of principal at different times. The related Prospectus Supplement
will describe the manner, timing and priority of payments of principal to
Certificateholders of each Class.
Funds on deposit in any Principal Fuect to a guaranteed rate agreement
or guaranteed investment contract or other arrangement specified in the
related Prospectus Supplement intended to assure a minimum rate of return
on the investment of such funds. In order to enhance the likelihood of the
payment in full of the principal amount of a Series of Certificates or
Class thereof at the end of an Accumulation Period, such Series of
Certificates or Class thereof may be subject to a principal payment
guaranty or other similar arrangement specified in the related Prospectus
Supplement.
Transfer and Assignment of Receivables
The Transferor will transfer and assign at the time of formation of
the Trust all of its right, title and interest in and to the Receivables in
the related Accounts and all Receivables thereafter created in such
Accounts.
In connection with each transfer of Receivables to the Trust, the
Transferor will indicate in its computer files that the related Receivables
have been conveyed to the Trust. In addition, the Transferor will provide
to the Trustee computer files or microfiche lists containing a true and
complete list of the related Accounts, identified by account number and by
total outstanding balance on the date of transfer. The Transferor will not
deliver to the Trustee any other records or agreements relating to the
Accounts or the Receivables, except in connection with additions or
removals of Accounts. Except as stated above, the records and agreements
relating to the Accounts and the Receivables maintained by the Transferor
or the Servicer are not and will not be segregated by the Transferor or the
Servicer from other documents and agreements relating to other credit card
accounts and receivables and are not and will not be stamped or marked to
reflect the transfer of the Receivables to the Trust, but the computer
records of the Transferor are and will be required to be marked to evidence
such transfer. The Transferor will file with respect to the Trust Uniform
Commercial Code financing statements with respect to the Receivables
meeting the requirements of applicable state law. See "Risk Factors --
Transfer of Receivables" and "Certain Legal Aspects of the Receivables --
Transfer of Receivables."
New Issuances
The Agreement will authorize the Trustee to issue three types of
certificates: (i) one or more Series of Certificates which are
transferable and have the characteristics described below; (ii) the
Transferor Certificate, which evidences the Transferor Interest and which
will initially be held by the Transferor and will be transferable only as
provided in the Agreement; and (iii) one or more Supplemental Certificates,
evidencing partial interests in the Transferor Interest, which are not
offered hereby and which will be transferable only as provided in the
Agreement. Pursuant to the Agreement, the Transferor may define, with
respect to any newly issued Series, the terms of such new Series. Upon the
issuance of an additional Series of Certificates, none of the Transferor,
the Servicer, the Trustee or the Trust will be required (nor do they
intend) to obtain the consent of any Certificateholder of any other Series
previously issued by the Trust. However, as a condition of a New Issuance,
the Transferor will deliver to the Trustee written confirmation that the
New Issuance will not result in the reduction or withdrawal by any Rating
Agency of its rating of any outstanding Series. The Transferor may offer
any Series under a Disclosure Document in offerings pursuant to this
Prospectus or in transactions either registered under the Securities Act or
exempt from registration thereunder directly, through one or more other
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise. To the extent provided in the related
Supplement (and subject to any applicable requirements under the Exchange
Act and the rules and regulations thereunder, including Rule 13e-4), a new
Series may be issued fully or partially in exchange for certificates of one
or more existing Series.
The holder of the Transferor Certificate may execute New Issuances
such that each Series has a period during which amortization or
accumulation of the principal amount thereof is intended to occur which may
have a different length and begin on a different date than such period for
any other Series. Further, one or more Series may be in their amortization
or accumulation periods while other Series are not. Moreover, each Series
may have the benefit of a Credit Enhancement which is available only to
such Series. Under the Agreement, the Trustee shall hold any such form of
Credit Enhancement only on behalf of the Series to which it relates. The
holder of the Transferor Certificate may deliver a different form of Credit
Enhancement agreement with respect to any Series. The holder of the
Transferor Certificate may specify different certificate rates and monthly
servicing fees with respect to each Series (or a particular Class within
such Series). The holder of the Transferor Certificate will also have the
option under the Agreement to vary between Series the terms upon which a
Series (or a particular Class within such Series) may be repurchased by the
Transferor or remarketed to other investors. There will be no limit to the
number of New Issuances that may be performed under the Agreement.
A New Issuance may only occur upon the satisfaction of certain
conditions provided in the Agreement. Under the Agreement, the holder of
the Transferor Certificate may execute a New Issuance by notifying the
Trustee at least three days in advance of the date upon which the New
Issuance is to occur stating the Series to be issued on the date of the New
Issuance and, with respect to each such Series (and, if applicable, each
Class thereof): (1) its initial principal amount (or method for calculating
such amount), (2) its certificate rate (or method of calculating such rate)
and (3) the provider of Credit Enhancement, if any, which is expected to
provide support with respect to it. The Agreement will provide that on the
date of the New Issuance the Trustee will authenticate any such Series only
upon delivery to it of at least the following: (i) a Series Supplement
specifying the terms of such Series; (ii) (a) an opinion of counsel to the
effect that the certificates of such Series will be characterized as
indebtedness for Federal income tax purposes, unless the related Series
Supplement indicates that such opinion will not be provided, and (b) a Tax
Opinion; (iii) if required by the related Series Supplement, the form of
Credit Enhancement; (iv) if Credit Enhancement is required by the Series
Supplement, an appropriate Credit Enhancement agreement executed by the
Transferor and the Credit Enhancement Provider; (v) written confirmation
from each Rating Agency that the New Issuance will not result in such
Rating Agency's reducing or withdrawing its rating on any then outstanding
Series rated by it; (vi) an officer's certificate of the Transferor to the
effect that after giving effect to the New Issuance the Transferor would
not be required to add Additional Accounts pursuant to the Agreement and
the Transferor Interest would be at least equal to the Minimum Transferor
Interest; and (vii) the existing Transferor Certificate and, if applicable,
the certificates representing the Series to be exchanged. Upos, the Trustee
will cancel the existing Transferor Certificate and the certificates of the
exchanged Series, if applicable, and authenticate the new Series and a new
Transferor Certificate.
The Transferor also may from time to time cause the Trustee to sell
Purchased Interests to one or more purchasers. Any Purchased Interest will
represent an interest in the Trust's assets similar to the interest of a
Series of Certificates. No Series will be subordinated to any Purchased
Interest, and no Purchased Interest will have any interest in the
Enhancement or series accounts specified for any Series, except as
specified in the Prospectus Supplement relating to that Series. Any such
sale will take place pursuant to one or more agreements which will specify
terms for the applicable Purchased Interests and may grant the purchasers
of such interests notice and consultation rights with respect to rights or
actions of the Trustee. Any sale of Purchased Interests in the assets of
the Trust will be subject to the satisfaction of the same conditions
(including Rating Agency confirmations) as for a New Issuance as
appropriately adjusted to apply to the relevant Purchased Interest rather
than a New Issuance.
Additional Transferors
The Transferor may designate other persons to be included as a
"Transferor" ("Additional Transferors") under the Agreement (by means of an
amendment to the Agreement that will not require the consent of any
Certificateholder, see "-- Amendments" but will be subject to satisfaction
of certain conditions, including confirmation that such designation will
not result in the withdrawal or downgrade of the credit rating of any
outstanding Series. In connection with the designation of an Additional
Transferor, the Transferor will surrender the Transferor Certificate to the
Trustee in exchange for a newly issued Transferor Certificate modified to
reflect such Additional Transferor's interest in the Transferor's Interest.
Following the inclusion of an Additional Transferor, the Additional
Transferor will be treated in the same manner as the initial Transferor and
each Additional Transferor generally will have the same obligations and
rights as a Transferor described herein.
Representations and Warranties
In connection with the issuance of any Series of Certificates, the
Transferor will represent and warrant in the Agreement to the effect that
(a) as of the Closing Date, the Transferor was duly incorporated and in
good standing and that it has the authority to consummate the transactions
contemplated by the Agreement and (b) as of the Cut-Off Date (or as of the
date of the designation of Additional Accounts), each Account was an
Eligible Account. If (i) any of these representations and warranties proves
to have been incorrect in any material respect when made, and continues to
be incorrect for 60 days after notice to the Transferor by the Trustee or
to the Transferor and the Trustee by the Certificateholders holding more
than 50% of the Investor Interest of the related Series, and (ii) as a
result the interests of the Certificateholders are materially and adversely
affected, and continue to be materially and adversely affected during such
period, then the Trustee or Certificateholders holding more than 50% of the
Investor Interest may give notice to the Transferor (and to the Trustee in
the latter instance) declaring that a Pay Out Event has occurred, thereby
commencing the Rapid Amortization Period or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period.
The Transferor will also represent and warrant in the Agreement to the
effect that (a) as of the Closing Date of the initial Series of
Certificates, each of the related Receivables then existing is an Eligible
Receivable (as defined below) and (b) as of the date of creation of any new
Receivable, such Receivable is an Eligible Receivable and the
representation and warranty set forth in clause (b) in the immediately
following paragraph is true and correct with respect to such Receivable. In
the event (i) of a breach of any representation and warranty described in
this paragraph, within 60 days, or such longer period as may be agreed to
by the Trustee, of the earlier to occur of the discovery of such breach by
the Transferor or Servicer or receipt by the Transferor of written notice
of such breach given by the Trustee, or, with respect to certain breaches
relating to prior liens, immediately upon the earlier to occur of such
discovery or notice and (ii) that as a result of such breach, the
Receivables in the related Accounts are charged off as uncollectible, the
Trust's rights in, to or under the Receivables or its proceeds are impaired
or the proceeds of such Receivables are not available for any reason to the
Trust free and clear of any lien, the Transferor will accept reassignment
of each Principal Receivable as to which such breach relates (an
"Ineligible Receivable") on the terms and conditions set forth below. No
such reassignment will be required to be made with respect to an Ineligible
Receivable if, on any day within the applicable period (or such longer
period as may be agreed to by the Trustee), the representations and
warranties with respect to that Ineligible Receivable are true and correct
in all material respects. The Transferor will accept reassignment of
Ineligible Receivables by directing the Servicer to deduct the amount of
each Ineligible Receivable from the Aggregate Principal Receivables used to
calculate the Transferor Interest. If the exclusion of an Ineligible
Receivable from the calculation of the Transferor Interest would cause the
Transferor Interest to be less than the Minimum Transferor Interest, on the
date of reassignment of such Ineligible Receivable the Transferor will make
a deposit in the Excess Funding Account in immediately available funds in
an amount equal to the amount by which the Transferor Interest would be
reduced below the Minimum Transferor Interest. Any such deduction or
deposit shall be considered a repayment in full of the Ineligible
Receivable. The obligation of the Transferor to accept reassignment of any
Ineligible Receivable is the sole remedy respecting any breach of the
representations and warranties set forth in this paragraph with respect to
such Receivable available to the Certificateholders or the Trustee on
behalf of Certificateholders.
The Transferor will also represent and warrant in the Agreement to the
effect that as of the Closing Date of the initial Series of Certificates
(a) the Agreement will constitute a legal, valid and binding obligation of
the Transferor and (b) the transfer of Receivables by it to the Trust under
the Agreement will constitute either a valid transfer and assignment to the
Trust of all right, title and interest of the Transferor in and to the
Receivables (other than Receivables in Additional Accounts), whether then
existing or thereafter created and the proceeds thereof (including amounts
in any of the accounts established for the benefit of Certificateholders)
or the grant of a first priority perfected security interest in such
Receivables (except for certain tax and other governmental liens) and the
proceeds thereof (including amounts in any of the accounts established for
the benefit of Certificateholders), which is effective as to each such
Receivable upon the creation thereof. In the event of a breach of any of
the representations and warranties described in this paragraph which has a
material adverse effect on the interest of the Certificateholders in the
Receivables, either the Trustee or the Holders of Certificates evidencing
undivided interests in the Trust aggregating more than 50% of the aggregate
Investor Interest of all Series outstanding may direct the Transferor to
accept reassignment of the Trust Portfolio within 60 days of such notice,
or within such longer period specified in such notice. The Transferor will
be obligated to accept reassignment of such Receivables on a Distribution
Date occurring within such applicable period. Such reassignment will not be
required to be made, however, if at any time during such applicable period,
or such longer period, the representations and warranties are true and
correct in all material respects. The deposit amount for such reassignment
will equal the Investor Interest and Enhancement Invested Amount, if any,
plus accrued and unpaid interest for eat day of the Monthly Period
preceding the Distribution Date on which the reassignment is scheduled to
be made less the amount, if any, previously allocated for payment of
principal and interest to such Certificateholders or such holders of the
Enhancement Invested Amount or the Collateral Interest, if any, on such
Distribution Date. The payment of the reassignment deposit amount and the
transfer of all other amounts deposited for the preceding month in the
Distribution Account will be considered a payment in full of the Investor
Interest and the Enhancement Invested Amount, if any, for each such Series
required to be repurchased and will be distributed upon presentation and
surrender of the Certificates for each such Series. The obligation of the
Transferor to make any such deposit will constitute the sole remedy
respecting a breach of the representations and warranties available to the
Trustee or Certificateholders.
With respect to each Series of Certificates, an "Eligible Account"
means, as of the Cut-Off Date (or, with respect to Additional Accounts, as
of their date of designation for inclusion in the Trust), each Account
owned by the Transferor (a) which was in existence and maintained with the
Transferor, (b) which is payable in United States dollars, (c) the customer
of which has provided, as his most recent billing address, an address
located in the United States or its territories or possessions or a
military address (except that up to 3% of the aggregate number of all
Accounts as of the Cut-Off Date or any date on which Additional Accounts
are designated for inclusion in the Trust may have customers with billing
addresses that do not satisfy this requirement), (d) which has not been
classified by the Transferor as cancelled, counterfeit, fraudulent, stolen
or lost (except that Eligible Accounts may include Accounts identified by
the applicable customers as having balances incurred as a result of
fraudulent use or as to which the credit cards have been identified as lost
or stolen if (1) the Transferor appropriately reflects the balance of the
applicable Receivables on its books and records in accordance with its
customary practices and (2) charging privileges have been cancelled and are
not reinstated), (e) which has either been originated by the Transferor or
acquired by the Transferor from other institutions, (f) which has not been
charged off by the Transferor in its customary and usual manner for
charging off such Account as of the Cut-Off Date and, with respect to
Additional Accounts, as of their date of designation for inclusion in the
Trust and (g) which satisfies any additional requirements specified in the
related Prospectus Supplement. Under the Agreement, the definition of
Eligible Account may be changed by amendment to the Agreement without the
consent of the related Certificateholders if (i) the Transferor delivers to
the Trustee a certificate of an authorized officer to the effect that, in
the reasonable belief of the Transferor, such amendment will not as of the
date of such amendment adversely affect in any material respect the
interest of such Certificateholders, and (ii) such amendment will not
result in a withdrawal or reduction of the rating of any outstanding Series
under the Trust.
With respect to each Series of Certificates, an "Eligible Receivable"
means each Receivable (a) which has arisen under an Eligible Account, (b)
which was created in compliance, in all material respects, with all
requirements of law applicable to the Transferor, and pursuant to an
account agreement which complied in all material respects with all
requirements of law applicable to the Transferor, (c) with respect to which
all consents, licenses or authorizations of, or registrations with, any
governmental authority required to be obtained or given by the Transferor
in connection with the creation of such Receivable, or the execution,
delivery, creation and performance by the Transferor of the related account
agreement, have been duly obtained or given and are in full force and
effect as of the date of the creation of such Receivable, (d) as to which,
at the time of its creation, the Transferor or the Trust had good and
marketable title free and clear of all liens and security interests arising
under or through the Transferor (other than certain tax liens for taxes not
then due or which the Transferor is contesting and any other lien that is
released or terminated at or before the time that the receivable is
transferred to the Trust), (e) which is the legal, valid and binding
payment obligation of the obligor thereon, legally enforceable against such
obligor in accordance with its terms (with certain bankruptcy-related
exceptions), (f) which constitutes an "account," "chattel paper" or a
"general intangible" under Article 9 of the Uniform Commercial Code as then
in effect in the State of Louisiana and (g) which satisfies any additional
requirements specified in the related Prospectus Supplement.
The Trustee will not make any initial or periodic general examination
of the Receivables or any records relating to the Receivables for the
purpose of establishing the presence or absence of defects, compliance with
the Transferor's representations and warranties or for any other purpose.
The Servicer, however, will deliver to the Trustee on or before March 31 of
each year (or such other date specified in the related Prospectus
Supplement) an opinion of counsel with respect to the validity of the
security interest of the Trust in and to the Receivables and certain other
components of the Trust.
Addition of Trust Assets
As described above under "The Receivables," the Transferor will have
the right to designate for the Trust, from time to time, Additional
Accounts to be included as Accounts with respect to the Trust. In addition,
the Transferor will be required to designate Additional Accounts (a) to
maintain the Transferor Interest so that during any period of 30
consecutive days, the Transferor Interest averaged over that period equals
or exceeds the Minimum Transferor Interest for the same period and (b) to
maintain the sum of (i) the Aggregate Principal Receivables and (ii) the
principal amount on deposit in the Excess Funding Account equal to or
greater than the Minimum Aggregate Principal Receivables. "Minimum
Transferor Interest" means __% of the aggregate Principal Receivables at
the end of the day immediately prior to the date of determination.
"Minimum Aggregate Principal Receivables" means an amount equal to the sum
of the numerators used to calculate the Investor Percentages with respect
to the allocation of collections of Principal Receivables for each Series
issued by the Trust then outstanding. However, the percentage used to
calculate the Minimum Transfer Interest, the Minimum Aggregate Principal
Receivables or both may be increased or reduced at any time if each Rating
Agency confirms that such action will not result in a withdrawal or
downgrade of its rating of any outstanding Series as to which it is a
Rating Agency. The Transferor's designation of Additional Accounts
generally will be subject to the satisfaction of the conditions described
below.
However, the Transferor may from time to time designate to the Trust
certain accounts ("Automatic Additional Accounts") generated in the
ordinary course of business of the Transferor, subject to fewer conditions
(but the remaining conditions include limitations on the amount of
Automatic Additional Accounts that may be designated for the Trust during a
period of time). The Transferor will convey to the Trust its interest in
all Receivables in Additional Accounts, whether such Receivables are then
existing or thereafter created.
Each Additional Account (including Automatic Additional Accounts) must
be an Eligible Account at the time of its designation. However, Additional
Accounts may not be of the same credit quality as the initial Accounts.
Additional Accounts may have been originated by the Transferor using credit
criteria different from those which were applied by the Transferor to the
initial Accounts or may have been acquired by the Transferor from an
institution which may have had different credit criteria.
In addition to or in lieu of Additional Accounts, the Transferor under
the Agreement will be permitted to add to the Trust participations or trust
certificates representing undivided interests in a pool of assets primarily
consisting of receivables arising under revolving credit accounts and
collections thereon ("Participations"). Participations may be evidenced by
one or more certificates of ownership issued under a separate pooling and
servicing agreement or similar agreement (a "Participation Agreement")
entered into by the Transferor which entitles the certificateholder to
receive percentages of collections generated by the pool of assets subject
to such Participation Agreement from time to time and to certain other
rights and remedies specified therein. Participations may have their own
credit enhancement, pay out events, servicing obligations and servicer
defaults, all of which are likely to be enforceable by a separate trustee
under the Participation Agreement and may be different from those specified
herein. The rights and remedies of the Trust as the holder of a
Participation (and therefore the Certificateholders) will be subject to all
the terms and provisions of the related Participation Agreement. The
Agreement may be amended to permit the addition of a Participation in the
Trust without the consent of the related Certificateholders if (i) the
Transferor delivers to the Trustee a certificate of an authorized officer
to the effect that, in the reasonable belief of the Transferor, such
amendment will not as of the date of such amendment adversely affect in any
material respect the interest of such Certificateholders, and (ii) such
amendment will not result in a withdrawal or reduction of the rating of any
outstanding Series under the Trust.
A conveyance by the Transferor to the Trust of Receivables in
Additional Accounts or Participations is subject to the following
conditions, among others: (i) except in the case of Automatic Additional
Accounts, the Transferor shall give the Trustee, each Rating Agency and the
Servicer written notice that such Additional Accounts or Participations
will be included, which notice shall specify the approximate aggregate
amount of the Receivables or interests therein to be transferred; (ii) the
Transferor shall have delivered to the Trustee a written assignment
(including an acceptance by the Trustee on behalf of the Trust for the
benefit of the Certificateholders) as provided in the Agreement relating to
such Additional Accounts or Participations (the "Assignment") and, the
Transferor shall have delivered to the Trustee a computer file or
microfiche list, dated the date of such Assignment, containing a true and
complete list of such Additional Accounts or Participations; (iii) the
Transferor shall represent and warrant that (a) each Additional Account is,
as of the Addition Date, an Eligible Account, and each Receivable in such
Additional Account is, as of the Addition Date, an Eligible Receivable, (b)
no selection procedures believed by the Transferor to be materially adverse
to the interests of the Certificateholders were utilized in selecting the
Additional Accounts from the available Eligible Accounts from the Bank
Portfolio and (c) as of the Addition Date, the Transferor is not insolvent;
(iv) the Transferor shall deliver certain opinions of counsel with respect
to the transfer of the Receivables in the Additional Accounts or the
Participations to the Trust; and (v) under certain circumstances with
respect to Additional Accounts (but not in the case of Automatic Additional
Accounts), and in all cases with respect to Participations, the addition of
such Additional Accounts or Participations will not result in a withdrawal
or reduction of the rating of any outstanding Series under the Trust.
In addition to the periodic reports otherwise required to be filed by
the Servicer with the Commission pursuant to the Exchange Act, the Servicer
intends to file, on behalf of the Trust, a Report on Form 8-K with respect
to any addition to the Trust of Receivables in Additional Accounts or
Participations that would have a material effect on the composition of the
assets of the Trust.
Removal of Accounts
The Transferor may, but shall not be obligated to, designate from time
to time certain Accounts to be Removed Accounts and stop transferring new
Receivables arising in the Removed Accounts to the Trust. Pre-existing
Receivables in Removed Accounts may either be conveyed to the Transferor or
its designee or retained by the Trust. If such pre-existing Receivables are
retained in the Trust, the Servicer and the Transferor will agree to
allocate principal collections on the Removed Accounts on a first-in,
first-out basis, so that such collections will be allocated to outstanding
advances in the order in which such advances arose (beginning with the
oldest outstanding advance). Principal collections allocable to Receivables
retained by the Trust will be applied as Collections in accordance with the
Agreement. Upon payment of all amounts owing in respect of such
Receivables, the Trust will transfer the related Account to the Transferor.
The Transferor will, however, be permitted to designate Removed
Accounts only if: (i) such designation will not, in the reasonable belief
of the Transferor, cause a Pay Out Event to occur; (ii) the Transferor
shall have delivered to the Trustee for execution a written assignment and
a computer file or microfiche list containing a true and complete list of
all Removed Accounts identified by account number and the aggregate amount
of the Receivables in such Removed Accounts as of the end of the Billing
Cycle immediately preceding the date of removal; (iii) the Transferor
represents and warrants that no selection procedures believed by the
Transferor to be materially adverse to the interests of the holders of any
Series of Certificates outstanding were used in selecting the Removed
Accounts to be removed from the Trust; (iv) the Transferor shall have
received notice from each such Rating Agency that such proposed removal
will not result in a downgrade of its then-current rating for any such
Series; (v) such other conditions as are specified in any Prospectus
Supplement or adopted by the Transferor to enable the Transferor to
derecognize Receivables transferred to the Trust in accordance with
generally accepted accounting principles ("GAAP"); and (vi) the Transferor
shall have delivered to the Trustee an officer's certificate confirming the
items set forth in clauses (i) through (v) above. Notwithstanding the
above, the Transferor will be permitted to designate as a Removed Account
without the consent of the Trustee, Certificateholders or Rating Agencies
any Account that has a zero balance and which the Transferor will remove
from its computer file.
Collection and Other Servicing Procedures
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the
Servicer's policies and procedures for servicing credit card receivables
comparable to the Receivables. The Servicer will be required to maintain
fidelity bond coverage insuring against losses through wrongdoing of its
officers and employees who are involved in the servicing of credit card
receivables covering such actions and in such amounts as the Servicer
believes to be reasonable from time to time.
Discount Option
The Transferor may at any time designate a specified fixed or variable
percentage as specified in the related Prospectus Supplement (the "Discount
Percentage") of the amount of Receivables arising in the Accounts on and
after the date such option is exercised (and if the Transferor so elects,
Receivables arising in the Accounts before the date such option is
exercised) that otherwise would have been treated as Principal Receivables
to be treated as Finance Charge Receivables. Such designation will become
effective upon satisfaction of the requirements set forth in the Agreement,
including, if the Discount Percentage would be greater than 3% after such
designation, confirmation by each Rating Agency that such designation will
not result in a withdrawal or downgrade of its rating of any outstanding
Series of the Trust. On the date of processing of any collections, the
product of the Discount Percentage and collections of Receivables that
arise in the Accounts on such day on or after the date such option is
exercised (and if the Transferor so elects, Receivables arising in the
related Accounts before the date such option is exercised) that otherwise
would be Principal Receivables will be deemed collections of Finance Charge
Receivables and will be applied accordingly.
Trust Accounts
With respect to the Trust, the Trustee will establish and maintain in
the name of the Trust, a "Finance Charge Account" and an "Excess Funding
Account," as segregated trust accounts or with a Qualified Institution, for
the benefit of the Certificateholders of all related Series, including any
Series offered pursuant to this Prospectus. The Agreement will also permit
the Trustee to establish accounts for particular Series, including an
Interest Funding Account, a Principal Funding Account, a Pre-Funding
Account or any other account specified in the related Series Supplement.
Each series account will be held for the benefit of the Certificateholders
of the related Series and for the purposes set forth in the related
Prospectus Supplement. The Trustee will also establish a segregated demand
deposit account to serve as the "Distribution Account" for the Trust. The
Servicer will establish and maintain, in the name of the Trustee, on behalf
of the Trust, for the benefit of Certificateholders of all Series issued
thereby, a non-interest bearing segregated account to serve as the
Collection Account for the Trust. The Distribution Account and Collection
Account will each be established as a segregated trust account or with a
"Qualified Institution," defined as a depository institution or trust
company, which may include the Trustee, organized under the laws of the
United States or any one of the states thereof, which at all times has a
certificate of deposit, short-term deposit or commercial paper rating of P-
1 by Moody's Investors Service, Inc. ("Moody's") and of at least A-1 by
Standard & Poor's Ratings Services, a division of The McGraw Hill
Companies, Inc. ("Standard & Poor's") or long-term unsecured debt
obligation (other than such obligation the rating of which is based on
collateral or on the credit of a person other than such institution or
trust company) rating of at least Aa3 by Moody's and AA- by Standard &
Poor's and deposit insurance provided by either the Bank Insurance Fund
("BIF") or the Savings Association Insurance Fund ("SAIF"), each
administered by the FDIC, or a depository institution, which may include
the Trustee, which is acceptable to each Rating Agency. Funds in the
Excess Funding Account, the Finance Charge Account, the Principal Funding
Account, the Distribution Account and any series account for the Trust will
be invested, at the direction of the Servicer, in (i) obligations fully
guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies, the certificates of deposit of which have the highest rating
from Moody's and Standard & Poor's, (iii) commercial paper having, at the
time of the Trust's investment, a rating in the highest rating category
from Moody's and Standard & Poor's, (iv) bankers' acceptances issued by any
depository institution or trust company described in clause (ii) above, (v)
money market funds which have the highest rating from, or have otherwise
been approved in writing by, Moody's and Standard & Poor's (so long as such
investment will not require the Trust to register as an investment company
under the Investment Company Act of 1940, as amended), (vi) repurchase
obligations with respect to any security described in clause (i) above or
with respect to any other security issued or guaranteed by an agency or
instrumentality of the United States of America, in either case entered
into with a depository institution or trust company described in clause
(ii) above and (vii) any other investment if each Rating Agency confirms in
writing that such investment will not adversely affect its then current
rating or ratings of the Investor Certificates and making such investment
will not require the Trust to register as an investment company under the
Investment Company Act of 1940, as amended (such investments, "Permitted
Investments"). Any earnings (net of losses and investment expenses) on
funds in the Finance Charge Account, the Excess Funding Account or the
Distribution Account will be paid to the Transferor. The Servicer will
have the revocable power to withdraw funds from the Collection Account and
to instruct the Trustee to make withdrawals and payments from the Finance
Charge Account and the Excess Funding Account for the purpose of carrying
out the Servicer's duties under the Agreement. Each Prospectus Supplement
will identify a paying agent which will have the revocable power to
withdraw funds from the Distribution Account for the purpose of making
distributions to the Certificateholders (or, if no such entity is
designated, the Trustee shall act as paying agent).
Funding Period
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, all or a portion of the principal
amount of such Series (the "Pre-Funding Amount") will be held in a Pre-
Funding Account pending the transfer of additional Receivables to the Trust
or pending the reduction of the Investor Interests of other Series issued
by the Trust. The related Prospectus Supplement will specify the initial
Investor Interest with respect to such Series, the Full Investor Interest
and the date by which the Investor Interest is expected to equal the Full
Investor Interest. The Investor Interest will increase as Receivables are
added to the Trust or as the Investor Interests of other Series of the
Trust are reduced. See "-- Addition of Trust Assets." This feature is
intended to permit the Transferor to issue a new Series of Certificates at
an opportune time, if the Investor Interest of existing Series are expected
to be reduced or additional Receivables are expected to be included in the
Trust at a subsequent time. Certificateholders will not incur any costs,
direct or indirect, as a result of the exercise of this feature. If the
Investor Interest does not equal the Full Investor Interest by the end of
the Funding Period, Certificateholders of the affected Series will receive
principal repayments prior to the expected date of receipt. See "Risk
Factors -- Pre-Funding Account." Any designation of Additional Accounts (or
Participations) during the Funding Period will be subject to the same
conditions and protections applicable at any other time. It is not
expected or required that the Trustee or any other Person (except for the
Transferor) will make any initial examination of Receivables added to the
Trust during a Funding Period for the purpose of establishing the presence
or absence of defects, compliance with the Transferor's representations and
warranties or for any other purpose.
During the Funding Period, funds on deposit in the Pre-Funding Account
for a Series of Certificates will be withdrawn and paid to the holder of
the Transferor Certificate to the extent of any increases in the Investor
Interest. In the event that the Investor Interest does not for any reason
equal the Full Investor Interest by the end of the Funding Period, any
amount remaining in the Pre-Funding Account and any additional amounts
specified in the related Prospectus Supplement will be payable to the
Certificateholders of such Series in the manner and at such time as set
forth in the related Prospectus Supplement. Such payment will reduce the
aggregate principal amount of such Certificates.
Monies in the Pre-Funding Account will be invested by the Trustee in
Permitted Investments and, if so specified in the related Prospectus
Supplement, will be subject to a guaranteed rate or investment agreement or
other similar arrangement, and, in connection with each Distribution Date
during the Funding Period, investment earnings on funds in the Pre-Funding
Account during the related Monthly Period will be withdrawn from the Pre-
Funding Account and deposited, together with any applicable payment under a
guaranteed rate or investment agreement or other similar arrangement, into
the Finance Charge Account for distribution in respect of interest on the
Certificates of the related Series in the manner specified in the related
Prospectus Supplement.
Allocations
The Servicer will allocate between the Investor Interest of each
Series issued by the Trust (and between each Class of each Series) and the
Transferor Interest, and, in certain circumstances, the interest of certain
Credit Enhancement Providers, all amounts collected on Finance Charge
Receivables, all amounts collected on Principal Receivables and all Net
Default Amounts and Net Recoveries. The Servicer will make each allocation
by reference to the applicable Investor Percentage of each Series and the
Transferor Percentage, and, in certain circumstances, the percentage
interest of certain providers of Enhancement (the "Credit Enhancement
Percentage") with respect to such Series. The Prospectus Supplement
relating to a Series will specify the Investor Percentage and, if
applicable, the Credit Enhancement Percentage (or the method of calculating
such percentages) with respect to the allocations of collections of
Principal Receivables, Finance Charge Receivables and Net Default Amounts
and Net Recoveries during the Revolving Period, any Amortization Period and
any Accumulation Period, as applicable. In addition, for each Series of
Certificates having more than one Class, the related Prospectus Supplement
will specify the method of allocation between each Class.
The Transferor Percentage will, in all cases, be equal to 100% minus
the aggregate Investor Percentages and, if applicable, the Credit
Enhancement Percentages, for all Series then outstanding.
Application of Collections
Except as otherwise provided below, the Servicer will deposit into the
Collection Account for the Trust, no later than the second business day (or
such other day specified in the related Prospectus Supplement) following
the date of processing, any payment collected by the Servicer on the
Receivables. On the same day as any such deposit is made, the Servicer
will make the deposits and payments to the accounts and parties as
indicated below; provided, however, that for as long as First NBC remains
the Servicer under the Agreement and (a) (i) the Servicer provides to the
Trustee a letter of credit or other credit enhancement covering the risk of
collection of the Servicer acceptable to the Rating Agencies and (ii) the
Rating Agency Condition shall have been satisfied with respect to reliance
on such letter of credit or other credit enhancement or (b) the certificate
of deposit or unsecured short-term debt obligations of the Transferor are
rated P-1 by Moody's and at least A-1 by Standard & Poor's and insured by
either BIF or SAIF or (c) the Transferor makes other arrangements
satisfactory to each Rating Agency rating any Series then outstanding, then
the Servicer may make deposits to the Collection Account and such other
deposits and payments on the business day immediately prior to the
Distribution Date (the "Transfer Date") in an amount equal to the net
amount of such deposits and payments which would have been made had the
conditions of this proviso not applied.
The Pooling and Servicing Agreement provides, that until the date on
which First NBC notifies the Trustee that First NBC is able, and elects, to
calculate the aggregate amount of Finance Charge Receivables and Principal
Receivables on a daily basis rather than on a Billing Cycle basis (the
"Conversion Date") references herein to deposits and payments of
collections received during a particular month shall instead refer to
collections received during Billing Cycles ending during such month. See
- --Description of Certificates -- Application of Collections.-- The Servicer
will make such deposits and payments based on the assumption that all
collections received by the Servicer with respect to the Receivables in
each Billing Cycle are collections of Finance Charge Receivables up to the
amount of Finance Charge Receivables billed with respect to Receivables in
such Billing Cycle (with respect to each Billing Cycle, the "Billed Finance
Charge Receivables") and collections in excess of the Billed Finance Charge
Receivables are collections of Principal Receivables, subject to a monthly
reconciliation procedure. The term "Aggregate Principal Receivables" means
in the case of any date of determination which occurs before the Conversion
Date, the aggregate amount of Principal Receivables as of the end of the
Billing Cycles during the Monthly Period immediately preceding such date of
determination or, in the case of any date of determination which occurs on
or after the Conversion Date, the aggregate amount of Principal Receivables
as of the end of the last day of the Monthly Period immediately preceding
such date of determination.
Whether the Servicer is required to make monthly or daily deposits to
the Collection Account with respect to any Monthly Period, (i) the Servicer
will only be required to deposit Collections from the Collection Account
into the Finance Charge Account, the Excess Funding Account or such related
series account up to the required amount to be deposited into any such
account or, without duplication, distributed on or prior to the related
Distribution Date to Certificateholders or to the provider of Enhancement
and (ii) if at any time prior to such Distribution Date the amount of
Collections deposited in the Collection Account exceeds the amount required
to be deposited pursuant to clause (i) above, the Servicer will be
permitted to withdraw the excess from the Collection Account.
The Servicer will withdraw the following amounts from the Collection
Account for application as indicated:
(a) an amount equal to the Transferor Percentage of the
aggregate amount of such deposits in respect of Principal Receivables
and Finance Charge Receivables, respectively, will be paid or held for
payment to the holder of the Transferor Certificate (or, in certain
limited circumstances, deposited in the Excess Funding Account);
(b) subject to reallocations among a Reallocation Group (see "--
Reallocations Among Certificates of Different Series within a
Reallocation Group"), an amount equal to the applicable Investor
Percentage of the aggregate amount of such deposits in respect of
Finance Charge Receivables will be deposited into the Finance Charge
Account for allocation and distribution as described in the related
Prospectus Supplement;
(c) during the Revolving Period, an amount equal to the
applicable Investor Percentage of the aggregate amount of such
deposits in respect of Principal Receivables will, in the case of a
Principal Sharing Series, be made available for principal payments or
accumulation on other Series of Certificates and otherwise (or to the
extent not needed for such principal payments or accumulation), will
be paid or held for payment to the holder of the Transferor
Certificate, provided that if after giving effect to the inclusion in
the Trust of all Receivables on or prior to such date of processing
and the application of payments referred to in paragraph (a) above the
Transferor Interest is reduced to less than the Minimum Transferor
Interest, the excess will be deposited in the Excess Funding Account
and will be used as described in the related Prospectus Supplement;
(d) during the Controlled Amortization Period, Controlled
Accumulation Period or Rapid Accumulation Period, as applicable, an
amount equal to the applicable Investor Percentage of such deposits in
respect of Principal Receivables up to the amount, if any, specified
in the related Prospectus Supplement will be deposited in the
Principal Funding Account or related series account identified for
such purpose, as applicable, for allocation and distribution to
Certificateholders as described in the related Prospectus Supplement,
except that, if collections of Principal Receivables exceed the
principal payments which may be allocated or distributed to
Certificateholders, then the amount of such excess will be paid to the
holder of the Transferor Certificate until the Transferor Interest is
reduced to the Minimum Transferor Interest, and thereafter will be
deposited in the Excess Funding Account or other specified account and
will be used as described in the related Prospectus Supplement,
including for payment to other Series of Certificates issued by the
Trust; and
(e) during the Principal Amortization Period, if applicable, and
the Rapid Amortization Period, an amount equal to the applicable
Investor Percentage of such deposits in respect of Principal
Receivables will be deposited into the related series account
identified for such purpose for application and distribution as
provided in the related Prospectus Supplement.
In the case of a Series of Certificates having more than one Class,
the amounts in the Collection Account will be allocated and applied to each
Class in the manner and order of priority described in the related
Prospectus Supplement.
Reallocations Among Certificates of Different Series within a Reallocation
Group
Group Investor Finance Charge Collections. Any Series offered hereby
may, if so specified in the related Prospectus Supplement, be included in a
Reallocation Group. Other Series issued in the future may also be included
in such Group.
The Servicer will calculate for each Monthly Period the Group Investor
Finance Charge Collections for a particular Reallocation Group, and on the
following Distribution Date will allocate such amount among the Investor
Interests (including any Enhancement Invested Amounts) for all Series in
such Reallocation Group in the following priority:
(i) Group Investor Monthly Interest;
(ii) Group Investor Monthly Fees;
(iii) Group Investor Default Amounts;
(iv) Group Investor Charge-Offs; and
(v) the balance pro rata among each Series in such Reallocation
Group based on the current Investor Interest (including any
Enhancement Invested Amount) of each such Series.
In the case of clauses (i), (ii), (iii) and (iv), if the amount of
Group Investor Finance Charge Collections is not sufficient to cover each
such amount in full, the amount available will be allocated among the
Series in such Reallocation Group pro rata, based on the claim that each
Series has under the applicable clause. This means, for example, that if
the amount of Group Investor Finance Charge Collections is not sufficient
to cover Group Investor Monthly Interest, each Series in such Reallocation
Group will share such amount pro rata, and any Series in such Reallocation
Group with a claim with respect to monthly interest, overdue monthly
interest and interest on such overdue monthly interest, if applicable,
which is larger than the claim for such amounts for any other Series in
such Reallocation Group (due to a higher certificate rate) will receive a
proportionately larger allocation than such other Series.
The amount of Group Investor Finance Charge Collections allocated to
the Investor Interest (including any Enhancement Invested Amount) for a
particular Series offered hereby as described above is referred to herein
as "Reallocated Investor Finance Charge Collections."
"Group Investor Charge-Offs" means, for any Reallocation Group on any
Distribution Date, the sum of the Investor Charge-Offs for all Series in
such Reallocation Group for the related Monthly Period.
"Group Investor Default Amounts" means, for any Reallocation Group on
any Distribution Date, the sum of the Investor Default Amounts for all
Series in such Reallocation Group for the related Monthly Period.
"Group Investor Finance Charge Collections" means, for any
Reallocation Group on any Distribution Date, the sum of the Investor
Finance Charge Collections for all Series in such Reallocation Group for
such Monthly Period.
"Group Investor Monthly Fees" means, for any Reallocation Group on any
Distribution Date, the aggregate amount of Investor Monthly Fees for all
Series in such Reallocation Group for such Distribution Date.
"Group Investor Monthly Interest" means, for any Reallocation Group on
any Distribution Date, the aggregate amount of monthly interest, overdue
monthly interest and interest on such overdue monthly interest, if
applicable, for all Series in such Reallocation Group for such Distribution
Date.
"Investor Finance Charge Collections" means, for any Series, the
amount of collections of Finance Charge Receivables allocable to the
Investor Interest (including any Enhancement Invested Amount) of that
Series for the related Monthly Period, which is determined by multiplying
by the applicable Investor Percentage the aggregate amount of such
collections for that Monthly Period.
"Investor Monthly Fees" means, for any Series on any Distribution
Date, the sum of the Servicing Fee for that Series for the related Monthly
Period, and any fees in respect of Credit Enhancement or similar fees which
are paid out of Reallocated Investor Finance Charge Collections for such
Series pursuant to the applicable Series Supplement.
The chart below demonstrates the manner in which collections of
Finance Charge Receivables are allocated and reallocated among Series in a
Reallocation Group. The chart assumes that the Trust has issued three
Series (Series 1, 2 and 3), and that each such Series is in its Revolving
Period.
In Step 1, total collections of Finance Charge Receivables are
allocated among the three Series and the Transferor Interest based on the
Investor Percentage for each Series and the Transferor Percentage. The
amounts allocated to each Series pursuant to Step 1 are referred to as
"Investor Finance Charge Collections."
Group Investor Finance Charge Collections for all Series in a
particular Reallocation Group are pooled as shown above in Step 2 for
reallocation to each such Series as shown in Step 3. In Step 3 Group
Investor Finance Charge Collections are reallocated to each Series in such
Reallocation Group as described above based on the Series' respective claim
with respect to interest payable on the Certificates or Enhancement
Invested Amount (if any) of such Series, the Servicing Fee and the Investor
Default Amount allocable to such Series and certain other amounts in
respect to such Series. The excess is allocated pro rata among the Series
in such Group based on their respective Investor Interests (including any
Enhancement Invested Amounts).
- ------------------------------------------------------------------------------------------------------------
FIRST NBC CREDIT CARD MASTER TRUST FINANCE CHARGE COLLECTIONS
- ------------------------------------------------------------------------------------------------------------
____________________ _______________________ _____________________ ___________________
Step 1 Series 1 Series 2 Series 3 Transferor's Finance
Investor Finance Investor Finance Investor Finance Charge Collections
Charge Collections Charge Collections Charge Collections (based upon the
(based upon the (based upon the (based upon the Transferor
Investor Percentage) Investor Percentage) Investor Percentage) Percentage)
____________________ _______________________ _____________________ ___________________
_________|___________________________|___________________________|__________
Step 2 Group
Investor Finance Collections
____________________________________________________________________________
_____________________________________|______________________________________
Step 3 Series 1 Series 2 Series 3
Monthly Interest Monthly Interest Monthly Interest
____________________________________________________________________________
_____________________________________|______________________________________
Series 1 Series 2 Series 3
Investor Monthly Fees Investor Monthly Fees Investor Monthly Fees
____________________________________________________________________________
_____________________________________|______________________________________
Series 1 Series 2 Series 3
Investor Default Amount Investor Default Amount Investor Default Amount
____________________________________________________________________________
_____________________________________|______________________________________
Series 1 Series 2 Series 3
Investor Charge-Offs Investor Charge-Offs Investor Charge-Offs
____________________________________________________________________________
_____________________________________|______________________________________
Series 1 Series 2 Series 3
Balance based upon Balance based upon Balance based upon
Investor Interest Investor Interest Investor Interest
(including any (including any (including any
Enhancement Enhancement Enhancement
Invested Amount) Invested Amount) Invested Amount)
---------------------------------------------------------------------------
Shared Excess Finance Charge Collections
The Prospectus Supplement relating to a Series will specify whether
such Series will be an Excess Allocation Series and will identify any
previously issued Excess Allocation Series. The Certificateholders of an
Excess Allocation Series may be entitled to receive all or a portion of
Excess Finance Charge Collections with respect to other Excess Allocation
Series to cover any shortfalls with respect to amounts payable from
collections of Finance Charge Receivables allocable to such Series. While
any Series offered hereby may be designated as an Excess Allocation Series,
there can be no assurance that (a) any other Series will be designated as
an Excess Allocation Series, (b) there will be any Excess Finance Charge
Collections with respect to any such other Series for any Monthly Period,
or (c) any agreement relating to any Credit Enhancement will not be amended
in such a manner as to increase payments to the providers of Credit
Enhancement and thereby decrease the amount of Excess Finance Charge
Collections available from such Series. See "-- Application of Collections"
and "-- Defaulted Receivables; Incentive Payments and Fraudulent Charges;
Investor Charge-Offs."
Excess Funding Account
If on any date the Transferor Interest is less than the Minimum
Transferor Interest (after giving effect to any addition of Principal
Receivables to the Trust), the Servicer will not distribute to the holder
of the Transferor Certificate any collections of Principal Receivables that
otherwise would be distributed to the holder of the Transferor Certificate,
but shall instead deposit such funds in a segregated account established
and maintained by the Trustee, in the name of the Trust, for the benefit of
Certificateholders of all Series, as a trust account or with the Servicer
or with a Qualified Institution (the "Excess Funding Account") until the
Transferor Interest equals the Minimum Transferor Interest. Funds on
deposit in the Excess Funding Account will be withdrawn and paid to the
holder of the Transferor Certificate on any date to the extent that the
Transferor Interest is greater than the Minimum Transferor Interest on such
date. If a Controlled Accumulation Period, Controlled Amortization Period,
Principal Amortization Period, Rapid Amortization Period or Rapid
Accumulation Period commences with respect to any Series entitled to the
benefits of Shared Principal Collections, then an amount of funds on
deposit in the Excess Funding Account (after giving effect to the release
of funds to the holder of the Transferor Certificate as described above) up
to the amount, if any, by which the Transferor Interest would be less than
zero if there were no funds on deposit in the Excess Funding Account on
such date, will be treated as Shared Principal Collections to the extent
needed to cover principal payments due to or for the benefit of such
Series, if the Series Supplement with respect to such Series so provides.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Permitted Investments. Any
earnings (net of losses and investment expenses) earned on amounts on
deposit in the Excess Funding Account during any Monthly Period will be
withdrawn from the Excess Funding Account and turned over to or at the
direction of the Servicer.
Shared Principal Collections
If a Series is designated a "Principal Sharing Series" in the related
Prospectus Supplement, to the extent that collections of Principal
Receivables and certain other amounts that are allocated to the Investor
Interest of such Series are not needed to make payments or deposits with
respect to such Series, such collections will constitute Shared Principal
Collections and will be applied to cover principal payments due to or for
the benefit of Certificateholders of other Principal Sharing Series. Any
such reallocation will not result in a reduction in the Investor Interest
of the Series to which such collections were initially allocated.
Paired Series
If specified in the Prospectus Supplement relating to a Series, such
Series may be paired with another Series (each, a "Paired Series"), such
that a reduction in the Investor Interest or Adjusted Investor Interest of
one such Series results in an increase in the Investor Interest of the
other such Series. A Paired Series would provide financing for a portion of
the Trust's assets, from which the Collections of Principal Receivables are
dedicated to a pre-existing Series if that pre-existing Series has, in
part, been paid or effectively defeased with Collections that have been set
aside for an eventual payment. The effect of a Paired Series is to provide
for continuous investment in the Receivables by Certificateholders, thereby
reducing the potential increase in the Transferor Interest as the first of
the Paired Series' interest in the Trust is reduced through the
amortization or accumulation of principal. If a Pay Out Event occurs with
respect to a Series having a Paired Series or with respect to the Paired
Series when such Series is in a Controlled Amortization Period or
Controlled Accumulation Period, the Investor Percentage for collections of
Principal Receivables for the Series and for its Paired Series may be reset
as specified in the related Prospectus Supplements. The "Adjusted Investor
Interest" for any Series means the Investor Interest of that Series,
adjusted in any manner described in the related Prospectus Supplement.
Defaulted Receivables; Incentive Payments and Fraudulent Charges; Investor
Charge-Offs
For each Series of Certificates, on the business day preceding each
Transfer Date (the "Determination Date"), the Servicer will calculate the
amount (for each Series, the "Investor Default Amount") equal to the
applicable Investor Percentage of the Net Default Amount for the related
Monthly Period. In the case of a Series of Certificates having more than
one Class, the Investor Default Amount will be allocated among the Classes
in the manner described in the related Prospectus Supplement. If so
provided in the related Prospectus Supplement, an amount equal to the
Investor Default Amount for any Monthly Period may be paid from other
amounts, including collections in the Finance Charge Account or from Credit
Enhancement, and applied to pay principal to Certificateholders or the
holder of the 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.
The Investor Interest of each Series will be reduced (an "Investor
Charge-Off") to the extent that the related Investor Default Amount for any
Monthly Period exceeds the amount of collections in the Finance Charge
Account available to cover the Investor Default Amount and any amounts
available under applicable Credit Enhancement for such purpose. Investor
Charge-Offs will be reimbursed on any Distribution Date to the extent
amounts on deposit in the Finance Charge Account and otherwise available
therefor exceed interest, fees and any aggregate Investor Default Amount
payable on such date, resulting in an increase in the Series' Investor
Interest. In the case of a Series of Certificates having more than one
Class, the related Prospectus Supplement will describe the manner and
priority of allocating Investor Charge-Offs and reimbursements thereof
among the Investor Interests of the several Classes.
If the Servicer adjusts the amount of any Principal Receivable because
of transactions or set-offs occurring in respect of an incentive payment to
or for the benefit of a cardholder or because such Principal Receivable was
created in respect of merchandise which was refused or returned by a
cardholder, then the amount of the Transferor Interest in the Trust will be
reduced by the aggregate amount of the adjustment. In addition, the
Transferor Interest in the Trust will be reduced, on a net basis, as a
result of transactions in respect of any Principal Receivable which was
discovered to have been created through a fraudulent or counterfeit charge.
Furthermore, in the event that the exclusion of such Receivables from the
calculation of the Transferor Interest at such time would cause the
Transferor Interest to be less than the Minimum Transferor Interest, the
Transferor will be required to pay an amount equal to such deficiency into
the Excess Funding Account.
Defeasance
If so specified in the Prospectus Supplement relating to a Series, the
Transferor may terminate its substantive obligations in respect of such
Series or the Trust by depositing with the Trustee, from amounts
representing, or acquired with, collections of Receivables, money or
Permitted Investments sufficient to make all remaining scheduled interest
and principal payments on such Series or all outstanding Series of
Certificates, as the case may be, on the dates scheduled for such payments
and to pay all amounts owing to any Credit Enhancement Provider with
respect to such Series or all outstanding Series, as the case may be, if
such action would not result in a Pay Out Event for any Series. Prior to
its first exercise of its right to substitute money or Permitted
Investments for Receivables, the Transferor will deliver to the Trustee (i)
an opinion of counsel to the effect that such deposit and termination of
obligations will not result in the Trust being required to register as an
"investment company" within the meaning of the Investment Company Act of
1940, as amended and (ii) a Tax Opinion.
Final Payment of Principal; Termination
The Certificates of each Series will be subject to optional repurchase
by the Transferor on any Distribution Date after that Series' Investor
Interest and any related Enhancement Invested Amount is reduced to an
amount less than or equal to 5% of the initial Investor Interest (or such
other amount specified in the related Prospectus Supplement), if certain
conditions set forth in the Agreement are met. The repurchase price will be
specified in the related Prospectus Supplement.
The Certificates of each Series will be retired on the day following
the Distribution Date on which the final payment of principal is scheduled
to be made to the Certificateholders, whether as a result of optional
reassignment to the Transferor or otherwise. Each Prospectus Supplement
will specify the final date on which principal and interest with respect to
the related Series of Certificates will be scheduled to be distributed (the
"Series Termination Date"). Certificates may, however, be subject to prior
termination as provided above. If the Investor Interest is greater than
zero on the Series Termination Date, the Trustee or Servicer may be
required to sell or cause to be sold certain Receivables in the manner
provided in the Agreement and Series Supplement and to pay the net proceeds
of such sale and any collections on the Receivables, in an amount at least
equal to the sum of the Investor Interest and the Enhancement Invested
Amount, if any, with respect to such Series plus accrued interest due
thereon.
Unless the Servicer and the holder of the Transferor Certificate
instruct the Trustee otherwise, the Trust will terminate on the earlier of
(a) the day after the Distribution Date on which the aggregate Investor
Interest and, if specified in the Prospectus Supplement for any Series, the
Enhancement Invested Amount or Collateral Interest, if any, with respect to
each Series is zero, (b) the Specified Trust Termination Date or (c) if the
Receivables are sold or disposed of, immediately following such sale or
disposition (such date, the "Trust Termination Date"). Upon the termination
of the Trust and the surrender of the Transferor Certificate, the Trustee
shall convey to the holder of the Transferor Certificate all right, title
and interest of the Trust in and to the Receivables and other funds of the
Trust. For purposes hereof, the "Specified Trust Termination Date" means
the day which is 21 years less one day after the death of the officers and
the last survivor of all the lineal descendants of every officer of the
Trustee of the Trust who are living on the date of the Agreement, or such
later date which would not render the rights, privileges or options under
the Trust invalid under applicable law.
Pay Out Events
The Revolving Period will terminate prior to the date specified in the
related Prospectus Supplement if a Pay Out Event occurs prior to such date.
A Pay Out Event occurs with respect to all Series upon the occurrence of
any of the following events:
(a) certain events of insolvency or receivership relating to the
Transferor;
(b) the Transferor is unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the
Agreement; or
(c) the Trust becomes an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
In addition, a Pay Out Event may occur with respect to any Series upon
the occurrence of any other event specified in the related Prospectus
Supplement. On the date on which a Pay Out Event is deemed to have
occurred, the Rapid Amortization Period or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period will commence. If,
because of the occurrence of a Pay Out Event, the Rapid Amortization Period
begins earlier than the scheduled commencement of an Amortization Period or
prior to a Scheduled Payment Date, Certificateholders will begin receiving
distributions of principal earlier than they otherwise would have, which
may shorten the average life of the Certificates.
In addition to the consequences of a Pay Out Event discussed above, if
pursuant to certain provisions of Federal law, the Transferor voluntarily
enters liquidation or a receiver is appointed for the Transferor, on the
day of such event the Transferor will immediately cease to transfer
Principal Receivables to the Trust and promptly give notice to the Trustee
of such event.
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the
Transferor, the conservator or receiver may have the power to prevent the
early sale, liquidation or disposition of the Receivables and the
commencement of a Rapid Amortization Period or, if applicable with respect
to a Series as specified in the related Prospectus Supplement, a Rapid
Accumulation Period. In addition, a conservator or receiver may have the
power to cause the early sale of the Receivables and the early retirement
of the Certificates. See "Risk Factors -- Certain Matters Relating to
Receivership" and "Certain Legal Aspects of the Receivables -- Certain
Matters Relating to Receivership."
Servicing Compensation and Payment of Expenses
For each Series of Certificates, the Servicer will be compensated for
its servicing activities and reimbursed for its expenses by payment to it
of the Servicing Fee at the times and in the amounts specified in the
related Prospectus Supplement. The Servicing Fee will be funded from
collections of Finance Charge Receivables allocated to the Investor
Interest and will be paid each month (or on any other specified basis) from
amounts so allocated and on deposit in the Finance Charge Account (which,
if so specified in the related Prospectus Supplement, may include all or a
portion of the Interchange arising from the Accounts) or, in certain
limited circumstances, from amounts available from Enhancement and other
sources, if any. The remainder of the servicing fee for the Trust will be
allocable to the Transferor Interest, the Investor Interests of any other
Series issued by the Trust and the interest represented by the Collateral
Interest or the Enhancement Invested Amount, if any, with respect to such
Series, as described in the related Prospectus Supplement. Neither the
Trust nor the Certificateholders will have any obligation to pay the
portion of the servicing fee allocable to the Transferor Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables, including payment of
the fees and disbursements of the Trustee and independent certified public
accountants and other fees that are not expressly stated in the Agreement
to be payable by the Trust or the Certificateholders (but excluding
Federal, state and local income and franchise taxes, if any, of the Trust).
Certain Matters Regarding the Transferor and the Servicer
With respect to each Series of Certificates, the Servicer may not
resign except upon determination that performance of its duties is no
longer permissible under applicable law. No such resignation will become
effective until the Trustee or another successor to the Servicer has
assumed the Servicer's responsibilities and obligations under the
Agreement.
The Agreement will provide that the Servicer will indemnify the Trust
and Trustee from and against any reasonable loss, liability, expense,
damage or injury suffered or sustained by reason of any acts or omissions
or alleged acts or omissions of the Servicer with respect to the activities
of the Trust or the Trustee. The Servicer will not, however, indemnify (a)
the Trustee for liabilities imposed by reason of fraud, negligence or
willful misconduct by the Trustee in the performance of its duties under
the Agreement, (b) the Trust, the Certificateholders or the Certificate
Owners for liability arising from actions taken by the Trustee at the
request of Certificateholders, (c) the Trust, the Certificateholders or the
Certificate Owners for any losses, claims, damages or liabilities incurred
by any of them in their capacities as investors, including losses incurred
as a result of defaulted Receivables or Receivables which are written off
as uncollectible, or (d) the Trust, the Certificateholders or the
Certificate Owners for any liabilities, costs or expenses of the Trust, the
Certificateholders or the Certificate Owners arising under any tax law,
including any Federal, state, local or foreign income or franchise tax or
any other tax imposed on or measured by income (or any interest or
penalties with respect thereto or arising from a failure to comply
therewith) required to be paid by the Trust, the Certificateholders or the
Certificate Owners in connection with the Agreement to any taxing
authority.
The Agreement will provide that neither the Transferor nor the
Servicer nor any of their respective directors, officers, employees or
agents will be under any other liability to the Trust, Trustee,
Certificateholders or any other person for any action taken, or for
refraining from taking any action, in good faith pursuant to the Agreement.
Neither the Transferor, the Servicer, nor any of their respective
directors, officers, employees or agents will be protected against any
liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence of the Transferor, the Servicer
or any such person in the performance of its duties or by reason of
reckless disregard of obligations and duties thereunder. In addition, the
Agreement will provide that the Servicer is not under any obligation to
appear in, prosecute or defend any legal action which is not incidental to
its servicing responsibilities under the Agreement and which in its opinion
may expose it to any expense or liability.
The Agreement will provide that, in addition to New Issuances, the
Transferor may transfer its interest in all or a portion of the Transferor
Certificate, provided that prior to any such transfer (a) the Trustee
receives written notification from each Rating Agency that such transfer
will not result in a lowering of its then-existing rating of the
Certificates of each outstanding Series rated by it and (b) the Trustee
receives a Tax Opinion.
Any person into which, in accordance with the Agreement, the
Transferor or the Servicer may be merged or consolidated or any person
resulting from any merger or consolidation to which the Transferor or the
Servicer is a party, or any person succeeding to the business of the
Transferor or the Servicer, upon execution of a supplement to the Agreement
and delivery of an opinion of counsel with respect to the compliance of the
transaction with the applicable provisions of the Agreement, will be the
successor to the Transferor or the Servicer, as the case may be, under the
Agreement.
In addition, if the Bank elects to sell or otherwise dispose of the
Accounts, then the new owner of the Accounts may be substituted for the
Bank as Transferor and Servicer upon the satisfaction of certain
conditions, including the delivery of a Tax Opinion and receipt of written
confirmation from each Rating Agency that such substitution will not result
in such Rating Agency's reducing or withdrawing its rating on any then
outstanding Series rated by it.
Servicer Default
In the event of any Servicer Default (as defined below), either the
Trustee or Certificateholders representing undivided interests aggregating
more than 50% of the Investor Interests for all Series of Certificates of
the Trust, by written notice to the Servicer (and to the Trustee if given
by the Certificateholders), may terminate all of the rights and obligations
of the Servicer as servicer under the Agreement and in and to the
Receivables and the proceeds thereof and the Trustee may appoint a new
Servicer (a "Service Transfer"). The rights and interest of the Transferor
under the Agreement and in the Transferor Interest will not be affected by
such termination. The Trustee will as promptly as possible appoint a
successor Servicer. If no such Servicer has been appointed and has accepted
such appointment by the time the Servicer ceases to act as Servicer, all
authority, power and obligations of the Servicer under the Agreement will
pass to and be vested in the Trustee. If the Trustee is unable to legally
act as Servicer, the Trustee shall petition a court to appoint a financial
institution with risk-based capital or a net worth of at least $50,000,000
whose regular business includes servicing VISA or MasterCard credit card
receivables to act as successor Servicer.
"Servicer Default" under the Agreement refers to any of the following
events:
(a) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make certain
payments, transfers or deposits, on the date the Servicer is required
to do so under the Agreement or any Series Supplement (or within the
applicable grace period, which shall not exceed 10 business days);
(b) failure on the part of the Servicer duly to observe or perform
in any respect any other covenants or agreements of the Servicer which
has a material adverse effect on the Certificateholders of any Series
issued and outstanding and which continues unremedied for a period of
60 days after written notice and continues to have a material adverse
effect on such Certificateholders; or the delegation by the Servicer
of its duties under the Agreement, except as specifically permitted
thereunder;
(c) any representation, warranty or certification made by the
Servicer in the Agreement, or in any certificate delivered pursuant to
the Agreement, proves to have been incorrect when made which has a
material adverse effect on the Certificateholders of any Series issued
and outstanding, and which continues to be incorrect in any material
respect for a period of 60 days after written notice and continues to
have a material adverse effect on such Certificateholders; or
(d) the occurrence of certain insolvency events with respect to
the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in clause (a) above for a period of 30 business days (or, in
either case, such longer or shorter period as may be specified in the
related Prospectus Supplement), or referred to under clause (b) or (c) for
a period of 60 business days, will not constitute a Servicer Default if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Servicer and such delay or failure was caused by an act of
God or other similar occurrence. Upon the occurrence of any such event, the
Servicer will not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the
Agreement, and the Servicer will provide the Trustee, any provider of
Enhancement, the Transferor and the holders of Certificates of each Series
issued and outstanding under the Trust prompt notice of such failure or
delay by it, together with a description of the cause of such failure or
delay and its efforts to perform its obligations.
If a conservator or receiver is appointed for the Servicer, and no
Servicer Default other than such conservatorship or receivership or the
insolvency of the Servicer exists, the conservator or receiver may have the
power to prevent either the Trustee or the majority of the
certificateholders from effecting a Service Transfer.
Reports to Certificateholders
For each Series of Certificates, on each Distribution Date, or as soon
thereafter as is practicable, as specified in the related Prospectus
Supplement, the Trustee will forward to each Certificateholder of record a
statement prepared by the Servicer setting forth, among other things: (a)
the total amount distributed, (b) the amount of the distribution on such
Distribution Date allocable to principal on the Certificates, (c) the
amount of such distribution allocable to interest on the Certificates, (d)
the amount of collections of Principal Receivables processed during the
preceding month or months since the last Distribution Date and allocated in
respect of the Certificates, (e) the Aggregate Principal Receivables, the
Investor Interest and the Investor Interest as a percentage of the
aggregate amount of the Principal Receivables in the Trust as of the end of
the last day of the preceding Monthly Period or Periods since the last
Distribution Date, (f) the aggregate outstanding balance of Accounts which
are 30-59, 60-89 and 90 or more days delinquent (or a similar
classification of delinquency) as of the end of the last day of the
preceding Monthly Period or Periods since the last Distribution Date, (g)
the aggregate Investor Default Amount for the preceding Monthly Period or
Periods since the last Distribution Date, (h) the amount of Investor
Charge-Offs for the preceding Monthly Period or Periods since the last
Distribution Date and the amount of reimbursements of previous Investor
Charge-Offs for the preceding Monthly Period or Periods since the last
Distribution Date, (i) the amount of the Servicing Fee for the preceding
Monthly Period or Periods since the last Distribution Date, (j) the amount
available under any Enhancement and Credit Enhancement, if any, as of the
close of business on such Distribution Date, (k) the aggregate amount of
collections on Finance Charge Receivables processed during the preceding
Monthly Period or Periods since the last Distribution Date, (l) the
Portfolio Yield for the preceding Monthly Period or Periods since the last
Distribution Date and (m) certain information relating to the floating or
variable Certificate Rates, if applicable, for the Monthly Period or
Periods ending on such Distribution Date. If a Series of Certificates has
more than one Class, the statements forwarded to Certificateholders will
provide information as to each Class of Certificates.
On or before January 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Trustee will furnish to
each person who at any time during the preceding calendar year was a
Certificateholder of record, a statement prepared by the Servicer
containing the information required to be contained in the regular monthly
report to Certificateholders, as set forth in clauses (a), (b) and (c)
above aggregated for such calendar year or the applicable portion thereof
during which such person was a Certificateholder, together with such other
customary information (consistent with the treatment of the Certificates as
debt) as the Trustee or the Servicer deems necessary or desirable to enable
the Certificateholders to prepare their United States tax returns.
Evidence as to Compliance
The Agreement will provide that on or before March 31 of each calendar
year commencing after the calendar year during which it becomes effective
(or another date specified in the related Prospectus Supplement) the
Servicer will cause a firm of independent certified public accountants to
furnish a report to the effect that such accounting firm has made a study
and evaluation of the Servicer's internal accounting controls relative to
the servicing of the Accounts and that, on the basis of such examination,
such firm is of the opinion that such servicing was conducted in compliance
with the sections of the Agreement during the period covered by such report
(which shall be the prior calendar year), except for such exceptions or
errors as such firm shall believe to be immaterial and such other
exceptions as shall be set forth in such statement.
The Agreement will provide for delivery to the Trustee on or before
March 31 of each calendar year commencing after the calendar year during
which it becomes effective, or such other date as is specified in the
related Prospectus Supplement, of an annual statement signed by an officer
of the Servicer to the effect that the Servicer has fully performed its
obligations under the Agreement throughout the preceding year, or, if there
has been a default in the performance of any such obligation, specifying
the nature and status of the default.
Amendments
The Agreement and any Series Supplement may be amended by the
Transferor, the Servicer and the Trustee, without the consent of
Certificateholders of any Series then outstanding, provided that the
Transferor has delivered to the Trustee an officer's certificate to the
effect that the Transferor reasonably believes that such amendment will not
adversely affect in any material respect the interest of such
Certificateholders and that the Rating Agency Condition has been satisfied.
Amendments may be made as described in the foregoing sentence in order
(among other things) to (i) provide additional Credit Enhancement for the
benefit of the Holders of any Series or substitute such Credit Enhancement
(so long as the amount of such substitute Credit Enhancement, unless
otherwise provided in the related Series Supplement, is at least equal to
the Credit Enhancement for such Series), (ii) add one or more
Participations to the Trust, (iii) designate one or more Additional
Transferors or substitute Transferors, (iv) cure any ambiguity or correct
or supplement any provision contained in the Agreement or Series Supplement
which may be defective or inconsistent with any other provisions thereof,
(v) enable all or a portion of the Trust to qualify as, and to permit an
election to be made to cause the Trust to be treated as, a "financial asset
securitization investment trust," as described in the provisions of the
SBJP Act (and, in connection with any such election, to modify or eliminate
existing provisions of relating to the intended Federal income tax
treatment of the Certificates and the Trust), (vi) enable the Trust to
qualify as a partnership for purposes of any state tax laws and (vii)
enable Receivables transferred to the Trust to be derecognized by the
Transferor (or applicable Additional Transferor) under GAAP (including
provisions relating to the removal of Accounts) and the Trust to not be
treated as a member of the Transferor's (or such related Additional
Transferor's) consolidated group under GAAP.
Among other amendments that may be made as described under clause (vi)
in the preceding paragraph, the Agreement may beprovisions of Federal law,
the Transferor voluntarily enters liquidation or a receiver is appointed
for the Transferor, within 15 days, the Trustee will publish a notice of
the liquidation or the appointment stating that the Trustee intends to
sell, dispose of, or otherwise liquidate the Receivables in a commercially
reasonable manner. Any such amendment will provide that, unless otherwise
instructed within a specified period by Certificateholders representing
undivided interests aggregating more than 50% of the Investor Interest of
each Series (or if any Series has more than one Class, of each Class, and
any other Person specified in the Agreement or a Series Supplement) issued
and outstanding, the Trustee will sell, dispose of, or otherwise liquidate
the Receivables in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from the sale, disposition or liquidation of
the Receivables will be treated as collections of the Receivables and
applied as specified above in "-- Application of Collections" and in the
various Prospectus Supplements.
The Agreement and the related Series Supplement may also be amended by
the Transferor, the Servicer and the Trustee with the consent of the
holders of Certificates evidencing undivided interests aggregating not less
than 66-2/3% (or such other percentage specified in the related Prospectus
Supplement) of the Investor Interests for all Series of the Trust, for the
purpose of adding any provisions to, changing in any manner or eliminating
any of the provisions of, the Agreement or the related Series Supplement or
of modifying in any manner the rights of Certificateholders of any
outstanding Series of the Trust. No such amendment, however, may (a) reduce
in any manner the amount of, or delay the timing of, distributions required
to be made on any Series, (b) change the definition of or the manner of
calculating the interest of any Certificateholder of any Series issued by
the Trust or (c) reduce the aforesaid percentage of undivided interests the
holders of which are required to consent to any such amendment, in each
case without the consent of all Certificateholders of the related Series
and of all Series adversely affected. Promptly following the execution of
any amendment to the Agreement, the Trustee will furnish written notice of
the substance of such amendment to each Certificateholder. Any Series
Supplement and any amendments regarding the addition or removal of
Receivables or Participations from the Trust will not be considered an
amendment requiring Certificateholder consent under the provisions of the
Agreement and any Series Supplement.
List of Certificateholders
Upon written request of Certificateholders of record representing
undivided interests in the Trust aggregating not less than 10% (or such
other percentage specified in the related Prospectus Supplement) of a
Series' Investor Interest, the Trustee will afford such Certificateholders
access during business hours to the current list of Certificateholders of
the Trust for purposes of communicating with other Certificateholders with
respect to their rights under the Agreement. The Trustee may, however,
refuse to supply such list until it has been adequately indemnified by such
Certificateholders for its costs and expenses, and will give the Servicer
notice that such request has been made. See "-- Book-Entry Registration" and
"-- Definitive Certificates" above.
The Trustee
The Prospectus Supplement for each Series will specify the Trustee
under the Agreement. The Transferor, the Servicer and their respective
affiliates may from time to time enter into normal banking and trustee
relationships with the Trustee and its affiliates. The Trustee, the
Transferor, the Servicer and any of their respective affiliates may hold
Certificates in their own names (except that the Trustee may not hold a
Certificate issued by the Trust for its own account). In addition, for
purposes of meeting the legal requirements of certain local jurisdictions,
the Trustee shall have the power to appoint a co-trustee or separate
trustees of all or any part of the Trust. In the event of such appointment,
all rights, powers, duties and obligations conferred or imposed upon the
Trustee by the Agreement shall be conferred or imposed upon the Trustee and
such separate trustee or co-trustee jointly, or, in any jurisdiction in
which the Trustee shall be incompetent or unqualified to perform certain
acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will
be obligated to appoint a successor Trustee. The Transferor may also remove
the Trustee if the Trustee ceases to be eligible to continue as such under
the Agreement or if the Trustee becomes insolvent. In such circumstances,
the Transferor will be obligated to appoint a successor Trustee. Any
resignation or removal of the Trustee and appointment of a successor
Trustee does not become effective until acceptance of the appointment by
the successor Trustee.
Interest Rate Swaps and Related Caps, Floors and Collars
The Trustee on behalf of the Trust may enter into interest rate swaps
and related caps, floors and collars to minimize the risk to
Certificateholders from adverse changes in interest rates (collectively,
"Swaps").
An interest rate Swap is an agreement between two parties
("Counterparties") to exchange a stream of interest payments on an agreed
hypothetical or "notional" principal amount. No principal amount is
exchanged between the Counterparties to an interest rate Swap. In the
typical Swap, one party agrees to pay a fixed rate on a notional principal
amount, while the Counterparty pays a floating rate based on one or more
reference interest rates such as the London Interbank Offered Rate
("LIBOR"), a specified bank's prime rate, or U.S. Treasury Bill rates.
Interest rate Swaps also permit Counterparties to exchange a floating rate
obligation based upon one reference interest rate (such as LIBOR) for a
floating rate obligation based upon another referenced interest rate (such
as U.S. Treasury Bill rates).
The Swap market has grown substantially in recent years with a
significant number of banks and financial service firms acting both a
principals and as agents utilizing standardized Swap documentation. Caps,
floors and collars are more recent innovations, and they are less liquid
than other Swaps. There can be no assurance that the Trust will be able to
enter into or offset Swaps at any specific time or at prices or on other
terms that are advantageous. In addition, although the terms of Swaps may
provide for termination under certain circumstances, there can be no
assurance that the Trust will be able to terminate or offset a Swap on
favorable terms.
CREDIT ENHANCEMENT
General
Credit Enhancement may be provided with respect to one or more Classes
or any Series. Credit Enhancement may be in the form of the subordination
of one or more Classes of the Certificates of such Series, the
establishment of a cash collateral guaranty or account, a collateral
interest, a letter of credit, a surety bond, an insurance policy, a spread
account, a reserve account, the use of cross-support features, another
method of Credit Enhancement described in the related Prospectus Supplement
or any combination of the foregoing. To the extent specified in the related
Prospectus Supplement, any form of Credit Enhancement may be drawn upon by
more than one Class.
Credit Enhancement generally will not provide protection against all
risks of loss and will not guarantee repayment of the entire principal
balance of the Certificates and interest thereon, although Credit
Enhancement for a particular Class or Series may provide such protection
and guarantee if so specified in the related Prospectus Supplement. If
losses occur which exceed the amount covered by the Credit Enhancement or
which are not covered by the Credit Enhancement, Certificateholders will
bear their allocable share of deficiencies.
If Credit Enhancement is provided with respect to a Series, the
related Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment
thereunder not otherwise described herein, (c) the conditions (if any)
under which the amount payable under such Credit Enhancement may be reduced
and under which such Credit Enhancement may be terminated or replaced and
(d) any material provision of any agreement relating to such Credit
Enhancement. Additionally, the related Prospectus Supplement may set forth
certain information with respect to any Credit Enhancement Provider,
including (i) a brief description of its principal business activities,
(ii) its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business, (iii)
if applicable, the identity of regulatory agencies which exercise primary
jurisdiction over the conduct of its business and (iv) its total assets,
and its stockholders' or policy holders' surplus, if applicable, and other
appropriate financial information as of the date specified in the
Prospectus Supplement. If so specified in the related Prospectus
Supplement, Credit Enhancement with respect to a Series may be available to
pay principal of the Certificates of such Series following the occurrence
of certain Pay Out Events with respect to such Series, and the Credit
Enhancement Provider may have an interest in certain cash flows in respect
of the Receivables to the extent described in such Prospectus Supplement
(the "Enhancement Invested Amount").
Subordination
If specified in the related Prospectus Supplement, one or more Classes
of any Series will be subordinated as described in the related Prospectus
Supplement to the extent necessary to fund payments with respect to the
related Senior Certificates. The rights of the holders of any such
Subordinated Certificates to receive distributions of principal and/or
interest on any Distribution Date will be subordinate in right and priority
to the rights of the holders of Senior Certificates to the extent set forth
in the related Prospectus Supplement. If specified in the related
Prospectus Supplement, subordination may apply only in the event of certain
types of losses not covered by another Credit Enhancement. The related
Prospectus Supplement will also set forth information concerning the amount
of subordination of a Class or Classes of Subordinated Certificates in a
Series, the circumstances in which such subordination will be applicable,
the manner, if any, in which the amount of subordination will decrease over
time and the conditions under which amounts available from payments that
would otherwise be made to holders of such Subordinated Certificates will
be distributed to holders of Senior Certificates. If collections of
Receivables otherwise distributable to holders of a Subordinated Class of a
Series will be used as support for a Class of another Series, the related
Prospectus Supplement will specify the manner and conditions for applying
such a cross-support feature.
Cash Collateral Guaranty or Account
If specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by a guaranty (the
"Cash Collateral Guaranty") secured by the deposit of cash or certain
permitted investments in an account (the "Cash Collateral Account")
reserved for the beneficiaries of the Cash Collateral Guaranty or by a Cash
Collateral Account alone. The amount available pursuant to the Cash
Collateral Guaranty or the Cash Collateral Account will be the lesser of
amounts on deposit in the Cash Collateral Account and an amount specified
in the related Prospectus Supplement. The related Prospectus Supplement
will set forth the circumstances under which payments are made to
beneficiaries of the Cash Collateral Guaranty from the Cash Collateral
Account or from the Cash Collateral Account directly.
Collateral Interest
If specified in the related Prospectus Supplement, support for a
Series or one or more of its Classes will be provided initially by an
undivided interest in the Trust (the "Collateral Interest") in an amount
initially equal to a percentage of the Certificates of such Series as
specified in the Prospectus Supplement. Such Series may also have the
benefit of a Cash Collateral Guaranty or Cash Collateral Account with an
initial amount on deposit therein, if any, as specified in the Prospectus
Supplement which will be increased (i) to the extent the Transferor elects,
subject to certain conditions specified in the related Prospectus
Supplement, to apply collections of Principal Receivables allocable to the
Collateral Interest to decrease the Collateral Interest, (ii) to the extent
collections of Principal Receivables allocable to the Collateral Interest
are required to be deposited into the Cash Collateral Account as specified
in the related Prospectus Supplement and (iii) to the extent excess
collections of Finance Charge Receivables are required to be deposited into
the Cash Collateral Account as specified in the related Prospectus
Supplement. The total amount of the Credit Enhancement available pursuant
to the Collateral Interest and, if applicable, the Cash Collateral Guaranty
or Cash Collateral Account will be the lesser of the sum of the Collateral
Interest and the amount on deposit in the Cash Collateral Account and an
amount specified in the related Prospectus Supplement. The related
Prospectus Supplement will set forth the circumstances under which payments
which otherwise would be made to holders of the Collateral Interest will be
distributed to holders of Certificates and, if applicable, the
circumstances under which payment will be made under the Cash Collateral
Guaranty or under the Cash Collateral Account.
Letter of Credit
If specified in the related Prospectus Supplement, support for a
Series or one or more of its Classes will be provided by one or more
letters of credit. A letter of credit may provide limited protection
against certain losses in addition to or in lieu of other Credit
Enhancement. The issuer of the letter of credit will be obligated to honor
demands with respect to such letter of credit, to the extent of the amount
available thereunder, to provide funds under the circumstances and subject
to such conditions as are specified in the related Prospectus Supplement.
The maximum liability of the issuer of the letter of credit under a
letter of credit will generally be an amount equal to a percentage
specified in the related Prospectus Supplement of the Initial Investor
Interest of a Series or a Class of such Series. The maximum amount
available at any time to be paid under a letter of credit will be
determined in the manner specified therein and in the related Prospectus
Supplement.
Surety Bond or Insurance Policy
If specified in the related Prospectus Supplement, insurance with
respect to a Series or one or more of its Classes will be provided by one
or more insurance companies. Such insurance will guarantee, with respect to
one or more Classes of the related Series, distributions of interest or
principal in the manner and amount specified in the related Prospectus
Supplement.
If specified in the related Prospectus Supplement, a surety bond will
be purchased for the benefit of the holders of any Series or Class or such
Series to assure distributions of interest or principal with respect to
such Series or Class of Certificates in the manner and amount specified in
the related Prospectus Supplement.
Spread Account
If specified in the related Prospectus Supplement, support for a
Series or one or more of its Classes will be provided by the periodic
deposit of certain available excess cash flow from the Trust assets into an
account (the "Spread Account") intended to assist with subsequent
distribution of interest and principal on the Certificates of such Class or
Series in the manner specified in the related Prospectus Supplement.
Reserve Account
If specified in the related Prospectus Supplement, support for a
Series or one or more of its Classes or any related Enhancement will be
provided by a reserve account (the "Reserve Account"). The Reserve Account
may be funded, to the extent provided in the related Prospectus Supplement,
by an initial cash deposit, the retention of certain periodic distributions
of principal, interest or both otherwise payable to one or more Classes of
Certificates, including the Subordinated Certificates, or the provision of
a letter of credit, guarantee, insurance policy or other form of credit or
any combination thereof. The Reserve Account will be established to assist
with the subsequent distribution of principal or interest on the
Certificates of such Series or Class or amounts owing on any related
Enhancement as provided in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Transferor will represent and warrant in the Agreement that the
transfer of Receivables by it to the Trust is either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor
in and to the related Receivables, except for the interest of the
Transferor as holder of the Transferor Certificate, or the grant to the
Trustee of a security interest in such Receivables. The Transferor also
will represent and warrant in the Agreement that, if the transfer of
Receivables by the Transferor to the Trust is deemed to create a security
interest under Chapter 9 of the Louisiana Commercial Laws, as in effect in
the State of Louisiana (the "UCC"), there will exist a valid, subsisting
and enforceable first priority perfected security interest in such
Receivables created thereafter in favor of the Trustee on and after their
creation, except for certain tax and other governmental liens. For a
discussion of the Trust's rights arising from a breach of these warranties,
see "Description of the Certificates -- Representations and Warranties."
The Transferor will represent as to Receivables to be conveyed that
the Receivables are "accounts", "chattel paper" or "general intangibles"
for purposes of the UCC. Both the absolute transfer and assignment of
accounts and the transfer of accounts as security for an obligation are
treated for certain purposes under Article 9 of the UCC as creating a
security interest therein and are subject to its provisions, and the filing
of an appropriate financing statement is required to perfect the interest
of the Trust. Financing statements covering the Receivables have been and
will be filed with the appropriate governmental authority to protect the
interests of the Trust in the Receivables.
There are certain limited circumstances under the UCC in which a prior
or subsequent transferee of Receivables coming into existence after a
Closing Date could have an interest in such Receivables with priority over
the Trust's interest. Under the Agreement, however, the Transferor will
represent and warrant that it transferred the Receivables to the Trust free
and clear of the lien of any third party. In addition, the Transferor will
covenant that it will not sell, pledge, assign, transfer or grant any lien
on any Receivable (or any interest therein) other than to the Trust. A tax
or government lien or other nonconsensual lien on property of the
Transferor arising prior to the time a Receivable comes into existence may
also have priority over the interest of the Trust in such Receivable. In
addition, if the FDIC were appointed as conservator or receiver of the
Transferor, certain administrative expenses of the receiver may also have
priority over the interest of the Trust in such Receivable. If a
conservatorship or receivership proceeding were to be commenced involving
the Transferor and the conservator or receiver of the Transferor were to
take the position that the transfer of the Receivables from the Transferor
to the Trust should be characterized as the grant of a security interest in
such Receivables, then delays in distributions on the Certificates and
reductions in such distributions could result. In addition, while the
Transferor is the Servicer, cash collections held by the Transferor may,
subject to certain conditions, be commingled and used for the benefit of
the Transferor prior to the date on which such collections are required to
be deposited in the Finance Charge Account and Principal Account as
described under "Description of Certificates -- Application of Collections."
In the event of the conservatorship or receivership of the Transferor or,
in certain circumstances, the lapse of certain time periods, the Trust may
not have a perfected interest in such collections and, in sucf all or part
of such collections which may result in a loss to Certificateholders.
Certain Matters Relating to Receivership
The Transferor is chartered as a national banking association and is
subject to regulation and supervision by the Office of the Comptroller of
the Currency, which is authorized to appoint the FDIC as conservator or
receiver of the Transferor upon the occurrence of certain events relating
to the Transferor's financial condition.
The FDIA, as amended by FIRREA, sets forth certain powers that the
FDIC in its capacity as conservator or receiver for the Transferor could
exercise. Positions taken by the FDIC prior to the passage of FIRREA
suggest that the FDIC, if appointed as conservator or receiver for the
Transferor, would not interfere with the timely transfer to the Trust of
payments collected on the Receivables or interfere with the timely
liquidation of related Receivables, as described below. To the extent that
the Transferor has granted a security interest in Receivables to the Trust,
and that interest was validly perfected before the Transferor's insolvency
and was not taken in contemplation of the insolvency of the Transferor, or
with the intent to hinder, delay or defraud the Transferor or the creditors
of the Transferor, the FDIA provides that such security interest should not
be subject to avoidance by the FDIC. However, such positions are not
binding on the FDIC and if the FDIC were to assert a contrary position,
such as by requiring the Trustee to establish its right to those payments
by submitting to and completing the administrative claims procedure under
the FDIA, or were the conservator or receiver to request a stay of
proceedings with respect to the Transferor as provided under the FDIA,
delays in payments could occur. In addition, the FDIC, if appointed as the
conservator or receiver for the Transferor has the power under the FDIA to
repudiate contracts, including secured contracts of the Transferor. The
FDIA provides that a claim for damages arising from the repudiation of a
contract is limited to "actual direct compensatory damages." In the event
the FDIC were to be appointed as conservator or receiver of the Transferor
and were to repudiate the Agreement, then the amount payable out of
available collections to the Certificateholders could be lower than the
outstanding principal and accrued interest on the Certificates.
As a result, payments to the Trust with respect to the Receivables
shonservator or receiver of the Transferor. If, however, the FDIC, as
conservator or receiver for the Transferor, 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 FDIA, or the conservator or receiver were
to request a stay of proceedings with respect to the Transferor as provided
under the FDIA, delays in payments on the related Series of Certificates
and possible reductions in the amount of those payments could occur.
Upon the appointment of a conservator or receiver or upon a voluntary
liquidation with respect to the Transferor, the Transferor will promptly
give notice thereof to the Trustee and a Pay Out Event will occur with
respect to all Series then outstanding under the Trust. Pursuant to the
Agreement, newly created Principal Receivables will not be transferred to
the Trust on and after any such appointment or voluntary liquidation.
Under the Agreement, the proceeds from the sale of the Receivables would be
treated as collections of the Receivables and the Investor Percentage of
such proceeds would be distributed to the Certificateholders or, if so
specified in the related Prospectus Supplement, collected and held for the
benefit of Certificateholders. This procedure could be delayed, as
described above. If the only Pay Out Event to occur is either the
insolvency of the Transferor or the appointment of a conservator or
receiver for the Transferor, the conservator or receiver may have the power
to prevent the commencement of a Rapid Amortization Period or, if
applicable with respect to a Series as specified in the related Prospectus
Supplement, a Rapid Accumulation Period. In addition, a conservator or
receiver may have the power to cause the early sale of the Receivables and
the early retirement of the Certificates or to prohibit the continued
transfer of Principal Receivables to the Trust. See "Description of the
Certificates -- Pay Out Events."
Consumer Protection Laws
The relationships of cardholders, credit card issuers and lenders are
extensively regulated by Federal and state consumer protection laws. With
respect to credit cards issued by the Transferor, the most significant laws
include the Federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting, Fair Debt Collection Practice and Electronic Funds Transfer
Acts, at the Federal level, and the Louisiana Consumer Credit Law,
Louisiana Collection Agency Regulation Act and Louisiana Equal Credit
Opportunity Law. Certain of these statutes impose disclosure requirements
when a credit card account is advertised, when it is opened, at the end of
Billing Cycles and at year end. In addition, certain of these statutes
limit customer liability for unauthorized use, prohibit certain
discriminatory practices in extending credit, and impose certain
limitations on the type of account-related charges that may be assessed.
Cardholders are entitled under these laws to have payments and credits
applied to the credit card accounts promptly, to receive prescribed notices
and to require billing errors to be resolved promptly. The Trust may be
liable for certain violations of consumer protection laws that apply to the
related Receivables, either as assignee from the Transferor with respect to
obligations arising before transfer of the Receivables to the Trust or as a
party directly responsible for obligations arising after the transfer. In
addition, a cardholder may be entitled to assert such violations by way of
set-off against his obligation to pay the amount of Receivables owing. The
Transferor will warrant in the Agreement that all related Receivables have
been and will be created in compliance with the requirements of such laws.
The Servicer will also agree in the Agreement to indemnify the Trust, among
other things, for any liability arising from such violations caused by the
Servicer. For a discussion of the Trust's rights arising from the breach of
these warranties, see "Description of the Certificates -- Representations
and Warranties."
In addition, the SSCRA provides for a stay of court proceedings
against military personnel (including Air Force personnel) on active duty
if the ability of such person to defend against a suit would be materially
affected by reason of military service. The SSCRA could adversely affect
the Servicer's ability to collect on Receivables generated under First
NBC's USAF Club Card program and other military programs, which make up a
significant portion of the Trust Portfolio. See "First NBC's Credit Card
Activities -- General." In its experience to date with the military
programs, First NBC does not believe that the SSCRA has had a material
impact on its collection efforts, but there can be no assurance that the
SSCRA would not have an adverse effect in the future.
Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdiction's consumer protection laws
(including laws limiting the charges imposed by such credit card issuers)
in connection with their operations in such jurisdictions. A successful
challenge by such a jurisdiction could have an adverse impact on the
Transferor's credit card operations or the yield on the Receivables in the
Trust.
Application of Federal and state bankruptcy and debtor relief laws
would affect the interests of the Certificateholders if such laws result in
any related Receivables being written off as uncollectible when the amount
available under any Credit Enhancement is equal to zero. See "Description
of the Certificates -- Defaulted Receivables; Rebates and Fraudulent
Charges; Investor Charge-Offs."
U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion, summarizing the material anticipated Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates of a Series, is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), proposed, temporary and
final Treasury regulations thereunder, and published rulings and court
decisions in effect as of the date hereof, all of which are subject to
change, possibly retroactively. To the extent that the following summary
relates to matters of law or legal conclusions with respect thereto, such
summary represents the opinion of Mayer, Brown & Platt, special federal tax
counsel for the Bank subject to the qualifications set forth herein.
Mayer, Brown & Platt have prepared or reviewed the statements in this
Prospectus under the heading "U.S. Federal Income Tax Consequences," and
are of the opinion that such statements are correct in all material
respects. This discussion does not address every aspect of the Federal
income tax laws that may be relevant to Certificate Owners of a Series in
light of their personal investment circumstances or to certain types of
Certificate Owners of a Series subject to special treatment under the
Federal income tax laws (for example, banks and life insurance companies).
Accordingly, investors should consult their own tax advisors regarding
Federal, state, local, foreign and any other tax consequences to them of
any investment in the Certificates of a Series. PROSPECTIVE INVESTORS ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN
CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, FOREIGN COUNTRY, OR OTHER TAXING JURISDICTION.
Characterization of the Certificates as Indebtedness
Mayer, Brown & Platt, or such other counsel specified in the related
Prospectus Supplement, will act as special tax counsel to the Bank
("Special Tax Counsel") and will, upon issuance of a Series of
Certificates, render an opinion to the Bank based on the assumptions and
qualifications set forth therein that the Certificates of such Series that
are offered pursuant to a Prospectus Supplement (the "Offered
Certificates") will be treated as indebtedness for Federal income tax
purposes. A copy of such opinion will be filed with the Commission with a
Report on Form 8-K following the issuance of a Series of Certificates.
However, opinions of counsel are not binding on the Internal Revenue
Service (the "IRS"), and there can be no assurance that the IRS could not
successfully challenge this conclusion.
The Transferor expresses in the Agreement its intent that for Federal,
state, local and foreign income or franchise tax purposes, the Offered
Certificates of each Series will be indebtedness secured by the
Receivables. The Transferor agrees and each Certificateholder and
Certificate Owner, by acquiring an interest in an Offered Certificate,
agrees or will be deemed to agree to treat the Offered Certificates of such
Series as indebtedness for Federal, state and local income or franchise tax
purposes. However, because different criteria are used to determine the
non-tax accounting characterization of the transactions contemplated by the
Agreement, the Transferor expects to treat such transaction, for
regulatory and financial accounting purposes, as a sale of an ownership
interest in the Receivables and not as a debt obligation.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured
by the property, is a question of fact, the resolution of which is based
upon the economic substance of the transaction rather than its form or the
manner in which it is labeled. While the IRS and the courts have set forth
several factors to be taken into account in determining whether the
substance of a transaction is a sale of property or a secured indebtedness
for Federal income tax purposes, the primary factor in making this
determination is whether the transferee has assumed the risk of loss or
other economic burdens relating to the property and has obtained the
benefits of ownership thereof. Special Tax Counsel may analyze and rely on
several factors in reaching its opinion that the weight of the benefits and
burdens of ownership of the Receivables has not been transferred to the
Certificate Owners.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of
the transaction does not accord with its form. It is expected that Special
Tax Counsel may advise that the rationale of those cases will not apply to
the transaction evidenced by a Series of Certificates because the form of
the transaction, as reflected in the operative provisions of the documents,
either is not inconsistent with the characterization of the Offered
Certificates of such Series as debt for Federal income tax purposes or
otherwise makes the rationale of those cases inapplicable to this
situation.
Taxation of Interest Income of Certificateholders
As set forth above, Special Tax Counsel will render an opinion to the
Bank that the Offered Certificates will constitute indebtedness for Federal
income tax purposes, and accordingly, interest thereon generally will be
includible in income by Certificate Owners as ordinary income when received
(in the case of a cash basis taxpayer) or accrued (in the case of an
accrual basis taxpayer) in accordance with their respective methods of tax
accounting. Interest received on the Offered Certificates may also
constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be
issued at a greater than de minimis discount, under Treasury regulations
(the "Regulations") the Offered Certificates may nevertheless be deemed to
have been issued with original issue discount ("OID"). This could be the
case, for example, if interest payments for a Series are not deemed to be
payments of "qualified stated interest" because (i) Certificate Owners of a
Series do not have default remedies ordinarily available to holders of debt
instruments and (ii) no penalties are imposed on the Bank or the Trust as a
result of any failure to make interest payments. As a result, if such
Regulations were to apply, all of the taxable income to be recognized with
respect to the Offered Certificates would be includible in income as OID
but would not be includible again when the interest is actually received.
If the Offered Certificates are in fact issued at a greater than de
minimis discount or are treated as having been issued with OID under the
Regulations, the following rules will apply. The excess of the "stated
redemption price at maturity" of an Offered Certificate over the original
issue price (in this case, the initial offering price at which a
substantial amount of the Offered Certificates are sold to the public) will
constitute OID. A Certificate Owner must include OID in income as interest
over the term of the Offered Certificate under a constant yield method. In
general, OID must be included in income in advance of the receipt of cash
representing that income. Accordingly, cash basis taxpayers would
effectively be treated as being on the accrual method and therefore be
required to include interest into income prior to the receipt of cash
representing that income. In the case of a debt instrument as to which the
repayment of principal may be accelerated as a result of the prepayment of
other obligations securing the debt instrument, the periodic accrual of OID
is determined by taking into account both the prepayment assumptions used
in pricing the debt instrument and the prepayment experience. If this
provision applies to a Class of Certificates (which is not clear), the
amount of OID which will accrue in any given "accrual period" may either
increase or decrease depending upon the actual prepayment rate.
Accordingly, each Certificate Owner should consult its own tax adviser
regarding the impact to it of the OID rules if the Offered Certificates are
issued with OID. Under the Regulations, a holder of a Certificate issued
with de minimis OID must include such OID in income proportionately as
principal payments are made on a Class of Certificates.
A holder who purchases an Offered Certificate at a discount from its
adjusted issue price may be subject to the "market discount" rules of the
Code. These rules provide, in part, for the treatment of gain attributable
to accrued market discount as ordinary income upon the receipt of partial
principal payments or on the sale or other disposition of the Offered
Certificate, and for the deferral of interest deductions with respect to
debt incurred to acquire or carry the market discount Offered Certificate.
A subsequent holder who purchases an Offered Certificate at a premium
may elect to amortize and deduct this premium over the remaining term of
the Offered Certificate in accordance with rules set forth in Section 171
of the Code.
Sale of a Certificate
In general, a Certificate Owner will recognize gain or loss upon the
sale, exchange, redemption, or other taxable disposition of an Offered
Certificate measured by the difference between (i) the amount of cash and
the fair market value of any property received (other than amounts
attributable to, and taxable as, accrued interest) and (ii) the Certificate
Owner's tax basis in the Offered Certificate (as increased by any OID or
market discount previously included in income by the holder and decreased
by any deductions previously allowed for amortizable bond premium and by
any payments reflecting principal or OID received with respect to such
Certificate). Subject to the market discount rules discussed above and to
the one-year holding requirement for long-term capital gain treatment, any
such gain or loss generally will be long-term capital gain or loss,
provided that the Offered Certificate was held as a capital asset. The
maximum ordinary income rate for individuals, estates, and trusts exceeds
the maximum long-term capital gains rate for such taxpayers. In addition,
any capital losses realized generally may be used by a corporate taxpayer
only to offset capital gains and by an individual taxpayer only to the
extent of capital gains plus $3,000 of other income.
Tax Characterization of Trust
The Agreement permits the issuance of Classes of Certificates that are
treated for Federal income tax purposes either as indebtedness or as an
interest in a partnership. Accordingly, the Trust could be characterized
either as (i) a security device to hold Receivables securing the repayment
of the Certificates of all Series or (ii) a partnership in which the
Transferor and certain classes of Certificateholders are partners, and
which has issued debt represented by other classes of Certificates of the
Trust (including the Offered Certificates). In connection with the
issuance of Certificates of any Series, Special Tax Counsel will render an
opinion to the Bank, based on the assumptions and qualifications set forth
therein, that under then current law, the issuance of the Certificates of
such Series will not cause the Trust to be characterized for Federal income
tax purposes as an association (or publicly traded partnership) taxable as
a corporation. A copy of such opinion will be filed with the Commission
with a Report on Form 8-K following the issuance of a Series of
Certificates.
FASIT Legislation
In August, 1996, the United States Congress passed and President
Clinton signed into law the "Small Business Job Protection Act of 1996,"
H.R. 3448 (the "SBJP Act"). The SBJP Act creates a new type of entity for
federal income tax purposes called a "financial asset securitization
investment trust" or "FASIT." The effective date of the FASIT provisions
of the SBJP Act is September 1, 1997. The SBJP Act enables certain
arrangements similar to the Trust to elect to be treated as a FASIT. Under
the FASIT provisions of the SBJP Act a FASIT generally would avoid federal
income taxation and could issue securities substantially similar to the
Certificates, and those securities would be treated as debt for federal
income tax purposes. If so specified in the related Prospectus Supplement,
the Trust may make an election to be treated as a FASIT. The Agreement may
contain any such terms and provide for the issuance of Certificates on such
terms and conditions as are permitted to a FASIT and described in the
related Prospectus Supplement. In addition, upon satisfying certain
conditions set forth in the Agreement, the Transferor, Servicer and the
Trustee will be permitted to amend the Agreement in order to enable all or
a portion of the Trust to qualify as a FASIT and to permit a FASIT election
to be made with respect thereto, and to make such modifications to the
Agreement as may be permitted by reason of the making of such an election.
See "Description of Certificates -- Amendments." However, there can be no
assurance that the Transferor will or will not cause any permissible FASIT
election to be made with respect to the Trust or amend the Agreement in
connection with any election. In addition, if such an election is made, it
may cause a Certificateholder to recognize gain (but not loss) with respect
to any Certificates held by it, even though Special Tax Counsel will
deliver its opinion that a Certificate will be treated as debt for federal
income tax purposes without regard to the election and the Certificate
would be treated as debt following the election. Additionally, any such
election and any related amendments to the Agreement may have other tax and
non-tax consequences to Certificateholders. Accordingly, prospective
Certificateholders should consult their tax advisors with regard to the
effects of any such election and any permitted related amendments on them
in their particular circumstances.
Possible Classification of the Transaction as a Partnership or as an
Association Taxable as a
Corporation
The opinion of Special Tax Counsel with respect to Offered
Certificates will not be binding on the courts or the IRS. It is possible
that the IRS could assert that, for purposes of the Code, the transaction
contemplated by this Prospectus and a related Prospectus Supplement
constitutes a sale of the Receivables (or an interest therein) to the
Certificate Owners of one or more Series or Classes and that the proper
classification of the legal relationship between the Bank and some or all
of the Certificate Owners or Certificateholders of one or more Series
resulting from the transaction is that of a partnership (including a
publicly traded partnership), a publicly traded partnership taxable as a
corporation, or an association taxable as a corporation. The Transferor
currently does not intend to comply with the Federal income tax reporting
requirements that would apply if any Classes of Certificates were treated
as interests in a partnership or corporation (unless, as is permitted by
the Agreement, an interest in a Trust is issued or sold that is intended to
be classified as an interest in a partnership).
If a transaction were treated as creating a partnership between the
Transferor and the Certificate Owners or Certificateholders of one or more
Series, the partnership itself would not be subject to Federal income tax
(unless it were to be characterized as a publicly traded partnership
taxable as a corporation); rather, the partners of such partnership,
including the Certificate Owners or Certificateholders of such Series,
would be taxed individually on their respective distributive shares of the
partnership's income, gain, loss, deductions and credits. The amount and
timing of items of income and deductions of a Certificate Owner could
differ if the Offered Certificates were held to constitute partnership
interests, rather than indebtedness. Moreover, unless the partnership were
treated as engaged in a trade or business, an individual's share of
expenses of the partnership would be miscellaneous itemized deductions
that, in the aggregate, are allowed as deductions only to the extent they
exceed two percent of the individual's adjusted gross income, and would be
subject to reduction under Section 68 of the Code if the individual's
adjusted gross income exceeded certain limits. As a result, the individual
might be taxed on a greater amount of income than the stated rate on the
Offered Certificates. Finally, assuming a transaction were treated as
creating a partnership, all or a portion of any taxable income allocated to
a Certificate Owner that is a pension, profit-sharing or employee benefit
plan or other tax-exempt entity (including an individual retirement
account) may, under certain circumstances, constitute "unrelated business
taxable income" which generally would be taxable to the holder under the
Code.
If it were determined that a transaction created an entity classified
as an association or as a publicly traded partnership taxable as a
corporation, the Trust would be subject to Federal income tax at corporate
income tax rates on the income it derives from the Receivables, which would
reduce the amounts available for distribution to the Certificate Owners,
possibly including Certificate Owners of a Class that is treated as
indebtedness. Such classification may also have adverse state and local tax
consequences that would reduce amounts available for distribution to
Certificate Owners. Cash distributions to the Certificates Owners (except
any Class not recharacterized as an equity interest in an association)
generally would be treated as dividends for tax purposes to the extent of
such deemed corporation's earnings and profits.
Foreign Investors
As set forth above, Special Tax Counsel will render an opinion, upon
issuance, that the Offered Certificates will be treated as debt for U.S.
Federal income tax purposes. The following information describes the U.S.
Federal income tax treatment of investors that are not U.S. persons
("Foreign Investors") if the Offered Certificates are treated as debt. The
term "Foreign Investor" means any person other than (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof or (iii) an estate or trust the income of which is
includible in gross income for U.S. Federal income tax purposes, regardless
of its source.
Interest, including OID, paid to a Foreign Investor will be subject to
U.S. withholding taxes at a rate of 30% unless (i) the income is
"effectively connected" with the conduct by such Foreign Investor of a
trade or business in the United States or (ii) the Foreign Investor and
each securities clearing organization, bank, or other financial institution
that holds the Offered Certificates on behalf of the customer in the
ordinary course of its trade or business, in the chain between the
Certificate Owner and the U.S. person otherwise required to withhold the
U.S. tax, complies with applicable identification requirements and the
Certificate Owner does not actually or constructively own 10% or more of
the voting stock of the Bank (or, upon the issuance of an interest in the
Trust that is treated as a partnership interest, any holder of such
interest) and is not a controlled foreign corporation with respect to the
Bank (or the holder of such an interest). Applicable identification
requirements generally will be satisfied if there is delivered to a
securities clearing organization (i) IRS Form W-8 signed under penalties of
perjury by the Certificate Owner, stating that the Certificate Owner is not
a U.S. person and providing such Certificate Owner's name and address, (ii)
IRS Form 1001, signed by the Certificate Owner or such Certificate Owner's
agent, claiming exemption from withholding under an applicable tax treaty,
or (iii) IRS Form 4224 signed by the Certificate Owner or such owner's
agent, claiming exemption from withholding of tax on income effectively
connected with the conduct of a trade or business in the United States;
provided that in any such case (x) the applicable form is delivered
pursuant to applicable procedures and is properly transmitted to the United
States entity otherwise required to withhold tax and (y) none of the
entities receiving the form has actual knowledge that the Certificate Owner
is a U.S. person.
A Certificate Owner that is a nonresident alien or foreign corporation
will not be subject to U.S. Federal income tax on gain realized upon the
sale, exchange, or redemption of an Offered Certificate, provided that (i)
such gain is not effectively connected with the conduct of a trade or
business in the United States, (ii) in the case of a Certificate Owner that
is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such sale,
exchange, or redemption occurs, and (iii) in the case of gain representing
accrued interest, the conditions described in the immediately preceding
paragraph are satisfied.
If the interests of the Certificate Owners of a Series were
reclassified as interests in a partnership (not taxable as a corporation),
such recharacterization could cause a Foreign Investor to be treated as
engaged in a trade or business in the United States. In such event the
Certificate Owner of such Series would be required to file a Federal income
tax return and, in general, would be subject to Federal income tax,
including branch profits tax in the case of a Certificateholder that is a
corporation, on its net income from the partnership. Further, the
partnership would be required, on a quarterly basis, to pay withholding tax
equal to the sum, for each foreign partner, of such foreign partner's
distributive share of "effectively connected" income of the partnership
multiplied by the highest rate of tax applicable to that foreign partner.
The tax withheld from each foreign partner would be credited against such
foreign partner's U.S. income tax liability.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an
applicable tax treaty.
STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of the Trust,
the Certificates of any Series, or the Certificate Owners of any Series
under state and local tax laws. Prospective investors are urged to consult
their own tax advisors regarding state and local tax treatment of the Trust
and the Certificates of any Series, and the consequences of purchase,
ownership or disposition of the Certificates of any Series under any state
or local tax law.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect
to the plan. ERISA also imposes certain duties on persons who are
fiduciaries of plans subject to ERISA and prohibits certain transactions
between a plan and parties in interest with respect to such plans. Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a plan is considered to be a
fiduciary of such plan (subject to certain exceptions not here relevant). A
violation of these "prohibited transaction" rules may generate excise tax
and other liabilities under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding of
the Certificates of a Series and the operations of the Trust would result
in direct or indirect prohibited transactions under ERISA and the Code. The
operations of the Trust could result in prohibited transactions if Benefit
Plans (as defined below) that purchase the Certificates of a Series are
deemed to own an interest in the underlying assets of the Trust. There may
also be an improper delegation of the responsibility to manage Benefit Plan
assets if Benefit Plans that purchase the Certificates are deemed to own an
interest in the underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes
the "plan assets" of an employee benefit plan subject to ERISA or the Code,
or an individual retirement account ("IRA") (collectively referred to as
"Benefit Plans"), the assets and properties of certain entities in which a
Benefit Plan makes an equity investment could be deemed to be assets of the
Benefit Plan in certain circumstances. Accordingly, if Benefit Plans
purchase Certificates of a Series, the Trust could be deemed to hold plan
assets unless one of the exceptions under the Final Regulation is
applicable to the Trust.
The Final Regulation only applies to the purchase by a Benefit Plan of
an "equity interest" in an entity. Assuming that interests in Certificates
of a Series are equity interests, the Final Regulation contains an
exception that provides that if a Benefit Plan acquires a "publicly-offered
security," the issuer of the security is not deemed to hold plan assets. A
publicly-offered security is a security that is (i) freely transferable,
(ii) part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another and (iii) either is (A) part
of a class of securities registered under Section 12(b) or 12(g) of the
Exchange Act or (B) sold to the plan as part of an offering of securities
to the public pursuant to an effective registration statement under the Act
and the class of securities of which such security is a part is registered
under the Exchange Act within 120 days (or such later time as may be
allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred. In
addition, the Final Regulation provides that if at all times more than 75%
of the value of all classes of equity interests in Certificates of a Series
are held by investors other than benefit plan investors (which is defined
as including plans subject to ERISA, government plans and IRAs), the
investing plan's assets will not include any of the underlying assets of
the Trust.
There are no restrictions imposed on the transfer of the Certificates
offered hereby, and the Certificates offered hereby will be sold as part of
an offering pursuant to an effective registration statement under the
Securities Act. At or before the conclusion of the offering, the
underwriters will notify the Transferor and the Trustee as to whether or
not the Certificates of any Series (or if there is more than one Class in a
Series each Class) will be expected to be held by at least 100 separately
named persons at the conclusion of the offering. The Transferor will not,
however, determine whether there will, in fact, be at least 100 separately
named persons or whether the 100-investor requirement of the exception for
publicly offered securities is satisfied as to the Certificates of such
Series (or Class). If the Certificates of any Series (or if there is more
than one Class in a Series in any Class) are expected to be held by at
least 100 separately named persons at the conclusion of the offering, those
Certificates will be timely registered under the Exchange Act.
If interests in the Certificates of a Series fail to meet the criteria
of publicly-offered securities and the Trust's assets are deemed to include
assets of Benefit Plans that are Certificateholders, transactions involving
the Trust and "parties in interest" or "disqualified persons" with respect
to such plans might be prohibited under Section 406 of ERISA and Section
4975 of the Code unless an exemption is applicable. Thus, for example, if a
participant in any Benefit Plan is a cardholder of one of the Accounts,
under DOL interpretations the purchase of interests in Certificates by such
plan could constitute a prohibited transaction. In addition, the
Transferor, Servicer, Trustee or any underwriter of such Series may be
considered to be a party in interest, disqualified person or fiduciary with
respect to an investing Benefit Plan. Accordingly, an investment by a
Benefit Plan in Certificates may be a prohibited transaction under ERISA
and the Code unless such investment is subject to a statutory or
administrative exemption. Four class exemptions issued by the DOL that
could apply in such event are DOL Prohibited Transaction Exemption ("PTE")
84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers), PTE 91-38 (Class
Exemption for Certain Transactions Involving Bank Collective Investment
Funds), PTE 90-1 (Class Exemption for Certain Transactions Involving
Insurance Company Pooled Separate Accounts) and PTE 95-60 (Class Exemption
for Certain Transactions Involving Insurance Company General Accounts).
There is no assurance that these exemptions, even if all of the conditions
specified therein are satisfied, or any other exemption will apply to all
transactions involving the Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN CONSIDERING
THE PURCHASE OF INTERESTS IN CERTIFICATES OF ANY SERIES SHOULD CONSULT
THEIR OWN COUNSEL AS TO WHETHER THE ASSETS OF THE TRUST WHICH ARE
REPRESENTED BY SUCH INTERESTS WOULD BE CONSIDERED PLAN ASSETS, AND WHETHER,
UNDER THE GENERAL FIDUCIARY STANDARDS OF INVESTMENT PRUDENCE AND
DIVERSIFICATION, AN INVESTMENT IN CERTIFICATES OF ANY SERIES IS APPROPRIATE
FOR THE BENEFIT PLAN TAKING INTO ACCOUNT THE OVERALL INVESTMENT POLICY OF
THE BENEFIT PLAN AND THE COMPOSITION OF THE BENEFIT PLAN'S INVESTMENT
PORTFOLIO. In addition, fiduciaries should consider the consequences that
would apply if the Trust's assets were considered plan assets, the
applicability of exemptive relief from the prohibited transaction rules,
and, whether all conditions for such exemptive relief would be satisfied.
In particular, insurance companies considering the purchase of
Certificates of any Series should consult their own benefits or other
appropriate counsel with respect to the United States Supreme Court's
decision in John Hancock Mutual Life Insurance Co. v. Harris Trust &
Savings Bank, 114 S. Ct. 517 (1993) ("John Hancock") and the applicability
of PTE 95-60. In John Hancock, the Supreme Court held that assets held in
an insurance company's general account may be deemed to be "plan assets"
under certain circumstances; however, PTE 95-60 may exempt some or all of
the transactions that could occur as the result of the acquisition and
holding of the Certificates of a Series by an insurance company general
account from the penalties normally associated with prohibited
transactions. Accordingly, investors should analyze whether John Hancock
and PTE 95-60 or any other exemption may have an impact with respect to
their purchase of the Certificates of any Series.
PLAN OF DISTRIBUTION
The Transferor may sell or cause Certificates to be sold (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. In addition, the Transferor or its affiliates may act as
selling agent for the Certificates, if so specified in the related
Prospectus Supplement. The related Prospectus Supplement in respect of a
Series offered hereby will set forth the terms of the offering of such
Certificates, including the name or names of any underwriters, the purchase
price of such Certificates and the proceeds to the Transferor from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial offering price and any discounts or concessions
allowed or reallowed or paid to dealers. Only underwriters so named in such
Prospectus Supplement shall be deemed to be underwriters in connection with
the Certificates offered thereby.
Subject to the terms and conditions set forth in an underwriting
agreement (an "Underwriting Agreement") to be entered into with respect to
each series of Certificates, the Transferor will agree to sell or cause the
Trust to sell to each of the underwriters named therein and in the related
Prospectus Supplement, and each of such underwriters will severally agree
to purchase from the Transferor or Trust, as applicable, the principal
amount of Certificates set forth therein and in the related Prospectus
Supplement (subject to proportional adjustment on the terms and conditions
set forth in the related Underwriting Agreement in the event of an increase
or decrease in the aggregate amount of Certificates offered hereby and by
the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any
of such Certificates are purchased. In the event of a default by any
underwriter, each Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting underwriters may
be increased or the Underwriting Agreement may be terminated.
Each Underwriting Agreement will provide that the Transferor will
indemnify the related underwriters against liabilities relating to the
adequacy of disclosure to investors, including under the Securities Act of
1933, as amended.
The place and time of delivery for any Series of Certificates in
respect of which this Prospectus is delivered will be set forth in the
accompanying Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates
will be passed upon for the Transferor by Mayer, Brown & Platt, Chicago,
Illinois. Certain legal matters relating to the Federal tax consequences of
the issuance of the Certificates will be passed upon for the Transferor by
Mayer, Brown & Platt. Certain legal matters relating to the issuance of the
Certificates will be passed upon for the Underwriters by Orrick, Herrington
& Sutcliffe LLP, New York, New York.
INDEX OF DEFINED TERMS FOR PROSPECTUS
Term Page
Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Accumulation Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Additional Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Additional Transferors. . . . . . . . . . . . . . . . . . . . . . . . . .40
Adjusted Investor Interest. . . . . . . . . . . . . . . . . . . . . . . .52
Agent banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Aggregate Principal Receivables . . . . . . . . . . . . . . . . . . . . .47
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Amortization Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Automatic Additional Accounts . . . . . . . . . . . . . . . . . . . . . .43
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4, 10
Bank Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
BHC Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Billed Finance Charge Receivables . . . . . . . . . . . . . . . . . . . .47
Billing Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Cash Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . .60
Cash Collateral Guaranty. . . . . . . . . . . . . . . . . . . . . . . . .60
Cede. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Cedel Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Certificate Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificate Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Certificateholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Collateral Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Collection Account. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Controlled Accumulation Amount. . . . . . . . . . . . . . . . . . . . . .13
Controlled Accumulation Period. . . . . . . . . . . . . . . . . . . . . .13
Controlled Amortization Amount. . . . . . . . . . . . . . . . . . . . . .12
Controlled Amortization Period. . . . . . . . . . . . . . . . . . . . . .12
Controlled Deposit Amount . . . . . . . . . . . . . . . . . . . . . . . .13
Controlled Distribution Amount. . . . . . . . . . . . . . . . . . . . . .12
Conversion Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10, 32
Counterparties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Credit Enhancement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Credit Enhancement Percentage . . . . . . . . . . . . . . . . . . . . . .46
Credit Enhancement Provider . . . . . . . . . . . . . . . . . . . . . . . 6
Cut-Off Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Defaulted Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . . .10
Depositaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Depository. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Determination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Disclosure Document . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Discount Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Distribution Account. . . . . . . . . . . . . . . . . . . . . . . . . . .45
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, A-1
DTC Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Eligible Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Eligible Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Enhancement Invested Amount . . . . . . . . . . . . . . . . . . . . . . .60
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Euroclear Operator. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Euroclear Participants. . . . . . . . . . . . . . . . . . . . . . . . . .36
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . .16
Excess Funding Account. . . . . . . . . . . . . . . . . . . . . .17, 45, 51
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FASIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
FCSC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
FDIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
FDIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Final Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
Finance Charge Account. . . . . . . . . . . . . . . . . . . . . . . . . .45
Finance Charge Receivables. . . . . . . . . . . . . . . . . . . . . . . . 7
FIRREA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
First Bankcard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
First NBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4, 10
Foreign Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
Foreign Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
Full Investor Interest. . . . . . . . . . . . . . . . . . . . . . . . . .18
Funding Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Group Investor Charge-Offs. . . . . . . . . . . . . . . . . . . . . . . .49
Group Investor Default Amounts. . . . . . . . . . . . . . . . . . . . . .49
Group Investor Finance Charge Collections . . . . . . . . . . . . . . . .49
Group Investor Monthly Interest . . . . . . . . . . . . . . . . . . . . .49
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Indirect Participants . . . . . . . . . . . . . . . . . . . . . . . . . .34
Ineligible Receivable . . . . . . . . . . . . . . . . . . . . . . . . . .41
Interchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Interest Funding Account. . . . . . . . . . . . . . . . . . . . . . . . .38
Interest Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Investor Charge-Off . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Investor Default Amount . . . . . . . . . . . . . . . . . . . . . . . . .52
Investor Finance Charge Collections . . . . . . . . . . . . . . . . . . .49
Investor Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investor Monthly Fees . . . . . . . . . . . . . . . . . . . . . . . . . .49
Investor Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
John Hancock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Minimum Transferor Interest . . . . . . . . . . . . . . . . . . . . . . . 8
Monthly Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Net Default Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Net Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
New Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Offered Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . .65
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Paired Series . . . . . . . . . . . . . . . . . . . . . . . . . . . .17, 51
Partial Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . .16
Participation Agreement . . . . . . . . . . . . . . . . . . . . . . . . .43
Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 43
Pay Out Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . .45
Portfolio Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Pre-Funding Amount. . . . . . . . . . . . . . . . . . . . . . . . . .18, 45
Principal Amortization Period . . . . . . . . . . . . . . . . . . . . . .12
Principal Commencement Date . . . . . . . . . . . . . . . . . . . . . . .12
Principal Funding Account . . . . . . . . . . . . . . . . . . . . . . . .13
Principal Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . .16, 51
Private Label Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Prospectus Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
Purchased Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Qualified Institution . . . . . . . . . . . . . . . . . . . . . . . . . .45
Rapid Accumulation Period . . . . . . . . . . . . . . . . . . . . . . . .14
Rapid Amortization Period . . . . . . . . . . . . . . . . . . . . . . . .15
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Reallocated Investor Finance Charge Collections . . . . . . . . . . . . .49
Reallocation Group. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Removed Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Revolving Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
SAIF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
SBJP Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
Scheduled Payment Date. . . . . . . . . . . . . . . . . . . . . . . . . .12
Securities Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Senior Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4, A-1
Series Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Series Termination Date . . . . . . . . . . . . . . . . . . . . . . . . .53
Service Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Servicer Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Shared Principal Collections. . . . . . . . . . . . . . . . . . . . . . .16
Special Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Specified Trust Termination Date. . . . . . . . . . . . . . . . . . . . .53
Spread Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
SSCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Standard & Poor's . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Subordinated Certificates . . . . . . . . . . . . . . . . . . . . . . . . 6
Supplemental Certificates . . . . . . . . . . . . . . . . . . . . . . . . 8
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Terms and Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . .36
Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .13, 47
Transferor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Transferor Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Transferor Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Transferor Percentage . . . . . . . . . . . . . . . . . . . . . . . . . .33
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 4
Trust Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Trust Termination Date. . . . . . . . . . . . . . . . . . . . . . . . . .53
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
U.S. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . .71
USAF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered First
NBC Credit Card Master Trust Asset Backed Certificates (the "Global
Securities") to be issued in Series from time to time (each, a "Series")
will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through any of The Depository
Trust Company ("DTC"), Cedel or Euroclear. The Global Securities will be
tradeable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-
day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in
accordance with conventional eurobond practice (i.e., seven calendar day
settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of Cedel and Euroclear
(in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on
their behalf as direct and indirect Participants in DTC. As a result, Cedel
and Euroclear will hold positions on behalf of their participants through
their respective Depositaries, which in turn will hold such positions in
accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to U.S. corporate debt
obligations. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and
seller's accounts are located to ensure that settlement can be made on the
desired value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S.
corporate debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be
settled using the procedures applicable to conventional eurobonds in same-
day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC
Participant to the account of a Cedel Participant or a Euroclear
Participant, the purchaser will send instructions to Cedel or Euroclear
through a Cedel Participant or Euroclear Participant at least one business
day prior to settlement. Cedel or Euroclear will instruct the respective
Depositary, as the case may be, to receive the Global Securities against
payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the
settlement date. Payment will then be made by the respective Depositary to
the DTC Participant's account against delivery of the Global Securities.
After settlement has been completed, the Global Securities will be credited
to the respective clearing system and by the clearing system, in accordance
with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next
day (European time) and the cash debit will be back-valued to, and the
interest on the Global Securities will accrue from, the value date (which
would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade
fails), the Cedel or Euroclear cash debit will be valued instead as of the
actual settlement date.
Cedel Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-
position funds for settlement, either from cash on hand or existing lines
of credit, as they would for any settlement occurring within Cedel or
Euroclear. Under this approach, they may take on credit exposure to Cedel
or Euroclear until the Global Securities are credited to their accounts one
day later.
As an alternative, if Cedel or Euroclear has extended a line of credit
to them, Cedel Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear
Participants purchasing Global Securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the Global Securities
were credited to their accounts. However, interest on the Global Securities
would accrue from the value date. Therefore, in many cases the investment
income on the Global Securities earned during that one-day period may
substantially reduce or offset the amount of such overdraft charges,
although this result will depend on each Cedel Participant's or Euroclear
Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global
Securities to the respective Depositary for the benefit of Cedel
Participants or Euroclear Participants. The sale proceeds will be available
to the DTC seller on the settlement date. Thus, to the DTC Participant a
cross-market transaction will settle no differently than a trade between
two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedel Participants and Euroclear
Participants may employ their customary procedures for transactions in
which Global Securities are to be transferred by the respective clearing
system, through the respective Depositary, to a DTC Participant. The seller
will send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. In
these cases, Cedel or Euroclear will instruct the respective Depositary, as
appropriate, to deliver the bonds to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the
settlement date. The payment will then be reflected in the account of the
Cedel Participant or Euroclear Participant the following day, and receipt
of the cash proceeds in the Cedel Participant's or Euroclear Participant's
account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of
receipt of the sale proceeds in its account, the back-valuation will
extinguish any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade
fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use Cedel or Euroclear and that
purchase Global Securities from DTC Participants for delivery to Cedel
Participants or Euroclear Participants should note that these trades would
automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would
give the Global Securities sufficient time to be reflected in their
Cedel or Euroclear account in order to settle the sale side of the
trade; or
(c) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC Participant
is at least one day prior to the value date for the sale to the Cedel
Participant or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Cedel or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally
applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless (i) each clearing system,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business in the chain of intermediaries
between such beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements and (ii) such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption form
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must
be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U. S. Persons resident in treaty
countries (Form 1001). Non- U.S. Persons that are Certificate Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the Certificate Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of
a Global Security or in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom
it holds (the clearing agency, in the case of persons holding directly on
the books of the clearing agency). Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof or (iii) an estate
or trust the income of which is includible in gross income for United
States tax purposes, regardless of its source. This summary does not deal
with all aspects of U.S. Federal income tax withholding that may be
relevant to foreign holders of the Global Securities. Investors are advised
to consult their own tax advisers for specific tax advice concerning their
holding and disposing of the Global Securities.
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee . . . . . . . . . . . . . $ *
Printing and Engraving . . . . . . . . . . *
Trustee's Fees . . . . . . . . . . . . . . *
Legal Fees and Expenses. . . . . . . . . . *
Blue Sky Fees and Expenses . . . . . . . . *
Accountants' Fees and Expenses . . . . . . *
Rating Agency Fees . . . . . . . . . . . . *
Miscellaneous Fees . . . . . . . . . . . . *
---------
Total . . . . . . . . . . . . . . . . $ *
=
______________
* To be specified in a pre-effective amendment.
ITEM 15. Indemnification of Directors and Officers
Articles V and VI of the Registrant's Articles of Association provide
as follows:
ARTICLE V
Limitation of Liability of Directors and Officers
A. No director or officer of the Association shall be liable to the
Association or to its shareholder for monetary damages for breach of his
fiduciary duty as a director or officer, provided that the foregoing
provision shall not eliminate or limit the liability of a director or
officer for (a) any breach of his duty of loyalty to the Association or its
shareholder; (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (c) liability for
unlawful distributions of the association's assets to, or redemption or
repurchase of the Association's shares from, the shareholder of the
Association; or (d) any transaction from which he derived an improper
personal benefit.
B. The Board of Directors may, with the approval of the shareholder,
(a) cause the Association to enter into contracts with directors and
officers providing for the limitation of liability set forth in this
Article V and for indemnification to the fullest extent permitted by law.
C. Any amendment or repeal of this Article V shall not adversely
affect any elimination or limitation of liability of a director or officer
of the Association under this Article V with respect to any action or
inaction occurring prior to the time of such amendment or repeal.
ARTICLE VI
Indemnification
Section 1. Definitions. As used in this Article the following terms
shall have the meanings set out below:
a. "Board" - the Board of Directors of the Association.
b. "Claim" - any threatened or pending or completed claim,
action, suit, or proceeding, whether civil, criminal, administrative
or investigative and whether made judicially or extra-judicially, or any
separate issue or matter therein, as the context requires.
c. "Determining Body" - (i) the shareholder, or (ii) if a
majority of the members of the board of directors of the shareholder are
parties to the Claim, or the shareholder so directs, independent legal
counsel, which may be the regular outside counsel of the Association.
d. "Disbursing Officer" - the Chief Executive Officer of the
Association or, if the Chief Executive Officer is a party to the Claim for
which indemnification is being sought, any officer not a party to such
Claim who is designated by the shareholder to be the Disbursing Officer
with respect to indemnification requests related to the Claim, which
designation shall be made promptly after receipt of the initial request for
indemnification with respect to such Claim.
e. "Expenses" - any expenses or costs (including, without
limitation, attorney's fees, judgments, punitive or exemplary damages,
fines and amounts paid in settlement).
f. "Indemnitee" - each person who is or was a director or
officer of the Association, but such term shall not include any person who
was a director or officer of any institution absorbed by the Association by
way of merger, consolidation, transfer of assets or otherwise, provided
that nothing herein shall prevent the Association from providing
indemnification to such persons under circumstances which the Association
determines in its discretion to be appropriate and in accordance with law.
Section 2. Indemnity.
a. To the extent such Expenses exceed the sum of amounts paid or
due under or pursuant to (i) policies of liability insurance maintained by
the Association, (ii) policies of liability insurance maintained by or on
behalf of Indemnitee and (iii) provisions for indemnification in the by-
laws, resolutions or other instruments of any entity other than the
Association or its shareholder, the Association shall indemnify Indemnitee
against any Expenses actually and reasonably incurred by him (as they are
incurred) in connection with any Claim either against him or as to which he
is involved solely as a witness or person required to give evidence, by
reason of his position.
(1) as a director or officer of the Association,
(2) as a director or officer of any subsidiary of the
Association or as fiduciary with respect to any employee benefit plan of
the Association, or
(3) as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other for profit or not
for profit entity or enterprise, if such position is or was held at the
request of the Association,
whether relating to service in such position, before or after the effective
date of this Article, if he (i) is successful in his defense of the Claim
on the merits or otherwise or (ii) has been found by the Determining Body
(acting in good faith) to have met the Standard of Conduct; provided that
(A) the amount otherwise payable by the Association may be reduced by the
Determining Body to such amount as it deems proper if it determines that
the Claim involved the receipt of a personal benefit by Indemnitee, and (B)
no indemnification shall be made (i) in respect of any Claim as to which
Indemnitee shall have been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable for willful or
intentional misconduct in the performance of his duty to the Association or
to have obtained an improper personal benefit, or (ii) for expenses,
penalties or other payments incurred in an administrative proceeding or
action instituted by a bank regulatory agency, which action results in a
final order assessing civil monetary penalties or payments to the
Association, unless in each such case, and only to the extent that, a court
shall determine upon application that, in view of all the circumstances of
the case, Indemnitee is fairly and reasonably entitled to indemnity for
such Expenses as the court deems proper.
b. The Standard of Conduct is met when the conduct by an
Indemnitee with respect to which a Claim is asserted was conduct that he
reasonably believed to be in, or not opposed to, the best interest of the
Association, and, in the case of a criminal action or proceeding, that he
had no reasonable cause to believe was unlawful. The termination of any
Claim by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that Indemnitee did not meet the Standard of Conduct.
c. Promptly upon becoming aware of the existence of any Claim as
to which he may be indemnified hereunder, Indemnitee shall notify the Chief
Executive Officer of the Association of the Claim and whether he intends to
seek indemnification hereunder. If such notice indicates that Indemnitee
does so intend, the Chief Executive Officer shall promptly notify the
shareholder, which shall promptly establish the Determining Body. After the
Determining Body has been established the Chief Executive Officer shall
inform Indemnitee thereof and Indemnitee shall immediately provide the
Determining Body with all facts relevant to the Claim known to him. Within
60 days of the receipt of such information, together with such additional
information as the Determining Body may request of Indemnitee, the
Determining Body shall determine, and shall advise Indemnitee of its
determination, whether Indemnitee has met the Standard of Conduct. The
Determining Body may extend such sixty-day period by no more than an
additional sixty days.
d. Indemnitee shall promptly inform the Determining Body upon
his becoming aware of any relevant facts not therefore provided by him to
the Determining Body, unless the Determining Body has obtained such facts
by other means. If, after determining that the Standard of Conduct has been
met, the Determining Body obtains facts of which it was not aware at the
time it made such determination, the Determining Body on its own motion,
after notifying Indemnitee and providing him an opportunity to be heard,
may, on the basis of such facts, revoke such determination, provided that
in the absence of actual fraud by Indemnitee no such revocation may be made
later than thirty days after final disposition of the Claim.
e. In the case of any Claim not involving a proposed, threatened
or pending criminal proceeding,
(1) If Indemnitee has, in the good faith judgment of the
Determining Body, met the Standard of Conduct, the Association may, in its
sole discretion after notice to Indemnitee, assume all responsibility for
the defense of the Claim, and, in any event, the Association and Indemnitee
each shall keep the other informed as to the progress of the defense,
including prompt disclosure of any proposals for settlement; provided that
if the Association or the shareholder is a party to the Claim and
Indemnitee reasonably determines that there is a conflict between the
positions of the Association or the shareholder and Indemnitee with respect
to the Claim, then Indemnitee shall be entitled to conduct his defense,
with counsel of his choice; and provided further that Indemnitee shall in
any event be entitled at his expense to employ counsel chosen by him to
participate in the defense of the Claim; and
(2) The Association shall fairly consider any proposals by
Indemnitee for settlement of the Claim. If the Association (A) proposes a
settlement acceptable to the person asserting the Claim, or (B) believes a
settlement proposed by the person asserting the Claim should be accepted,
it shall inform Indemnitee of the terms thereof and shall fix a reasonable
date by which Indemnitee shall respond. If Indemnitee agrees to such terms,
he shall execute such documents as shall be necessary to effect the
settlement. If he does not agree he may proceed with the defense of the
Claim in any manner he chooses, but if he is not successful on the merits
or otherwise, the Association's obligation to indemnify him for any
Expenses incurred following his disagreement shall be limited to the lesser
of (A) the total Expenses incurred by him following his decision not to
agree to such proposed settlement or (B) the amount the Association would
have paid pursuant to the terms of the proposed settlement. If, however,
the proposed settlement would impose upon Indemnitee any requirement to act
or refrain from acting that would materially interfere with the conduct of
his affairs, Indemnitee may refuse such settlement and proceed with the
defense of the Claim, if he so desires, at the Association's expense
without regard to the limitations imposed by the preceding sentence. In no
event, however, shall the Association be obligated to indemnify Indemnitee
for any amount paid in a settlement that the Association has not approved.
f. In the case of a Claim involving a proposed, threatened or
pending criminal proceeding, Indemnitee shall be entitled to conduct the
defense of the Claim, and to make all decisions with respect thereto, with
counsel of his choice; provided that the Association shall not be obligated
to indemnify Indemnitee for an amount paid in settlement that the
Association has not approved.
g. After notifying the Association of the existence of a Claim,
Indemnitee may from time to time request the Association to pay the
Expenses (other than judgments, fines, penalties or amounts paid in
settlement) that he incurs in pursuing a defense of the Claim prior to the
time that the Determining Body determines whether the Standard of Conduct
has been met. If the Disbursing Officer believes the amount requested to be
reasonable, he shall pay to Indemnitee the amount requested (regardless of
Indemnitee's apparent ability to repay such amount) upon receipt of an
undertaking by or on behalf of Indemnitee to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Association under the circumstances. If the Disbursing Officer does not
believe such amount to be reasonable, the Association shall pay the amount
deemed by him to be reasonable, and Indemnitee may apply directly to the
Determining Body for the remainder of the amount requested.
h. After it has been determined that the Standard of Conduct was
met, for so long as and to the extent that the Association is required to
indemnify Indemnitee under this Article, the provisions of Paragraph (g)
shall continue to apply with respect to Expenses incurred after such time
except that (i) no undertaking shall be required of Indemnitee and (ii) the
Disbursing Officer shall pay to Indemnitee such amount of any fines,
penalties or judgments against him which have become final and as to which
the Association is obligated to indemnify him.
i. Any determination by the Association with respect to
settlements of a Claim shall be made by the Determining Body.
j. The Association and Indemnitee shall keep confidential, to
the extent permitted by law and their fiduciary obligations, all facts and
determinations provided or made pursuant to or arising out of the operation
of this Agreement, and the Association and Indemnitee shall instruct it or
his agents and employees to do likewise.
Section 3. Enforcement.
a. The rights provided by this Article shall be enforceable by
Indemnitee in any court of competent jurisdiction.
b. If Indemnitee seeks a judicial adjudication of his rights
under this Article Indemnitee shall be entitled to recover from the
Association, and shall be indemnified by the Association against, any and
all Expenses actually and reasonably incurred by him in connection with
such proceeding but only if he prevails therein. If it shall be determined
that Indemnitee is entitled to receive part but not all of the relief
sought, then Indemnitee shall be entitled to be reimbursed for all Expenses
incurred by him in connection with such judicial adjudication if the amount
to which he is determined to be entitled exceeds 50% of the amount of his
claim. Otherwise, the Expenses incurred by Indemnitee in connection with
such judicial adjudication shall be appropriately prorated.
c. In any judicial proceeding described in this subsection, the
Association shall bear the burden of proving that Indemnitee is not
entitled to any Expenses sought with respect to any Claim.
Section 4. Saving Clause. If any provision of this Article is
determined by a court having jurisdiction over the matter to require the
Association to do or refrain from doing any act that is in violation of
applicable law, the court shall be empowered to modify or reform such
provision so that, as modified or reformed, such provision provides the
maximum indemnification permitted by law, and such provision, as so
modified or reformed, and the balance of this Article, shall be applied in
accordance with their terms. Without limiting the generality of the
foregoing, if any portion of this Article shall be invalidated on any
ground, the Association shall nevertheless indemnify an Indemnitee to the
full extent permitted by any applicable portion of this Article that shall
not have been invalidated and to the full extent permitted by law with
respect to that portion that has been invalidated.
Section 5. Non-Exclusivity.
a. The indemnification and advancement of Expenses provided by
or granted pursuant to this Article shall not be deemed exclusive of any
other rights to which Indemnitee is or may become entitled under any
statute, article of association or incorporation, by-law, authorization of
shareholders or directors, agreement, or otherwise, provided that unless
required by law any indemnification payment made otherwise than pursuant to
this Article must be approved by the shareholder.
b. It is the intent of the Association by this Article to
indemnify and hold harmless Indemnitee to the fullest extent permitted by
law, so that if applicable law would permit the Association to provide
broader indemnification rights than are currently permitted, the
Association shall indemnify and hold harmless Indemnitee to the fullest
extent permitted by applicable law notwithstanding that the other terms of
this Article would provide for lesser indemnification, provided that unless
otherwise required by law or the express terms of this Article, no
indemnification payment may be made unless it is approved by the
shareholder.
Section 6. Successors and Assigns. This Article shall inure to the
benefit of Indemnitee's heirs, personal representatives, and assigns and to
the benefit of the Association, its successors and assigns.
Section 7. Indemnification of Other Persons.
The Association may indemnify any person not covered by Sections
1 through 6 of this Article to the extent provided in a resolution of the
shareholder or a separate provision of these Articles.
Section 8. Restrictions on Indemnification By Law and Regulation.
Notwithstanding any provision of this Article to the contrary, no
indemnification or advancement of expenses may be made if, in the good
faith opinion of the shareholder, such indemnification or advancement of
expenses could violate any applicable law or regulation, unless the
Association has received evidence satisfactory to it that no such violation
would occur.
ITEM 16. Exhibits and Financial Statements
(a) Exhibits
1.1 Form of Underwriting Agreement. **
3.1 Articles of Association.*
3.2 By-Laws.*
4.1 Form of Pooling and Servicing Agreement.**
4.2 Form of Series Supplement (including form of
Certificate).**
4.3 Form of Prospectus Supplement.*
5.1 Opinion of Mayer, Brown & Platt with respect to legality.**
8.1 Opinion of Mayer, Brown & Platt with respect to tax
matters.**
23.1 Consent of Mayer, Brown & Platt (to be included in opinion
filed as Exhibit 5.1).
24.1 Powers of Attorney.*
___________________________________
* Filed herewith.
** To be filed by pre-effective amendment.
(b) Financial Statements
All financial statements, schedules and historical financial
information have been omitted
as they are not applicable.
ITEM 17. Undertakings
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that (a)(i) and (a)(ii) will not
apply if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(f) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(i) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New Orleans, State of Louisiana,
on March 25, 1997.
FIRST NATIONAL BANK OF COMMERCE
as originator of the Trust and registrant
By: /s/ Michael J. Fowler
Name: Michael J. Fowler
Title: Executive Vice President
Senior ALCO Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
President and Chief March 25, 1997
- ------------------------ Executive Officer and
Ashton J. Ryan, Jr. Director (Principal
Executive Officer)
* Chairman of the Board March 25, 1997
- ------------------------
Howard C. Gaines
* Secretary (Principal March 25, 1997
- ------------------------ Financial Officer)
Michael A. Flick
* Controller (Principal March 25, 1997
- ------------------------ Accounting Officer)
Jane B. Truett
* Director March 25, 1997
- ------------------------
Margaret Moss Allums
* Director March 25, 1997
- ------------------------
Ian Arnof
* Director March 25, 1997
- ------------------------
William G. Barry
* Director March 25, 1997
- ------------------------
Sydney J. Besthoff III
* Director March 25, 1997
- ------------------------
John D. Charbonnet
* Director March 25, 1997
- ------------------------
Laurance Eustis, Jr.
* Director March 25, 1997
- ------------------------
Norman C. Francis
* Director March 25, 1997
- ------------------------
Erik F. Johnsen
* Director March 25, 1997
- ------------------------
J. Merrick Jones, Jr.
* Director March 25, 1997
- ------------------------
Harry Merritt Lane III
* Director March 25, 1997
- ------------------------
Edwin Lupberger
* Director March 25, 1997
- ------------------------
Robert W. Merrick
* Director March 25, 1997
- ------------------------
G. Frank Purvis, Jr.
* Director March 25, 1997
- ------------------------
Edward M. Simmons
* Director March 25, 1997
- ------------------------
Charles C. Teamer
* Signature by Thomas L. Callicutt, Jr., as Attorney-in-Fact under Power
of Attorney
/s/ Thomas L. Callicutt, Jr.
Thomas L. Callicutt, Jr.
Exhibit No. Description of Exhibit
1.1 Form of Underwriting Agreement. **
3.1 Articles of Association.*
3.2 By-Laws.*
4.1 Form of Pooling and Servicing Agreement.**
4.2 Form of Series Supplement (including form of Certificate).**
4.3 Form of Prospectus Supplement. *
5.1 Opinion of Mayer, Brown & Platt with respect to legality.**
8.1 Opinion of Mayer, Brown & Platt with respect to tax
matters.**
23.1 Consent of Mayer, Brown & Platt (to be included in opinion
filed as Exhibit 5.1).
24.1 Powers of Attorney.*
_________________________________________
* Filed herewith.
** To be filed by pre-effective amendment.