<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-05433
333-05433-01
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 29, 1998)
ADVANTA CREDIT CARD MASTER TRUST II
$966,000,000 CLASS A FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1998-A
$86,250,000 CLASS B FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1998-A
ADVANTA NATIONAL BANK
SELLER AND SERVICER
------------------
Each Class A Floating Rate Asset Backed Certificate, Series 1998-A
(collectively, the "Class A Certificates") and each Class B Floating Rate Asset
Backed Certificate, Series 1998-A (collectively, the "Class B Certificates" and,
together with the Class A Certificates, the "Certificates") will represent an
undivided interest in the ADVANTA Credit Card Master Trust II (the "Trust")
formed pursuant to a Pooling and Servicing Agreement among Advanta National Bank
(formerly known as Advanta National Bank
(Continued on next page)
------------------
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS
NO ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH IN "RISK FACTORS" COMMENCING ON PAGE
S-17 HEREIN AND ON PAGE 17 IN THE PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF ADVANTA NATIONAL BANK, ADVANTA CORP. OR ANY
AFFILIATE THEREOF, EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN. A CERTIFICATE
IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR
RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "FDIC") OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
===============================================================================================
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT BANK(1)(2)
- -----------------------------------------------------------------------------------------------
Per Class A Certificate 99.80851% 0.225% 99.58351%
- -----------------------------------------------------------------------------------------------
Per Class B Certificate 99.80406% 0.275% 99.52906%
- -----------------------------------------------------------------------------------------------
Total $1,050,231,208 $2,410,688 $1,047,820,520
===============================================================================================
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the
Class B Certificate Rate, as applicable, from February 6, 1998.
(2) Before deduction of expenses payable by the Bank estimated at $700,000.
------------------
The Certificates are offered by the Underwriters when, as and if issued by
the Trust and accepted by the Underwriters and subject to the Underwriters'
right to reject orders in whole or in part. It is expected that the Certificates
will be offered globally and delivered in book-entry form on or about February
6, 1998, through the facilities of The Depository Trust Company, Cedel Bank,
societe anonyme and the Euroclear System.
------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
SALOMON SMITH BARNEY
J.P. MORGAN & CO.
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
UNDERWRITER OF THE CLASS B CERTIFICATES
J.P. MORGAN & CO.
The date of this Prospectus Supplement is February 3, 1998
<PAGE> 2
(Continued from previous page)
USA and prior to that known as Colonial National Bank USA and successor in
interest to the former Advanta National Bank) (the "Bank"), as seller and
servicer, and Bankers Trust Company, as trustee. The property of the Trust
includes a portfolio of VISA(R) and MasterCard(R) credit card receivables (the
"Receivables") generated or to be generated from time to time in the ordinary
course of business in a portfolio of consumer revolving credit card accounts
(the "Accounts"), all monies due in payment of the Receivables and certain other
property, as described more fully herein, including the benefits of funds on
deposit in the Cash Collateral Account as described herein. In addition, the
Collateral Interest (as defined herein) will be issued in the initial amount of
$97,750,000 and will be subordinate to the Certificates. The Certificateholders
will be entitled to certain assets of the Trust, including the right to receive
a varying percentage of each month's collections with respect to the Receivables
at the times and in the manner described herein. The Bank owns the remaining
undivided interest in the Trust not represented by the Certificates or the
certificates of any other Series and any uncertificated interests in the Trust
issued as Series Enhancement, and the Bank will continue to service the
Receivables. The Bank has offered and from time to time may offer other Series
of certificates that represent undivided interests in certain assets of the
Trust, which may have terms significantly different from the Certificates.
Interest will accrue on the Class A Certificates from February 6, 1998 (the
"Closing Date") at the rate of 0.04% per annum above the London interbank
offered quotations United States dollar deposits ("LIBOR") for a period of two
months (for the period from the Closing Date through April 14, 1998) or one
month (for each Interest Period thereafter) prevailing on the related LIBOR
Determination Date (as defined herein) determined as described herein (the
"Class A Certificate Rate"). Interest will accrue on the Class B Certificates
from the Closing Date at the rate of 0.24% per annum above two-month LIBOR (for
the period from the Closing Date through April 14, 1998) or one-month LIBOR (for
each Interest Period thereafter) prevailing on the related LIBOR Determination
Date determined as described herein (the "Class B Certificate Rate"). Interest
with respect to the Certificates will be distributed on the 15th day of each
month or, if such 15th day is not a Business Day (as defined herein), the next
succeeding Business Day (each, a "Distribution Date") commencing April 15, 1998.
Principal with respect to the Class A Certificates is scheduled to be
distributed to the Class A Certificateholders on the January 2001 Distribution
Date, or earlier in certain circumstances described herein. Principal with
respect to the Class B Certificates is expected to be distributed to the Class B
Certificateholders on the February 2001 Distribution Date, or earlier or later
in certain circumstances described herein. The Class B Certificates will be
subordinated to the Class A Certificates to the extent necessary to fund
payments on the Class A Certificates as described herein. In addition, the
Certificates will have the benefit of the Collateral Interest and funds on
deposit in the Cash Collateral Account as described herein.
The Certificates initially will be represented by certificates which will
be registered in the name of Cede & Co., the nominee of The Depository Trust
Company. The interests of holders of beneficial interests in the Certificates
("Certificate Owners") will be represented by book-entries on the records of The
Depository Trust Company and participating members thereof. Definitive
Certificates will be available to Certificate Owners only under the limited
circumstances described in the Prospectus. See "Description of the
Certificates -- Definitive Certificates" in the Prospectus.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS,
SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
The Certificates offered hereby constitute a separate Series of
Certificates being offered by the Bank from time to time pursuant to its
Prospectus dated January 29, 1998. This Prospectus Supplement does not contain
complete information about the offering of the Certificates. Additional
information is contained in the Prospectus and investors are urged to read both
this Prospectus Supplement and the Prospectus in full. Sales of the Certificates
may not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
S-2
<PAGE> 3
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used herein are defined
elsewhere in this Prospectus Supplement and the accompanying Prospectus. A
listing of the pages on which some of such terms are defined is found in the
"Index of Principal Terms" in this Prospectus Supplement and the accompanying
Prospectus. Other Series which may be issued pursuant to other similar
prospectus supplements and prospectuses or disclosure documents may also use
such capitalized terms in such prospectuses or documents. However, in such
cases, reference to such terms will, unless the context otherwise requires, only
be made in the context of such other Series.
TRUST...................... The ADVANTA Credit Card Master Trust II (the
"Trust"). It is expected that as part of the
Transfer, if it occurs, the Trust will be renamed
the Fleet Credit Card Master Trust II. See
"Transfer and Assignment" in the Prospectus.
THE CERTIFICATES AND THE
COLLATERAL INTEREST...... Each of the Class A Floating Rate Asset Backed
Certificates, Series 1998-A (the "Class A
Certificates") and the Class B Floating Rate Asset
Backed Certificates, Series 1998-A (the "Class B
Certificates," together with the Class A
Certificates, the "Certificates") offered hereby
represents a specified undivided interest in the
assets of the Trust allocated to the Certificates
(the "Investor Interest"). The term "Class A
Certificateholders" refers to holders of the Class
A Certificates, the term "Class B
Certificateholders" refers to holders of the Class
B Certificates, the term "Certificateholders"
refers to holders of the Certificates, and the term
"Series" refers to any series of certificates
issued by the Trust, including the series ("Series
1998-A") of which the Certificates form a part. In
addition, an undivided interest in the Trust (the
"Collateral Interest") will be issued concurrently
with the issuance of the Certificates as part of
Series 1998-A in an initial amount of $97,750,000
(the "Collateral Initial Investor Amount") and
will, together with the amounts on deposit in the
Cash Collateral Account, constitute the Series
Enhancement for the Certificates. The Certificates
will be issued pursuant to the Amended and Restated
Pooling and Servicing Agreement dated as of
December 1, 1993, as amended and restated as of May
23, 1994, and as amended by Amendment Number 1
dated as of July 1, 1994, between the Bank, as
seller (in such capacity, the "Seller") and
servicer (in such capacity, the "Servicer"), and
Bankers Trust Company, as trustee (the "Trustee"),
as further amended by Amendment Number 2 dated as
of October 6, 1995 among the Bank, as seller and
servicer, the former Advanta National Bank, as a
Seller, and the Trustee (the "Master Pooling and
Servicing Agreement"), and a related supplement
thereto (the "Supplement" and, together with the
Master Pooling and Servicing Agreement, the
"Pooling and Servicing Agreement") (unless the
context otherwise requires). See "Description of
the Certificates." It is expected that on or about
February 20, 1998 as part of the Transfer, the
Pooling and Servicing Agreement will be amended
without Certificateholder consent to allow
replacement of the Bank as Seller and Servicer with
Fleet Bank (RI), N.A., ("Fleet (RI)"), a credit
card bank affiliated with Fleet Financial Group,
Inc. See "Transfer and Assignment" in the
Prospectus and "Risk Factors -- No Assurances of
Transfer" herein.
S-3
<PAGE> 4
The Certificates will be available for purchase in
minimum denominations of $1,000 and in integral
multiples of $1,000 in excess thereof. Except in
certain limited circumstances as described in the
Prospectus under "Description of the
Certificates -- Definitive Certificates," the
Certificates will only be available in book-entry
form.
The Trust's assets will be allocated among the
Investor Interest, the Collateral Interest, the
interests of the holders of other Series and the
interest of the holders of the Seller Certificates
(the "Sellers' Interest"), as described below. The
aggregate amount of Principal Receivables and
amounts, if any, on deposit in the Excess Funding
Account allocated to the Certificateholders and the
Collateral Interest (the "Invested Amount") will be
$862,500,000 on the Closing Date (the "Initial
Invested Amount"). The Invested Amount will, except
as otherwise provided herein, increase up to a
maximum amount of $1,150,000,000 during the Funding
Period, remain fixed during the remainder of the
Revolving Period and decline thereafter during the
Accumulation Period or Rapid Amortization Period as
principal is deposited into the Principal Funding
Account or paid on the Certificates. The Invested
Amount is subject to increase during the Funding
Period to the extent amounts are withdrawn from the
Pre-Funding Account and paid to the Seller in
connection with an increase in the amount of
Principal Receivables in the Trust. The aggregate
amount of Principal Receivables and amounts, if
any, on deposit in the Excess Funding Account
allocated to the Class A Certificateholders (the
"Class A Invested Amount") will be $724,500,000 on
the Closing Date (the "Class A Initial Invested
Amount"). The aggregate amount of Principal
Receivables and amounts, if any, on deposit in the
Excess Funding Account allocated to the Class B
Certificateholders (the "Class B Invested Amount")
will be $64,687,500 on the Closing Date (the "Class
B Initial Invested Amount"). The aggregate amount
of Principal Receivables and amounts, if any, on
deposit in the Excess Funding Account allocated to
the Collateral Interest (the "Collateral Invested
Amount") will be $73,312,500 on the Closing Date
(the "Collateral Initial Invested Amount"). During
the Funding Period, the Class A Invested Amount,
the Class B Invested Amount and the Collateral
Invested Amount may increase under certain
conditions as the Sellers' Interest is increased
until the Class A Invested Amount is equal to
$966,000,000, the Class B Invested Amount is equal
to $86,250,000 and the Collateral Invested Amount
is equal to $97,750,000. Thereafter, the Class A
Invested Amount will remain, prior to the
commencement of the Accumulation or Rapid
Amortization Period, fixed at such Class A Invested
Amount, except if there are unreimbursed Class A
Investor Charge-Offs or if a Series 1998-A Pay Out
Event or a Trust Pay Out Event occurs. In addition,
the Class B Invested Amount will decline in certain
circumstances as a result of (a) the allocation to
the Class B Certificates of Defaulted Amounts,
including such amounts otherwise allocable to the
Class A Certificates, and (b) the reallocation of
collections of Principal Receivables otherwise
allocable to the Class B Certificates to fund
certain payments in respect of the Class A
Certificates. Any such reductions in the Class B
Invested Amount may be reimbursed out of Excess
Spread, if any, Excess Finance Charges allocable to
Series 1998-A, the reallocation of certain amounts
allocable to the Collateral
S-4
<PAGE> 5
Interest and certain amounts, if any, on deposit in
the Cash Collateral Account as described herein.
The Seller Amount will fluctuate as the amount of
Principal Receivables in the Trust, the invested
amount of each Series and the amounts on deposit in
the Excess Funding Account and the Principal
Funding Account change from time to time. The
Sellers' Interest will represent the right to the
assets of the Trust not allocated to the Investor
Interest, the Collateral Interest or the holders of
investor certificates of other Series (the Investor
Interest, the Collateral Interest and the interest
in the assets of the Trust held by the holders of
investor certificates of other Series is referred
to herein as the "Certificateholders' Interest").
The Class A Certificates will represent the right
to receive from the assets of the Trust allocated
to the Investor Interest and the Collateral
Interest funds up to (but not in excess of) the
amounts required to make payments of interest on
the Class A Certificates from the Closing Date at
the rate of 0.04% per annum above the London
interbank offered quotations for United States
dollar deposits ("LIBOR") for a period of two
months (for the period from the Closing Date
through April 14, 1998) or one month (for each
Interest Period thereafter) determined as set forth
under "Description of the Certificates -- Interest
Payments" (such rate, the "Class A Certificate
Rate"), and payment of principal on the January
2001 Distribution Date or, in certain limited
circumstances, monthly payments of principal during
the Rapid Amortization Period, to the extent of the
Class A Invested Amount. See "Description of the
Certificates -- General," "-- Interest Payments"
and "-- Principal Payments."
The Class B Certificates will represent the right
to receive from the assets of the Trust allocated
to the Investor Interest and the Collateral
Interest funds up to (but not in excess of) the
amounts required to make payments of interest on
the Class B Certificates from the Closing Date at
the rate of 0.24% per annum above two-month LIBOR
(for the period from the Closing Date through April
14, 1998) or one-month LIBOR (for each Interest
Period thereafter) (such rate, the "Class B
Certificate Rate"), and monthly payments of
principal, following the payment in full of the
Class A Investor Amount, during the Class B
Accumulation Period or the Rapid Amortization
Period, to the extent of the Class B Invested
Amount. See "Description of the
Certificates -- General," "-- Interest Payments"
and "-- Principal Payments."
The Certificates represent beneficial interests in
the Trust only and do not represent interests in or
obligations of the Bank or any affiliate thereof
except to the limited extent provided herein. None
of the Certificates, the Accounts or the
Receivables are insured or guaranteed by the
Federal Deposit Insurance Corporation (the "FDIC")
or any other governmental agency or
instrumentality.
RECEIVABLES................ The aggregate amount of Principal Receivables and
Finance Charge Receivables in the Accounts as of
December 31, 1997, equaled $8,752,935,351 and
$198,752,657, respectively. The aggregate undivided
interest in the Principal Receivables and amounts
on deposit in the Excess Funding Account, if any,
evidenced by the Certificates will never exceed the
sum of the Class A Invested Amount and the Class B
Invested Amount, regardless of the total amount of
Principal Receiv-
S-5
<PAGE> 6
ables in the Trust and amounts on deposit in the
Excess Funding Account, if any, at any time. See
"The Receivables."
REGISTRATION OF
CERTIFICATES............. The Certificates initially will be represented by
certificates registered in the name of Cede & Co.
("Cede"), as the nominee of The Depository Trust
Company ("DTC"). No person acquiring a beneficial
interest in the Certificates (a "Certificate
Owner") will be entitled to receive a definitive
certificate representing such person's interest (a
"Definitive Certificate"), except in the event that
Definitive Certificates are issued under the
limited circumstances described herein. Investor
Certificateholders may elect to hold their Investor
Certificates through DTC (in the United States) or
Cedel or Euroclear (in Europe). See "Description of
the Certificates -- Definitive Certificates" in the
Prospectus.
SELLER AND SERVICER........ Advanta National Bank (formerly known as Advanta
National Bank USA and prior to that known as
Colonial National Bank USA and successor in
interest to the former Advanta National Bank), a
national banking association and an indirect wholly
owned subsidiary of Advanta Corp. See "Summary of
Terms -- Seller" and, "The Bank and Advanta Corp."
in the Prospectus. The principal executive offices
of the Bank are located at Delaware Corporate
Center I, One Righter Parkway, Wilmington, Delaware
19803. It is expected that on or about February 20,
1998 as part of the Transfer that the Bank will be
replaced as Seller and Servicer by Fleet (RI). See
"Transfer and Assignment" in the Prospectus and
"Risk Factors -- No Assurances of Transfer" herein.
COLLECTIONS................ All collections of Receivables will be allocated by
the Servicer between amounts collected on Principal
Receivables and amounts collected on Finance Charge
Receivables. All such amounts will then be
allocated in accordance with the respective
interests of the Class A Certificateholders, the
Class B Certificateholders, the holder of the
Collateral Interest (the "Collateral Interest
Holder"), the holders of the Seller Certificates
and the holders of certificates and uncertificated
interests of other Series, if any, in the Principal
Receivables and in the Finance Charge Receivables.
Subject to certain exceptions, the Servicer will
deposit all collections of Receivables
distributable to Certificateholders, the Collateral
Interest Holder and to holders of certificates and
uncertificated interests of other Series, if any,
in the Collection Account no later than the day
prior to the applicable Distribution Date. See
"Description of the Certificates -- Allocation
Percentages."
INTEREST................... Interest on the Certificates for each Interest
Period will be distributed on the 15th day of each
month or, if such day is not a Business Day, on the
next succeeding Business Day (each, a "Distribution
Date"), commencing April 15, 1998 in an amount
equal to the product of (i)(a) the actual number of
days in the related Interest Period divided by 360,
times (b) the Class A Certificate Rate or Class B
Certificate Rate, as applicable, and (ii) the
outstanding principal amount of the Class A
Certificates or the outstanding principal amount of
the Class B Certificates, as applicable, as of the
preceding Record Date (or, in the case of the April
1998 Distribution Date, as of the Closing Date).
The "Interest Period," with respect to any
Distribution Date, will be the period from the
previous Distribution Date through the day
preceding such Distribution Date, except the
initial Interest Period will be the period from the
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<PAGE> 7
Closing Date through April 14, 1998, the day
preceding the initial Distribution Date. The term
"Business Day" means any day other than a Saturday,
Sunday or a day on which banking institutions in
New York, New York, Claymont, Delaware, or
Philadelphia, Pennsylvania (or, with respect to the
determination of LIBOR, London, England) or any
other state in which the principal executive
offices of the Seller or any Additional Seller are
located, are authorized or obligated by law,
executive order or governmental decree to be
closed. The "Monthly Period," with respect to any
Distribution Date will be the period from and
including the first day of the preceding calendar
month to and including the last day of such
calendar month (other than the initial Monthly
Period, which will commence on the Closing Date and
end on March 31, 1998). See "Description of the
Certificates -- Interest Payments."
ADDITIONAL AMOUNTS
AVAILABLE TO
CERTIFICATEHOLDERS....... If Class A Available Funds are less than the sum of
(i) current and overdue Class A Monthly Interest,
(ii) current and overdue Class A Additional
Interest, (iii) current and overdue Class A
Servicing Fee and (iv) the Class A Investor Default
Amount, with respect to the related Distribution
Date, Excess Spread and Excess Finance Charges
allocable to Series 1998-A will be applied to fund
the deficiency (the "Class A Required Amount").
"Excess Spread" for any Distribution Date will
equal the sum of (a) the excess of Class A
Available Funds over the sum of the amounts
referred to in clauses (i), (ii), (iii) and (iv)
above, (b) the excess of Class B Available Funds
over the sum of (i) current and overdue Class B
Monthly Interest, (ii) current and overdue Class B
Additional Interest and (iii) current and overdue
Class B Servicing Fee and (c) the Collateral
Available Funds not used, if the Bank (or, if the
Transfer has occurred, Fleet (RI)) or the Trustee
is no longer the Servicer, to pay current and
overdue Collateral Servicing Fee. If Excess Spread
and Excess Finance Charges allocable to Series
1998-A with respect to such Distribution Date are
less than the Class A Required Amount, amounts, if
any, on deposit in the Cash Collateral Account will
then be withdrawn to fund the remaining Class A
Required Amount. If Excess Spread and Excess
Finance Charges allocable to Series 1998-A with
respect to such Distribution Date and amounts, if
any, on deposit in the Cash Collateral Account are
less than the Class A Required Amount, Reallocated
Principal Collections allocable first to the
Collateral Invested Amount and then the Class B
Invested Amount with respect to the related Monthly
Period will then be used to fund the remaining
Class A Required Amount. If Reallocated Principal
Collections with respect to such Monthly Period are
insufficient to fund the remaining Class A Required
Amount for the related Distribution Date, then a
portion of the Collateral Invested Amount will be
reduced by the amount of such deficiency (but not
by more than the Class A Investor Default Amount
for such Monthly Period). If such reduction would
cause the Collateral Invested Amount to be reduced
below zero, the Class B Invested Amount will be
reduced by the amount by which the Collateral
Invested Amount would have been reduced below zero
(but not by more than the excess of the Class A
Investor Default Amount for such Monthly Period
over the amount of such reduction in the Collateral
Invested Amount) to avoid a charge-off with respect
to the Class A Certificates. If the Class B
Invested Amount is reduced to zero, the
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<PAGE> 8
Class A Invested Amount will be reduced by the
amount by which the Class A Required Amount for any
Distribution Date exceeds the sum of (i) Excess
Spread and Excess Finance Charges allocated to
Series 1998-A, (ii) amounts, if any, on deposit in
the Cash Collateral Account and (iii) Reallocated
Principal Collections for the related Monthly
Period, but not by more than the excess of the
Class A Investor Default Amount for such Monthly
Period over the aggregate reductions in the
Collateral Invested Amount and the Class B Invested
Amount with respect to such Monthly Period, and the
Class A Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust. See "Description
of the Certificates -- Reallocation of Cash Flows"
and "-- Allocation of Investor Default Amount."
Excess Spread and Excess Finance Charges allocable
to Series 1998-A and not required to pay the Class
A Required Amount or reimburse Class A Investor
Charge-Offs will be applied to fund the Class B
Required Amount. The "Class B Required Amount"
means the amount for any Distribution Date equal to
the sum of (a) the amount, if any, by which the sum
of (i) current and overdue Class B Monthly
Interest, (ii) current and overdue Class B
Additional Interest and (iii) current and overdue
Class B Servicing Fee exceeds Class B Available
Funds and (b) the Class B Investor Default Amount
for the related Monthly Period. If Excess Spread
and Excess Finance Charges allocable to Series
1998-A with respect to such Distribution Date not
required to pay the Class A Required Amount are
less than the Class B Required Amount, amounts, if
any, on deposit in the Cash Collateral Account not
required to fund the Class A Required Amount will
be withdrawn and applied to fund the Class B
Required Amount. If such amounts available with
respect to such Distribution Date are insufficient
to pay the Class B Required Amount, Reallocated
Principal Collections allocable to the Collateral
Invested Amount for the related Monthly Period not
required to fund the Class A Required Amount will
then be used to fund the remaining Class B Required
Amount. If Reallocated Principal Collections
allocable to the Collateral Invested Amount with
respect to such Monthly Period are insufficient to
fund the remaining Class B Required Amount for the
related Distribution Date, then the Collateral
Invested Amount will be reduced by the amount of
such deficiency (but not by more than the Class B
Investor Default Amount for such Monthly Period).
If such reduction would cause the Collateral
Invested Amount to be reduced below zero, the Class
B Invested Amount will be reduced by the amount by
which the Class B Required Amount for any
Distribution Date exceeds the sum of Excess Spread
and Excess Finance Charges allocated to Series
1998-A not required to pay the Class A Required
Amount and amounts, if any, on deposit in the Cash
Collateral Account not required to pay the Class A
Required Amount and Reallocated Principal
Collections not required to pay the Class A
Required Amount for the related Monthly Period, but
not by more than the excess of the Class B Investor
Default Amount for such Monthly Period over the
reduction in the Collateral Invested Amount with
respect thereto, for such Monthly Period. In the
event of a reduction of the Class A Invested
Amount, the Class B Invested Amount or the
Collateral Invested Amount, the amount of principal
and interest available to fund payments with
respect to the Class A Certificates and the Class B
Certificates will
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<PAGE> 9
be decreased. See "Description of the
Certificates -- Reallocation of Cash Flows" and
"-- Allocation of Investor Default Amount."
EXCESS FINANCE CHARGES..... "Excess Finance Charges" means amounts designated
by another Series for allocation to Series within
Group One and which, pursuant to the Master Pooling
and Servicing Agreement and any related supplement,
are allocable to Series 1998-A. Series 1998-A will
be the fifteenth Series issued by the Trust which
will be outstanding on the Closing Date. Series
1998-A will be the fifteenth Series outstanding
included in a group of Series ("Group One")
expected to be issued by the Trust from time to
time. See "Annex 1." Additional Series are expected
to be issued from time to time by the Trust.
THE CASH COLLATERAL
ACCOUNT.................... A cash collateral account (the "Cash Collateral
Account") will be held in the name of the Trustee
for the benefit of the Certificateholders and the
Collateral Interest Holder. The Cash Collateral
Account will have a beginning balance of
$23,000,000 which may be increased to the extent
collections of Excess Spread and Excess Finance
Charges allocable to Series 1998-A are required to
be deposited therein as described below. See
"Description of the Certificates -- The Cash
Collateral Account." To the extent set forth
herein, withdrawals will be made from the Cash
Collateral Account to pay the Class A Required
Amount first, then to pay the Class B Required
Amount and then to pay any unpaid Collateral
Servicing Fee. See "Description of the
Certificates -- Reallocation of Cash Flows."
AMOUNTS AVAILABLE AS
ENHANCEMENT.............. On each Distribution Date, the amount of
enhancement (the "Enhancement") available to the
Certificateholders will equal the lesser of (i) the
sum of the Collateral Investor Amount and the
amount, if any, on deposit in the Cash Collateral
Account (the "Available Enhancement Amount") and
(ii) the Required Enhancement Amount. The "Required
Enhancement Amount" with respect to any
Distribution Date means, subject to certain
limitations more fully described herein, the
greater of (i) the product of (a) the sum of (I)
the sum of the Class A Invested Amount and the
Class A Floating Percentage of the Pre-Funded
Amount and (II) the sum of the Class B Invested
Amount and the Class B Floating Percentage of the
Pre-Funded Amount, each as of such Distribution
Date after taking into account distributions made
on such Distribution Date, minus the amount of
funds on deposit in the Cash Collateral Account
after taking into account all deposits and
withdrawals on such Distribution Date, and (b) a
fraction, the numerator of which is 11% and the
denominator of which is the excess of 100% over 11%
and (ii) the sum of (A) the product of (I)
$1,150,000,000, (II) 1% and (III) a fraction the
numerator of which is equal to the Available Cash
Collateral Amount as of the immediately preceding
Distribution Date and the denominator of which is
the Total Enhancement for such Distribution Date
and (B) the product of (I) $1,150,000,000, (II) 3%
and (III) a fraction the numerator of which is
equal to the Collateral Invested Amount as of the
immediately preceding Distribution Date and the
denominator of which is the Total Enhancement for
such Distribution Date, subject to certain
limitations. "Total Enhancement" with respect to
any Distribution Date means the sum of the
Available Cash Collateral Amount and the Collateral
Investor Amount as of the imme-
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<PAGE> 10
diately preceding Distribution Date. With respect
to any Distribution Date, if the Available
Enhancement Amount is less than the Required
Enhancement Amount, certain Excess Spread and
Excess Finance Charges allocable to Series 1998-A
will be used first to increase the Collateral
Invested Amount to the extent of any prior
unreimbursed reductions in the Collateral Invested
Amount and then deposited into the Cash Collateral
Account to the extent of such shortfall. See
"Description of the Certificates -- Application of
Collections -- Excess Spread; Excess Finance
Charges." On any Distribution Date, to the extent
that the sum of the amount on deposit in the Cash
Collateral Account plus the Collateral Investor
Amount exceeds the Required Enhancement Amount,
such amount may be paid to the Collateral Interest
Holder and will not be available to the
Certificateholders. See "Description of the
Certificates -- The Cash Collateral Account."
FUNDING PERIOD............. During the period from and including the Closing
Date to but excluding the earlier of (i) the
commencement of the Rapid Amortization Period, (ii)
the date on which the Invested Amount first equals
$1,150,000,000 and (iii) April 30, 1998 (the
"Funding Period"), the Pre-Funded Amount will be
maintained in a trust account to be established
with the Trustee (the "Pre-Funding Account"). The
"Pre-Funded Amount" means the principal amount on
deposit in the Pre-Funding Account, which initially
will equal $287,500,000. Funds on deposit in the
Pre-Funding Account will be invested by the Trustee
in Eligible Investments.
During the Funding Period, funds on deposit in the
Pre-Funding Account will be withdrawn on a weekly
basis to the extent of any increases in the
Invested Amount as a result of an increase in the
amount of Principal Receivables in the Trust to the
extent that the Seller Amount on such day exceeds
the product of (A) the sum of 0.50% and the
Required Seller Percentage on such date and (B) the
sum of the aggregate amount of Principal
Receivables in the Trust and amounts on deposit in
the Excess Funding Account on such day; provided,
however, that the Invested Amount will in no event
exceed $1,150,000,000 or increase by an amount in
excess of the Pre-Funded Amount immediately prior
to giving effect to such increase.
Certificateholders will have no further right to or
interest in such funds upon their withdrawal from
the Pre-Funding Account in connection with such
increases in the Invested Amount. Should the
Pre-Funded Amount be greater than zero at the end
of the Funding Period, the amounts remaining on
deposit in the Pre-Funding Account will be payable
pro rata to the Class A Certificateholders, the
Class B Certificateholders and the Collateral
Interest Holder on the next succeeding Distribution
Date and result in a reduction of the Class A
Investor Amount, the Class B Investor Amount and
the Collateral Investor Amount. See "Description of
the Certificates -- Pre-Funding Account."
REVOLVING PERIOD........... No principal will be payable to or for the benefit
of Certificateholders during the period (the
"Revolving Period") from and including the Closing
Date to but not including the earlier of (i) the
commencement of the Accumulation Period and (ii)
the commencement of the Rapid Amortization Period.
The accumulation period with respect to the
Certificates (the "Accumulation Period"), which
includes separate accumulation periods for the
Class A Certificates and the Class B Certifi-
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<PAGE> 11
cates, is scheduled to begin at the close of
business on March 31, 2000. Subject to the
conditions set forth herein under "Description of
the Certificates -- Postponement of Accumulation
Period," the day on which the Revolving Period ends
and the Accumulation Period begins may be delayed
to no later than the end of the day on November 30,
2000. During the Revolving Period, collections of
Principal Receivables allocated to the Certificates
and the Collateral Interest (other than Reallocated
Principal Collections that are used to pay any
deficiency in the Class A Required Amount or the
Class B Required Amount) will generally be paid
from the Trust to the holders of the Seller
Certificates or to amortizing or accumulating
Series in Group One or deposited into the Excess
Funding Account. See "Description of the
Certificates -- Principal Payments."
ACCUMULATION PERIOD;
PRINCIPAL PAYMENTS....... Unless a Series 1998-A Pay Out Event or a Trust Pay
Out Event shall have occurred, (a) the Class A
accumulation period (the "Class A Accumulation
Period") will begin at the end of the day on the
last day of the Revolving Period and will end on
the earliest of (i) the commencement of the Rapid
Amortization Period, (ii) the payment in full to
the Class A Certificateholders of the Class A
Investor Amount, and (iii) the Series 1998-A
Termination Date, and (b) the Class B accumulation
period (the "Class B Accumulation Period") will
commence on the first day of the Monthly Period
immediately preceding the Class B Principal
Commencement Date and end on the earliest of (i)
the commencement of the Rapid Amortization Period,
(ii) the payment in full to the Class B
Certificateholders of the Class B Invested Amount
and (iii) the Series 1998-A Termination Date.
During the Accumulation Period, the Available
Investor Principal Collections will no longer be
paid to the holders of the Seller Certificates or
to amortizing or accumulating Series in Group One
or deposited into the Excess Funding Account as
described above but instead will be deposited
monthly, along with certain other amounts
constituting Available Investor Principal
Collections, on each Distribution Date beginning
with the Distribution Date in the month following
the commencement of the Accumulation Period in a
trust account established by the Servicer for the
benefit of Certificateholders (the "Principal
Funding Account") to be accumulated for payment to
the Certificateholders as provided herein, first to
the Class A Certificateholders, which payment is
anticipated to be on the Class A Expected Final
Distribution Date, and then (following payment in
full of the Class A Investor Amount) to the Class B
Certificateholders, which payment is anticipated to
be on the Class B Expected Final Distribution Date.
With respect to any Distribution Date, during
either the Rapid Amortization Period or the
Accumulation Period, until the Class B Invested
Amount is paid in full and subject to certain other
exceptions, "Collateral Monthly Principal" shall
mean an amount equal to the lesser of (A) the sum
of (x) Collateral Principal Collections and (y)
Available Investor Principal Collections not
applied to Class A Monthly Principal or Class B
Monthly Principal and (B) the excess, if any, of
(i) the amount on deposit in the Cash Collateral
Account plus the Collateral Investor Amount over
(ii) the Required Enhancement Amount (the
"Enhancement Surplus"). During the Accumulation
Period and the Rapid Amortization Period,
collections of Principal Receivables gener-
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<PAGE> 12
ally will be allocated to the Invested Amount in a
ratio the numerator of which is the Invested Amount
as of the last day of the Revolving Period and the
denominator of which is the greater of (x) the sum
of the aggregate amount of Principal Receivables
and the principal amount on deposit in the Excess
Funding Account as of the last day of the prior
Monthly Period and (y) the sum of the numerators
used to calculate the Series Percentages applicable
to Principal Receivables for all Series
outstanding; provided, however, that such ratio is
subject to adjustment to give effect to additions
of Additional Accounts. See "Description of the
Certificates -- Allocation Percentages,"
"-- Application of Collections" and "-- Principal
Payments."
With respect to any Distribution Date relating to
the Accumulation Period, if Available Investor
Principal Collections in the prior Monthly Period
are equal to or greater than the sum of (i) the
Controlled Accumulation Amount on such Distribution
Date and (ii) the existing Deficit Controlled
Accumulation Amount (as defined below), if any,
from the immediately preceding Distribution Date
(such sum for such Distribution Date, the
"Controlled Deposit Amount," provided that the
Controlled Deposit Amount on any Distribution Date
after the payment in full of the Class A
Certificates shall not exceed the Class B Invested
Amount), then the Controlled Deposit Amount will be
deposited into the Principal Funding Account, and
the excess of such Available Investor Principal
Collections over the Controlled Deposit Amount and
any amounts thereof applied as Collateral Monthly
Principal will be paid from the Trust to the
holders of the Seller Certificates or to other
amortizing or accumulating Series in Group One or
deposited into the Excess Funding Account. The
existing "Deficit Controlled Accumulation Amount"
means, on any Distribution Date, the excess, if
any, of the Controlled Deposit Amount from the
prior Distribution Date over the Available Investor
Principal Collections.
If the Available Investor Principal Collections in
the prior Monthly Period are less than the
Controlled Deposit Amount, such remaining Available
Investor Principal Collections will be deposited
into the Principal Funding Account, and the excess
of the Controlled Deposit Amount over such
Available Investor Principal Collections will be
the Deficit Controlled Accumulation Amount for the
succeeding Monthly Period. See "Description of the
Certificates -- Application of Collections."
All amounts in the Principal Funding Account will
be invested at the direction of the Servicer by the
Trustee in certain Eligible Investments. Investment
earnings (net of investment losses and expenses) on
funds on deposit in the Principal Funding Account
(the "Principal Funding Investment Proceeds")
during the Accumulation Period will be included in
Class A Available Funds with respect to each
Distribution Date.
Funds on deposit in the Principal Funding Account
will be available to pay the Class A
Certificateholders in respect of the Class A
Investor Amount on the Class A Expected Final
Distribution Date. If the aggregate principal
amount of deposits made to the Principal Funding
Account are insufficient to pay in full the Class A
Investor Amount on the Class A Expected Final
Distribution Date, the Rapid Amortization Period
will commence as described below and on each
Distribution Date
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<PAGE> 13
thereafter until the Class A Investor Amount is
paid in full the Class A Certificateholders will
receive distributions of Class A Monthly Principal.
Although it is anticipated that during the Class A
Accumulation Period, funds will be deposited in the
Principal Funding Account in an amount equal to the
applicable Controlled Accumulation Amount with
respect to each Distribution Date and that
scheduled principal will be available for
distribution to the Class A Certificateholders on
the Class A Expected Final Distribution Date, no
assurance can be given in that regard. See
"Maturity Assumptions" herein.
On the Class B Expected Final Distribution Date,
provided that the Class A Investor Amount is paid
in full on the Class A Expected Final Distribution
Date and the Rapid Amortization Period has not
commenced, Available Investor Principal Collections
will be used to pay the Class B Invested Amount as
described herein. If the Available Investor
Principal Collections are insufficient to pay the
Class B Invested Amount on the Class B Expected
Final Distribution Date, the Rapid Amortization
Period will commence as described below and on each
Distribution Date thereafter following the payment
in full of the Class A Certificates until the Class
B Invested Amount is paid in full, the Class B
Certificateholders will receive distributions of
Class B Monthly Principal. Although it is
anticipated that scheduled principal will be
available for distribution to the Class B
Certificateholders on the Class B Expected Final
Distribution Date, no assurance can be given in
that regard. See "Maturity Assumptions" herein.
If a Series 1998-A Pay Out Event or Trust Pay Out
Event occurs during the Accumulation Period, the
Rapid Amortization Period will commence and any
amount on deposit in the Principal Funding Account
will be paid to the Class A Certificateholders on
the Distribution Date following the Monthly Period
in which the Rapid Amortization Period commences.
CLASS A EXPECTED FINAL
DISTRIBUTION DATE........ The January 2001 Distribution Date.
CLASS B EXPECTED FINAL
DISTRIBUTION DATE........ The February 2001 Distribution Date.
RAPID AMORTIZATION PERIOD;
PRINCIPAL PAYMENTS....... During the period beginning with the occurrence of
any Series 1998-A Pay Out Event or Trust Pay Out
Event and ending on the earlier of (i) the payment
in full to the Certificateholders of the Class A
Investor Amount and the Class B Invested Amount and
payment in full to the Collateral Interest Holder
of the Collateral Invested Amount and (ii) the
Series 1998-A Termination Date (the "Rapid
Amortization Period"), Available Investor Principal
Collections will no longer be paid from the Trust
to the holders of the Seller Certificates or to
amortizing or accumulating Series in Group One or
deposited into the Excess Funding Account as
described above but instead will be distributed on
each Distribution Date, first to the Class A
Certificateholders until the Class A Investor
Amount has been paid in full and then to the Class
B Certificateholders until the Class B Invested
Amount is paid in full, beginning with the
Distribution Date following the Monthly Period in
which the Rapid Amortization Period commences. See
"Description of
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<PAGE> 14
the Certificates -- Series 1998-A Pay Out Events
and Trust Pay Out Events" for a discussion of the
events which might lead to the commencement of the
Rapid Amortization Period. See "Description of the
Certificates -- Application of Collections."
SUBORDINATION OF THE CLASS
B CERTIFICATES AND THE
COLLATERAL INTEREST...... The Class B Certificates will be subordinated as
described herein to the extent necessary to fund
payments with respect to the Class A Certificates
as described herein. In addition, the Collateral
Interest will be subordinated to the extent
necessary to fund certain payments with respect to
the Certificates. If the Collateral Invested Amount
and the amount on deposit in the Cash Collateral
Account are reduced to zero, the Class B
Certificateholders will bear directly the credit
and other risks associated with their undivided
interest in the Trust. To the extent the Class B
Invested Amount is reduced, and is not reinstated,
the amount of principal distributable to the Class
B Certificateholders will be reduced. See
"Description of the Certificates -- Subordination."
SHARED COLLECTIONS OF
PRINCIPAL RECEIVABLES.... To the extent that collections of Principal
Receivables allocated to the Certificates or the
Collateral Interest are not needed to make payments
to or for the benefit of Certificateholders or the
Collateral Interest Holder, such collections may be
applied to cover principal payments due to or for
the benefit of other Series, if any, in Group One.
Any such application of collections will not result
in a reduction of the Class A Invested Amount, the
Class B Invested Amount or the Collateral Invested
Amount. In addition, during the Accumulation
Period, certain collections of Principal
Receivables allocated to other Series in Group One,
to the extent such collections are not needed to
make payments in respect of such other Series, may
be applied to cover principal amounts payable to or
for the benefit of the Certificateholders or the
Collateral Interest Holder. See "Description of the
Certificates -- Shared Collections of Principal
Receivables."
REQUIRED SELLER
PERCENTAGE............... The Required Seller Percentage applicable to Series
1998-A is currently 5%, provided that the Required
Seller Percentage may be reduced to as low as 2% if
the Seller delivers an officer's certificate
stating that such reduction will not have an
Adverse Effect and the Rating Agency Condition is
satisfied.
RECORD DATE................ With respect to any Distribution Date, the last
Business Day of the month preceding such
Distribution Date.
OPTIONAL REPURCHASE........ The Certificates will be subject to optional
purchase by the Seller on any Distribution Date
after the Investor Amount is less than or equal to
5% of the Initial Investor Amount, unless certain
events as specified in the Pooling and Servicing
Agreement have occurred. The purchase price on the
Distribution Date on which such purchase occurs
will be equal to the Investor Amount plus accrued
and unpaid interest on the Certificates and the
Collateral Interest as described herein. See
"Description of the Certificates -- Optional
Repurchase."
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<PAGE> 15
FINAL PAYMENT OF PRINCIPAL
AND INTEREST; TERMINATION
OF TRUST................. The interest of the Certificateholders in the Trust
will terminate following the earlier of (i) the day
after the Distribution Date on which the Investor
Amount is paid in full and (ii) the earlier of the
July 2003 Distribution Date and the termination of
the Trust (the "Series 1998-A Termination Date").
All principal and interest will be due and payable
no later than the Series 1998-A Termination Date.
See "Description of the Certificates -- Final
Payment of Principal and Interest; Termination" in
the Prospectus.
TRUSTEE.................... Bankers Trust Company.
TAX STATUS................. Subject to the matters discussed under "Certain
Federal Income Tax Consequences" herein and in the
Prospectus, Special Tax Counsel to the Bank will
deliver its opinion to the effect that, under
existing law, the Class A Certificates and the
Class B Certificates will properly be characterized
as debt for Federal income tax purposes on the date
of issuance. Under the Pooling and Servicing
Agreement, the Certificate Owners will agree to
treat the Certificates as indebtedness for income
tax purposes. See "Certain Federal Income Tax
Consequences" herein and in the Prospectus for
additional information concerning the application
of Federal income tax laws.
ERISA CONSIDERATIONS....... Under a regulation issued by the Department of
Labor, the Trust's assets would not be deemed "plan
assets" of any employee benefit plan holding
interests in the Class A Certificates if certain
conditions are met, such that the Class A
Certificates would constitute "publicly-offered
securities," including that interests in the Class
A Certificates be held by at least 100 persons
independent of the Seller and each other upon
completion of the public offering being made
hereby. The Class A Underwriters expect that
interests in the Class A Certificates will be held
by at least 100 such persons; however, no assurance
can be given, and no monitoring or other measures
will be taken, to ensure that such condition will
be met. It is anticipated that the other conditions
of the "publicly-offered security" exception
contained in the regulation will be met. If the
Trust's assets were deemed to be "plan assets" of
such a plan, there is uncertainty as to whether
existing exemptions from the "prohibited
transaction" rules of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"),
would apply to all transactions involving the
Trust's assets. Accordingly, employee benefit plans
contemplating purchasing interests in the Class A
Certificates should consult their counsel before
making a purchase. See "ERISA Considerations" in
the Prospectus.
The Class B Underwriter currently does not expect
that the Class B Certificates will be held by at
least 100 such persons and, therefore, does not
expect that such Class B Certificates will qualify
as publicly-offered securities under the regulation
referred to in the preceding paragraph.
Accordingly, the Class B Certificates may not be
acquired by (a) any employee benefit plan that is
subject to ERISA, (b) any plan or other arrangement
(including an individual retirement account or
Keogh plan) that is subject to Section 4975 of the
Code, or (c) any entity whose underlying assets
include "plan assets" under the regulation by
reason of any such plan's investment in the entity.
By its acceptance of a Class B
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<PAGE> 16
Certificate, each Class B Certificateholder will be
deemed to have represented and warranted that it is
not subject to the foregoing limitation.
CERTIFICATE RATINGS........ It is a condition to the issuance of the Class A
Certificates that they be rated in the highest
rating category by at least one nationally
recognized rating agency.
It is a condition to the issuance of the Class B
Certificates that they be rated in one of the three
highest rating categories by at least one
nationally recognized rating agency.
The rating agency or rating agencies rating the
Certificates, the Collateral Interest or any other
Series are collectively referred to herein as the
"Rating Agencies" or individually as a "Rating
Agency." The Certificates offered hereby are
investment grade asset-backed securities within the
meaning of the Act and the rules promulgated
thereunder.
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<PAGE> 17
RISK FACTORS
Limited Liquidity. There is currently no market for the Certificates. The
Underwriters expect to make a secondary market in the Certificates, but are not
obligated to do so. There can be no assurance that a secondary market will
develop or, if it does develop, that such market will provide Certificateholders
with liquidity of investment or that it will continue for the life of the
Certificates.
Rating of the Certificates. It is a condition to the issuance of the Class
A Certificates that they be rated in the highest rating category by at least one
nationally recognized rating agency. It is a condition to the issuance of the
Class B Certificates that they be rated in one of the three highest rating
categories by at least one nationally recognized rating agency. The rating of
the Certificates is based primarily on the value of the Receivables, the
availability of funds on deposit in the Cash Collateral Account and the
Pre-Funding Account as support for the Certificates and, in the case of the
Class A Certificates, the subordination of the Class B Certificates and the
Collateral Interest and, in the case of the Class B Certificates, the
subordination of the Collateral Interest. The ratings of the Certificates are
not a recommendation to purchase, hold or sell Certificates, and such ratings do
not comment as to the marketability of the Certificates, any market price or
suitability for a particular investor. There is no assurance that any rating
will remain for any given period of time or that any rating will not be lowered
or withdrawn entirely by any such rating agency, if in its judgment
circumstances so warrant.
No Assurances of Transfer. As described under the caption "Transfer and
Assignment" in the Prospectus, Advanta Corp. and Fleet Financial Group, Inc.
("Fleet Financial Group") have entered into a Contribution Agreement which
provides, among other things, that Advanta Corp. and certain of its
subsidiaries, including the Bank (the "Advanta Contributors") and Fleet
Financial Group and certain of its subsidiaries (the "Fleet Contributors"), will
contribute certain of the assets and liabilities relating to their respective
consumer credit card businesses to a newly created Rhode Island limited
liability company, Fleet Credit Card LLC (the "LLC"), in exchange for a 4.99%
membership interest in the LLC to Advanta Corp. (and its subsidiaries) and a
95.01% interest to Fleet Financial Group (and its subsidiaries) and the
assumption of certain liabilities, and the LLC will cause the Fleet Contributors
and the Advanta Contributors to transfer to Fleet Bank (RI), N.A. ("Fleet
(RI)"), certain of those assets and liabilities, including the Accounts and
other assets of the Bank relating to the Trust (such contributions and
transfers, collectively, the "Transfer"). In connection with the Transfer, Fleet
(RI) is expected to become Seller and Servicer in place of the Bank.
The Bank currently expects that the Transfer will occur on or about
February 20, 1998. There are, however, numerous conditions which must be met
before the Transfer will occur. These conditions include, among others, the need
for approval by the stockholders of Advanta Corp., review and approval by
various regulatory authorities and review by the Rating Agencies and
confirmation of existing ratings on certificates. In addition, it is possible
that certain groups may initiate legal action to challenge certain aspects of
the Transfer. Therefore, there can be no assurance that the Transfer will occur
or, if it occurs, when it will occur. The Contribution Agreement, by its terms,
may be terminated by either party if the Transfer has not been consummated by
March 31, 1998, although this date may be extended to June 30, 1998 under
certain circumstances. In addition, if the Transfer occurs, the terms may vary
from those described in the Prospectus and in this Prospectus Supplement.
Limited Amounts of Credit Enhancement. Although credit enhancement with
respect to the Certificates will be provided by the funds held in the Cash
Collateral Account and the subordination of the Collateral Interest, such
amounts are limited. If the Collateral Invested Amount and any amount on deposit
in the Cash Collateral Account are reduced to zero, the Class B
Certificateholders will bear directly the credit and other risks associated with
their undivided interest in the Trust and the Class B Invested Amount may be
reduced. If the Class B Invested Amount is reduced to zero, Class A
Certificateholders will bear directly the credit and other risks associated with
their undivided interest in the Trust. See "Description of the Certificates --
Allocation Percentages," "-- Allocation of Investor Default Amount" and "-- The
Cash Collateral Account."
Effect of Subordination of Class B Certificates; Principal Payments. The
Class B Certificates are subordinated in right of payment of principal to the
Class A Certificates. Payments of principal in respect of
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<PAGE> 18
the Class B Certificates will not commence until after the final principal
payment with respect to the Class A Investor Amount has been made as described
herein. Moreover, the Class B Invested Amount is subject to reduction if the
Class A Required Amount for any Monthly Period is greater than zero and is not
funded from Excess Spread and Excess Finance Charges allocated to Series 1998-A,
Reallocated Principal Collections with respect to the Collateral Invested
Amount, amounts, if any, on deposit in the Cash Collateral Account, and
reductions in the Collateral Invested Amount. To the extent the Class B Invested
Amount is reduced, the percentage of collections of Finance Charge Receivables
allocable to the Class B Certificateholders will be reduced. See "Description of
the Certificates -- Allocation Percentages" and "-- Reallocation of Cash Flows."
If the Class B Invested Amount is reduced to zero, the Class A
Certificateholders will bear directly the credit and other risks associated with
their undivided interest in the Trust. See "Description of the
Certificates -- Subordination."
Discount Option. Pursuant to the Pooling and Servicing Agreement, the
Sellers have the option to designate a fixed percentage or a variable percentage
of Receivables that otherwise would be treated as Principal Receivables to be
treated as Finance Charge Receivables. Any such designation would result in an
increase in the amount of Finance Charge Receivables and a slower rate of
payment of collections in respect of Principal Receivables than otherwise would
occur. Pursuant to the Pooling and Servicing Agreement, the Seller can make such
a designation without notice to or the consent of Certificateholders. The Seller
must provide 30 days' prior written notice to the Servicer, the Trustee and each
Rating Agency of any such designation, and such designation will become
effective only if (i) in the reasonable belief of the Seller such designation
would not cause to occur a Pay Out Event with respect to any Series or an event
which with notice or the lapse of time or both would constitute a Pay Out Event
with respect to any Series and (ii) the Rating Agency Condition is satisfied.
See "Description of the Certificates -- Discount Option" in the Prospectus.
Book-Entry Registration. The Certificates initially will be represented by
certificates registered in the name of Cede, the nominee for DTC, and will not
be registered in the names of the Certificate Owners or their nominees. As a
result, unless and until Definitive Certificates are issued, Certificate Owners
will not be recognized by the Trustee as Certificateholders, as that term is
used in the Pooling and Servicing Agreement. Until such time, Certificate Owners
will only be able to exercise the rights of Certificateholders indirectly
through DTC and its participating members (in the United States) or Cedel or
Euroclear (in Europe). See "Description of the Certificates -- Book-Entry
Registration" and "-- Definitive Certificates" in the Prospectus.
THE BANK'S CREDIT CARD ACTIVITIES
BILLING AND PAYMENT
Nearly all of the accounts in the Advanta Consumer Credit Card Portfolio
are subject to finance charges at prime indexed variable rates ranging from 4.9%
to 22.9% for purchases and cash advances, or London interbank offered rate
indexed variable rates also ranging from 4.9% to 22.9% for purchases and cash
advances. For more information, see "The Bank's Credit Card
Activities -- Billing and Payments" in the Prospectus.
DELINQUENCIES AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for each
of the periods shown for the Advanta Consumer Credit Card Portfolio. As of
December 31, 1997, the Advanta Consumer Credit Card Portfolio included
receivables from accounts the receivables of which were transferred to trusts
similar to the Trust in an aggregate amount equal to $1.4 billion ("Prior
Securitizations"). As of December 31, 1997, the Advanta Consumer Credit Card
Portfolio also included approximately $8,952 million of receivables from
accounts the receivables of which were transferred to the Trust. Additional
Accounts have been designated for inclusion in the Trust from time to time (the
"Master Trust II Sales") as set forth in Annex II. The Accounts in the Trust
Portfolio have been selected from accounts in the Advanta Consumer Credit Card
Portfolio based on certain eligibility criteria specified in the Pooling and
Servicing Agreement. See "The Receivables." There can be no assurance that the
delinquency and loss experience for the Receivables will be similar to the
historical experience set forth below or, if the Transfer takes place, that the
delinquency and loss experience for Receivables selected from the Fleet Consumer
Credit Card Portfolio will be similar to the historical experience of the
Advanta Consumer Credit Card Portfolio. See "Transfer and Assignment" in the
Prospectus.
S-18
<PAGE> 19
DELINQUENCY EXPERIENCE
ADVANTA CONSUMER CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------
1997(1) 1996(1) 1995(1)
----------- ----------- ----------
<S> <C> <C> <C>
Receivables Outstanding(2)......................... $11,244,601 $12,691,472 $9,984,291
Receivables Contractually Delinquent as a
Percentage of Receivables Outstanding:
30-59 days....................................... 1.74% 1.62% 1.12%
60-89 days....................................... 1.10 1.08 0.57
90 or more days.................................. 2.45 2.28 0.95
----------- ----------- ----------
Total.................................... 5.29% 4.98% 2.64%
=========== =========== ==========
</TABLE>
- ---------------
(1) Includes the receivables transferred in connection with the Prior
Securitizations and Master Trust II Sales.
(2) Receivables Outstanding consists of all amounts due from cardholders as
posted to the accounts.
CHARGE-OFF EXPERIENCE
ADVANTA CONSUMER CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding(1)(2).............. $11,349,058 $12,167,084 $7,677,833
Gross Losses(3).................................... 865,990 472,314 205,715
Recoveries......................................... 70,062 21,075 12,874
Net Losses......................................... 795,928 451,239 192,841
Net Losses as a Percentage of Average Receivables
Outstanding...................................... 7.01%(4) 3.71%(4) 2.51%
</TABLE>
- ---------------
(1) Includes the receivables transferred in connection with the Prior
Securitizations and Master Trust II Sales.
(2) Average Receivables Outstanding is the sum of receivables outstanding at the
beginning and end of each month during the period indicated, divided by
twice the number of months in the period indicated.
(3) Total Gross Losses are presented net of adjustments made pursuant to the
Bank's normal servicing procedures, including removal of incorrect or
disputed finance charges and reversal of annual cardholder fees on
cardholder accounts which have been closed. Losses do not include accrued
finance charges that have been written off of fraud losses.
(4) Beginning in August 1996, the Bank adopted a new charge-off methodology
related to bankrupt credit card accounts. See "The Bank's Credit Card
Activities -- Delinquencies" in the Prospectus.
The causes of the increase in the charge-offs on the Advanta Consumer
Credit Card Portfolio from 1996 to 1997 include the following factors:
continuing increases in the level of consumer bankruptcies, the seasoning of the
portfolio and a general trend in the credit card industry towards higher gross
charge-offs. Advanta Corp. has announced a number of initiatives which have been
used to stem losses including improving the Bank's collection process by further
customizing collection methods, more quickly identifying and intervening on
potentially troubled accounts by means of advanced computer-based behavior
prediction programs and tightening underwriting standards.
INTERCHANGE
In respect of Interchange attributed to the cardholder charges for
merchandise and services in the Accounts, the Seller will be required, pursuant
to the terms of the Pooling and Servicing Agreement, to transfer to the Trust on
the Business Day immediately preceding the Distribution Date an amount equal to
one-twelfth of 1.25% of the outstanding balance of the Principal Receivables
allocable to the Series 1998-A at the end of the last day of the preceding
Monthly Period.
S-19
<PAGE> 20
THE RECEIVABLES
The Receivables in the Initial Accounts were conveyed to the Trust on
December 9, 1993 (the "Initial Closing Date"). The Initial Accounts were
selected from the Advanta Consumer Credit Card Portfolio satisfying criteria set
forth in the Pooling and Servicing Agreement (the "Criteria") as applied on
October 31, 1993 (the "Initial Cut Off Date"). Receivables in Additional
Accounts have been conveyed to the Trust from time to time since the Initial
Closing Date as set forth in Annex II. Such Receivables arose in Additional
Accounts selected from the Advanta Consumer Credit Card Portfolio satisfying the
Criteria as applied on the relevant cut off date (the "Relevant Cut Off Date").
All such Accounts and any additional Receivables which have arisen from those
Accounts conveyed to the Trust are hereinafter referred to as the "Trust
Portfolio." In order to meet the Criteria, each Account must, on the Relevant
Cut Off Date, among other things, have been in existence and maintained by the
Seller, have a cardholder with a billing address in the United States, its
territories or possessions or a military address, and, except under certain
circumstances, not be an account the credit card or cards with respect to which
have been reported to the Seller as having been lost or stolen. See "Description
of the Certificates -- Representations, Warranties and Covenants" in the
Prospectus. Cardholders whose accounts are included in the Advanta Consumer
Credit Card Portfolio have billing addresses in all 50 states, the District of
Columbia, Puerto Rico, Guam, the Virgin Islands and certain foreign countries.
Pursuant to the Pooling and Servicing Agreement, the Seller may be obligated
(subject to certain limitations and conditions) to designate Additional Accounts
to be included as Accounts and to convey to the Trust all Receivables of such
Additional Accounts, or may elect to automatically designate Additional Accounts
and convey the Receivables therein whether such Receivables are then existing or
thereafter created. See "Description of the Certificates -- Addition of
Accounts" in the Prospectus. These accounts must meet the criteria set forth
above as of the Relevant Cut Off Date that the Seller designates such accounts
as Additional Accounts. Throughout the term of the Trust, the Accounts from
which the Receivables arise will be the same MasterCard and VISA accounts
designated by the Seller on the Relevant Cut Off Date (plus any Additional
Accounts subsequently designated as described above). In addition, as of the
Relevant Cut Off Date and on the date any new Receivables are created, the
Seller will represent and warrant to the Trust that the Receivables meet the
eligibility requirements specified in the Pooling and Servicing Agreement. See
"Description of the Certificates -- Representations, Warranties and Covenants"
in the Prospectus.
The Receivables (including receivables in the Additional Accounts the
receivables of which are expected to be conveyed to the Trust during the period
from the date of this Prospectus Supplement through the Closing Date), as of
December 31, 1997, totalled $9,555,955,234 in 6,425,475 Accounts. The Accounts
had an average credit limit of $6,387. The percentage of the aggregate total
Receivable balance to the aggregate total credit limit was 23.3%. The average
age of the Accounts was approximately 27.1 months.
The following tables summarize the Trust Portfolio (including receivables
in the Additional Accounts the receivables of which are expected to be conveyed
to the Trust during the period from the date of this Prospectus Supplement
through the Closing Date) by various criteria as of the close of business on
December 31, 1997. Because the future composition of the Trust Portfolio may
change over time, these tables are not necessarily indicative of future results.
S-20
<PAGE> 21
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ---------------------------------------- --------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Credit balance.......................... 111,018 1.7% $ (10,266,042) (0.1)%
$0.00................................... 3,265,706 50.8 0 0.0
$0.01 to $1,000.00...................... 798,169 12.4 288,779,483 3.0
$1,000.01 to $2,500.00.................. 629,721 9.8 1,092,334,321 11.4
$2,500.01 to $5,000.00.................. 923,300 14.4 3,452,240,855 36.1
$5,000.01 to $7,500.00.................. 513,017 8.0 3,122,371,041 32.7
Over $7,500.00.......................... 184,544 2.9 1,610,495,576 16.9
--------- ----- ------------- -----
Total................................... 6,425,475 100.0% $9,555,955,234 100.0%
========= ===== ============= =====
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ---------------------------------------- --------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
$0.00 to $1,000.00...................... 68,436 1.1% $ 13,511,325 0.1%
$1,000.01 to $2,500.00.................. 489,894 7.6 388,825,790 4.1
$2,500.01 to $5,000.00.................. 1,761,089 27.4 2,466,221,586 25.8
$5,000.01 to $7,500.00.................. 2,266,898 35.3 3,337,878,357 34.9
Over $7,500.00.......................... 1,839,158 28.6 3,349,518,176 35.1
--------- ----- ------------- -----
Total................................... 6,425,475 100.0% $9,555,955,234 100.0%
========= ===== ============= =====
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
PERIOD OF DELINQUENCY OF TOTAL PERCENTAGE
(DAYS CONTRACTUALLY NUMBER OF NUMBER OF OF TOTAL
DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ---------------------------------------- --------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent.......................... 6,132,455 95.4% $8,422,904,344 88.1%
1 to 29 days............................ 187,650 2.9 677,957,311 7.1
30 to 59 days........................... 39,138 0.6 154,931,974 1.6
60 to 89 days........................... 22,761 0.4 97,146,623 1.0
90 to 119 days.......................... 17,335 0.3 79,131,009 0.8
120 to 149 days......................... 13,650 0.2 64,772,630 0.7
150 to 179 days......................... 10,985 0.2 53,197,724 0.6
180 or more............................. 1,501 0.0 5,913,619 0.1
--------- ------ -------------- ------
Total................................... 6,425,475 100.0% $9,555,955,234 100.0%
========= ====== ============== ======
</TABLE>
S-21
<PAGE> 22
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
AGE (IN MONTHS) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ---------------------------------------- --------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
0 to 6 months........................... 759,983 11.8% $1,675,503,946 17.5%
Over 6 to 12 months..................... 608,327 9.5 1,313,812,592 13.7
Over 12 to 24 months.................... 1,381,807 21.5 2,132,327,220 22.3
Over 24 to 36 months.................... 1,430,499 22.3 1,887,723,408 19.8
Over 36 to 48 months.................... 1,323,013 20.6 1,511,279,355 15.8
Over 48 to 60 months.................... 265,392 4.1 372,103,643 3.9
Over 60 to 84 months.................... 239,301 3.7 262,658,253 2.7
Over 84 months.......................... 417,153 6.5 400,546,817 4.3
--------- ------ -------------- ------
Total................................... 6,425,475 100.0% $9,555,955,234 100.0%
========= ====== ============== ======
</TABLE>
S-22
<PAGE> 23
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS AND RECEIVABLES
TRUST PORTFOLIO*
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF TOTAL PERCENTAGE OF TOTAL
STATE ACCOUNTS NUMBER OF ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------- --------- ------------------ -------------- -------------------
<S> <C> <C> <C> <C>
Alabama.......................... 75,283 1.2% $ 111,886,273 1.2%
Alaska........................... 10,212 0.2 16,669,760 0.2
Arizona.......................... 94,833 1.5 147,280,560 1.5
Arkansas......................... 53,586 0.8 90,074,411 0.9
California....................... 911,627 14.2 1,398,046,045 14.6
Colorado......................... 110,745 1.7 159,203,538 1.7
Connecticut...................... 88,845 1.4 126,899,985 1.3
Delaware......................... 23,307 0.4 30,811,124 0.4
District of Columbia............. 12,679 0.2 20,088,525 0.2
Florida.......................... 365,204 5.7 585,538,034 6.1
Georgia.......................... 137,381 2.1 204,750,739 2.1
Hawaii........................... 23,847 0.4 40,003,698 0.4
Idaho............................ 27,519 0.4 38,456,737 0.4
Illinois......................... 265,426 4.1 385,322,458 4.0
Indiana.......................... 136,050 2.1 188,898,199 2.0
Iowa............................. 74,452 1.2 103,140,614 1.1
Kansas........................... 64,052 1.0 99,676,103 1.0
Kentucky......................... 67,218 1.0 94,190,845 1.0
Louisiana........................ 84,634 1.3 121,237,779 1.3
Maine............................ 1,794 0.0 2,637,956 0.0
Maryland......................... 141,649 2.2 206,817,758 2.2
Massachusetts.................... 186,468 2.9 256,453,763 2.7
Michigan......................... 222,860 3.5 327,895,552 3.4
Minnesota........................ 132,981 2.1 178,331,842 1.9
Mississippi...................... 39,269 0.6 57,841,553 0.6
Missouri......................... 124,573 1.9 187,904,086 2.0
Montana.......................... 18,647 0.3 24,272,446 0.3
Nebraska......................... 38,380 0.6 52,472,175 0.5
Nevada........................... 50,248 0.8 87,768,988 0.9
New Hampshire.................... 30,009 0.5 42,425,866 0.4
New Jersey....................... 259,930 4.0 358,510,576 3.8
New Mexico....................... 32,071 0.5 47,615,335 0.5
New York......................... 504,384 7.8 805,738,352 8.4
North Carolina................... 128,786 2.0 181,341,291 1.9
North Dakota..................... 13,958 0.2 18,610,844 0.2
Ohio............................. 248,537 3.9 353,997,923 3.7
Oklahoma......................... 73,820 1.1 119,014,757 1.2
Oregon........................... 76,558 1.2 104,533,151 1.1
Pennsylvania..................... 293,878 4.7 376,553,064 4.0
Rhode Island..................... 28,878 0.4 41,936,115 0.4
South Carolina................... 60,522 0.9 84,545,486 0.9
South Dakota..................... 13,880 0.2 18,785,128 0.2
Tennessee........................ 109,393 1.7 154,561,858 1.6
Texas............................ 423,656 6.6 724,817,409 7.6
Utah............................. 39,789 0.6 55,721,875 0.6
Vermont.......................... 13,409 0.2 18,957,240 0.2
Virginia......................... 159,450 2.5 239,539,922 2.5
Washington....................... 133,748 2.1 192,116,365 2.0
West Virginia.................... 28,906 0.4 39,946,759 0.4
Wisconsin........................ 146,031 2.3 196,762,545 2.1
Wyoming.......................... 10,984 0.2 15,871,030 0.2
All Others....................... 11,129 0.2 19,480,797 0.2
--------- ----- -------------- -----
Total............................ 6,425,475 100.0% $9,555,955,234 100.0%
========= ===== ============== =====
</TABLE>
- ---------------
* All data as of December 31, 1997.
S-23
<PAGE> 24
MATURITY ASSUMPTIONS
The Pooling and Servicing Agreement provides that Class A
Certificateholders will not begin to receive payments of principal until the
Class A Expected Final Distribution Date or following the occurrence of a Series
1998-A Pay Out Event or a Trust Pay Out Event which results in the commencement
of the Rapid Amortization Period. Class B Certificateholders will not receive
payments of principal until the payment in full of the Class A Investor Amount.
Unless and until a Series 1998-A Pay Out Event or a Trust Pay Out Event occurs,
on each Distribution Date during the Accumulation Period, monthly deposits of
principal equal to the lesser of (a) Available Investor Principal Collections
and (b) the Controlled Deposit Amount will be made into the Principal Funding
Account.
Although it is anticipated that a single principal payment will be made to
Class A Certificateholders in an amount equal to the Class A Investor Amount on
the January 2001 Distribution Date (the "Class A Expected Final Distribution
Date") and that a single principal payment will be made to Class B
Certificateholders in an amount equal to the Class B Invested Amount on the
February 2001 Distribution Date (the "Class B Expected Final Distribution
Date"), no assurance can be given in that regard.
A "Series 1998-A Pay Out Event" occurs, with respect to Series 1998-A only,
either automatically or after specified notice, upon (a) failure of the Seller
to make certain payments or transfers of funds for the benefit of the
Certificateholders within the time periods stated in the Pooling and Servicing
Agreement, (b) material breaches of certain representations, warranties or
covenants of the Seller, provided, however, that such determination will be
made, for so long as the Collateral Invested Amount is greater than zero,
without reference to whether any funds are available pursuant to any Series
Enhancement, (c) (i) with respect to the end of any Monthly Period, as
determined on the third Business Day preceding the related Distribution Date
(the "Determination Date"), with respect to which the Seller Amount is less than
the Required Seller Amount as of the last day of such Monthly Period, the
failure of the Seller to convey Receivables in Additional Accounts to the Trust
such that the Seller Amount is at least equal to the Required Seller Amount on
or prior to the tenth Business Day following such Determination Date or (ii)
with respect to the end of any Monthly Period with respect to which the
aggregate Principal Receivables in the Trust are not at least equal to the
Required Principal Balance as of the last day of such Monthly Period, the
failure of the Seller to convey Receivables in Additional Accounts to the Trust
such that the aggregate Principal Receivables in the Trust are at least equal to
the Required Principal Balance on or prior to the tenth Business Day following
such Determination Date, (d) the average of the Net Portfolio Yield for three
consecutive Monthly Periods being a rate which is less than the average of the
Base Rate for such period, (e) the occurrence of a Servicer Default having a
material adverse effect on the Certificateholders, provided, however, that such
determination will be made, for so long as the Collateral Invested Amount is
greater than zero, without reference to whether any funds are available pursuant
to any Series Enhancement, or (f) failure to pay in full (i) the Class A
Investor Amount on the Class A Expected Final Distribution Date or (ii) the
Class B Invested Amount on the Class B Expected Final Distribution Date. The
term "Net Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction the numerator of which is the sum
of (a) the amount of collections of Finance Charge Receivables during such
Monthly Period allocable to the Certificates and to the Collateral Interest
including any other amounts that are to be treated as Collections of Finance
Charge Receivables under the Pooling and Servicing Agreement, after subtracting
therefrom the Defaulted Amount allocable to the Class A Certificates, the Class
B Certificates and the Collateral Interest for the Distribution Date with
respect to such Monthly Period, plus (b) the amount of any Principal Funding
Investment Proceeds for the related Distribution Date, plus (c) the amount of
any investment earnings (net of investment losses and expenses) on funds on
deposit in the Pre-Funding Account for the related Distribution Date, plus (d)
the amount of funds, if any, to be withdrawn from the Reserve Account that,
pursuant to the Supplement, are required to be included in Class A Available
Funds with respect to such Distribution Date, and the denominator of which is
the Investor Amount as of the last day of the preceding Monthly Period. For any
Monthly Period, the "Base Rate" will be equal to the annualized percentage
equivalent of a fraction, the numerator of which is equal to the sum of (i) the
Class A Monthly Interest, (ii) the Class B Monthly Interest, (iii) the
Collateral Monthly Interest and (iv) the Monthly Servicing Fee, each with
respect to the related Distribution Date and the denominator of which is the
Investor Amount as of the last day of the preceding Monthly Period. A "Trust Pay
Out Event" occurs, with respect to the Certificates and each other
S-24
<PAGE> 25
Series automatically upon (a) an Insolvency Event relating to any Seller
(including any Additional Seller), (b) the Trust becoming an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), or (c) the inability of the Seller to transfer
Receivables to the Trust in accordance with the Pooling and Servicing Agreement.
Although the Bank believes that the likelihood of a Series 1998-A Pay Out Event
or a Trust Pay Out Event occurring is remote, there can be no assurance that a
Series 1998-A Pay Out Event or a Trust Pay Out Event will not occur. See
"Description of the Certificates -- Series 1998-A Pay Out Events and Trust Pay
Out Events."
In the event of the occurrence of a Series 1998-A Pay Out Event or a Trust
Pay Out Event, the Rapid Amortization Period will begin. During the Rapid
Amortization Period, first the Class A Certificateholders and then, following
the payment in full of the Class A Investor Amount, the Class B
Certificateholders will be entitled to receive monthly payments of principal
equal to the Available Investor Principal Collections received by the Trust
during the related Monthly Period (plus the principal amount on deposit in the
Principal Funding Account) until the Class A Investor Amount or Class B Invested
Amount, as applicable, are paid in full. Allocations of Principal Receivables
will be based on the Principal Allocation Percentage. See "Description of the
Certificates -- Allocation Percentages."
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Advanta Consumer Credit Card Portfolio during any month in
the periods shown and the average of the cardholder monthly payment rates for
all months during the period shown, in each case calculated as a percentage of
total opening monthly account balances during the periods shown. Payments shown
in the table include amounts which would be deemed payments of Principal
Receivables and Finance Charge Receivables with respect to the Accounts.
MONTHLY PAYMENT RATES
ADVANTA CONSUMER CREDIT CARD PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Lowest.................................... 9.85% 8.49% 9.29%
Highest................................... 12.10% 10.23% 12.42%
Monthly Average........................... 10.93% 9.40% 10.73%
</TABLE>
The amount of collections on Receivables may vary from month to month due
to seasonal variations, general economic conditions, changes in tax law and
payment habits of individual cardholders. There can be no assurance that
collections of Principal Receivables with respect to the Trust Portfolio, and
thus the rate at which Certificateholders could expect to accumulate or receive
payments of principal on their Certificates during the Accumulation Period or
the Rapid Amortization Period, will be similar to the historical experience set
forth above or, if the Transfer takes place, that the payment rates with respect
to the Fleet Consumer Credit Card Portfolio will be similar to the experience of
the Advanta Consumer Credit Card Portfolio. In addition, the ability of the
Certificateholders to be paid the applicable Class A Invested Amount or the
Class B Invested Amount on the Class A Expected Final Distribution Date and the
Class B Expected Final Distribution Date, respectively, may be dependent upon
the availability of Shared Principal Collections. Since the Trust, as a master
trust, may issue additional Series from time to time, there can be no assurance
that the issuance of additional Series or the terms of any additional Series
might not have an impact on the timing of payments received by
Certificateholders. Further, if a Series 1998-A Pay Out Event or a Trust Pay Out
Event occurs, the average life and maturity of the Certificates could be
significantly reduced.
RECEIVABLE YIELD CONSIDERATIONS
The yield on the Advanta Consumer Credit Card Portfolio for each of the
three years in the period ended December 31, 1997 is set forth in the following
table. The historical yield figures in the table are calculated on an accrual
basis. Collections on the Receivables will be on a cash basis and may not
reflect the historical yield experience in the table. For example, during
periods of increasing delinquencies, accrual yields may exceed cash yields as
amounts collected on credit card receivables lag behind amounts accrued and
billed to cardholders. Conversely, as delinquencies decrease, cash yields may
exceed accrual yields as amounts
S-25
<PAGE> 26
collected in a current period may include amounts accrued during prior periods.
Yield on both an accrual and a cash basis will be affected by numerous factors,
including the finance charges on the Receivables, the amount of the annual
cardholder fee and other fees and charges, changes in the delinquency rate on
the Receivables and the percentage of cardholders who pay their balances in full
each month and do not incur finance charges. There can be no assurance that the
revenue from finance charges and fees for the Receivables will be similar to the
historical experience set forth below or, if the Transfer takes place, that the
revenue from finance charges and fees for the Receivables selected from the
Fleet Consumer Credit Card Portfolio will be similar to the historical
experience of the Advanta Consumer Credit Card Portfolio. See "Risk Factors" and
"Assignment and Transfer" in the Prospectus.
REVENUE FROM FINANCE CHARGES AND FEES
ADVANTA CONSUMER CREDIT CARD PORTFOLIO(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997(2) 1996(2) 1995(2)
------- ------- -------
<S> <C> <C> <C>
Average Monthly Accrued Fees and Charges(3)(4)............. $39.80 $32.29 $27.03
Average Account Balance(5)................................. 2,932 2,960 2,435
Yield From Fees and Charges(3)(4).......................... 16.29% 13.09% 13.32%
</TABLE>
- ---------------
(1) The figures shown do not include revenue attributable to Interchange.
(2) Includes the receivables transferred in connection with the Prior
Securitizations and Master Trust II Sales.
(3) Fees and Charges are comprised of finance charges, annual cardholder fees
and certain other service charges.
(4) Average Monthly Accrued Fees and Charges and Yield from Fees and Charges are
presented net of adjustments made pursuant to the Bank's normal servicing
procedures, including removal of incorrect or disputed finance charges and
reversal of finance charges accrued on charged off accounts.
(5) Average Account Balance includes purchases, cash advances and billed and
unpaid finance and other charges, and is calculated based on the average of
the opening monthly account balances for accounts with balances during the
periods shown.
The yield for the Advanta Consumer Credit Card Portfolio shown in the above
table is comprised of three components: finance charges, annual cardholder fees
and other service charges, such as late charges. The yield related to annual
cardholder fees (on those accounts which assess such fees) and other service
charges varies with the type and volume of activity in, and the balance of each
account. The Bank currently assesses annual cardholder fees of $10 to $50 for
certain of its credit card accounts. Most accounts originated since March 1987
do not carry an annual cardholder fee. See "The Banks' Credit Card Activities"
herein and in the Prospectus. As account balances increase, an annual cardholder
fee, which remains constant, represents a smaller percentage of the aggregate
account balance.
The decline in yield for the period from 1995 to 1996, as demonstrated in
the above table, is the result of the Bank's focus on the direct solicitation of
low rate, prime rate and London interbank offered rate based, no annual fee
credit card accounts and the fluctuations in the prime rate during the period
shown. Certain of the most recently originated credit card accounts have a lower
introductory rate which might have the effect of lowering finance charge income
on such accounts below the level indicated in the above table. The Trust
Portfolio contains a greater proportion of receivables arising under such
accounts than does the Advanta Consumer Credit Card Portfolio.
The increase in yields demonstrated in the above tables from 1996 to 1997
is the result of the Bank's action to improve the revenue produced by its credit
card business. Several risk based repricing initiatives were implemented in 1996
and 1997. In May 1997, the average percentage rate on a majority of receivables
in the consumer credit card portfolio were increased on average from 200 to 300
basis points. In addition, late, overlimit and non sufficient funds fees, cash
advance fees, and certain other fees were either increased or added. Due to
scaled down marketing efforts, there was also a lower percentage of teaser rate
credit cards in the portfolio in 1997 as compared to prior years.
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DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement entered into among Advanta National Bank, as Seller and as Servicer of
the Accounts and the Receivables, and Bankers Trust Company, as Trustee for the
Certificateholders, substantially in the form filed as an exhibit to the
Registration Statement of which the Prospectus is a part. Pursuant to the Master
Pooling and Servicing Agreement, the Seller may execute further supplements
thereto among each of the Sellers and the Trustee in order to issue additional
Series. See "Description of the Certificates -- New Issuances" in the
Prospectus. The Trustee will provide a copy of the Master Pooling and Servicing
Agreement (without exhibits or schedules), including any Supplements, to
Certificateholders without charge upon written request. The following summary
describes certain terms of the Pooling and Servicing Agreement and is qualified
in its entirety by reference to the Pooling and Servicing Agreement.
GENERAL
The Certificates will represent undivided interests in the Trust, including
the right to a floating percentage (in the case of collections of Principal
Receivables during the Revolving Period, which collections will be allocated to
the Certificates and paid to the holders of the Seller Certificates, to
amortizing or accumulating Series in Group One or, in certain limited
circumstances described herein, to the holder of the Collateral Interest, or
deposited into the Excess Funding Account, and in the case of collections of
Finance Charge Receivables and Defaulted Receivables at all times) or a
resettable fixed/floating percentage (in the case of collections of Principal
Receivables during the Accumulation Period or the Rapid Amortization Period)
(each, the "Series Percentage") of all cardholder payments on the Receivables;
provided, however, that on any Distribution Date during the Accumulation Period,
the amount to be deposited in the Principal Funding Account in respect of
collections of Principal Receivables will be limited to the Controlled Deposit
Amount on such Distribution Date. See "-- Allocation Percentages." For any
Monthly Period, the portion of the Principal Receivables and any amounts on
deposit in the Excess Funding Account represented by the Certificates and the
Collateral Interest (the "Invested Amount") will be equal to the Initial
Invested Amount, plus the amount of any increases in the Invested Amount during
the Funding Period as a result of withdrawals from the Pre-Funding Account in
connection with any increases in the amount of Principal Receivables in the
Trust, minus the amount of principal deposits into the Principal Funding
Account, minus (without duplication of the amount of principal deposits into the
Principal Funding Account) the amount of principal payments paid to the
Certificateholders and the Collateral Interest Holder (other than any principal
payments made from any amounts on deposit in the Pre-Funding Account at the end
of the Funding Period) and minus any unreimbursed reductions in the Invested
Amount. See "Description of the Certificates -- Defaulted Receivables; Rebates
and Fraudulent Charges" in the Prospectus and "-- Allocation of Investor Default
Amount" herein. Each Certificate represents the right to receive monthly
payments of interest for the related Interest Periods at the applicable
Certificate Rate for such Interest Periods from collections of Finance Charge
Receivables and, in certain circumstances, from withdrawals from the Cash
Collateral Account and Reallocated Principal Collections, and deposits or
payments of principal during the Accumulation Period or the Rapid Amortization
Period funded from collections of Principal Receivables allocated to the Class A
Invested Amount and the Class B Invested Amount (plus certain other amounts
specified herein, including, during the Accumulation Period, certain collections
of Principal Receivables otherwise allocable to other Series, to the extent such
collections are not needed to make payments to or for the benefit of such other
Series).
The Seller holds the interest in the Principal Receivables and the amounts
on deposit in the Excess Funding Account, if any (the "Seller Amount"), not
represented by the Certificates, the Collateral Interest and the certificates of
and uncertificated interests in other Series, if any. The Seller holds an
undivided interest in the Trust (the "Sellers' Interest"), including the right
to a percentage (the "Seller Percentage") of all cardholder payments on the
Receivables.
During the Revolving Period, the Investor Amount will remain constant
except in certain limited circumstances (including the circumstance where there
are amounts remaining in the Pre-Funding Account at the end of the Funding
Period that are paid to Certificateholders). See "Description of the
Certificates --
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Defaulted Receivables; Rebates and Fraudulent Charges" in the Prospectus and
"-- Pre-Funding Account" and "-- Allocation of Investor Default Amounts" herein.
The amount of Principal Receivables, however, will vary each day as new
Principal Receivables are created and others are paid. The Seller Amount will
fluctuate daily, therefore, to reflect the changes in the amount of the
Principal Receivables. During the Accumulation Period or the Rapid Amortization
Period, the Invested Amount will decline for each Monthly Period as cardholder
payments of Principal Receivables are collected and deposited in the Principal
Funding Account or paid to the Certificateholders.
INTEREST PAYMENTS
Interest will accrue on the Certificates at the applicable Class A
Certificate Rate or Class B Certificate Rate from the date of the initial
issuance of the Certificates (the "Closing Date"). Interest at such applicable
rate will be paid to the Certificateholders on each Distribution Date beginning
on April 15, 1998.
Interest payments on the Certificates on any Distribution Date will be
calculated on the outstanding principal amount of the Class A Certificates or
the Class B Certificates, as applicable, as of the preceding Record Date (or, in
the case of the first Distribution Date, as of the Closing Date) based upon the
applicable Certificate Rate for the related Interest Period. Interest due but
not paid on any Distribution Date will be payable on the next succeeding
Distribution Date together with additional interest on such amount at the
applicable Certificate Rate plus 2.00%.
Interest on the Class A Certificates and the Class B Certificates will be
calculated on the basis of the actual number of days in the related Interest
Period and a 360-day year. The Class A Certificates will bear interest from the
Closing Date at the rate of 0.04% per annum above the London interbank offered
quotations for United States dollar deposits ("LIBOR") for a period of two
months (for the period from the Closing Date through April 14, 1998) or one
month (for each Interest Period thereafter) determined as set forth below. The
Class B Certificates will bear interest from the Closing Date at the rate of
0.24% per annum above two-month LIBOR (for the period from the Closing Date
through April 14, 1998) or one-month LIBOR (for each Interest Period thereafter)
determined as set forth below.
The Trustee will determine LIBOR on February 4, 1998 for the period from
the Closing Date through April 14, 1998, and for each Interest Period
thereafter, on the second Business Day prior to every Distribution Date on which
such Interest Period begins, commencing with the April 1998 Distribution Date
(each a "LIBOR Determination Date").
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a period of the Designated Maturity which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such date. If such rate
does not appear on Telerate Page 3750, the rate for that LIBOR Determination
Date will be determined on the basis of the rates at which deposits in United
States dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on that day to prime banks in the London interbank market for a
period of the Designated Maturity. The Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for that LIBOR Determination
Date will be the arithmetic mean of the quotations. If fewer than two quotations
are provided as requested, the rate for that LIBOR Determination Date will be
the arithmetic mean of the rates quoted by three 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
period of the Designated Maturity.
"Designated Maturity" means, for the initial LIBOR Determination Date, two
months, and for each LIBOR Determination Date thereafter, one month.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means three major banks in the London interbank market
selected by the Servicer.
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The determination of LIBOR by the Trustee and the Trustee's subsequent
calculation of the applicable Certificate Rate for the relevant Interest Periods
shall (in the absence of manifest error) be final and binding on each
Certificateholder. The Class A Certificate Rate or Class B Certificate Rate
applicable to the then current Interest Period may be obtained by telephoning
the Trustee at its Corporate Trust Office at (800) 735-7777.
On each Distribution Date, Class A Monthly Interest and Class A Monthly
Interest previously due but not distributed to the Class A Certificateholders
will be paid to the Class A Certificateholders from Class A Available Funds for
the related Monthly Period. To the extent Class A Available Funds for such
Monthly Period are insufficient to pay such interest, Excess Spread and Excess
Finance Charges allocated to Series 1998-A, amounts, if any, on deposit in the
Cash Collateral Account and Reallocated Principal Collections allocable first to
the Collateral Invested Amount and then the Class B Invested Amount will be used
to make such payments. "Class A Available Funds" means, with respect to any
Monthly Period, an amount equal to the sum of (a) the Class A Floating
Percentage of collections of Finance Charge Receivables allocated to the Series
1998-A Certificates with respect to such Monthly Period (including any
investment earnings on amounts on deposit in the Pre-Funding Account and certain
other amounts that are to be treated as collections of Finance Charge
Receivables in accordance with the Pooling and Servicing Agreement), (b) the
amount of Principal Funding Investment Proceeds, if any, with respect to such
Distribution Date and (c) the amount of funds, if any, to be withdrawn from the
Reserve Account that, pursuant to the Supplement, are required to be included in
Class A Available Funds with respect to such Distribution Date.
On each Distribution Date, Class B Monthly Interest and Class B Monthly
Interest previously due but not distributed to the Class B Certificateholders
will be paid to the Class B Certificateholders from Class B Available Funds for
the related Monthly Period. To the extent Class B Available Funds for such
Monthly Period are insufficient to pay such interest, Excess Spread and Excess
Finance Charges allocated to Series 1998-A, amounts, if any, on deposit in the
Cash Collateral Account and Reallocated Principal Collections allocable to the
Collateral Invested Amount will be used to make such payment. "Class B Available
Funds" means, with respect to any Monthly Period, an amount equal to the Class B
Floating Percentage of collections of Finance Charge Receivables allocated to
the Series 1998-A Certificates with respect to such Monthly Period (including
any investment earnings on amounts on deposit in the Pre-Funding Account and
certain other amounts that are to be treated as collections of Finance Charge
Receivables in accordance with the Pooling and Servicing Agreement).
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) (A) a fraction, the numerator of which is the
actual number of days in the period from and including the preceding
Distribution Date to but excluding such Distribution Date and the denominator of
which is 360, times (B) the Class A Certificate Rate and (ii) the outstanding
principal amount of the Class A Certificates as of the preceding Record Date;
provided, however, with respect to the first Distribution Date, Class A Monthly
Interest shall be equal to the interest accrued on the outstanding principal
amount of the Class A Certificates at the applicable Class A Certificate Rate
for the period from the Closing Date through April 14, 1998.
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) (A) a fraction, the numerator of which is the
actual number of days in the period from and including the preceding
Distribution Date to but excluding such Distribution Date and the denominator of
which is 360, times (B) the Class B Certificate Rate and (ii) the outstanding
principal amount of the Class B Certificates as of the preceding Record Date;
provided, however, with respect to the first Distribution Date, Class B Monthly
Interest shall be equal to the interest accrued on the outstanding principal
amount of the Class B Certificates at the applicable Class B Certificate Rate
for the period from the Closing Date through April 14, 1998.
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Percentage of the collections of Finance
Charge Receivables allocated to Series 1998-A (including any investment earnings
on amounts on deposit in the Pre-Funding Account and any other
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amounts that are to be treated as collections of Finance Charge Receivables in
accordance with the Pooling and Servicing Agreement).
"Collateral Monthly Interest" means, with respect to any Distribution Date,
an amount equal to the product of (i) (A) a fraction, the numerator of which is
the actual number of days in the period from and including the preceding
Distribution Date to but excluding such Distribution Date and the denominator of
which is 360, times (B) the Collateral Rate and (ii) the Collateral Investor
Amount as of the preceding Record Date; provided, however, with respect to the
first Distribution Date, Collateral Monthly Interest shall be equal to the
interest accrued on the Collateral Initial Investor Amount at the applicable
Collateral Rate for the period from the Closing Date through April 14, 1998.
"Collateral Rate" means a rate specified in the Loan Agreement not greater
than one-month LIBOR plus 1% per annum.
PRE-FUNDING ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Certificateholders and the Collateral Interest Holder, the
Pre-Funding Account with an Eligible Institution. Funds on deposit in the
Pre-Funding Account will be withdrawn on a weekly basis to the extent of any
increases in the Invested Amount during the Funding Period as a result of an
increase in the amount of Principal Receivables in the Trust to the extent that
the Seller Amount on such day exceeds the product of (A) the sum of 0.50% and
the Required Seller Percentage on such date and (B) the sum of the aggregate
amount of Principal Receivables in the Trust and amounts on deposit in the
Excess Funding Account on such day; provided, however, that the Invested Amount
will in no event exceed $1,150,000,000 or increase by an amount in excess of the
Pre-Funded Amount immediately prior to giving effect to such increase. Should
the Pre-Funded Amount be greater than zero at the end of the Funding Period, any
principal amounts remaining on deposit in the Pre-Funding Account will be
withdrawn for pro rata distribution to Certificateholders and the Collateral
Interest Holder on the next succeeding Distribution Date.
All amounts on deposit in the Pre-Funding Account will be invested by the
Trustee in Eligible Investments. On each Distribution Date with respect to the
Funding Period, all net investment income earned on amounts in the Pre-Funding
Account during the preceding Monthly Period will be withdrawn from the
Pre-Funding Account and deposited into the Collection Account for distribution
as collections of Finance Charge Receivables allocable to the Certificateholders
and the Collateral Interest Holder. Such investment income will be deemed to be
collections of Finance Charge Receivables allocable to the Certificates and the
Collateral Interest for such Monthly Period.
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the Accumulation Period or, if earlier, the
Rapid Amortization Period), no principal payments will be made to the
Certificateholders (other than any principal payment made from any amount on
deposit in the Pre-Funding Account at the end of the Funding Period). On each
Distribution Date during the Revolving Period, collections of Principal
Receivables allocable to the Certificateholders' Interest and the Collateral
Interest will, subject to certain limitations, including the allocation of any
Reallocated Principal Collections with respect to the related Monthly Period to
pay the Class A Required Amount and the Class B Required Amount and payments of
Collateral Monthly Principal, be treated as Shared Principal Collections.
Collateral Monthly Principal will be applied in accordance with the Loan
Agreement. The "Loan Agreement" means the Loan Agreement, dated as of the
Closing Date, among the Seller, the Servicer, the Trustee and the Collateral
Interest Holder, as amended, supplemented or otherwise modified from time to
time.
The first principal payment (other than any principal payment made from any
amount on deposit in the Pre-Funding Account at the end of the Funding Period)
will be made to the Certificateholders on the earlier of the Class A Expected
Final Distribution Date or on the Distribution Date in the month following the
month in which the Rapid Amortization Period commences. On each Distribution
Date with respect to the Class A Accumulation Period, an amount equal to the
least of (a) Available Investor Principal Collections on deposit
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<PAGE> 31
in the Collection Account with respect to such Distribution Date, (b) the
applicable Controlled Deposit Amount for such Distribution Date and (c) the
Class A Invested Amount, will be deposited in the Principal Funding Account for
payment to the Class A Certificateholders on the Class A Expected Final Payment
Date or on the first Distribution Date with respect to the Rapid Amortization
Period. After the Class A Investor Amount has been paid in full, on each
Distribution Date with respect to the Class B Accumulation Period, amounts equal
to the least of (a) Available Investor Principal Collections on deposit in the
Collection Account with respect to such Distribution Date (minus the portion of
such Available Investor Principal Collections applied to Class A Monthly
Principal on such Distribution Date), (b) the applicable Controlled Deposit
Amount for such Distribution Date and (c) the Class B Invested Amount will be
paid to the Class B Certificateholders until the Class B Invested Amount has
been paid in full.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) an amount equal to the
product of the Invested Principal Collections multiplied by the sum of the Class
A Principal Percentage and the Class B Principal Percentage, minus (ii) the
amount of Reallocated Principal Collections with respect to such Monthly Period
used to fund the Class A Required Amount (excluding certain Reallocated
Principal Collections that have resulted in a reduction of the Collateral
Invested Amount), plus (b) any Shared Principal Collections with respect to
other Series in Group One that are allocated to Series 1998-A, plus (c) any
other amounts which pursuant to the Supplement are to be treated as Available
Investor Principal Collections with respect to the related Distribution Date,
plus (d) an amount equal to the excess, if any, of Collateral Principal
Collections over Collateral Monthly Principal. "Invested Principal Collections"
means, with respect to any Monthly Period, the Principal Allocation Percentage
of all collections of Principal Receivables received during such Monthly Period.
"Collateral Principal Collections" means, with respect to any Monthly
Period, the Invested Principal Collections less an amount equal to the product
of (i) Invested Principal Collections with respect to such Monthly Period and
(ii) the sum of the Class A Principal Percentage and the Class B Principal
Percentage with respect to such Monthly Period, plus the amount, if any, of
Excess Spread and Excess Finance Charges to be distributed pursuant to clauses
(h) and (i) of " -- Application of Collections -- Excess Spread; Excess Finance
Charges" on the related Distribution Date, minus the amount of Reallocated
Principal Collections with respect to such Monthly Period which are required to
fund any deficiency in the amounts to be distributed pursuant to the Class A
Required Amount or the Class B Required Amount for the related Distribution Date
(excluding Reallocated Principal Collections which have been allocated to reduce
the Class B Invested Amount).
On each Distribution Date during the Rapid Amortization Period until the
Class A Investor Amount has been paid in full or the Series 1998-A Termination
Date occurs, the Class A Certificateholders will be entitled to receive
Available Investor Principal Collections in an amount up to the Class A Investor
Amount. After payment in full of the Class A Investor Amount, the Class B
Certificateholders will be entitled to receive, on each such Distribution Date,
Available Investor Principal Collections until the earlier of the date the Class
B Invested Amount is paid in full and the Series 1998-A Termination Date.
"Class A Monthly Principal" with respect to any Distribution Date relating
to the Class A Accumulation Period or the Rapid Amortization Period will equal
the least of (i) the Available Investor Principal Collections on deposit in the
Collection Account with respect to such Distribution Date, (ii) for each
Distribution Date with respect to the Class A Accumulation Period (and on or
prior to the Class A Expected Final Distribution Date), the Controlled Deposit
Amount for such Distribution Date and (iii) the Class A Invested Amount on such
Distribution Date.
"Class B Monthly Principal" with respect to any Distribution Date,
beginning with the Class B Principal Commencement Date, will equal the least of
(i) the Available Investor Principal Collections on deposit in the Collection
Account with respect to such Distribution Date (minus the portion of such
Available Principal Collections applied to Class A Monthly Principal on such
Distribution Date), (ii) for each Distribution Date with respect to the Class B
Accumulation Period, the Controlled Deposit Amount for such Distribution Date
and (iii) the Class B Invested Amount on such Distribution Date.
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<PAGE> 32
"Collateral Monthly Principal" means (i) on any Distribution Date prior to
the Distribution Date on which the Class B Invested Amount is paid in full, an
amount equal to the lesser of (A) Collateral Principal Collections with respect
to such Distribution Date plus Available Investor Principal Collections (not
including any amounts specified in clause (d) of the definition of "Available
Investor Principal Collections") not applied to Class A Monthly Principal or
Class B Monthly Principal on such Distribution Date and (B) the Enhancement
Surplus on such Distribution Date, if any, (ii) beginning with the Distribution
Date on which the Class B Invested Amount is paid in full, an amount equal to
the sum of the Available Investor Principal Collections (not including any
amounts specified in clause (d) of the defnition of "Available Investor
Principal Collections") with respect to such Distribution Date (minus the
portion of such Available Investor Principal Collections applied to Class A
Monthly Principal and Class B Monthly Principal on such Distribution Date) and
the Collateral Principal Collections with respect to such Distribution Date; and
(iii) on any Distribution Date, in addition to the amounts, if any, set forth in
items (i) and (ii), at the option of the Seller, and after receipt by the
Servicer and the Trustee of a written determination by each Rating Agency that
such action will not result in a reduction or withdrawal of the then current
ratings of the Class A Certificates or the Class B Certificates, an amount
established by the Seller and consistent with any restrictions set forth in the
determination of the Rating Agency; provided, however, with respect to any
Distribution Date, Collateral Monthly Principal will not exceed the Collateral
Invested Amount.
"Controlled Accumulation Amount" means (a) for any Distribution Date with
respect to the Class A Accumulation Period, the maximum Class A Invested Amount
during the Revolving Period divided by nine, subject to upward adjustment in
connection with the postponement of the Class A Accumulation Period, and (b) for
any Distribution Date with respect to the Class B Accumulation Period, the
maximum Class B Invested Amount during the Revolving Period.
"Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the Controlled Accumulation Amount
for such Distribution Date over the amount distributed from the Collection
Account as Class A Monthly Principal or Class B Monthly Principal, as the case
may be, for such Distribution Date and (b) on each subsequent Distribution Date
with respect to the Class A Accumulation Period or the Class B Accumulation
Period, the excess, if any, of the Controlled Deposit Amount for such subsequent
Distribution Date over the amount distributed from the Collection Account as
Class A Monthly Principal or Class B Monthly Principal, as the case may be, for
such subsequent Distribution Date.
POSTPONEMENT OF ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Class A Accumulation Period, and extend the length of the
Revolving Period, subject to certain conditions including those set forth below.
The Servicer may make such election only if the Accumulation Period Length
(determined as described below) is less than nine months. On each Determination
Date, until the Class A Accumulation Period begins, the Servicer will determine
the "Accumulation Period Length," which is the number of months expected to be
required to fully fund the Principal Funding Account no later than the Class A
Expected Final Distribution Date, based on (a) the expected monthly collections
of Principal Receivables expected to be distributable to the Certificateholders
of all Series, assuming a principal payment rate no greater than the lowest
monthly principal payment rate on the Receivables for the preceding twelve
months and (b) the amount of principal expected to be distributable to
certificateholders of Series which are not expected to be in their revolving
periods during the Class A Accumulation Period. If the Accumulation Period
Length is less than nine months, the Servicer may, at its option, postpone the
commencement of the Class A Accumulation Period such that the number of months
included in the Class A Accumulation Period will be equal to or exceed the
Accumulation Period Length. The effect of the foregoing calculation is to permit
the reduction of the length of the Class A Accumulation Period based on the
investor interest of certain other Series which are scheduled to be in their
revolving periods during the Class A Accumulation Period and on increases in the
principal payment rate occurring after the Closing Date. The length of the Class
A Accumulation Period will not be less than one month.
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SUBORDINATION
The Class B Certificateholders' Interest and the Collateral Interest will
be subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Collateral Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain principal payments otherwise allocable to the
Class B Certificateholders may be reallocated to the Class A Certificateholders
and the Class B Invested Amount may be reduced. Similarly, certain principal
payments allocable to the Collateral Interest may be reallocated to the Class A
Certificateholders and the Class B Certificateholders and the Collateral
Invested Amount may be reduced. To the extent the Class B Invested Amount is
reduced, the percentage of collections of Finance Charge Receivables allocated
to the Class B Certificateholders in subsequent Monthly Periods will be reduced.
Moreover, to the extent the amount of such reduction in the Class B Invested
Amount is not reimbursed, the amount of principal distributable to the Class B
Certificateholders will be reduced. See "-- Allocation Percentages,"
"-- Reallocation of Cash Flows," and "-- Application of Collections -- Excess
Spread; Excess Finance Charges."
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, with respect to each
Monthly Period the Servicer will allocate among the Class A Certificates, the
Class B Certificates and the Collateral Interest, the certificateholders'
interest for all other Series issued and outstanding and the Sellers' Interest
all collections of Finance Charge Receivables and Principal Receivables and the
Defaulted Amount with respect to such Monthly Period.
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to Series 1998-A based on the
Floating Allocation Percentage. The "Floating Allocation Percentage" means, with
respect to any Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is the Invested Amount
as of the last day of the preceding Monthly Period (or with respect to the first
Monthly Period, the Initial Invested Amount) and the denominator of which is the
greater of (1) the sum of (x) the total amount of the Principal Receivables in
the Trust as of such day (or with respect to the first Monthly Period, the total
amount of Principal Receivables in the Trust on the Closing Date) and (y) the
principal amount on deposit in the Excess Funding Account as of such day and (2)
the sum of the numerators used to calculate the Series Percentages with respect
to Finance Charge Receivables or Defaulted Receivables, as applicable, for all
Series of certificates then outstanding; provided, however, that such ratio is
subject to adjustment to give effect to designations of Additional Accounts and
to give effect to increases in the Invested Amount during the Funding Period.
Such amounts so allocated will be further allocated between the Class A
Certificateholders, the Class B Certificateholders and the Collateral Interest
Holder in accordance with the Class A Floating Percentage, the Class B Floating
Percentage and the Collateral Floating Percentage, respectively. The "Class A
Floating Percentage" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class A Invested Amount as of the close of
business on the last day of the preceding Monthly Period (or with respect to the
first Monthly Period, the Class A Initial Invested Amount) and the denominator
of which is equal to the Invested Amount as of the close of business on such day
(or with respect to the first Monthly Period, the Initial Invested Amount). The
"Class B Floating Percentage" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is equal to the Class B Invested Amount as of the close
of business on the last day of the preceding Monthly Period (or with respect to
the first Monthly Period, the Class B Initial Invested Amount) and the
denominator of which is equal to the Invested Amount at the close of business on
such day (or with respect to the first Monthly Period, the Initial Invested
Amount). The "Collateral Floating Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Collateral Invested Amount as of the
close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Collateral Initial Invested Amount) and
the denominator of which is equal to the Invested Amount as of the close of
business on such day (or with respect to the first Monthly Period, the Initial
Invested Amount).
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Collections of Principal Receivables will be allocated to Series 1998-A
based on the Principal Allocation Percentage. The "Principal Allocation
Percentage" means, with respect to any Monthly Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is (a) during the Revolving Period, the Invested Amount as of the last day of
the immediately preceding Monthly Period (or, in the case of the first Monthly
Period, the Closing Date) and (b) during the Accumulation Period or the Rapid
Amortization Period, the Invested Amount as of the last day of the Revolving
Period or if the numerator has been reduced as described in the first proviso
below during an Accumulation Period and a Rapid Amortization Period commences,
as of the last day of the Accumulation Period, and the denominator of which is
the greater of (i) the sum of the total amount of Principal Receivables in the
Trust as of the last day of the immediately preceding Monthly Period and the
principal amount on deposit in the Excess Funding Account as of such last day
(or, in the case of the first Monthly Period, the Closing Date) and (ii) the sum
of the numerators used to calculate the Series Percentages applicable to
Principal Receivables for all Series outstanding as of the date as to which such
determination is being made; provided, however, that during the Accumulation
Period, on any date, at the option of the Servicer, the numerator of the
Principal Allocation Percentage may be reduced below the numerator used in the
previous Monthly Period, to an amount not less than the greater of (x) the
Invested Amount as of the last day of the immediately preceding Monthly Period
(less the amount of any distributions of principal made to Series 1998-A
Certificateholders since the last day of the immediately preceding Monthly
Period) and (y) an amount that if used as the numerator of the Principal
Allocation Percentage for the remainder of the Accumulation Period, based on
certain assumptions set forth in the Supplement, would assure that Available
Investor Principal Collections for Series 1998-A would equal at least 125% of
the Controlled Accumulation Amount for each Monthly Period for so long as the
Invested Amount is greater than zero; provided, further, however, that such
ratio is subject to adjustment to give effect to designations of Additional
Accounts and to increases in the Invested Amount during the Funding Period. Such
amounts allocated to the Certificateholders will be further allocated between
the Class A Certificateholders and the Class B Certificateholders based on the
Class A Principal Percentage and the Class B Principal Percentage, respectively.
The "Class A Principal Percentage" means, with respect to any Monthly Period (a)
during the Revolving Period, the percentage equivalent (which shall never exceed
100%) of a fraction, the numerator of which is equal to the Class A Invested
Amount as of the last day of the immediately preceding Monthly Period (or, in
the case of the first Monthly Period, the Closing Date), and the denominator of
which is equal to the Invested Amount as of such day (or, in the case of the
first Monthly Period, the Closing Date) and (b) during the Accumulation Period
or the Rapid Amortization Period, the percentage equivalent (which shall never
exceed 100%) of a fraction, the numerator of which is the Class A Invested
Amount as of the last day of the Revolving Period, and the denominator of which
is the Invested Amount as of such last day. The "Class B Principal Percentage"
means, with respect to any Monthly Period, (i) during the Revolving Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is the Class B Invested Amount as of the last day of the
immediately preceding Monthly Period (or, in the case of the first Monthly
Period, the Closing Date) and the denominator of which is the Invested Amount as
of such day (or, in the case of the first Monthly Period, the Closing Date) and
(ii) during the Accumulation Period or the Rapid Amortization Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is the Class B Invested Amount as of the last day of the
Revolving Period, and the denominator of which is the Invested Amount as of such
last day. Collections of Principal Receivables allocable to Series 1998-A and
not allocated to the Class A Certificateholders or the Class B
Certificateholders will be allocated, in an amount up to the Collateral Invested
Amount, to the Collateral Interest Holder.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" for any date means an amount equal to (i) the
Class A Initial Invested Amount, plus (ii) the amount of any increases in the
Class A Invested Amount during the Funding Period on or prior to such date,
minus (iii) the amount of principal payments (other than principal payments made
from amounts on deposit in the Pre-Funding Account on the first Distribution
Date following the end of the Funding Period) made to the Class A
Certificateholders on or prior to such date, minus (iv) the excess, if any,
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of the aggregate amount of Class A Investor Charge-Offs for all prior
Distribution Dates over the aggregate amount of any reimbursements of Class A
Investor Charge-Offs for all Distribution Dates prior to such date and minus (v)
the principal amount on deposit in the Principal Funding Account (the "Principal
Funding Account Balance").
"Class B Invested Amount" for any date means an amount equal to (i) the
Class B Initial Invested Amount, plus (ii) the amount of any increases in the
Class B Invested Amount during the Funding Period on or prior to such date,
minus (iii) the amount of principal payments (other than principal payments made
from amounts on deposit in the Pre-Funding Account on the first Distribution
Date following the end of the Funding Period) made to Class B Certificateholders
on or prior to such date, minus (iv) the excess, if any, of the aggregate amount
of Class B Investor Charge-Offs for all prior Distribution Dates over the
aggregate amount of any reimbursement of Class B Investor Charge-Offs for all
Distribution Dates preceding such date, minus (v) the aggregate amount of
Reallocated Principal Collections for all prior Distribution Dates which have
been used to fund the Class A Required Amount with respect to such Distribution
Dates (excluding any Reallocated Principal Collections that have resulted in a
reduction of the Collateral Invested Amount), minus (vi) an amount equal to the
amount by which the Class B Invested Amount has been reduced to fund the Class A
Investor Default Amount on all prior Distribution Dates as described under
"-- Allocation of Investor Default Amount," and plus (vii) the aggregate amount
of Excess Spread and Excess Finance Charges allocated to Series 1998-A and
applied on all prior Distribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (iv), (v) and (vi); provided,
however, that the Class B Invested Amount may not be reduced below zero.
"Collateral Invested Amount" means an amount equal to (i) the Collateral
Initial Invested Amount, plus (ii) the amount of any increases in the Collateral
Invested Amount during the Funding Period on or prior to such date, minus (iii)
the aggregate amount of principal payments (other than principal payments made
from amounts on deposit in the Pre-Funding Account on the first Distribution
Date following the end of the Funding Period) made with respect to the
Collateral Interest prior to the date of determination, minus (iv) the aggregate
amount of Reallocated Principal Collections allocable to the Collateral Invested
Amount for all prior Distribution Dates which have been used to fund the Class A
Required Amount or the Class B Required Amount, minus (v) an amount equal to the
aggregate amount by which the Collateral Invested Amount has been reduced to
fund the Class A Investor Default Amount and the Class B Investor Default Amount
on all prior Distribution Dates as described under "-- Allocation of Investor
Default Amount," minus (vi) an amount equal to the product of the Collateral
Floating Percentage and the Investor Default Amount (the "Collateral Default
Amount") with respect to any Distribution Date that is not funded out of Excess
Spread and Excess Finance Charges allocated to Series 1998-A and available for
such purpose on such Distribution Date, and plus (vi) the aggregate amount of
Excess Spread and Excess Finance Charges allocated and available to reimburse
amounts deducted pursuant to the foregoing clauses (iv), (v) and (vi); provided,
however, that the Collateral Invested Amount may not be reduced below zero.
"Invested Amount," for any date means an amount equal to the sum of the
Class A Invested Amount, the Class B Invested Amount and the Collateral Invested
Amount.
"Class A Investor Amount" for any date means an amount equal to the sum of
the Class A Invested Amount, plus the Class A Floating Percentage of the
Pre-Funded Amount, plus the Principal Funding Account Balance.
"Class B Investor Amount" for any date means an amount equal to the sum of
the Class B Invested Amount plus the Class B Floating Percentage of the
Pre-Funded Amount.
"Collateral Investor Amount" for any date means an amount equal to the sum
of the Collateral Invested Amount plus the Collateral Floating Percentage of the
Pre-Funded Amount.
"Investor Amount," for any date means an amount equal to the sum of the
Class A Investor Amount, the Class B Investor Amount and Collateral Investor
Amount.
"Series Investor Amount" for any date means an amount equal to the
numerator of the Principal Allocation Percentage on such date.
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REALLOCATION OF CASH FLOWS
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class A Required Amount"), which will
be equal to the amount, if any, by which (a) the sum of (i) Class A Monthly
Interest for such Distribution Date, (ii) any Class A Monthly Interest
previously due but not paid to Class A Certificateholders on a prior
Distribution Date, (iii) any Class A Additional Interest and any Class A
Additional Interest previously due but not paid to the Class A
Certificateholders on a prior Distribution Date, (iv) the Class A Servicing Fee
for such Distribution Date and any unpaid Class A Servicing Fee and (v) the
Class A Investor Default Amount, if any, for such Distribution Date exceeds (b)
the Class A Available Funds. If the Class A Required Amount is greater than
zero, Excess Spread and Excess Finance Charges allocated to Series 1998-A and
available for such purpose will be used to fund the Class A Required Amount with
respect to such Distribution Date. If such Excess Spread and Excess Finance
Charges available with respect to such Distribution Date are less than the Class
A Required Amount, amounts, if any, on deposit in the Cash Collateral Account
will then be used to fund the remaining Class A Required Amount. If such Excess
Spread and Excess Finance Charges and amounts, if any, on deposit in the Cash
Collateral Account are insufficient to fund the Class A Required Amount,
collections of Principal Receivables allocable first to the Collateral Interest
and then to the Class B Certificates for the related Monthly Period
("Reallocated Principal Collections") will then be used to fund the remaining
Class A Required Amount. If Reallocated Principal Collections with respect to
the related Monthly Period, together with Excess Spread and Excess Finance
Charges allocated to Series 1998-A and amounts, if any, on deposit in the Cash
Collateral Account are insufficient to fund the Class A Required Amount for such
related Monthly Period, then the Collateral Invested Amount will be reduced by
the amount of such excess (but not by more than the Class A Investor Default
Amount for such Distribution Date). In the event that such reduction would cause
the Collateral Invested Amount to be a negative number, the Collateral Invested
Amount will be reduced to zero, and the Class B Invested Amount will be reduced
by the amount by which the Collateral Invested Amount would have been reduced
below zero (but not by more than the excess of the Class A Investor Default
Amount, if any, for such Distribution Date over the amount of such reduction, if
any, of the Collateral Invested Amount with respect to such Distribution Date).
In the event that such reduction would cause the Class B Invested Amount to be a
negative number, the Class B Invested Amount will be reduced to zero, and the
Class A Invested Amount will be reduced by the amount by which the Class B
Invested Amount would have been reduced below zero, but not by more than the
excess, if any, of the Class A Investor Default Amount for such Distribution
Date over the amount of the reductions, if any, of the Collateral Invested
Amount and the Class B Invested Amount with respect to such Distribution Date as
described above. Any such reduction in the Class A Invested Amount will have the
effect of slowing or reducing the return of principal and interest to the Class
A Certificateholders. In such case, the Class A Certificateholders will bear
directly the credit and other risks associated with their interest in the Trust.
See "-- Allocation of Investor Default Amount."
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class B Required Amount"), which will
be equal to the sum of (a) the amount, if any, by which the sum of (i) Class B
Monthly Interest for such Distribution Date, (ii) any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a prior
Distribution Date, (iii) any Class B Additional Interest and any Class B
Additional Interest previously due but not paid to Class B Certificateholders on
a prior Distribution Date and (iv) the Class B Servicing Fee for such
Distribution Date and any unpaid Class B Servicing Fee exceeds the Class B
Available Funds and (b) the Class B Investor Default Amount for the related
Monthly Period. If the Class B Required Amount is greater than zero, Excess
Spread and Excess Finance Charges allocated to Series 1998-A not required to pay
the Class A Required Amount or reimburse Class A Investor Charge-Offs will be
used to fund the Class B Required Amount with respect to such Distribution Date.
If such Excess Spread and Excess Finance Charges available to fund the remaining
Class B Required Amount with respect to such Distribution Date are less than the
Class B Required Amount, amounts, if any, on deposit in the Cash Collateral
Account not required to fund the Class A Required Amount will then be used to
fund the remaining Class B Required Amount. If such Excess Spread and Excess
Finance Charges and amounts, if any, on deposit in the Cash Collateral Account
are insufficient to pay the Class B Required Amount, Reallocated Principal
Collections allocable to the Collateral Interest not required to pay
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<PAGE> 37
the Class A Required Amount for the related Monthly Period will then be used to
fund the remaining Class B Required Amount. If such Reallocated Principal
Collections allocable to the Collateral Interest with respect to the related
Monthly Period are insufficient to fund the remaining Class B Required Amount,
then the Collateral Invested Amount remaining after any adjustments made thereto
for the benefit of the Class A Certificateholders will be reduced by the amount
of such insufficiency (but not by more than the Class B Investor Default Amount
for such Distribution Date). In the event that such a reduction would cause the
Collateral Invested Amount to be a negative number, the Collateral Invested
Amount will be reduced to zero, and the Class B Invested Amount will be reduced
by the amount by which the Collateral Invested Amount would have been reduced
below zero (but not by more than the excess of the Class B Investor Default
Amount for such Distribution Date over the amount of such reduction of the
Collateral Invested Amount), and the Class B Certificateholders will bear
directly the credit and other risks associated with their interests in the
Trust. See "-- Allocation of Investor Default Amount."
Reductions of the Class A Invested Amount or Class B Invested Amount shall
thereafter be reimbursed and the Class A Invested Amount or Class B Invested
Amount increased to the extent of Excess Spread and Excess Finance Charges and
Reallocated Principal Collections available for such purposes on each
Distribution Date. See "-- Application of Collections -- Excess Spread; Excess
Finance Charges." When such reductions of the Class A Invested Amount and Class
B Invested Amount have been fully reimbursed, reductions of the Collateral
Invested Amount shall be reimbursed until reimbursed in full in a similar
manner.
APPLICATION OF COLLECTIONS
Application of Collections to the Collection Account. The Servicer will
apply, or will instruct the Trustee to apply, on or prior to the close of
business on the second Business Day following the date of processing of any
collections, all collections and other funds to be deposited into the Collection
Account that are allocated to the Certificates and the Collateral Interest as
follows:
(1) during the Revolving Period, an amount equal to the Floating
Allocation Percentage of the collections of Finance Charge Receivables
processed on such date will be allocated to the Certificates and the
Collateral Interest, and of that allocation, the following amounts will be
deposited and retained in the Collection Account: (A) prior to the LIBOR
Determination Date occurring in the current Monthly Period, the entire
amount of such allocation, and (B) on and after such LIBOR Determination
Date, the difference between (x) Monthly Interest for the related
Distribution Date (plus, if the Bank is not the Servicer, the Monthly
Servicing Fee for such Monthly Period) and (y) the amounts previously
deposited in the Collection Account with respect to such Monthly Interest
(plus, if the Bank is not the Servicer, the Monthly Servicing Fee for such
Monthly Period) pursuant to this clause (1);
(2) during the Accumulation Period or Rapid Amortization Period, an
amount equal to the Floating Allocation Percentage of the collections of
Finance Charge Receivables processed on such date will be allocated to the
Certificates and the Collateral Interest and deposited and retained in the
Collection Account;
(3) during the Revolving Period, an amount equal to the Principal
Allocation Percentage of collections of Principal Receivables processed on
such date will be allocated to the Certificates and the Collateral Interest
and first, if any other Principal Sharing Series in Group One is
outstanding and in its amortization period or accumulation period, retained
in the Collection Account for application, to the extent necessary, as
Shared Principal Collections to other Series in Group One on the related
Distribution Date, and second paid to the holders of the Seller
Certificates; provided that such amount will be paid to the holders of the
Seller Certificates only if the Seller Amount is greater than the Required
Seller Amount and otherwise will be deposited in the Excess Funding Account
until the Seller Amount is greater than the Required Seller Amount and the
remainder will be paid to the holders of the Seller Certificates; provided
further, that if and for so long as the Total Enhancement is less than the
Required Enhancement Amount during a Monthly Period, an amount equal to the
sum of (x) the Collateral Floating Percentage of the product of the
Principal Allocation Percentage and the collections of Principal
Receivables and (y) the Class B Principal Percentage of the product of the
Principal Allocation
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Percentage and the collections of Principal Receivables ("Subordinate
Principal Collections") will be deposited and retained in the Collection
Account;
(4) during the Accumulation Period, an amount equal to the Principal
Allocation Percentage of collections of Principal Receivables processed on
such date (for any such date, a "Percentage Allocation") will be allocated
to the Certificates and the Collateral Interest and deposited and retained
in the Collection Account; provided, however, that if the sum of such
Percentage Allocations with respect to the same Monthly Period exceeds the
Controlled Deposit Amount for the related Distribution Date, then such
excess shall not be treated as a Percentage Allocation and shall be first,
if any other Principal Sharing Series in Group One is outstanding and in
its amortization period or accumulation period, retained in the Collection
Account for application, to the extent necessary, as Shared Principal
Collections to other Series in Group One on the related Distribution Date,
and second paid to the holders of the Seller Certificates only if the
Seller Amount on such Date of Processing is greater than the Required
Seller Amount and otherwise will be deposited in the Excess Funding Account
until the Seller Amount is greater than the Required Seller Amount and the
remainder will be paid to the holders of the Seller Certificates; provided
further, however, that if and for so long as, the Total Enhancement is less
than the Required Enhancement Amount during a Monthly Period, Subordinate
Principal Collections will be retained in the Collection Account; and
(5) during the Rapid Amortization Period, an amount equal to the
Principal Allocation Percentage of the collections of Principal Receivables
processed on such date will be allocated to the Certificates and the
Collateral Interest and deposited and retained in the Collection Account;
provided, however, that after the date on which an amount of such
Collections equal to the Investor Amount has been deposited into the
Collection Account and allocated to the Certificates and the Collateral
Interest, such amount in excess of the Investor Amount will be first, if
any other Principal Sharing Series in Group One is outstanding and in its
amortization period or accumulation period, retained in the Collection
Account for application, to the extent necessary, as Shared Principal
Collections to other Series in Group One on the related Distribution Date,
and second paid to the holders of the Seller Certificates only if the
Seller Amount is greater than the Required Seller Amount and otherwise will
be deposited in the Excess Funding Account until the Seller Amount is
greater than the Required Seller Amount and the remainder will be paid to
the holders of the Seller Certificates.
Withdrawals from Series Accounts. On or before each Distribution Date, the
Servicer will direct the Trustee to make the following withdrawals from the
following Series Accounts:
(1) on the Business Day preceding each Transfer Date with respect to
the Funding Period, all net investment income earned on amounts in the
Pre-Funding Account during the preceding Monthly Period will be withdrawn
from the Pre-Funding Account and deposited into the Collection Account for
distribution as collections of Finance Charge Receivables allocable to the
Certificateholders and the Collateral Interest Holder;
(2) on each Distribution Date with respect to the Class A Accumulation
Period beginning on the second such Distribution Date and on the first
Distribution Date with respect to the Rapid Amortization Period, if
applicable, all Principal Funding Investment Proceeds then on deposit in
the Principal Funding Account will be withdrawn from the Principal Funding
Account and deposited into the Collection Account for distribution as a
portion of Class A Available Funds for such Distribution Date;
(3) on each Distribution Date after the Reserve Account Funding Date,
all net investment income accrued since the preceding Distribution Date on
funds on deposit in the Reserve Account will be retained in the Reserve
Account (to the extent that the amount on deposit in the Reserve Account is
less than the Required Reserve Account Amount) and the balance, if any,
will be deposited in the Collection Account for distribution as collections
of Finance Charge Receivables allocable to the Certificateholders and the
Collateral Interest Holder; and
(4) on or before each Distribution Date with respect to the Class A
Accumulation Period and on the first Distribution Date with respect to the
Rapid Amortization Period, if applicable, an amount equal
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to the lesser of (a) the Available Reserve Account Amount with respect to
such Distribution Date and (b) the excess, if any, of a portion of the
Class A Monthly Interest determined in accordance with the Pooling and
Servicing Agreement over the Principal Funding Investment Proceeds with
respect to such Distribution Date (provided that the amount of such
withdrawal will be reduced to the extent that funds otherwise would be
available to be deposited in the Reserve Account on such Distribution Date)
will be withdrawn from the Reserve Account and deposited in the Collection
Account for distribution as a portion of Class A Available Funds for such
Distribution Date.
Payment of Interest, Fees and Other Items. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds (see "-- Interest Payments" above) and
Collateral Available Funds in the following priority:
(A) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to such Distribution Date will be withdrawn
from the Collection Account and distributed in the following priority:
(1) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to the Class A Certificateholders on
a prior Distribution Date at a rate equal to the Class A Certificate
Rate plus 2% per annum ("Class A Additional Interest"), will be
distributed to the Class A Certificateholders;
(2) an amount equal to the Class A Servicing Fee for such
Distribution Date, plus the amount of any Class A Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account);
(3) an amount equal to the Class A Investor Default Amount for such
Distribution Date will be treated as a portion of Available Investor
Principal Collections for such Distribution Date; and
(4) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as described under "-- Excess Spread;
Excess Finance Charges" below.
(B) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be withdrawn
from the Collection Account and distributed in the following priority:
(1) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to the Class B Certificateholders on
a prior Distribution Date at a rate equal to the Class B Certificate
Rate plus 2% per annum ("Class B Additional Interest"), will be
distributed to the Class B Certificateholders;
(2) an amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account); and
(3) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as described under "-- Excess Spread;
Excess Finance Charges" below.
(C) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be withdrawn
from the Collection Account and distributed in the following priority:
(1) if the Bank or the Trustee is no longer the Servicer, an amount
equal to the Collateral Servicing Fee for such Distribution Date, plus
the amount of any Collateral Servicing Fee previously
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<PAGE> 40
due but not distributed to the Servicer on a prior Distribution Date,
will be distributed to the Servicer (unless such amount has been netted
against deposits to the Collection Account); and
(2) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as described under "-- Excess Spread;
Excess Finance Charges" below.
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (A)(4) above, clause (B)(3)
above and clause (C)(2) above under "-- Payment of Interest, Fees and Other
Items."
Excess Spread; Excess Finance Charges. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply Excess
Spread and Excess Finance Charges allocated to Series 1998-A with respect to the
related Monthly Period to make the following distributions in the following
priority:
(1) an amount equal to any deficiency pursuant to clauses (A)(1), (2)
and (3) above under "-- Payment of Interest, Fees and Other Items" will be
used to fund such deficiency, provided that, in the event such deficiency
exceeds the amount of Excess Spread and Excess Finance Charges allocated to
Series 1998-A, such Excess Spread and Excess Finance Charges shall be
applied first to pay amounts due with respect to such Distribution Date
pursuant to clause (A)(1) above under "-- Payment of Interest, Fees and
Other Items", second to pay the Class A Servicing Fee pursuant to clause
(A)(2) above under "-- Payment of Interest, Fees and Other Items" and third
to pay the Class A Investor Default Amount for such Distribution Date
pursuant to clause (A)(3) above under "-- Payment of Interest, Fees and
Other Items;"
(2) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Available Investor Principal Collections for such Distribution
Date as described under "-- Payments of Principal" below;
(3) an amount equal to any deficiency pursuant to clauses (B)(1) and
(2) above under "-- Payment of Interest, Fees and Other Items" will be used
to fund such deficiency, provided that, in the event such deficiency for
such Distribution Date exceeds the remaining amount of Excess Spread and
Excess Finance Charges allocated to Series 1998-A, such Excess Spread and
Excess Finance Charges shall be applied first to pay amounts due with
respect to such Distribution Date pursuant to clause (B)(1) above under
"-- Payment of Interest, Fees and Other Items," and second to pay the Class
B Servicing Fee pursuant to clause (B)(2) above under "-- Payment of
Interest, Fees and Other Items;"
(4) an amount equal to the Class B Investor Default Amount for such
Distribution Date will be treated as a portion of Available Investor
Principal Collections for such Distribution Date as described under
"-- Payments of Principal" below;
(5) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (iv), (v) and (vi) of
the definition of "Class B Invested Amount" under "-- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated as a
portion of Available Investor Principal Collections for such Distribution
Date;
(6) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of any Collateral Monthly Interest
previously due but not paid to the Collateral Interest Holder on a prior
Distribution Date, plus any additional interest with respect to amounts
that were due but not paid to the Collateral Interest Holder on a prior
Distribution Date at a rate equal to the Collateral Rate ("Collateral
Additional Interest"), will be distributed to the Collateral Interest
Holder for application in accordance with the Loan Agreement;
(7) an amount equal to the Collateral Servicing Fee due but not paid
to the Servicer on such Distribution Date or a prior Distribution Date
shall be paid to the Servicer;
(8) an amount equal to the Collateral Default Amount for such
Distribution Date shall be treated as a portion of Collateral Principal
Collections with respect to such Distribution Date;
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(9) an amount equal to the aggregate amount by which the Collateral
Invested Amount has been reduced pursuant to clauses (iv), (v) and (vi) of
the definition of "Collateral Invested Amount" under "-- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated as a
portion of Collateral Principal Collections for such Distribution Date;
(10) an amount up to the excess, if any, of the Required Cash
Collateral Amount over the remaining Available Cash Collateral Amount
(without giving effect to any deposit to the Cash Collateral Account made
on such date) shall be deposited into the Cash Collateral Account;
(11) an amount up to the excess, if any, of the Required Reserve
Account Amount over the principal amount on deposit in the Reserve Account
will be deposited in the Reserve Account;
(12) an amount equal to the aggregate of any other amounts then owed
to the Collateral Interest Holder or otherwise to be applied pursuant to
the Loan Agreement out of collections of Excess Spread and Excess Finance
Charges allocated to Series 1998-A shall be applied in accordance with the
Loan Agreement; and
(13) the balance, if any, will constitute a portion of Excess Finance
Charges for such Distribution Date and will be available for allocation to
other Series in Group One or to the holders of the Seller Certificates as
described in "Description of the Certificates -- Sharing of Excess Finance
Charges" in the Prospectus.
Cash Collateral Account; Reallocated Principal Collections. On or before
each Distribution Date after giving effect to the distributions above under
"-- Excess Spread; Excess Finance Charges," the Trustee, acting pursuant to the
Servicer's instructions, will apply the Available Cash Collateral Amount on such
Distribution Date and Reallocated Principal Collections for the related Monthly
Period to make the following distributions in the following priority:
(1) if the amount of Excess Spread and Excess Finance Charges
allocated to Series 1998-A for the related Monthly Period is less than the
amounts specified in clauses (1) through (5) and (7) above under "-- Excess
Spread; Excess Finance Charges," an amount equal to such deficiency, not to
exceed the Available Cash Collateral Amount, will be withdrawn from the
Cash Collateral Account and distributed to fund such deficiency in the
order of priority set forth in clauses (1) through (5) and (7) above under
"-- Excess Spread; Excess Finance Charges";
(2) if the sum of (x) the amount of Excess Spread and Excess Finance
Charges allocated to Series 1998-A for the related Monthly Period and (y)
the Available Cash Collateral Amount on such Distribution Date is less than
the Class A Required Amount, Reallocated Principal Collections, up to the
amount of such deficiency, will be withdrawn from the Collection Account
and distributed to fund such deficiency in the order of priority set forth
in clause (1) above under "-- Excess Spread; Excess Finance Charges"; and
(3) if the sum of (x) the amount of Excess Spread and Excess Finance
Charges allocated to Series 1998-A for the related Monthly Period not
required to fund the Class A Required Amount or reimburse Class A Investor
Charge-Offs and (y) the Available Cash Collateral Amount not required to
fund the Class A Required Amount is less than the Class B Required Amount,
Reallocated Principal Collections allocable to the Collateral Interest not
required to fund the Class A Required Amount, up to the amount of such
deficiency, will be withdrawn from the Collection Account and distributed
to fund such deficiency in the order of priority set forth in clauses (3)
and (4) above under "-- Excess Spread; Excess Finance Charges."
Payments of Principal. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Investor
Principal Collections (see "-- Principal Payments" above) in the following
priority:
(1) on each Distribution Date with respect to the Revolving Period,
all such Available Investor Principal Collections, which are not allocated
as part of Collateral Monthly Principal to make a payment
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with respect to the Collateral Interest, will be treated as Shared
Principal Collections and applied as described under "Description of the
Certificates -- Shared Principal Collections" in the Prospectus; and
(2) on each Distribution Date with respect to the Accumulation Period
or the Rapid Amortization Period, all such Available Investor Principal
Collections will be distributed or deposited in the following priority:
(i) an amount equal to Class A Monthly Principal will be deposited
in the Principal Funding Account for payment to the Class A
Certificateholders on the earlier to occur of the Class A Expected Final
Distribution Date or the first Distribution Date with respect to the
Rapid Amortization Period;
(ii) for each Distribution Date beginning on the Distribution Date
on which the Class A Investor Amount is paid in full (the "Class B
Principal Commencement Date"); provided, that if the Class A Investor
Amount is paid in full on the Class A Expected Final Distribution Date
and the Rapid Amortization Period has not commenced, the Class B
Principal Commencement Date will be the Class B Expected Final
Distribution Date, an amount equal to Class B Monthly Principal for such
Distribution Date will be paid to the Class B Certificateholders;
(iii) the balance, if any, will be allocated to Collateral Monthly
Principal if so required by the definition thereof; and
(iv) the balance, if any, will be treated as Shared Principal
Collections and applied as described under "Description of the
Certificates -- Shared Principal Collections" in the Prospectus.
On each Distribution Date, the Trustee, acting pursuant to the Servicer's
instructions, will distribute Collateral Principal Collections (see
"-- Principal Payments" above) on deposit in the Collection Account in the
following priority:
(3) on each Distribution Date with respect to the Revolving Period,
all such Collateral Principal Collections will be distributed or deposited
in the following priority:
(i) an amount equal to Collateral Monthly Principal for such
Distribution Date, up to the Collateral Invested Amount on such
Distribution Date, will be applied in accordance with the Loan
Agreement; and
(ii) the balance, if any, will be treated as Available Investor
Principal Collections and applied as described in clause (1) above;
(4) on each Distribution Date with respect to the Accumulation Period
or the Rapid Amortization Period, all such Collateral Principal Collections
will be distributed or deposited in the following priority:
(i) an amount equal to Collateral Monthly Principal for such
Distribution Date, up to the Collateral Invested Amount on such
Distribution Date, will be applied in accordance with the Loan
Agreement; and
(ii) the balance, if any, will be treated as Available Investor
Principal Collections and applied as described in clause (2) above.
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Supplement, the Servicer will establish and maintain the
principal funding account as a segregated trust account held for the benefit of
the Certificateholders (the "Principal Funding Account"). During the Class A
Accumulation Period, the Trustee at the direction of the Servicer will transfer
Available Investor Principal Collections to the Principal Funding Account as
described under " -- Application of Collections -- Payments of Principal."
Funds on deposit in the Principal Funding Account will be invested by the
Trustee at the direction of the Servicer in Eligible Investments. Investment
earnings (net of investment losses and expenses) on funds on
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deposit in the Principal Funding Account (the "Principal Funding Investment
Proceeds") will be included in Class A Available Funds with respect to each
Distribution Date.
RESERVE ACCOUNT
Pursuant to the Supplement, the Servicer will establish and maintain the
reserve account as a segregated trust account held for the benefit of the
Certificateholders (the "Reserve Account"). The Reserve Account is established
to assist with the subsequent distribution of interest on the Certificates
during the Class A Accumulation Period. With respect to each Distribution Date
from and after the Reserve Account Funding Date, but prior to the termination of
the Reserve Account, the Trustee, acting pursuant to the Servicer's
instructions, will apply Excess Spread and Excess Finance Charges allocated to
the Certificates (to the extent described above under " -- Application of
Collections -- Excess Spread; Excess Finance Charges") to increase the amount on
deposit in the Reserve Account (to the extent such amount is less than the
Required Reserve Account Amount). The "Reserve Account Funding Date" will be the
Distribution Date with respect to the Monthly Period which commences no later
than three months prior to the Monthly Period in which, as of the related
Determination Date, the Class A Accumulation Period is scheduled to commence, or
such earlier date as the Servicer may determine. The "Required Reserve Account
Amount" with respect to any Distribution Date on or after the Reserve Account
Funding Date will be equal to (a) the product of (i) .5% of the Class A Investor
Amount as of the preceding Distribution Date (after giving effect to all changes
therein on such date) and (ii) a fraction, the numerator of which is the number
of Monthly Periods scheduled to be included in the Class A Accumulation Period
as of such date, and the denominator of which is nine, provided that if such
numerator is one, the Required Reserve Account Amount will be zero, or (b) any
other amount designated by the Seller, provided, that if such designation is of
a lesser amount, the Seller shall have provided the Servicer and the Trustee
with evidence that the Rating Agency Condition has been satisfied and the Seller
shall have delivered to the Trustee a certificate of an authorized officer to
the effect that, based on the facts known to such officer at such time, in the
reasonable belief of the Seller, such designation will not cause a Series 1998-A
Pay Out Event or a Trust Pay Out Event or an event that, after the giving of
notice or the lapse of time, would cause a Series 1998-A Pay Out Event or a
Trust Pay Out Event to occur. On each Distribution Date, after giving effect to
any deposit to be made to, and any withdrawal to be made from the Reserve
Account, the Trustee will withdraw from the Reserve Account an amount equal to
the excess, if any, of the amount on deposit in the Reserve Account over the
Required Reserve Account Amount and will apply such amount in accordance with
the Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account with respect to any Distribution
Date (after giving effect to any deposits to, or withdrawals from, the Reserve
Account to be made on such Distribution Date) will be invested by the Trustee at
the direction of the Servicer in Eligible Investments. The interest and other
investment income (net of investment expenses and losses) earned on such
investments will be retained in the Reserve Account (to the extent the amount on
deposit is less than the Required Reserve Account Amount) or deposited in the
Collection Account and treated as collections of Finance Charge Receivables
allocable to Series 1998-A.
On or before each Distribution Date with respect to the Class A
Accumulation Period and on the first Distribution Date with respect to the Rapid
Amortization Period, a withdrawal will be made from the Reserve Account, and the
amount of such withdrawal will be deposited in the Collection Account and
included in Class A Available Funds in an amount equal to the lesser of (a) the
Available Reserve Account Amount with respect to such Distribution Date and (b)
the excess, if any, of a portion of the Class A Monthly Interest determined in
accordance with the Pooling and Servicing Agreement over the Principal Funding
Investment Proceeds with respect to such Distribution Date; provided, that the
amount of such withdrawal shall be reduced to the extent that funds otherwise
would be available to be deposited in the Reserve Account on such Distribution
Date. On each Distribution Date, the amount available to be withdrawn from the
Reserve Account (the "Available Reserve Account Amount") will be equal to the
lesser of the amount on deposit in the Reserve Account (before giving effect to
any deposit to be made to the Reserve Account on such Distribution Date) and the
Required Reserve Account Amount for such Distribution Date.
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The Reserve Account will be terminated following the earlier to occur of
(a) the termination of the Trust pursuant to the Pooling and Servicing
Agreement, (b) the date on which the Class A Investor Amount is paid in full and
(c) if the Class A Accumulation Period has not commenced, the occurrence of a
Series 1998-A Pay Out Event or a Trust Pay Out Event or, if the Class A
Accumulation Period has commenced, the earlier of the first Distribution Date
with respect to the Rapid Amortization Period and the Class A Expected Final
Distribution Date. Upon the termination of the Reserve Account, all amounts on
deposit therein (after giving effect to any withdrawal from the Reserve Account
on such date as described above) will be distributed to the Collateral Interest
Holder for application in accordance with the Loan Agreement. Any amounts
withdrawn from the Reserve Account and distributed to the Collateral Interest
Holder as described above will not be available for distribution to the
Certificateholders.
PAIRED SERIES
The Certificates are subject to being paired with one or more other Series
(each, a "Paired Series") on or after the commencement of the Accumulation
Period or the Rapid Amortization Period. Each Paired Series will be pre-funded
with an initial deposit to a funding account or will have a variable principal
amount. Any such funding account will be held for the benefit of such Paired
Series and not for the benefit of the Certificateholders. Upon payment in full
of the Certificates, assuming that there have been no unreimbursed charge-offs
with respect to any related Paired Series, the aggregate investor amount of such
Paired Series will have been increased by an amount up to an aggregate amount
equal to the Investor Amount. The issuance of a Paired Series will be subject to
the conditions described under "Description of the Certificates -- New
Issuances" in the Prospectus. There can be no assurance that the terms of any
Paired Series might not have an impact on the calculation of the Series
Percentage or the timing or amount of payments received by a Certificateholder.
SHARED COLLECTIONS OF PRINCIPAL RECEIVABLES
To the extent that collections of Principal Receivables allocated to the
Certificates or the Collateral Interest are not needed to make payments to or
for the benefit of the Certificateholders or the Collateral Interest Holder,
such collections may be applied to cover principal payments due to or for the
benefit of other Series in Group One. Any such application of collections will
not result in a reduction of the Invested Amount of the Certificates.
Similarly, certain collections of Principal Receivables allocated to other
Series in Group One, to the extent such collections are not needed to make
payments to or for the benefit of certificateholders of such other Series
("Shared Principal Collections"), will be applied, if necessary, to cover
payments of principal due to Certificateholders during the Accumulation Period.
There can be no assurance that such Shared Principal Collections will be
available to cover payments of principal or deposits due on any Distribution
Date during the Accumulation Period. If no such Shared Principal Collections
were available to the Certificates, the Class A Investor Amount may not be paid
in full by the Class A Expected Final Distribution Date and the Class B Invested
Amount may not be paid in full by the Class B Expected Final Distribution Date.
Such Shared Principal Collections may also be allocated to other Series either
currently outstanding or to be issued by the Trust in the future. To the extent
such Shared Principal Collections are allocated to other Series, the pro rata
share of such Shared Principal Collections allocated to Certificateholders will
be reduced.
THE CASH COLLATERAL ACCOUNT
The Cash Collateral Account will be held for the benefit of the
Certificateholders and the Collateral Interest Holder, as their interests appear
in the Supplement. Funds on deposit in the Cash Collateral Account will be
invested in certain Eligible Investments. On each Distribution Date, all
interest and earnings (net of losses and investment expenses) accrued since the
preceding Distribution Date on funds on deposit in the Cash Collateral Account
will be applied in accordance with the Loan Agreement. The Cash Collateral
Account will be funded by the Bank on the Closing Date in the initial amount of
$23,000,000.
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On each Distribution Date, the amount available to be withdrawn from the
Cash Collateral Account (the "Available Cash Collateral Amount") will be equal
to the least of (i) the amount on deposit in the Cash Collateral Account (before
giving effect to any deposit to be made to, or withdrawal from, the Cash
Collateral Account on such Distribution Date), (ii) the Required Enhancement
Amount and (iii) the Invested Amount as of such date. The "Required Enhancement
Amount" with respect to any Distribution Date means the greater of (i) the
product of (a) the sum of (I) the sum of the Class A Invested Amount and the
Class A Floating Percentage of the Pre-Funded Amount and (II) the sum of the
Class B Invested Amount and the Class B Floating Percentage of the Pre-Funded
Amount, each as of such Distribution Date after taking into account
distributions made on such Distribution Date minus the amount of funds on
deposit in the Cash Collateral Account after taking into account all deposits
and withdrawals on such Distribution Date, and (b) a fraction, the numerator of
which is 11% and the denominator of which is the excess of 100% over 11% and
(ii) the sum of (A) the product of (I) $1,150,000,000, (II) 1% and (III) a
fraction the numerator of which is equal to the Available Cash Collateral Amount
as of the immediately preceding Distribution Date and the denominator of which
is the Total Enhancement for such Distribution Date and (B) the product of (I)
$1,150,000,000, (II) 3% and (III) a fraction the numerator of which is equal to
the Collateral Invested Amount as of the immediately preceding Distribution Date
and the denominator of which is the Total Enhancement for such Distribution
Date; provided, however, that (i) if certain withdrawals are made from the Cash
Collateral Account or if a Series 1998-A Pay Out Event or a Trust Pay Out Event
occurs or if there are certain reductions in the Collateral Invested Amount, the
Required Enhancement Amount for such Distribution Date shall equal the Required
Enhancement Amount for the Distribution Date immediately preceding the
occurrence of such drawing or such Series 1998-A Pay Out Event or a Trust Pay
Out Event or reduction in Collateral Invested Amount, (ii) in no event shall the
Required Enhancement Amount exceed the sum of the Class A Invested Amount and
the Class B Invested Amount on any such date, and (iii) the Required Enhancement
Amount may be reduced without the consent of the Certificateholders, if the
Seller shall have received written notice from each Rating Agency that such
reduction will not result in the reduction or withdrawal of the then current
rating of the Certificates and the Seller shall have delivered to the Trustee a
certificate of an authorized officer to the effect that, based on the facts
known to such officer at such time, in the reasonable belief of the Seller, such
reduction will not cause a Trust Pay Out Event or an event that, after the
giving of notice or the lapse of time, would constitute a Series 1998-A Pay Out
Event to occur.
On each Distribution Date, one or more withdrawals may be made from the
Cash Collateral Account in an amount up to the Available Cash Collateral Amount,
to fund the amounts specified in clauses (1) through (5) and (7) of
"-- Application of Collections -- Excess Spread; Excess Finance Charges" in the
order of priority specified therein.
On each Distribution Date, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread and Excess Finance Charges
(to the extent described above under "-- Application of Collections -- Excess
Spread; Excess Finance Charges") to increase the amount on deposit in the Cash
Collateral Account to the extent such amount is less than the Required Cash
Collateral Amount. The "Required Cash Collateral Amount" means on any date of
determination the Required Enhancement Amount less the Collateral Investor
Amount. In addition, if on any Distribution Date the amount on deposit in the
Cash Collateral Account exceeds the Required Cash Collateral Amount, such excess
will be withdrawn and applied in accordance with the Loan Agreement.
ALLOCATION OF INVESTOR DEFAULT AMOUNT
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (i) the Floating
Allocation Percentage with respect to such Monthly Period and (ii) the Defaulted
Amount for such Monthly Period. A portion of the Investor Default Amount will be
allocated to the Class A Certificateholders (the "Class A Investor Default
Amount") on each Distribution Date in an amount equal to the product of the
Class A Floating Percentage applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Class B Certificateholders (the "Class B
Investor Default Amount") in an amount equal to the product of the Class B
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Floating Percentage applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Collateral Interest Holder in an amount
equal to the Collateral Default Amount. An amount equal to the Class A Investor
Default Amount for each Monthly Period will be paid from Class A Available
Funds, Excess Spread and Excess Finance Charges allocated to Series 1998-A or
from amounts, if any, on deposit in the Cash Collateral Account and Reallocated
Principal Collections and applied as described above in "-- Application of
Collections -- Payment of Interest, Fees and Other Items," "-- Application of
Collections -- Excess Spread; Excess Finance Charges" and "-- Reallocation of
Cash Flows." An amount equal to the Class B Investor Default Amount for each
Monthly Period will be paid from Excess Spread and Excess Finance Charges
allocated to Series 1998-A or from amounts, if any, available under the Cash
Collateral Account and Reallocated Principal Collections allocable to the
Collateral Invested Amount and applied as described above in "-- Application of
Collections -- Excess Spread; Excess Finance Charges" and "-- Reallocation of
Cash Flows."
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charges
allocable to Series 1998-A, amounts, if any, on deposit in the Cash Collateral
Account and Reallocated Principal Collections, the Collateral Invested Amount
will be reduced by the amount of such excess, but not by more than the Class A
Investor Default Amount for such Distribution Date. In the event that such
reduction would cause the Collateral Invested Amount to be a negative number,
the Collateral Invested Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the Collateral Invested Amount
would have been reduced below zero, but not by more than the excess, if any, of
the Class A Investor Default Amount for such Distribution Date over the amount
of such reduction, if any, of the Collateral Invested Amount with respect to
such Distribution Date. In the event that such reduction would cause the Class B
Invested Amount to be a negative number, the Class B Invested Amount will be
reduced to zero, and the Class A Invested Amount will be reduced by the amount
by which the Class B Invested Amount would have been reduced below zero, but not
by more than the excess, if any, of the Class A Investor Default Amount for such
Distribution Date over the amount of the reductions, if any, of the Collateral
Invested Amount and the Class B Invested Amount with respect to such
Distribution Date as described above (a "Class A Investor Charge-Off"), which
will have the effect of slowing or reducing the return of principal to the Class
A Certificateholders. If the Class A Invested Amount has been reduced by the
amount of any Class A Investor Charge-Offs, it will thereafter be increased on
any Distribution Date (but not by an amount in excess of the aggregate Class A
Investor Charge-Offs) by the amount of Excess Spread and Excess Finance Charges
allocated to Series 1998-A and available for such purpose as described under
"-- Application of Collections -- Excess Spread; Excess Finance Charges."
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charges
allocable to Series 1998-A and not required to pay the Class A Required Amount,
amounts, if any, on deposit in the Cash Collateral Account not required to pay
the Class A Required Amount and Reallocated Principal Collections allocable to
the Collateral Interest and not required to pay the Class A Required Amount,
then the Collateral Invested Amount will be reduced by the amount of such
excess. In the event that such reduction would cause the Collateral Invested
Amount to be a negative number, the Collateral Invested Amount will be reduced
to zero, and the Class B Invested Amount will be reduced by the amount by which
the Collateral Invested Amount would have been reduced below zero, but not by
more than the excess, if any, of the Class B Investor Default Amount for such
Distribution Date over the amount of such reduction, if any, of the Collateral
Invested Amount with respect to such Distribution Date (a "Class B Investor
Charge-Off"). If the Class B Invested Amount has been reduced by the amount of
any Class B Investor Charge-Offs, it will thereafter be increased on any
Distribution Date (but not by an amount in excess of the aggregate Class B
Investor Charge-Offs) by the amount of Excess Spread and Excess Finance Charges
allocated to Series 1998-A and available for such purpose as described under
"-- Application of Collections -- Excess Spread; Excess Finance Charges."
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OPTIONAL REPURCHASE
On the Distribution Date occurring on or after the date that the Investor
Amount is reduced to 5% or less of the maximum Invested Amount during the
Revolving Period, the Seller will have the option (to be exercised in its sole
discretion) to repurchase the Certificates. The purchase price of the
Certificates and the Collateral Interest will be equal to the Investor Amount as
of the last day of the Monthly Period preceding the Distribution Date on which
such purchase occurs plus accrued and unpaid interest on the unpaid principal
amount of the Certificates plus accrued and unpaid interest on the Collateral
Interest. Following any such repurchase, the Certificateholders will have no
further rights with respect to the Receivables.
SERIES 1998-A PAY OUT EVENTS AND TRUST PAY OUT EVENTS
The Revolving Period will continue through March 31, 2000 (or such later
date resulting from postponement of the Class A Accumulation Period), unless a
Series 1998-A Pay Out Event or a Trust Pay Out Event occurs prior to such date.
A Series 1998-A Pay Out Event refers to any of the following events, which are
applicable only to Series 1998-A (although other Series may have similar or
identical pay out events):
(a) failure on the part of the Seller (i) to make any payment or
deposit on the date required under the Pooling and Servicing Agreement on
or before the date occurring five Business Days after the date such payment
or deposit is required to be made; or (ii) duly to observe or perform in
any material respect any other covenants or agreements of the Seller in the
Pooling and Servicing Agreement, which failure has a material adverse
effect on the Certificateholders (which determination will be made, for so
long as the Collateral Invested Amount is greater than zero, without
reference to whether any funds are available pursuant to any Series
Enhancement) and continues unremedied for a period of 60 days after written
notice of such failure shall have been given to the Seller by the Trustee,
or to the Seller and the Trustee by the holders of Certificates aggregating
not less than 50% of the outstanding principal balance of the Certificates;
(b) any representation or warranty made by the Seller in the Pooling
and Servicing Agreement or any information required to be given by the
Servicer on behalf of the Seller to identify the Accounts proves to have
been incorrect in any material respect when made or delivered and continues
to be incorrect in any material respect for a period of 60 days after
written notice of such failure shall have been given to the Seller by the
Trustee, or to the Seller and the Trustee by the holders of Certificates
aggregating not less than 50% of the outstanding principal balance of the
Certificates and as a result the interests of the Certificateholders are
materially and adversely affected (which determination shall be made, for
so long as the Collateral Invested Amount is greater than zero, without
reference to whether any funds are available pursuant to any Series
Enhancement); provided, however, that a Series 1998-A Pay Out Event shall
not be deemed to have occurred with respect to this subparagraph (b) if the
Seller have accepted reassignment of the related Receivable or all such
Receivables, if applicable, during such period (or such longer period as
the Trustee may specify) in accordance with the provisions of the Pooling
and Servicing Agreement;
(c) with respect to the end of any Monthly Period (i) with respect to
which the Seller Amount is less than the Required Seller Amount, the
failure of the Seller to convey on or prior to the tenth Business Day
following the related Determination Date Receivables in Additional Accounts
to the Trust such that the Seller Amount is at least equal to the Required
Seller Amount or (ii) with respect to which the aggregate Principal
Receivables are less than the Required Principal Balance, the failure of
the Seller to convey on or prior to the tenth Business Day following the
related Determination Date Receivables in Additional Accounts to the Trust
such that the aggregate Principal Receivables are at least equal to the
Required Principal Balance;
(d) the Net Portfolio Yield averaged over three consecutive Monthly
Periods is less than the Base Rate averaged over such period;
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(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders (which determination shall be made, for so
long as the Collateral Invested Amount is greater than zero, without
reference to whether any funds are available pursuant to any Series
Enhancement); or
(f) the Class A Investor Amount shall not be paid in full on the Class
A Expected Final Distribution Date or the Class B Invested Amount shall not
be paid in full on the Class B Expected Final Distribution Date.
A Trust Pay Out Event refers to any of the following events, which are
applicable to the Certificates and other Series:
(g) an Insolvency Event relating to any Seller (including any
Additional Seller);
(h) the Trust becomes an "investment company" within the meaning of
the Investment Company Act; or
(i) the inability of the Seller for any reason to transfer Receivables
to the Trust in accordance with the provisions of the Pooling and Servicing
Agreement.
In the case of any event described in subparagraphs (a), (b) or (e), a
Series 1998-A Pay Out Event or a Trust Pay Out Event will be deemed to have
occurred only if, after any applicable grace period described in such clauses,
the Trustee or Certificateholders and the Collateral Interest Holder evidencing
undivided interests aggregating not less than 50% of the aggregate unpaid
principal amount of the Certificates and the Collateral Interest, by written
notice to the Seller and the Servicer (and to the Trustee if given by the
Certificateholders and the Collateral Interest Holder), declare that a Series
1998-A Pay Out Event has occurred with respect to the Certificates and the
Collateral Interest and is continuing as of the date of such notice, and in the
case of any event described in subparagraphs (c), (d), (f), (g), (h) or (i), a
Series 1998-A Pay Out Event or a Trust Pay Out Event will be deemed to have
occurred without any notice or other action on the part of the Trustee, or the
Certificateholders and the Collateral Interest Holder immediately upon the
occurrence of such event. Upon the occurrence of a Series 1998-A Pay Out Event
or a Trust Pay Out Event, the Rapid Amortization Period will commence. In such
event, distributions of principal to the Certificateholders in the priority
provided for above will begin on the first Distribution Date following the month
in which the Series 1998-A Pay Out Event or the Trust Pay Out Event occurred.
If an Insolvency Event occurs with respect to any Seller, the Collateral
Interest Holder will be deemed to be a Class for purposes of voting on whether
to liquidate the Receivables. See "Description of the Certificates -- Trust Pay
Out Events" in the Prospectus.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Certificates and the
Collateral Interest with respect to any Distribution Date (the "Monthly
Servicing Fee") will be equal to one-twelfth of the product of (a) 2.00% (the
"Servicing Fee Rate") and (b) the Invested Amount as of the last day of the
Monthly Period preceding such Distribution Date (the amount calculated pursuant
to this clause (b) is referred to as the "Servicing Base Amount"); provided,
however, with respect to the first Distribution Date, the Monthly Servicing Fee
will be $1,725,000.
The share of the Monthly Servicing Fee allocable to the Class A
Certificateholders with respect to any Distribution Date (the "Class A Servicing
Fee") will be equal to one-twelfth of the product of (a) the Class A Floating
Percentage, (b) the Servicing Fee Rate and (c) the Servicing Base Amount;
provided, however, that with respect to the first Distribution Date, the Class A
Servicing Fee will be $1,449,000. The share of the Monthly Servicing Fee
allocable to the Class B Certificateholders with respect to any Distribution
Date (the "Class B Servicing Fee") will be equal to one-twelfth of the product
of (a) the Class B Floating Percentage, (b) the Servicing Fee Rate and (c) the
Servicing Base Amount; provided, however, that with respect to the first
Distribution Date, the Class B Servicing Fee will be equal to $129,375. The
Class A Servicing Fee and the Class B Servicing Fee shall be payable to the
Servicer solely to the extent amounts are
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available for distribution in respect thereof as described under "-- Application
of Collections Payment of Interest, Fees and Other Items" above.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Based on the application of existing law to the facts as set forth in the
Pooling and Servicing Agreement and other relevant documents, Orrick, Herrington
& Sutcliffe LLP, special counsel to the Bank ("Special Tax Counsel"), will
deliver its opinion to the effect that the Certificates will properly be treated
as indebtedness for Federal income tax purposes. See "Certain Federal Income Tax
Consequences" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreements relating to the Class A Certificates and the Class B Certificates
(collectively, the "Underwriting Agreement"), the Bank has agreed to sell to the
underwriters named below (the "Class A Underwriters"), and each of the Class A
Underwriters has agreed to purchase from the Bank, the principal amount of Class
A Certificates set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CLASS A
CLASS A UNDERWRITER CERTIFICATES
----------------------------------------------------------------------- ----------------
<S> <C>
Salomon Brothers Inc................................................... $319,000,000
J.P. Morgan Securities Inc. ........................................... 319,000,000
Bear, Stearns & Co. Inc. .............................................. 164,000,000
Chase Securities Inc. ................................................. 164,000,000
----------------
Total........................................................ $966,000,000
=============
</TABLE>
The Bank has been advised by the Class A Underwriters that the Class A
Underwriters propose initially to offer the Class A Certificates to the public
at the price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of 0.175% of the
principal amount of the Class A Certificates. The Class A Underwriters may allow
and such dealers may reallow a concession not in excess of 0.125% of the
principal amount of the Class A Certificates to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Bank has agreed to sell to the underwriter named below (the
"Class B Underwriter" and together with the Class A Underwriters, the
"Underwriters") and the Class B Underwriter has agreed to purchase from the
Bank, the principal amount of Class B Certificates set forth opposite its name
below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CLASS B
CLASS B UNDERWRITER CERTIFICATES
----------------------------------------------------------------------- ----------------
<S> <C>
J.P. Morgan Securities Inc. ........................................... $ 86,250,000
</TABLE>
The Bank has been advised by the Class B Underwriter that the Class B
Underwriter proposes initially to offer the Class B Certificates to the public
at the price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of 0.200% of the
principal amount of the Class B Certificates. The Class B Underwriter may allow
and such dealers may reallow a concession not in excess of 0.125% of the
principal amount of the Class B Certificates to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
S-49
<PAGE> 50
The Bank has agreed that it will indemnify the Underwriters against certain
liabilities, including liabilities under the Act, or contribute to payments the
Underwriters may be required to make in respect thereof. The Underwriters have
agreed to reimburse the Bank for certain expenses of the issuance and
distribution of the Certificates.
Each Underwriter has represented and agreed that (a) it has complied and
will comply with all applicable provisions of the Financial Services Act of 1986
and the Public Offers of Securities Regulations 1995 (the "Regulations") with
respect to anything done by it in relation to the Certificates 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 of the Certificates to a person who is of a kind
described in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on; and (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 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.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Certificates in accordance with regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the Certificates so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of the
Certificates in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the Underwriters
to reclaim a selling concession from a syndicate member when the Certificates
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
Certificates to be higher than they would otherwise be in the absence of such
transactions. Neither the Bank nor the Underwriters represents that the
Underwriters will engage in any such transactions or that such transactions,
once commenced, will not be discontinued without notice at any time.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Bank by Elizabeth H. Mai, Esq., General Counsel of the Bank,
and, with respect to the Federal tax consequences of such issuance and certain
other legal matters, by counsel to the Bank, Orrick, Herrington & Sutcliffe LLP.
Ms. Mai owns or has the right to acquire a number of shares of common stock of
Advanta Corp. well below 1% of the outstanding common stock of Advanta Corp.
Certain legal matters will be passed upon for the Underwriters by Mayer, Brown &
Platt.
S-50
<PAGE> 51
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE NO.
- --------------------------------------------------------------------------- ---------------
<S> <C>
Accounts................................................................... S-2
Accumulation Period........................................................ S-10
Accumulation Period Length................................................. S-32
Advanta Contributors....................................................... S-17
Available Cash Collateral Amount........................................... S-45
Available Enhancement Amount............................................... S-9
Available Investor Principal Collections................................... S-31
Available Reserve Account Amount........................................... S-43
Bank....................................................................... S-2
Base Rate.................................................................. S-24
Business Day............................................................... S-7
Cash Collateral Account.................................................... S-9
Cede....................................................................... S-6
Certificate Owner.......................................................... S-6
Certificate Owners......................................................... S-2
Certificateholders......................................................... S-3
Certificateholders' Interest............................................... S-5
Certificates............................................................... S-1, S-3
Class A Accumulation Period................................................ S-11
Class A Additional Interest................................................ S-39
Class A Available Funds.................................................... S-29
Class A Certificateholders................................................. S-3
Class A Certificates....................................................... S-1, S-3
Class A Certificate Rate................................................... S-2, S-5
Class A Expected Final Distribution Date................................... S-24
Class A Floating Percentage................................................ S-33
Class A Initial Invested Amount............................................ S-4
Class A Invested Amount.................................................... S-4, S-34
Class A Investor Amount.................................................... S-35
Class A Investor Charge-Off................................................ S-46
Class A Investor Default Amount............................................ S-45
Class A Monthly Interest................................................... S-29
Class A Monthly Principal.................................................. S-31
Class A Principal Percentage............................................... S-34
Class A Required Amount.................................................... S-36
Class A Servicing Fee...................................................... S-48
Class A Underwriters....................................................... S-49
Class B Accumulation Period................................................ S-11
Class B Additional Interest................................................ S-39
Class B Available Funds.................................................... S-29
Class B Certificate Rate................................................... S-2, S-5
Class B Certificateholders................................................. S-3
Class B Certificates....................................................... S-1, S-3
Class B Expected Final Distribution Date................................... S-24
Class B Floating Percentage................................................ S-33
Class B Initial Invested Amount............................................ S-4
Class B Invested Amount.................................................... S-4, S-35
Class B Investor Amount.................................................... S-35
Class B Investor Charge-Off................................................ S-46
Class B Investor Default Amount............................................ S-45
Class B Monthly Interest................................................... S-29
Class B Monthly Principal.................................................. S-31
Class B Principal Commencement Date........................................ S-42
Class B Principal Percentage............................................... S-34
</TABLE>
S-51
<PAGE> 52
<TABLE>
<CAPTION>
TERM PAGE NO.
- --------------------------------------------------------------------------- ---------------
<S> <C>
Class B Required Amount.................................................... S-8, S-36
Class B Servicing Fee...................................................... S-48
Class B Underwriter........................................................ S-49
Closing Date............................................................... S-2, S-28
Collateral Additional Interest............................................. S-40
Collateral Available Funds................................................. S-29
Collateral Default Amount.................................................. S-35
Collateral Floating Percentage............................................. S-33
Collateral Initial Invested Amount......................................... S-4
Collateral Initial Investor Amount......................................... S-3
Collateral Interest........................................................ S-3
Collateral Interest Holder................................................. S-6
Collateral Invested Amount................................................. S-4, S-35
Collateral Investor Amount................................................. S-35
Collateral Monthly Interest................................................ S-30
Collateral Monthly Principal............................................... S-11, S-32
Collateral Principal Collections........................................... S-31
Collateral Rate............................................................ S-30
Controlled Accumulation Amount............................................. S-32
Criteria................................................................... S-20
Deficit Controlled Accumulation Amount..................................... S-12, S-32
Definitive Certificate..................................................... S-6
Designated Maturity........................................................ S-28
Determination Date......................................................... S-24
Distribution Date.......................................................... S-2, S-6
DTC........................................................................ S-6
Enhancement................................................................ S-9
Enhancement Surplus........................................................ S-11
ERISA...................................................................... S-15
Excess Finance Charges..................................................... S-9
Excess Spread.............................................................. S-7
FDIC....................................................................... S-1, S-5
Fleet (RI)................................................................. S-3, S-17
Fleet Contributers......................................................... S-17
Fleet Financial Group...................................................... S-17
Floating Allocation Percentage............................................. S-33
Funding Period............................................................. S-10
Group One.................................................................. S-9
Initial Closing Date....................................................... S-20
Initial Cut Off Date....................................................... S-20
Initial Invested Amount.................................................... S-4
Interest Period............................................................ S-6
Invested Amount............................................................ S-4, S-27, S-35
Invested Principal Collections............................................. S-31
Investment Company Act..................................................... S-26
Investor Default Amount.................................................... S-45
Investor Interest.......................................................... S-3
LIBOR...................................................................... S-2, S-5, S-7
LIBOR Determination Date................................................... S-28
LLC........................................................................ S-17
Loan Agreement............................................................. S-30
Master Pooling and Servicing Agreement..................................... S-3
Master Trust II Sales...................................................... S-18
Monthly Period............................................................. S-7
Monthly Servicing Fee...................................................... S-48
</TABLE>
S-52
<PAGE> 53
<TABLE>
<CAPTION>
TERM PAGE NO.
- --------------------------------------------------------------------------- ---------------
<S> <C>
Net Portfolio Yield........................................................ S-24
Paired Series.............................................................. S-44
Percentage Allocation...................................................... S-38
Pooling and Servicing Agreement............................................ S-3
Pre-Funded Amount.......................................................... S-10
Pre-Funding Account........................................................ S-10
Principal Allocation Percentage............................................ S-34
Principal Funding Account.................................................. S-11,S-42
Principal Funding Account Balance.......................................... S-35
Principal Funding Investment Proceeds...................................... S-12,S-43
Prior Securitizations...................................................... S-18
Rapid Amortization Period.................................................. S-13
Rating Agencies............................................................ S-16
Rating Agency.............................................................. S-16
Reallocated Principal Collections.......................................... S-36
Receivables................................................................ S-2
Reference Banks............................................................ S-28
Regulations................................................................ S-50
Relevant Cut Off Date...................................................... S-20
Required Cash Collateral Amount............................................ S-45
Required Enhancement Amount................................................ S-9,S-45
Required Reserve Account Amount............................................ S-43
Reserve Account............................................................ S-43
Reserve Account Funding Date............................................... S-43
Revolving Period........................................................... S-10
Seller..................................................................... S-3
Seller Amount.............................................................. S-27
Seller Percentage.......................................................... S-27
Sellers' Interest.......................................................... S-4,S-27
Series..................................................................... S-3
Series 1998-A.............................................................. S-3
Series 1998-A Pay Out Event................................................ S-24
Series 1998-A Termination Date............................................. S-15
Series Investor Amount..................................................... S-35
Series Percentage.......................................................... S-27
Servicer................................................................... S-3
Servicing Base Amount...................................................... S-48
Servicing Fee Rate......................................................... S-48
Shared Principal Collections............................................... S-44
Special Tax Counsel........................................................ S-49
Subordinate Principal Collections.......................................... S-38
Supplement................................................................. S-3
Telerate Page 3750......................................................... S-28
Total Enhancement.......................................................... S-9
Transfer................................................................... S-17
Trust...................................................................... S-1,S-3
Trust Pay Out Event........................................................ S-24
Trust Portfolio............................................................ S-20
Trustee.................................................................... S-3
Underwriters............................................................... S-49
Underwriting Agreement..................................................... S-49
</TABLE>
S-53
<PAGE> 54
ANNEX I
OTHER SERIES ISSUED
The Certificates will be the eighteenth Series to be issued by the Trust.
The table below sets forth the principal characteristics of the fourteen other
Series heretofore issued by the Trust and currently outstanding. Such Series are
the Series 1994-B Certificates, the Series 1994-D Certificates, the Series
1995-A Certificates, the Series 1995-B Certificates, the Series 1995-C
Certificates, the Series 1995-D Certificates, the Euro Series 1995-E
Certificates, the Series 1995-F Certificates, the Series 1995-G Certificates,
the Series 1996-A Certificates, the Series 1996-B Certificates, the Series
1996-C Certificates, the Series 1996-D Certificates and the Series 1996-E
Certificates. Series 1995-B and Euro Series 1995-E were issued in offerings
exempt from the registration requirements of the Act. Solely for purposes of
this Annex I, "LIBOR" shall mean London interbank offered quotations for United
States dollar deposits determined as set forth in the related Series
Supplements.
<TABLE>
<S> <C>
SERIES 1994-B
Initial Invested Amount...................... $450,000,000
Initial Pre-Funded Amount.................... $300,000,000
Invested Amount as of December 31, 1997...... $750,000,000
Class A Certificate Rate..................... One Month LIBOR plus .28% per annum
(capped at 12% per annum)
Class B Certificate Rate..................... One Month LIBOR plus .53% per annum
(capped at 12% per annum)
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00%
per annum
Initial Enhancement Amount................... $75,000,000
Series Servicing Fee Rate.................... 2% per annum
Stated Series 1994-B Termination Date........ October 1, 2001
Series Issuance Date......................... July 19, 1994
SERIES 1994-D
Initial Invested Amount...................... $600,000,000
Initial Pre-Funded Amount.................... $400,000,000
Invested Amount as of December 31, 1997...... $61,920,687
Class A Certificate Rate..................... One Month LIBOR plus .16% per annum
Class B Certificate Rate..................... One Month LIBOR plus .36% per annum
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00%
per annum
Initial Enhancement Amount................... $105,000,000
Series Servicing Fee Rate.................... 2% per annum
Stated Series 1994-D Termination Date........ September 1, 2000
Series Issuance Date......................... October 11, 1994
SERIES 1995-A
Initial Invested Amount...................... $600,000,000
Initial Pre-Funded Amount.................... $100,000,000
Invested Amount as of December 31, 1997...... $700,000,000
Class A Certificate Rate..................... One Month LIBOR plus .180% per annum
Class B Certificate Rate..................... One Month LIBOR plus .375% per annum
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00%
per annum
Initial Enhancement Amount................... $73,500,000
Series Servicing Fee Rate.................... 2% per annum
</TABLE>
I-1
<PAGE> 55
<TABLE>
<S> <C>
Stated Series 1995-A Termination Date........ January 1, 2003
Series Issuance Date......................... January 18, 1995
SERIES 1995-B
Maximum Certificate Investor Amount.......... $600,000,000
Investor Amount as of December 31, 1997...... $18,000,000
Certificate Rate............................. Commercial Paper Index
Initial Enhancement Amount................... $41,000,000
Series Servicing Fee Rate.................... 2% per annum
Stated Series 1995-B Termination Date........ November 1, 2001 (extendible)
Series Issuance Date......................... March 22, 1995
SERIES 1995-C
Initial Invested Amount...................... $375,000,000
Initial Pre-Funded Amount.................... $200,000,000
Investor Amount as of December 31, 1997...... $575,000,000
Class A Certificate Rate..................... Three Month LIBOR plus .20% per annum
Class B Certificate Rate..................... Three Month LIBOR plus .34% per annum
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00% per
annum
Initial Enhancement Amount................... $60,375,000
Series Servicing Fee Rate.................... 2% per annum
Stated Series 1995-C Termination Date........ January 1, 2005
Series Issuance Date......................... April 27, 1995
SERIES 1995-D
Initial Invested Amount...................... $450,000,000
Initial Pre-Funded Amount.................... $150,000,000
Investor Amount as of December 31, 1997...... $600,000,000
Class A Certificate Rate..................... One Month LIBOR plus .19% per annum
Class B Certificate Rate..................... One Month LIBOR plus .32% per annum
Initial Enhancement Amount................... $63,000,000
Series Servicing Fee Rate.................... 2% per annum
Stated Series 1995-D Termination Date........ February 1, 2004
Series Issuance Date......................... July 25, 1995
EURO SERIES 1995-E........................... $275,000,000
Initial Invested Amount
Initial Pre-Funded Amount.................... $25,000,000
Investor Amount as of December 31, 1997...... $300,000,000
Class A Certificate Rate..................... Three Month LIBOR plus .09% per annum
Class B Certificate Rate..................... Three Month LIBOR plus .21% per annum
Initial Enhancement Amount................... $31,500,000
Series Servicing Fee Rate.................... 2% per annum
Stated Series 1995-E Termination Date........ December 15, 2000
Series Issuance Date......................... September 6, 1995
</TABLE>
I-2
<PAGE> 56
<TABLE>
<S> <C>
SERIES 1995-F
Initial Invested Amount...................... $750,000,000
Initial Pre-Funded Amount.................... $100,000,000
Investor Amount as of December 31, 1997...... $850,000,000
Class A-1 Certificate Rate................... 6.05% per annum
Class A-2 Certificate Rate................... One Month LIBOR plus .19% per annum
Class B Certificate Rate..................... One Month LIBOR plus .30% per annum
Initial Enhancement Amount................... $65,875,000
Series Servicing Fee Rate.................... 2% per annum
Series 1995-F Termination Date............... August 1, 2003
Series Issuance Date......................... November 21, 1995
SERIES 1995-G
Initial Invested Amount...................... $500,000,000
Investor Amount as of December 31, 1997...... $500,000,000
Class A Certificate Rate..................... One Month LIBOR plus .14% per annum
Class B Certificate Rate..................... One Month LIBOR plus .29% per annum
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00% per
annum
Initial Enhancement Amount................... $50,000,000
Series Servicing Fee Rate.................... 2% per annum
Series 1995-G Termination Date............... June 2002 Distribution Date
Series Issuance Date......................... December 15, 1995
SERIES 1996-A
Initial Invested Amount...................... $400,000,000
Initial Pre-Funded Amount.................... $100,000,000
Investor Amount as of December 31, 1997...... $500,000,000
Class A-1 Certificate Rate................... 6.0% per annum
Class A-2 Certificate Rate................... One Month LIBOR plus .23% per annum
Class B Certificate Rate..................... One Month LIBOR plus .35% per annum
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00% per
annum
Initial Enhancement Amount................... $43,750,000
Series Servicing Fee Rate.................... 2% per annum
Series 1996-A Termination Date............... November 2005 Distribution Date
Series Issuance Date......................... January 18, 1996
SERIES 1996-B
Initial Invested Amount...................... $750,000,000
Investor Amount as of December 31, 1997...... $750,000,000
Class A Certificate Rate..................... Three Month LIBOR plus .230% per annum
Class B Certificate Rate..................... Three Month LIBOR plus .375% per annum
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00% per
annum
Initial Enhancement Amount................... $75,000,000
Series Servicing Fee Rate.................... 2% per annum
Series 1996-B Termination Date............... January 2007 Distribution Date
Series Issuance Date......................... March 26, 1996
</TABLE>
I-3
<PAGE> 57
<TABLE>
<S> <C>
SERIES 1996-C
Initial Invested Amount...................... $700,000,000
Investor Amount as of December 31, 1997...... $700,000,000
Class A Certificate Rate..................... Three Month LIBOR plus .120% per annum
Class B Certificate Rate..................... Three Month LIBOR plus .250% per annum
Collateral Rate.............................. No higher than Three Month LIBOR plus 1.00%
per annum
Initial Enhancement Amount................... $70,000,000
Series Servicing Fee Rate.................... 2% per annum
Series 1996-C Termination Date............... November 2003 Distribution Date
Series Issuance Date......................... May 13, 1996
SERIES 1996-D
Initial Invested Amount...................... $575,000,000
Initial Pre-Funded Amount.................... $125,000,000
Investor Amount as of December 31, 1997...... $700,000,000
Class A Certificate Rate..................... One Month LIBOR plus .15% per annum
Class B Certificate Rate..................... One Month LIBOR plus .30% per annum
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00% per
annum
Initial Enhancement Amount................... $70,000,000
Series Servicing Fee Rate.................... 2% per annum
Series 1996-D Termination Date............... June 2005 Distribution Date
Series Issuance Date......................... June 18, 1996
SERIES 1996-E
Initial Invested Amount...................... $450,000,000
Initial Pre-Funded Amount.................... $50,000,000
Investor Amount as of December 31, 1997...... $500,000,000
Class A Certificate Rate..................... One Month LIBOR plus .10% per annum
Class B Certificate Rate..................... One Month LIBOR plus .33% per annum
Collateral Rate.............................. No higher than One Month LIBOR plus 1.00%
Initial Enhancement Amount................... $50,000,000
Series Servicing Fee rate.................... 2% per annum
Series 1996-E Termination Date............... May 2004 Distribution Date
Series Issuance Date......................... November 1, 1996
</TABLE>
I-4
<PAGE> 58
ANNEX II
RECEIVABLES IN ADDITIONAL ACCOUNTS
CONVEYED TO THE TRUST BY THE BANKS
<TABLE>
<CAPTION>
NUMBER OF RECEIVABLES
ASSIGNMENT DATE RECEIVABLES ADDITIONAL IN ADDITIONAL
NUMBER TRANSFERRED TO TRUST RELEVANT CUT OFF DATE ACCOUNTS(1) ACCOUNTS(1)
- ---------- ------------------------ ------------------------ ----------- -------------
<C> <S> <C> <C> <C>
1 May 16, 1994 March 31, 1994 276,371 $ 367,091,261
2 July 1, 1994 May 31, 1994 157,629 $ 202,859,562
3 August 17, 1994 July 31, 1994 226,342 $ 351,961,171
4 September 23, 1994 August 31, 1994 192,815 $ 299,924,106
5 November 18, 1994 October 31, 1994 332,866 $ 406,625,727
6 January 6, 1995 November 30, 1994 217,320 $ 316,458,944
7 March 15, 1995 February 28, 1995 291,057 $ 348,693,399
8 April 18, 1995 March 31, 1995 143,714 $ 168,739,171
9 May 23, 1995 April 30, 1995 98,330 $ 137,485,579
10 July 18, 1995 June 30, 1995 322,271 $ 432,984,240
11 August 15, 1995 July 31, 1995 126,338 $ 188,302,827
12 August 31, 1995 August 11, 1995 67,968 $ 94,548,321
13 November 21, 1995 October 25, 1995 285,122 $ 491,863,655
14 December 15, 1995 November 26, 1995 265,376 $ 369,389,253
15 January 18, 1996 December 26, 1995 182,985 $ 330,263,251
16 February 19, 1996 January 31, 1996 269,467 $ 560,543,656
17 March 26, 1996 February 29, 1996 150,460 $ 330,531,723
18 May 1, 1996 March 31, 1996 68,056 $ 251,797,517
19 May 13, 1996 March 31, 1996 219,150 $ 499,241,938
20 June 18, 1996 April 30, 1996 244,770 $ 636,632,670
21 June 30, 1996 May 31, 1996 73,771 $ 200,155,226
22 September 1, 1996 July 31, 1996 217,130 $ 640,152,919
23 November 1, 1996 September 30, 1996 151,051 $ 500,113,079
24 November 1, 1996 September 30, 1996 30,631 $ 100,564,456
25 November 15, 1996 October 31, 1996 100,603 $ 250,370,356
26 January 17, 1996 December 31, 1996 118,232 $ 368,278,729
27 February 14, 1997 January 31, 1997 111,777 $ 307,635,708
28 March 14, 1997 February 28, 1997 169,598 $ 400,826,266
29 April 18, 1997 March 31, 1997 204,546 $ 450,500,767
30 May 14, 1997 April 30, 1997 155,299 $ 450,053,037
31 June 13, 1997 May 31, 1997 148,940 $ 241,091,790
32 June 29, 1997 May 31, 1997 5,757 $ 10,065,454
33 September 12, 1997 August 31, 1997 250,570 $ 499,607,860
34 September 30, 1997 August 31, 1997 218,401 $ 301,830,170
35 November 14, 1997 October 31, 1997 167,351 $ 322,443,973
36 December 12, 1997 November 30, 1997 228,234 $ 203,845,007
37 January 30, 1998 December 31, 1997 492,821 $ 729,961,299
</TABLE>
- ---------------
(1) The amounts shown are as of the Relevant Cut Off Date.
II-1
<PAGE> 59
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE SELLER OR ANY AGENT OR UNDERWRITER. NEITHER THIS PROSPECTUS SUPPLEMENT
NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER OR A SOLICITATION BY ANYONE
IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, NOR ANY
SALE MADE HEREUNDER OR THEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE SELLER OR THE
RECEIVABLES OR THE ACCOUNTS SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Terms....................... S-3
Risk Factors........................... S-17
The Bank's Credit Card Activities...... S-18
The Receivables........................ S-20
Maturity Assumptions................... S-24
Receivable Yield Considerations........ S-25
Description of the Certificates........ S-27
Certain Federal Income Tax
Consequences......................... S-49
Underwriting........................... S-49
Legal Matters.......................... S-50
Index of Principal Terms............... S-51
PROSPECTUS
Prospectus Supplement.................. 2
Reports to Certificateholders.......... 2
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Summary of Terms....................... 4
Risk Factors........................... 17
Formation of the Trust................. 21
Transfer and Assignment................ 21
The Bank's Credit Card Activities...... 23
Use of Proceeds........................ 27
The Bank and Advanta Corp.............. 27
Certain Legal Aspects of the
Receivables.......................... 27
Description of the Certificates........ 30
Enhancement............................ 59
Certain Federal Income Tax
Consequences......................... 61
ERISA Considerations................... 66
Plan of Distribution................... 68
Underwriting........................... 68
Legal Matters.......................... 69
Index of Principal Terms............... 70
</TABLE>
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ADVANTA
CREDIT CARD
MASTER TRUST II
$966,000,000
CLASS A FLOATING RATE
ASSET BACKED CERTIFICATES,
SERIES 1998-A
$86,250,000
CLASS B FLOATING RATE
ASSET BACKED CERTIFICATES,
SERIES 1998-A
ADVANTA NATIONAL BANK
SELLER AND SERVICER
------------
PROSPECTUS SUPPLEMENT
------------
UNDERWRITERS OF THE CLASS A
CERTIFICATES
SALOMON SMITH BARNEY
J.P. MORGAN & CO.
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
UNDERWRITER OF THE CLASS B
CERTIFICATES
J.P. MORGAN & CO.
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