Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-48860
333-48860-01
Prospectus Supplement to Prospectus dated February 16, 2001
First Consumers Credit Card Master Note Trust
Issuer
First Consumers National Bank
Seller and Servicer
Series 2001-A Asset Backed Notes
Class A Notes Class B Notes
------------- -------------
Principal amount $462,000,000 $63,000,000
Interest Rate One-month LIBOR plus 0.31% One-month LIBOR plus 1.10%
per year, payable monthly on the 15th per year, payable monthly on the 15th
Expected principal payment date February 2006 distribution date March 2006 distribution date
Final maturity date September 2008 distribution date September 2008 distribution date
Price to public $462,000,000 (or 100.00%) $63,000,000 (or 100.00%)
Underwriting discount $1,386,000 (or 0.300%) $267,750 (or 0.425%)
Proceeds to issuer $460,614,000 (or 99.700%) $62,732,250 (or 99.575%)
The notes will be paid from the trust assets consisting primarily of an
interest in receivables in a portfolio of MasterCard(R) and VISA(R) revolving
credit card accounts owned by First Consumers National Bank.
We expect to issue your series of notes in book-entry form on or about March 6,
2001.
You should consider carefully the risk factors beginning on page S-11 in
this prospectus supplement and page 2 in the prospectus.
A note is not a deposit and neither the notes nor the underlying accounts
or receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of First Consumers Credit Card Master Note Trust
only and are not obligations of First Consumers National Bank or any other
person.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these notes or determined that this prospectus
supplement or the prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
Underwriters of the Class A notes
Deutsche Banc Alex. Brown
Banc of America Securities LLC
Commerzbank Capital Markets Corp.
JPMorgan
Underwriter of the Class B notes
Deutsche Banc Alex. Brown
February 28, 2001
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We (First Consumers National Bank) provide information to you about the
notes in two separate documents: (a) the accompanying prospectus, which
provides general information, some of which may not apply to your series of
notes, and (b) this prospectus supplement, which describes the specific terms
of your series of notes.
Whenever the information in this prospectus supplement is more specific
than the information in the accompanying prospectus, you should rely on the
information in this prospectus supplement.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the notes in any state where the
offer is not permitted.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents in the accompanying prospectus provide the pages on which these
captions are located.
TABLE OF CONTENTS
Page
----
Summary of Terms.......................................................... S-1
Structural Summary........................................................ S-3
The Issuer.............................................................. S-3
Collateral for the Notes................................................ S-3
First Consumers Master Trust............................................ S-4
Other Claims on the Receivables......................................... S-4
Allocations of Collections and Losses................................... S-5
Application of Finance Charge Collections............................... S-6
Principal Collections................................................... S-6
Credit Enhancement...................................................... S-7
Interest Rate Swaps..................................................... S-7
Pay Out Events.......................................................... S-8
Events of Default....................................................... S-8
Optional Redemption..................................................... S-9
Tax Status.............................................................. S-9
ERISA Considerations.................................................... S-10
Risk Factors............................................................ S-10
Ratings................................................................. S-10
First Consumers National Bank........................................... S-10
Risk Factors.............................................................. S-11
Receivables Performance................................................... S-12
Delinquency and Loss Experience......................................... S-12
Revenue Experience...................................................... S-14
The Trust Portfolio....................................................... S-14
Maturity Considerations................................................... S-18
Controlled Accumulation Period.......................................... S-18
Rapid Amortization Period............................................... S-18
Payment Rates........................................................... S-18
Paired Series........................................................... S-19
Spiegel's Retail Operations............................................... S-19
Spiegel Catalog......................................................... S-19
Eddie Bauer............................................................. S-20
Newport News............................................................ S-20
Description of Series Provisions.......................................... S-21
Page
----
General................................................................. S-21
Collateral Amount....................................................... S-21
Allocation Percentages.................................................. S-21
Interest Payments....................................................... S-22
Interest Rate Swaps..................................................... S-23
Interest Rate Swap Counterparty......................................... S-24
Principal Payments...................................................... S-26
Controlled Accumulation Period.......................................... S-26
Rapid Amortization Period............................................... S-27
Subordination........................................................... S-28
Application of Finance Charge Collections............................... S-29
Reallocation of Principal Collections................................... S-29
Investor Charge-Offs.................................................... S-31
Sharing Provisions...................................................... S-31
Principal Accumulation Account.......................................... S-31
Reserve Account......................................................... S-32
Excess Collateral Amount................................................ S-34
Paired Series........................................................... S-34
Pay Out Events.......................................................... S-35
Events of Default....................................................... S-36
Servicing Compensation and Payment of Expenses.......................... S-36
Underwriting.............................................................. S-37
Legal Matters............................................................. S-39
Glossary of Terms for Prospectus Supplement............................... S-40
Other Securities Issued and Outstanding................................... I-1
i
SUMMARY OF TERMS
Issuer: First Consumers Credit Card Master Note Trust
Seller and Servicer: First Consumers National Bank
Indenture Trustee: The Bank of New York
Owner Trustee: Bankers Trust Company
Closing Date: March 6, 2001
Clearance and Settlement: DTC/Clearstream/Euroclear
Minimum Denominations: $1,000
Servicing Fee Rate: 2.0% per annum
Minimum Seller Percentage: 7.0%
Primary Assets of the Issuer: An interest in receivables originated in
MasterCard(R) and VISA(R) credit card
accounts/1/
Offered Notes: Only the Class A and Class B notes are offered
by this prospectus supplement and the
accompanying prospectus. The Class C notes will
be sold to investors in private transactions.
Series 2001-A
Class Amount % of Collateral Amount
----- ------ ----------------------
Class A notes $462,000,000 77.0%
Class B notes 63,000,000 10.5%
Class C notes 36,000,000 6.0%
Excess collateral amount 39,000,000 6.5%
------------ -----
Initial collateral amount $600,000,000 100.0%
============ =====
Offered Notes
Class A Class B
------- -------
Anticipated Ratings:/2/ Aaa/AAA/AAA A2/A/A
(Moody's/Standard &
Poor's/Fitch)
Credit Enhancement: subordination of Class B and subordination of Class C notes
Class C notes and excess and excess collateral amount,
collateral amount, interest rate interest rate swap
swap
- --------
/1 /MasterCard and VISA are federally registered servicemarks of MasterCard
International and VISA U.S.A., Inc., respectively.
/2 /It is a condition to issuance that one of these ratings be obtained and
that the collateral certificate be rated investment grade.
S-1
Interest Rate: One-month LIBOR plus One-month LIBOR plus
0.31% per year 1.10% per year
Interest Accrual Method: actual/360 actual/360
Interest Payment Dates: monthly (15th) monthly (15th)
Interest Rate Index Reset 2 London business days 2 London business days
Date: before each interest before each interest
payment date payment date
First Interest Payment Date: April 16, 2001 April 16, 2001
Commencement of Accumulation February 1, 2005 February 1, 2005
Period (subject to
adjustment):
Expected Principal Payment February 2006 March 2006
Dates: distribution date distribution date
Final Maturity Dates: September 2008 September 2008
distribution date distribution date
ERISA Eligibility: Yes, subject to important considerations
described under "ERISA Considerations" in the
accompanying prospectus.
Debt for United States Yes, subject to important considerations
Federal Income Tax described under "Federal Income Tax Consequences"
Purposes: in the accompanying prospectus.
S-2
STRUCTURAL SUMMARY
This summary does not contain all of the information that you need to
consider in making your investment decision. You should carefully read this
entire document and the accompanying prospectus before you purchase any notes.
[FLOW CHART]
The Issuer
The notes will be issued by First Consumers Credit Card Master Note Trust,
an Illinois common law trust, under an indenture supplement to an indenture,
each between the issuer and the indenture trustee.
The indenture trustee is The Bank of New York.
Collateral for the Notes
The notes are secured by a beneficial interest in a pool of receivables
that arise under our MasterCard and VISA credit card accounts. We refer to
these accounts collectively as bank card accounts, to distinguish them from our
private label credit card accounts.
We have designated all of the eligible accounts in our bank card portfolio
and have transferred the receivables in those accounts to First Consumers
Master Trust. We refer to the accounts that have been designated as trust
accounts as the trust portfolio. First Consumers Master Trust has issued a
certificate representing an interest in the receivables and the other assets of
First Consumers Master Trust to us. We have transferred that certificate to the
issuer and that certificate serves as collateral for the notes.
The accounts in the trust portfolio include unsecured cards, as well as
secured cards, which require the cardholder to secure his or her line of credit
with a savings or time deposit with us. The cardholders in our secured card
program, representing approximately 10% of the trust portfolio, are generally
individuals who have a low income level and/or a limited or adverse credit
history. Based on our experience with the secured card program, we have
developed certain unsecured card programs, representing approximately 15% of
the trust portfolio, that are targeted at individuals that have adverse credit
histories. The cardholders in both programs must fit within our parameters for
our secured card or unsecured credit card programs, as applicable, indicating a
probability that the customer is a reasonable, although higher, credit risk
after taking into account any deposit securing obligations under the account.
See "Risk Factors--Secured card and related programs may affect portfolio
yield" and "Our Bank Card Activities" in the accompanying prospectus. Our other
unsecured card programs, representing
S-3
approximately 75% of the trust portfolio, include the Eddie Bauer and Spiegel
Catalog co-branded programs and other Visa and MasterCard programs.
The receivables in First Consumers Master Trust as of the beginning of the
day on January 1, 2001 were as follows:
. total receivables: $1,107,292,402
. principal receivables: $1,079,756,137
. finance charge receivables: $27,536,265
. total accounts designated to First Consumers Master Trust: 1,463,920
The Class A and Class B notes also have the benefit of interest rate swaps,
covering the period from the closing date through the final maturity date.
In addition, a share of interchange on the bank card accounts and
investment earnings from temporary investments of receivables collections that
are held by the trust will be allocated to your series.
First Consumers Master Trust
First Consumers Master Trust is a common law trust formed by us in 1992
under a pooling and servicing agreement that we amended and restated on
February 1, 1999. We have transferred our bank card receivables to First
Consumers Master Trust under that pooling and servicing agreement.
The trustee for First Consumers Master Trust is The Bank of New York.
After all outstanding series of investor certificates that have been issued
by First Consumers Master Trust have been retired, we may cause First Consumers
Master Trust to terminate, at which time the receivables will be transferred to
the issuer and held directly by the issuer as collateral for the notes. We
refer to the entity --either First Consumers Master Trust or the issuer --that
holds the receivables at any given time as the trust.
Other Claims on the Receivables
Other Series of Notes
Series 2001-A is the first series of notes issued by the issuer. The issuer
may issue other series of notes from time to time in the future. Neither you
nor any other noteholder will have the right to consent to the issuance of
future series of notes.
Outstanding Series of Investor Certificates
The collateral certificate issued by First Consumers Master Trust to the
issuer will be the eighth series of investor certificates issued by First
Consumers Master Trust. In addition to the collateral certificate, there will
be three series of investor certificates outstanding on the closing date, one
of which, Series 2000-A, will be retired on the closing date. Each series of
investor certificates represents a beneficial interest in the receivables and
the other trust assets. A summary of the outstanding series of investor
certificates is in "Annex I: Other Securities Issued and Outstanding" included
at the end of this prospectus supplement. Neither you nor any other noteholder
will have the right to consent to the issuance of future series of investor
certificates.
The Seller Interest
We own the interest, called the seller interest, in the receivables and the
other assets of the trust not securing your series
S-4
or any other series of notes or investor certificates. The seller interest
does not provide credit enhancement for your series or any other series.
Allocations of Collections and Losses
Your notes represent the right to payments from a portion of the collections
on the receivables. The servicer will also allocate to your notes a portion of
defaulted receivables and would also allocate a portion of the dilution on the
receivables to your series if we failed to comply with our obligation to
compensate the trust for dilution. Dilution means any reduction to the
principal balances of receivables made by the servicer because of merchandise
returns or any other reason except losses or payments.
The portion of collections, defaulted receivables and uncovered dilution
allocated to your series generally will be based upon the ratio of the amount
of collateral for your series to the sum of the total amount of principal
receivables in the trust and any balance in the trust's excess funding
account. The way this ratio is calculated will vary during each of three
periods that will or may apply to your notes:
. The revolving period, which will begin on the closing date and end when
either of the other two periods begins.
. The controlled accumulation period, which is scheduled to begin on February
1, 2005 and end when the notes have been paid in full. However, if a pay
out event occurs before the controlled accumulation period begins, there
will be no controlled accumulation period. If a pay out event occurs during
the controlled accumulation period, the controlled accumulation period will
end, and a rapid amortization period will begin.
. The rapid amortization period, which will only occur if one or more adverse
events, known as pay out events, occurs.
For most purposes, the collateral amount used in determining these ratios
will be reset no less frequently than at the end of each month. However, for
allocations of principal collections during the controlled accumulation period
or the rapid amortization period, the collateral amount at the end of the
revolving period will be used, subject to reduction during the controlled
accumulation period if a pay out event occurs for a series paired with Series
2001-A.
The collateral amount for your series is:
. the original principal amount of the notes, plus
. an initial excess collateral amount of $39,000,000, minus
. principal payments on the notes and the balance held in the principal
accumulation account for principal payments, minus
. reductions in the excess collateral amount that result from reductions in
the required amount of the excess collateral, minus
. the amount of any principal collections reallocated to cover interest, net
swap payments and servicing payments for your series to non-affiliates,
minus
S-5
. your series' share of defaults and uncovered dilution to the extent not
reimbursed from finance charge collections and investment earnings
allocated to your series.
A reduction to the collateral amount because of reallocated principal
collections, defaults or uncovered dilution will be reversed to the extent that
your series has extra finance charge collections and investment earnings in
future periods.
Application of Finance Charge Collections
The issuer will apply your series' share of collections of finance charge
receivables, interchange, net swap receipts and investment earnings each month
in the following order of priority:
. to pay interest on the Class A notes and to make net swap payments under
the Class A interest rate swap;
. to pay interest on the Class B notes and to make net swap payments under
the Class B interest rate swap;
. to pay the servicing fee for your series if neither we nor any of our
affiliates is the servicer;
. to pay interest on the Class C notes;
. to cover your series' share of defaults and uncovered dilution;
. to cover reductions in your series' collateral amount resulting from
defaults and uncovered dilution allocated to your series and from
reallocated principal collections, in each case that have not been
previously reimbursed;
. to fund, in limited circumstances, a reserve account to cover interest
payment shortfalls for the Class A and Class B notes during the
controlled accumulation period;
. to make a deposit, if needed, to the spread account for the Class C notes
up to the required spread account amount and to pay any other amounts due
under the Class C note purchase agreement;
. to make any early termination or other miscellaneous payments due under
the interest rate swap relating to the Class A and Class B notes;
. to pay the servicing fee for your series if we or any of our affiliates
is the servicer; and
. to other series that share excess finance charge collections with Series
2001-A or to us or our assigns.
Principal Collections
Revolving Period
During the revolving period, no principal will be paid or accumulated in a
trust account for you.
Controlled Accumulation Period
During the controlled accumulation period, your series' share of principal
collections will be deposited in a trust account, up to a specified deposit
amount on each distribution date. Amounts on deposit in that account will be
paid to the Class A noteholders on the expected principal payment date for
Class A until the Class A notes are paid in full. The remaining amount will be
paid to the Class B noteholders on the expected principal payment date for
Class B until the Class B notes are paid in full.
Rapid Amortization Period
A rapid amortization period for your series may start if a pay out event
occurs.
S-6
The pay out events for your series are described below in this summary and
under "Description of Series Provisions--Pay Out Events" in this prospectus
supplement. During the rapid amortization period, your series' share of
principal collections will be paid monthly first to the Class A noteholders,
then to the Class B noteholders and then to the Class C noteholders, in each
case until the specified class is paid in full.
Reallocation of Principal Collections
During any of the above periods, principal collections allocated to your
series may be reallocated, if necessary, to make required payments of interest
on the Series 2001-A notes, net swap payments due from the issuer and monthly
servicing fee payments to non-affiliates not made from your series' share of
finance charge collections and other amounts treated as finance charge
collections for your series and, with respect to interest on the Class C notes,
withdrawals from the spread account for the Class C notes. This reallocation is
one of the ways that the notes obtain the benefit of subordination, as
described in the next section of this summary. The amount of reallocated
principal collections is limited by the amount of available subordination.
At all times, collections of principal receivables allocated to your series
that are not needed for payments on your series will first be made available to
other series, and then, second, paid to us or our assigns or deposited in the
excess funding account.
Credit Enhancement
Credit enhancement for the Class A notes is provided by the subordination
of the Class B notes, the Class C notes and the excess collateral amount.
Credit enhancement for the Class B notes is provided by the subordination
of the Class C notes and the excess collateral amount.
Subordination serves as credit enhancement as follows. The more
subordinated, or junior, classes of notes will not receive payment of interest
or principal until required payments have been made to the more senior classes.
As a result, subordinated classes will absorb any shortfalls in collections or
deterioration in the collateral for the notes prior to senior classes. The
excess collateral amount for your series is subordinated to all of the classes
of notes, so it will absorb shortfalls and collateral deterioration before even
the most subordinated class of notes does.
Credit enhancement for your series is for your series' benefit only, and
you are not entitled to the benefits of credit enhancement available to other
series.
Interest Rate Swaps
As additional enhancement for the Class A and Class B notes, the issuer
will enter into an interest rate swap for the Class A notes and an interest
rate swap for the Class B notes, each covering the period from the closing date
through the final maturity date.
The notional amounts of the Class A interest rate swap and the Class B
interest rate swap will, for each interest period, be equal to the outstanding
principal balances of the Class A notes and Class B notes, respectively, as of
the end of the first day of the related interest period. Under each swap, if
one-month LIBOR exceeds a specified fixed rate the issuer will
S-7
receive payments from the swap counterparty equal to:
rate Class A or Class B days in interest period
differential principal balance, 360
X as applicable X
where the rate differential equals one-month LIBOR minus the specified fixed
rate. Alternatively, if one-month LIBOR is less than the applicable specified
fixed rate, the issuer will be required to make a payment to the swap
counterparty equal to the result of the equation shown above, where the rate
differential equals the specified fixed rate minus one-month LIBOR. The
specified fixed rate for the Class A interest rate swap is 5.665% per annum.
The specified fixed rate for the Class B interest rate swap is 5.670% per
annum.
The interest rate swaps are more fully described in "Description of Series
Provisions--Interest Rate Swaps."
Pay Out Events
The issuer will begin to repay the principal of the notes before the
expected principal payment date if a pay out event occurs. A pay out event will
occur if the finance charge collections on the receivables in the designated
accounts are too low. The minimum amount that must be available for payments to
your series in any month, referred to as the base rate, is the sum of the
interest payable on the Series 2001-A notes and any net swap payment due from
the issuer for the related interest period, plus your series' share of the
servicing fee for the related calendar month. If the average net yield for the
trust portfolio, after deducting net defaulted receivables and adding net swap
receipts, for any three consecutive calendar months is less than the average
base rate for the same three consecutive calendar months, a pay out event will
occur.
The other pay out events are:
. Our failure to make required payments or deposits or material failure to
perform other obligations, subject to applicable grace periods;
. Material inaccuracies in our representations and warranties;
. The Class A or Class B notes are not paid in full on their respective
expected principal payment dates;
. Bankruptcy, insolvency or similar events relating to us;
. We are unable to transfer receivables to the trust when required;
. We do not transfer receivables in additional accounts to the trust within
5 business days after we are required to do so;
. Material defaults of the servicer;
. Failure of a swap counterparty to make a payment required under the Class
A or Class B interest rate swap for 5 business days after it is due;
. the early termination of the Class A or Class B interest rate swap unless
the issuer obtains a replacement interest rate swap acceptable to the
rating agencies;
. First Consumers Master Trust or the issuer becomes subject to regulation
as an "investment company" under the Investment Company Act of 1940; or
. An event of default occurs for the Series 2001-A notes and their final
maturity date is accelerated.
Events of Default
The Series 2001-A notes are subject to events of default described under
"The
S-8
Indenture--Events of Default; Rights upon Event of Default" in the accompanying
prospectus. These include, among other things, the failure to pay interest
within 35 days after it is due or to pay principal when it is due on the final
maturity date.
In the case of an event of default involving bankruptcy, insolvency or
similar events relating to the issuer, the principal amount of the Series 2001-
A notes automatically will become immediately due and payable. If any other
event of default occurs and continues with respect to the Series 2001-A notes,
the indenture trustee or holders of more than 50% of the then-outstanding
principal balance of the Series 2001-A notes may declare the principal amount
of the Series 2001-A notes to be immediately due and payable. Acceleration of
the Series 2001-A notes may be rescinded by holders of more than 50% of the
then-outstanding principal balance of the Series 2001-A notes if the related
event of default has been cured, subject to the conditions described under "The
Indenture--Events of Default; Rights upon Event of Default" in the accompanying
prospectus.
After an event of default and the acceleration of the Series 2001-A notes,
funds allocated to Series 2001-A and on deposit in the collection account, the
excess funding account and the other trust accounts will be applied to pay
principal of and interest on the Series 2001-A notes to the extent permitted by
law. Principal collections and finance charge collections allocated to Series
2001-A will be applied to make monthly principal and interest payments on the
Series 2001-A notes until the earlier of the date those notes are paid in full
or the final maturity date of those notes.
If the Series 2001-A notes are accelerated or the issuer fails to pay the
principal of the Series 2001-A notes on the final maturity date, subject to the
conditions described in the prospectus under "The Indenture--Events of Default;
Rights upon Event of Default," the indenture trustee may, if legally permitted,
cause the issuer to sell principal receivables in an amount equal to the
collateral amount for Series 2001-A and the related finance charge receivables.
Optional Redemption
The servicer has the option to purchase your notes when the outstanding
principal amount for your series has been reduced to 10% or less of the initial
principal amount. See "Description of the Notes--Final Payment of Principal" in
the accompanying prospectus.
Tax Status
Subject to important considerations described under "Federal Income Tax
Consequences" in the accompanying prospectus, Rooks, Pitts and Poust as special
tax counsel to the issuer, is of the opinion that under existing law the Class
A and Class B notes will be characterized as debt for federal income tax
purposes and that the issuer will not be classified as an association or
constitute a publicly traded partnership taxable as a corporation for U.S.
federal income tax purposes. By your acceptance of a Series 2001-A note, you
will agree to treat your Series 2001-A notes as debt for federal, state and
local income and franchise tax purposes. See "Federal Income Tax Consequences"
in the accompanying prospectus for additional information concerning the
application of federal income tax laws.
S-9
ERISA Considerations
Subject to important considerations described under "ERISA Considerations"
in the accompanying prospectus, the Class A and Class B notes are eligible for
purchase by persons investing assets of employee benefit plans or individual
retirement accounts. If you are contemplating purchasing any Series 2001-A
notes on behalf of or with plan assets of any plan or account, we suggest that
you consult with counsel regarding whether the purchase or holding of the
Series 2001-A notes could give rise to a transaction prohibited or not
otherwise permissible under ERISA or Section 4975 of the Internal Revenue Code.
Risk Factors
There are material risks associated with an investment in the Series 2001-A
notes, and you should consider the matters set forth under "Risk Factors"
beginning on page S-11 below and on page 2 of the accompanying prospectus.
Ratings
It is a condition to the issuance of your notes that one of the ratings set
forth for each class of Series 2001-A notes in the "Summary of Terms" above be
obtained.
Any rating assigned to the notes by a credit rating agency will reflect the
rating agency's assessment solely of the likelihood that noteholders will
receive the payments of interest and principal required to be made under the
terms of the series and will be based primarily on the value of the receivables
in the trust, the credit enhancement provided and the creditworthiness of the
swap counterparty. The rating is not a recommendation to purchase, hold or sell
any notes. The rating does not constitute a comment as to the marketability of
any notes, any market price or suitability for a particular investor. Any
rating can be changed or withdrawn by a rating agency at any time.
First Consumers National Bank
Our address is 9300 S.W. Gemini Drive, Beaverton, Oregon 97008. Our phone
number is (503) 520-8200.
S-10
This prospectus supplement uses defined terms. You can find a glossary of
terms under the caption "Glossary of Terms for Prospectus Supplement" beginning
on page S-40 in this prospectus supplement and under the caption "Glossary of
Terms for Prospectus" beginning on page 78 in the accompanying prospectus.
RISK FACTORS
In addition to the risk factors described in the prospectus, you should
consider the following.
Default by interest rate swap counterparty or
termination of interest rate swap could lead to a rapid
amortization.
The issuer will enter into interest rate swaps for
the benefit of the Class A and Class B notes. Each
interest rate swap will require the swap counterparty
to make payments to the issuer if one month LIBOR
exceeds the specified fixed rate for that interest rate
swap.
If a swap counterparty does not make a required
payment, the issuer will have less funds available to
pay interest on your notes. This could cause delays or
reductions in the amount of interest paid to you. The
failure of a swap counterparty to make a required
payment for five business days after a payment is due
will also cause a pay out event and commencement of the
rapid amortization period. If this were to happen, you
could be paid sooner than expected and may not be able
to reinvest the amount paid to you at the same rate you
would have been able to earn on your notes.
We cannot assure you that the servicer will be able
to enter into a replacement interest rate swap or make
other arrangements to hedge the issuer's interest
payment obligations if a swap counterparty is
downgraded or if a swap counterparty defaults on its
obligations. The early termination of the Class A or
Class B interest rate swap will cause a pay out event
and commencement of the rapid amortization period if
the issuer does not enter into a replacement interest
rate swap as described under "Description of Series
Provisions--Interest Rate Swaps." If this were to
happen, you could be paid sooner than expected and may
not be able to reinvest the amount paid to you at the
same rate you would have been able to earn on your
notes.
S-11
RECEIVABLES PERFORMANCE
The tables below contain performance information for the receivables in the
bank card portfolio for the fiscal years ended December 31, 2000, 1999, 1998,
1997 and 1996. The composition of the bank card portfolio is expected to change
over time. The actual performance of the receivables in the bank card portfolio
may be different from that set forth below.
Delinquency and Loss Experience
The following tables set forth the aggregate delinquency and loss
experience for cardholder payments on the credit card accounts in the bank card
portfolio for each of the five fiscal years in the period ended December 31,
2000.
The delinquency and loss experience primarily reflects the overall credit
quality of the cardholders, the composition of the bank card portfolio by
marketing program, the seasoning of the accounts, the success of various
initiatives taken in recent years and general economic conditions. As indicated
in the delinquency and loss tables, delinquency and loss rates have decreased
in the most recent year. The improvement in these rates is due primarily to:
. an increase in the number of accounts in the Eddie Bauer and Spiegel
Catalog co-branded programs, which historically demonstrate lower
delinquency rates than other programs in the portfolio, resulting in an
overall lower delinquency and loss rates for the portfolio;
. cancellation of a test program which was active from October 1997
through March 1999. The test program demonstrated higher delinquency and
loss rates than other programs in the portfolio. The percentage of the
portfolio represented by the test program has decreased from
approximately 13.6% as of November 30, 1998 to approximately 1.9% as of
December 31, 2000;
. more frequent assignment of lower credit limits to new accounts, with
credit limits being increased for more seasoned accounts based on
consistent payment behavior; and
. improved collection techniques, including contacting delinquent
cardholders earlier, using a greater number of collectors and more
frequent outsourcing of pre-charge-off accounts to external collections
agencies.
We cannot assure you that the future delinquency and loss experience for
the receivables will be similar to the historical experience set forth below.
S-12
For purposes of the following delinquency experience table, average
receivables outstanding is the average of the receivables balances at the end
of each month for the period indicated.
DELINQUENCY EXPERIENCE
(Dollars in Thousands)
Year Ended December 31,
-----------------------------------------------------------------------
2000 1999 1998
----------------------- ----------------------- -----------------------
Percentage Percentage Percentage
Average of Average Average of Average Average of Average
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
Average Receivables
Outstanding............ $858,418 $515,211 $343,447
Average Receivables
Delinquent:
31-60 Days............ $ 22,718 2.65% $ 13,449 2.61% $ 10,648 3.10%
61-90 Days............ 17,690 2.06 10,776 2.09 7,909 2.30
91 Days or more....... 38,538 4.49 25,436 4.94 15,266 4.44
-------- ---- -------- ---- -------- ----
Total............... $ 78,946 9.20% $ 49,661 9.64% $ 33,823 9.84%
Year Ended December 31,
-----------------------------------------------
1997 1996
----------------------- -----------------------
Percentage Percentage
Average of Average Average of Average
Receivables Receivables Receivables Receivables
----------- ----------- ----------- -----------
Average Receivables
Outstanding................... $230,163 $201,248
Average Receivables Delinquent:
31-60 Days................... $ 7,126 3.10% $ 6,769 3.36%
61-90 Days................... 5,460 2.37 4,972 2.47
91 Days or more.............. 9,625 4.18 6,698 3.33
-------- ---- -------- ----
Total...................... $ 22,211 9.65% $ 18,439 9.16%
For purposes of the following loss experience table:
. Average receivables outstanding is the average of the receivable
balances at the end of each month for the period indicated.
. Total charge-offs shown include principal receivables only, before
recoveries, and include all losses due to bankruptcy in accordance with
our policies.
. Net charge-offs are total charge-offs less recoveries.
LOSS EXPERIENCE
(Dollars in Thousands)
Year Ended December 31,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Average Receivables
Outstanding................. $858,418 $515,211 $343,447 $230,163 $201,248
Total Charge-Offs............ $ 96,191 $ 64,611 $ 37,350 $ 26,248 $ 15,316
Recoveries................... $ 9,480 $ 4,884 $ 3,621 $ 2,492 $ 1,973
Net Charge-Offs.............. $ 86,711 $ 59,727 $ 33,729 $ 23,756 $ 13,343
Net Charge-Offs as a
Percentage of Average
Receivables Outstanding..... 10.1% 11.6% 9.8% 10.3% 6.6%
S-13
Revenue Experience
The gross revenues from finance charges, credit card fees and interchange
related to accounts in the bank card portfolio for each of the five fiscal
years in the period ended December 31, 2000 are set forth in the following
table. The historical yield figures reflected in the following table are
calculated on an accrual basis.
The higher gross portfolio yield for 1998, when compared to the gross
portfolio yields for other years shown in the following table, is due primarily
to a test program which was active from October 1997 through March 1999. The
test program relied on higher front-end fees to absorb higher credit risks,
resulting in higher gross portfolio yields for the periods during which the
program was active. The percentage of the portfolio represented by the test
program has decreased from approximately 13.6% as of November 30, 1998 to
approximately 1.9% as of December 31, 2000.
For purposes of the following gross portfolio yield table:
. The revenue for the accounts is comprised of monthly periodic finance
charges, interchange and credit card fees. These revenues vary for each
account based on the type and volume of activity for each account. See
"Our Bank Card Activities" in the accompanying prospectus.
. Average receivables outstanding is the average of the receivable
balances at the end of each month for the period indicated.
GROSS PORTFOLIO YIELD
(Dollars in Thousands)
Year Ended December 31,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Average Receivables.......... $858,418 $515,211 $343,447 $230,163 $201,248
Billed Finance Charges,
Interchange and Fees........ $253,728 $174,359 $161,814 $ 76,452 $ 63,917
Gross Portfolio Yield........ 29.6% 33.8% 47.1% 33.2% 31.8%
THE TRUST PORTFOLIO
As of the beginning of the day on January 1, 2001:
. The receivables in the trust portfolio included $1,079,756,137 of
principal receivables and $27,536,265 of finance charge receivables.
. The accounts designated for the trust portfolio had an average principal
receivable balance of $1,203 and an average credit limit of $2,945.
. The percentage of the aggregate total receivable balance to the
aggregate total credit limit was approximately 26%.
. The average age of the accounts was approximately 23 months.
. Cardholders whose accounts are designated for the trust portfolio had
billing addresses in all 50 states and the District of Columbia.
S-14
The following tables summarize the trust portfolio by various criteria as
of the beginning of the day on January 1, 2001. Because the future composition
of the trust portfolio will change over time, these tables are not indicative
of the composition of the trust portfolio at any subsequent time. The number of
accounts represents all accounts in the trust that have made a payment or
purchase during the past two years.
COMPOSITION BY ACCOUNT BALANCE
Trust Portfolio
Percentage
of Total Percentage
Number of Number of of Total
Account Balance Range Accounts Accounts Receivables Receivables
- --------------------- --------- ---------- -------------- -----------
Credit Balance................. 10,043 0.7% $ (1,275,923) (0.1)%
$ 0-$ 999.99............... 1,089,214 74.4 255,828,970 23.1
$1,000-$1,999.99............... 207,773 14.2 286,820,978 25.9
$2,000-$2,999.99............... 78,322 5.3 190,477,525 17.2
$3,000-$3,999.99............... 31,289 2.1 107,886,274 9.8
$4,000-$4,999.99............... 17,487 1.2 78,144,837 7.1
$5,000-$5,999.99............... 12,192 0.8 66,740,140 6.0
$6,000-$6,999.99............... 11,041 0.8 71,808,170 6.5
$7,000-$7,999.99............... 5,179 0.4 38,055,025 3.4
$8,000-$8,999.99............... 839 0.1 7,039,299 0.6
$9,000-$9,999.99............... 325 0.0 3,080,042 0.3
$10,000+....................... 216 0.0 2,687,064 0.2
--------- ----- -------------- -----
Total..................... 1,463,920 100.0% $1,107,292,401 100.0%
========= ===== ============== =====
COMPOSITION BY CREDIT LIMIT
Trust Portfolio
Percentage
of Total Percentage
Number of Number of of Total
Credit Limit Range Accounts Accounts Receivables Receivables
- ------------------ --------- ---------- -------------- -----------
$ 0-$ 999.99................ 443,033 30.3% $ 164,709,425 14.9%
$1,000-$1,999.99................ 272,687 18.6 238,876,814 21.6
$2,000-$2,999.99................ 191,227 13.1 178,476,794 16.1
$3,000-$3,999.99................ 116,752 8.0 118,925,764 10.7
$4,000-$4,999.99................ 70,797 4.8 61,661,180 5.6
$5,000-$5,999.99................ 148,990 10.2 73,420,666 6.6
$6,000-$6,999.99................ 34,033 2.3 92,206,335 8.3
$7,000-$7,999.99................ 92,389 6.3 134,824,862 12.2
$8,000-$8,999.99................ 45,936 3.1 20,297,613 1.8
$9,000-$9,999.99................ 1,220 0.1 4,072,669 0.4
$10,000+........................ 46,856 3.2 19,820,279 1.8
--------- ----- -------------- -----
Total...................... 1,463,920 100.0% $1,107,292,401 100.0%
========= ===== ============== =====
S-15
COMPOSITION BY PERIOD OF DELINQUENCY
Trust Portfolio
Percentage
of Total Percentage
Number of Number of of Total
Delinquency Status Accounts Accounts Receivables Receivables
- ------------------ --------- ---------- -------------- -----------
Not Delinquent................. 1,320,592 90.2% $ 919,244,590 83.0%
1 to 30 Days.................. 61,816 4.2 78,112,643 7.1
31 to 60 Days.................. 24,929 1.7 31,328,392 2.8
61 to 90 Days.................. 18,554 1.3 23,744,313 2.1
91 or More Days................ 38,029 2.6 54,862,463 5.0
--------- ----- -------------- -----
Total...................... 1,463,920 100.0% $1,107,292,401 100.0%
========= ===== ============== =====
COMPOSITION BY ACCOUNT AGE
Trust Portfolio
Percentage
of Total Percentage
Number of Number of of Total
Account Age Accounts Accounts Receivables Receivables
- ----------- --------- ---------- -------------- -----------
6 Months or Less.............. 375,428 25.6% $ 228,083,378 20.6%
7 Months to 9 Months.......... 140,493 9.6 98,771,816 8.9
10 Months to 12 Months......... 92,641 6.3 59,448,654 5.4
13 Months to 15 Months......... 162,576 11.1 127,031,843 11.5
16 Months to 18 Months......... 113,789 7.8 79,924,663 7.2
19 Months to 21 Months......... 61,750 4.2 45,128,655 4.1
22 Months to 24 Months......... 31,422 2.2 24,236,214 2.2
25 Months to 36 Months......... 108,907 7.4 81,930,648 7.4
Over 36 Months................. 376,914 25.8 362,736,530 32.7
--------- ----- -------------- -----
Total...................... 1,463,920 100.0% $1,107,292,401 100.0%
========= ===== ============== =====
S-16
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
Trust Portfolio
Percentage of Percentage
Number Total Number of Total
Billing Address of Accounts of Accounts Receivables Receivables
- --------------- ----------- ------------- -------------- -----------
California................ 187,681 12.8% $ 158,182,434 14.3%
New York.................. 126,524 8.6 94,825,128 8.6
Texas..................... 106,815 7.3 90,232,241 8.1
Florida................... 84,818 5.8 74,022,388 6.7
Illinois.................. 61,108 4.2 49,860,184 4.5
Ohio...................... 58,829 4.0 40,315,355 3.6
New Jersey................ 51,134 3.5 38,084,931 3.4
Pennsylvania.............. 60,654 4.1 38,062,208 3.4
Georgia................... 40,664 2.8 36,109,826 3.3
Michigan.................. 56,618 3.9 36,564,622 3.3
Virginia.................. 36,754 2.5 27,683,701 2.5
Washington................ 33,841 2.3 25,285,992 2.3
Maryland.................. 33,035 2.3 24,340,728 2.2
Other..................... 525,445 35.9 373,722,663 33.8
--------- ----- -------------- -----
Total................ 1,463,920 100.0% $1,107,292,401 100.0%
========= ===== ============== =====
S-17
MATURITY CONSIDERATIONS
Unless a pay out event occurs, each class of notes will not receive
payments of principal until the expected principal payment date for that class.
The expected principal payment dates for the Class A notes and the Class B
notes will be the distribution dates in February 2006 and March 2006,
respectively. We expect the issuer to have sufficient funds to pay the full
principal amount of each class of Series 2001-A notes on its expected principal
payment date. However, if a pay out event occurs, principal payments for any
class may begin prior to the expected principal payment date for that class.
Controlled Accumulation Period
During the controlled accumulation period, principal allocated to the
Series 2001-A noteholders will accumulate in the principal accumulation account
in an amount calculated to pay the Class A notes and the Class B notes in full
on their respective expected principal payment dates. We expect, but cannot
assure you, that the amount available in the principal accumulation account on
the expected principal payment date for any class of notes will be sufficient
to pay in full the outstanding principal amount of that class. If there are not
sufficient funds on deposit in the principal accumulation account to pay any
class of notes in full on the expected principal payment date for that class, a
pay out event will occur and the rapid amortization period will begin.
Rapid Amortization Period
If a pay out event occurs during either the revolving period or the
controlled accumulation period, the rapid amortization period will begin. If a
pay out event occurs during the controlled accumulation period, on the next
distribution date any amount on deposit in the principal accumulation account
will be paid:
. first to Class A noteholders, up to the outstanding principal balance of
the Class A notes; and
. then to Class B noteholders, up to the outstanding principal balance of
the Class B notes.
In addition, if the outstanding principal balance of the notes has not been
paid in full, the issuer will continue to pay principal to the noteholders on
each distribution date during the rapid amortization period until the Series
2001-A final maturity date, which is the September 2008 distribution date.
Funds available for this purpose will be distributed first to the Class A
noteholders, then to the Class B noteholders and then to the Class C
noteholders, in each case until the specified class of notes has been paid in
full.
Payment Rates
The payment rate on the receivables is the most important factor that will
determine the size of principal payments during a rapid amortization period and
whether the issuer has funds available to repay the Class A and Class B notes
on their respective expected principal
S-18
payment dates. The following table sets forth the highest and lowest cardholder
monthly payment rates on the credit card accounts during any month in the
periods shown and the average cardholder monthly payment rates for all months
in the periods shown, in each case calculated as a percentage of average total
receivables for each month during the periods shown. Payment rates shown in the
table are based on amounts which would be deemed payments of principal
receivables and finance charge receivables with respect to the accounts,
including recoveries on charged-off accounts.
CARDHOLDER MONTHLY PAYMENT RATES
Year Ended December 31,
-----------------------------
2000 1999 1998 1997 1996
----- ----- ----- ----- -----
Lowest Month...................................... 11.9% 13.9% 13.7% 12.9% 12.0%
Highest Month..................................... 16.0% 17.8% 17.5% 15.2% 16.3%
Monthly Average................................... 14.1% 15.5% 15.2% 14.1% 14.3%
We cannot assure you that the cardholder monthly payment rates in the
future will be similar to the historical experience set forth above. In
addition, the amount of collections of receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual cardholders.
Paired Series
The issuer may issue another series of notes as a paired series for Series
2001-A. If issued, a paired series may have terms that are different than the
terms of Series 2001-A and other series. For example, the pay out events for
the paired series may vary from the pay out events for Series 2001-A and may
include pay out events that are unrelated to the status of the issuer or the
servicer, such as pay out events related to the continued availability and
rating of the providers of credit enhancement for the paired series. If a pay
out event occurs with respect to the paired series prior to the payment in full
of the Series 2001-A notes, the allocation percentage used to determine your
series' share of principal collections may be reduced, which may delay the
final payment of principal for your series. See "Description of Series
Provisions--Paired Series" in this prospectus supplement.
SPIEGEL'S RETAIL OPERATIONS
Spiegel offers merchandise primarily through three subsidiaries--Spiegel
Catalog, Inc., Eddie Bauer, Inc. and Newport News, Inc.
Spiegel Catalog
Spiegel Catalog is a leading lifestyle resource for the working woman.
Spiegel Catalog serves its customers by offering an extensive array of
fashionable apparel, home furnishings and other merchandise through its
trademark semi-annual catalog, seasonal and specialty catalogs, and the
spiegel.com e-commerce site. Spiegel Catalog offers overstock, end-of-season
and other merchandise through its Ultimate Outlet stores, predominantly located
in
S-19
outlet malls, catalogs and the ultimate-outlet.com e-commerce site. Total net
sales were $833 million and $717 million for the fiscal years ended December
30, 2000 and January 1, 2000, respectively. Sales through catalog offerings and
e-commerce sites comprise approximately 92 percent of total net sales. Spiegel
Catalog distributed over 149 million catalogs in 2000 and at December 30, 2000
had approximately 3.3 million active customers who had purchased merchandise
within the last 18 months.
Eddie Bauer
Eddie Bauer is a leading specialty retailer serving the active, casual
lifestyle needs of men and women through the sale of high quality private-label
apparel, accessories and home furnishings. Eddie Bauer markets its products
through stores, catalogs and e-commerce sites. Total net sales were $1.7
billion and $1.8 billion for the fiscal years ended December 30, 2000 and
January 1, 2000, respectively. Approximately 73 percent of total net sales for
Eddie Bauer are retail and outlet store sales.
Eddie Bauer's apparel category comprised 81 percent of its total net sales
in 2000. Eddie Bauer presents its active, casual apparel and related
accessories through its trademark Eddie Bauer sportswear stores, catalogs and
the eddiebauer.com and eddiebaueroutlet.com e-commerce sites. The apparel
category includes full seasonal collections of fine quality sportswear and
dress casual, outerwear, footwear and accessories. Eddie Bauer presents its
comfortable, relaxed home furnishings and decor for the bed and bath through
its Eddie Bauer HOME retail stores, catalogs and on its e-commerce sites.
At December 30, 2000, Eddie Bauer operated a total of 563 stores,
consisting of 492 retail stores and 71 outlets. There are 523 stores located in
the United States and 40 stores in Canada. The Eddie Bauer catalog division
distributed 103 million catalogs in 2000 and at December 30, 2000 had
approximately 3.6 million active customers who had purchased merchandise within
the last 18 months.
Newport News
Newport News is a specialty catalog business offering fashionable,
moderately priced women's apparel and home furnishings. Total net sales were
$479 million for the fiscal year ended December 30, 2000, compared to $411
million for the fiscal year ended January 1, 2000. Newport News distributed 238
million catalogs in 2000 and at December 30, 2000 had approximately 4.2 million
active customers who had purchased merchandise within the last 18 months. In
1999, Newport News launched an e-commerce site, newport-news.com, to broaden
its sales and marketing reach.
S-20
DESCRIPTION OF SERIES PROVISIONS
We have summarized the material terms of the Series 2001-A notes below and
under "Description of the Notes" in the accompanying prospectus.
General
The Class A notes, the Class B notes and the Class C notes comprise the
Series 2001-A notes and will be issued under the indenture, as supplemented by
the Series 2001-A indenture supplement, in each case between the issuer and the
indenture trustee.
The Class A and Class B notes will be issued in denominations of $1,000 and
integral multiples of $1,000 and will be available only in book-entry form,
registered in the name of Cede & Co., as nominee of DTC. See "Description of
the Notes--General," "--Book-Entry Registration" and "--Definitive Notes" in
the accompanying prospectus. Payments of interest and principal will be made on
each distribution date on which those amounts are due to the noteholders in
whose names Series 2001-A notes were registered on the related record date,
which will be the last business day of the calendar month preceding that
distribution date.
Collateral Amount
Your notes are secured by collateral consisting of an interest in the
receivables. At any time, the principal amount of the collateral for your
notes, which we call the collateral amount, is calculated as follows:
(a) the initial collateral amount, which equals the aggregate initial
principal amount of the Series 2001-A notes plus an excess collateral
amount of $39,000,000, less
(b) all previous principal payments made on your series and the
balance held in the principal accumulation account for such payments, less
(c) reductions in the excess collateral amount that result from
reductions in the required amount of the excess collateral, less
(d) all unreimbursed reductions to the collateral amount as a result
of defaulted receivables or uncovered dilution allocated to your series or
reallocations of principal collections to cover interest, net swap
payments or the servicing fee for your series.
The collateral amount may also be reduced if we reduce the excess
collateral amount as described under "--Excess Collateral Amount" below. The
collateral amount cannot be less than zero.
Allocation Percentages
The servicer will allocate among your series, other series of notes issued
and outstanding, outstanding series of investor certificates issued by First
Consumers Master Trust and our unpledged interest in the trust the following
items: collections of finance
S-21
charge receivables and principal receivables; interchange; defaulted
receivables; and any dilution amounts that are not absorbed by our interest in
the trust or reimbursed by us. On any day, the allocation percentage for your
series will be the percentage equivalent--which may not exceed 100%--of a
fraction:
. the numerator of which is the collateral amount measured as of a
specified date, and
. the denominator of which is the greater of:
(a) the sum of the total amount of principal receivables in the
trust, the amount on deposit in the excess funding account, after
excluding investment earnings, and the amount of principal collections
on deposit in the collection account, after excluding investment
earnings, in each case as of the preceding day; and
(b) the sum of the numerators used to calculate the applicable
allocation percentages for all series of notes and investor
certificates outstanding as of the date of determination.
The numerator referred to above will initially be set as of the closing
date. For purposes of allocating finance charge collections, interchange and
defaulted receivables at all times, and principal collections during the
revolving period, the numerator will be reset at the end of each calendar month
for allocations during the following calendar month. For purposes of
allocations of principal collections during the controlled accumulation period
and the rapid amortization period, the numerator will be fixed at the end of
the revolving period and will not change thereafter except as follows.
The Series 2001-A notes are subject to being paired with a future series.
If a pay out event occurs with respect to a series paired with Series 2001-A
during the controlled accumulation period for Series 2001-A, we may, by written
notice delivered to the indenture trustee and the servicer, designate a
different numerator for allocating principal collections to your series,
provided that:
(1) the numerator is not less than the collateral amount as of the
last day of the revolving period for the series paired with Series 2001-A;
and
(2) each rating agency confirms that the designation will not impair
its rating of the Series 2001-A notes.
Any reduction in the numerator made as described in the preceding paragraph
will also apply during any rapid amortization period that begins after the
reduction is made.
Interest Payments
The Class A notes will accrue interest from and including the closing date
through but excluding April 16, 2001, and for each following interest period,
at a rate of 0.31% per year above LIBOR for the related interest period.
The Class B notes will accrue interest from and including the closing date
through but excluding April 16, 2001, and for each following interest period,
at a rate of 1.10% per year above LIBOR for the related interest period.
S-22
The Class C notes will accrue interest from and including the closing date
through but excluding April 16, 2001, and for each following interest period,
at an interest rate not to exceed 2.50% per year above LIBOR for the related
interest period.
Each interest period will begin on and include a distribution date and end
on but exclude the next distribution date. However, the first interest period
will begin on and include the closing date.
For purposes of determining the interest rates applicable to each interest
period, LIBOR will be determined two London business days before that interest
period begins and will equal the rate for deposits in United States dollars for
a one-month period which appears on the display page currently designated as
"Telerate Page 3750" on the Bridge Telerate Markets Report, or any other page
as may replace that page on that service for the purpose of displaying
comparable rates or price as of 11:00 a.m., London time, on that date. If that
rate does not appear on that display page, the rate for that date will be
determined based on the rates at which deposits in United States dollars are
offered by four major banks, selected by the servicer, at approximately 11:00
a.m., London time, on that day to prime banks in the London interbank market
for a one-month period. The indenture trustee will request the principal London
office of each of those banks to provide a quotation of its rate. If at least
two quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided, the rate for that
date will be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the servicer, at approximately 11:00 a.m., New York City
time, on that day for loans in United States dollars to leading European banks
for a one-month period.
The interest rates applicable to the then current and immediately preceding
interest period may be obtained by telephoning the indenture trustee at its
corporate trust office at (312) 827-8500 or any other telephone number
identified in a written notice from the indenture trustee to the Series 2001-A
noteholders from time to time.
Interest on the notes will be calculated on the basis of the actual number
of days in the related interest period and a 360-day year.
If the issuer does not pay interest as calculated above to any class when
due on a distribution date, the amount not paid will be due on the next
distribution date, together with interest on the overdue amount of regular
monthly interest at the interest rate for the applicable class.
Interest Rate Swaps
To hedge the issuer's interest payment obligations, the issuer will enter
into an interest rate swap for the Class A notes and an interest rate swap for
the Class B notes, each covering the period from the closing date through the
final maturity date.
The notional amount of the Class A interest rate swap and the notional
amount of the Class B interest rate swap for each interest period will be equal
to the outstanding principal balance of the Class A notes and the outstanding
principal balance of the Class B
S-23
notes, respectively, in each case as of the end of the first day of the related
interest period. Under each swap, if one-month LIBOR exceeds a specified fixed
rate, the issuer will receive payments from the swap counterparty equal to:
rate Class A or Class B days in interest period
-----------------------
differential note principal balance, 360
X as applicable X
where the rate differential equals one-month LIBOR minus the specified fixed
rate. Alternatively, if one-month LIBOR is less than the applicable specified
fixed rate, the issuer will be required to make a payment to the swap
counterparty equal to the result of the equation shown above, where the rate
differential equals the specified fixed rate minus one-month LIBOR. The
specified fixed rate for the Class A interest rate swap is 5.665% per annum.
The specified fixed rate for the Class B interest rate swap is 5.670% per
annum.
Any net amounts received by the issuer under the interest rate swaps will
be treated as collections of finance charge receivables. Any net amounts
payable by the issuer under the Class A interest rate swap will be paid from
finance charge collections at the same priority as the interest payments on the
Class A notes. Any net amounts payable by the issuer under the Class B interest
rate swap will be paid from finance charge collections at the same priority as
interest payments on the Class B notes.
The issuer can only enter into and maintain interest rate swap agreements
with counterparties that have debt ratings consistent with the standards of the
rating agencies for the notes. If one of these rating agencies withdraws or
lowers its rating for a swap counterparty, the servicer may obtain a
replacement swap from a counterparty having the required credit ratings.
Alternatively, it may enter into some other arrangement satisfactory to the
rating agencies for the notes.
Interest Rate Swap Counterparty
Deutsche Bank AG, acting through its New York Branch
Deutsche Bank AG New York Branch is the initial counterparty to both the
Class A interest rate swap and the Class B interest rate swap. It is a branch
of Deutsche Bank Aktiengesellschaft (referred to in this prospectus supplement
as Deutsche Bank AG), was established in 1978 and is licensed by the New York
Superintendent of Banks. Its office is currently located at 31 West 52nd
Street, New York, NY 10019. The initial counterparty is examined by the New
York State Banking Department and is subject to the banking laws and
regulations applicable to a foreign bank that operates a New York branch. The
initial counterparty is also examined by the Federal Reserve Bank of New York.
Deutsche Bank AG and the Deutsche Bank Group
Pursuant to the law of Germany on the Regional Scope of Credit
Institutions, Deutsche Bank, the predecessor to Deutsche Bank AG, founded in
1870, was split into three regional banks in 1952. The present day Deutsche
Bank AG originated from the merger of Norddeutsche Bank Aktiengesellschaft,
Hamburg, Deutsche Bank Aktiengesellschaft West, Dusseldorf and Suddeutsche Bank
Aktiengesellschaft, Munich. The merger and the name were entered in the
Commercial Register of the District Court, Frankfurt am Main, on
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May 2, 1957. Deutsche Bank AG is a banking company with limited liability
incorporated under the laws of Germany under registration number HRB 30 000.
Deutsche Bank AG has its registered office at Taunusanlage 12, D-60325
Frankfurt am Main, Germany.
Deutsche Bank AG is the parent company of a group--referred to in this
prospectus supplement as the Deutsche Bank Group--consisting of banks, capital
market companies, fund management companies, mortgage banks and a property
finance company, installment financing and leasing companies, insurance
companies, research and consultancy companies and other domestic and foreign
companies./3/ Deutsche Bank Group has over 2,300 branches and offices engaged
in banking business and other financial business worldwide.
The objectives of Deutsche Bank AG, as stated in its Articles of
Association, are the transaction of banking business of every kind, the
provision of financial and other services and the promotion of international
economic relations. Deutsche Bank AG may realize these objectives itself or
through subsidiaries and affiliated companies. To the extent permitted by law,
Deutsche Bank AG is entitled to transact all business and to take all steps
which appear likely to promote its objectives, in particular to acquire and
dispose of real estate, to establish branches at home and abroad, to acquire,
administer and dispose of interests in other enterprises, and to conclude
enterprise agreements.
As of November 30, 2000, the subscribed share capital of Deutsche Bank AG
amounted to (Euro)1,578,275,957.76 consisting of 616,514,046 shares of no par
value. The shares are fully paid up and in registered form. The shares are
listed for trading and official quotation on all the German stock exchanges.
They are also listed on the stock exchanges in Amsterdam, Antwerp, Brussels,
London, Luxembourg, Paris, Tokyo, Vienna and the Swiss Stock Exchange.
The long-term senior debt of Deutsche Bank AG has been assigned a rating of
AA by Standard & Poor's, Aa3 by Moody's and AA by Fitch. The short-term senior
debt of Deutsche Bank AG has been assigned a rating of A-1+ by Standard &
Poor's, P-1 by Moody's and F1+ by Fitch. A credit rating may be subject to
revision, suspension or withdrawal at any time by the rating organization.
As of September 30, 2000, based on International Accounting Standards,
Deutsche Bank Group had total assets of (Euro)996.0 billion, total loans and
advances to customers of (Euro)418.3 billion, amounts owed to other depositors
of (Euro)397.7 billion, liabilities evidenced by paper of (Euro)173.4 billion
and capital and reserves of (Euro)27.0 billion. International Accounting
Standards may not conform to generally accepted accounting principles applied
by United States banks.
Deutsche Bank AG will provide without charge to each person to whom this
prospectus supplement is delivered, upon the written or oral request of such
person a copy of the most recent Annual Report of Deutsche Bank AG, which
contains the consolidated statements of
- --------
/3 /There are non-consolidated subsidiaries of Deutsche Bank AG whose assets
amounted to roughly 0.2% of the aggregate balance sheet total as of
December 1999. Owing to their minor importance for the assets and income
situation of the Deutsche Bank Group, these companies are not included in
the consolidated statement of accounts.
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Deutsche Bank AG and the most recent Interim Report of Deutsche Bank AG showing
unaudited figures. The Interim Reports of Deutsche Bank AG that are made
available are for
purposes of information only. Written requests should be directed to: Deutsche
Bank AG New York Branch, 31 West 52nd Street, New York, NY 10019, Attention:
Management.
Litigation or Arbitration Proceedings
No court or arbitration proceedings which could have a significant effect
on the financial condition of Deutsche Bank AG, or had such an effect in the
last two years, have been pending, and Deutsche Bank AG is not aware, to the
best of its knowledge, of any such proceedings now pending or threatened.
Since June of 1998, several purported class and individual actions have
been filed with various U.S. courts against Deutsche Bank AG and other banks
with regard to events that occurred during the period of the "Third Reich,"
between 1933 and 1945. The plaintiffs seek the release of accounting records,
the creation of an endowment (trust), restitution, disgorgement of profits, and
compensatory and punitive damages in an amount to be determined at trial.
Deutsche Bank AG believes that the actions filed are not permissible class
actions, that the claims are without merit, and that they will not have a
material adverse effect on the financial condition of Deutsche Bank AG
presented in this prospectus supplement.
Principal Payments
During the revolving period, no principal payments will be made on your
notes. During the controlled accumulation period and the rapid amortization
period, deposits to the principal accumulation account and principal payments
on the Series 2001-A notes will be made on each distribution date from the
following sources:
(a) principal collections allocated to your series based on your
allocation percentage and retained in the collection account during the
prior calendar month, less any amounts required to be reallocated to cover
interest payments on the Series 2001-A notes, net swap payments due from
the issuer or servicing fees payments to non-affiliates; plus
(b) any amount on deposit in the excess funding account allocated to
your series on that distribution date; plus
(c) any finance charge collections or other amounts required to be
treated as principal collections in order to cover the share of defaulted
receivables and uncovered dilution amounts allocated to your series or to
reinstate prior reductions to the collateral amount; plus
(d) any principal collections from other series that are shared with
your series.
Controlled Accumulation Period
The controlled accumulation period is scheduled to commence on February 1,
2005 and to last twelve months. However, the servicer may elect to extend the
revolving period and postpone the controlled accumulation period, subject to
the conditions described under "Description of the Notes--Suspension and
Postponement of Controlled Accumulation
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Period" in the accompanying prospectus. The servicer may elect to postpone the
controlled accumulation period only if the number of months needed to fund the
principal accumulation account is less than twelve months. In no event will the
servicer postpone the beginning of the controlled accumulation period to later
than January 1, 2006.
The servicer may also elect to suspend the controlled accumulation period,
subject to the conditions described under "Description of the Notes--Suspension
and Postponement of Controlled Accumulation Period" in the accompanying
prospectus.
On each distribution date relating to the controlled accumulation period,
the indenture trustee will deposit in the principal accumulation account an
amount equal to the least of:
(1) funds available for this purpose for your series with respect to
that distribution date;
(2) $43,750,000 or, if the commencement of the controlled accumulation
is postponed, any higher deposit amount as the servicer may determine is
necessary to fully fund the principal accumulation account, plus any
amounts required to be deposited to the principal accumulation account on
prior distribution dates that have not yet been deposited;
(3) an amount equal to the outstanding principal amount of the Class A
and Class B notes, minus the amount on deposit in the principal
accumulation account prior to any deposits on that date; and
(4) the collateral amount.
Any remaining funds not deposited in the principal accumulation account
first will be made available to investors in other series as shared principal
collections and second will either be deposited in the excess funding account
under the circumstances described under "Description of the Notes--Excess
Funding Account" in the accompanying prospectus or paid to us or our assigns.
During the controlled accumulation period, if the excess collateral amount
exceeds the required excess collateral amount, the excess collateral amount
will be reduced, but not below the required excess collateral amount, by the
amount of funds applied as described in the preceding sentence.
If the rapid amortization period has not commenced, amounts in the
principal accumulation account, up to the outstanding principal balance of the
Class A notes, will be paid to the Class A noteholders on the expected
principal payment date for Class A. Any remaining amounts, up to the
outstanding principal balance of the Class B notes, will be paid to the Class B
noteholders on the expected principal payment date for Class B.
Rapid Amortization Period
On each distribution date relating to the rapid amortization period, the
Class A noteholders will be entitled to receive funds available for principal
payments for Series 2001-A for the related calendar month in an amount up to
the lesser of (a) the collateral amount for the notes and (b) outstanding
principal balance of the Class A notes.
After payment in full of the outstanding principal balance of the Class A
notes, the Class B noteholders will be entitled to receive, on each
distribution date relating to the rapid
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amortization period, the remaining available funds for Series 2001-A for the
related calendar month in an amount up to the lesser of (a) the collateral
amount for the notes and (b) the outstanding principal balance of the Class B
notes.
After payment in full of the outstanding principal balance of the Class B
notes, the Class C noteholders will be entitled to receive on each distribution
date relating to the rapid amortization period, the remaining available funds
for Series 2001-A for the related calendar month in an amount up to the lesser
of (a) the collateral amount for the notes and (b) the outstanding principal
balance of the Class C notes.
See "--Pay Out Events" below for a discussion of events that might lead to
the commencement of the rapid amortization period.
Subordination
The Class B notes are subordinated to the Class A notes. The Class C notes
are subordinated to the Class A and Class B notes. The excess collateral amount
is subordinated to all three classes of notes. Interest payments will be made
on the Class A notes prior to being made on the Class B and Class C notes.
Interest payments will be made on the Class B notes prior to being made on the
Class C notes.
Principal payments on the Class B notes will not begin until the Class A
notes have been paid in full. Principal payments on the Class C notes will not
begin until the Class A and Class B notes have been paid in full.
The collateral amount for your series will be reduced as the collateral is
applied for the benefit of your series, for instance as principal payments are
made on your series. Reductions due to principal payments on a senior class
should not directly cause a loss on junior classes.
However, the collateral amount can be applied for the benefit of your
series in two other ways:
. by reallocating principal collections to make interest payments and to
pay net swap payments due from the issuer and the servicing fee for your
series payable to non-affiliates when finance charge collections and
investment earnings are not sufficient to make these payments; and
. to absorb your series' share of defaulted receivables and any uncovered
dilution amounts, when finance charge collections and investment
earnings are not sufficient to cover these amounts.
The excess collateral amount provides credit enhancement by absorbing these
types of reductions. If the total amount of these latter two types of
reductions exceeds the excess collateral amount and the principal amount of the
Class C notes, then the Class B Notes may not be repaid in full. If the total
exceeds the sum of the excess collateral amount and the principal amounts of
the Class B and Class C notes, then the Class A notes may not be repaid in
full. See "--Excess Collateral Amount" below.
If receivables are sold after an event of default, the net proceeds of that
sale would be paid first to the Class A notes, then to the Class B notes and
finally to the Class C notes, in each case until the outstanding principal
amount of the specified class and all accrued and unpaid interest payable to
that class have been paid in full.
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Application of Finance Charge Collections
We refer to your series' share of finance charge collections and
interchange, plus net investment proceeds transferred from the principal
accumulation account, net swap receipts, amounts withdrawn from the reserve
account and any available excess finance charge collections from other series,
collectively, as finance charge collections. On each distribution date, the
servicer will direct the indenture trustee to apply your series' share of
finance charge collections for the prior month in the following order:
(1)to pay interest on the Class A notes, including any overdue
interest and additional interest on the overdue interest, and any net
payments due from the issuer under the Class A interest rate swap;
(2)to pay interest on the Class B notes, including any overdue
interest and additional interest on the overdue interest, and any net
payments due from the issuer under the Class B interest rate swap;
(3)if neither we nor any of our affiliates is the servicer, to pay the
servicing fee for your series for the prior calendar month and any overdue
servicing fee;
(4)to pay interest on the Class C notes, including any overdue
interest and additional interest on the overdue interest;
(5)an amount equal to your series' share of the defaulted receivables
and uncovered dilution will be treated as principal collections for that
distribution date;
(6)an amount equal to any previously unreimbursed reductions to the
collateral amount on account of defaulted receivables, uncovered dilution
or reallocations of principal collections will be treated as principal
collections for that distribution date;
(7)on and after the reserve account funding date, an amount equal to
the excess, if any, of the required reserve account amount over the amount
then on deposit in the reserve account will be deposited into the reserve
account;
(8)to pay any amounts due under the Class C note purchase agreement
and to deposit an amount equal to the excess, if any, of the required
spread account amount over the amount then on deposit in the spread
account into the spread account for the Class C notes;
(9)to make any early termination or other miscellaneous payments due
under the interest rate swap relating to the notes;
(10) to pay any unpaid servicing fee for your series for the prior
calendar month and any overdue servicing fee to the extent not paid in
accordance with clause (3) above; and
(11) all remaining amounts will constitute excess finance charge
collections and will be available to cover any shortfalls in finance
charge collections for other outstanding series in group one and, after
payment of these shortfalls, the remaining amount will be paid to us or
our assigns.
Reallocation of Principal Collections
If your series' share of finance charge collections is not sufficient to
pay the aggregate amount of interest on the Class A and Class B notes, net swap
payments due from the issuer,
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interest on the Class C notes that remains unpaid after any withdrawal from the
spread account for the Class C notes and the servicing fee for your series
payable to non-affiliates, then principal collections will be reallocated to
cover these amounts. Any reallocation of principal collections is a use of the
collateral for your series. Consequently, these uses will reduce the remaining
collateral amount by a corresponding amount. The amount of principal
collections that will be reallocated on any distribution date will not exceed:
. the lower of:
. the excess of the amounts needed to pay current, overdue and
additional interest on the Class A notes and any net swap payments due
from the issuer under the Class A interest rate swap over the amount
of finance charge collections allocated to your series and available
to cover these amounts; and
. the greater of (1)(a) 23% of the initial collateral amount minus (b)
the sum of (i) the amount of unreimbursed investor charge-offs after
giving effect to investor charge-offs for the related calendar month
and (ii) the amount of unreimbursed reallocated principal collections
as of the previous distribution date and (2) zero; plus
. the lower of:
. the excess of the sum of the amounts needed to pay current, overdue
and additional interest on the Class B notes, any net swap payments
due from the issuer under the Class B interest rate swap and the
current and past due servicing fee for your series payable to non-
affiliates over the amount of finance charge collections allocated to
your series and available to cover these amounts; and
. the greater of (1)(a) 12.5% of the initial collateral amount minus (b)
the sum of (i) the amount of unreimbursed investor charge-offs after
giving effect to investor charge-offs for the related calendar month
and (ii) the amount of unreimbursed reallocated principal collections
as of the previous distribution date and after giving effect to the
reallocation of principal collections to make required interest
payments for Class A and net swap payments under the Class A interest
rate swap on the then-current distribution date and (2) zero; plus
. the lower of:
. the excess of the amounts needed to pay current, overdue and
additional interest on the Class C notes over the sum of the amount of
finance charge collections allocated to your series and the amount of
any withdrawal from the spread account for the Class C notes available
to cover these amounts; and
. the greater of (1)(a) 6.5% of the initial collateral amount minus (b)
the sum of (i) the amount of unreimbursed investor charge-offs after
giving effect to investor charge-offs for the related calendar month
and (ii) the amount of unreimbursed reallocated principal collections
as of the previous distribution date and after giving effect to the
reallocation of principal collections to make required interest
payments for Class A and Class B, net swap payments under the Class A
and Class B interest rate swaps and required servicing fee payments to
non-affiliates on the then-current distribution date and (2) zero.
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Investor Charge-Offs
The servicer will allocate a portion of defaulted receivables for each
calendar month to your series based on the average allocation percentage for
your series for that calendar month. The allocation percentage for purposes of
allocating defaulted receivables is described under "--Allocation Percentages"
above.
Dilution will also be allocated to your series in the circumstances
described in "Description of the Notes--Defaulted Receivables; Dilution;
Investor Charge-Offs" in the accompanying prospectus. If dilution is allocated
among series, your series' share of dilution will equal:
(1) dilution to be allocated to all series, times
(2) a fraction,
. the numerator of which is your series' allocation percentage for
purposes of allocating defaulted receivables, as described under
"--Allocation Percentages" above, and
. the denominator of which is the sum of the allocation
percentages used by all outstanding series for purposes of
allocating defaulted receivables.
As described under "Description of the Notes--Defaulted Receivables;
Dilution; Investor Charge-Offs" in the accompanying prospectus, so long as your
series had a Minimum Seller Percentage greater than zero, dilution allocated to
your series will first reduce the Seller Amount and collections allocated to
the seller interest and funds on deposit in the excess funding account will be
available on a ratable basis to cover dilution allocated to all series that
have Minimum Seller Percentages greater than zero. On each distribution date,
if the sum of the defaulted receivables and any remaining uncovered dilution
allocated to your series is greater than finance charge collections used to
cover those amounts, then the collateral amount will be reduced by the amount
of the excess.
Any reductions in the collateral amount on account of defaulted receivables
and uncovered dilution will be reinstated to the extent that finance charge
collections are available for that purpose on any subsequent distribution date.
Sharing Provisions
Your series is in group one for purposes of sharing excess finance charge
collections. Your series will share excess finance charge collections with
other series of notes in group one and other series of investor certificates in
group one for First Consumers Master Trust. See "Description of the Notes--
Shared Excess Finance Charge Collections" in the accompanying prospectus.
Your series is a principal sharing series. See "Description of the Notes--
Shared Principal Collections; Excess Funding Account" in the accompanying
prospectus.
Principal Accumulation Account
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the principal
accumulation account. During the
S-31
controlled accumulation period, the indenture trustee at the direction of the
servicer will make deposits to the principal accumulation account as described
under "--Principal Payments" in this prospectus supplement.
Funds on deposit in the principal accumulation account will be invested to
the following distribution date by the indenture trustee at the direction of
the servicer in highly rated liquid investments that meet the criteria
described in the indenture supplement. Investment earnings, net of investment
losses and expenses, on funds on deposit in the principal accumulation account
will be deposited in the collection account and treated as finance charge
collections available to your series for the related interest period. If, for
any distribution date, these net investment earnings are less than the sum of:
(a) the product of (i) the balance of the principal accumulation
account, up to the outstanding principal balance of the Class A notes, on
the record date immediately preceding that distribution date, (ii) the
Class A note interest rate for the related interest period and (iii) the
number of days in the related interest period divided by 360, plus
(b) the product of (i) the balance of the principal accumulation
account in excess of the outstanding principal balance of the Class A
notes, up to the outstanding principal balance of the Class B notes, in
each case on the record date immediately preceding that distribution date,
(ii) the Class B note interest rate for the related interest period and
(iii) the number of days in the related interest period divided by 360,
then the indenture trustee will withdraw the shortfall, to the extent required
and available, from the reserve account and deposit it in the collection
account for use as finance charge collections that are available to your
series.
Reserve Account
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the reserve
account. The reserve account is established to assist with the distribution of
interest on the Class A and Class B notes during the controlled accumulation
period and on the first distribution date with respect to the rapid
amortization period. On each distribution date from and after the reserve
account funding date, but prior to the termination of the reserve account, the
indenture trustee will apply finance charge collections allocated to your
series to increase the amount on deposit in the reserve account to the extent
the amount on deposit in the reserve account is less than the required reserve
account amount.
The reserve account funding date will be the distribution date with respect
to the calendar month which commences three months prior to the commencement of
the controlled accumulation period, or an earlier date as the servicer may
determine.
The required reserve account amount for any distribution date on or after
the reserve account funding date will be equal to (a) 0.50% of the outstanding
principal balance of the Class A and Class B notes or (b) any other amount
designated by us. We may only designate a lesser amount if each rating agency
confirms that the designation will not impair its rating of any outstanding
series or class.
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On each distribution date, after giving effect to any deposit to be made
to, and any withdrawal to be made from, the reserve account on that
distribution date, the indenture trustee will withdraw from the reserve account
an amount equal to the excess, if any, of the amount on deposit in the reserve
account over the required reserve account amount, will deposit the excess in
the spread account to the extent that funds available in the spread account are
less than the required spread account amount and will distribute any remaining
excess to us or our assigns. Any amounts withdrawn from the reserve account and
distributed to us or our assigns will not be available for distribution to the
noteholders.
All amounts on deposit in the reserve account on any distribution date--
after giving effect to any deposits to, or withdrawals from, the reserve
account to be made on that distribution date--will be invested to the following
distribution date by the indenture trustee, at the direction of the servicer,
in highly rated liquid investments that meet the criteria described in the
indenture supplement. The interest and other investment income, net of losses
and investment expenses, earned on these investments will be either retained in
the reserve account to the extent the amount on deposit is less than the
required reserve account amount or deposited in the collection account and
treated as finance charge collections available to your series.
On or before each distribution date with respect to the controlled
accumulation period and on or before the first distribution date with respect
to the rapid amortization period, the indenture trustee will withdraw from the
reserve account and deposit in the collection account an amount equal to the
least of:
(1) the amount then on deposit in the reserve account with respect to
that distribution date;
(2) the required reserve account amount; and
(3) the amount of the shortfall described under "--Principal
Accumulation Account" above.
Amounts withdrawn from the reserve account on any distribution date will be
included as finance charge collections available to your series for that
distribution date.
The reserve account will be terminated upon the earliest to occur of:
(1) the first distribution date for the rapid amortization period;
(2) the expected principal payment date for the Class B notes; and
(3) the termination of the issuer.
Upon the termination of the reserve account, all amounts on deposit in the
reserve account, after giving effect to any withdrawal from the reserve account
on that date, will be deposited in the spread account to the extent that funds
available in the spread account are less than the required spread account
amount and any remaining amounts will be distributed to us or our assigns. Any
amounts withdrawn from the reserve account and distributed to us or our assigns
will not be available for distribution to the noteholders.
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Excess Collateral Amount
An excess collateral amount provides credit enhancement for your series.
The initial excess collateral amount will be $39,000,000, which equals 6.5% of
the initial collateral amount.
On each distribution date during the controlled accumulation period, the
excess collateral amount will be decreased--but not below the required excess
collateral amount after giving effect to any deposits to the principal
accumulation account on that distribution date--by the amount of funds that are
available but not required to be deposited into the principal accumulation
account on that distribution date. See "Description of Series Provisions--
Controlled Accumulation Period" in this prospectus supplement and "Credit
Enhancement--Excess Collateral Amount" in the accompanying prospectus.
The required excess collateral amount for your series on any day is
currently equal to the lesser of (a) $39,000,000 and (b) 7.5% of the total
collateral amount on that day. However, the required excess collateral amount
may be decreased in the future if each rating agency we designate for the
Series 2001-A notes confirms that the reduction will not impair its ratings of
the notes. In addition:
(a) except as provided in clause (c), the required excess collateral
amount will never be less than 3% of the initial collateral amount,
(b) except as provided in clause (c), the required excess collateral
amount will not reduce during a rapid amortization period, and
(c) the required excess collateral amount will never exceed the
aggregate outstanding principal amount of the notes, minus the balances on
deposit in the principal accumulation account.
Paired Series
Your series may be paired with one or more other series issued at a later
time once the controlled accumulation period for your series begins. We call
each of these later issued series a paired series. See "Description of the
Notes--Paired Series" in the accompanying prospectus. The issuance of the
paired series will be subject to the conditions described under "Description of
the Notes--New Issuances" in the accompanying prospectus.
We cannot guarantee that the terms of any paired series will not have an
impact on the calculation of the allocation percentage used to allocate
principal collections to your series or the timing or amount of payments
received by you as a Series 2001-A noteholder. In particular, the numerator for
the allocation percentage used to allocate principal collections to your series
may be reduced upon the occurrence of a pay out event for a paired series, but
not below the collateral amount as of the last day of the revolving period for
the paired series. See "--Allocation Percentages" above. The extent to which
the timing or amount of payments received by you may be affected will depend on
many factors, only one of which is a change in the calculation of the
allocation percentage.
S-34
Pay Out Events
A pay out event will occur for the Series 2001-A notes upon the occurrence
of any of the following events:
(a) our failure (i) to make any payment or deposit on the date
required to be made under the transfer and servicing agreement, the
indenture or the Series 2001-A indenture supplement within the applicable
grace period which shall not exceed 5 business days or (ii) to observe or
perform in any material respect any of our other covenants or agreements
set forth in the transfer and servicing agreement, the indenture or the
Series 2001-A indenture supplement, which failure has a material adverse
effect on the Series 2001-A noteholders and which continues unremedied for
a period of 60 days after written notice of the failure, requiring the
same to be remedied;
(b) any representation or warranty made by us in the transfer and
servicing agreement or the pooling and servicing agreement or any
information required to be given by us to identify the accounts proves to
have been incorrect in any material respect when made or delivered and
which continues to be incorrect in any material respect for a period of 60
days after written notice of the failure, requiring the same to be
remedied, and as a result of which the interests of the Series 2001-A
noteholders are materially and adversely affected and continue to be
materially and adversely affected for the designated period; except that a
pay out event described in this subparagraph (b) will not occur if we have
accepted reassignment of the related receivable or all related
receivables, if applicable, within the designated period;
(c) our failure to convey receivables in additional accounts to the
trust within 5 business days after we are required to do so;
(d) any servicer default occurs;
(e) the average of the Portfolio Yields for any 3 consecutive calendar
months is less than the average of the Base Rates for the same calendar
months;
(f) sufficient funds are not available to pay in full the outstanding
principal balance of the Class A notes or the Class B notes on their
respective expected principal payment dates;
(g) specified bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to us;
(h) we are unable for any reason to transfer receivables to the trust;
(i) First Consumers Master Trust or the issuer becomes subject to
regulation as an "investment company" within the meaning of the Investment
Company Act of 1940, as amended;
(j) an event of default for Series 2001-A and an acceleration of the
maturity of the Series 2001-A notes occurs under the indenture;
(k) failure of any interest rate swap counterparty to make a payment
required under the Class A or Class B interest rate swap for 5 business
days after it is due; or
S-35
(l) the early termination of the Class A or Class B interest rate swap
unless the issuer obtains a replacement interest rate swap acceptable to
the rating agencies.
In the case of any event described in clause (a), (b) or (d) above, a pay
out event will be deemed to have occurred with respect to Series 2001-A only
if, after any applicable grace period, either the indenture trustee or Series
2001-A noteholders representing more than 50% of the aggregate unpaid principal
amount of the Series 2001-A notes, by written notice to us, the servicer and,
if notice is given by the Series 2001-A noteholders, the indenture trustee,
declare that a pay out event has occurred with respect to Series 2001-A as of
the date of the notice.
In the case of any event described in clause (g), (h) or (i), a pay out
event with respect to all series then outstanding, and in the case of any event
described in clause (c), (e), (f), (j), (k) or (l), a pay out event with
respect to only Series 2001-A, will occur without any notice or other action on
the part of the indenture trustee or the Series 2001-A noteholders immediately
upon the occurrence of the event.
On the business day immediately before the date on which a pay out event is
deemed to have occurred, the rapid amortization period will begin.
See "Description of the Notes--Pay Out Events" in the accompanying
prospectus for an additional discussion of the consequences of insolvency,
conservatorship or receivership events related to us.
Events of Default
The events of default for Series 2001-A, as well as the rights and remedies
available to the indenture trustee and the Series 2001-A noteholders when an
event of default occurs, are described under "The Indenture--Events of Default;
Rights Upon Event of Default" in the accompanying prospectus.
In the case of an event of default involving bankruptcy, insolvency or
similar events relating to the issuer, the principal amount of the Series 2001-
A notes automatically will be deemed to be immediately due and payable. If any
other event of default for Series 2001-A occurs, the indenture trustee or the
Series 2001-A noteholders representing a majority of the then-outstanding
principal balance of the Series 2001-A notes may declare the Series 2001-A
notes to be immediately due and payable. If the Series 2001-A notes are
accelerated, you may receive principal prior to the expected principal payment
date for your class of notes.
Servicing Compensation and Payment of Expenses
The servicing fee rate for your series is 2% per annum. Your series' share
of the servicing fee for each month will be calculated as described under
"Description of the Notes--Servicing Compensation and Payment of Expenses" in
the accompanying prospectus. However, the monthly servicing fee allocable to
your series for the first distribution date will equal $866,666.67.
S-36
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
between us, Spiegel and the underwriters named below, we have agreed to sell to
the underwriters, and each of the underwriters has severally agreed to
purchase, the principal amount of the Class A notes and Class B notes set forth
opposite its name:
Principal Amount of
Class A Underwriters Class A Notes
-------------------- -------------------
Deutsche Banc Alex. Brown Inc......................... $115,500,000
Banc of America Securities LLC........................ 115,500,000
Chase Securities Inc.................................. 115,500,000
Commerzbank Capital Markets Corp...................... 115,500,000
------------
Total............................................ $462,000,000
============
Principal Amount of
Class B Underwriter Class B Notes
------------------- -------------------
Deutsche Banc Alex. Brown Inc......................... $ 63,000,000
------------
Total............................................ $ 63,000,000
============
In the underwriting agreement, the underwriters of each class of notes have
agreed, subject to the terms and conditions set forth in that agreement, to
purchase all of the notes in that class offered by this prospectus supplement
if any of the notes in that class are purchased.
The underwriters of each class of notes have advised us that they propose
initially to offer the notes in that class to the public at the prices set
forth in this prospectus supplement, and to dealers chosen by the underwriters
at the prices set forth in this prospectus supplement less a concession not in
excess of the percentages set forth in the following table. The underwriters of
each class of notes and those dealers may reallow a concession not in excess of
the percentages set forth in the following table. After the initial public
offering of the notes, the public offering prices and the concessions referred
to in this paragraph may be changed. Additional offering expenses are estimated
to be $700,000.
Class A Notes Class B Notes
Concessions................................... 0.180% 0.255%
Reallowances.................................. 0.125% 0.125%
The underwriters will be compensated as set forth in the following table:
Underwriters' Amount
Discounts and per $1,000
Commissions of Principal Total Amount
------------- ------------ ------------
Class A Notes..................... 0.300% $3.00 $1,386,000
Class B Notes..................... 0.425% $4.25 $ 267,750
----------
Total Class A and Class B Notes......................... $1,653,750
==========
S-37
Each underwriter has represented and agreed that:
(a) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the notes in, from or otherwise involving the United Kingdom;
(b) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the
issue or sale of the notes to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom that
document may otherwise lawfully be issued or passed on;
(c) if it is an authorized person under Chapter III of part I of the
Financial Services Act 1986, it has only promoted and will only promote
(as that term is defined in Regulation 1.02(2) of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described in this prospectus supplement and the
accompanying prospectus if that person is of a kind described either in
Section 76(2) of the Financial Services Act 1986 or in Regulation 1.04 of
the Financial Services (Promotion of Unregulated Schemes) Regulations
1991; and
(d) it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996.
We will indemnify the underwriters against the liabilities specified in the
underwriting agreement, including liabilities under the Securities Act, or will
contribute to payments the underwriters may be required to make in connection
with those liabilities.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the notes in accordance with Regulation M under the Exchange Act. Over-
allotment transactions involve syndicate sales in excess of the offering size,
which creates a syndicate short position. The underwriters do not have an
"overallotment" option to purchase additional notes in the offering, so
syndicate sales in excess of the offering size will result in a naked short
position. The underwriters must close out any naked short position through
syndicate covering transactions in which the underwriters purchase notes in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the notes in the open market after pricing that would adversely affect
investors who purchase in the offering. Stabilizing transactions permit bids to
purchase the notes so long as the stabilizing bids do not exceed a specified
maximum. Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the notes originally sold by that syndicate member
are purchased in a syndicate covering transaction. Over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
have the effect of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the notes. As a
result, the price of the notes may be higher than the price that might
otherwise exist in the open market. Neither we nor the underwriters represent
that the underwriters will engage in any of these transactions or that those
transactions, once commenced, will not be discontinued without notice at any
time.
S-38
In the ordinary course of their respective businesses, the underwriters and
their respective affiliates have engaged and may in the future engage in
investment banking or commercial banking transactions with us and our
affiliates. We will use a portion of the net proceeds from the issuance of the
Series 2001-A notes to reduce outstandings under various credit facilities
provided by some of the underwriters, their affiliates and special purpose
entities administered by some of the underwriters and their affiliates.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Series 2001-A notes
will be passed upon for us by Rooks, Pitts and Poust, special counsel for us.
Certain legal matters relating to the federal tax consequences of the issuance
of the Series 2001-A notes will be passed upon for us by Rooks, Pitts and
Poust. Certain legal matters relating to the issuance of the Series 2001-A
notes will be passed upon for the underwriters by Mayer, Brown & Platt.
S-39
GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT
"Base Rate" means, with respect to any calendar month, the annualized
percentage equivalent of a fraction:
(1) the numerator of which is the sum of (a) the interest due on the
Series 2001-A notes on the following distribution date, (b) your series'
share of the monthly servicing fee for the following distribution date and
(c) any net swap payments due from the issuer on the following
distribution date; and
(2) the denominator of which is the collateral amount as of the first
day of that calendar month.
"Portfolio Yield" means, with respect to any calendar month, the annualized
percentage equivalent of a fraction:
(1) the numerator of which is the sum of (a) amount of finance charge
collections allocated to your series, plus (b) net swap receipts received
by the issuer under the Class A or Class B interest rate swaps on the
following distribution date, minus the amount of defaulted receivables
allocated to your series for that calendar month; and
(2) the denominator of which is the collateral amount as of the first
day of that calendar month.
The allocation of finance charge collections referred to in clause (1) above
will be made in accordance with the method of estimation that the servicer uses
from time to time to allocate collections between finance charge collections
and principal collections. The amount of finance charge collections in clause
(1) will also include interchange allocated to your series, net investment
proceeds transferred from the principal accumulation account and amounts
withdrawn from the reserve account.
S-40
Annex I
OTHER SECURITIES ISSUED AND OUTSTANDING
The principal characteristics of the outstanding series of investor
certificates issued by First Consumers Master Trust are set forth in the table
below. All of the outstanding series of investor certificates are in group one.
Series 2000-A
Initial Class A Investor Amount.................................... $300,000,000
Initial Class B Investor Amount..................................... $44,828,000
Class A interest rate....... Floating rate generally based upon commercial paper
rates
Class B interest rate....... Floating rate generally based upon commercial paper
rates
Scheduled Pay Out Commencement Date.............................. March 31, 2001
Annual servicing fee percentage.................................. 2.0% per annum
Enhancement for the Class A certificates... Subordination of Class B certificate
Scheduled Series 2000-A termination date........... April 2004 distribution date
Series Issuance Date.......................................... December 21, 2000
Series 1999-A
Initial Class A Investor Amount.................................... $214,000,000
Initial Class B Investor Amount..................................... $36,000,000
Initial Class C Investor Amount..................................... $26,243,094
Class A interest rate..................................................... 5.80%
Class B interest rate..................................................... 6.28%
Class C interest rate........................................................ 0%
Scheduled Pay Out Commencement Date................ April 2003 Distribution Date
Annual servicing fee percentage.................................. 2.0% per annum
Enhancement for the Class A certificates... Subordination of Class B and Class C
certificate
Enhancement for the Class B certificates... Subordination of Class C certificate
Series 1999-A termination date.................. December 2005 distribution date
Series Issuance Date........................................... February 1, 1999
Series 1999-B
Initial Class A Investor Amount.............................................. $0
Initial Class B Investor Amount.............................................. $0
Maximum Class A Investor Amount.................................. $1,125,000,000
Maximum Class B Investor Amount.................................... $168,103,448
Class A interest rate....... Floating rate generally based upon commercial paper
rates
Class B interest rate...................................... non-interest bearing
Scheduled Pay Out Commencement Date.... last day of December 2002 Monthly Period
Annual servicing fee percentage.................................. 2.0% per annum
Enhancement for the Class A certificates.. Subordination of Class B certificates
Series 1999-B termination date.. 36 months after the earlier of the commencement
of the Controlled Amortization Period or a Rapid Amortization Period
Series Issuance Date........................................... December 9, 1999
I-1
Prospectus
- -------------------------------------------------------------------------------
First Consumers Credit Card
Master Note Trust
Issuer
First Consumers National Bank
Seller and Servicer
Asset Backed Notes
- -------------------------------------------------------------------------------
The Issuer--
. may periodically issue asset backed notes in one or more series with one
or more classes; and
. will have a direct or indirect interest in--
. receivables in a portfolio of MasterCard(R) and VISA(R) revolving
credit card accounts owned by First Consumers National Bank;
. payments due on those receivables; and
. other property described in this prospectus and in the accompanying
prospectus supplement.
The Notes--
. will be paid only from the trust assets;
. offered with this prospectus will be rated in one of the four highest
rating categories by at least one nationally recognized rating
organization;
. may have one or more forms of credit enhancement; and
. will be issued as part of a designated series which may include one or
more classes of notes.
You should consider carefully the risk factors beginning on page 2 in
this prospectus.
A note is not a deposit and neither the notes nor the underlying
accounts or receivables are insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency.
The notes are obligations of First Consumers Credit Card Master Note
Trust only and are not obligations of First Consumers National Bank
or any other person.
This prospectus may be used to offer and sell notes of a series only
if accompanied by the prospectus supplement for that series.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these notes or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal
offense.
February 16, 2001
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the notes in two separate documents:
(a) this prospectus, which provides general information, some of which may not
apply to your series of notes, and (b) the accompanying prospectus supplement,
which describes the specific terms of your series of notes, including:
. the terms, including interest rates, for each class;
. the timing of interest and principal payments;
. information about the receivables;
. information about credit enhancement, if any, for each class;
. the ratings for each class being offered; and
. the method for selling the notes.
If the terms of your series of notes vary between this prospectus and the
accompanying prospectus supplement, you should rely on the information in the
prospectus supplement.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the notes in any state where the offer is not
permitted.
We include cross references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
in the accompanying prospectus supplement provide the pages on which these
captions are located.
TABLE OF CONTENTS
Page
----
Summary: Overview of Transactions......................................... 1
Risk Factors.............................................................. 2
It may not be possible to find an investor to purchase your notes....... 2
Some liens would be given priority over your notes which could cause
delayed or reduced payments........................................... 3
If a conservator or receiver were appointed for us, delays or reductions
in payment of your notes could occur.................................. 4
We may change the terms and conditions of the accounts in a way that
reduces collections................................................... 4
Changes to consumer protection laws may impede collection efforts or
reduce collections.................................................... 4
Limited remedies for breaches of representations could reduce or delay
payments.............................................................. 5
Payment patterns of receivables could reduce collections................ 5
Allocations of charged-off receivables or uncovered dilution could
reduce payments to you................................................ 6
Subordinated classes bear losses before senior classes.................. 6
Recharacterization of principal receivables would reduce principal
receivables and may require addition of new receivables............... 7
The note interest rate and the receivables interest rate may re-set at
different times, resulting in reduced or early payments to you........ 7
Page
----
Competition in the bank credit card industry could impair our ability to
generate new receivables.............................................. 7
Reliance on co-branding may reduce portfolio yield...................... 8
Secured card and related programs may affect portfolio yield............ 9
Important Parties......................................................... 10
The Issuer.............................................................. 10
First Consumers Master Trust............................................ 10
First Consumers National Bank........................................... 10
Spiegel, Inc. and its Retail Subsidiaries............................... 11
Our Bank Card Activities.................................................. 12
Origination............................................................. 13
Credit Granting Procedures.............................................. 13
Billing and Payments.................................................... 15
Delinquency and Collections............................................. 16
Customer Service and Account Management................................. 17
Description of First Data Resources..................................... 18
The Trust Portfolio....................................................... 18
Use of Proceeds........................................................... 20
Description of the Notes.................................................. 20
General................................................................. 20
Book-Entry Registration................................................. 22
Definitive Notes........................................................ 25
Interest Payments....................................................... 26
Principal Payments...................................................... 26
Suspension and Postponement of Controlled Accumulation Period........... 28
Transfer and Assignment of Receivables.................................. 30
New Issuances of Notes.................................................. 30
Representations and Warranties.......................................... 31
Addition of Trust Assets................................................ 32
Removal of Accounts..................................................... 34
i
Page
----
Collection and Other Servicing Procedures............................... 34
Discount Option......................................................... 34
Trust Accounts.......................................................... 35
Funding Period.......................................................... 35
Application of Collections.............................................. 36
Shared Excess Finance Charge Collections................................ 37
Shared Principal Collections............................................ 38
Excess Funding Account.................................................. 38
Defaulted Receivables; Dilution; Investor Charge-Offs................... 39
Defeasance.............................................................. 40
Final Payment of Principal.............................................. 40
Paired Series........................................................... 41
Pay Out Events.......................................................... 42
Servicing Compensation and Payment of Expenses.......................... 43
Matters Regarding the Seller and the Servicer........................... 43
Servicer Default........................................................ 46
Reports to Noteholders.................................................. 49
Evidence as to Compliance............................................... 50
Amendments.............................................................. 51
The Indenture............................................................. 52
Events of Default; Rights upon Event of Default......................... 53
Covenants............................................................... 56
Modification of the Indenture........................................... 58
Annual Compliance Statement............................................. 60
Indenture Trustee's Annual Report....................................... 60
List of Noteholders..................................................... 60
Satisfaction and Discharge of Indenture................................. 60
The Indenture Trustee................................................... 60
Matters Regarding the Administrator..................................... 61
Pooling and Servicing Agreement........................................... 61
New Issuances of Investor Certificates.................................. 61
Amendments.............................................................. 62
Page
----
Credit Enhancement........................................................ 64
General................................................................. 64
Excess Collateral Amount................................................ 64
Subordination........................................................... 64
Letter of Credit........................................................ 65
Cash Collateral Guaranty or Account..................................... 65
Surety Bond or Insurance Policy......................................... 66
Spread Account.......................................................... 66
Reserve Account......................................................... 66
Note Ratings.............................................................. 67
Material Legal Aspects of the Receivables................................. 67
Transfer of Receivables................................................. 67
Conservatorship and Receivership........................................ 68
Consumer Protection Laws................................................ 70
Federal Income Tax Consequences........................................... 70
General................................................................. 70
Tax Classification of the Issuer and the Notes.......................... 71
Consequences to Holders of the Offered Notes............................ 72
State and Local Tax Consequences........................................ 75
ERISA Considerations...................................................... 75
Plan of Distribution...................................................... 76
Reports to Noteholders.................................................... 77
Where You Can Find More Information....................................... 77
Glossary of Terms for Prospectus.......................................... 78
Annex I
Global Clearance, Settlement and Tax Documentation Procedures........... A-1
ii
SUMMARY: OVERVIEW OF TRANSACTIONS
[FLOW CHART]
Each series of notes will be issued by First Consumers Credit Card Master Note
Trust and will include one or more classes of notes, representing debt of the
issuer. Each series and class may differ as to timing and priority of
distributions, allocations of losses, interest rates, amount of distributions
in respect of principal or interest and credit enhancement. We, First
Consumers National Bank, will disclose the details of these timing, priority
and other matters in a prospectus supplement.
Initially, the primary asset of the issuer will be a collateral certificate
issued by First Consumers Master Trust to us and transferred to the issuer
under a transfer and servicing agreement. It represents a beneficial interest
in the assets of First Consumers Master Trust. First Consumers Master Trust
owns primarily credit card receivables arising in MasterCard(R) and VISA(R)/1/
revolving credit card accounts.
We are the originator of the credit card receivables. We have designated all
eligible accounts from our portfolio of MasterCard and VISA credit card
accounts and have transferred the receivables in those accounts to First
Consumers Master Trust under a pooling and servicing agreement. We will
continue to own the accounts that are designated to the trust. After all
outstanding series of investor certificates that have been issued by First
Consumers Master Trust have been retired, we may cause First Consumers Master
Trust to terminate, at which time the receivables will be transferred to the
issuer and held directly by the issuer. We refer to the entity--either First
Consumers Master Trust or the issuer--that holds the receivables at any given
time as the trust.
The notes will represent the right to payments from a portion of collections
on the credit card receivables and certain fees held by the trust. All new
receivables generated in the accounts will be automatically transferred to the
trust. The total amount of receivables held by the trust will fluctuate daily
as new receivables are generated and payments are received on existing
receivables.
We continue to service the receivables that are transferred to the trust and
will act as the issuer's administrator.
The Bank of New York is the trustee for First Consumers Master Trust. The Bank
of New York will also act as indenture trustee for the issuer. The issuer will
grant a security interest in its assets--including the collateral certificate
or, if First Consumers Master Trust has terminated, the receivables--to the
indenture trustee for the benefit of the noteholders.
- -------
1/ MasterCard and VISA are federally registered servicemarks of MasterCard
International and VISA U.S.A., Inc., respectively.
1
RISK FACTORS
The following is a summary of the principal risk factors that apply to an
investment in the notes. You should consider the following risk factors and any
risk factors in the accompanying prospectus supplement before deciding whether
to purchase the notes.
It may not be possible to find an investor to purchase
your notes.
The underwriters may assist in resales of the notes
but they are not required to do so. A secondary market
for any notes may not develop. If a secondary market
does develop, it might not continue or it might not be
sufficiently liquid to allow you to resell any of your
notes.
Some liens would be given priority over your notes
which could cause delayed or reduced payments.
We account for the transfer of the receivables as a
sale. Even so, a court could conclude that we own the
receivables and that the trust holds only a security
interest. Even if a court would reach that conclusion,
however, the indenture trustee will have a first-
priority perfected security interest, either directly
or through First Consumers Master Trust.
If a court were to conclude that the trust has only
a security interest, a tax or governmental lien or
other lien imposed under applicable state or federal
law without consent on our property arising before
receivables come into existence may be senior to the
trust's interest in the receivables. Additionally, if a
receiver or conservator were appointed for us, the fees
and expenses of the receiver or conservator might be
paid from the receivables before the trust receives any
payments on the receivables. In addition, the trust may
not have a first-priority perfected security interest
in collections commingled and used for the benefit of
the servicer if (a) insolvency proceedings were
commenced by or against the servicer or (b) a ten-day
period were to elapse after receipt by the servicer of
collections that have been commingled with other funds.
If any of these events were to occur, payments to you
could be delayed or reduced. See "Material Legal
Aspects of the Receivables--Transfer of Receivables"
and "Description of the Notes--Representations and
Warranties" in this prospectus.
2
If a conservator or receiver were appointed for us,
delays or reductions in payment of your notes could
occur.
If we were to become insolvent, the FDIC could act
as our conservator or receiver. In that role, the FDIC
would have broad powers to repudiate contracts to which
we were party if the FDIC determined that the contracts
were burdensome and that repudiation would promote the
orderly administration of our affairs. In addition, no
agreement that tended to diminish or defeat the FDIC's
interest in an asset acquired from us would be
enforceable against the FDIC unless the agreement meets
legal requirements. One of those requirements is that
the agreement would have to have been executed by us
contemporaneously with our acquisition of the asset.
The FDIC has adopted a rule stating that the FDIC
shall not use its repudiation power to reclaim, recover
or recharacterize as property of an FDIC-insured bank
any financial assets transferred by that bank in
connection with a securitization transaction. The same
rule states that the FDIC shall not seek to avoid an
otherwise legally enforceable securitization agreement
solely because the agreement does not satisfy the
contemporaneous execution requirement. Although the
FDIC has the power to repeal or amend its own rules,
the securitization rule states that any repeal or
amendment of that rule will not apply to any transfers
of financial assets made in connection with a
securitization that was in effect before the repeal or
modification.
We have structured the issuance of the notes with
the intention that our transfers of the receivables
will have the benefit of this rule. If the FDIC were to
assert that the rule does not apply to these transfers
of receivables, however, payments of principal and
interest on your notes could be delayed and, if the
FDIC were successful, possibly reduced. Furthermore, if
the FDIC were successful, the FDIC could--
. require the indenture trustee to go through the
administrative claims procedure established by the
FDIC in order to obtain payments on the notes;
. obtain a stay of any actions by the indenture trustee
to enforce the transaction documents against us; or
. repudiate the transaction documents and limit the
affected parties' claims to their "actual direct
compensatory damages" (as defined in the statute that
governs the FDIC's authority and actions as a
receiver or conservator).
3
If the FDIC were to successfully take any of these
actions, the amount payable to you could be lower than
the outstanding principal and accrued interest on the
notes, thus resulting in losses to you.
If a conservator or receiver were appointed for us,
an early payment of principal on all outstanding series
could result. Under the terms of the agreement that
governs the transfer of the receivables from us to the
trust, new principal receivables would not be
transferred to the trust. However, the conservator or
the receiver may have the power, regardless of the
terms of that agreement, to prevent the early payment
of principal or to require new principal receivables to
continue being transferred.
In addition, our conservator or receiver may have
the power to prevent either the indenture trustee or
the noteholders from appointing a new servicer.
See "Material Legal Aspects of the Receivables--
Conservatorship and Receivership" in this prospectus.
We may change the terms and conditions of the accounts
in a way that reduces collections.
As owner of the accounts, we retain the right to
change various account terms, including finance
charges, other fees and the required monthly minimum
payment. These changes may be voluntary on our part or
may be forced by law or market conditions. Changes in
interest and fees could decrease the effective yield on
the accounts and this could result in an early payment
of principal of your notes. Changes could also cause a
reduction in the credit ratings on your notes.
Changes to consumer protection laws may impede
collection efforts or reduce collections.
Federal and state consumer protection laws regulate
the creation and enforcement of consumer loans,
including credit card accounts and receivables. Changes
or additions to those regulations could make it more
difficult for the servicer of the receivables to
collect payments on the receivables or reduce the
finance charges and other fees that the originator can
charge on credit card account balances, resulting in
reduced collections.
Receivables that do not comply with consumer
protection laws may not be valid or enforceable under
their terms against the obligors on those receivables.
4
If a cardholder sought protection under federal or
state bankruptcy or debtor relief laws, a court could
reduce or discharge completely the cardholder's
obligations to repay amounts due on its account and, as
a result, the related receivables would be written off
as uncollectible. See "Material Legal Aspects of the
Receivables--Consumer Protection Laws" in this
prospectus.
Limited remedies for breaches of representations could
reduce or delay payments.
When we transfer the receivables to the trust, we
make representations and warranties relating to the
validity and enforceability of the receivables arising
under the accounts designated to the trust, and as to
the perfection and priority of the indenture trustee's
interest in the receivables. However, none of the
trustee for First Consumers Master Trust, the owner
trustee or the indenture trustee will make any
examination of the receivables or the related assets to
determine the presence of defects or compliance with
the representations and warranties or for any other
purpose.
A representation or warranty relating to the
receivables may be violated if the related obligors
have defenses to payment or offset rights, or our
creditors claim rights to the trust assets. If a
representation or warranty is violated, we may have an
opportunity to cure the violation. If we are unable to
cure the violation within the specified time period or
if there is no right to cure the violation, we must
accept reassignment of the receivables affected by the
violation. These reassignments are the only remedy for
breaches of representations and warranties, even if
your damages exceed your share of the reassignment
price. See "Description of the Notes--Representations
and Warranties" in this prospectus.
Payment patterns of receivables could reduce
collections.
The receivables transferred to the trust may be
paid at any time. We cannot assure the creation of
additional receivables in the accounts designated to
the trust or that any particular pattern of cardholder
payments will occur. A significant decline in the
amount of new receivables generated could result in the
occurrence of a pay out event for one or more series
and the commencement of the rapid amortization period
for each of those series. If a pay out event occurs,
you could receive payment of
5
principal sooner than expected. Our ability to compete
in the current industry environment will affect our
ability to generate new receivables and might also
affect payment patterns on the receivables. In
addition, changes in finance charges can alter the
monthly payment rates of cardholders. A significant
decrease in monthly payment rates could slow the return
or accumulation of principal during an amortization
period or accumulation period. See "Maturity
Considerations" in the accompanying prospectus
supplement.
Allocations of charged-off receivables or uncovered
dilution could reduce payments to you.
As servicer, we will write off the receivables
arising in accounts designated to the trust if the
receivables become uncollectible. Your series will be
allocated a portion of these charged-off receivables.
See "Description of Series Provisions--Allocation
Percentages" and "--Investor Charge-Offs" in the
accompanying prospectus supplement. Unlike charged-off
receivables, reductions in the receivables due to
returns of merchandise, unauthorized charges and the
like, called dilution, are typically absorbed by
reductions in our interest in the trust or reimbursed
by us through cash deposits to the excess funding
account and are not intended to be allocated to
investors. However, to the extent our interest is
insufficient to cover dilution for any calendar month
and we then default in our obligation to compensate the
trust for these reductions, your series will be
allocated a portion of the uncovered dilution. If the
amount of charged-off receivables and any uncovered
dilution allocated to your series of notes exceeds the
amount of funds available to reimburse those amounts,
you may not receive the full amount of principal and
interest due to you. See "Description of Series
Provisions--Investor Charge-Offs" in the accompanying
prospectus supplement and "Description of the Notes--
Defaulted Receivables; Dilution; Investor Charge-Offs"
in this prospectus.
Subordinated classes bear losses before senior classes.
One or more classes of notes in a series may be
subordinated to one or more senior classes of notes in
the same series. Principal allocations to the
subordinated class or classes may not begin until each
of the more senior classes has been paid in full.
Additionally, if collections of finance charge
receivables allocated to a series are insufficient to
cover amounts due for that series' senior notes or to
reimburse for that series' share of charged-off
6
receivables, the collateral amount for the series might
be reduced. This would reduce the amount of finance
charge collections available to the subordinated notes
in future periods and could cause a possible delay or
reduction in principal and interest payments on the
subordinated notes.
Recharacterization of principal receivables would
reduce principal receivables and may require addition
of new receivables.
As described under "Description of the Notes--
Discount Option," we may designate a percentage of the
receivables that would otherwise be treated as
principal receivables to be treated as finance charge
receivables. This designation should decrease the
likelihood of a pay out event occurring as a result of
a reduction of the average net portfolio yield for a
given period. However, this designation will also
reduce the aggregate amount of principal receivables,
which may increase the likelihood that we will be
required to add receivables to the trust. If we were
unable to add receivables and could not make a
sufficient cash deposit into the excess funding
account, one or more series of notes, including your
series, could go into rapid amortization.
The note interest rate and the receivables interest
rate may re-set at different times, resulting in
reduced or early payments to you.
The accounts currently have finance charges
assessed at a variable rate. A series of notes may bear
interest either at a fixed rate or at a floating rate
based on a different index. If the interest rate
charged on the accounts declines, collections of
finance charge receivables may be reduced without a
corresponding reduction in the amounts of interest
payable on your notes and other amounts required to be
paid out of collections of finance charge receivables.
If the interest rate on the accounts declines or the
interest rate on a series increases, this could
decrease the spread, or difference, between collections
of finance charge receivables and those collections
allocated to make interest payments on your notes. This
would increase the risk of early repayment of your
notes, as well as the risk that there may not be
sufficient collections to make all required payments on
your notes.
Competition in the bank credit card industry could
impair our ability to generate new receivables.
The credit card industry is highly competitive and
operates in a legal and regulatory environment
increasingly focused on the
7
cost of services charged for credit cards. There is
increased use of advertising, target marketing and
pricing competition. New credit card issuers seek to
expand or enter the market, including the secured card
segment of the market which has previously been a
significant focus of ours. Congress and the states may
enact new laws and amendments to existing laws to
regulate further the credit card industry or to reduce
finance charges or other fees or charges applicable to
credit card accounts. In addition, certain credit card
issuers assess periodic finance charges or other fees
or charges at rates lower than the rate currently being
assessed on most of the accounts.
We currently issue the FCNB Preferred Charge credit
card for use by customers of Spiegel's retailing
subsidiaries, and we may solicit our MasterCard and/or
VISA cardholders to open FCNB Preferred Charge accounts
or other revolving credit card accounts which may offer
certain benefits not available under the accounts. If
cardholders choose to utilize these or other competing
sources of credit, the rate at which new receivables
are generated in the accounts may be reduced and
certain purchase and payment patterns with respect to
receivables may be affected. The trust will be
dependent upon our continued ability to generate new
receivables. If the rate at which new receivables are
generated declines significantly and we do not add
additional accounts to the trust, a pay out event could
occur.
Reliance on co-branding may reduce portfolio yield.
Over the last several years, the proportion of our
bank card accounts originated from the issuance of
credit cards co-branded with Spiegel Catalog and Eddie
Bauer has increased. This has had the effect of
reducing the rate of interest earned on our portfolio,
as well as reducing the rate of charge-offs experienced
by the portfolio, since the interest rate and the
charge-offs are both lower in this segment of our
portfolio. Our co-branding programs with Spiegel
Catalog and Eddie Bauer are expected to play a
significant part in the origination of our MasterCard
accounts. Eddie Bauer has experienced sales declines in
recent months. If such declines were to continue, it
could have a material adverse effect on such co-branded
account originations. Although the Spiegel Catalog and
Eddie Bauer co-branded programs have been important in
generating new receivables, there can be no assurance
that this will continue to be the case.
8
Secured card and related programs may affect portfolio
yield.
The cardholders in our secured card and certain
other of our credit card programs are generally
individuals who have a low income level and/or a
limited or adverse credit history but who nevertheless
fit within the parameters for our credit card programs
indicating a probability that, notwithstanding such
characteristics (and taking into account any deposit
securing obligations under the account), the customer
is a reasonable, although higher, credit risk. The
benefit to us in dealing with such higher risk
cardholders is that they are typically willing to pay a
relatively high annual percentage rate of interest and
annual fee for their credit card privileges. The risk
to holders of the notes is that the default rate for
such customers will also be relatively high.
In addition, if the FDIC were appointed as our
receiver or conservator, there could be delays in
realizing on the collateral for secured accounts, which
could result in delays or reductions in payments on the
notes.
This prospectus uses defined terms. You can find a
glossary of terms under the caption "Glossary of Terms
for Prospectus" beginning on page 78 in this
prospectus.
9
IMPORTANT PARTIES
The Issuer
The issuer of your notes will be First Consumers Credit Card Master Note
Trust. The issuer will be a common law trust created under the laws of the
State of Illinois. It will be operated under a trust agreement, dated as of
March 1, 2001, between us and Bankers Trust Company, as owner trustee.
The activities of the issuer are limited to:
. acquiring, owning and managing the trust assets and the proceeds of
those assets;
. issuing and making payments on the notes; and
. engaging in related activities.
The issuer's principal offices are in New York, in care of Bankers Trust
Company, as owner trustee, at the following address: 4 Albany Street, 10th
Floor, New York, New York 10006, Attention: Structured Finance Group.
We will pay the fees of the owner trustee and will reimburse it for various
liabilities and expenses.
First Consumers Master Trust
The notes are secured by a beneficial interest in a pool of receivables
that arise under MasterCard and VISA credit card accounts that we own and
designate as trust accounts. The receivables are currently held by First
Consumers Master Trust, an Illinois common law trust formed by us in September
1992 to securitize a portion of our MasterCard and VISA credit card
receivables. First Consumers Master Trust is operated under a pooling and
servicing agreement, amended and restated in February 1999, among us, as seller
and servicer, and The Bank of New York, as trustee.
First Consumers Master Trust has issued a collateral certificate to us that
represents a beneficial interest in the receivables. We have transferred this
collateral certificate to the issuer under a transfer and servicing agreement
between us, as seller and servicer, and the issuer. The other outstanding
series of investor certificates issued by First Consumers Master Trust and the
notes are referred to in this prospectus, collectively, as the securities, and
the holders of those securities are referred to as the securityholders. After
all the outstanding series of investor certificates issued by First Consumers
Master Trust are retired, we may cause First Consumers Master Trust to
terminate, at which time the receivables will be transferred to the issuer
under the transfer and servicing agreement and held directly by the issuer.
First Consumers National Bank
We are headquartered in Beaverton, Oregon, which is a suburb of Portland.
We were organized as a national banking association on December 12, 1988, and
operate as a "credit card bank." We were acquired by Spiegel on November 1,
1990. As a credit card bank, our
10
activities are limited primarily to the issuance of credit cards. We issue
MasterCard and VISA credit cards, as well as private label cards for purchases
from Spiegel's retail subsidiaries and other retailers. The receivables in the
trust arise under our MasterCard and VISA credit cards, which we refer to as
"bank cards." We continue to service the receivables that are transferred to
the trust.
Also, in our capacity as administrator under the administration agreement,
dated as of March 1, 2001, between us and the issuer, we will provide the
notices and perform on behalf of the issuer other administrative obligations
required by the transfer and servicing agreement, the indenture and the
indenture supplement for each series, and will be compensated for acting as the
administrator.
We are regulated, supervised, and examined by the Office of the Comptroller
of the Currency.
Spiegel, Inc. and its Retail Subsidiaries
Though not a party to the agreements governing the notes, the trust, the
issuer or the accounts, Spiegel is our parent corporation. Spiegel is a leading
international specialty retailer that offers merchandise through its
subsidiaries, including Eddie Bauer, Inc., Newport News, Inc. and Spiegel
Catalog, Inc. Spiegel's retail subsidiaries distribute apparel, household
furnishings and other merchandise through catalogs, Internet sites and retail
stores.
Spiegel and its predecessors date from 1865. Spiegel has operated as a
catalog merchandiser since 1905 and was incorporated in Delaware in 1965. In
1988, Spiegel acquired Eddie Bauer. In August 1993, Spiegel acquired
substantially all of the assets of Newport News, which was formerly named New
Hampton, Inc. until 1995.
The retail businesses of Spiegel Catalog, Eddie Bauer and Newport News are
described under "Spiegel's Retail Operations" in the accompanying prospectus
supplement.
11
OUR BANK CARD ACTIVITIES
We participate in both the MasterCard International and VISA U.S.A. Inc.
credit card systems. MasterCard and VISA credit cards are issued as part of the
worldwide MasterCard and VISA systems, respectively, and transactions creating
the receivables through the use of the credit cards are processed through the
MasterCard and VISA authorization and settlement systems. We began offering
MasterCard products in 1988 and began offering VISA products in July 1998.
We offer two types of bank cards to our customers: unsecured and secured
credit cards. Unsecured cards are either marketed on a co-branded basis to
certain customers of Spiegel Catalog and Eddie Bauer, or marketed to selected
affinity niches. Unsecured bank card products include the Eddie Bauer
MasterCard and the Spiegel MasterCard. Both the Spiegel MasterCard and Eddie
Bauer MasterCard offer a reward program. In some cases, the Spiegel MasterCard
also features a 10% discount on the first purchase. Costs of the reward
programs are paid by Spiegel Catalog and Eddie Bauer.
Secured cards require a cardholder to secure his or her line of credit with
a savings or time deposit with us in a minimum amount of $100. Approved
applicants typically receive a credit limit ranging from 100% to 300% of the
amount deposited, with the maximum unsecured portion of the credit limit
initially restricted to $2,500. Occasionally a credit limit of up to 500% is
used on a test basis. Customers earn interest on their deposits. While our
prior practice was to require customers to purchase certificates of deposit at
a third-party bank in order to secure lines of credit, this practice was
changed effective November 6, 1998 in light of legislation allowing us to hold
these types of customer deposits. We purchased the existing collateral deposit
liabilities of our secured card customers and transferred those deposits into
our savings accounts. We currently require that all new secured card customer
deposits be established with us as savings accounts.
Both secured and unsecured cards may be used to purchase goods and services
from Spiegel group retail subsidiaries or unaffiliated companies that accept
MasterCard or VISA, and to obtain cash advances within limits. We market
secured and unsecured bank cards on a nationwide basis through our Beaverton
headquarters office.
In addition to our bank cards, we issue three basic versions--one for each
of the merchandising subsidiaries of Spiegel--of the FCNB Preferred Charge
card, a private label card which may be used to purchase all types of goods or
services offered in Spiegel Catalog catalogs, and Ultimate Outlet stores, as
well as goods offered in Eddie Bauer catalogs and outlet stores and in Newport
News catalogs and outlet stores. We also issue private label retail cards for
other unaffiliated retailers.
Currently, all of our bank card receivables are included in the trust,
other than a portfolio of about $20 million that we recently purchased. This
has been the case since formation of the First Consumers Master Trust in 1992.
Preferred Charge receivables are not eligible for inclusion in the trust.
12
Origination
Our marketing operations are centralized in our Beaverton, Oregon
headquarters facility, with bank card originations varying based on whether the
bank card is a secured card or an unsecured card.
Our largest sources of new account openings for our secured cards are
direct mail and television advertising. Potential cardholders typically express
interest by responding by toll-free call to a number listed in our
advertisements and are then sent an application to complete and return with
their check or money order. In addition to advertising, we actively solicit
secured bank card customers through pre-approved card acquisition campaigns.
The names and addresses of prospective cardholders are acquired through credit
bureau extracts targeted to groups satisfying specific demographics. We also
take advantage of Spiegel's substantial marketing database by targeting
selected names that are declined for the FCNB Preferred Card product. This
strategy captures potential customers that would find utility in our secured
bank card product, while not cannibalizing the FCNB Preferred Card customer
base. A smaller channel of origination for secured bank cards is the offering
of "take-ones," available at distributor partners with affiliations to
customers who meet our target bank card demographics.
The majority of our new unsecured bank cards are issued as the result of
pre-approved solicitations. In particular, many of our MasterCard products
issued on a co-branded basis with Spiegel Catalog or Eddie Bauer are sourced
from the marketing files of these companies by identifying both inactive FCNB
Preferred Card customers as well as those FCNB Preferred Card prospects who
declined a FCNB Preferred Card. Pre-approved bank card applications are then
attached to catalog mailings or mailed as stand-alone offers to these bank card
prospects. We also solicit customers for unsecured credit who demonstrate
characteristics that we believe from our experience with secured card customers
will produce targeted performance on an unsecured basis. Finally, a small
number of applications for the Eddie Bauer MasterCard product are sourced via
"take-ones" in Eddie Bauer retail locations, and via Eddie Bauer's internet
website.
We are open to the opportunity to acquire one or more existing credit card
portfolios that would be included as part of the bank card program.
Credit Granting Procedures
Since early 1989, credit underwriting standards for FCNB's bank card
accounts have been revised periodically so as to improve the overall
performance of the FCNB bank card portfolio.
For the unsecured card, a credit bureau risk score and/or income and other
credit characteristics are used for determining whether an applicant is
accepted or declined. Adjustments to the scorecard and risk score cutoffs have
been made from time to time to continually improve performance. Behavioral
scores from the FCNB Preferred Card database (if available) are also used in
assessing applicants. Applicants with a no-file and inquiry-only
13
type bureau report are declined. There is also a minimum annual income
requirement of $12,000 and a minimum age requirement of 18. Before an unsecured
bank card application is approved, a credit bureau report is ordered to verify
that there has been no deterioration in applicant creditworthiness since the
bank card application was first sent out.
For secured card applicants, we use an empirically-derived scorecard
developed from our customer history to determine acceptance or rejection.
Serious derogatory ratings within the last 6 months or unrealized Federal tax
liens are reasons for decline. Bankruptcy, if discharged, will not cause
rejection. The $12,000 minimum annual income requirement and the 18-year
minimum age requirement also apply. Before a secured bank card application is
approved, a credit bureau report is ordered to verify that there has been no
deterioration in applicant creditworthiness since the bank card application was
first sent out.
The credit scoring model we use when processing bank card applications is
based on the same criteria as pre-approved offers, and our proprietary credit
scoring models are continually revalidated. Each of the models evaluates a
variety of factors. Although the relative importance of these factors varies
among models, the following factors currently contribute the most to the credit
score:
. performance with other creditors,
. number of references on credit file,
. length of time on credit file,
. utilization of credit lines with other creditors,
. types of trade lines,
. total amount of available credit,
. recent inquiries into credit file, and
. payment performance on other trade lines.
A small portion of total applications processed through the internal
scoring model are routed by the system for manual verification handling. These
applications are so routed due to credit bureau alert messages, name or address
variations between applications and credit reports or an existing credit line
from the bank listed on the report. Only applications meeting the final credit
score requirement are referred for verification procedures. Once applications
are referred, they are approved only upon successful verification of the
information in question.
The approval process for both the secured and unsecured bank cards is
automated. No manual overrides are allowed, thus reducing the potential for
human error.
We assign a credit limit to each bank card assigned based on the
applicant's credit score, income or type of account. We review credit limits on
existing accounts at least monthly, and credit line increases, or decreases (if
appropriate), are considered using adaptive control software. This software
uses a behavioral score in its analysis and includes a
14
credit bureau score component as well. The behavioral score used in the
decision process is updated at least monthly, while the credit bureau score is
refreshed at least once every four months. Credit lines are then adjusted
accordingly, if necessary. The software also performs ongoing authorizations.
If a purchase causes greater than a 10% overlimit, then the account is flagged
for collections review. We screen for fraud on the front end of the credit
process, at approval. We rely on various tools, including First Data Resources'
fraud referral criteria, credit bureau alerts and our own internally developed
fraud screens. On an ongoing basis, the adaptive control software flags
aberrant behavior as it considers authorizations. For example, large purchases
or large payments will be flagged, and no overlimit amount authorized until
appropriate verifications have been completed.
New purchases for existing accounts must fall within the authorized credit
limit plus an approval buffer determined by behavior scores and a set of
strategies, collectively referred to as "adaptive control software." All
existing account authorizations are approved if the account is in good credit
standing and the resulting balance is within the credit limit and the approval
buffer. The vast majority of existing account authorizations are handled by our
system logic without manual interruption.
Each accountholder is subject to an agreement governing the terms and
conditions of the account. Each of these agreements permits us to change or
terminate any terms, conditions, services or features of the account, including
increasing or decreasing finance charges, other charges or minimum payments.
We may change our credit standards or screening criteria and methods at any
time.
Billing and Payments
We assess finance charges on an account based upon the average daily
balance outstanding on the account during a monthly billing cycle. If a payment
is not received by the payment due date, a finance charge is imposed on all
purchases from the date of the transaction to the date of repayment. A finance
charge is imposed on each cash advance from the day that advance is made. The
finance charge is currently assessed at an annual variable percentage rate
subject to a floor of between 14.9% and 20.5%, depending on the product.
However, unsecured accounts under the Eddie Bauer and Spiegel Catalog co-
branding arrangements receive introductory fixed rates ranging from 6.9% to
9.9%.
The finance charge is applied to the average daily balance, which is the
sum of the daily unpaid balances of purchases and cash advances, finance
charges and fees on each day of the cycle divided by the number of days in the
cycle. Daily unpaid balances are determined by deducting payments and credits
and by adding new purchases, cash advances and other charges, in each case, as
of the date of the transaction. A $.50 minimum finance charge is imposed for
any billing cycle in which a finance charge of less than $.50 would otherwise
be imposed. Accountholders are given a grace period averaging 30 days from the
closing date of the cycle to the payment due date. If the entire balance on the
account is paid during the grace period, a finance charge is not imposed.
15
Currently accountholders must make a minimum monthly payment equal to the
greater of 2.5% of the outstanding balance and $10.00. Payments are applied
first to miscellaneous charges or fees, then to finance charges and then to
purchases in the order made, and last to cash advances in the order made.
Annual fees for unsecured bank cards range from none for the Eddie Bauer
and Spiegel Catalog co-branded cards to $60. Annual fees for secured bank cards
range from none to $48, with $39 being the standard fee. Other fee revenue
results from over limit charges, late charges, returned check fees, $35 each,
and reinstatement charges, all as provided in the applicable cardholder
agreement.
Credit card issuers participating in the MasterCard International, Inc. and
VISA USA, Inc. systems receive certain fees, called "interchange," as partial
compensation for taking credit risk, absorbing fraud losses and funding
receivables for a limited period prior to initial billing. Under the MasterCard
and VISA systems, a portion of this interchange in connection with cardholder
charges for merchandise and services is passed from banks which clear the
transactions for merchants to credit card-issuing banks. Interchange fees range
from approximately 1% to 4% of the transaction amount, and are set annually by
MasterCard and VISA based on the number of credit card transactions and the
amount charged per transaction. We transfer to the trust all interchange
allocated to the accounts in the trust, and treat the interchange like finance
charge collections.
Delinquency and Collections
Our collection centers for the bank card portfolio are located in
Beaverton, Oregon and Trevose, Pennsylvania. Generally the Trevose collection
center services accounts with billing addresses in the eastern half of the
United States, with the remaining accounts serviced from the Beaverton
collection center. Both collection centers are capable of collecting on
accounts with any billing address and delinquent accounts can be routed to
either site in the case of heavy call volume or a natural disaster at one
collection center.
We classify an account as delinquent when the minimum payment due on the
account is not received by the payment due date specified in the cardholder's
billing statement. Our collections staff is segregated into five separate
collection departments, each of which is made up of six queues based on
severity of delinquency. The collections staff initiates collection efforts as
early as the third day of delinquency if no contact has been made through the
autodialer as discussed below. Accounts are placed in the collection office at
various levels of delinquency, with all accounts being placed no later than 60
days after the first payment is missed. The majority of accounts are placed
within the first 30 days of a missed payment. We use behavioral scoring of all
accounts to adjust our collection efforts based on the potential risk of an
account and the dollars at risk. Collection efforts escalate in intensity as an
account cycles into a more advanced delinquency category.
Our collection strategy begins with an early delinquency calling program
using state of the art technology that includes predictive dialing for accounts
that are up to two payments past due. Statement messaging and automatic letter
dunning are also used on delinquent
16
accounts up to two payments past due. Accounts which are placed in the
collections office are assigned to specific members of our collections staff
for accelerated collection efforts, including demands for balance in full,
correspondence from one or more of the national credit bureaus describing the
impact that the delinquent credit obligation has on the cardholder's credit
history and preparatory actions to place accounts with attorneys for legal
action. We also outsource a portion of pre-charge-off accounts to external
collection agencies for resolution.
Additional purchases are not permitted to be charged to accounts which are
two or more payments past due. Accounts can be reinstated after six months if
no bankruptcy has occurred, the customer pays as agreed and after payment of a
reinstatement fee.
For secured accounts, an order to liquidate the related security deposit is
made when the account is between 90-120 days past due. Secured accounts are
permanently closed at 90 days past due.
We recognize losses when a customer's account becomes six months past due.
This practice is mandated by the OCC, our primary regulator. Charge-offs may be
recognized earlier in some circumstances, including bankruptcy, deceased
customers, accounts determined to be fraudulent and settlement of dispute. We
outsource collections for charged-off accounts to third-party collection agents
based on where the defaulted accountholder resides. Once outsourced to a third-
party collector, the charged-off account may be sent to a second or third
additional collection agency until resolution. We review all collection
agencies on a six month audit cycle, and the results of the agencies in each
region are compared against each other.
Our credit evaluation, servicing and charge-off policies and collection
practices may change at any time as dictated by our business judgment and
applicable law.
Customer Service and Account Management
An automated voice response unit at our headquarters in Beaverton handles a
substantial percentage of incoming calls and enables accountholders to receive
account information 24 hours a day, including balance, payment and credit
information, and request documents without having to speak with a customer
service representative.
We review accounts for potential credit line increases every three to six
months. All credit line increases are automated except that sometimes a manual
credit limit increase is granted if the customer will qualify for an automated
credit line increase during the next two months. Using adaptive control
software, we are able to identify accountholders who have demonstrated good
payment history and high usage patterns. The amount of the credit line
increases depends on the score assigned by the adaptive control software,
available credit bureau information and the type of account.
17
Description of First Data Resources
First Data Resources, Inc. provides new account processing, account
management, billing and new card production for us. We believe that this
relationship with First Data Resources allows us to achieve operational
efficiencies while remaining flexible enough to handle additional growth. If
First Data Resources were to fail to perform its services for us or become
insolvent, delays in processing could occur, and the replacement of the
services First Data Resources currently provides to us could be time consuming.
First Data Resources provides computer data processing services primarily
to the bank card industry. First Data Resources is a subsidiary of First Data
Corp.
THE TRUST PORTFOLIO
We refer to the accounts that have been designated as trust accounts as the
trust portfolio. References to the trustee in this prospectus will refer to (a)
The Bank of New York, as trustee of First Consumers Master Trust under the
pooling and servicing agreement for so long as First Consumers Master Trust
holds the receivables, or (b) The Bank of New York, as indenture trustee, if
the issuer holds the receivables.
In addition to the receivables in the trust portfolio, the notes will be
secured by:
. interchange;
. all proceeds of these receivables and related recoveries;
. all proceeds of any credit insurance policies relating to these
receivables;
. all monies on deposit in specified trust accounts or investments made
with these monies, including any earned investment proceeds if the
prospectus supplement for your series of notes so indicates;
. proceeds of any credit enhancement or derivative contracts, consisting
of interest rate swaps, currency swaps, credit swaps, interest rate caps
or bankruptcy options, which are instruments under which a counterparty
assumes the risk of an increase in bankruptcies in exchange for payment,
as described in the prospectus supplement for your series of notes.
Receivables in the trust consist of:
. principal receivables, which are amounts charged by trust account
cardholders for goods and services and cash advances; and
. finance charge receivables, which are periodic finance charges,
interchange and other amounts charged to trust accounts, including late
fees, over limit fees, NSF fees, cash advance fees and annual fees.
We currently designate all newly created eligible bank card accounts to the
trust as they arise and we expect to continue to do so. However, our right to
automatically add all additional eligible bank card accounts to the trust as
they arise is subject to the quantitative
18
limitations described in "Description of the Notes--Addition of Trust Assets"
in this prospectus. We may also elect to stop designating all new accounts to
the trust. If we do so, we have the right, and in some cases the obligation, to
designate from time to time additional eligible accounts to the trust portfolio
and to convey to the trust all receivables in those additional accounts,
whether those receivables are then existing or thereafter created.
The accounts must be Eligible Accounts as of the date we designate them as
additional accounts. Once these accounts are designated, only the receivables
arising under these accounts, and not the accounts themselves, are sold. In
addition, as of the date on which any new receivables are created, we will
represent and warrant to the trust that the receivables conveyed to the trust
on that day are Eligible Receivables. However, we cannot guarantee that all the
accounts will continue to meet the applicable eligibility requirements
throughout the life of the trust.
Under some circumstances, we may also designate that some accounts will no
longer be trust accounts, and the receivables originated under these accounts
will be removed from the trust. Throughout the term of the trust, the trust
portfolio will consist of receivables originated in the initial accounts plus
receivables originated in any additional accounts and minus receivables
originated in any removed accounts.
We can designate accounts to the trust that are different from the current
accounts, if the rating agencies for each outstanding series of securities
confirm that doing so will not impair their ratings of any outstanding
securities. There can be no assurance that additional accounts will be of the
same credit quality as the initial accounts. Moreover, additional accounts may
contain receivables which consist of fees, charges and amounts which are
different from the fees, charges and amounts described in this prospectus.
Additional accounts may also have different credit guidelines, balances and
ages. Consequently, there can be no assurance that the accounts will continue
to have the characteristics described in this prospectus as additional accounts
are added. In addition, if we designate additional accounts with lower periodic
finance charges, that may have the effect of reducing the portfolio yield.
The prospectus supplement relating to each series of notes will provide the
following information about the trust portfolio as of the date specified:
. the amount of principal receivables;
. the amount of finance charge receivables;
. the range and average of principal balances of the accounts;
. the range and average of credit limits of the accounts;
. the range and average of ages of the accounts;
. the geographic distribution of the accounts; and
. delinquency statistics relating to the accounts.
19
USE OF PROCEEDS
We will receive the net proceeds from the sale of each series of notes
offered by this prospectus and will use those proceeds (a) to retire existing
series of investor certificates, and (b) for general corporate purposes.
DESCRIPTION OF THE NOTES
The issuer will issue one or more series of notes under a master indenture
and an indenture supplement entered into by the issuer and the indenture
trustee. The following summaries describe all material provisions common to
each series of notes. The accompanying prospectus supplement gives you all of
the additional material terms specific to the notes of your series. The
summaries are qualified by all of the provisions of the transfer and servicing
agreement, the indenture and the related indenture supplement and the pooling
and servicing agreement. We have filed a copy of the pooling and servicing
agreement for First Consumers Master Trust and a form of each of the transfer
and servicing agreement, the indenture and an indenture supplement with the SEC
as exhibits to the registration statement relating to the notes.
General
The notes will be secured by and paid from the assets of the issuer. The
amount of collateral allocated for any series of notes, called its collateral
amount, will be specified in the related prospectus supplement. Each series of
notes will be allocated collections of principal receivables and finance
receivables based on its allocation percentage, which will be based on the
collateral amount for that series and will be calculated as described in the
related prospectus supplement.
Each series of notes may consist of one or more classes, one or more of
which may be senior notes and one or more of which may be subordinated notes.
Each class of a series will evidence the right to receive a specified portion
of each distribution of principal or interest or both. Each class of a series
may differ from other classes in some aspects, including:
. amounts allocated to principal payments;
. maturity date;
. interest rate; and
. availability and amount of enhancement.
We or our assigns will have the right to receive all cash flows from the
assets of the trust not required to make payments on the securities or to make
payments to credit enhancement providers for any series of securities. Our
interest is called the seller interest and is an amount equal to the Seller
Amount.
20
During the revolving period, the amount of collateral for a series will
remain constant unless reduced on account of:
. defaulted receivables or dilution; or
. reallocation of principal collections to cover shortfalls in the payment
of interest or other specified amounts to be paid from finance charge
collections.
See "--Defaulted Receivables; Dilution; Investor Charge-Offs" in this
prospectus. The amount of principal receivables in the trust, however, will
vary each day as new principal receivables are created and others are paid.
The Seller Amount will fluctuate each day to reflect the changes in the amount
of the principal receivables in the trust. When a series is amortizing, the
collateral amount of that series will decline as customer payments of
principal receivables are collected and distributed, or accumulated for
distribution, to the noteholders. As a result, the Seller Amount will
generally increase to reflect reductions in the collateral amount for that
series and will also change to reflect the variations in the amount of
principal receivables in the trust. The Seller Amount may also be reduced as
the result of new issuances by the issuer, see "--New Issuances" in this
prospectus, or new issuances of investor certificates by First Consumers
Master Trust, see "Pooling and Servicing Agreement--New Issuances of Investor
Certificates" in this prospectus.
Generally, notes offered under this prospectus and the accompanying
prospectus supplement:
. will be represented by notes registered in the name of a DTC nominee;
. will be available for purchase in minimum denominations of $1,000 and
multiples of $1,000 in excess of that amount; and
. will be available for purchase in book-entry form only.
The accompanying prospectus supplement will specify if your notes have
different characteristics from those listed above.
DTC has informed us that its nominee will be Cede & Co. Accordingly, Cede
& Co. is expected to be the holder of record of each series of notes. As an
owner of beneficial interests in the notes, you will generally not be entitled
to a definitive note representing your interest in the issued notes because
you will own notes through a book-entry record maintained by DTC. References
in this prospectus and the accompanying prospectus supplement to
distributions, reports, notices and statements to noteholders refer to DTC or
Cede & Co., as registered holder of the notes, for distribution to you in
accordance with DTC procedures. All references in this prospectus and the
accompanying prospectus supplement to actions by noteholders shall refer to
actions taken by DTC upon instructions from DTC participants.
The accompanying prospectus supplement may state that application will be
made to list your series or class of notes on the Luxembourg Stock Exchange or
another exchange.
21
Book-Entry Registration
Following is a description of the form your notes will take. We also
describe how your notes may be transferred and how payments will be made to
you.
The information in this section concerning DTC and DTC's book-entry system
has been provided by DTC. We have not independently verified the accuracy of
this information.
You may hold your notes through DTC in the U.S., Clearstream or Euroclear
in Europe or in any other manner described in the accompanying prospectus
supplement. You may hold your notes directly with one of these systems if you
are a participant in the system, or indirectly through organizations which are
participants.
Cede & Co., as nominee for DTC, will hold the global notes. Clearstream and
Euroclear will hold omnibus positions on behalf of the Clearstream customers
and the Euroclear participants, respectively, through customers' securities
accounts in Clearstream's and Euroclear's names on the books of their
respective depositaries, which in turn will hold those positions in customers'
securities accounts in the depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include other organizations.
Participants also may include the underwriters of any series. Indirect access
to the DTC system also is available to others, including banks, brokers,
dealers and trust companies, as indirect participants, that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream customers 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 Clearstream
customers or Euroclear participants, on the other, will be effected through DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary; however, those cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in that system in accordance with its rules
and procedures and within its established deadlines, which will be based on
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
22
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Clearstream customers and Euroclear participants
may not deliver instructions directly to Clearstream's and Euroclear's
depositaries.
Because of time-zone differences, credits of securities in Clearstream or
Euroclear as a result of a transaction with a participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and those credits or any transactions in
those securities settled during that processing will be reported to the
relevant Clearstream customer or Euroclear participant on that business day.
Cash received in Clearstream or Euroclear as a result of sales of securities by
or through a Clearstream customer 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 Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
Note owners that are not participants or indirect participants but desire
to purchase, sell or otherwise transfer ownership of, or other interest in,
notes may do so only through participants and indirect participants. In
addition, note owners will receive all distributions of principal of and
interest on the notes from the indenture trustee through the participants who
in turn will receive them from DTC. Under a book-entry format, note owners may
experience some delay in their receipt of payments, since payments will be
forwarded by the indenture trustee to Cede & Co., as nominee for DTC. DTC will
forward those payments to its participants, which thereafter will forward them
to indirect participants or note owners. It is anticipated that the only
"noteholder" will be Cede & Co., as nominee of DTC. Note owners will not be
recognized by the indenture trustee as noteholders, as that term is used in the
indenture, and note owners will only be permitted to exercise the rights of
noteholders indirectly through the participants who in turn will exercise the
rights of noteholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among participants
on whose behalf it acts with respect to the notes and is required to receive
and transmit distributions of principal and interest on the notes. Participants
and indirect participants with which note owners have accounts with respect to
the notes similarly are required to make book-entry transfers and receive and
transmit those payments on behalf of their respective note owners. Accordingly,
although note owners will not possess notes, note owners will receive payments
and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of a note owner
to pledge notes to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of those notes, may be limited due
to the lack of a physical certificate for those notes.
DTC has advised us that it will take any action permitted to be taken by a
noteholder under the indenture only at the direction of one or more
participants to whose account with DTC the notes are credited. Additionally,
DTC has advised us that it will take those actions
23
with respect to specified percentages of the collateral amount only at the
direction of and on behalf of participants whose holdings include interests
that satisfy those specified percentages. DTC may take conflicting actions with
respect to other interests to the extent that those actions are taken on behalf
of participants whose holdings include those interests.
Clearstream is incorporated under the laws of Luxembourg. Clearstream holds
securities for its customers and facilitates the clearance and settlement of
securities transactions between Clearstream customers through electronic book-
entry changes in accounts of Clearstream customers, thereby eliminating the
need for physical movement of notes. Transactions may be settled in Clearstream
in any of 36 currencies, including United States dollars. Clearstream provides
to its Clearstream customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream also deals with domestic
securities markets in over 30 countries through established depository and
custodial relationships. Clearstream is registered as a bank in Luxembourg, and
therefore is subject to regulation by the Commission de Surveillance du Secteur
Financier, which supervises Luxembourg banks. Clearstream's customers are
world-wide financial institutions, including underwriters, securities brokers
and dealers, banks, trust companies and clearing corporations, among others,
and may include the underwriters of any series of notes. Clearstream's U.S.
customers are limited to securities brokers and dealers and banks. Currently,
Clearstream has approximately 2,000 customers located in over 80 countries,
including all major European countries, Canada and the United States. Indirect
access to Clearstream is also available to other institutions that clear
through or maintain a custodial relationship with an account holder of
Clearstream. Clearstream has established an electronic bridge with Euroclear
Bank S.A./N.V. as the operator of the Euroclear System in Brussels to
facilitate settlement of trades between Clearstream and Euroclear.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System 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 notes and any
risk from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 34 currencies, including United States dollars.
The Euroclear System includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Euroclear Bank S.A./N.V.
as the Euroclear operator. All operations are conducted by the Euroclear
operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear operator. Euroclear participants
include central banks and other banks, securities brokers and dealers and other
professional financial intermediaries and may include the underwriters of any
series of notes. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
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. These terms and
conditions govern transfers of
24
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 these
rules and laws only on behalf of Euroclear participants and has no record of or
relationship with persons holding through Euroclear participants.
Distributions with respect to notes held through Clearstream or Euroclear
will be credited to the cash accounts of Clearstream customers or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. Those distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences" in this prospectus.
Clearstream or the Euroclear operator, as the case may be, will take any other
action permitted to be taken by a noteholder under the indenture on behalf of a
Clearstream customer or Euroclear participant only in accordance with its
relevant rules and procedures and subject to its depositary's ability to effect
those actions on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform those procedures and those procedures may be discontinued at any
time.
Definitive Notes
Notes that are initially cleared through DTC will be issued in definitive,
fully registered, certificated form to note owners or their nominees, rather
than to DTC or its nominee, only if:
. the issuer advises the indenture trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as
depository with respect to that series or class of notes, and the
indenture trustee or the issuer is unable to locate a qualified
successor;
. we, at our option, advise the indenture trustee in writing that we elect
to terminate the book-entry system through DTC with respect to that
series or class of notes; or
. after the occurrence of a servicer default, note owners representing
more than 50%--or another percentage specified in the accompanying
prospectus supplement--of the outstanding principal amount of the notes
of that series advise the indenture trustee and DTC through participants
in writing that the continuation of a book-entry system through DTC or a
successor to DTC is no longer in the best interest of the note owners.
If any of these events occur, DTC must notify all participants of the
availability through DTC of definitive notes. Upon surrender by DTC of the
definitive instrument representing the notes and instructions for re-
registration, the issuer will execute and the indenture trustee will
authenticate the notes as definitive notes, and thereafter the indenture
trustee will recognize the registered holders of those definitive notes as
noteholders under the indenture.
25
Distribution of principal and interest on the notes will be made by the
indenture trustee directly to holders of definitive notes in accordance with
the procedures set forth in this prospectus and in the indenture. Interest
payments and any principal payments on each distribution date will be made to
holders in whose names the definitive notes were registered at the close of
business on the related record date. Distributions will be made by check mailed
to the address of the noteholders as it appears on the register maintained by
the indenture trustee. However, the final payment on any note--whether
definitive notes or the notes registered in the name of Cede & Co. representing
the notes--will be made only upon presentation and surrender of that note at
the office or agency specified in the notice of final distribution to
noteholders. The indenture trustee will provide this notice to registered
noteholders not later than the fifth day of the month of the final
distributions.
Definitive notes will be transferable and exchangeable at the offices of
the transfer agent and registrar, which will initially be the indenture
trustee. No service charge will be imposed for any registration of transfer or
exchange, but the issuer and transfer agent and registrar may require payment
of a sum sufficient to cover any tax or other governmental charge imposed in
connection with the transfer or exchange. The transfer agent and registrar will
not be required to register the transfer or exchange of definitive notes for a
period of twenty days preceding the due date for any payment on those
definitive notes.
Interest Payments
Your class of notes will pay interest on the dates and at the interest rate
specified in the accompanying prospectus supplement. The interest rate on any
note may be a fixed, floating or any other type of rate as specified in the
accompanying prospectus supplement. If your notes bear interest at a floating
or variable rate, the accompanying prospectus supplement will describe how that
rate is calculated.
Interest payments or deposits on any distribution date will be funded from:
. collections of finance charge receivables, recoveries of charged off
receivables and interchange allocated to the series during the preceding
monthly period or periods;
. investment earnings, if any, on any funds held in trust accounts, to the
extent described in the accompanying prospectus supplement;
. any credit enhancement or derivative instrument, to the extent described
in the accompanying prospectus supplement; and
. collections of principal receivables treated as collections of finance
charge receivables as described under "--Discount Option," to the extent
described in the accompanying prospectus supplement.
If interest payments will be made less frequently than monthly, an interest
funding account may be established to accumulate the required interest amount.
If a series has more than one class of notes, that series may have more than
one interest funding account.
Principal Payments
Each series will begin with a revolving period during which no principal
payments will be made to the noteholders of that series.
26
The revolving period for each series will be scheduled to end on or no
later than a specified date, at which time a new period will begin during which
principal collections available to that series will be set aside on a daily
basis to repay the series. That new period is called an amortization period if
partial principal payments are made each month and an accumulation period if
the available principal is accumulated for a series over one or more months to
pay off a class in full. If the amount paid or accumulated each month is
limited to some specified figure then the period is called a controlled
amortization period or controlled accumulation period.
However, each series will also be subject to pay out events, which could
cause the revolving period to end earlier than scheduled or could terminate an
existing amortization period or accumulation period. Upon a pay out event, a
rapid amortization period will begin, during which available principal will be
distributed monthly and will not be subject to any controlled amount or
accumulation provision. Finally, a series with an accumulation period may
specify some adverse events as accumulation events, rather than pay out events,
resulting in an early start to an accumulation period or removing any
limitation based on a controlled accumulation amount.
Principal payments for any series or the related class will be funded from
collections of principal receivables allocated to that series or class and from
other sources specified in the accompanying prospectus supplement. In the case
of a series with more than one class of notes, the noteholders of one or more
classes may receive payments of principal at different times. The accompanying
prospectus supplement will describe the manner, timing and priority of payments
of principal to noteholders of each class.
Funds on deposit in any principal accumulation account for a series may be
subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement intended to assure a minimum rate of return on the investment
of those funds if specified in the related prospectus supplement. In order to
enhance the likelihood of the payment in full of the principal amount of a
series or a related class of notes at the end of an accumulation period, that
series or class of notes may be subject to a principal guaranty or other
similar arrangement if specified in the related prospectus supplement.
27
Suspension and Postponement of Controlled Accumulation Period
The prospectus supplement for any series having a controlled accumulation
period will specify the date on which that period is scheduled to commence and
the scheduled length of that period. However, if specified in the prospectus
supplement for any series, upon notice to the indenture trustee, the servicer
may extend the revolving period and postpone the controlled accumulation
period, or may elect to suspend the controlled accumulation, subject to the
conditions described in the third following paragraph and any other conditions
described in the related prospectus supplement.
On each determination date until the controlled accumulation period begins
for any series, the servicer will review the amount of expected principal
collections and determine the number of months expected to be required to fully
fund the principal accumulation account by the related expected principal
payment date for each class of notes in that series. If the number of months
needed to fully fund the principal accumulation account by the related expected
principal payment date for each class is less than the number of months in the
scheduled controlled accumulation period, the servicer may then elect to
postpone the controlled accumulation period. In making its decision, the
servicer is required to assume that the principal payment rate will be no
greater than the lowest monthly principal payment rate for the prior 12 months
and will consider the amount of principal expected to be allocable to
noteholders of all other series and certificateholders of all other series of
investor certificates issued by First Consumers Master Trust, which are
expected to be amortizing or accumulating principal during the controlled
accumulation period for that series. In no case will the controlled
accumulation period for any series be reduced to less than one month.
The method for determining the number of months required to fully fund the
principal accumulation account may be changed if each rating agency confirms
that the change will not impair its rating of any outstanding series or class.
If specified in the prospectus supplement for any series having a
controlled accumulation period, the servicer may also elect to suspend the
controlled accumulation period if it:
. obtains a qualified maturity agreement in which an Eligible Institution
agrees to deposit in the related principal accumulation account on the
expected principal payment date for each class of notes of that series
an amount equal to the outstanding principal amount of those notes as of
their respective expected principal payment dates; and
. delivers an opinion of counsel to the indenture trustee to the effect
that the qualified maturity agreement is enforceable against the
provider of that agreement.
The servicer will pledge to the indenture trustee, for the benefit of the
noteholders of the related series, all right, title and interest in any
qualified maturity agreement.
28
If the servicer obtains a qualified maturity agreement, the servicer will
cause the provider of that agreement to deposit in the principal accumulation
account for the related series or class on or before its expected principal
payment date an amount equal to the outstanding principal amount of that
series or class. However, on the expected principal payment date for any
series or class, we may instead elect to fund all or a portion of the required
deposit from either the proceeds of a new series or collections of principal
receivables and other amounts allocated to that series or class for that
purpose.
A qualified maturity agreement for any series or class will terminate at
the close of business on the related expected principal payment date. However,
(1) the servicer may terminate a qualified maturity agreement earlier
than the expected principal payment date if:
(a) the servicer obtains a substitute qualified maturity
agreement,
(b) the institution providing the qualified maturity agreement
ceases to be an Eligible Institution and the servicer is unable to
obtain a substitute qualified maturity agreement, or
(c) a pay out event occurs for the related series; and
(2) the servicer may terminate a qualified maturity agreement prior to
the later of:
(a) the date on which the controlled accumulation period was
scheduled to begin, before giving effect to the suspension of the
controlled accumulation period, and
(b) the date to which the commencement of the controlled
accumulation period may be postponed, as determined on the
determination date preceding the termination of the qualified maturity
agreement.
If the institution providing a qualified maturity agreement ceases to be
an Eligible Institution, the servicer will use its best efforts to obtain a
substitute qualified maturity agreement, unless the servicer elects to
terminate the qualified maturity agreement and is not required to obtain a
substitute qualified maturity agreement for any of the reasons described in
the preceding paragraph.
If a qualified maturity agreement is terminated prior to the earlier of
the expected principal payment date for the related series or class and the
commencement of the rapid amortization period for that series and the servicer
does not obtain a substitute qualified maturity agreement, the controlled
accumulation period will begin on the latest of:
. the date on which the controlled accumulation period was scheduled to
begin, before giving effect to the suspension of the controlled
accumulation period;
. at the servicer's election, the date to which the controlled
accumulation period may be postponed, as determined on the determination
date preceding the termination of the qualified maturity agreement; and
. the first day of the calendar month following the termination of the
qualified maturity agreement.
29
Transfer and Assignment of Receivables
We have transferred and assigned to the trust the receivables in the
accounts designated as accounts of the trust and future receivables created in
these accounts. In connection with each future transfer of receivables to the
trust, we will indicate in our computer files or books and records that the
receivables have been conveyed to the trust. In addition, we have provided or
caused to be provided to the trustee and the owner trustee computer files or
microfiche lists, containing a true and complete list showing each account,
identified by account number and by total outstanding balance on the date of
transfer. We will not deliver to the trustee or the owner 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 in this
paragraph, the records and agreements that we maintain relating to the accounts
and the receivables are not and will not be segregated 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 transfers described in this
paragraph, but our computer records are and will be required to be marked to
evidence these transfers. We have filed in all appropriate jurisdictions
Uniform Commercial Code financing statements with respect to the receivables
meeting the requirements of applicable law. See "Risk Factors--Some liens would
be given priority over your notes which could cause delayed or reduced
payments" and "Material Legal Aspects of the Receivables" in this prospectus.
New Issuances of Notes
We may cause the owner trustee, on behalf of the issuer, to issue one or
more new series of notes. We will define all principal terms of each new series
in an indenture supplement. Each series issued may have terms and enhancements
that are different than those for any other series. Upon the issuance of an
additional series of notes, neither we nor any of the servicer, the indenture
trustee or the issuer will be required or will intend to obtain the consent of
any noteholder of any other series previously issued by the issuer. We may
offer any series under a prospectus or other disclosure document in
transactions either registered under the Securities Act or exempt from
registration under the Securities Act directly, through one or more other
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise.
Unless First Consumers Master Trust has been terminated, the interests of
all series of notes in the receivables and the other trust assets will be
evidenced by a single global certificate held by the issuer. A new collateral
certificate will be deemed to be issued and evidenced by the global certificate
upon the issuance of each series of notes.
No new series may be issued unless we satisfy various conditions, including
that:
(1) each rating agency confirms that the new issuance will not impair
its rating of any outstanding series or class;
(2) we certify that we reasonably believe, based on the facts known to
the certifying officer, that the new issuance will not:
(a) cause a pay out event or an event of default, or
30
(b) materially and adversely affect the amount or timing of
payments to be made to the noteholders of any series or class;
(3) after giving effect to the new issuance, the Aggregate Principal
Balance is not less than the Minimum Aggregate Principal Balance;
(4) we deliver an opinion of counsel to the effect that, for federal
income tax purposes:
(a) except as otherwise stated in the related indenture
supplement, the notes of the new series will be characterized as debt;
(b) the issuance will not adversely affect the tax
characterization as debt of the notes of any outstanding series or
class that were characterized as debt at the time of their issuance;
(c) the new issuance will not cause the issuer to be deemed to be
an association or publicly traded partnership taxable as a
corporation; and
(d) the new issuance will not cause or constitute an event in
which gain or loss would be recognized by any noteholder; and
(5) unless First Consumers Master Trust has been terminated, all of
the conditions required for it to issue a new series of investor
certificates are satisfied, as described under "Pooling and Servicing
Agreement--New Issuances of Investor Certificates."
Representations and Warranties
As of the date each receivable is transferred to the trust, we represent
to the trust that:
(1) each receivable is an Eligible Receivable;
(2) each receivable has been transferred to the trust free and clear
of any liens, other than liens permitted by the pooling and servicing
agreement and the transfer and servicing agreement, and in compliance in
all material respects with all applicable laws;
(3) all required governmental approvals in connection with the
transfer of each receivable to the trust have been obtained and remain in
full force and effect; and
(4) the trust has all right, title and interest in each receivable or
has a first priority perfected security interest in that receivable.
If any of these representations is not true with respect to any receivable
as of the date that receivable is transferred to the trust, we are required to
accept reassignment of the affected receivable. Except with respect to the
breach of the representation set forth in clause (2) above, before accepting
reassignment, (a) prior to the termination of First Consumers Master Trust, we
will be permitted 30 days to cure the breach or a longer period not to exceed
60 days agreed to by the trustee for First Consumers Master Trust and (b) if
First Consumer Master Trust has terminated, we will be permitted 60 days to
cure the breach or a longer period not to exceed 120 days agreed to by the
indenture trustee. If, with respect to any receivable, there has been a breach
of the representation set forth in clause (2) above, we will be obligated to
immediately accept retransfer of that receivable.
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We will accept retransfer of a receivable by directing the servicer to
deduct the principal amount of the ineligible receivable from the Seller
Amount. Prior to the termination of First Consumers Master Trust, if this would
reduce the Seller Amount below the Minimum Seller Amount, we will make a cash
deposit in the collection account in the amount by which the Minimum Aggregate
Principal Balance would have exceeded the Aggregate Principal Balance after
giving effect to the deduction. After the termination of First Consumers Master
Trust, if this would reduce the Seller Amount below the Minimum Seller Amount,
we will make a cash deposit in the collection account in the amount by which
the Seller Amount would have been reduced below the Minimum Seller Amount after
giving effect to the deduction. Any deduction or deposit is considered a
repayment in full of the ineligible receivable.
On the closing date for each series, we will also make representations and
warranties to the trust as to enforceability against us of the agreement that
governs the transfer of the receivables to the trust--either the pooling and
servicing agreement or the transfer and servicing agreement--and the
effectiveness of that agreement as an absolute assignment of, or a grant of a
first priority security interest in, the receivables free and clear of any
liens, other than liens permitted by the pooling and servicing agreement and
the transfer and servicing agreement. If any of these representations and
warranties is false in any material respect and the breach of the
representation or warranty has a material adverse effect on the receivables or
the availability of the proceeds of the receivables to the trust, then (i)
prior to the termination of First Consumers Master Trust, either the trustee
for First Consumers Master Trust or securityholders holding not less than 25%
of the principal amount of any series of securities, or (ii) if First Consumers
Master Trust has terminated, the owner trustee, the indenture trustee or
noteholders holding not less than 50% of the aggregate principal amount of all
outstanding series of notes may direct us to accept retransfer of the entire
trust portfolio. Prior to the termination of First Consumers Master Trust, we
will be permitted 45 days after a direction to accept retransfer of the
receivables is given or a longer period, as may be specified in the direction,
to cure the breach. If First Consumers Master Trust has been terminated, we
will be permitted 60 days after the direction is given, or a longer period, not
to exceed 120 days, as may be specified in the direction, to cure the breach.
The reassignment price would equal the aggregate outstanding principal
amounts for all series of securities, in each case as of the distribution date
on which the reassignment is scheduled to be made, plus accrued and unpaid
interest on the securities through the distribution date, plus any other
amounts specified in any prospectus supplement.
Reassignment of any affected receivables or the entire trust portfolio to
us, as the case may be, is the sole remedy respecting any breach of the
representations and warranties described in this section.
Addition of Trust Assets
We may, at our option, designate additional accounts to the trust, the
receivables in which will be sold and assigned to the trust. As described above
under "The Trust Portfolio,"
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we currently designate all new Eligible Accounts to the trust upon their
establishment, and we expect to continue to do so. We are permitted to continue
to automatically designate all new Eligible Accounts as they arise, so long as
the number of accounts that we designate in this manner does not exceed the
following limits:
(1) The new accounts designated during any period of twelve
consecutive months may not exceed 20% of the number of accounts as of the
first day of that period; or
(2) For any calendar quarter, the new accounts designated during that
calendar quarter may not exceed 15% of the number of accounts as of the
first day of that calendar quarter.
We may exceed these limitations if each rating agency confirms that doing
so will not impair its rating of any outstanding series or class of securities.
In addition, we will be required to designate additional accounts, to the
extent available to maintain the Aggregate Principal Balance on any day so that
the Aggregate Principal Balance is not less than the Minimum Aggregate
Principal Balance on that day.
When we transfer receivables in additional accounts to the trust in our
discretion, we must satisfy several conditions, including:
. each rating agency and each credit enhancement provider must receive
prior notice of each addition;
. we must certify that any additional accounts are Eligible Accounts and
that:
. no selection procedures materially adverse to the securityholders
were used in selecting the additional accounts from the available
Eligible Accounts;
. as of the addition date, we are not insolvent and would not become
insolvent by the addition of the accounts; and
. the transfer of the additional receivables constitutes a valid
transfer to the trust of all our right, title and interest in the
receivables in the additional accounts or the grant to the trust of
a first priority perfected security interest in those receivables;
and
. we must deliver an opinion of counsel with respect to the perfection of
the transfer and related matters.
In addition to the periodic reports otherwise required to be filed by the
servicer with the SEC in accordance with the Securities Exchange Act of 1934,
we will file a Report on Form 8-K with respect to any addition to the trust of
receivables in additional accounts that would have a material effect on the
composition of the trust assets.
Defaulted accounts that have been charged-off as uncollectible in
accordance with the servicer's credit card guidelines and the servicer's
customary and usual policies and procedures for servicing revolving credit card
receivables will not be included in any account addition. See "--Defaulted
Receivables; Dilution; Investor Charge-Offs" in this prospectus.
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In addition, less than 20% of the receivables in the trust portfolio, by
outstanding principal balance, will be 30 or more days delinquent immediately
following any account addition.
Removal of Accounts
We also have the right to remove accounts from the list of designated
accounts and to require the reassignment to us of all receivables in the
removed accounts, whether the receivables already exist or arise after the
designation. However, we may not designate removed accounts more than once
during any calendar month and, prior to the termination of First Consumers
Master Trust, we may not designate removed accounts at any time that any series
is not in its revolving period. Our right to remove accounts is subject to the
satisfaction of several conditions, including that:
(1) if the accounts to be removed have outstanding receivables, each
rating agency confirms that the removal will not impair its rating of any
outstanding series or class of securities;
(2) we certify that:
(a) individual accounts or administratively convenient groups of
accounts, such as billing cycles, were chosen for removal randomly or
at any rate not on a basis intended to select particular accounts or
groups of accounts for removal for any reason other than
administrative convenience;
(b) no selection procedures adverse to the securityholders were
used in selecting the removed accounts;
(c) in our reasonable belief, the removal will not cause a pay out
event, or an event that with notice or lapse of time or both, would
constitute a pay out event;
(d) as of the removal date, we are not insolvent and the removal
was not made in contemplation of our insolvency; and
(e) the removal will not cause the Aggregate Principal Balance to
be less than the Minimum Aggregate Principal Balance after giving
effect to the removal.
Collection and Other Servicing Procedures
The servicer will be responsible for servicing and administering the
receivables in the trust portfolio in accordance with the servicer's policies
and procedures for servicing credit card receivables comparable to the
receivables in the trust portfolio. 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.
Discount Option
We have the option to reclassify a percentage of collections of principal
receivables in the trust portfolio as collections of finance charge
receivables. If we do so, the reclassified percentage of collections of
principal receivables for the trust portfolio for each monthly period will be
considered collections of finance charge receivables and will be allocated with
all other collections of finance charge receivables in the trust portfolio.
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We may exercise this option in order to compensate for a decline in the
portfolio yield, but only if there would be sufficient principal receivables to
allow for that discounting. Exercise of this option would result in a larger
amount of collections of finance charge receivables and a smaller amount of
collections of principal receivables. By doing so, we would reduce the
likelihood that a pay out event would occur as a result of a decreased
portfolio yield and, at the same time, would increase the likelihood that we
will have to add principal receivables to the trust. We may not exercise our
option to reclassify collections of principal receivables as collections of
finance charge receivables if we reasonably believe that doing so would cause a
pay out event, or any event that with notice or lapse of time or both, would
constitute a pay out event for any series of securities.
In addition, we may exercise this option only if each rating agency, other
than Moody's, confirms that doing so will not impair its rating of any
outstanding series or class of securities.
Trust Accounts
As servicer, we have established and maintain a collection account and an
excess funding account, each in the name of the trustee, for the benefit of the
securityholders. Both the collection account and the excess funding account
must be Qualified Accounts.
The funds on deposit in these accounts may only be invested, at the
direction of the servicer, in highly rated liquid investments that meet the
criteria described in the indenture or the related indenture supplement for
that series.
The indenture trustee, acting as the initial paying agent--or any entity
then acting as paying agent--will have the revocable power to withdraw funds
from the collection account and the excess funding account for the purpose of
making payments to the noteholders of any series under the related indenture
supplement.
Funding Period
On the closing date for any series of notes, the total amount of principal
receivables in the trust available to that series may be less than the total
principal amount of the notes of that series. If this occurs, the initial
collateral amount for that series of notes will be less than the principal
amount of that series of notes. In this case, the related prospectus supplement
will set forth the terms of the funding period, which is the period from that
series' closing date to the earlier of:
. the date that series' collateral amount equals the principal amount of
that series of notes, plus any initial excess collateral amount; and
. the date specified in the related prospectus supplement, which will be
no later than one year after that series' closing date.
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During the funding period, the portion of the collateral amount not
invested in receivables will be maintained in a prefunding account, which is a
trust account established with the indenture trustee for the benefit of the
noteholders of that series. On the closing date for that series of notes, this
amount may be up to 100% of the principal balance of that series of notes. The
collateral amount for that series will increase as new receivables are
transferred to the trust or as the collateral amounts of other outstanding
series of securities are reduced. The collateral amount may decrease due to
investor charge-offs allocated to the series.
During the funding period, funds on deposit in the prefunding account will
be paid to us as the collateral amount increases. If the collateral amount for
that series is not increased so that the initial collateral amount equals the
initial principal balance of the notes of that series, plus any initial excess
collateral amount, by the end of the funding period, any amount remaining in
the prefunding account will be repaid to noteholders.
The prospectus supplement for a series with a funding period will set
forth:
. the series' initial collateral amount;
. the series' full collateral amount, which is the initial principal
balance of the series of notes plus any initial excess collateral
amount;
. the date on which the series' collateral amount is expected to equal the
series' full collateral amount;
. the date by which the funding period will end; and
. what other events, if any, will occur if the end of the funding period
is reached before the full collateral amount is funded.
We will file a Current Report on Form 8-K with the SEC following the
termination of any funding period containing updated trust portfolio
information.
Application of Collections
The servicer must deposit into the collection account, no later than two
business days after processing, all payments made on receivables in the trust
portfolio. However, the servicer will be able to make these deposits on a
monthly or other periodic basis if:
(1) we remain the servicer and no servicer default has occurred and is
continuing; and
(2) either
(a)(i) the servicer provides to the trustee a letter of credit or
other arrangement covering risk of collection of the
servicer; and
(ii) written confirmation is received from each rating agency
that the arrangement will not impair its rating of any
outstanding series or class of securities; or
(b) unless written confirmation is received from each rating
agency that making monthly deposits will not impair its rating
of any outstanding
36
series or class of securities, the servicer has and maintains
a certificate of deposit or short-term deposit rating of at
least A-1 by Standard & Poor's and P-1 by Moody's and has
deposit insurance as required by law and by the FDIC.
The servicer is only required to make daily or periodic deposits to the
collection account during any monthly period to the extent that the funds are
needed for deposit into other trust accounts or distribution to
securityholders or other parties on or prior to the related distribution date.
If the collection account balance ever exceeds the amount needed for those
deposits or distributions, the servicer may withdraw the excess and pay that
amount to us or our assigns. Subject to the immediately preceding sentence,
the servicer may retain its servicing fee for any series and will not be
required to deposit it in the collection account.
The servicer may estimate for each business day the amount of collections
that are attributable to finance charge receivables and principal receivables.
The servicer may change the method for determining the allocation of
collections as finance charge collections or principal collections from time
to time to more accurately reflect the amounts being collected in respect of
the principal receivables and finance charge receivables in the trust
portfolio.
The servicer will also deposit into the collection account on the business
day before each distribution date, the excess of (i) all of the recoveries by
the servicer during the preceding calendar month on receivables that have
previously been charged-off as uncollectible over (ii) the aggregate amount of
receivables in accounts that have been charged-off as uncollectible during
that calendar month. The servicer will treat these net recoveries as
collections of finance charge receivables.
The servicer will then allocate all collections of finance charge
receivables and principal receivables among each series of securities and the
Seller Amount based on the respective allocation percentages for each series
and the seller allocation percentage. The seller allocation percentage at any
time will equal 100% minus the total of the applicable allocation percentages
for all outstanding series. The seller allocation percentage of finance charge
collections will be paid to us or our assigns. Prior to the termination of
First Consumers Master Trust, the seller allocation percentage of principal
collections will first be deposited in the excess funding account to the
extent required to maintain an Aggregate Principal Balance that is not less
than the Minimum Aggregate Principal Balance. If First Consumers Master Trust
has been terminated, the seller allocation percentage of principal collections
will first be deposited in the excess funding account to the extent required
to maintain a Seller Amount that is not less than the Minimum Seller Amount.
Any remaining principal collections will be paid to us or our assigns. The
collections allocated to each series will be retained in the collection
account or applied as described in the related prospectus supplement.
Shared Excess Finance Charge Collections
If a series is identified in the prospectus supplement for that series as
included in a group, collections of finance charge receivables allocated to
that series in excess of the
37
amount needed to make deposits or payments for the benefit of that series may
be shared with other series of securities that have been designated for
inclusion in the same group. The servicer will allocate the aggregate of the
excess finance charge collections for all series in the same group to cover any
payments required to be made out of finance charge collections for any series
in that group that have not been covered out of the finance charge collections
allocable to those series. If the finance charge shortfalls exceed the excess
finance charge collections for any group for any calendar month, excess finance
charge collections will be allocated pro rata among the applicable series based
on the relative amounts of finance charge shortfalls.
Shared Principal Collections
Each series of notes will share excess principal collections with each
other series of securities unless the related prospectus supplement excludes
that series from this sharing arrangement. If a principal sharing series--
including any series of investor certificates designated as a principal sharing
series--is allocated principal in excess of the amount needed for deposits or
distributions of principal collections, that excess will be shared with other
principal sharing series. The servicer will allocate the aggregate of the
shared principal collections for all principal sharing series to cover any
scheduled or permitted principal distributions to securityholders and deposits
to principal accumulation accounts, if any, for any series that have not been
covered out of the collections of principal receivables allocable to those
series. Shared principal collections will not be used to cover investor charge-
offs for any series of securities.
If the principal shortfalls exceed the amount of shared principal
collections for any calendar month, shared principal collections for all series
will be allocated pro rata among the applicable series based on the relative
amounts of principal shortfalls. If shared principal collections exceed
principal shortfalls, the balance will be paid to us or our assigns or
deposited in the excess funding account under the circumstances described under
"--Excess Funding Account" below.
Excess Funding Account
Prior to the termination of First Consumers Master Trust, on each business
day on which the Aggregate Principal Balance is less than the Minimum Aggregate
Principal Balance, the servicer will deposit collections of principal
receivables allocable to the Seller Amount, as described in "--Application of
Collections" above, and excess shared principal collections otherwise
distributable to us or our assigns, into the excess funding account until the
Aggregate Principal Balance equals the Minimum Aggregate Principal Balance.
Thereafter, prior to the termination of First Consumers Master Trust, funds on
deposit in the excess funding account will be treated as shared principal
collections to the extent that, after giving effect to the application of those
funds as shared principal collections, the Aggregate Principal Balance would
exceed the Minimum Aggregate Principal Balance.
38
If First Consumers Master Trust has been terminated, on each business day
on which the Seller Amount is less than the Minimum Seller Amount, the
servicer will deposit collections of principal receivables allocable to the
Seller Amount, as described in "--Application of Collections" above, and
excess shared principal collections otherwise distributable to us or our
assigns, into the excess funding account until the Seller Amount equals the
Minimum Seller Amount. Thereafter, if First Consumers Master Trust has been
terminated, funds on deposit in the excess funding account will be treated as
shared principal collections to the extent that, after giving effect to the
application of those funds as shared principal collections, the Seller Amount
would exceed the Minimum Seller Amount.
We may, at our option, instruct the indenture trustee to deposit shared
principal collections that are otherwise payable to us or our assigns, into
the excess funding account.
Investment earnings on amounts on deposit in the excess funding account
will be treated as finance charge collections and allocated to each series of
securities based on the respective allocation percentages for each series.
Defaulted Receivables; Dilution; Investor Charge-Offs
Receivables in any account will be charged-off as uncollectible in
accordance with the servicer's credit card guidelines and the servicer's
customary and usual policies and procedures for servicing revolving credit
card receivables and other revolving credit account receivables comparable to
the receivables. The servicer's current policy is to charge off the
receivables in an account when that account becomes 180 days delinquent. On
the date on which an account is charged-off, the trust will automatically be
deemed to transfer all receivables in the charged-off account to us and the
charged-off account will cease to be a trust account.
Each series will be allocated a portion of defaulted receivables in an
amount equal to its allocation percentage, as specified in the related
prospectus supplement, of the product of:
(1) the excess of:
(a) receivables charged-off during that calendar month, minus
(b) recoveries received during that calendar month,
multiplied by
(2) (a)1.00, minus
(b) the percentage (expressed as a decimal) of receivables, other
than receivables in defaulted accounts, that are finance
charge receivables.
Unlike defaulted receivables, dilution, which includes reductions in
principal receivables as a result of returns, unauthorized charges and the
like, is not intended to be allocated to investors. Instead, these reductions
are applied to reduce the Seller Amount, and to the extent they would reduce
the Seller Amount below the Minimum Seller Amount, we are required to deposit
the amount of the reduction into the trust's excess funding account. However,
if we
39
default in our obligation to make a payment to cover dilution, then a portion
of any resulting shortfall in receivables will be allocated to your series as
specified in the accompanying prospectus supplement. For all series that have
Minimum Seller Percentages greater than zero, the portion of dilution allocated
to those series will first reduce the Seller Amount. In addition, any
collections allocated to the seller interest and the balance on deposit in the
excess funding account will be available on a ratable basis to cover dilution
allocated to those series that have Minimum Seller Percentages greater than
zero. For all series that have Minimum Seller Percentages equal to zero, the
portion of dilution allocated to those series will not further reduce the
Seller Amount and those series will not receive collections allocated to the
seller interest or funds on deposit in the excess funding account to cover
dilution.
On each distribution date, if the sum of the defaulted receivables and any
dilution allocated to any series is greater than the finance charge collections
and other funds available to cover those amounts as described in the related
prospectus supplement, then the collateral amount for that series will be
reduced by the amount of the excess. Any reductions in the collateral amount
for any series on account of defaulted receivables and dilution will be
reinstated to the extent that finance charge collections and other amounts on
deposit in the collection account are available for that purpose on any
subsequent distribution date as described in the related prospectus.
Defeasance
If so specified in the prospectus supplement relating to a series, the
issuer may, at our direction, terminate its substantive obligations in respect
of that series or the trust by depositing with the indenture trustee, from
amounts representing, or acquired with, collections of receivables, money or
eligible investments sufficient to make all remaining scheduled interest and
principal payments on that series on the dates scheduled for those payments and
to pay all amounts owing to any credit enhancement provider with respect to
that series or all outstanding series, as the case may be, if that action would
not result in a pay out event for any series. Prior to its first exercise of
its right to substitute money or eligible investments for receivables, the
issuer will deliver to the indenture trustee an opinion of counsel to the
effect that:
. for federal income tax purposes, the deposit and termination of
obligations will not cause the trust, or any portion of the trust, to be
deemed to be an association or publicly traded partnership taxable as a
corporation; and
. the 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.
Final Payment of Principal
For each series, the servicer has the option to purchase the notes at any
time after the remaining outstanding principal amount of that series is 10% or
less of the initial principal
40
amount of that series. The purchase price will equal:
. the outstanding principal amount of the notes of that series, plus
. any accrued and unpaid interest through the day preceding the
distribution date on which the repurchase occurs or, if the repurchase
occurs on any other date, through the day preceding the distribution
date immediately following the repurchase date.
For any series of notes, the related prospectus supplement may specify
additional conditions to the servicer's purchase option.
Each prospectus supplement will specify the final maturity date for the
related series of notes, which will generally be a date falling substantially
later than the expected principal payment date. For any series, the failure to
pay principal in full not later than the final maturity date will be an event
of default and the indenture trustee or holders of a specified percentage of
the notes of that series will have the rights described under "The Indenture--
Events of Default; Rights upon Event of Default" in this prospectus.
Paired Series
The prospectus supplement for a series of notes will specify whether that
series may be paired with a previously or later issued series so that a
decrease in the collateral amount of the previously issued series results in a
corresponding increase in the collateral amount of the later issued series. In
general, a series may be issued as a paired series so the trust can fund the
amount by which the previously issued series either has amortized or has
accumulated funds for a principal payment.
The later issued series will either be prefunded with an initial deposit to
a prefunding account in an amount up to the initial principal balance of the
previously issued series or will have a variable principal amount.
During the controlled amortization period or controlled accumulation period
for any series that is paired with a later issued series, as principal payments
are made on that previously issued series or deposits are made to the principal
accumulation account for that previously issued series, as applicable,
(a) in the case of a prefunded paired series, an equal amount of funds
on deposit in any prefunding account for that prefunded paired series will
be released, which funds will be distributed to us;
(b) in the case of a paired series having a variable principal amount,
an interest in that variable paired series in an equal or lesser amount
may be sold by the issuer, and the proceeds from the issuance will be
distributed to us; and
(c) in either case, the collateral amount of the later issued series
will increase by up to a corresponding amount.
41
If a pay out event occurs for the previously issued series or its paired
series when the previously issued series is amortizing, the allocation
percentage for the allocation of collections of principal receivables for the
previously issued series may be reset to a lower percentage as described in the
prospectus supplement for that series and the period over which it will
amortize may be lengthened as a result. The extent to which the period over
which it amortizes is lengthened will depend on many factors, only one of which
is the reduction of its allocation percentage. For a discussion of these
factors, see "Risk Factors--Issuance of additional series by the trust may
affect the timing of payments to you" in this prospectus and "Maturity
Considerations" in the accompanying prospectus supplement.
Pay Out Events
The revolving period for your series of notes will continue through the
date specified in the accompanying prospectus supplement unless a pay out event
occurs prior to that date. A pay out event occurs with respect to all series
issued by the issuer upon the occurrence of any of the following events:
(a) insolvency, liquidation, conservatorship, receivership or similar
events relating to us;
(b) we are unable for any reason to transfer receivables to the trust;
or
(c) First Consumers Master Trust or the issuer becomes subject to
regulation as an "investment company" within the meaning of the Investment
Company Act of 1940.
In addition, a pay out event may occur with respect to any series upon the
occurrence of any other event specified in the accompanying 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 accompanying
prospectus supplement, the early 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
an expected principal payment date, noteholders will begin receiving
distributions of principal earlier than they otherwise would have, which may
shorten the average life of the notes.
In addition to the consequences of a pay out event discussed above, unless
otherwise specified in the accompanying prospectus supplement, if insolvency or
similar proceedings under the Federal Deposit Insurance Act or similar laws
occur with respect to us, on the day of that event we will immediately cease to
transfer principal receivables to the trust and promptly give notice to the
trustee for First Consumers Master Trust, the indenture trustee and the owner
trustee of this event. Any principal receivables transferred to the trust prior
to the event, as well as collections on those principal receivables and finance
charge receivables accrued at any time with respect to those principal
receivables, will continue to be part of the trust assets.
If the only pay out event to occur is our insolvency, the court may have
the power to require the continued transfer of principal receivables to the
trust. See "Risk Factors--If a conservator were appointed for us, delays or
reductions in payment of your notes could occur" in this prospectus.
42
Servicing Compensation and Payment of Expenses
The servicer receives a fee for its servicing activities and reimbursement
of expenses incurred in administering the issuer. The share of the servicing
fee allocable to each series of notes for any distribution date will be equal
to one-twelfth of the product of (a) the servicing fee rate specified in the
related prospectus supplement and (b) (i) the collateral amount for that series
as of the last day of the calendar period preceding that distribution date,
minus (ii) the product of the amount, if any, on deposit in the excess funding
account as of the last day of the calendar month preceding that distribution
date and the allocation percentage for that series with respect to finance
charge collections for that calendar month.
The servicer will pay from its servicing compensation expenses of servicing
the receivables, including payment of the fees and disbursements of the
indenture trustee, the trustee for First Consumers Master Trust, the owner
trustee and independent certified public accountants and other fees which are
not expressly stated in the transfer and servicing agreement, the indenture,
any indenture supplement or the pooling and servicing agreement for First
Consumers Master Trust to be payable by the issuer or the securityholders,
other than federal, state and local income and franchise taxes, if any, of the
issuer or First Consumers Master Trust.
Each series' servicing fee is payable each period from collections of
finance charge receivables allocated to the series. Neither the issuer nor the
noteholders are responsible for any servicing fee allocable to the Seller
Amount.
Matters Regarding the Seller and the Servicer
The servicer may not resign from its obligations and duties, except upon a
determination that:
. performance of its duties is no longer permissible under applicable law,
as evidenced by an opinion of counsel to that effect delivered to the
trustee; and
. there is no reasonable action that the servicer could take to make the
performance of its duties permissible under applicable law.
If within 120 days of the determination that the servicer is no longer
permitted to act as servicer, the indenture trustee is unable to appoint a
successor, then the indenture trustee will act as servicer. If the indenture
trustee is unable to act as servicer, it will petition an appropriate court to
appoint an eligible successor.
The servicer's resignation will not become effective until the indenture
trustee or another successor has assumed the servicer's obligations and duties.
The resigning servicer will notify each rating agency of its resignation. The
servicer may delegate any of its servicing duties to any entity, including
Spiegel, that agrees to conduct those duties in accordance with our charge
account guidelines. However, the servicer's delegation of its duties will not
relieve it of its liability and responsibility with respect to the delegated
duties.
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The servicer will indemnify the indenture trustee and its officers,
directors, employees and agents for any losses, including legal fees, incurred
by the indenture trustee in connection with its performance of its duties under
the indenture, the transfer and servicing agreement and related documents
except for any losses or expenses incurred as a result of the indenture
trustee's willful misconduct or negligence.
The servicer will indemnify First Consumers Master Trust, the issuer, the
owner trustee and the trustee for First Consumers Master Trust for any losses
suffered as a result of actions or omissions arising out of the activities of
First Consumers Master Trust, the issuer, the owner trustee or the trustee for
First Consumers Master Trust under the pooling and servicing agreement, the
transfer and servicing agreement, the indenture and related documents,
including its actions or omissions as servicer, except in each case, for losses
resulting from the fraud, negligence, breach of fiduciary duty or misconduct by
the trustee for First Consumers Master Trust or the fraud, gross negligence or
breach of fiduciary duty by the owner trustee. The indemnity also does not
include:
. any liabilities, costs or expenses of First Consumers Master Trust, the
trustee for First Consumers Master Trust, the issuer or the
securityholders arising from any action taken by the trustee for First
Consumers Master Trust or the indenture trustee at the direction of the
securityholders;
. any losses, claims or damages that are incurred by First Consumers
Master Trust, the issuer or any securityholder in the capacity of an
investor, including losses incurred as a result of the performance of
the receivables; and
. any federal, state or local income or franchise taxes or any other tax
imposed on or measured by income or any penalties under any related tax
laws required to be paid by First Consumers Master Trust, the issuer or
any securityholder.
No indemnity payments by the servicer will be paid from the assets of the
issuer or First Consumers Master Trust.
Except as provided in the preceding two paragraphs, neither the servicer
nor any of its directors, officers, employees or agents will be liable to First
Consumers Master Trust, the issuer, the owner trustee, the indenture trustee,
the trustee for First Consumers Master Trust, the securityholders or any other
person for any action taken, or for refraining from taking any action under the
pooling and servicing agreement or the transfer and servicing agreement.
However, none of them will be protected against any liability resulting from
willful wrongdoing, bad faith or gross negligence in the performance of its
duties or by reason of its willful misconduct under the pooling and servicing
agreement or the transfer and servicing agreement or resulting from its
negligence in the performance of its duties under the pooling and servicing
agreement. In addition, we are not under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its servicing
responsibilities under the pooling and servicing agreement and the transfer and
servicing agreement and which in its reasonable opinion may expose it to any
expense or liability.
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Neither we nor any of our directors, officers, employees or agents will be
liable to First Consumers Master Trust, the issuer, the owner trustee, the
indenture trustee, the trustee for First Consumers Master Trust, the
securityholders or any other person for any action taken, or for refraining
from taking any action, under the pooling and servicing agreement or the
transfer and servicing agreement. However, neither we nor any of the foregoing
persons will be protected against any liability resulting from willful
wrongdoing, bad faith or gross negligence in the performance of its duties or
by reason of its willful misconduct under the pooling and servicing agreement
or the transfer and servicing agreement or resulting from its negligence in the
performance of its duties under the pooling and servicing agreement. We will be
liable for any actual damages resulting directly from our material failure to
perform any of our obligations under the pooling and servicing agreement or the
transfer and servicing agreement, but only if another remedy is not provided
for in those agreements.
The trust agreement provides that we may sell, assign, pledge or otherwise
transfer our interest in all or a portion of the seller interest. Before we may
transfer our interest in the seller interest to an entity that is not an
affiliate, the following must occur:
(1) each rating agency confirms that the transfer will not impair its
rating of any outstanding series or class of notes;
(2) we certify to the owner trustee and the indenture trustee that, based
on the facts known to the certifying officer, the new issuance will
not:
(a) cause a pay out event or an event of default; or
(b) materially and adversely affect the amount or timing of payments
to be made to the noteholders of any series or class;
(3) after giving effect to the transfer, the Aggregate Principal Balance
exceeds the Minimum Aggregate Principal Balance;
(4) we deliver an opinion of counsel to the effect that, for federal
income tax purposes:
(a) the transfer will not adversely affect the tax characterization as
debt of notes of any outstanding series or class that were
characterized as debt at the time of their issuance;
(b) the transfer will not cause the issuer to be deemed to be an
association or publicly traded partnership taxable as a
corporation; and
(c) the transfer will not cause or constitute an event in which gain
or loss would be recognized by any noteholder; and
(5) we deliver an opinion of counsel to the effect that:
(a) the transfer will not subject the issuer to any state income tax
or to the Illinois Personal Property Replacement Tax; and
(b) the transfer will not require the registration of the transferred
interest under the Securities Act or any state securities law
except for any such registration that has been duly completed and
become effective.
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Neither we nor any person may transfer the seller interest nor any
interest in the seller interest to any person unless opinions of the type
described in clauses (4) and (5) above are delivered to the owner trustee and
the indenture trustee regarding the transfer.
We or the servicer may consolidate with, merge into, or sell our or its
respective businesses to, another entity, in accordance with the pooling and
servicing agreement and the transfer and servicing agreement on the following
conditions:
(1) the entity, if other than us or the servicer, as applicable,
formed by the consolidation or merger or that acquires our property or
assets or the servicer's property or assets, as the case may be:
(a) is organized under the laws of the United States or any one of
its states;
(b) in the case of a merger or consolidation involving us, is a
national banking association, federal savings association, state
banking corporation or state savings association that is not subject
to the bankruptcy laws of the United States; and
(c) expressly assumes, by a supplemental agreement, to perform
every covenant and obligation of us or the servicer, as applicable;
except that, if any of our rights, covenants or obligations under the
pooling and servicing agreement or the transfer and servicing
agreement is inapplicable to the successor entity, the successor
entity will be subject to that covenant or obligation, or benefit from
that right, as would apply, to the extent practicable, to the
successor entity;
(2) delivery to the trustee for First Consumers Master Trust and the
indenture trustee of an officer's certificate and an opinion of counsel
stating that the merger, consolidation or transfer and the related
supplemental agreement comply with the pooling and servicing agreement and
the transfer and servicing agreement and that all conditions precedent
relating to the applicable transaction have been complied with and, in the
case of the opinion of counsel, the related supplemental agreement is
legal, valid and binding with respect to us or the servicer, as
applicable; and
(3) delivery of notice of the applicable transaction to each rating
agency.
Servicer Default
Each of the following events constitutes a servicer default:
(1) failure by the servicer to make any payment, transfer or deposit
or to make any required drawing, withdrawal or payment under any credit
enhancement, or to give instructions or notice to the trustee to do so, on
the required date under the pooling and servicing agreement, any series
supplement to the pooling and servicing agreement with respect to a series
of investor certificates, the transfer and servicing agreement, the
indenture or any indenture supplement, in each case on or before (i) prior
to the termination of First Consumers Master Trust, the date occurring 3
business days after the date that payment, transfer or deposit or that
instruction or notice is required to be made or given by the servicer
under the applicable document, or (ii) if First Consumers Master Trust has
been terminated, the date occurring 5 business days after the date that
46
payment by the servicer, transfer or deposit or that instruction or notice
is required to be made or given by the Servicer under the applicable
document;
(2) failure on the part of the servicer to observe or perform in any
material respect any of its other covenants or agreements if the failure:
(a) has a material adverse effect on the securityholders;
(b) prior to the termination of First Consumers Master Trust,
continues unremedied for a period of 30 days after the earlier of (i)
the servicer's knowledge of the failure or (ii) notice to the servicer
by the trustee for First Consumers Master Trust or to the servicer and
the trustee for First Consumers Master Trust by securityholders
holding not less than 25% of the outstanding principal amount of any
affected series; and
(c) if First Consumers Master Trust has been terminated, continues
unremedied for a period of 60 days after notice to the servicer by the
indenture trustee or to the servicer and the indenture trustee by
noteholders holding not less than 10% of the outstanding principal
amount of the notes of any adversely affected series and continues to
materially adversely affect those noteholders during the 60-day
period;
(3) the servicer delegates its duties, except as specifically
permitted under the pooling and servicing agreement and the transfer and
servicing agreement;
(4) any representation, warranty or certification made by the servicer
in the pooling and servicing agreement or the transfer and servicing
agreement, or in any certificate delivered in accordance with either
agreement, proves to have been incorrect when made if it:
(a) has a material adverse effect on the rights of the
securityholders of any series;
(b) prior to the termination of First Consumers Master Trust,
continues to be incorrect in any material respect for a period of 30
days after the earlier of (i) the servicer's knowledge of the failure
or (ii) notice to the servicer by the trustee for First Consumers
Master Trust or to the servicer and the trustee for First Consumers
Master Trust by securityholders holding not less than 25% of the
outstanding principal amount of any affected series, or if the failure
cannot be cured within the applicable 30-day period due to causes
beyond the control of the servicer, if the servicer fails to proceed
promptly to cure the failure with diligence and continuity; and
(c) if First Consumers Master Trust has been terminated, continues
to be incorrect in any material respect and to materially adversely
affect those securityholders for a period of 60 days after notice to
the servicer by the indenture trustee or to the servicer and the
indenture trustee by noteholders holding not less than 10% of the
outstanding principal amount of the notes of any adversely affected
series, or if the failure cannot be cured within the applicable 60-day
period due to causes beyond the control of the servicer, if the
servicer fails to proceed promptly to cure the failure with diligence
and continuity; and
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(5) specific insolvency, liquidation, conservatorship, receivership or
similar events relating to the servicer; or
(6) any other event specified in the accompanying prospectus
supplement.
Prior to the termination of First Consumers Master Trust, if a servicer
default occurs, for so long as it has not been remedied, the trustee for First
Consumers Master Trust or securityholders representing more than 50% of the
then-outstanding principal amount of any outstanding series of securities
affected by the servicer default may give notice to the servicer, and if
notice is given by the securityholders, the trustee for First Consumers Master
Trust, terminating all of the rights and obligations of the servicer under the
pooling and servicing agreement and the transfer and servicing agreement. If
First Consumers Master Trust has been terminated, if a servicer default
occurs, for so long as it has not been remedied, the indenture trustee or
noteholders representing more than 50% of the aggregate principal amount of
all outstanding series of notes may give notice to the servicer, and if notice
is given by the noteholders, the indenture trustee, terminating all of the
rights and obligations of the servicer under the transfer and servicing
agreement.
The trustee will as promptly as possible appoint an eligible successor to
the servicer with the consent of securityholders representing more than 50% of
the then-outstanding principal amount of each series of securities. If the
trustee is unable to obtain bids from eligible servicers and the servicer
delivers a certificate of an authorized officer to the effect that it cannot
in good faith cure the servicer default which gave rise to a transfer of
servicing, then the trustee for First Consumers Master Trust or the owner
trustee, as applicable, will offer us the right to accept retransfer of all of
the receivables. However, if our long-term unsecured debt obligations are not
rated at least Baa3 by Moody's and BBB- by Standard & Poor's at the time of
the proposed retransfer, no retransfer will occur unless we have delivered an
opinion of counsel reasonably acceptable to the trustee that the retransfer
would not constitute a fraudulent conveyance by us.
The retransfer price to be received by each series of notes will be equal
to the higher of:
(1) the outstanding principal balance of the notes of that series, plus
accrued interest at the applicable interest rate, through the date of
retransfer; and
(2) the average bid price quoted by two recognized dealers for a similar
security rated in the highest rating category by Moody's and Standard
& Poor's and having a remaining maturity similar to the remaining
maturity of those notes.
If no successor has been appointed and has accepted the appointment by the
time the servicer ceases to act as servicer, the trustee will automatically
become the successor. If the trustee is legally unable to act as servicer, the
trustee will petition a court of competent jurisdiction to appoint an eligible
servicer.
Prior to the termination of First Consumers Master Trust, the
securityholders representing more than 50% of the then-outstanding principal
amount of the securities of any series affected by any default by the servicer
or us in the performance of its or our
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obligations under the pooling and servicing agreement may waive, on behalf of
all securityholders, that default unless the default relates to a failure to
make any required deposits or payments with respect to any series. If First
Consumers Master Trust has been terminated, any default by the servicer or us
in the performance of its or our obligations under the transfer and servicing
agreement may be waived by noteholders holding 66 2/3% or more of the then-
outstanding principal balance of the notes of each series as to which that
default relates, or with respect to any series with two or more classes, each
class as to which the default relates, unless that default relates to a failure
to make any required deposits or payments to be made to noteholders. No waiver
by the securityholders of any default under the pooling and servicing agreement
will affect the rights of any credit enhancement provider for any series.
Our rights and obligations under the pooling and servicing agreement and
the transfer and servicing agreement will be unaffected by any change in
servicer.
If a conservator or receiver is appointed for the servicer, the conservator
or receiver may have the power to prevent either the trustee or the
securityholders from appointing a successor servicer.
Reports to Noteholders
Noteholders of each series issued by the issuer will receive reports with
information on the series and the trust. The paying agent will forward to each
noteholder of record a report, prepared by the servicer, for its series on the
distribution dates for that series. The report will contain the information
specified in the related prospectus supplement. If a series has multiple
classes, information will be provided for each class, as specified in the
related prospectus supplement.
Periodic information to noteholders generally will include:
. the total amount distributed;
. the amount of principal and interest for distribution;
. collections of principal receivables and finance charge receivables
allocated to the series;
. the aggregate amount of principal receivables, the collateral amount and
the collateral amount as a percentage of the aggregate amount of the
principal receivables in the trust portfolio;
. the aggregate outstanding balance of accounts broken out by delinquency
status;
. the aggregate defaults and dilution allocated to the series;
. the amount of reductions, if any, to the collateral amount due to
defaulted receivables and dilution allocated to the series and any
reimbursements of previous reductions to the collateral amount;
. the monthly servicing fee for that series;
49
. the amount available under the credit enhancement, if any, for the
series or each class of the series;
. the "pool factor," which is the ratio of the current collateral amount
to the initial collateral amount;
. the Base Rate and Portfolio Yield, each as defined in the related
prospectus supplement for the series;
. if the series or a class of the series bears interest at a floating or
variable rate, information relating to that rate;
. for any distribution date during a funding period, the remaining balance
in the prefunding account; and
. for the first distribution date that is on or immediately following the
end of a funding period, the amount of any remaining balance in the
prefunding account that has not been used to fund the purchase of
receivables and is being paid as principal on the notes.
By January 31 of each calendar year, the paying agent will also provide to
each person who at any time during the preceding calendar year was a
noteholder of record a statement, prepared by the servicer, containing the
type of information presented in the periodic reports, aggregated for that
calendar year or the portion of that calendar year that the person was a
noteholder, together with other information that is customarily provided to
holders of debt, to assist noteholders in preparing their United States tax
returns.
Evidence as to Compliance
The pooling and servicing agreement and the transfer and servicing
agreement provide that on or before April 30 of each calendar year, beginning
with April 2002, the servicer will have a firm of independent certified public
accountants furnish a report showing that, for the prior calendar year:
. the accounting firm has applied the procedures required by those
agreements to the documents and records relating to the servicing of the
accounts, compared the information contained in the servicer's
certificates delivered during the prior calendar year with those
documents and records, and that based upon those procedures, no matters
came to the attention of that accounting firm that caused them to
believe that servicing was not conducted in compliance with specified
sections of the pooling and servicing agreement and the transfer and
servicing agreement, and
. the accounting firm has compared specified amounts set forth in the
periodic reports prepared by the servicer for the prior calendar year
with the servicer's computer reports and that, in the accounting firm's
opinion, the amounts are in agreement,
in either case, except for any discrepancies or exceptions they consider
immaterial or that are otherwise disclosed.
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The pooling and servicing agreement and the transfer and servicing
agreement also provide that by April 30 of each calendar year, beginning with
April 2002, the servicer will deliver to the trustee for First Consumers Master
Trust, the indenture trustee, each credit enhancement provider and each rating
agency a certificate of an authorized officer to the effect that the servicer
has fully performed its obligations under the pooling and servicing agreement
and the transfer and servicing agreement during the preceding year, or, if
there has been a default in the performance of any of its obligations,
specifying the nature and status of the default.
Amendments
The transfer and servicing agreement may be amended by us, the servicer and
the issuer, without the consent of the indenture trustee or the noteholders of
any series to cure any ambiguity, to correct or supplement any provisions of
the agreement that are inconsistent with any other provisions of the agreement
or to add any other provisions concerning matters or questions raised under the
agreement that are not inconsistent with the provisions of the agreement, so
long as the amendment does not adversely affect in any material respect the
interests of any noteholder. In addition, the transfer and servicing agreement
may be amended by us, the servicer and the issuer, without the consent of the
indenture trustee or the noteholders of any series, on the following
conditions:
(1) we deliver to the owner trustee and the indenture trustee a
certificate of an authorized officer stating that, in our reasonable
belief, the amendment will not:
(a) result in the occurrence of a pay out event or an event of
default; or
(b) materially and adversely affect the amount or timing of
distributions to be made to noteholders of any series or class; and
(2) each rating agency confirms that the amendment will not impair its
rating of any outstanding series or class of notes.
The transfer and servicing agreement may also be amended by us, the
servicer and the issuer at our direction, without the consent of the indenture
trustee, the noteholders of any series or the credit enhancement providers for
any series to add, modify or eliminate any provisions necessary or advisable in
order to enable the issuer or any portion of the issuer to (i) qualify as, and
to permit an election to be made for the issuer to be treated as, a "financial
asset securitization investment trust" under the Internal Revenue Code and (ii)
avoid the imposition of state or local income or franchise taxes on the
issuer's property or its income. However, we may not amend the transfer and
servicing agreement as described in this paragraph unless each rating agency
confirms that the amendment will not impair its rating of any outstanding
series or class of notes. In addition, the amendment must not affect the
rights, duties or obligations of the indenture trustee or the owner trustee
under the transfer and servicing agreement.
The amendments that we may make without the consent of the noteholders of
any series or the credit enhancement providers for any series may include the
addition or sale of
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receivables in the trust portfolio and the addition of one or more persons,
other than us, as sellers of receivables to the issuer.
The transfer and servicing agreement may also be amended by us, the
servicer and the issuer with the consent of noteholders representing more than
66 2/3% of the then-outstanding principal balance of the notes of each series
affected by the amendment for which we have not delivered a certificate of an
authorized officer stating that, in our reasonable belief, the amendment will
not:
(a) result in the occurrence of a pay out event or an event of
default; or
(b) materially and adversely affect the amount or timing of
distributions to be made to noteholders of any series or class.
However, no amendment may occur if it:
(1) reduces the amount of, or delays the timing of:
(a) any distributions to be made to noteholders of any series or
deposits of amounts to be distributed; or
(b) the amount available under any credit enhancement, in each
case, without the consent of each affected noteholder;
(2) changes the manner of calculating the interest of any noteholder
without the consent of each affected noteholder;
(3) reduces the percentage of the outstanding principal balance of the
notes required to consent to any amendment, without the consent of each
affected noteholder; or
(4) adversely affects the rating of any series or class by each rating
agency, without the consent of noteholders representing more than 66 2/3%
of the then-outstanding principal balance of the notes of each affected
series or class.
For purposes of clause (1) above, changes in pay out events or events of
default that decrease the likelihood of the occurrence of those events will not
be considered delays in the timing of distributions.
In no event may any amendment to the transfer and servicing agreement
adversely affect in any material respect the interests of any credit
enhancement provider without the consent of that credit enhancement provider.
THE INDENTURE
We have summarized the material terms of the indenture below. The summary
is not complete and is qualified in its entirety by reference to the indenture.
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Events of Default; Rights upon Event of Default
An event of default will occur under the indenture for any series of notes
upon the occurrence of any of the following events:
(1) the issuer fails to pay principal when it becomes due and payable
on the final maturity date for that series of notes;
(2) the issuer fails to pay interest when it becomes due and payable
and the default continues for a period of 35 days;
(3) bankruptcy, insolvency, conservatorship, receivership, liquidation
or similar events relating to the issuer;
(4) the issuer fails to observe or perform covenants or agreements
made in the indenture in respect of the notes of that series, and:
(a) the failure continues, or is not cured, for 60 days after
notice to the issuer by the indenture trustee or to the issuer and the
indenture trustee by noteholders representing 25% or more of the then-
outstanding principal amount of that series of notes; and
(b) as a result, the interests of the noteholders are materially
and adversely affected, and continue to be materially and adversely
affected during the 60-day period; or
(5) any additional event specified in the indenture supplement related
to that series.
An event of default will not occur if the issuer fails to pay the full
principal amount of a note on its expected principal payment date.
An event of default with respect to one series of notes will not
necessarily be an event of default with respect to any other series of notes.
If an event of default referred to in clause (1), (2) or (4) above occurs
and is continuing with respect to any series of notes, the indenture trustee
or noteholders holding a majority of the then-outstanding principal balance of
the notes of the affected series may declare the principal of the notes of
that series to be immediately due and payable. If an event of default referred
to in clause (3) above occurs and is continuing, the unpaid principal and
interest due on the notes automatically will be deemed to be declared due and
payable. Before a judgment or decree for payment of the money due has been
obtained by the indenture trustee, noteholders holding a majority of the then-
outstanding principal balance of the notes of that series may rescind the
declaration of acceleration of maturity if:
(a) the issuer has paid or deposited with the indenture trustee all
principal and interest due on the Notes and all other amounts that
would then be due if the event of default giving rise to the
acceleration had not occurred, including all amounts then payable
to the indenture trustee; and
(b) all events of default have been cured or waived.
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If an event of default occurs, the indenture trustee will be under no
obligation to exercise any of the rights or powers under the indenture if
requested or directed by any of the holders of the notes of the affected series
if:
(1) the indenture trustee is advised by counsel that the action it is
directed to take is in conflict with applicable law or the indenture;
(2) the indenture trustee determines in good faith that the requested
actions would be illegal or involve the indenture trustee in personal
liability or be unjustly prejudicial to noteholders not making the
request or direction; or
(3) the indenture trustee reasonably believes it will not be adequately
indemnified against the costs, expenses and liabilities which might be
incurred by it in complying with that request.
Subject to those provisions for indemnification and those limitations
contained in the indenture, noteholders holding more than 50% of the then-
outstanding principal balance of the notes of the affected series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee if an event of default has occurred
and is continuing. Prior to the acceleration of the maturity of the notes of
the affected series, the noteholders holding more than 50% of the then-
outstanding principal balance of each class of the notes of the affected series
may also waive any default with respect to the notes, except a default in the
payment of principal or interest or a default relating to a covenant or
provision of the indenture that cannot be modified without the waiver or
consent of each affected noteholder.
After acceleration of a series of notes, principal collections and finance
charge collections allocated to those notes will be applied to make monthly
principal and interest payments on the notes until the earlier of the date the
notes are paid in full or the final maturity date of the notes. Funds in the
collection account, the excess funding account and the other trust accounts for
an accelerated series of notes will be applied immediately to pay principal of
and interest on those notes.
Upon acceleration of the maturity of a series of notes following an event
of default, the indenture trustee will have a lien on the collateral for those
notes for its unpaid fees and expenses that ranks senior to the lien of those
notes on the collateral.
In general, the indenture trustee will enforce the rights and remedies of
the holders of accelerated notes. However, noteholders will have the right to
institute any proceeding with respect to the indenture if the following
conditions are met:
. the noteholder or noteholders have previously given the indenture
trustee written notice of a continuing event of default;
. the noteholders of at least 25% of the then-outstanding principal
balance of each affected series make a written request of the indenture
trustee to institute a proceeding as indenture trustee;
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. the noteholders offer indemnification to the indenture trustee against
the costs, expenses and liabilities of instituting a proceeding that is
satisfactory to the indenture trustee;
. the indenture trustee has not instituted a proceeding within 60 days
after receipt of the request and offer of indemnification; and
. during the 60-day period following receipt of the request and offer of
indemnification, the indenture trustee has not received from noteholders
holding more than 50% of the then-outstanding principal balance of the
notes of that series a direction inconsistent with the request.
If the indenture trustee receives conflicting or inconsistent requests and
indemnity from two or more groups of any affected series, each representing no
more than 50% of the then-outstanding principal balance of that series, the
indenture trustee in its sole discretion may determine what action, if any,
will be taken.
Each holder of a note will have an absolute and unconditional right to
receive payment of the principal of and interest in respect of that note as
principal and interest become due and payable, and to institute suit for the
enforcement of any payment of principal and interest then due and payable and
those rights may not be impaired without the consent of that noteholder.
If any series of notes has been accelerated following an event of default,
and the indenture trustee has not received any valid directions from those
noteholders, the indenture trustee may, but is not required to, elect to
continue to hold the portion of the trust assets that secures those notes and
apply distributions on the trust assets to make payments on those notes to the
extent funds are available.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if any series of notes has been accelerated following an
event of default, the indenture trustee may:
. institute proceedings in its own name and as trustee for the collection
of all amounts then payable on the notes of the affected series; or
. take any other appropriate action to protect and enforce the rights and
remedies of the indenture trustee and the noteholders of the affected
series.
Subject to the conditions described in the following sentence, the
indenture trustee also may cause the trust to sell principal receivables in an
amount equal to the collateral amount for the series of accelerated notes and
the related finance charge receivables. Before exercising this remedy, the
indenture trustee must receive an opinion of counsel to the effect that
exercise of this remedy complies with applicable federal and state securities
laws and one of the following conditions must be satisfied:
. receipt by the indenture trustee of the consent of all noteholders of
the affected series;
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. determination by the indenture trustee that any proceeds from exercising
the remedy will be sufficient to discharge in full all principal and
interest due on the accelerated notes, and the indenture trustee obtains
the consent of noteholders holding more than 50% of the then-outstanding
principal balance of the affected series; or
. determination by the indenture trustee that the assets may not continue
to provide sufficient funds for the payment of principal of and interest
on those notes as they would have become due if the notes had not been
accelerated, and the indenture trustee obtains the consent of
noteholders holding at least 66 2/3% of the then-outstanding principal
balance of each class of the notes of the affected series.
The remedies described above are the exclusive remedies provided to
noteholders and each noteholder by accepting its interest in the notes of any
series or the indenture trustee expressly waives any other remedy that might
have been available under the Uniform Commercial Code.
The indenture trustee and the noteholders will covenant that they will not
at any time institute against the issuer or First Consumers Master Trust any
reorganization or other proceeding under any federal or state law.
None of us, the administrator, the owner trustee, the indenture trustee,
the servicer, or First Consumers Master Trust, nor any holder of an ownership
interest in the issuer, nor any of their respective owners, beneficiaries,
agents, officers, directors, employees, successors or assigns shall, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the notes or for the agreements of
the issuer contained in the indenture. The notes will represent obligations
solely of the issuer, and the notes will not be insured or guaranteed by us,
the servicer, the administrator, the owner trustee, the indenture trustee, or
any other person or entity.
Covenants
The indenture provides that the issuer may not consolidate with, merge into
or sell its business to, another entity, unless:
(1) the entity, if other than the issuer, formed by or surviving the
consolidation or merger or that acquires the issuer's business:
(a) is organized under the laws of the United States or any one of
its states;
(b) is not subject to regulation as an "investment company" under
the Investment Company Act of 1940;
(c) expressly assumes, by supplemental indenture, the issuer's
obligation to make due and punctual payments upon the notes and the
performance of every covenant of the issuer under the indenture;
(d) in the case of a sale of the issuer's business, expressly
agrees, by supplemental indenture that (i) all right, title and
interest so conveyed or transferred by the issuer will be subject and
subordinate to the rights of the
56
noteholders and (ii) it will make all filings with the Securities and
Exchange Commission required by the Securities Exchange Act of 1934 in
connection with the notes; and
(e) in the case of a sale of the issuer's business, expressly
agrees to indemnify the issuer from any loss, liability or expense
arising under the indenture and the notes;
(2) no pay out event or event of default will exist immediately after
the merger, consolidation or sale;
(3) each rating agency confirms that the transaction will not impair
its rating of any outstanding series or class of notes;
(4) the issuer will have received an opinion of counsel to the effect
that for federal income tax purposes:
(a) the transaction will not adversely affect the tax
characterization as debt of notes of any outstanding series or class
that were characterized as debt at the time of their issuance;
(b) the transaction will not cause the issuer to be deemed to be
an association or publicly traded partnership taxable as a
corporation; and
(c) the transaction will not cause or constitute an event in which
gain or loss would be recognized by any noteholder;
(5) any action necessary to maintain the lien and security interest
created by the indenture will have been taken; and
(6) the issuer has delivered to the indenture trustee an opinion of
counsel and officer's certificate each stating that the consolidation,
merger or sale satisfies all requirements under the indenture and that the
supplemental indenture is duly authorized, executed and delivered and is
valid, binding and enforceable.
As long as the notes are outstanding, the issuer will not, among other
things:
. except as expressly permitted by the indenture, the transfer and
servicing agreement or related documents, sell, transfer, exchange or
otherwise dispose of any of the assets of the issuer that secure the
notes unless directed to do so by the indenture trustee;
. claim any credit on or make any deduction from payments in respect of
the principal of and interest on the notes--other than amounts withheld
under the Internal Revenue Code or applicable state law--or assert any
claim against any present or former noteholders because of the payment
of taxes levied or assessed upon the assets of the issuer that secure
the notes;
. voluntarily dissolve or liquidate in whole or in part; or
. permit (A) the validity or effectiveness of the indenture or the lien
under the indenture to be impaired, or permit any person to be released
from any covenants or obligations with respect to the notes under the
indenture except as may be expressly
57
permitted by the indenture, (B) any lien or other claim of a third party
to be created with respect to the assets of the issuer, or (C) the lien
of the indenture not to constitute a valid first priority perfected
security interest in the assets of the issuer that secure the notes.
The issuer may not engage in any activity other than as specified under
"The Issuer" in this prospectus. The issuer will not incur, assume or
guarantee any indebtedness other than indebtedness under the notes and the
indenture.
Modification of the Indenture
The issuer and the indenture trustee may, without the consent of any
noteholders but with prior written notice to each rating agency, enter into
one or more supplemental indentures for any of the following purposes:
. to correct or enhance the description of any property subject to the
lien of the indenture, or to take any action that will enhance the
indenture trustee's lien under the indenture, or to add to the property
pledged to secure the notes;
. to reflect the agreement of another person to assume the role of the
issuer;
. to add to the covenants of the issuer, for the benefit of the
noteholders, or to surrender any right or power of the issuer;
. to transfer or pledge any property to the indenture trustee;
. to cure any ambiguity, to correct or supplement any provision in the
indenture or in any supplemental indenture that may be inconsistent with
any other provision in the indenture or in any supplemental indenture or
to make any other provisions concerning matters arising under the
indenture as long as that action would not adversely affect the
interests of the noteholders;
. to appoint a successor to the indenture trustee with respect to the
notes and to add to or change any of the provisions of the indenture to
allow more than one indenture trustee to act under the indenture;
. to modify, eliminate or add to the provisions of the indenture as
necessary to qualify the indenture under the Trust Indenture Act of
1939, or any similar federal statute later enacted;
. to permit the issuance of one or more new series of notes under the
indenture; or
. to terminate any interest rate swap agreement or other credit
enhancement in accordance with the related indenture supplement.
The issuer and the indenture trustee may also, without the consent of any
noteholders, enter into one or more supplemental indentures to amend the
indenture, upon:
(1) receipt of written confirmation from each rating agency that the
action will not impair its rating of any outstanding series or class of
notes; and
(2) our certification to the effect that, in the reasonable belief of
the certifying officer, the action will not (i) cause a pay out event or
an event of default or (ii)
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materially and adversely affect the amount or timing of payments to be
made to the noteholders of any series or class.
The issuer and the indenture trustee may also, without the consent of the
noteholders of any series or the credit enhancement providers for any series,
enter into one or more supplemental indentures to add, modify or eliminate any
provisions necessary or advisable in order to enable the issuer or any portion
of the issuer (i) to qualify as, and to permit an election to be made for the
issuer to be treated as, a "financial asset securitization investment trust"
under the Internal Revenue Code and (ii) to avoid the imposition of state or
local income or franchise taxes on the issuer's property or its income. Prior
to any amendment described in this paragraph, each rating agency must confirm
that the amendment will not impair its rating of any outstanding series or
class of notes. In addition, no amendment described in this paragraph may
affect the rights, duties or obligations of the indenture trustee or the owner
trustee under the indenture.
The issuer and the indenture trustee will not, without prior notice to each
rating agency and the consent of each noteholder affected, enter into any
supplemental indenture to:
. change the date of payment of any installment of principal of or
interest on any note or reduce the principal amount of a note, the note
interest rate or the redemption price of the note or change any place of
payment where, or the currency in which, any note is payable;
. impair the right to institute suit for the enforcement of specified
payment provisions of the indenture;
. reduce the percentage of the aggregate principal amount of the notes of
any series, whose consent is required (a) for execution of any
supplemental indenture or (b) for any waiver of compliance with
specified provisions of the indenture or of some defaults under the
indenture and their consequences provided in the indenture;
. reduce the percentage of the aggregate outstanding amount of the notes
required to direct the indenture trustee to sell or liquidate the trust
assets if the proceeds of the sale would be insufficient to pay the
principal amount and interest due on those notes;
. decrease the percentage of the aggregate principal amount of the notes
required to amend the sections of the indenture that specify the
percentage of the principal amount of the notes of a series necessary to
amend the indenture or other related agreements;
. modify provisions of the indenture prohibiting the voting of notes held
by the issuer, any other party obligated on the notes, us, or any of
their affiliates; or
. permit the creation of any lien superior or equal to the lien of the
indenture with respect to any of the collateral for any notes or, except
as otherwise permitted or contemplated in the indenture, terminate the
lien of the indenture on the collateral or deprive any noteholder of the
security provided by the lien of the indenture.
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The issuer and the indenture trustee may otherwise, with receipt of written
confirmation from each rating agency that the action will not impair its rating
of any outstanding series or class and with the consent of noteholders holding
more than 66 2/3% of the then-outstanding principal balance of the notes of
each series adversely affected, enter into one or more supplemental indentures
to add provisions to or change in any manner or eliminate any provision of the
indenture or to change the rights of the noteholders under the indenture.
Annual Compliance Statement
The issuer will be required to present to the indenture trustee each year a
written statement as to the performance of its obligations under the indenture.
Indenture Trustee's Annual Report
The indenture trustee will be required to mail to the noteholders each year
a brief report relating to its eligibility and qualification to continue as
indenture trustee under the indenture, the property and funds physically held
by the indenture trustee and any action it took that materially affects the
notes and that has not been previously reported.
List of Noteholders
Upon the issuance of definitive notes, three or more holders of the notes
who have each owned a note for at least six months may obtain access to the
list of noteholders the indenture trustee maintains for the purpose of
communicating with other noteholders. The indenture trustee may elect not to
allow the requesting noteholders access to the list of noteholders if it agrees
to mail the requested communication or proxy, on behalf and at the expense of
the requesting noteholders, to all noteholders of record.
Satisfaction and Discharge of Indenture
The indenture will be discharged with respect to the notes upon the
delivery to the indenture trustee for cancellation of all the notes or, with
specific limitations, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all the notes.
The Indenture Trustee
The indenture trustee may resign at any time. Noteholders holding more than
66 2/3% of the aggregate outstanding principal balance of all series may remove
the indenture trustee and may appoint a successor indenture trustee. In
addition, the administrator will remove the indenture trustee if it ceases to
be eligible to continue as an indenture trustee under the indenture or if the
indenture trustee becomes insolvent or otherwise becomes legally unable to act
as indenture trustee. If the indenture trustee resigns or is removed, the
administrator will then be obligated to appoint a successor indenture trustee.
If a successor indenture trustee does not assume the duties of indenture
trustee within 60 days after the retiring indenture trustee resigns or is
removed, the retiring indenture trustee, the issuer or
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noteholders representing more than 50% of the aggregate outstanding principal
balance of all series may petition a court of competent jurisdiction to appoint
a successor indenture trustee. In addition, if the indenture trustee ceases to
be eligible to continue as indenture trustee, any noteholder may petition a
court of competent jurisdiction for the removal of the indenture trustee and
the appointment of a successor indenture trustee.
If an event of default occurs under the indenture, under the Trust
Indenture Act of 1939, the indenture trustee may be deemed to have a conflict
of interest and be required to resign as indenture trustee for one or more
classes of each series of notes. In that case, a successor indenture trustee
will be appointed for one or more of those classes of notes and may provide for
rights of senior noteholders to consent to or direct actions by the indenture
trustee which are different from those of subordinated noteholders. Any
resignation or removal of the indenture trustee and appointment of a successor
indenture trustee for any class or series of notes will not become effective
until the successor indenture trustee accepts its appointment.
The indenture trustee is not responsible for the accuracy, validity or
adequacy of any of the information contained in this prospectus.
Matters Regarding the Administrator
The administrator will, to the extent provided in the administration
agreement, provide the notices and perform on behalf of the issuer other
administrative obligations required by the indenture.
POOLING AND SERVICING AGREEMENT
We have summarized the terms of the pooling and servicing agreement that
are material to noteholders in this prospectus. The summary is not complete and
is qualified in its entirety by reference to the pooling and servicing
agreement.
New Issuances of Investor Certificates
The pooling and servicing agreement provides that, in any one or more
series supplements to the pooling and servicing agreement, we may direct the
trustee for First Consumers Master Trust to issue one or more new series of
investor certificates and may define all principal terms of those series. A
series supplement may only modify or amend the terms of the pooling and
servicing agreement as applied to the new series. There is no limit to the
number of new issuances we may cause under the pooling and servicing agreement.
No new series of investor certificates may be issued unless we satisfy
various conditions, including that:
(1) each rating agency confirms that the issuance of the new series
will not impair its rating of any outstanding series or class of investor
certificates;
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(2) we certify that, after giving effect to the issuance of the new
series:
(i) we would not be required to add additional accounts; and
(ii) the Aggregate Principal Balance would exceed the Minimum
Aggregate Principal Balance.
(3) we deliver an opinion to the effect that:
(i) the issuance will not adversely affect the tax
characterization as debt of any outstanding series or class of
investor certificates that was characterized as debt at the time of
its issuance;
(ii) the issuance will not cause First Consumers Master Trust to
be deemed to be an association or publicly traded partnership taxable
as a corporation;
(iii) the transaction will not cause or constitute an event in
which gain or loss would be recognized by an investor
certificateholder; and
(iv) except as provided in the series supplement for the new
series, the new series will be properly characterized as debt.
Amendments
The pooling and servicing agreement and any series supplement to the
pooling and servicing agreement may be amended by us, the servicer and the
trustee for First Consumers Master Trust, without the consent of
certificateholders of any series, to cure any ambiguity, to correct or
supplement any provisions which may be inconsistent with any other provisions
of the pooling and servicing agreement, to qualify the transfers of receivables
under the pooling and servicing agreement as sales under generally accepted
accounting principles or to add any other provisions which would not be
inconsistent with the pooling and servicing agreement if the amendment would
not adversely effect the interests of the certificateholders in any material
respect and we deliver an opinion of counsel to that effect to the rating
agencies.
The amendments that we may make without the consent of the
certificateholders of any series or the credit enhancement providers for any
series may include the addition or sale of receivables in the trust portfolio.
The pooling and servicing agreement may also be amended by us, the servicer
and the trustee for First Consumers Master Trust, with the consent of
certificateholders representing not less than 66 2/3% of the investor amount of
the investor certificates of each series adversely affected by the amendment,
if each rating agency, other than Moody's, confirms that the amendment will not
impair its rating of any outstanding series or class of investor certificates.
Even with the consent of the investor certificateholders and the written
confirmation from the rating agencies described in the preceding sentence, no
amendment may occur if it:
(1) reduces the amount of, or delays the timing of, any distributions
to be made to certificateholders of any series without the consent of each
affected certificateholder;
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(2) changes the manner of calculating the investor amounts and
allocation percentages for any series or changes the manner of allocating
defaulted receivables to any series without the consent of each affected
certificateholder; or
(3) reduces the percentage of undivided interests the holders of which
are required to consent to any amendment, without the consent of each
affected noteholder.
CREDIT ENHANCEMENT
General
For any series, credit enhancement may be provided with respect to one or
more of the related classes. Credit enhancement may be in the form of setting
the collateral amount for that series at an amount greater than the initial
principal amount of the notes in that series, the subordination of one or more
classes of the notes of that series, a letter of credit, the establishment of a
cash collateral guaranty or account, a surety bond, an insurance policy, a
spread account, a reserve account, the use of cross support features or another
method of credit enhancement described in the accompanying prospectus
supplement, or any combination of these. If so specified in the accompanying
prospectus supplement, any form of credit enhancement may be structured so as
to be drawn upon by more than one class to the extent described in that
accompanying prospectus supplement. Any credit enhancement that constitutes a
guarantee of the applicable notes will be separately registered under the
Securities Act unless exempt from registration under the Securities Act.
In the prospectus supplement for each series, we will describe the amount
and the material terms of the related credit enhancement. Often, the credit
enhancement will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance of the notes and interest
thereon. If losses occur which exceed the amount covered by the credit
enhancement or which are not covered by the credit enhancement, noteholders
will bear their allocable share of deficiencies.
If credit enhancement is provided with respect to a series, the
accompanying prospectus supplement will include a description of:
. the amount payable under that credit enhancement;
. any conditions to payment not described here;
. the conditions, if any, under which the amount payable under that credit
enhancement may be reduced and under which that credit enhancement may
be terminated or replaced; and
. any material provision of any agreement relating to that credit
enhancement.
The accompanying prospectus supplement may also set forth additional
information with respect to any credit enhancement provider, including:
. a brief description of its principal business activities;
. its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business;
63
. if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business; and
. 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 accompanying prospectus supplement, credit
enhancement with respect to a series may be available to pay principal of the
notes of that series following the occurrence of one or more pay out events
with respect to that series. In this event, the credit enhancement provider
will have an interest in the cash flows in respect of the receivables to the
extent described in that prospectus supplement.
Excess Collateral Amount
If specified in the accompanying prospectus supplement, support for a
series may be provided by an excess collateral amount. The excess collateral
amount for any series will equal the collateral amount for that series
(calculated prior to any reduction to the collateral amount for amounts on
deposit in any principal accumulation account), minus the aggregate outstanding
principal amount of the notes of that series, after giving effect to all other
reductions through the date of determination. Because the collateral amount of
a series having an excess collateral amount will be higher than the outstanding
principal amount of the notes of that series, a greater amount of finance
charge collections and principal collections will be allocated to that series.
In addition, losses from defaulted receivables and uncovered dilution amounts
allocated to that series will first reduce the excess collateral amount before
reducing the principal amount ultimately paid on the notes. The excess
collateral amount for any series will be reduced by the amount of reallocated
principal collections applied to make payments for that series.
If your series is supported by an excess collateral amount, the
accompanying prospectus supplement will specify the required excess collateral
amount for your series. The required excess collateral amount for any series
may be decreased at any time with the consent of the rating agencies then
rating that series. During the controlled accumulation period or controlled
amortization period for a series, the excess collateral amount for that series
may be reduced by the amount of funds available but not required to be
deposited to the principal accumulation account or to make principal payments
to noteholders, as the case may be, on any distribution date, but only to the
extent that the excess collateral amount exceeds the required excess collateral
amount.
The excess collateral amount for a series may also be increased under the
circumstances described in the related prospectus supplement.
Subordination
If so specified in the accompanying prospectus supplement, one or more
classes of any series will be subordinated as described in the accompanying
prospectus supplement to the extent necessary to fund payments with respect to
the senior notes. The rights of the holders
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of these subordinated notes to receive distributions of principal and/or
interest on any distribution date for that series will be subordinate in right
and priority to the rights of the holders of senior notes, but only to the
extent set forth in the accompanying prospectus supplement. If so specified in
the accompanying prospectus supplement, subordination may apply only in the
event that a specified type of loss is not covered by another credit
enhancement.
The accompanying prospectus supplement will also set forth information
concerning:
. the amount of subordination of a class or classes of subordinated notes
in a series;
. the circumstances in which that 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 those subordinated notes will be
distributed to holders of senior notes.
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 accompanying prospectus supplement will specify the manner and
conditions for applying that cross-support feature.
Letter of Credit
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by one or more
letters of credit. A letter of credit may provide limited protection against
some 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
that letter of credit, to the extent of the amount available thereunder, to
provide funds under the circumstances and subject to any conditions as are
specified in the accompanying prospectus supplement.
The maximum liability of the issuer of a letter of credit under its letter
of credit will generally be an amount equal to a percentage specified in the
accompanying prospectus supplement of the initial collateral amount of a
series or a class of that series. The maximum amount available at any time to
be paid under a letter of credit will be set forth in the accompanying
prospectus supplement.
Cash Collateral Guaranty or Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by a cash
collateral guaranty, secured by the deposit of cash or permitted investments
in a cash collateral account, reserved for the beneficiaries of the cash
collateral guaranty or by a cash collateral account alone. The amount
available from 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 accompanying prospectus supplement. The accompanying
prospectus supplement will set forth the circumstances under which payments
are made to beneficiaries of the cash
65
collateral guaranty from the cash collateral account or from the cash
collateral account directly.
Surety Bond or Insurance Policy
If so specified in the accompanying prospectus supplement, insurance with
respect to a series or one or more of the related classes will be provided by
one or more insurance companies and 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 accompanying prospectus supplement.
If so specified in the accompanying prospectus supplement, a surety bond
will be purchased for the benefit of the holders of any series or class of that
series to assure distributions of interest or principal with respect to that
series or class of notes in the manner and amount specified in the accompanying
prospectus supplement.
If an insurance policy or a surety bond is provided for any series or
class, the provider of the insurance policy or surety bond will be permitted to
exercise the voting rights of the noteholders of the applicable series or class
to the extent described in the prospectus supplement for that series. For
example, if specified in the related prospectus supplement, the provider of the
insurance policy or surety bond, rather than the noteholders of that series,
may have the sole right to:
. consent to amendments to the indenture, the pooling and servicing
agreement, the transfer and servicing agreement or any other document
applicable to that series;
. if an event of default occurs, accelerate the notes of that series or
direct the trustee to exercise any remedy available to the noteholders;
or
. waive any event of default for that series.
Spread Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by the periodic
deposit of all or a portion of available excess cash flow from the trust assets
into a spread account intended to assist with subsequent distribution of
interest and principal on the notes of that class or series in the manner
specified in the accompanying prospectus supplement.
Reserve Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes or any related enhancement will be
provided by a reserve account. The reserve account may be funded, to the extent
provided in the accompanying prospectus supplement, by an initial cash deposit,
the retention of a portion of periodic distributions of principal or interest
or both otherwise payable to one or more classes of notes, including the
subordinated notes, or the provision of a letter of credit, guarantee,
insurance policy or other form of credit or any combination of these
arrangements. The
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reserve account will be established to assist with the subsequent distribution
of principal or interest on the notes of that series or the related class or
any other amount owing on any related enhancement in the manner provided in the
accompanying prospectus supplement.
NOTE RATINGS
Any rating of the notes by a rating agency will indicate:
. its view on the likelihood that noteholders will receive required
interest and principal payments; and
. its evaluation of the receivables and the availability of any credit
enhancement for the notes.
Among the things a rating will not indicate are:
. the likelihood that principal payments will be paid on a scheduled date;
. the likelihood that a pay out event will occur;
. the likelihood that a U.S. withholding tax will be imposed on non-U.S.
noteholders;
. the marketability of the notes;
. the market price of the notes; or
. whether the notes are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the notes. A
rating may be lowered or withdrawn at any time by a rating agency.
We will request a rating of the notes offered by this prospectus and the
accompanying prospectus supplement from at least one rating agency. Rating
agencies other than those requested could assign a rating to the notes and, if
so, that rating could be lower than any rating assigned by a rating agency
chosen by us. Except as otherwise expressly stated, any reference in this
prospectus or the accompanying prospectus supplement to a rating agency refers
to a rating agency selected by us to rate the securities issued by the issuer
or First Consumers Master Trust.
MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
In the pooling and servicing agreement and the transfer and servicing
agreement, we will represent and warrant that our transfer of receivables
constitutes a valid sale and assignment of all of our right, title and interest
in and to the receivables, except for the Seller Interest, or creates in favor
of the issuer a valid first-priority perfected security interest in our rights
in the receivables in existence at the time that the trust is formed or at the
time that receivables in additional accounts are transferred, as the case may
be, and a valid first-priority perfected security interest in our rights in the
receivables arising in accounts already designated for the trust portfolio on
and after their creation, in each case until termination of
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the trust. For a discussion of the issuer's rights arising from these
representations and warranties not being satisfied, see "Description of the
Notes--Representations and Warranties" in this prospectus.
We will represent in the pooling and servicing agreement and the transfer
and servicing agreement that the receivables are "accounts" or "general
intangibles" for purposes of the UCC. Both the sale of accounts and the
transfer of accounts as security for an obligation are subject to the
provisions of Article 9 of the UCC. In addition, a transfer of general
intangibles as security for an obligation is subject to the provisions of
Article 9 of the UCC. Therefore, we will file appropriate UCC financing
statements to perfect the respective transferee's security interest in the
receivables.
There are limited circumstances in which prior or subsequent transferees of
receivables coming into existence after a series closing date could have an
interest in those receivables with priority over the trust's interest. Under
the pooling and servicing agreement and the transfer and servicing agreement,
however, we will represent and warrant that we have transferred the receivables
to the trust free and clear of the lien of any third party other than the
indenture trustee, and we will covenant that we will not sell, pledge, assign,
transfer, or grant any lien on any receivable or any interest in any receivable
other than to the trust. Nevertheless, a tax, governmental or other
nonconsensual lien on our property arising prior to the time a receivable comes
into existence may have priority over the interest of the trust in that
receivable. Furthermore, if the FDIC were appointed as our receiver or
conservator, administrative expenses of the receiver or conservator may have
priority over the interest of the trust in the receivables.
If the servicer has satisfied the conditions discussed in "Description of
the Notes--Application of Collections" in this prospectus, the servicer will be
permitted to make deposits of collections on a monthly or other periodic basis.
In that event, cash collections held by the servicer may be commingled and used
for the benefit of the servicer prior to each distribution date and, in the
event of the insolvency of the servicer or the lapse of a ten-day period after
receipt by the servicer of collections that have been commingled with other
funds, the trust may not have a first-priority perfected security interest in
those collections. In that event, the amount payable to you could be lower than
the outstanding principal and accrued interest on the notes, thus resulting in
losses to you.
Conservatorship and Receivership
We are chartered as a national banking association and are regulated and
supervised principally by the Office of the Comptroller of the Currency, which
is required to appoint the FDIC as conservator or receiver for us if specified
events occur relating to our financial condition or the propriety of our
actions. In addition, the FDIC could appoint itself as our conservator or
receiver.
In its role as conservator or receiver, the FDIC would have broad powers to
repudiate contracts to which we were a party if the FDIC determined that the
contracts were burdensome and that repudiation would promote the orderly
administration of our affairs.
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In addition, no agreement that tended to diminish or defeat the FDIC's interest
in an asset acquired from us would be enforceable against the FDIC unless the
agreement were to meet certain legal requirements. One of those requirements is
that the agreement would have to have been executed by us contemporaneously
with our acquisition of the asset.
The FDIC has adopted a rule stating that the FDIC shall not use its
repudiation power to reclaim, recover or recharacterize as property of an FDIC-
insured bank any financial assets transferred by that bank in connection with a
securitization transaction. The same rule states that the FDIC shall not seek
to avoid an otherwise legally enforceable securitization agreement solely
because the agreement does not satisfy the contemporaneous execution
requirement. Although the FDIC has the power to repeal or amend its own rules,
the securitization rule states that any repeal or amendment of that rule will
not apply to any transfers of financial assets made in connection with a
securitization that was in effect before the repeal or modification.
We have structured the issuance of the notes with the intention that our
transfers of receivables to the trust would have the benefit of this rule.
Nevertheless, if the FDIC were to assert that the transfers do not have the
benefit of the rule, or were to require the indenture trustee to go through the
administrative claims procedure established by the FDIC in order to obtain
payments on the notes, or were to request a stay of any actions by the
indenture trustee to enforce the pooling and servicing agreement or the
transfer and servicing agreement against us, delays in payments on outstanding
series of notes could occur. Furthermore, if the FDIC's assertions were
successful, possible reductions in the amount of those payments could occur.
In addition, regardless of the terms of the indenture, the FDIC as our
conservator or receiver may have the power to prevent the commencement of a
rapid amortization period, to prevent or limit the early liquidation of the
receivables and termination of the trust, or to require the continued transfer
of new principal receivables. Regardless of the instructions of those
authorized to direct the indenture trustee's action, moreover, the FDIC as our
conservator or receiver may have the power to require the early liquidation of
the receivables, to require the early termination of the trust and the
retirement of the notes, or to prohibit or limit the continued transfer of new
principal receivables.
In the event of our conservatorship or receivership, the conservator or
receiver may have the power to prevent either the indenture trustee or the
noteholders from appointing a successor servicer. See "Description of the
Notes--Servicer Default" in this prospectus.
If insolvency proceedings occur with respect to us, we will promptly notify
the indenture trustee and a pay out event will occur with respect to each
series. Under the pooling and servicing agreement and the transfer and
servicing agreement, newly created receivables will not be transferred to the
trust on and after any of these insolvency related events. Any principal
receivables transferred to the trust prior to the event, as well as collections
on those principal receivables and finance charge receivables accrued at any
time with respect to those principal receivables, will continue to be part of
the trust assets and will be applied as specified above in "Description of the
Notes--Application of Collections" and in the accompanying prospectus
supplement.
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A conservator or receiver, however, may have the power to delay application
of collections or to require the continued transfer of principal receivables to
the trust. See "Risk Factors--If a conservator or receiver were appointed for
us, delays or reductions in payment of your notes could occur" in this
prospectus.
Application of federal and state insolvency and debtor relief laws would
affect the interests of the noteholders if those laws result in any receivables
being charged-off as uncollectible. See "Description of the Notes--Defaulted
Receivables; Rebates and Fraudulent Charges Investor Charge-Offs" in this
prospectus.
Consumer Protection Laws
The relationship of the consumer and the provider of consumer credit is
extensively regulated by federal and state consumer protection laws. With
respect to credit accounts issued by us, the most significant federal laws
include the Federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting and Fair Debt Collection Practices Acts. These statutes impose
various disclosure requirements either before or when an account is opened, or
both, and at the end of monthly billing cycles, and, in addition, limit account
holder liability for unauthorized use, prohibit various discriminatory
practices in extending credit and regulate practices followed in collections.
In addition, account holders are entitled under these laws to have payments and
credits applied to the revolving credit account promptly and to request prompt
resolution of billing errors. Congress and the states may enact new laws and
amendments to existing laws to regulate further the consumer revolving credit
industry. The trust may be liable for violations of consumer protection laws
that apply to the receivables, either as assignee from us with respect to
obligations arising before transfer of the receivables to the trust or as the
party directly responsible for obligations arising after the transfer. In
addition, an account holder may be entitled to assert those violations by way
of set-off against the obligation to pay the amount of receivables owing. All
receivables that were not created in compliance in all material respects with
the requirements of consumer protection laws, if the noncompliance has a
material adverse effect on the noteholders' interest therein, will be
reassigned to us. The servicer has also agreed in the pooling and servicing
agreement and the transfer and servicing agreement to indemnify the trust,
among other things, for any liability arising from those types of violations.
For a discussion of the trust's rights if the receivables were not created in
compliance in all material respects with applicable laws, see "Description of
the Notes--Representations and Warranties" in this prospectus.
FEDERAL INCOME TAX CONSEQUENCES
General
The following summary describes the material United States federal income
tax consequences of the purchase, ownership and disposition of the notes.
Additional federal income tax considerations relevant to a particular series
may be set forth in the accompanying prospectus supplement. The following
summary has been prepared and
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reviewed by Rooks, Pitts and Poust as special tax counsel to the Issuer. The
summary is based on the Internal Revenue Code of 1986, as amended as of the
date hereof, and final, temporary and proposed Treasury regulations, revenue
rulings and judicial decisions, all of which are subject to prospective and
retroactive changes. The summary is addressed only to original purchases of the
notes, deals only with notes held as capital assets within the meaning of
Section 1221 of the Internal Revenue Code and, except as specifically set forth
below, does not address tax consequences of holding notes that may be relevant
to investors in light of their own investment circumstances or their special
tax situations, for example:
. banks and thrifts,
. insurance companies,
. regulated investment companies,
. dealers in securities,
. holders that will hold the offered notes as a position in a "straddle"
for tax purposes or as a part of a "synthetic security," "conversion
transaction" or other integrated investment comprised of the offered
notes, and one or more other investments,
. trusts and estates, and
. pass-through entities, the equity holders of which are any of the
foregoing.
Further, this discussion does not address alternative minimum tax
consequences or any tax consequences to holders of interests in a noteholder.
Special tax counsel to the issuer is of the opinion that the following summary
of federal income tax consequences is correct in all material respects. An
opinion of special tax counsel to the issuer, however, is not binding on the
Internal Revenue Service or the courts, and no ruling on any of the issues
discussed below will be sought from the IRS. In addition, no transaction
closely comparable to the purchase of the notes has been the subject of any
Treasury Regulation, revenue ruling or judicial decision. Accordingly, we
suggest that persons considering the purchase of notes consult their own tax
advisors with regard to the United States federal income tax consequences of an
investment in the notes and the application of United States federal income tax
laws, as well as the laws of any state, local or foreign taxing jurisdictions,
to their particular situations.
Tax Classification of the Issuer and the Notes
Treatment of the Issuer as an Entity, Not Subject to Tax. Special tax
counsel to the issuer is of the opinion that, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
Regulation, revenue ruling or judicial decision, the trust will not be treated
as a publicly traded partnership taxable as a corporation for federal income
tax purposes. Special tax counsel to the issuer is also of the opinion that,
absent an affirmative election by the issuer to be classified as an
association, it will not be treated as a taxable entity under the Treasury
Regulations prescribing classification of business entities for federal income
tax purposes. As a result, special tax counsel to the issuer is of the opinion
that the issuer will not be subject to federal income tax. However, as
discussed above, this opinion is not binding on the IRS and no assurance can be
given that this classification will prevail.
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The precise tax classification of the issuer for federal income tax
purposes is not certain. It might be viewed as merely holding assets on our
behalf as collateral for notes issued by us. On the other hand, the issuer
could be viewed as a separate entity for tax purposes issuing its own notes.
This distinction may have a significant tax effect on particular noteholders as
stated below under "Possible Alternative Classifications."
Treatment of the Notes as Debt. Special tax counsel to the issuer is of the
opinion that, although no transaction closely comparable to that contemplated
herein has been the subject of any Treasury regulation, revenue ruling or
judicial decision, the notes will be characterized as debt for United States
federal income tax purposes. The issuer agrees by entering into the Indenture,
and the noteholders agree by their purchase and holding of notes, to treat the
notes as debt for United States federal income tax purposes.
Possible Alternative Classifications. If, contrary to the opinion of
special tax counsel to the issuer, the IRS successfully asserted that a series
or class of notes did not represent debt for United States federal income tax
purposes, those notes might be treated as equity interests in the issuer or
some other entity for United States federal income tax purposes. If so treated,
investors could be treated for United States federal income tax purposes either
as partners in a partnership or, alternatively, as equity owners in a taxable
entity. Treatment of a noteholder as a partner could have adverse tax
consequences to certain holders; for example, income to foreign persons
generally would be subject to United States tax and United States tax return
filing and withholding requirements, and individual holders might be subject to
limitations on their ability to deduct their share of partnership expenses. If
notes instead were treated as an equity interest in a taxable entity, the
taxable entity would not be able to reduce its taxable income by deductions for
interest expense on notes recharacterized as equity, and any tax imposed on the
taxable entity could materially reduce cash available to make payments on the
notes; further, noteholders might not be entitled to any dividends received
deduction in respect of payments of interest on notes treated as dividends. In
addition, even if the notes are treated as debt, the issuer is also able to
issue other securities which may be treated as debt or as equity interests in
the issuer. The issuance of additional securities requires the delivery of a
new opinion of counsel generally to the effect that the new issuance will not
cause the issuer to become taxable as a separate entity for federal income tax
purposes; however, the new opinion would not bind the IRS, and the issuer could
become a taxable entity as a result of the new issuance, potentially
diminishing cash available to make payments on the notes. We suggest that
prospective investors consult with their own tax advisors with regard to the
consequences of each of the possible alternative characterizations to them in
their particular circumstances. The following discussion assumes that the
classifications of the notes as debt is correct.
Consequences to Holders of the Offered Notes
Interest and Original Issue Discount. In general, stated interest on a note
will be includible in gross income as it accrues or is received in accordance
with a noteholder's usual method of tax accounting. If a class of notes is
issued with original issue discount, the provisions of Sections 1271 through
1273 and 1275 of the Code will apply to those notes.
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Under those provisions, a holder of a note issued with original issue
discount--including a cash basis holder--generally would be required to include
the original issue discount on a note in income for federal income tax purposes
on a constant yield basis, resulting in the inclusion of original issue
discount in income in advance of the receipt of cash attributable to that
income. In general, a note will be treated as having original issue discount to
the extent that its "stated redemption price" exceeds its "issue price," if
that excess equals or exceeds 0.25 percent multiplied by the weighted average
life of the note, determined by taking into account the number of complete
years following issuance until payment is made for each partial principal
payment. Under Section 1272(a)(6) of the Internal Revenue Code, special
provisions apply to debt instruments on which payments may be accelerated due
to prepayments of other obligations securing those debt instruments. However,
no regulations have been issued interpreting those provisions, and the manner
in which those provisions would apply to the notes is unclear, but the
application of Section 1272(a)(6) could affect the rate of accrual of original
issue discount and could have other consequences to holders of the notes.
Additionally, the IRS could take the position based on Treasury regulations
that none of the interest payable on a note is "unconditionally payable" and
hence that all of the interest payable on the note should be included in the
note's stated redemption price at maturity. If sustained, that treatment should
not significantly affect tax liabilities for most holders of the notes, but we
suggest that prospective noteholders consult their own tax advisors concerning
the impact to them in their particular circumstances. The issuer intends to
take the position that interest on the notes constitutes "qualified stated
interest" and that the above consequences do not apply.
Disposition of the Notes: Defeasance. Upon the sale, exchange or retirement
of a note, the holder of the note generally will recognize taxable gain or loss
in an amount equal to the difference between (a) the amount realized on the
disposition, other than that part of the amount attributable to accrued
interest and (b) the holder's adjusted tax basis in the note. A taxable
exchange of a note could also occur as a result of our substitution of money or
investments for the receivables in the trust portfolio. See "Description of the
Notes--Defeasance" in this prospectus. The holder's adjusted tax basis in the
note generally will equal the cost of the note to that holder, increased by any
original issue discount previously included in income by that holder with
respect to the note, and decreased by the amount of any payments of principal
or original issue discount previously received by that holder with respect to
its note. Any related gain or loss generally will be capital gain or loss, and
will be long-term capital gain or loss if at the time of sale the note has been
held for more than one year.
Foreign Holders. Under United States federal income tax law, payments of
interest by the issuer to a holder of a note who, as to the United States, is a
nonresident alien individual or a foreign corporation (a "foreign person") will
be considered "portfolio interest," and will not be subject to United States
federal income tax and withholding tax provided:
. the interest is not effectively connected with the conduct of a trade or
business within the United States by the foreign person,
. the foreign person is not, for United States federal income tax
purposes, actually or constructively a "10 percent shareholder" of us or
the issuer, a "controlled foreign
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corporation" with respect to which we or the issuer is a "related
person" within the meaning of the Internal Revenue Code, or a bank
extending credit under a loan agreement entered into in the ordinary
course of its trade or business, or,
. the foreign person provides the person who is otherwise required to
withhold United States tax with respect to the notes with an appropriate
statement, on IRS Form W-8BEN and signed under penalties of perjury,
certifying that the beneficial owner of the note is a foreign person and
providing the foreign person's name and address.
If the interest paid to the foreign person is not portfolio interest, then
it will be subject to withholding of United States federal income tax at a
rate of 30%, unless reduced or eliminated by an applicable tax treaty or the
interest is effectively connected with the conduct of a trade or business
within the United States and, in either case, an appropriate signed IRS form
has been filed by or on behalf of the foreign person. If a note is held
through a securities clearing organization or other financial institutions, as
is expected to be the case unless definitive notes are issued, the
organization or institution may provide the relevant signed statement
generally to the withholding agent. In that case, however, the signed
statement generally must be accompanied by an IRS Form W-8BEN provided by the
foreign person that owns the note. Recently issued final Treasury Regulations
revised some of the procedures whereby a foreign person may establish an
exemption from withholding generally beginning January 1, 2001. We suggest
that foreign persons consult their tax advisors concerning the impact to them,
if any, of those revised procedures.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income tax and withholding tax, provided that (i) the gain is
not effectively connected with the conduct of a trade or business in the
United States by the foreign person, and (ii) in the case of an individual
foreign person, the individual is not present in the United States for 183
days or more in the taxable year.
Backup Withholding. Payments of principal and interest, as well as
payments of proceeds from the sale, retirement or disposition of a note, may
be subject to "backup withholding" tax under Section 3406 of the Internal
Revenue Code at a rate of 31% if a recipient of those payments fails to
furnish to the payor required identifying information. Any amounts deducted
and withheld would be allowed as a credit against the recipient's United
States federal income tax if appropriate proof is provided under rules
established by the IRS. Furthermore, penalties may be imposed by the IRS on a
recipient of payments that is required to supply information but does not do
so in the proper manner. Backup withholding will not apply with respect to
payments made to exempt recipients, such as corporations and financial
institutions. Holders of the notes are urged to consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining an exemption.
The United States federal income tax discussion set forth above may not be
applicable depending upon a holder's particular tax situation, and does not
purport to address the issues described with the degree of specificity that
would be provided by a taxpayer's own tax
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advisor. We suggest that prospective purchasers consult their own tax advisors
with respect to the tax consequences to them of the purchase, ownership and
disposition of the notes and the possible effects of changes in federal tax
laws.
State and Local Tax Consequences
The discussion above does not address the taxation of the trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
notes under any state or local tax law. We suggest that each investor consult
its own tax advisor regarding state and local tax consequences.
ERISA CONSIDERATIONS
The prospectus supplement for each series of notes will specify whether the
notes offered by that prospectus supplement are eligible for purchase by
employee benefit plans. Subject to the considerations discussed below, unless
otherwise specified in the accompanying prospectus supplement the notes offered
under this registration statement are eligible for purchase by employee benefit
plans.
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended and Section 4975 of the Internal Revenue Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as an individual
retirement account or Keogh plan, from engaging in specified transactions with
persons that are "parties in interest" under ERISA or "disqualified persons"
under the Internal Revenue Code with respect to these benefit plans. A
violation of these "prohibited transaction" rules may result in an excise tax
or other penalties and liabilities under ERISA and the Internal Revenue Code
for these persons. Title I of ERISA also requires that fiduciaries of a benefit
plan subject to ERISA make investments that are prudent, diversified (unless
clearly prudent not to do so), and in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the notes
might be deemed to constitute prohibited transactions under ERISA and the
Internal Revenue Code if assets of the trust were deemed to be assets of a
benefit plan. Under a regulation issued by the United States Department of
Labor, the assets of the trust would be treated as plan assets of a benefit
plan for the purposes of ERISA and the Internal Revenue Code only if the
benefit plan acquires an "equity interest" in the trust and none of the
exceptions contained in the regulation is applicable. An equity interest is
defined under the regulation as an interest in an entity other than an
instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. Although there can be no assurances
in this regard, it appears that, at the time of their initial issuance, the
notes should be treated as debt without substantial equity features for
purposes of the regulation. The debt characterization of the notes could change
after their initial issuance if the trust incurs losses.
However, without regard to whether the notes are treated as an equity
interest for these purposes, the acquisition or holding of the notes by or on
behalf of a benefit plan could be considered to give rise to a prohibited
transaction if we, the issuer, the owner trustee, the
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servicer, the administrator or the indenture trustee, is or becomes a party in
interest or a disqualified person with respect to these benefit plans. In that
case, various exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the plan fiduciary making
the decision to acquire a note. Included among these exemptions are:
. Prohibited Transaction Class Exemption 96-23, regarding transactions
effected by "in-house asset managers";
. Prohibited Transaction Class Exemption 90-1, regarding investments by
insurance company pooled separate accounts;
. Prohibited Transaction Class Exemption 95-60, regarding transactions
effected by "insurance company general accounts";
. Prohibited Transaction Class Exemption 91-38, regarding investments by
bank collective investment funds; and
. Prohibited Transaction Class Exemption 84-14, regarding transactions
effected by "qualified professional asset managers."
By your acquisition of a note, you will be deemed to represent and warrant
that your purchase and holding of the note will not result in a non-exempt
prohibited transaction under ERISA or the Internal Revenue Code.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA, and certain church plans, as defined in Section 3(33) of ERISA,
are not subject to ERISA requirements, but may be subject to state or other
federal law requirements which may impose restrictions similar to those under
ERISA and the Internal Revenue Code discussed above.
If you are a plan fiduciary considering the purchase of any of the notes,
you should consult your tax and legal advisors regarding whether the assets of
the trust would be considered plan assets, the possibility of exemptive relief
from the prohibited transaction rules and other issues and their potential
consequences.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
to be entered into with respect to each series of notes, we will cause the
notes to be sold by the issuer to each of the underwriters named in that
underwriting agreement and in the accompanying prospectus supplement, and each
of those underwriters will severally agree to purchase from the issuer, the
principal amount of notes set forth in that underwriting agreement and in the
accompanying 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 notes offered by
this prospectus and by the accompanying prospectus supplement.
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In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in that underwriting agreement,
to purchase all the notes offered by this prospectus and by the accompanying
prospectus supplement if any of those notes are purchased. In the event of a
default by any underwriter, each underwriting agreement will provide that, in
specified circumstances, purchase commitments of the nondefaulting underwriters
may be increased or the underwriting agreement may be terminated.
Each prospectus supplement will set forth the price at which each series of
notes or class being offered initially will be offered to the public and any
concessions that may be offered to dealers participating in the offering of
those notes. After the initial public offering, the public offering price and
those concessions may be changed.
Each underwriting agreement will provide that the seller will indemnify the
related underwriters against specified liabilities, including liabilities under
the Securities Act of 1933, as amended.
The place and time of delivery for any series of notes in respect of which
this prospectus is delivered will be set forth in the accompanying prospectus
supplement.
REPORTS TO NOTEHOLDERS
The servicer will prepare monthly and annual reports that will contain
information about the issuer. The financial information contained in the
reports will not be prepared in accordance with generally accepted accounting
principles. Unless and until definitive notes are issued, the reports will be
sent to Cede & Co. which is the nominee of The Depository Trust Company and the
registered holder of the notes. No financial reports will be sent to you. See
"Description of the Notes--Book-Entry Registration," "--Reports to Noteholders"
and "--Evidence as to Compliance" in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the notes with the SEC. This
prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies
of these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov.).
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The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
be filed under the name of First Consumers National Bank and will automatically
update the information in this prospectus. In all cases, you should rely on the
later information over different information included in this prospectus or the
accompanying prospectus supplement. We incorporate by reference any future
annual, monthly and special SEC reports and proxy materials filed by or on
behalf of the issuer and First Consumers Master Trust until we terminate our
offering of the notes.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents--unless the
exhibits are specifically incorporated by reference--at no cost, by writing or
calling us care of: First Consumers National Bank, 9300 S.W. Gemini Drive,
Beaverton, Oregon 97008, Telephone: (503) 520-8200.
GLOSSARY OF TERMS FOR PROSPECTUS
"Aggregate Principal Balance" means, on any date, the sum of (a) the total
amount of principal receivables, other than discount option receivables, (b)
the amount on deposit in the excess funding account, after excluding any
investment earnings and (c) the amount of principal collections on deposit in
the collection account, after excluding any investment earnings, in each case
as of that date.
"Eligible Account" means an account:
. that is payable in United States dollars;
. that is serviced in any of our credit service centers that is located in
the United States;
. the cardholder of which has provided, as his or her initial billing
address, an address located in the United States or its territories or
possessions;
. that we have not finally determined to be counterfeit or fraudulent;
. that does not have any receivables that have been charged off as
uncollectible by the servicer in accordance with its charge account
guidelines or its customary and usual servicing procedures;
. that has not been sold or pledged to any other party;
. that does not have receivables that have been sold or pledged to any
other party; and
. is a Visa or MasterCard revolving credit card account.
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"Eligible Institution" means:
(a) a depository institution, which may include the owner trustee or
the indenture trustee, that:
(i)is organized under the laws of the United States or any one of
its states,
(ii) has FDIC deposit insurance, and
(iii) has a long-term unsecured debt rating or a certificate of
deposit rating acceptable to the rating agencies; or
(b) any other institution acceptable to the rating agencies, which may
include the servicer.
"Eligible Receivable" means each receivable:
. that has arisen under an Eligible Account;
. that was created in compliance, in all material respects, with all
requirements of law applicable to us or the originator of the related
account pursuant to a credit card agreement between the cardholder and
us or the originator of the related account which complies, in all
material respects, with all requirements of law applicable to us or the
originator of the related account;
. for which all consents, licenses, approvals or authorizations of, or
registrations with, any governmental authority required to be obtained
or given by us or the originator of the related account in connection
with the creation of the receivable or the execution, delivery and
performance by us or the originator of the related account of the
related credit card agreement have been duly obtained or given and are
in full force and effect as of the date of the creation of that
receivable;
. as to which, immediately prior to being transferred to the trust, we had
good title free and clear of all liens and security interests arising
under or through us and our affiliates, other than any lien for state,
municipal or other local taxes if those taxes are not then due and
payable or if we are then contesting the validity of those taxes in good
faith by appropriate proceedings and we have set aside on our books
adequate reserves with respect to those taxes;
. that is the legal, valid and binding payment obligation of the related
cardholder, enforceable against that cardholder in accordance with its
terms, subject to permitted insolvency- and equity-related exceptions;
. that constitutes either an "account" or a "general intangible" under
Article 9 of the Uniform Commercial Code as in effect in the State of
Illinois;
. that, at the time of transfer to the trust, has not been waived or
modified except as permitted by our charge account guidelines and which
waiver or modification has been reflected in our computer files;
. that, at the time of transfer to the trust, is not, to our knowledge,
subject to any right of recission, setoff, counterclaim or defense,
including usury, that would require that receivable to be charged off in
accordance with our charge account guidelines, other than some
insolvency- and equity-related defenses;
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. as to which we have satisfied all obligations required to be satisfied
at the time it is transferred to the trust;
. with respect to receivables transferred to the issuer after the
termination of First Consumers Master Trust, in which all of our right,
title and interest has been validly transferred and assigned to the
issuer or in which a valid first priority perfected security interest
has been granted to the issuer; and
. with respect to receivables transferred to the issuer after the
termination of First Consumers Master Trust, as to which, at the time of
transfer of that receivable to the issuer, we have not taken or omitted
to take any action that would impair the rights of the issuer or the
noteholders.
"Minimum Aggregate Principal Balance" means, on any date of determination,
the greater of (a) the sum of the collateral and investor amounts of all
series outstanding on the date of determination, plus the Minimum Seller
Amount and (b) the sum of the numerators used to calculate the allocation
percentages for principal collections for all outstanding series of securities
on that date of determination.
"Minimum Seller Amount" will be calculated as follows:
(i) the weighted average times (ii) the aggregate of the
(by collateral and collateral and
investor amounts) of investor amounts of
the Minimum Seller all outstanding
Percentages for all series of securities
outstanding series of
securities
We may reduce the Minimum Seller Amount by written notice to the indenture
trustee if (a) each rating agency confirms that the reduction will not impair
its rating of any outstanding series or class of securities and (b) we deliver
to the indenture trustee an opinion of counsel stating that the reduction will
not have a material adverse effect on the federal income tax characterization
of any outstanding series.
"Minimum Seller Percentage" means, for any series of securities, the
amount specified in the prospectus supplement for that series, or if not
specified in the related prospectus supplement, 0%.
"Qualified Account" means either:
(a) a non-interest bearing segregated account established with an
Eligible Institution; or
(b) a non-interest bearing segregated trust account with the corporate
trust department of a depository institution that:
(1) is organized under the laws of the United States or any one of
its states,
(2) acts as trustee for funds deposited in the account, and
(3) has a credit rating from each rating agency in one of its
generic credit rating categories that signifies investment grade.
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"Seller Amount" means, on any date, the difference between:
(1) the Aggregate Principal Balance at the end of the preceding day;
minus
(2) the aggregate of the collateral and investor amounts of all
outstanding series of securities at the end of the preceding day.
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Annex I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered First
Consumers Credit Card Master Note Trust Asset Backed Notes (the "global
securities") to be issued in series from time to time will be available only in
book-entry form. Investors in the global securities may hold those global
securities through any of The Depository Trust Company, Clearstream or
Euroclear. The global securities will be tradable 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 Clearstream 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 Clearstream or Euroclear and DTC
participants holding notes will be effected on a delivery-against-payment basis
through the respective depositaries of Clearstream and Euroclear, in that
capacity, and as DTC participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless those 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, Clearstream and Euroclear
will hold positions on behalf of their participants through their respective
depositaries, which in turn will hold those positions in accounts as DTC
participants.
Investors electing to hold their global securities through DTC (other than
through accounts at Clearstream or Euroclear) 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 Clearstream or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Global securities will be credited
to the securities custody accounts on the settlement date against payment for
value on the settlement date.
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Secondary Market Trading
Because 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, other than the depositaries for Clearstream and Euroclear, will
be settled using the procedures applicable to U.S. corporate debt obligations
in same-day funds.
Trading between Clearstream customers and/or Euroclear participants.
Secondary market trading between Clearstream customers and/or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC seller and Clearstream customer or Euroclear purchaser.
When global securities are to be transferred from the account of a DTC
participant--other than the depositaries for Clearstream and Euroclear--to the
account of a Clearstream customer or a Euroclear participant, the purchaser
must send instructions to Clearstream prior to 12:30 p.m. on the settlement
date. Clearstream or Euroclear, as the case may be, will instruct the
respective depositary to receive the global securities for payment. Payment
will then be made by the respective depositary, as the case may be, 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 Clearstream customer's or Euroclear participant's
account. Credit for the global securities 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 Clearstream or Euroclear cash
debit will be valued instead as of the actual settlement date.
Clearstream customers 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 Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream customers 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, Clearstream customers 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
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charges, although this result will depend on each Clearstream customer'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 European depositary for the benefit of Clearstream customers 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 from a trade between two DTC participants.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream customers 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 European depositary, to another DTC participant. The
seller will send instructions to Clearstream before 12:30 p.m. on the
settlement date. In these cases, Clearstream or Euroclear will instruct the
respective European depositary, as appropriate, to credit the global securities
to the DTC participant's account against payment. The payment will then be
reflected in the account of the Clearstream customer or Euroclear participant
the following day, and receipt of the cash proceeds in the Clearstream
customer'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.
If the Clearstream customer or Euroclear participant has a line of credit with
its respective clearing system and elects to draw on such line of credit in
anticipation of receipt of the sale proceeds in its account, the back-valuation
may substantially reduce or offset 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 Clearstream
customer's or Euroclear participant's account would instead be valued as of the
actual settlement date.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global securities holding securities through
Clearstream, 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 the beneficial
owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) the beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons; Reduced rate or exemption for non-U.S.
Persons resident in treaty countries. Form W-8BEN, "Certificate of Foreign
Status of Beneficial Owner for United States Tax Withholding," is designed to
establish foreign status, advise that the signatory is the beneficial owner of
the income for which the form is being furnished and, if applicable, claim a
reduced rate of, or exemption from, withholding as a resident of a
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foreign country with which the U.S. has an income tax treaty. For interest
payments which qualify as "portfolio interest," non-U.S. Persons generally can
obtain complete exemption from withholding tax by completing part I of Form W-
8BEN and filing the signed form. If the payments do not qualify as "portfolio
interest," non-U.S. Persons residing in a country that has a tax treaty with
the United States can obtain a reduced tax rate or exemption depending on the
treaty terms by completing parts I and II of Form W-8BEN and filing the signed
form.
Exemption for non-U.S. Persons with effectively connected income. 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 W-8EC1--Certificate of Foreign Person's Claim for Exemption
from Withholding on Income Effectively Connected with the Conduct of a Trade or
Business in the United States.
Exemption for U.S. Persons. U.S. Persons can obtain a complete exemption
from the withholding tax by filing Form W-9--Request for Taxpayer
Identification Number and Certification.
U.S. Federal Income Tax Reporting Procedure. The note owner of a global
security files by submitting the appropriate form to the person through whom it
holds. This is the clearing agency, in the case of persons holding directly on
the books of the clearing agency.
Form W-8BEN, if furnished with a taxpayer identification number, will
remain in effect until the status of the beneficial owner changes, or a change
in circumstances makes any information on the form incorrect. Form W-8BEN, if
furnished without a taxpayer identification number, and a Form W-8ECI will
remain in effect for a period starting on the date the form is signed and
ending on the last day of the third succeeding calender year, unless a change
in circumstances makes any information on the form incorrect. If the
information shown on Form W-8BEN changes, a new Form W-8BEN must be filed
within 30 days of the change.
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, any state thereof, or any political subdivision of either
(including the District of Columbia), 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. We suggest that investors consult their own tax advisors for
specific tax advice concerning their holding and disposing of the global
securities. Further, recently finalized Treasury Regulations revise some
procedures for withholding on amounts paid to foreign persons. Under these
regulations, interest or original issue discount paid to a nonresident alien
would continue to be exempt from U.S. withholding taxes, including backup
withholding, provided that the holder complies with the new certification
procedures.
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First Consumers Credit Card
Master Note Trust
Issuer
First Consumers National Bank
Seller and Servicer
Series 2001-A
$462,000,000
Class A Floating Rate Asset Backed Notes
$63,000,000
Class B Floating Rate Asset Backed Notes
-----------
PROSPECTUS SUPPLEMENT
-----------
Underwriters of the Class A Notes
Deutsche Banc Alex. Brown
Banc of America Securities LLC
Commerzbank Capital Markets Corp.
JPMorgan
Underwriter of the Class B Notes
Deutsche Banc Alex. Brown
You should rely on the information contained or incorporated by reference in
this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the notes in any state where the offer is not permitted.
We do not claim the accuracy of the information in this prospectus supplement
and the accompanying prospectus as of any date other than the dates stated on
their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the notes and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the notes will deliver a
prospectus supplement and prospectus until May 29, 2001.