<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1998
REGISTRATION NOS. 333-52583 AND 333-52583-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FLEET CREDIT CARD MASTER TRUST II
(FORMERLY ADVANTA CREDIT CARD MASTER TRUST II)
(ISSUER OF SECURITIES)
FLEET BANK (RI), NATIONAL ASSOCIATION
(DEPOSITOR TO THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
UNITED STATES 050495490
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
50 KENNEDY PLAZA
18TH FLOOR
PROVIDENCE, RHODE ISLAND 02903
(401) 278-5451
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LINDA MORRIS, ESQ.
FLEET BANK (RI), NATIONAL ASSOCIATION
PA HR GO1F
101 GIBRALTAR ROAD
HORSHAM, PENNSYLVANIA 19044
(215) 444-2339
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
PAUL WEIFFENBACH, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP
WASHINGTON HARBOUR
3050 K STREET, N.W.
WASHINGTON, D.C. 20007
(202) 339-8400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective as determined by market
conditions.
If any of the securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
TITLE OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE PROPOSED MAXIMUM AGGREGATE
REGISTERED REGISTERED PRICE PER UNIT* OFFERING PRICE*
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset Backed Certificates.... $1,000,000 100% $1,000,000
=================================================================================================================
<CAPTION>
============================= ======================
TITLE OF SECURITIES TO BE AMOUNT OF
REGISTERED REGISTRATION FEE**
- ----------------------------------------------------------------------------
<S> <C>
Asset Backed Certificates.... $295
- ---------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
** Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
On February 20, 1998, through a series of transactions, Advanta National
Bank transferred substantially all of its consumer credit card business to
affiliates of Fleet Financial Group, Inc., including Fleet Bank (RI), National
Association, and the rights and obligations of Advanta National Bank, as Seller
and Servicer under the Pooling and Servicing Agreement were assigned,
transferred to and assumed by Fleet Bank (RI), National Association. References
herein to the "Seller" or the "Servicer" shall, unless the context otherwise
requires, for historical purposes prior to February 20, 1998 mean Advanta
National Bank and shall mean Fleet Bank (RI), National Association and its
successors and assigns for all periods on or after February 20, 1998.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
REPRESENTATIVE FORM OF PROSPECTUS SUPPLEMENT
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 199 )
FLEET CREDIT CARD MASTER TRUST II
(FORMERLY KNOWN AS ADVANTA CREDIT CARD MASTER TRUST II)
$ CLASS A [FLOATING-RATE] [ %] ASSET-BACKED CERTIFICATES, SERIES
199 -
$ CLASS B [FLOATING-RATE] [ %] ASSET-BACKED CERTIFICATES, SERIES
199 -
FLEET BANK (RI), NATIONAL ASSOCIATION
SELLER AND SERVICER
------------------------
Each Class A [Floating-Rate] [ %] Asset-Backed Certificate, Series
199 - (collectively, the "Class A Certificates") and each Class B
[Floating-Rate][ %] Asset-Backed Certificate, Series 199 -
(collectively, the "Class B Certificates" and, together with the Class A
Certificates, the "Certificates") offered hereby will represent an undivided
interest in the assets of the Fleet Credit Card Master Trust II (formerly known
as the ADVANTA Credit Card Master Trust II) (the "Trust") formed pursuant to a
Pooling and Servicing Agreement between a predecessor in interest of Fleet Bank
(RI), National Association (the "Bank"), as Seller and Servicer (each as defined
herein), and Bankers Trust Company, as trustee (the "Trustee").
(Continued on next page)
------------------------
POTENTIAL INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH IN "RISK
FACTORS" COMMENCING ON PAGE S-18 HEREIN AND ON PAGE 17 IN THE PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF FLEET BANK (RI), NATIONAL ASSOCIATION OR ANY OF
ITS AFFILIATES. A CERTIFICATE IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION (THE "FDIC"). THE RECEIVABLES ARE NOT INSURED OR
GUARANTEED BY 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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE CLASS B CERTIFICATES WILL BE SUBORDINATE TO THE CLASS A CERTIFICATES.
[THE TRUST IS ALSO ISSUING $ OF CLASS C INTERESTS. THE CLASS C
INTERESTS WILL BE SUBORDINATE TO BOTH THE CLASS A CERTIFICATES AND THE CLASS B
CERTIFICATES.]
<TABLE>
<CAPTION>
=====================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT TRUST(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Certificate...................... % % %
- ---------------------------------------------------------------------------------------------------------------------
Per Class B Certificate...................... % % %
- ---------------------------------------------------------------------------------------------------------------------
Total........................................ $ $ $
=====================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, at the rate of , as applicable,
from , .
------------------------
The Certificates are offered by the Underwriter[s] when, as and if issued
by the Trust and accepted by the Underwriter[s] and subject to the
Underwriter['s][s'] 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 , 199 , through the facilities of The Depository Trust
Company, [Cedel Bank, societe anonyme and the Euroclear System].
------------------------
[UNDERWRITER[S]]
The date of this Prospectus Supplement is , 199
<PAGE> 4
(Continued from previous page)
Concurrently with the issuance of the Certificates, the Trust will issue
$ Class C Asset-Backed Interests, Series 199 - (the "Class C
Interests"), which will be subordinated to the Certificates as described herein.
Only the Class A Certificates and the Class B Certificates are offered hereby.
The property of the Trust includes a portfolio of MasterCard(R) and
VISA(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 and in the Prospectus, and including the benefits of monies and other
properties constituting Eligible Investments, if any, on deposit in, credited to
or held in certain accounts of the Trust and earnings thereon (collectively, the
"Trust Assets"). The Receivables arise in accounts which are owned by the
Seller. The Bank will service the Receivables. 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 Seller owns the remaining
undivided interest in the Trust not represented by the Certificates, the Class C
Interests or the certificates of any other Series and any other certificated or
uncertificated interests in the Trust issued as Series Enhancement. The Trust
has offered and may offer from time to time other Series of certificates that
represent undivided interests in certain assets of the Trust, which may have
terms significantly different from the Certificates and the Class C Interests.
Interest on the Class A Certificates will accrue from
[at the rate of %] [at a floating-rate determined as follows
]. Interest will be distributed on the Class
A Certificates on the day of each month, commencing , 199 .
Interest on the Class B Certificates will accrue from
[at the rate of %] [at a floating-rate determined as follows
]. Interest will be distributed on the Class B
Certificates on the day of each month, commencing , 199 .
Principal with respect to the Class A Certificates is scheduled to be
distributed to the Class A Certificateholders on the
Distribution Date, or earlier or later 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
Distribution Date, or earlier or later in certain circumstances described
herein.
[The Trust will have the benefit of funds on deposit in a cash collateral
account (the "Cash Collateral Account") which will be funded by an initial
deposit of $ , for the benefit of the Class A Certificates, the Class B
Certificates and the Class C Interests. Amounts on deposit in the Cash
Collateral Account on each Distribution Date in excess of the Required Cash
Collateral Amount will be withdrawn and applied as described herein. Amounts
available to be withdrawn from the Cash Collateral Account will be applied as
described herein under "Summary of Terms -- The Cash Collateral Account" and
"Description of the Certificates -- The Cash Collateral Account."]
[Application will be made to list the Certificates on the [Luxembourg Stock
Exchange; however, no assurance can be given that such listing will be obtained.
Certificateholders should consult with , the Luxembourg listing
agent for the Certificates , phone number
, for the status of such listing.] [other exchanges].]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SERIES
199 - CERTIFICATES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE
OF THE SERIES 199 - CERTIFICATES TO COVER SYNDICATE SHORT POSITIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING" HEREIN.]
THE CERTIFICATES OFFERED HEREBY (TOGETHER WITH THE CLASS C INTERESTS, WHICH
ARE NOT OFFERED HEREBY OR BY THE PROSPECTUS) CONSTITUTE A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE SELLER FROM TIME TO TIME PURSUANT TO THE
PROSPECTUS DATED , 199 . 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.
- ---------------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
S-2
<PAGE> 5
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" beginning on page S-49 in this Prospectus Supplement
and page 68 in 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 Fleet Credit Card Master Trust II (formerly
known as the ADVANTA Credit Card master Trust II)
(the "Trust").
THE CERTIFICATES AND THE
CLASS C INTERESTS............ Each of the Class A [Floating-Rate] [ %]
Asset-Backed Certificates, Series 199 - (the
"Class A Certificates") and the Class B
[Floating-Rate] [ %] Asset-Backed Certificates,
Series 199 - (the "Class B Certificates,"
together with the Class A Certificates, the
"Certificates") offered hereby, together with the
Class C Asset-Backed Interests, Series 199 - (the
"Class C Interests") represent a specified
undivided interest in the Trust Assets allocated
to the Certificates and the Class C Interests
(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 designated as Series 199 -
("Series 199 - ") of which the Certificates form
a part. 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 (as
further amended and in effect from time to time,
the "Master Pooling and Servicing Agreement"),
between a predecessor in interest to Fleet Bank
(RI), National Association (the "Bank"), as
Seller and as Servicer (as each such term is
defined below), and Bankers Trust Company, as
trustee (the "Trustee"), 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." The Class C Interests will be
issued concurrently with the issuance of the
Certificates as part of Series 199 - and will [,
together with amounts on deposit in the Cash
Collateral Account,] constitute the Series
Enhancement for the Certificates.
The Trust was organized by 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) in 1993. In connection with the
Transfer and as permitted by the Master Pooling
and Servicing Agreement as amended by Amendment
Number 3 to the Amended and Restated Pooling and
Servicing Agreement dated as of February 20,
1998, (i) Advanta National Bank transferred to
the Bank, and the Bank accepted and assumed, all
of Advanta National Bank's rights and obligations
under the Master Pooling and Servicing Agreement
and
S-3
<PAGE> 6
the outstanding Series Supplements, (ii) the Bank
became Seller and Servicer of the Trust, (iii)
Advanta National Bank was released from any
continuing obligations under the Master Pooling
and Servicing Agreement and the outstanding
Series Supplements, (iv) the Trust's name was
changed to the Fleet Credit Card Master Trust II
and (v) Advanta National Bank and the Bank filed
with the appropriate governmental authorities
Uniform Commercial Code financing statements
reflecting the transfer to and assumption by the
Bank. See "Transfer and Assignment" in the
Prospectus. The terms "Seller" and "Servicer"
mean the entity acting in each such capacity
under the Pooling and Servicing Agreement, is (a)
for the period prior to February 20, 1998,
Advanta National Bank and (b) for the period
beginning on February 20, 1998 to the date of
this Prospectus Supplement, the Bank.
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 Assets will be allocated among the
Investor 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 and
other property constituting Eligible Investments,
if any, on deposit in, credited to or held in the
Excess Funding Account allocated to the
Certificateholders and the Class C Interest
Holders (the "Invested Amount") will be
$ on the Closing Date (the "Initial
Invested Amount"). The Invested Amount will,
except as otherwise provided herein, [increase up
to a maximum amount of $ 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 and other property constituting Eligible
Investments, if any, on deposit in, credited to
or held in the Excess Funding Account allocated
to the Class A Certificateholders (the "Class A
Invested Amount") will be $ on the
Closing Date (the "Class A Initial Invested
Amount"). The aggregate amount of Principal
Receivables and amounts, if any, on deposit in,
credited to or held in the Excess Funding Account
allocated to the Class B Certificateholders (the
"Class B Invested Amount") will be $ 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 Class
C Interest Holders (the "Class C Invested
Amount") will be $ on the Closing Date
(the "Class C Initial Invested Amount"). [During
the Funding Period, the Class A Invested Amount,
the Class B Invested Amount and the Class C
Invested
S-4
<PAGE> 7
Amount may increase under certain conditions as
the Sellers' Interest is increased until the
Class A Invested Amount is equal to $ ,
the Class B Invested Amount is equal to
$ and the Class C Invested Amount is
equal to $ .]
Thereafter, the Class A Invested Amount will
remain, prior to the commencement of the
Accumulation Period or Rapid Amortization Period,
fixed at [the Class A Initial Invested Amount]
[such] Class A Invested Amount, except if there
are unreimbursed Class A Investor Charge-Offs or
if a 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 199 - , the reallocation of certain
amounts allocable to the Class C 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, the Discount Percentage
and the amounts and other property constituting
Eligible Investments, if any, on deposit in,
credited to or held 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 or the
holders of investor certificates of other Series
(the Investor 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 Trust Assets allocated to the
Investor 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 %] [a
floating-rate determined as follows ]
(such rate, the "Class A Certificate Rate"), and
payment of principal on the
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 Trust Assets allocated to the
Investor 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 %] [a
floating-rate determined as follows ]
(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
S-5
<PAGE> 8
Certificates -- General," "-- Interest Payments"
and "-- Principal Payments."
The Certificates represent beneficial interests
in the Trust Assets only and do not represent
interests in or obligations of Fleet Financial
Group, Inc., the Bank or any affiliate thereof
except to the limited extent provided herein.
None of the Certificates, the Class C Interests,
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
, 199 equaled $ and
$ , respectively. The aggregate
undivided interest in the Principal Receivables
and amounts on deposit in the Excess Funding
Account, if any, evidenced by the Certificates
and the Class C Interests will never exceed the
sum of the Class A Invested Amount, the Class B
Invested Amount and the Class C Invested Amount,
regardless of the total amount of Principal
Receivables 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.
Certificateholders may elect to hold their
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.......... Fleet Bank (RI), National Association, a national
banking association and a wholly-owned subsidiary
of Fleet Financial Group, Inc. The principal
executive offices of the Servicer are located at
50 Kennedy Plaza, 18th Floor, Providence, Rhode
Island 02903. See "The Bank and Fleet Financial
Group" in the Prospectus.
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 holders of the Class C
Interests (the "Class C Interest Holders"), 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 the
Certificateholders, the Class C Interest Holders
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."
S-6
<PAGE> 9
INTEREST..................... Interest on the Certificates for each Interest
Period will be distributed on the day of
each month or, if any such day is not a Business
Day, on the next succeeding Business Day (each, a
"Distribution Date"), commencing ,
199 in an amount equal to [one-twelfth of] the
product of (i) [(a) the actual number of days in
the related Interest Period divided by
[360][365], 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 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 that the initial Interest Period will be
the period from the Closing Date through
, 199 , 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,
Providence, Rhode Island (or, with respect to the
determination of LIBOR, London, England) or any
other state in which the principal executive
offices of the Bank or any Additional Seller or
the Trustee 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 , 199 ).
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 199 -
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 Class C Available Funds
not used, if the Bank or the Trustee is no longer
the Servicer, to pay current and overdue Class C
Servicing Fee. If Excess Spread and Excess
Finance Charges allocable to Series 199 - 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 199 - for
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
Class C Invested Amount
S-7
<PAGE> 10
and then the Class B Invested Amount with respect
to the related Monthly Period will 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 Class C
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 Class C
Invested Amount to be reduced below zero, the
Class B Invested Amount will be reduced by the
amount by which the Class C 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 Class C 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 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 199 - , (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 Class
C 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 199 - 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 and (b) the Class B
Investor Default Amount for the related Monthly
Period. If Excess Spread and Excess Finance
Charges allocable to Series 199 - 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 Class C 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 Class C 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 Class C Invested Amount will be
reduced by the
S-8
<PAGE> 11
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 Class C 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 199 - and 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 Class C
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 Class C 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 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 199 - .
Series 199 - will be the Series issued by
the Trust that will be outstanding on the Closing
Date. Series 199 - will be the Series
included in a group of Series ("Group [One]")
expected to be issued by the Trust from time to
time. See "Annex I." 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
Class C Interest Holders. The Cash Collateral
Account will have a beginning balance of
$ which may be increased to the extent
collections of Excess Spread and Excess Finance
Charges allocable to Series 199 - are expected 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 Class C
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] Class C 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
S-9
<PAGE> 12
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 account all deposits and withdrawals
on such Distribution Date,] and (b) a fraction,
the numerator of which is % and the denominator
of which is the excess of 100% over % and (ii)
[the sum of (A)] the product of (I) $ ,
(II) % [and (III) a fraction the numerator of
which is equal to [the sum of] the Available Cash
Collateral Amount as of the immediately preceding
Distribution Date [and the Class C Floating
Percentage of the Pre-Funded Amount] and the
denominator of which is the Total Enhancement for
such Distribution Date and (B) the product of (I)
$ , (II) % and (III) a fraction, the
numerator of which is equal to the Class C
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. 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 199 - will be used [first] to increase the
Class C Invested Amount to the extent of any
prior unreimbursed reductions in the Class C
Invested Amount [and then deposited to 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 and the Class C
Investor Amount exceeds the Required Enhancement
Amount, such excess may be paid to the Class C
Interest Holders and will not be available to the
Certificateholders.]
[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 $ and (iii) ,
(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 $ or
% of the initial Investor Amount of the
Certificates and the Class C Interests. 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
monthly 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 the last
day of a Monthly Period during the Funding Period
exceeds the product of (A) the sum of % 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 $
S-10
<PAGE> 13
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 Class C Interest
Holders on the next succeeding Distribution Date
and result in a reduction of the Class A Investor
Amount, the Class B Investor Amount and the Class
C Investor Amount. See "Description of the
Certificates -- Pre-Funding Account."]
REVOLVING PERIOD............. No principal will be payable to or for the
benefit of Certificateholders [(other than any
principal payment made from amounts on deposit in
the Pre-Funding Account at the end of the Funding
Period)] during the period (the "Revolving
Period") from and including the Closing Date to
but not including the earlier of (i) the
commencement of the controlled 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 Certificates, is scheduled to begin at
the close of business on , .
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 , . During the
Revolving Period, collections of Principal
Receivables allocated to the Certificates and the
Class C 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 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 199 - 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 199 - 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
S-11
<PAGE> 14
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, "Class C Monthly
Principal" shall mean an amount equal to the
lesser of (A) 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 Class C
Investor Amount over (ii) the Required
Enhancement Amount (the "Enhancement Surplus").
During the Accumulation Period or the Rapid
Amortization Period, collections of Principal
Receivables generally 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 designations 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 Class C 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
S-12
<PAGE> 15
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 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.
S-13
<PAGE> 16
If a 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 Distribution Date.
CLASS B EXPECTED FINAL
DISTRIBUTION DATE............ The Distribution Date.
RAPID AMORTIZATION PERIOD;
PRINCIPAL PAYMENTS........... During the period beginning with the occurrence
of any 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 Class
C Interest Holders of the Class C Invested Amount
and (ii) the Series 199 - 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, then to the Class B Certificateholders
until the Class B Invested Amount is paid in full
and then to the Class C Interest Holders until
the Class C Invested Amount is paid in full,
beginning with the Distribution following the
Monthly Period in which the Rapid Amortization
Period commences. See "Description of the
Certificates -- 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
CLASS C INTERESTS............ 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 Class C
Interests will be subordinated to the extent
necessary to fund certain payments with respect
to the Certificates. If the Class C Investor
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
Class C Interests are not needed to make payments
to or for the benefit of Certificateholders or
the Class C Interest Holders, such collections
may be applied to cover principal payments due to
or for the benefit of other Series, if any, in
[Group One]. Any
S-14
<PAGE> 17
such application of collections will not result
in a reduction of the Class A Invested Amount,
the Class B Invested Amount or the Class C
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 Class C Interest
Holders. See "Description of the
Certificates -- Shared Collections of Principal
Receivables."
REQUIRED SELLER PERCENTAGE... The Required Seller Percentage applicable to
Series 199 - is currently %, 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
repurchase by the Seller on any Distribution Date
after the Investor Amount is less than or equal
to % of the Initial Investor Amount. The
repurchase 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 Class C Interests as
described herein. If such optional repurchase
occurs it may result in an early return of the
investor's investment and no premium will be paid
as a result of any such optional repurchase and
there can be no assurance that a
Certificateholder will be able to invest such
early repayment amount at a similar rate of
return. See "Description of the
Certificates -- Optional Repurchase."
FINAL PAYMENT OF PRINCIPAL
AND INTEREST; TERMINATION OF
TRUST........................ The interest of the Certificateholders in the
Trust will terminate following the earliest of
(i) the day after the Distribution Date on which
the Investor Amount is paid in full, (ii) the
Distribution Date and (iii) the
termination of the Trust (the "Series 199 -
Termination Date"). All principal and interest
will be due and payable no later than the Series
199 - Termination Date. See "Description of the
Certificates -- Final Payment of Principal and
Interest; Termination" in the Prospectus.
TRUSTEE...................... Bankers Trust Company, a New York banking
corporation.
TAX STATUS................... Subject to the matters discussed under "Federal
Income Tax Consequences" herein and in the
Prospectus, Special Tax Counsel to the Seller is
of the opinion 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 "Federal Income Tax
Consequences" herein and in the Prospectus for
additional information concerning the application
of federal income tax laws.
S-15
<PAGE> 18
ERISA CONSIDERATIONS......... [Subject to the considerations described below,
the Class A Certificates are eligible for
purchase by employee benefit plan investors.
Under a regulation issued by the Department of
Labor, the Trust Assets would not be deemed "plan
assets" of an employee benefit plan holding the
Certificates if certain conditions are met,
including that the Class A Certificates must be
held, upon completion of the public offering made
hereby, by at least 100 investors who are
independent of the Seller and of one another. The
Underwriter[s] expect that the Class A
Certificates will be held by at least 100
independent investors at the conclusion of the
offering, although no assurance can be given, and
no monitoring or other measures will be taken to
ensure that such condition will be met. The
Seller anticipates that the other conditions of
the regulation will be met. If the Trust Assets
were deemed to be "plan assets" of an employee
benefit plan investor (e.g., if the 100
independent investor criterion is not satisfied)
violation of the "prohibited transaction" rules
of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), could result and
generate excise tax and other liabilities under
ERISA and Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code"), unless a
statutory, regulatory or administrative exemption
is available. It is uncertain whether existing
exemptions from the "prohibited transaction"
rules of ERISA would apply to all transactions
involving the Trust Assets. Accordingly, employee
benefit plan fiduciaries or other persons
contemplating purchasing the Class A Certificates
on behalf or with "plan assets" of any employee
benefit plan should consult their counsel before
making a purchase.]
[The Underwriter[s] currently do not expect that
the Class B Certificates will be held by at least
100 such persons and, therefore, do 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 or held 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 Certificate, each Class B
Certificateholder will be deemed to have
represented and warranted that it is not and will
not be subject to the foregoing limitations.]
See "ERISA Considerations" in the Prospectus.
CERTIFICATE RATINGS.......... It is a condition to the issuance of the Class A
Certificates that they be rated in the
rating category by at least nationally
recognized rating [agency][agencies].
It is a condition to the issuance of the Class B
Certificates that they be rated in the
rating category by at least nationally
recognized rating [agency][agencies].
The rating agency or rating agencies rating the
Certificates or any other Series are collectively
referred to herein as the "Rating Agencies" or
individually as a "Rating Agency." The
Certificates offered
S-16
<PAGE> 19
hereby are investment grade asset-backed
securities within the meaning of the Act and the
rules promulgated thereunder.
[LISTING..................... Application will be made to list the Certificates
on the Luxembourg Stock Exchange; however, no
assurance can be given that such listing will be
obtained. Certificateholders should consult with
, the Luxembourg listing agent for the
Certificates , phone number
, for the status of such listing.]
S-17
<PAGE> 20
RISK FACTORS
Limited Liquidity. There is currently no market for the Certificates. The
Underwriter[s] 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.
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] subordination of the Class C Interests, such amounts are
limited. If the Class C 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 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 199 - ,
Reallocated Principal Collections with respect to the Class C Invested Amount,
[amounts, if any, on deposit in the Cash Collateral Account] and reductions in
the Class C 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
Seller has 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 not 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 a Pay Out Event to occur 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.
Rating of the Certificates. It is a condition to the issuance of the Class
A Certificates that they be rated in the rating category by at least
nationally recognized rating [agency][agencies]. It is a condition to the
issuance of the Class B Certificates that they be rated in the rating
category by at least
nationally recognized rating [agency][agencies]. 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 Class C Interest and, in the
case of the Class B Certificates, the subordination of the Class C 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
S-18
<PAGE> 21
time or that any rating will not be lowered or withdrawn entirely by any such
rating agency, if in its judgment circumstances so warrant.
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
GENERAL
The Bank, as the survivor of a November 14, 1997 merger between the Bank
and Fleet Bank (Delaware), National Association, was, prior to the Transfer, the
owner of a portfolio of consumer credit card accounts originated or acquired by
the Bank or its predecessor (the "Existing Fleet Credit Card Portfolio"). As
discussed in the Prospectus under the caption "The Bank's Credit Card
Activities," on February 20, 1998, Advanta National Bank transferred to the Bank
the ownership interest in substantially all of the accounts in the Advanta
Consumer Credit Card Portfolio. The Fleet Credit Card Portfolio is, therefore, a
combination of consumer credit card accounts derived from the Existing Fleet
Credit Card Portfolio, from the Advanta Consumer Credit Card Portfolio and
additional consumer credit card accounts originated or acquired by the Bank
since February 20, 1998.
BILLING AND PAYMENT
Nearly all of the accounts in the Fleet Credit Card Portfolio are subject
to finance charges at prime indexed variable rates ranging from % to %
for purchases and cash advances, or London interbank offered rate indexed
variable rates ranging from % to % 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 Fleet Credit Card Portfolio. As of ,
199 , the Fleet 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 approximately $ ("Prior Securitizations"). As
of , 199 , the Fleet Credit Card Portfolio also included
approximately $ 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 Fleet Credit Card Portfolio that meet the requirements of
Eligible Accounts in the Pooling and Servicing Agreement. See "The Receivables"
herein and "Description of the Certificates -- Representations, Warranties and
Covenants" in the Prospectus.
S-19
<PAGE> 22
There can be no assurance that the delinquency and loss experience for the
Receivables will be similar to the historical experience set forth below.
DELINQUENCY EXPERIENCE
FLEET CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Receivables Outstanding.....................................
Receivables Contractually Delinquent........................
As a Percentage of Receivables Outstanding:.................
30-59 Days.............................................
60-89 Days.............................................
90 or more days........................................
--------
Total.............................................
========
</TABLE>
LOSS EXPERIENCE
FLEET CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Average Receivables Outstanding.............................
Gross Losses................................................
Recoveries..................................................
Net Losses..................................................
Net Losses as a Percentage of Average Receivables
Outstanding...............................................
</TABLE>
INTERCHANGE
In respect of Interchange attributed to the cardholder charges for
merchandise and services in the Accounts, the Bank will be required, pursuant to
the terms of the Pooling and Servicing Agreement, to transfer to the Trust in
the Business Day immediately preceding the Distribution Date an amount equal to
one-twelfth of % of the outstanding balance of the Principal Receivables
allocable to Series 199 - at the end of the last day of the preceding Monthly
Period.
THE RECEIVABLES
The Receivables in the Initial Accounts were conveyed to the Trust on
December 3, 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 were generated from
Additional Accounts selected from the Advanta Consumer Credit Card portfolio
prior to February 20, 1998 and from the Fleet Credit Card Portfolio after
February 20, 1998, in each case satisfying the Criteria as applied on the
relevant cut off date (the "Relevant Cut-Off Date"). The Initial Accounts and
all Additional Accounts and any additional Receivables generated by such
Accounts conveyed to the Trust are hereinafter referred to as the "Trust
Portfolio." The Bank has broad discretion in selecting accounts that will be
designated as Additional Accounts. The Criteria are the requirements for an
account to qualify as an "Eligible Account" that are set forth in the
Prospectus. 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
Bank, 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 Bank 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 Fleet 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
S-20
<PAGE> 23
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 -- General" "-- Addition of
Accounts" in the Prospectus. These accounts must meet the Criteria set forth
above as of the Relevant Cut-Off Date. 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, as of , 199 , totaled $ in
Accounts. The Accounts had an average credit limit of $ . The
percentage of the aggregate total Receivables balance to the aggregate total
credit limit was %. The average age of the Accounts was approximately
months.
The following tables summarize the Trust Portfolio by various criteria as
of the close of business on , 199 . Because the future composition
of the Trust Portfolio may change over time, these tables are not necessarily
indicative of future results.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
ACCOUNT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Credit balance.............................. % $ %
Over $......................................
Total............................. % $ %
========
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
CREDIT LIMIT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- -------------------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
% $ %
Over $......................................
Total............................. % $ %
========
</TABLE>
S-21
<PAGE> 24
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------------------- --------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Not Delinquent............................... % $ %
1 to 29 days.................................
30 to 59 days................................
60 to 89 days................................
90 to 119 days...............................
120 to 149 days..............................
150 to 179 days..............................
180 or more..................................
Total.............................. % $ %
=======
</TABLE>
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................................ % $ %
Over 6 to 12 months..........................
Over 12 to 24 months.........................
Over 24 to 36 months.........................
Over 36 to 48 months.........................
Over 48 to 60 months.........................
Over 60 to 84 months.........................
Over 84 months...............................
Total.............................. % $ %
=======
</TABLE>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS AND RECEIVABLES
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alabama..................................... % $ %
Alaska......................................
Arizona.....................................
Arkansas....................................
California..................................
Colorado....................................
Connecticut.................................
Delaware....................................
District of Columbia........................
Florida.....................................
Georgia.....................................
</TABLE>
S-22
<PAGE> 25
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Hawaii......................................
Idaho.......................................
Illinois....................................
Indiana.....................................
Iowa........................................
Kansas......................................
Kentucky....................................
Louisiana...................................
Maine.......................................
Maryland....................................
Massachusetts...............................
Michigan....................................
Minnesota...................................
Mississippi.................................
Missouri....................................
Montana.....................................
Nebraska....................................
Nevada......................................
New Hampshire...............................
New Jersey..................................
New Mexico..................................
New York....................................
North Carolina..............................
North Dakota................................
Ohio........................................
Oklahoma....................................
Oregon......................................
Pennsylvania................................
Rhode Island................................
South Carolina..............................
South Dakota................................
Tennessee...................................
Texas.......................................
Utah........................................
Vermont.....................................
Virginia....................................
Washington..................................
West Virginia...............................
Wisconsin...................................
Wyoming.....................................
All Others..................................
Total............................. % $ %
========
</TABLE>
S-23
<PAGE> 26
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 Pay
Out Event that 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 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 , 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
, Distribution Date (the "Class B Expected Final Distribution
Date"), no assurance can be given in that regard.
A Pay Out Event occurs, with respect to Series 199 - 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, (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, as determined on the related Determination Date,
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, 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 Class C Interests,
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 Class C Interests for the Distribution Date for such
Monthly Period, plus (b) the amount of any Principal Funding Investment Proceeds
for such 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 such 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 prior Monthly Period. For any Monthly Period, the "Base Rate"
will be equal to the annualized percentage equivalent to 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 Class C 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 Pay Out Event occurs, with respect to the Certificates and each other
Series, automatically upon (a) an Insolvency Event relating to the 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
S-24
<PAGE> 27
"Investment Company Act"), or (c) the inability of the Seller (including any
Additional Seller) to transfer Receivables to the Trust in accordance with the
Pooling and Servicing Agreement. There can be no assurance that a Pay Out Event
will not occur. See "Description of the Certificates -- Pay Out Events."
In the event of the occurrence of a 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 Fleet 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
FLEET CREDIT CARD PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
Lowest..........................................
Highest.........................................
Monthly Average.................................
</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. In addition, the ability of the Certificateholders to be paid the
applicable Class A Investor 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 Pay Out Event
occurs, the average life and maturity of the Certificates could be significantly
reduced.
RECEIVABLE YIELD CONSIDERATIONS
The yield on the Fleet Consumer Credit Card Portfolio for the period
ended , and for each of the years in the period ended
, 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 yield may exceed accrual yields as amounts
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 fees and other fees and charges, changes in the delinquency rate on
the Receivables and the percentage of cardholders who pay their balances
S-25
<PAGE> 28
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. See "Risk Factors" in the
Prospectus.
REVENUE FROM FINANCE CHARGES AND FEES
FLEET CREDIT CARD PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
,
------------
<S> <C>
Average Monthly Accrued Fees and Charges........
Average Account Balance.........................
Yield From Fees and Charges.....................
</TABLE>
The yield for the Fleet 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 that assess such fees) and other service charges varies
with the type and volume of activity in, and the balance of each account.
[Information concerning annual cardholder fees, if any, to be discussed.]
[Discussion of any significant trends in Revenue table above, if any, to be
discussed.]
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Master Pooling and
Servicing Agreement entered into between a predecessor in interest to the Bank
(and later assumed by the Bank), as Seller and as Servicer of the Accounts and
the Receivables, and Bankers Trust Company, as Trustee for the
Certificateholders, 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
Seller 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, together with information contained
elsewhere in this Prospectus Supplement and the Prospectus, describes the
material terms of the Certificates contained in the Pooling and Servicing
Agreement. The following summary is qualified in its entirety by reference to
the Pooling and Servicing Agreement.
GENERAL
The Certificates will represent undivided interests in the Trust Assets,
including the right to a floating percentage (in the case of collections of
Principal Receivables during the Revolving Period, such 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 holders of the Class C Interests,
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
Class C Interests (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
S-26
<PAGE> 29
principal payments paid to the Certificateholders and the Class C 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 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 Class C 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 -- 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 or the Class C
Interest Holders.
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 , .
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 %.
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][365] day year.] [a 360-day year of twelve 30-day months.] The
Class A Certificates will bear interest from the Closing Date at [the rate of
%][a Floating-Rate determined as follows .]
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 199 - , and Reallocated Principal
Collections allocable first to the Class C 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
S-27
<PAGE> 30
collections of Finance Charge Receivables allocated to the Series
199 - 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 199 - , and Reallocated Principal
Collections allocable to the Class C 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 199 - 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 [one-twelfth of] 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][365], 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
, .
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to [one-twelfth of] 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][365], 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
, .
"Class C Available Funds" means, with respect to any Monthly Period, an
amount equal to the Class C Floating Percentage of the collections of Finance
Charge Receivables allocated to Series 199 - (including any [investment
earnings on amounts on deposit in the Pre-Funding Account and any] other amounts
that are to be used as collections of Finance Charge Receivables in accordance
with the Pooling and Servicing Agreement)
"Class C 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 C Interest Rate and (ii) the Class C Investor
amount as of the preceding Record Date; provided, however, with respect to the
first Distribution Date, Class C Monthly Interest shall be equal to the interest
accrued on the Class C Initial Investor Amount at the applicable Class C
Interest Rate for the period from the Closing Date through , .
"Class C Interest Rate" means a rate specified in the Class C Supplemental
Agreement not greater than [one month LIBOR plus % per annum].
S-28
<PAGE> 31
[PRE-FUNDING ACCOUNT]
[The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Certificateholders and the Class C Interest Holders, the
Pre-Funding Account with an Eligible Institution. Funds on deposit in the
Pre-Funding Account will be withdrawn on a monthly 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 the last day of any Monthly Period during the Funding
Period exceeds the product of (A) the sum of % 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
$ 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 Class C Interest Holders 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 Class C Interest Holders. Such investment income will be deemed to be
collections of Finance Charge Receivables allocable to the Certificates and the
Class C 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 Class C
Interests 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
Class C Monthly Principal, be treated as Shared Principal Collections. Class C
Monthly Principal will be applied in accordance with the Class C Supplemental
Agreement. The "Class C Supplemental Agreement" means the Class C Supplemental
Agreement dated as of the Closing Date, between the Bank, as Seller and
Servicer, and the Trustee.
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 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
S-29
<PAGE> 32
sum of the Class A Principal Percentage and the Class B Principal Percentage for
such Monthly Period, minus (ii) the amount of Reallocated Principal Collections
with respect to such Monthly Period used to fund the Class A Required Amount or
the Class B Required Amount (excluding certain reallocated Principal Collections
that have resulted in a reduction of the Class C Invested Amount), plus (b) any
Shared Principal Collections with respect to other Series in [Group One] that
are allocated to Series 199 - , 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 Class C Principal Collections over Class C Monthly Principal.
"Invested Principal Collections" means for any Monthly Period, the Principal
Allocation Percentage of all collections of Principal Receivables during such
Monthly Period.
"Class C Principal Collections" means, with respect to any Monthly Period,
the Invested Principal Collections less an amount equal to the product of (i)
the Invested Principal Collections 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 199 - 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 199 - 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.
"Class C 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) Class C 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 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 Class C 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,
S-30
<PAGE> 33
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, Class C Monthly Principal will not exceed the Class C
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 , 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 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 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 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 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 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 that 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.]
SUBORDINATION
The Class B Certificateholders' Interest and the Class C Interests will be
subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Class C Interests 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 Class C Interests may be reallocated to the Class A
Certificateholders and the Class B Certificateholders and the Class C 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."
S-31
<PAGE> 34
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 Class C Interests, 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 199 - 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.
Such amounts so allocated will be further allocated between the Class A
Certificateholders, the Class B Certificateholders and the Class C Interest
Holders in accordance with the Class A Floating Percentage, the Class B Floating
Percentage and the Class C 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 as of the close of
business on such day (or with respect to the first Monthly Period, the Initial
Invested Amount).
The "Class C 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 C 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 C 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).
Collections of Principal Receivables will be allocated to Series 199 -
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, 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
S-32
<PAGE> 35
being made; provided, however, that such ratio is subject to adjustment to give
effect to designations of Additional Accounts.
Such amounts allocated to the Certificateholders will be further allocated
between the Class A Certificateholders and the Class B Certificateholders and
the Class C Interests 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 199 - and not allocated to the Class
A Certificateholders or the Class B Certificateholders will be allocated, in an
amount up to the Class C Invested Amount, to the Class C Interest Holders.
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, 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 Class C 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
199 - 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.
S-33
<PAGE> 36
"Class C Invested Amount" means an amount equal to (i) the Class C Initial
Invested Amount, [plus (ii) the amount of any increases in the Class C 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 Class C
Interests prior to the date of determination, minus (iv) the aggregate amount of
Reallocated Principal Collections allocable to the Class C 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 Class C 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 Class C
Floating Percentage and the Investor Default Amount (the "Class C Investor
Default Amount") with respect to any Distribution Date that is not funded out of
Excess Spread and Excess Finance Charges allocated to Series 199 - 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 Class C 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 Class C 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.]
["Class C Investor Amount" for any date means an amount equal to the sum of
the Class C Invested Amount plus the Class C 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 Class C Investor
Amount.
"Series Investor Amount" for any date means an amount equal to the
numerator of the Principal Allocation Percentage on such date.
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 199 - 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 are insufficient to fund the Class A Required Amount, [amounts, if any,
on deposit in the Cash Collateral Account will then be used to fund the
remaining Class A Required Amount. If such Excess Spread and 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 Class C Interests 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
199 - [and amounts, if any, on deposit in the Cash Collateral Account] are
S-34
<PAGE> 37
insufficient to fund the Class A Required Amount for such related Monthly
Period, then the Class C 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 Class A
Invested Amount to be a negative number, the Class C Invested Amount will be
reduced to zero, and the Class B Invested Amount will be reduced by the amount
by which the Class C 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 Class C
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 Class C 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 such Monthly
Period. If the Class B Required Amount is greater than zero, Excess Spread and
Excess Finance Charges allocated to Series 199 - 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 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 Class C Interests not required to pay 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 Class C
Interests with respect to the related Monthly Period are insufficient to fund
the remaining Class B Required Amount, then the Class C 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 Class C Invested Amount to be a
negative number, the Class C Invested Amount will be reduced to zero, and the
Class B Invested Amount will be reduced by the amount by which the Class C
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 Class C 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 Class C Invested
Amount shall be reimbursed until reimbursed in full in a similar manner.
S-35
<PAGE> 38
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 Class C Interests 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 Class
C Interests, and of that allocation, the following amounts will be
deposited and retained in the Collection Account: [an amount equal to the
Monthly Interest for the related Distribution Date less amounts previously
deposited in the Collection Account for such Monthly Interest] [prior to
the
day, the entire amount of such allocation and on and after the day the
difference between the amount required to pay the Monthly Interest and
amounts previously deposited for such Monthly Interest];
(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 Class C Interests 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 Class C Interests
and 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 the aggregate
amount of Principal Receivables is greater than the Required Principal
Balance and otherwise will be deposited in the Excess Funding Account until
the Seller Amount is greater than the Required Seller Amount and the
aggregate amount of Principal Receivables is greater than the Required
Principal Balance and the remainder will be paid to the holders of the
Seller Certificates; provided further, that if the Total Enhancement is
less than the Required Enhancement Amount, an amount equal to the sum of
(x) the Class C Principal 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
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 Class C Interests 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 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 the
aggregate amount of Principal Receivables is greater than the Required
Principal Balance and otherwise will be deposited in the Excess Funding
Account until the Seller Amount is greater than the Required Seller Amount
and the aggregate amount of Principal Receivables is greater than the
Required Principal Balance and the remainder will be paid to the holders of
the Seller Certificates; provided further, however, that if the is total
Enhancement is less than the Required Enhancement Amount, 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 Class
C Interests 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 Class C Interests, such amount in
excess of the Investor Amount will be paid to the holders of the Seller
Certificates only if the Seller Amount is greater than the Required Seller
Amount and aggregate amount of Principal Receivables is greater than
S-36
<PAGE> 39
the Required Principal Balance and otherwise will be deposited in the
Excess Funding Account until the Seller Amount is greater than the Required
Seller Amount and the aggregate amount of Principal Receivables is greater
than the Required Principal Balance 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 Class C Interest Holders;]
(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 that 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
Class C Interest Holders 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 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
Class C 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 % 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);
S-37
<PAGE> 40
(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 % 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."
(C) On each Distribution Date, an amount equal to the Class C
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 Class C Servicing Fee for such Distribution Date, plus the
amount of any Class C 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
(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 199 -
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 199 - , 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;
S-38
<PAGE> 41
(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 199 - , 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 Class C Monthly Interest, for such Distribution
Date, plus the amount of any Class C Monthly Interest previously due but
not paid to the Class C Interest Holders on a prior Distribution Date, plus
any additional interest with respect to amounts that were due but not paid
to the Class C Interest Holders on a prior Distribution Date at a rate
equal to the Class C Interest Rate ("Class C Additional Interest"), will be
distributed to the Class C Interest Holders;
(7) an amount equal to the Class C 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 Class C Investor Default Amount for such
Distribution Date shall be treated as a portion of Class C Principal
Collections with respect to such Distribution Date;
(9) an amount equal to the aggregate amount by which the Class C
Invested Amount has been reduced pursuant to clauses (iv), (v) and (vi) of
the definition of "Class C 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 Class C 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 to the Cash Collateral Account; and
(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 amounts to be applied
pursuant to the Class C Supplemental Agreement out of Excess Spread and
Excess Finance Charges allocated to Series 199 - will be applied in
accordance with the Class C Supplemental 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
S-39
<PAGE> 42
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 199 - 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 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 199 - 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, 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";
(3) if [the sum of (x)] the amount of Excess Spread and Excess Finance
Charges allocated to Series 199 - 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 Class C 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 that are not allocated as
a portion of Class C Monthly Principal will be treated as Shared Principal
Collections and applied as described under "Description of the
Certificates -- Shared Principal Collections" in the Prospectus;
(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, may be treated as Class C 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.
S-40
<PAGE> 43
(3) on each Distribution Date with respect to the Revolving Period,
all such Class C Principal Collections will be distributed or deposited in
the following priority:
(i) an amount equal to Class C Monthly Principal for such
Distribution Date, up to the Class C Invested Amount on such
Distribution Date, will be applied in accordance with the Class C
Supplemental 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 Class C Principal Collections
will be distributed or deposited in the following priority:
(i) an amount equal to Class C Monthly Principal for such
Distribution Date, up to the Class C Invested Amount on such
Distribution Date, will be applied in accordance with the Class C
Supplemental 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 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 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) % 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 ,
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 Pay Out Event or an event that, after the giving of notice or the lapse
of time, would cause a Pay Out
S-41
<PAGE> 44
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 pay such amount to the holders of the Seller Certificates.
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 199 - .
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.
The Reserve Account will be terminated following the earliest 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
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 holder of the Seller Certificates. Any amounts withdrawn from
the Reserve Account and distributed to the holders of the Seller Certificates 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 later issued
Series (each, a "Paired Series") on or after the commencement of the
Accumulation Period or the Rapid Amortization Period. A Paired Series will be
pre-funded with an initial deposit to a funding account or may 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. The full extent by which the
timing or amount of payments received by a Certificateholder may be affected
will be dependent on a number of factors and will not be readily determinable by
the change that may occur in the Series Percentage.]
S-42
<PAGE> 45
SHARED COLLECTIONS OF PRINCIPAL RECEIVABLES
To the extent that collections of Principal Receivables allocated to the
Certificates or the Class C Interest are not needed to make payments to or for
the benefit of the Certificateholders or the Class C Interest Holders, such
collections may be applied to cover principal payments due to or for the benefit
of other Principal Sharing Series [in Group One]. Any such application of
collections will not result in a reduction of the Invested Amount of the
Certificates and the Class C Interests.
Similarly, certain collections of Principal Receivables allocated to other
Principal Sharing 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 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 might not be paid in full by
the Class A Expected Final Distribution Date and the Class B Invested Amount
might 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 Interest Holders, 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
paid to the holders of the Seller Certificates. The Cash Collateral Account will
be funded on the Closing Date in the initial amount of $ .
On each Distribution Date, the amount available to be withdrawn from the
Cash Collateral Account (the "Available Cash Collateral Amount") will be equal
to the least of (i) the amount on deposit in the Cash Collateral Account (before
giving effect to any deposit to, or withdrawal from, the Cash Collateral Account
on such Distribution Date), (ii) the Required Enhancement Amount and (iii) the
Invested Amount as of such date.
The "Required Enhancement Amount" for 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 % and the denominator of which is the
excess of 100% over % and (ii) the sum of (A) the product of (I)
$ , (II) % and (III) a fraction the numerator of which is equal to
the Available Cash Collateral Amount as of the immediately preceding
Distribution Date and (B) the product of (I) $ , (II) % and (III)
a fraction the numerator of which is equal to the Class C Invested Amount as of
the immediately preceding Distribution Date and the denominator of which is the
Total Enhancement Amount; provided, however, that (i) if certain withdrawals are
made from the Cash Collateral Account or if a Pay Out Event with respect to
Series 199 - occurs or if there are certain reductions in the Class C Invested
Amount, the Required Enhancement Amount for such Distribution Date shall equal
the Required Enhancement Amount for the Distribution Date immediately preceding
the occurrence of such withdrawal, Pay Out Event or reduction in the Class C
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 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 that the Rating Agency Condition has been
S-43
<PAGE> 46
satisfied for such reduction and the Seller shall have delivered 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 Pay Out Event with respect to Series 199 - or an event that,
after the giving of notice or the lapse of time, would constitute a Pay Out
Event with respect to Series 199 - .
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
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 Class C 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 paid to the holder of the Seller Certificates.]
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
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 C Interest Holders in an amount
equal to the Class C Investor 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
199 - 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 199 - or from [amounts, if any, on deposit
in the Cash Collateral Account and] Reallocated Principal Collections allocable
to the Class C 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 - , [amounts, if any, on deposit in the Cash Collateral
Account and] Reallocated Principal Collections, the Class C 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 Class C Invested Amount to be a negative number, the
Class C Invested Amount will be reduced to zero, and the Class B Invested Amount
will be reduced by the amount by which the Class C 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 Class C 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
S-44
<PAGE> 47
any, of the Class A Investor Default Amount for such Distribution Date over the
amount of the reductions, if any, of the Class C 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 199 -
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 199 - 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 Class C Interests and not required to pay the Class A Required Amount,
then the Class C Invested Amount will be reduced by the amount of such excess.
In the event that such reduction would cause the Class C Invested Amount to be a
negative number, the Class C Invested Amount will be reduced to zero, and the
Class B Invested Amount will be reduced by the amount by which the Class C
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 Class C 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, Excess Finance Charges allocated to Series 199 - and
available for such purpose as described under "-- Application of
Collections -- Excess Spread; Excess Finance Charges."
OPTIONAL REPURCHASE
On the Distribution Date occurring on or after the date that the Investor
Amount is reduced to % or less of the Initial Investor Amount, 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 Class C Interests
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 Class C Interests. Following any such repurchase, the
Certificateholders will have no further rights with respect to the Receivables;
provided, however, that such repurchase in no way impacts Certificateholders'
rights under the federal securities law.
Any such optional repurchase may result in an early repayment of the
Certificateholders' investment without any prepayment penalty and there can be
no assurance that a Certificateholder will be able to invest such early
repayment amount at a similar rate of return.
PAY OUT EVENTS
The Revolving Period will continue through , , (or
such later date resulting from postponement of the Class A Accumulation Period),
unless a Pay Out event occurs prior to such date. A "Pay Out Event" for Series
199 - refers to any of the following events, which are applicable only to
Series 199 - (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 Class C 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
S-45
<PAGE> 48
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 interest of the Certificateholders are
materially and adversely affected (which determination shall be made, for
so long as the Class C Invested Amount is greater than zero, without
reference to whether any funds are available pursuant to any Series
Enhancement); provided, however, that a Pay Out Event shall not be deemed
to have occurred with respect to this subparagraph (b) if the Seller has
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;
(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders; 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 Pay Out Event for all Series 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 any Seller (including any Additional 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 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 Class C
Interest Holders evidencing undivided interests aggregating not less than 50% of
the aggregate unpaid principal amount of the Certificates and the Class C
Interests, by written notice to the Seller and the Servicer (and to the Trustee
if given by the Certificateholders and the Class C Interest Holders), declare
that a Pay Out Event has occurred with respect to the Certificates and the Class
C Interests 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 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 Class C Interest Holders
immediately upon the occurrence of such event. Upon the occurrence of a Pay Out
Event, the Rapid Amortization Period will
S-46
<PAGE> 49
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 Pay Out Event occurred.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Certificates and the Class
C Interests with respect to any Distribution Date (the "Monthly Servicing Fee")
will be equal to one-twelfth of the product of (a) % (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
$ .
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 $ . 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 Net 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 $ . The
Class A Servicing Fee and the Class B Servicing Fee shall be payable to the
Servicer solely to the extent amounts are available for distribution in respect
thereof as described under "-- Application of Collections -- Payment of
Interest, Fees and Other Items" above.
FEDERAL INCOME TAX CONSEQUENCES
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 Banks ("Special Tax Counsel"), is of the
opinion that the Certificates will properly be treated as indebtedness for
federal income tax purposes. See "Federal Income Tax Consequences" in the
Prospectus.
S-47
<PAGE> 50
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
underwriter[s] named below (the "Underwriters"), and each of the underwriters
has agreed to purchase from the Bank, the principal amount of [Class A
Certificates] [and Class B Certificates] set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER CLASS A CERTIFICATES CLASS B CERTIFICATES
----------- -------------------- --------------------
<S> <C> <C>
.......................... $ $
.......................... $ $
.......................... $ $
.......................... $ $
</TABLE>
If the Underwriter[s] create a short position in the Certificates in
connection with the offering, i.e., if they sell more Certificates than are set
forth on the cover page of this Prospectus Supplement, the Underwriter[s] may
reduce that short position by purchasing Certificates in the open market.
In general, the purchase of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchase.
None of the Seller, the Servicer, nor the Underwriter[s] makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the prices of the Certificates. In
addition, none of the Seller, the Servicer, nor the Underwriter[s] makes any
representation that the Underwriter[s] will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Seller has been advised by the Underwriters[s] that the Underwriter[s]
propose initially to offer the [Class A Certificates] [Class B Certificates] to
the public at the prices set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in excess
of % of the principal amount of the [Class A Certificates] [Class B
Certificates]. The Underwriter[s] may allow and such dealers may reallow a
concession not in excess of % of the principal amount of the [Class A
Certificates] [Class B Certificates] to certain other dealers. After the initial
public offering, the public offering price and such concessions may be changed.
The Seller has agreed that it will indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Act, or contribute to payments the
Underwriter[s] may be required to make in respect thereof. [The Underwriter[s]
have agreed to reimburse the Seller for certain expenses of the issuance and
distribution of the Certificates.]
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Seller by Edwards & Angell, Boston, Massachusetts. Certain
legal matters relating to the federal tax consequences of such issuance will be
passed upon for the Seller, by Orrick, Herrington & Sutcliffe LLP, Washington,
D.C. Certain matters relating to the issuance of the Certificates and ERISA
matters will be passed upon for the Underwriter[s] by Orrick, Herrington &
Sutcliffe LLP.
S-48
<PAGE> 51
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE NO.
---- --------
<S> <C>
Accounts.................................................. S-2
Accumulation Period....................................... S-11
Accumulation Period Length................................ S-31
Available Cash Collateral Amount.......................... S-43
Available Enhancement Amount.............................. S-9
Available Investor Principal Collections.................. S-29
Available Reserve Account Amount.......................... S-42
Bank...................................................... S-1, S-3
Base Rate................................................. S-24
Business Day.............................................. S-7
Cash Collateral Account................................... S-2, S-9
Cede...................................................... S-6
Certificate Owner......................................... S-6
Certificateholders........................................ S-3
Certificateholders' Interest.............................. S-5
Certificates.............................................. S-1, S-3
Class A Accumulation Period............................... S-11
Class A Additional Interest............................... S-37
Class A Available Funds................................... S-27
Class A Certificate Rate.................................. S-5
Class A Certificateholders................................ S-3
Class A Certificates...................................... S-1, S-3
Class A Expected Final Distribution Date.................. S-24
Class A Floating Percentage............................... S-32
Class A Initial Invested Amount........................... S-4
Class A Invested Amount................................... S-4, S-33
Class A Investor Amount................................... S-34
Class A Investor Charge Off............................... S-45
Class A Investor Default Amount........................... S-44
Class A Monthly Interest.................................. S-28
Class A Monthly Principal................................. S-30
Class A Principal Percentage.............................. S-33
Class A Required Amount................................... S-7, S-34
Class A Servicing Fee..................................... S-47
Class B Accumulation Period............................... S-11
Class B Additional Interest............................... S-38
Class B Available Funds................................... S-28
Class B Certificate Rate.................................. 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-32
Class B Initial Invested Amount........................... S-4
Class B Invested Amount................................... S-4, S-33
Class B Investor Amount................................... S-34
Class B Investor Charge Off............................... S-45
</TABLE>
S-49
<PAGE> 52
<TABLE>
<CAPTION>
TERM PAGE NO.
---- --------
<S> <C>
Class B Investor Default Amount........................... S-44
Class B Monthly Interest.................................. S-28
Class B Monthly Principal................................. S-30
Class B Principal Commencement Date....................... S-40
Class B Principal Percentage.............................. S-33
Class B Required Amount................................... S-8, S-35
Class B Servicing Fee..................................... S-47
Class C Additional Interest............................... S-39
Class C Available Funds................................... S-28
Class C Floating Percentage............................... S-32
Class C Initial Invested Amount........................... S-4
Class C Interest Holders.................................. S-6
Class C Interest Rate..................................... S-28
Class C Interests......................................... S-2, S-3
Class C Invested Amount................................... S-4, S-34
Class C Investor Amount................................... S-34
Class C Investor Default Amount........................... S-34
Class C Monthly Interest.................................. S-28
Class C Monthly Principal................................. S-12, S-30
Class C Principal Collections............................. S-30
Class C Supplemental Agreement............................ S-29
Closing Date.............................................. S-27
Code...................................................... S-16
Controlled Accumulation Amount............................ S-31
Controlled Deposit Amount................................. S-12
Criteria.................................................. S-20
Deficit Controlled Accumulation Amount.................... S-12, S-31
Definitive Certificate.................................... S-6
Determination Date........................................ S-24
Distribution Date......................................... S-7
DTC....................................................... S-6
Enhancement............................................... S-9
Enhancement Surplus....................................... S-12
ERISA..................................................... S-16
Excess Finance Charges.................................... S-9
Excess Spread............................................. S-7, S-38
Existing Fleet Credit Card Portfolio...................... S-19
FDIC...................................................... S-1, S-6
Floating Allocation Percentage............................ S-32
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-7
Invested Amount........................................... S-4, S-26, S-34
Invested Principal Collections............................ S-30
Investment Company Act.................................... S-25
Investor Amount........................................... S-34
Investor Default Amount................................... S-44
</TABLE>
S-50
<PAGE> 53
<TABLE>
<CAPTION>
TERM PAGE NO.
---- --------
<S> <C>
Investor Interest......................................... S-3
Master Pooling and Servicing Agreement.................... S-3
Master Trust II Sales..................................... S-19
Monthly Servicing Fee..................................... S-47
Monthly Period............................................ S-7
Net Portfolio Yield....................................... S-24
Paired Series............................................. S-42
Pay Out Event............................................. S-45
Percentage Allocation..................................... S-36
Pooling and Servicing Agreement........................... S-3
Pre-Funded Amount......................................... S-10
Pre-Funding Account....................................... S-10
Principal Allocation Percentage........................... S-32
Principal Funding Account................................. S-12, S-41
Principal Funding Account Balance......................... S-33
Principal Funding Investment Proceeds..................... S-13, S-41
Prior Securitizations..................................... S-19
Rapid Amortization Period................................. S-14
Rating Agencies........................................... S-16
Rating Agency............................................. S-16
Reallocated Principal Collections......................... S-34
Receivables............................................... S-2
Relevant Cut-Off Date..................................... S-20
Required Cash Collateral Amount........................... S-44
Required Enhancement Amount............................... S-9, S-43
Required Reserve Account Amount........................... S-41
Reserve Account........................................... S-41
Reserve Account Funding Date.............................. S-41
Revolving Period.......................................... S-11
Seller.................................................... S-4
Seller Amount............................................. S-27
Seller Percentage......................................... S-27
Sellers' Interest......................................... S-4, S-27
Series.................................................... S-3
Series 199 - ............................................ S-3
Series 199 - Termination Date............................ S-15
Series Investor Amount.................................... S-34
Series Percentage......................................... S-26
Servicer.................................................. S-4
Servicing Base Amount..................................... S-47
Servicing Fee Rate........................................ S-47
Shared Principal Collections.............................. S-43
Special Tax Counsel....................................... S-47
Subordinate Principal Collections......................... S-36
Supplement................................................ S-3
Trust..................................................... S-1, S-3
Trust Assets.............................................. S-2
Trust Portfolio........................................... S-20
Trustee................................................... S-1, S-3
Underwriters.............................................. S-48
Underwriting Agreement.................................... S-48
</TABLE>
S-51
<PAGE> 54
ANNEX I
[As of July 2, 1998]
OTHER SERIES ISSUED
The Certificates will be the Series to be issued by the Trust.
The table below sets forth the principal characteristics of the 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, the Series 1996-E
Certificates, and the Series 1998-A 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
</TABLE>
I-1
<PAGE> 55
<TABLE>
<S> <C>
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
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
</TABLE>
I-2
<PAGE> 56
<TABLE>
<S> <C>
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
Series 1995-E Termination Date............... December 15, 2000
Series Issuance Date......................... September 6, 1995
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................... 6.50% 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
</TABLE>
I-3
<PAGE> 57
<TABLE>
<S> <C>
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
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
Invested 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
<TABLE>
<S> <C>
SERIES 1998-A
Initial Invested Amount................................. $862,500,000
Initial Pre-Funded Amount............................... $287,500,000
Investor Amount as of , 1998.................. $
Class A Certificate Rate................................ One Month LIBOR plus .04% per annum
Class B Certificate Rate................................ One Month LIBOR plus .24% per annum
Collateral Rate......................................... No higher than One Month LIBOR plus 1.00% per annum
Initial Enhancement Amount.............................. $97,750,000
Series Servicing Fee Rate............................... 2% per annum
Series 1998-A Termination Date.......................... July 2003 Distribution Date
Series Issuance Date.................................... February 6, 1998
</TABLE>
[Subsequent Series to be listed]
I-5
<PAGE> 59
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
38 February 13, 1998 January 31, 1998 [250,000] [$350,000,000]
39 April 14, 1998 March 31, 1998 [317,000] [$750,000,000]
40 May 14, 1998 April 30, 1998 [250,000] [$475,000,000]
41 July 1, 1998 May 31, 1998 [256,000] [$500,000,000]
42 [Subsequent additions to be listed.]
43
44
</TABLE>
- ---------------
(1) The amounts shown are as of the Relevant Cut-Off Date.
II-1
<PAGE> 60
============================================================
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 PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER
OR THE UNDERWRITER(S). NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS
CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, NOR ANY SALE HEREUNDER OR THEREUNDER,
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE SELLER OR THE TRUST SINCE
SUCH DATES.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Terms.......................... S-3
Risk Factors.............................. S-18
The Bank's Credit Card Activities......... S-19
The Receivables........................... S-20
Maturity Assumptions...................... S-24
Receivable Yield Considerations........... S-25
Description of the Certificates........... S-26
Federal Income Tax Consequences........... S-47
Underwriting.............................. S-48
Legal Matters............................. S-48
Index of Principal Terms.................. S-49
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.................... 22
Transfer and Assignment................... 22
The Bank's Credit Card Activities......... 24
Use of Proceeds........................... 28
The Bank and Fleet Financial Group........ 28
Material Legal Aspects of the
Receivables............................. 28
Description of the Certificates........... 30
Enhancement............................... 58
Federal Income Tax Consequences........... 59
ERISA Considerations...................... 64
Plan of Distribution...................... 67
Underwriting.............................. 67
Legal Matters............................. 67
Index of Principal Terms.................. 68
</TABLE>
UNTIL , 19 , ALL DEALERS EFFECTING TRANSACTIONS IN THE
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT
AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS.
============================================================
============================================================
FLEET CREDIT CARD
MASTER TRUST II
$
CLASS A [ %] [FLOATING-RATE]
ASSET-BACKED CERTIFICATES,
SERIES 199 -
CLASS B [ %] [FLOATING-RATE]
ASSET-BACKED CERTIFICATES,
SERIES 199 -
FLEET BANK (RI),
NATIONAL ASSOCIATION
SELLER AND SERVICER
-------------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------------
UNDERWRITER(S)
============================================================
<PAGE> 61
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION.
SUBJECT TO COMPLETION, DATED JULY 2, 1998
PROSPECTUS
FLEET CREDIT CARD MASTER TRUST II
(FORMERLY KNOWN AS ADVANTA CREDIT CARD MASTER TRUST II)
ASSET-BACKED CERTIFICATES, ISSUABLE IN SERIES
FLEET BANK (RI), NATIONAL ASSOCIATION
SELLER AND SERVICER
This Prospectus relates to certain Asset-Backed Certificates (the
"Certificates") that may be issued from time to time by Fleet Credit Card Master
Trust II (formerly ADVANTA Credit Card Master Trust II) (the "Trust") in one or
more series (each a "Series"). The Trust was formed pursuant to a pooling and
servicing agreement between a predecessor in interest of Fleet Bank (RI),
National Association (the "Bank"), as seller and servicer, and Bankers Trust
Company, as Trustee. The property of the Trust includes and will include a
portfolio of credit card receivables (the "Receivables") generated from time to
time in the ordinary course of business in a portfolio of revolving credit card
accounts (the "Accounts") owned by the Bank, and all monies due in payment of
the Receivables and certain other property, which may include participation
interests in other pooled assets, all, as more fully described herein and, with
respect to any Series, in the related Prospectus Supplement.
The Certificates will be offered from time to time under this Prospectus on
terms determined for each Series at the time of the sale and as described in the
related Prospectus Supplement. Each Series will consist of one or more Classes,
one or more of which may be fixed rate Certificates, floating rate Certificates
or other type of Certificates as specified in the related Prospectus Supplement.
Payments of interest on each Class will be made on each Distribution Date
specified in the related Prospectus Supplement. Principal payments on each Class
will be made as specified in the related Prospectus Supplement. Any Series may
include one or more Classes which are subordinated in right and priority to the
extent described in the related Prospectus Supplement to payment of principal or
interest to one or more other Classes of such Series.
Each Certificate will represent an undivided interest in the Trust and each
Certificateholder will be entitled to receive a varying percentage of each
month's collections with respect to the Receivables at the times and in the
manner described herein and, with respect to any Series, in the related
Prospectus Supplement. One or more Classes of a Series may be entitled to the
benefits of a cash collateral guaranty or account, letter of credit, surety
bond, insurance policy or other form of enhancement as specified in the
Prospectus Supplement relating to such Series.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FLEET FINANCIAL GROUP, INC.,
FLEET BANK (RI), NATIONAL ASSOCIATION OR ANY AFFILIATE THEREOF. A CERTIFICATE IS
NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
(THE "FDIC"). THE RECEIVABLES ARE NOT INSURED OR GUARANTEED BY 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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
POTENTIAL INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH IN "RISK
FACTORS" COMMENCING ON PAGE 17 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
The Certificates offered by this Prospectus and by the related Prospectus
Supplement are offered by the underwriters, if any, subject to prior sale, to
withdrawal, cancellation or modification of the offer without notice, to
delivery to and acceptance by the underwriters, if any, and certain further
conditions. Retain this Prospectus for future reference.
Certain capitalized terms used herein are defined elsewhere in the
Prospectus. A listing of the pages on which such terms are defined can be found
in "Index of Principal Terms" beginning on page 68 herein.
Each Series of Certificates or Class of Certificates offered hereby will be
rated in one of the four highest rating categories by at least one nationally
recognized statistical rating organization.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE SECURITIES
OFFERED HEREBY UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
, 1998
<PAGE> 62
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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.............. 22
TRANSFER AND ASSIGNMENT............. 22
The Transfer...................... 22
Amendment to Pooling and Servicing
Agreement...................... 23
Assignment and Assumption
Agreement...................... 23
Rights Agreement.................. 23
Conversion to Limited
Partnership.................... 24
THE BANK'S CREDIT CARD ACTIVITIES... 24
General........................... 24
Acquisition and Use of Credit
Cards.......................... 24
Billing and Payments.............. 26
Description of FDR................ 26
Delinquencies..................... 26
Interchange....................... 27
Competition....................... 27
USE OF PROCEEDS..................... 28
THE BANK AND FLEET FINANCIAL
GROUP............................. 28
MATERIAL LEGAL ASPECTS OF THE
RECEIVABLES....................... 28
Transfer of Receivables........... 28
Matters Relating to
Receivership................... 29
Consumer Protection Laws.......... 30
DESCRIPTION OF THE CERTIFICATES..... 30
General........................... 31
Book-Entry Registration........... 32
Definitive Certificates........... 35
The Bank Certificate; Additional
Sellers........................ 35
Interest Payments................. 36
Principal Payments................ 37
Shared Principal Collections...... 37
Sharing of Excess Finance Charge
Collections.................... 37
Companion Series.................. 37
Groups............................ 38
New Issuances..................... 38
Transfer and Assignment of
Receivables.................... 39
Liquidation of Receivables........ 39
Representations, Warranties and
Covenants...................... 40
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Addition of Accounts.............. 44
Automatic Account Additions....... 46
Removal of Accounts............... 47
Servicing Procedures.............. 47
Discount Option................... 48
Trust Accounts.................... 48
Series Percentage and Seller
Percentage..................... 49
Application of Collections........ 49
Operation of Excess Funding
Account........................ 49
Defaulted Receivables; Rebates and
Fraudulent Charges............. 50
Final Payment of Principal and
Interest; Termination.......... 50
Trust Pay Out Events.............. 51
Servicing Compensation and Payment
of Expenses.................... 52
Matters Regarding the Servicer.... 52
Indemnification................... 53
Servicer Default.................. 54
Reports to Certificateholders..... 55
Evidence as to Compliance......... 56
Amendments........................ 56
Defeasance........................ 57
List of Certificateholders........ 57
The Trustee....................... 57
ENHANCEMENT......................... 58
General........................... 58
Subordination..................... 58
Letter of Credit.................. 58
Cash Collateral Guaranty or
Account........................ 59
Collateral Interest............... 59
Surety Bond or Insurance Policy... 59
Spread Account.................... 59
FEDERAL INCOME TAX CONSEQUENCES..... 59
General........................... 59
Treatment of the Certificates as
Debt........................... 60
Treatment of the Trust............ 60
Taxation of Interest Income of
U.S. Certificate Owners........ 62
Sale or Exchange of
Certificates................... 62
Non-U.S. Certificate Owners....... 63
Information Reporting and Backup
Withholding.................... 63
State and Local Taxation.......... 64
ERISA CONSIDERATIONS................ 64
PLAN OF DISTRIBUTION................ 67
UNDERWRITING........................ 67
LEGAL MATTERS....................... 67
INDEX OF PRINCIPAL TERMS............ 68
ANNEX I: GLOBAL CLEARANCE,
SETTLEMENT AND TAX DOCUMENTATION
PROCEDURES........................ I-1
</TABLE>
i
<PAGE> 63
PROSPECTUS SUPPLEMENT
Each Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a) the
initial aggregate principal amount, the certificate interest rate (or method for
determining it) and authorized denominations of each Class of such Series; (b)
certain information concerning the Receivables and other property, if any,
allocated for such Series; (c) the expected date or dates on which the principal
amount of the Certificates will be paid to Certificateholders; (d) the extent to
which any Class within a Series is subordinated to any other Class of such
Series or any other Series; (e) the identity of each Class of floating rate
Certificates and fixed rate Certificates included in such Series, if any, or
such other type of Class of Certificates; (f) the Distribution Dates for the
respective Classes; (g) relevant financial information with respect to the
Receivables and other property, if any; (h) additional information with respect
to any Series Enhancement, guaranteed investment contract or other agreement
relating to such Series; (i) the plan of distribution of such Series; and (j)
whether the Certificates are to be issuable in registered or book-entry form.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports, containing information concerning the Trust and prepared by
the Servicer, will be sent on behalf of the Trust to Cede & Co., as registered
holder of the Certificates, pursuant to the Pooling and Servicing Agreement. See
"Description of the Certificates -- Book Entry Registration," "-- Reports to
Certificateholders" and "-- Evidence as to Compliance." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. Neither the Bank nor Fleet Financial Group, Inc. intends
to send any of its financial reports to Certificateholders. The Servicer will
file with the Securities and Exchange Commission (the "Commission") such reports
with respect to the Trust as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
AVAILABLE INFORMATION
The Bank, as depositor to the Trust, has filed a Registration Statement
under the Securities Act of 1933, as amended (the "Act"), with the Commission on
behalf of the Trust with respect to the Certificates offered pursuant to this
Prospectus. This Prospectus, which forms part of the Registration Statement,
does not contain all of the information contained in the Registration Statement
and amendments thereof and exhibits thereto. For further information, reference
is made to the Registration Statement and amendments thereof and exhibits
thereto, which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; the Commission's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the
Registration Statement and amendments thereof and exhibits thereto may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a public access site on the Internet through the World Wide Web at
which site reports, proxy and information statements and other information
regarding registrants, including all electronic filing, may be viewed. The
Internet address of the Commission's World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information contained in all reports and other documents filed by the
Servicer with respect to the Trust pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Certificates offered are incorporated by
reference into and considered to be a part of this Prospectus. The information
contained in such reports and other documents automatically updates the
information in this Prospectus and should be relied upon over different
information included in this Prospectus or the accompanying Prospectus
Supplement.
2
<PAGE> 64
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Servicer at Fleet Bank (RI), National Association,
Fleet Credit Card Services, 300 North Wakefield Drive, Newark, Delaware 19713.
Telephone requests for such copies should be directed to the Servicer at (215)
444-6800.
3
<PAGE> 65
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the Prospectus
Supplement with respect to the Series offered thereby, and to the Pooling and
Servicing Agreement and the Series Supplement with respect to such Series (the
"Series Supplement") between the Bank, as Seller and Servicer, and Bankers Trust
Company (or another bank or trust company qualified under the Pooling and
Servicing Agreement and named in the Prospectus Supplement for the related
Series), as Trustee (collectively, the Pooling and Servicing Agreement and any
Series Supplement are sometimes referred to as the "Pooling and Servicing
Agreement"). Certain capitalized terms used herein are defined elsewhere in this
Prospectus. A listing of the pages on which some of such terms are defined is
found in the "Index of Principal Terms" beginning on page 68. Other Series which
may be issued pursuant to other similar 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 Fleet Credit Card Master Trust II (formerly
known as the ADVANTA Credit Card Master Trust II)
(the "Trust"), was formed pursuant to a pooling
and servicing agreement dated as of December 1,
1993, as amended and restated on May 23, 1994,
and as subsequently amended. Such pooling and
servicing agreement, as amended (the "Pooling and
Servicing Agreement"), is between Fleet Bank
(RI), National Association, as Seller and
Servicer, and Bankers Trust Company, as Trustee.
The Pooling and Servicing Agreement, as
originally executed, was between Colonial
National Bank USA and the Trustee. Colonial
National Bank USA subsequently changed its name
to Advanta National Bank USA and, following a
merger into it by Advanta National Bank, Advanta
National Bank USA changed its name to Advanta
National Bank ("Advanta National Bank"). Advanta
National Bank and the Trustee entered into
Amendment Number 3 to Amended and Restated
Pooling and Servicing Agreement dated as of
February 20, 1998 ("Amendment Number 3") to
permit Advanta National Bank to assign and
delegate to the Bank all of Advanta National
Bank's rights and obligations under the Pooling
and Servicing Agreement and to change the name of
the Trust from ADVANTA Credit Card Master Trust
II to the Fleet Credit Card Master Trust II. On
February 20, 1998, immediately after Amendment
Number 3 became effective, Advanta National Bank,
the Bank, Fleet Credit Card, LLC (the "LLC") and
the Trustee entered into an Assignment and
Assumption Agreement under which (i) Advanta
National Bank transferred to the Bank, and the
Bank accepted and assumed, all of Advanta
National Bank's rights and obligations under the
Pooling and Servicing Agreement, (ii) the Bank
became Seller and Servicer of the Trust, (iii)
Advanta National Bank was released from any
continuing obligations under the Pooling and
Servicing Agreement, (iv) the Trust's name was
changed to Fleet Credit Card Master Trust II, and
(iv) Advanta National Bank and the Bank filed
with the appropriate governmental authorities
Uniform Commercial Code financing statements
reflecting the transfer to and assumption by the
Bank. See "Transfer and Assignment." The terms
"Seller" and "Servicer" mean the entity acting in
such capacity under the Pooling and Servicing
Agreement, which is (a) for the period prior to
February 20, 1998, Advanta National Bank and (b)
for the period beginning on February 20, 1998 the
Bank and each Additional Seller. See "-- Seller."
4
<PAGE> 66
The Trust assets primarily include and will
include a portfolio of receivables (the
"Receivables") arising under selected consumer
revolving credit card accounts (the "Accounts")
in portfolios of consumer revolving credit card
accounts originated or acquired by Advanta
National Bank prior to February 20, 1998 (the
"Advanta Consumer Credit Card Portfolio") or by
the Bank or affiliates of the Bank (together with
the Advanta Consumer Credit Card Portfolio, the
"Fleet Credit Card Portfolio"), which accounts
are currently MasterCard* and Visa* credit card
accounts but may include consumer revolving
credit card accounts affiliated with other
programs or private-label credit card accounts,
all monies due or to become due and all amounts
received with respect thereto, all proceeds of
the Receivables, the right to receive certain
Interchange attributed to cardholder charges for
merchandise and services in the Accounts, certain
amounts recovered from Accounts in which the
Receivables have been written off as
uncollectible, proceeds of credit insurance
policies relating to the Receivables, all monies
and other property constituting Eligible
Investments on deposit in, credited to or held in
certain bank accounts of the Trust and the
benefits of any type of enhancement ("Series
Enhancement") issued with respect to any Series
(the drawing on or payment of such Series
Enhancement being available only to
Certificateholders of a specified Series or Class
unless otherwise indicated in the related
Prospectus Supplement). The Trust assets may also
include participations (including 100%
participations) representing undivided interests
in a pool of assets consisting of revolving
credit card receivables or consumer loan
receivables (secured and unsecured), and any
interests in both such types of receivables,
including securities representing or backed by
both such types of receivables and any interests
in both such types of receivables and other
self-liquidating financial assets owned by the
Seller or any affiliate of the Seller and
collections thereon (collectively, "Participation
Interests"). Advanta National Bank conveyed to
the Trust all Receivables existing under certain
designated Accounts at the time of the formation
of the Trust (the "Initial Accounts") and all
Receivables arising under such Initial Accounts
from time to time thereafter. In addition,
Advanta National Bank and the Bank have conveyed
and the Bank may convey in the future all
Receivables existing under certain designated
Additional Accounts (including Automatic
Additional Accounts) and all Receivables
thereafter arising in such Additional Accounts.
CERTIFICATES OFFERED......... The investor certificates issued by the Trust,
including any investor certificates offered
pursuant to this Prospectus and any Prospectus
Supplement (the "Certificates"), represent
undivided interests in the Trust, which, with
respect to each Series, shall consist of the
right to receive, to the extent necessary to make
the required payments with respect to the
Certificates of such Series at the times and in
the amounts specified in the related Series
Supplement, the portion of collections allocable
to Certificateholders of such Series pursuant to
the Pooling and Servicing Agreement and the
related Series Supple-
- ---------------
* MasterCard and VISA are registered trademarks of MasterCard International
Incorporated and VISA USA, Inc., respectively.
5
<PAGE> 67
ment, funds and other property constituting
Eligible Investments on deposit in, credited to
or held in the Collection Account and the Excess
Funding Account allocable to Certificateholders
of such Series pursuant to the Pooling and
Servicing Agreement and the related Series
Supplement, funds and other property constituting
Eligible Investments on deposit in, credited to
or held in any deposit, trust, escrow or similar
account maintained for the benefit of such Series
or any Class of such Series (each, a "Series
Account") and funds available pursuant to any
related Series Enhancement (collectively, with
respect to all Series, the "Certificateholders'
Interest"), it being understood that the
Certificates of any Series or Class shall not
represent any interest in any Series Account or
Series Enhancement for the benefit of any other
Series or Class. The Certificates may be issued
from time to time pursuant to the Pooling and
Servicing Agreement and a related Series
Supplement. Each Series will consist of one or
more classes (each a "Class"), one or more of
which may be Classes of fixed rate Certificates
or floating rate Certificates or other types of
Certificates. Each Class may differ in, among
other things, the priority of principal payments,
the maturity date, distribution dates and rate of
interest. Additionally, the Certificates of one
or more Classes may be subordinated to the
Certificates of one or more other Classes with
respect to the right to receive payments of
principal, interest, or both under the
circumstances and in such amounts as described
herein and in the related Prospectus Supplement.
The term "Certificateholders" refers to holders
of the Certificates, and the term "Series" refers
to any series of Certificates issued by the
Trust. See "Description of the Certificates."
Unless otherwise specified in the related
Prospectus Supplement, the Certificates of a
Series will be available for purchase in minimum
denominations of $1,000 and in integral multiples
of $1,000 in excess thereof and will be available
only in book-entry form, except in certain
limited circumstances. The Trust assets will be
allocated among the Certificateholders' Interest
of each Series, including certain providers of
Series Enhancement holding uncertificated
subordinated interests, and the interest of the
holders of the Seller Certificates (the "Sellers'
Interest"). The Sellers' Interest represents the
right to the assets of the Trust not allocated to
the Certificateholders' Interest. The term
"Seller Amount" refers to, at any time of
determination, an amount equal to the sum of (a)
the aggregate amount of principal Receivables in,
credited to or held in the Trust at such time and
(b) the principal amount on deposit in, credited
to or held in the Excess Funding Account at such
time, minus the sum of the amount of Principal
Receivables and the principal amount on deposit
in, credited to or held in the Excess Funding
Account allocated to each Series then outstanding
(for each Series, its "Invested Amount"). The
Seller Amount will fluctuate as the amount of
Principal Receivables in the Trust changes from
time to time. The term "Investor Amount" for a
Series will be set forth in the Series Supplement
for such Series and, for a Series offered hereby,
the related Prospectus Supplement, and generally
refers to the principal amount of the
Certificateholders' Interest in the assets of the
Trust.
6
<PAGE> 68
The Certificates of a Class offered hereby and
pursuant to a Prospectus Supplement will
represent the right to receive from the assets of
the Trust allocated to the applicable Series
funds up to (but not in excess of) the amounts
required to make payments of interest on the
Certificates of such Class at the rate specified
in the related Prospectus Supplement, and
payments of principal during any related
Amortization Period to the extent specified in
the related Prospectus Supplement.
Each Class of Certificates will include the right
to receive (but only to the extent needed to make
required payments under the Pooling and Servicing
Agreement) varying percentages of collections of
Finance Charge Receivables and Principal
Receivables for the related Monthly Period.
During the Revolving Period relating to such
Class, subject to certain limitations,
collections of Principal Receivables allocable to
the Certificates of such Class will generally be
allocated and paid to the holders of the Seller
Certificates or to other Series. During any
Amortization Period relating to such Class,
collections of Principal Receivables will be
allocated to such Class as provided herein and in
the related Prospectus Supplement.
The Certificates of each Series represent the
right to receive payments from the Trust only and
do not represent interests in or recourse
obligations of Fleet Financial Group, Inc.
("Fleet Financial Group"), the Bank or any
affiliate thereof. None of the Certificates, the
Accounts, the Receivables or the Participations
are insured or guaranteed by the Federal Deposit
Insurance Corporation (the "FDIC") or any other
governmental agency or instrumentality.
NEW ISSUANCES................ The Pooling and Servicing Agreement authorizes
the Trustee to issue three types of certificates:
(i) one or more Series of Certificates which will
be transferable and have the characteristics
described below, (ii) a Bank Certificate,
evidencing the Bank's interest as Seller (the
"Bank Certificate"), which will initially be held
by the Bank and which is transferable in certain
circumstances to members of the affiliated group
of which Fleet Financial Group is the common
parent and (iii) Supplemental Certificates
delivered in exchange for a portion of the Bank
Certificate under certain circumstances described
in the Pooling and Servicing Agreement (each, a
"Supplemental Certificate", and, together with
the Bank Certificate, the "Seller Certificates").
A new issuance of Certificates (a "New Issuance")
may occur only upon satisfaction of the following
conditions: (i) on or before the fifth day
immediately preceding the date of such New
Issuance, the Seller shall have given notice of
such issuance and its date to the Trustee and the
Servicer; and on or before the tenth day
immediately preceding the date of such New
Issuance, the Seller shall have given each Rating
Agency notice of such issuance and (ii) the
Seller shall have delivered to the Trustee (a)
the related Series Supplement specifying the
Principal Terms of the new Series, (b) any
agreement relating to the Series Enhancement, (c)
written confirmation from each Rating Agency that
the New Issuance will not result in the Rating
Agency reducing or withdrawing its rating of any
outstanding Series or Class (the "Rating Agency
Condition"), (d) an officer's
7
<PAGE> 69
certificate from the Seller stating that the
Seller reasonably believes that such New Issuance
will not cause a Pay Out Event to occur with
respect to any Series, and (e) if any Series of
Certificates are outstanding that were
characterized as debt at the time of their
issuance, an opinion of counsel to the effect
that, for federal tax purposes, the New Issuance
will not adversely affect the tax
characterization of Certificates of any
outstanding Series or Class that were
characterized as debt at the time of their
issuance, that the Trust will not be deemed to be
an association (or publicly traded partnership)
taxable as a corporation and that such New
Issuance will not cause an event in which gain or
loss would be recognized by any Certificateholder
or the Trust (a "Tax Opinion"). The Seller may
offer a Series to the public or other investors
under a prospectus or other disclosure document
(a "Disclosure Document") in transactions either
registered under the Act or exempt from
registration thereunder, directly or through one
or more underwriters or placement agents, in
fixed-price offerings or in negotiated
transactions or otherwise.
RECEIVABLES.................. The Receivables arise in Accounts that were
selected prior to February 20, 1998 from the
Advanta Consumer Credit Card Portfolio and
thereafter from the Fleet Credit Card Portfolio,
based on criteria provided in the Pooling and
Servicing Agreement. The initial accounts (the
"Initial Accounts") were selected from the
Advanta Consumer Credit Card Portfolio and the
Receivables therein were conveyed to the Trust on
December 9, 1993. With respect to Additional
Accounts or Participation Interests to be
included in the Trust, the selection was made or
will be made on the date specified in the related
assignment of such Additional Accounts or
Participation Interests to the Trust (each, a
"Related Cut-Off Date"). The Receivables consist
of amounts charged by cardholders for merchandise
and services and cash advances (collectively, the
"Principal Receivables"), plus the related
periodic finance charges, annual membership fees
and annual service charges, late fees, overlimit
fees, cash advance fees, all other fees and
charges with respect to Accounts designated by
the Seller to be included as Finance Charge
Receivables and net recovery amounts
("Recoveries") with respect to Defaulted
Receivables (collectively, the "Finance Charge
Receivables"); provided, however, that if the
Seller exercises the discount option, an amount
equal to the product of the Discount Percentage
and the amount of all or any specified portion of
Principal Receivables created after the effective
date of such option will be treated as Discount
Option Receivables and added to Finance Charge
Receivables. See "Description of the
Certificates -- Discount Option." In addition,
certain fees ("Interchange") received by the
Seller, as a creditor participating in the VISA
and MasterCard International associations, as
partial compensation for taking credit risk,
absorbing fraud losses and funding receivables
for a limited period prior to initial billing
attributed to cardholder charges for merchandise
and services will be treated as collections of
Finance Charge Receivables for purposes of the
Pooling and Servicing Agreement. When an Account
is designated to the Trust Receivables in such
Account as of the Related Cut-Off Date are
conveyed to this Trust and, thereafter, all new
Receivables arising in such Account will be
conveyed automatically to the Trust, except
8
<PAGE> 70
as described herein, but will not affect the
amount of the initial Investor Amount of a
Series. The total amount of Receivables will
fluctuate from day to day, because the amount of
new Receivables arising in the Accounts and the
amount of payments collected on existing
Receivables will usually differ each day. Because
the Seller's Interest represents the interest in
the Principal Receivables not represented by the
Certificates of any Series, the amount of the
Seller's Interest in Principal Receivables will
fluctuate daily as Receivables are collected and
new Receivables are conveyed to the Trust. See
"The Receivables" in the Prospectus Supplement.
REGISTRATION OF CERTIFICATES;
BOOK-ENTRY REGISTRATION...... Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each
Series initially will be represented by
certificates registered in the name of Cede & Co.
("Cede"), as the nominee of The Depository Trust
Company ("DTC") and will not be registered in the
names of the Certificateholders or their
nominees. No person acquiring a beneficial
interest in the Certificates of a Series (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
of such Series are issued under the limited
circumstances described herein and in the related
Prospectus Supplement. See "Description of the
Certificates -- Definitive Certificates."
Consequently, unless and until Definitive
Certificates are issued, the Certificateholders
will not be recognized by the Trustee as
"Certificateholders" (as such term is used in the
Pooling and Servicing Agreement and any Series
Supplement). Hence, until such time,
Certificateholders will only be able to exercise
the rights of a Certificateholder indirectly
through DTC, and its participating organizations,
and unless the Prospectus Supplement for a Series
provides otherwise, through Cedel or Euroclear
and their respective participating organizations.
See "Description of the
Certificates -- Book-Entry Registration" and
"-- Definitive Certificates."
CLEARANCE AND SETTLEMENT..... Unless otherwise provided in the related
Prospectus Supplement, Certificate Owners of each
Series offered hereby may elect to hold their
Certificates through any of (i) DTC (in the
United States) or (ii) Cedel or Euroclear (in
Europe). Transfers within DTC, Cedel or
Euroclear, as the case may be, will be made in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through Cedel or Euroclear, on the other, will be
effected in DTC through the relevant Depositaries
of Cedel or Euroclear. See "Description of the
Certificates -- Book-Entry Registration."
SERVICER..................... Fleet Bank (RI), National Association. The
principal executive offices of the Bank are
located at 50 Kennedy Plaza, 18th Floor,
Providence, Rhode Island 02903. The Bank conducts
its servicing functions through Fleet Credit Card
Services, L.P. The Bank is a wholly-owned
subsidiary of Fleet National Bank. Fleet National
Bank is a wholly-owned subsidiary of Fleet
Financial Group, Inc., a diversified
9
<PAGE> 71
financial services company organized under the
laws of the State of Rhode Island.
SELLER....................... The Bank is currently the only Seller. Subject to
certain conditions described herein under
"Description of the Certificates -- The Bank
Certificate; Additional Sellers," the Bank may
designate one or more affiliates to transfer all
right, title and interest in Receivables or
Participation Interests to the Trust from
time-to-time. Any such Additional Seller will
generally have the same rights and obligations as
those of the Seller described herein.
ISSUER....................... Fleet Credit Card Master Trust II.
COLLECTIONS.................. All collections of Receivables and Participation
Interests, if any, 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 Certificateholders of each Class
of each Series as described in the related
Prospectus Supplement. The Servicer will deposit
all collections of Receivables and Participation
Interests, if any, distributable to
Certificateholders in an eligible account
established for such purpose (the "Collection
Account") no later than the day prior to the
applicable Distribution Date. The "Distribution
Date" for a Series will be the fifteenth day of
each month (or, if such day is not a business
day, the next business day) or such other date
specified in the Series Supplement for a Series.
See "Description of the Certificates -- Series
Percentage and Seller Percentage" herein and
"Description of the Certificates -- Allocation
Percentages" in the Prospectus Supplement.
INTEREST..................... Interest on the Certificates for each Interest
Period with respect to a Series will be
distributed as set forth in the related
Prospectus Supplement. Interest payments in
respect of a Series will generally be funded from
the portion of Finance Charge Receivables
collected during the related Monthly Period
allocable to such Series and, if necessary and if
specified in the related Prospectus Supplement,
from any Series Enhancement available for such
Series. The terms "Interest Period" and "Monthly
Period" have the meanings specified in the
Prospectus Supplement relating to each Series.
See "Description of the Certificates -- Interest
Payments" and "Risk Factors -- Bank's Ability to
Change Terms of Receivables; Decrease in Finance
Charges."
REVOLVING PERIOD............. During the period from the closing date with
respect to a Series (the "Relevant Closing Date")
and ending on the day immediately preceding the
commencement of an Amortization Period with
respect to such Series (the "Revolving Period"),
collections of Principal Receivables allocated to
the Certificates of such Series will be paid from
the Trust to the holders of the Seller
Certificates, to other Series or deposited in the
Excess Funding Account (unless such collections
allocated to a subordinated Class are used to
make payments with respect to a Senior Class).
AMORTIZATION PERIODS;
PRINCIPAL PAYMENTS........... Unless otherwise specified in the Prospectus
Supplement relating to any Class, at the end of
any Revolving Period for a Class, collections
10
<PAGE> 72
of Principal Receivables that had been allocated
to Certificateholders of such Class but had been
paid to the holders of the Seller Certificates,
to other Series or deposited in the Excess
Funding Account shall instead be either paid
directly to such Certificateholders or
accumulated for payment to such
Certificateholders, in each case as specified in
the Prospectus Supplement relating to such Class.
The Revolving Period for a Series shall end and
an amortization period shall commence either upon
the occurrence of a Pay Out Event with respect to
such Series (a "Rapid Amortization Period") or at
a scheduled date (a "Scheduled Amortization
Date") set forth in the Prospectus Supplement
applicable to such Series (a "Controlled
Amortization Period," "Limited Amortization
Period," "Principal Amortization Period,"
"Optional Amortization Period," "Accumulation
Period" or other like period, collectively
referred to herein as an "Amortization Period,"
in each case as described in the related
Prospectus Supplement). In the event of a Rapid
Amortization Period, collections of Principal
Receivables allocated to Certificateholders will
generally be paid directly to such
Certificateholders, subject to any subordination
provisions specified in the related Prospectus
Supplement. See "Description of the
Certificates -- Trust Pay Out Events" for a
discussion of the events which might lead to a
Rapid Amortization Period with respect to all
Series outstanding. In the event of another
Amortization Period with respect to a Class,
collections of Principal Receivables will either
be paid directly to Certificateholders in
specified amounts on a monthly or other periodic
basis or accumulated in a Series Account for the
benefit of Certificateholders or otherwise
applied, in each case as set forth in the
Prospectus Supplement relating to such Class.
Funds on deposit in the Collection Account shall
at the direction of the Servicer be invested by
the Trustee in Eligible Investments selected by
the Servicer.
SHARED PRINCIPAL
COLLECTIONS.................. On each Distribution Date, (a) the Servicer shall
allocate Shared Principal Collections to each
Series entitled thereto (each, a "Principal
Sharing Series"), pro rata, in proportion to the
Principal Shortfalls, if any, with respect to
each such Series and (b) the Servicer shall
withdraw from the Collection Account and pay to
the holders of the Seller Certificates an amount
equal to the excess, if any, of (x) the aggregate
amount for all outstanding Series of collections
of Principal Receivables which the related Series
Supplements specify are to be treated as "Shared
Principal Collections" for such Distribution Date
over (y) the aggregate amount for all outstanding
Principal Sharing Series which the related Series
Supplements specify are "Principal Shortfalls"
for such Distribution Date; provided, however,
that if on any Distribution Date the Seller
Amount is less than or equal to the Required
Seller Amount, the Servicer will not distribute
to the holders of the Seller Certificates any
Shared Principal Collections that otherwise would
be distributed to the holders of the Seller
Certificates, but shall deposit such funds in the
Excess Funding Account.
11
<PAGE> 73
SHARING OF EXCESS COLLECTIONS
OF FINANCE CHARGE
RECEIVABLES.................. Collections of Finance Charge Receivables
allocable to any Class in excess of the amounts
necessary to make required payments with respect
to such Class may, if specified in the related
Series Supplement, be applied to cover
shortfalls, if any, with respect to amounts
payable from collections of Finance Charge
Receivables allocable to any other Class or
Series then outstanding, pro rata based upon the
amount of the shortfall as provided in the
related Series Supplement.
COMPANION SERIES............. If specified in the Prospectus Supplement
relating to a Series, a Series of Certificates
may be issued (each, a "Companion Series"), that
is paired with one or more other Series or a
portion of one or more other Series previously
issued by the Trust (a "Prior Series"), such that
a reduction in the Invested Amount of the Prior
Series results in an increase in the Invested
Amount of the Companion Series. If a Pay Out
Event or Reinvestment Event occurs with respect
to the Prior Series or the Companion Series when
the Prior Series is in an Amortization Period,
the percentage specified in the applicable
Prospectus Supplement for the allocation of
collections of Principal Receivables for the
Prior Series may be reset to a lower percentage
as set forth in the Prospectus Supplement for the
Prior Series and the Amortization Period for the
Prior Series may be lengthened.
GROUPS....................... If specified in the Prospectus Supplements
relating to any group of Series (each, a
"Group"), such Series may be allocated all
collections with respect to certain portions of
the Receivables and any Participation Interests,
provided that the Rating Agency Condition is
satisfied and that such grouping will not result
in the occurrence of a Pay Out Event with respect
to any Series or materially adversely affect the
amount or timing of distributions to be made to
any Series or Class (an "Adverse Effect").
FUNDING PERIOD............... The Prospectus Supplement relating to a Series of
Certificates may specify that for a period
beginning on the Relevant Closing Date for such
Series and ending on a specified date before the
commencement of an Amortization Period with
respect to such Series (the "Funding Period"),
the aggregate amount of Principle Receivables in
the Trust allocable to such Series may be less
than the aggregate principal amount of the
Certificates of such Series and an amount equal
to the amount of such deficiency (the
"Pre-Funding Amount") will be held in a trust
account established with the Trustee for the
benefit of Certificateholders of such Series (the
"Pre-Funding Account") pending the transfer of
additional Principal Receivables to the Trust or
pending the reduction of the Invested Amounts of
other Series issued by the Trust. The related
Prospectus Supplement will specify the initial
Invested Amount on the Relevant Closing Date, the
aggregate principal amount of the Certificates of
such Series (the "Full Invested Amount") and the
date by which the Invested Amount is expected to
equal the Full Invested Amount. The Invested
Amount will increase as Principal Receivables are
delivered to the Trust or as the Invested Amount
of other Series of the Trust are reduced. The
Invested Amount may also decrease due to the
occurrence of a Pay Out Event or Reinvestment
Event as specified in the related Prospectus
Supplement.
12
<PAGE> 74
During the Funding Period, funds on deposit in
the Pre-Funding Account for a Series of
Certificates will be withdrawn and paid to the
Transferor to the extent of any increases in the
Invested Amount. In the event that the Invested
Amount does not, for any reason, equal the Full
Invested Amount by the end of the Funding Period,
any amount remaining in the Pre-Funding Account
and any additional amount specified in the
related Prospectus Supplement will be payable to
the Certificateholders of such Series in a manner
and at such time as set forth in the related
Prospectus Supplement.
If so specified in the related Prospectus
Supplement, monies in the Pre-Funding Account
with respect to any Series will be invested by
the Trustee in Eligible Investments or will be
subject to a guaranteed rate or investment
agreement or other similar arrangement, and
investment earnings and any applicable payment
under any such investment arrangement will be
applied to pay interest on the Certificates of
such Series.
ENHANCEMENT.................. Enhancement with respect to one or more Classes
of a Series ("Series Enhancement") may be
provided in the form of subordination, a letter
of credit, a cash collateral guaranty, a cash
collateral account, a collateral interest, a
surety bond, insurance policy or any combination
of the above as specified in the related
Prospectus Supplement. Series Enhancement may
also be provided to a Class or Classes of
different Series by a cross-support feature which
requires that distributions of principal or
interest be made with respect to Certificates of
one or more Classes of a particular Series before
distributions are made to one or more Classes of
another Series.
The type, characteristics and amount of the
Series Enhancement will be determined based on
several factors, including the characteristics of
the Receivables and Accounts and other property
underlying or comprising the Trust assets as of
the Relevant Closing Date with respect to any
Series, and will be established on the basis of
requirements of each Rating Agency rating the
Certificates of such Series. The terms of the
Series Enhancement with respect to any Series
offered hereby will be described in the related
Prospectus Supplement. If so specified in the
Prospectus Supplement for a Series, the level of
Series Enhancement for such Series may be reduced
if such reduction satisfies the Rating Agency
Condition. If so specified in the related
Prospectus Supplement, any such Series
Enhancement may apply only in the event of
certain types of losses and the protection
against losses provided by such Series
Enhancement will be limited. See "Enhancement"
and "Risk Factors -- Limited Nature of Rating."
a. SUBORDINATION............. A Series of Certificates may include one or more
Classes of Certificates or uncertificated
interests that are subordinate to one or more
other Classes of such Series. The rights of the
holders of any such subordinated Certificates or
uncertificated interests to receive distributions
on any Distribution Date for such Series will be
subordinate in right and priority to the rights
of the holders of Certificates which are senior
to such subordinated Certificates or
uncertificated interests, but only to the extent
set forth in the related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, subordination may
13
<PAGE> 75
apply only in the event of certain types of
losses not covered by another Series Enhancement.
The related Prospectus Supplement will also set
forth information concerning the amount of
subordination of a Class or Classes of
subordinated Certificates or uncertificated
interests in a Series, the circumstances in which
such subordination will be applicable, the
manner, if any, in which the amount of
subordination will decrease over time, and the
conditions under which amounts available from
payments that would otherwise be made to holders
of such subordinated Certificates or
uncertificated interests will be distributed to
holders of Certificates which are senior to such
subordinated Certificates or uncertificated
interests. If cash flows otherwise distributable
to holders of a subordinated Class of a Series
will be used as support for a Class of another
Series, the related Prospectus Supplement will
specify the manner and conditions for applying
such a cross-support feature. See
"Enhancement -- Subordination."
b. LETTER OF CREDIT.......... If so specified in the related Prospectus
Supplement, support for a Series or one or more
Classes of a Series may be provided by one or
more letters of credit. A letter of credit may
provide limited protection against certain losses
in addition to or in lieu of another Series
Enhancement. The issuer of the letter of credit
(the "L/C Bank") will be obligated to honor
demands with respect to such letter of credit, to
the extent of the amount available thereunder, to
provide funds under the circumstances and subject
to such conditions as are specified in the
related Prospectus Supplement. The liability of
the L/C Bank under its letter of credit may be
reduced by the amount of unreimbursed payments
thereunder.
The maximum liability of an L/C Bank under its
letter of credit will generally be an amount
equal to a percentage specified in the related
Prospectus Supplement of the initial Investor
Amount of a Series or a Class of such Series. The
maximum amount available at any time to be paid
under a letter of credit will be determined in
the manner specified therein and in the related
Prospectus Supplement. See "Enhancement -- Letter
of Credit."
c. CASH COLLATERAL GUARANTY
OR ACCOUNT................ If so specified in the related Prospectus
Supplement, support for a Series or one or more
Classes of a Series may be provided by a guaranty
(the "Cash Collateral Guaranty") secured by the
deposit of cash or certain permitted investments
in an account (the "Cash Collateral Account")
reserved for the beneficiaries of the Cash
Collateral Guaranty or by a Cash Collateral
Account alone. The amount available pursuant to
the Cash Collateral Guaranty or the Cash
Collateral Account will be the lesser of amounts
on deposit in the Cash Collateral Account and an
amount specified in the related Prospectus
Supplement. The related Prospectus Supplement
will set forth the circumstances under which
payments are made to beneficiaries of the Cash
Collateral Guaranty from the Cash Collateral
Account or from the Cash Collateral Account
directly.
d. COLLATERAL INTEREST....... If so specified in the related Prospectus
Supplement, support for a Series of Certificates
or one or more Classes of a Series may be
provided initially by an uncertificated,
subordinated interest in the Trust (the
"Collateral Interest") in an amount initially
equal to a
14
<PAGE> 76
percentage specified in the related Prospectus
Supplement of the initial Investor Amount.
e. SURETY BOND OR INSURANCE
POLICY.................... If so specified in the related Prospectus
Supplement, support for a Series or one or more
Classes of a Series may be provided by the
posting of a surety bond or the issuance of
insurance by an insurance company, in each
instance designed to assure the distribution of
interest or principal on the Certificates of such
Class or Series in the manner and amount
specified in the related Prospectus Supplement.
f. SPREAD ACCOUNT............ If so specified in the related Prospectus
Supplement, support for a Series or one or more
Classes of a Series may be provided by the
periodic deposit of certain available excess cash
flow from the Trust assets into an account (the
"Spread Account") intended to assure the
subsequent distribution of interest or principal
on the Certificates of such Class or Series in
the manner specified in the related Prospectus
Supplement.
RECORD DATE.................. The last day of the month preceding any
Distribution Date, except as otherwise specified
with respect to a Series in the related
Prospectus Supplement.
OPTIONAL REPURCHASE.......... If specified in a Prospectus Supplement, the
Investor Amount of a Series may be subject to
optional purchase by the Seller on any
Distribution Date after such Investor Amount is
less than or equal to a certain specified level.
The purchase price on the Distribution Date on
which such purchase occurs will be as specified
in the related Prospectus Supplement and together
with any amounts on deposit in, credited to or
held in any Series Accounts held for the benefit
of the Certificateholders of such Series, will be
not less than an amount equal to the Investor
Amount plus accrued and unpaid interest on the
applicable Certificates. See "Description of the
Certificates -- Optional Repurchase" in the
related Prospectus Supplement.
FINAL PAYMENT OF
PRINCIPAL AND INTEREST;
TERMINATION OF TRUST......... The interest of the Certificateholders of a
Series in the Trust will terminate following the
earliest of (i) the day after the Distribution
Date on which the Investor Amount of such Series
is paid in full, (ii) a date specified in the
Series Supplement for such Series (the "Stated
Series Termination Date") and (iii) the
termination of the Trust (the "Trust Termination
Date"). All principal and interest will be due
and payable no later than the Stated Series
Termination Date.
TRUSTEE...................... Bankers Trust Company.
RISK FACTORS................. There are material risks associated with
investment in the Certificates. Investors should
consider the factors set forth under the caption
"Risk Factors" beginning on page 17.
TAX STATUS................... Except to the extent otherwise specified in the
related Prospectus Supplement, Special Tax
Counsel to the Bank is of the opinion that the
Certificates of each Series (or certain Classes
thereof) will be properly characterized as
indebtedness for federal income tax purposes.
Except as otherwise specified in the related
Prospectus Supplement, the Certificate Owners of
each Class as to which such opinion is
15
<PAGE> 77
rendered will be deemed to agree to treat the
Certificates as indebtedness for tax purposes.
See "Federal Income Tax Consequences" for
additional information concerning the application
of federal income tax laws.
ERISA CONSIDERATIONS......... Under a regulation issued by the Department of
Labor, the Trust Assets would not be deemed "plan
assets" of any employee benefit plan holding
interests in a Class of the Certificates of a
Series if certain conditions are met. If the
Trust Assets were deemed to be "plan assets" of
an employee benefit plan, there is uncertainty as
to whether existing exemptions from the
"prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), would apply to all
transactions involving the Trust Assets. No
assurance can be made with respect to any
offering of the Certificates of any Series that
the conditions which would allow the Trust Assets
not to be "plan assets" will be met, although the
intention of the Underwriters (but not their
assurance) as to whether any Class of the
Certificates of a particular Series will be
"publicly-offered securities," and therefore
eligible for an ERISA exemption, will be set
forth in the related Prospectus Supplement.
Accordingly, fiduciaries or other persons
contemplating purchasing interests in the
Certificates of any Series with "plan assets" of
any employee benefit plan should consult their
counsel before making a purchase. See "ERISA
Considerations."
CERTIFICATE RATING........... It will be a condition to the issuance of the
Certificates offered by this Prospectus and the
related Prospectus Supplement that they be rated
in one of the four highest applicable rating
categories by at least one nationally recognized
statistical rating organization selected by the
Seller (each such rating organization rating any
Series, a "Rating Agency"). The rating or ratings
applicable to the Certificates of each Class will
be as set forth in the related Prospectus
Supplement. The Certificates offered pursuant to
this Prospectus and the related Prospectus
Supplement must be investment grade asset-backed
securities within the meaning of the Act and the
rules promulgated thereunder.
A security rating should be evaluated
independently of similar ratings of different
types of securities. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning rating organization.
Each rating should be evaluated independently of
any other rating. See "Risk Factors -- Limited
Nature of Certificate Rating."
LISTING...................... If so specified in the Prospectus Supplement for
a Series, application will be made to list the
Certificates of such Series, or all or a portion
of any Class thereof, on the Luxembourg Stock
Exchange or any other specified exchange.
16
<PAGE> 78
RISK FACTORS
Investors should consider the following factors in connection with the
purchase of Certificates.
Limited Liquidity. There can be no assurance that a secondary market for
the Certificates of any Series offered hereby 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 of such
Series. The underwriters of any Series offered hereby presently expect to make a
secondary market in such Certificates and pursuant to any Prospectus Supplement,
but have no obligation to do so.
Competition in the Bank Credit Card Industry. The bank credit card
industry is highly competitive. There is increased competitive use of
advertising, target marketing and pricing competition in interest rates and
annual cardholder fees as both traditional and new credit card issuers seek to
expand or to enter the market. As a result of this competition, certain major
credit card issuers assess finance charges for selected portions of their
portfolios at rates lower than the rates currently being assessed on the
Accounts. Advanta National Bank, commencing in March 1987, and the Bank since
its succession to Advanta National Bank has attempted to respond to this
increased competition by marketing cards to customers primarily without an
annual fee and by attempting to offer customers a finance charge rate below that
generally available from competitors. In addition, the Advanta National Bank
was, since 1983, and the Bank now is in the business of acquiring accounts
through direct mail solicitation. The Bank's ability to compete in the credit
card industry will affect its ability to generate new Receivables. See "The
Bank's Credit Card Activities -- Competition."
Bank's Ability to Change Terms of the Receivables; Decrease in Finance
Charges. The Bank is not transferring the Accounts to the Trust, only the
receivables arising in the Accounts. As owner of the Accounts, the Bank retains
the right to determine the finance charges and the other fees and charges which
will be applicable from time to time on the Accounts, to alter the minimum
monthly payment required under the Accounts and to change various other terms of
its agreement with cardholders with respect to the Accounts. A decrease in the
finance charges and the other fees and charges assessed on the Accounts should
decrease the effective yield on the Accounts and could result in the occurrence
of a Series Pay Out Event for one or more Series and commencement of the Rapid
Amortization Period for each such Series. Under the Pooling and Servicing
Agreement, the Seller agrees that, unless required by law or as is otherwise
necessary, in its sole discretion, to maintain its lending business on a
competitive basis based on a good faith assessment by the Seller of the nature
of its competition in the lending business, it will not reduce the annual
percentage rate at which finance charges are assessed on the Receivables or the
other fees and charges assessed on any of the Accounts owned by it, if, as a
result of such reduction, either (i) the Seller's reasonable expectation is that
such reduction will cause a Series Pay Out Event to occur, or (ii) such
reduction is not also applied to any comparable segments of consumer revolving
credit card accounts owned by the Seller which have characteristics the same as,
or substantially similar to, such Accounts. The Seller also covenants that it
will change the terms relating to any of the Accounts owned by it only if the
change is made applicable to the comparable segment of the consumer revolving
credit card accounts owned by the Seller with characteristics the same as or
substantially similar to such Accounts, subject to compliance with all
requirements of law. In servicing the Accounts, the Servicer will be required to
exercise the same care and apply the same policies that it exercises in handling
similar matters for its own comparable accounts. Except as set forth above, the
Pooling and Servicing Agreement does not contain any restrictions on the ability
of a Seller to change the terms of the Accounts or the Receivables. See
"Description of the Certificates -- Representations, Warranties and Covenants."
There can be no assurance that changes in applicable law, changes in the
marketplace or prudent business practice might not result in a determination by
the Seller to decrease finance charges or other fees and charges for existing
accounts, or take actions which would otherwise change the terms of the
Accounts. In addition, there can be no assurance that a change made in the terms
of the Accounts would not result in the downgrade of the rating of the
Certificates.
Characteristic as a Sale; Potential Effect of Insolvency and Receivership
of the Seller. The Seller has represented and warranted in the Pooling and
Servicing Agreement that the transfer of the Receivables to the Trust is and
will be either a sale of all right, title and interest in the Receivables and
all proceeds thereof to the Trust or the grant to the Trust of a pledge of such
property to the Trust. The Seller has taken and will take
17
<PAGE> 79
certain actions required to perfect the Trust's interest in the Receivables. The
Seller has represented and warranted that if the transfer by it to the Trust is
deemed to be a grant to the Trust of a security interest in the Receivables,
upon the filing of financing statements required to be filed under the Pooling
and Servicing Agreement, the Trust will have a first priority perfected security
interest therein. Nevertheless, if the transfer of the Receivables and all
proceeds thereof to the Trust is deemed to create a security interest therein, a
tax, government lien or other nonconsensual lien on property of the Seller
arising before Receivables come into existence may have priority over the
Trust's interest in such Receivables. If the FDIC were appointed conservator or
receiver of the Seller, the conservator's or receiver's administrative expenses
may also have priority over the Trust's interest in such Receivables. Moreover,
if a conservatorship or receivership proceeding were to be commenced involving
the Seller and the conservator or receiver of the Seller were to take the
position that the transfer of the Receivables from the Seller to the Trust
should be characterized as a pledge of such Receivables, then delays in
distributions on the Certificates and reductions in such distributions could
result. In addition, while the Bank is the Servicer, cash collections held by
the Bank may, subject to certain conditions, be commingled and used for the
benefit of the Bank prior to the date on which such collections are required to
be deposited in the Collection Account as described under "Description of
Certificates -- Application of Collections." In the event of the conservatorship
or receivership of the Bank or, in certain circumstances, the lapse of certain
time periods, the Trust may not have a perfected interest in such collections
and, in such event, the Trust may suffer a loss of all or part of such
collections which may result in a loss to Certificateholders. See "Material
Legal Aspects of the Receivables -- Transfer of Receivables."
To the extent that the Seller has granted a security interest in the
Receivables to the Trust and that security interest was validly perfected before
the insolvency of the Seller and was not granted or taken in contemplation of
insolvency or with the intent to hinder, delay or defraud the Seller or its
creditors, the Federal Deposit Insurance Act ("FDIA"), as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended
("FIRREA"), provided that such security interest should not be subject to
avoidance by the FDIC, as conservator or receiver for the Seller. Positions
taken by the FDIC staff prior to the passage of FIRREA do not suggest that the
FDIC, as conservator or receiver for the Seller, would interfere with the timely
transfer to a Trust of payments collected on the Receivables. If, however, the
FDIC were to assert a contrary position, such as requiring the Trustee to
establish its right to those payments by submitting to and completing the
administrative claims procedure under the FDIA, or the conservator or receiver
were to request a stay of proceedings with respect to the Seller as provided
under the FDIA, delays in payments on the related Series of Certificates and
possible reductions in the amount of those payments could occur. In addition,
the FDIC, if appointed as conservator or receiver for the Seller, has the power
under the FDIA to repudiate contracts, including secured contracts of the
Seller. The FDIA provides that a claim for damages arising from the repudiation
of a contract is limited to "actual direct compensatory damages." In the event
the FDIC were to be appointed as conservator or receiver of the Seller and were
to repudiate the Pooling and Servicing Agreement, then the amount payable out of
available collateral to the Certificateholders could be lower than the
outstanding principal and accrued interest on the Certificates. In the event of
a Servicer Default, if a conservator or receiver is appointed for the Servicer,
and no Servicer Default other than such conservatorship or receivership or
insolvency of the Servicer exists, the conservator or receiver may have the
power to prevent either the Trustee or Certificateholders from effecting a
transfer of servicing to a successor Servicer. If a conservator or receiver were
appointed for the Seller pursuant to the Pooling and Servicing Agreement, new
Principal Receivables would not be transferred to the Trust and the Trustee
would sell the Receivables (unless Certificateholders representing more than 50%
of the Investor Amount of each Series, or if any such Series has more than one
Class, of each Class of such Series, and, if at such time there is more than one
Seller, any Seller that is not the subject of such Insolvency Event, and any
holder of a Supplemental Certificate and certain other parties specified in the
Series Supplements instruct otherwise), thereby causing early termination of the
Trust and a pro rata loss to the Certificateholders if the net proceeds of such
sale were insufficient to pay Certificates in full. Upon the occurrence of a Pay
Out Event, if a conservator or receiver was appointed for the Seller and no Pay
Out Event other than such conservatorship, receivership or insolvency of the
Seller existed, the conservator or receiver may have the power to prevent the
early sale, liquidation or disposition of the Receivables and the commencement
of the Rapid Amortization Period. In addition, a conservator or receiver for the
Seller may have the power to cause the early sale of the Receivables and the
18
<PAGE> 80
early payment of the Certificates or to prohibit the continued transfer of
Receivables to the Trust. See "Material Legal Aspects of the
Receivables -- Certain Matters Relating to Receivership."
Effect of Consumer Protection Laws on Certificateholders. The Accounts and
the Receivables are subject to numerous federal and state consumer protection
laws which impose requirements on the making and collection of consumer loans.
The Trust may be liable for certain violations of such laws that apply to the
Receivables, either as assignee of the Seller with respect to the obligations
arising before the transfer of the Receivables to the Trust or as a party
directly responsible for obligations arising after the transfer. Such laws, as
well as any new laws or rulings which may be adopted, may adversely affect the
Servicer's ability to collect on the Receivables or maintain previous levels of
finance charges, annual cardholder fees and other fees, and failure by the
Servicer to comply with such requirements also could adversely affect the
Servicer's ability to collect on the Receivables. Pursuant to the Pooling and
Servicing Agreement, the Seller covenants to accept the transfer of all
Receivables in an Account, upon the breach of certain representations and
warranties relating to requirements of law applicable to the Seller, if, as a
result of such breach, any Receivable in such Account becomes a Defaulted
Receivable or the Trust's rights in, to or under such Receivables are impaired
or the proceeds thereof are not available to the Trust free and clear of any
lien (other than those permitted by the Pooling and Servicing Agreement and
subject to certain cure periods). The Seller also makes certain other
representations and warranties relating to the validity and enforceability of
the Accounts and the Receivables and agrees to indemnify the Trust for, among
other things, any liability arising from the violation of such laws. However,
the Trustee will not make any examination of the Receivables or the records
relating thereto for the purpose of establishing the presence or absence of
defects, compliance with such representations and warranties, or for any other
purpose. The sole remedy if any such representation or warranty is breached and
such breach continues beyond the applicable cure period, if any, is that the
Seller or the Servicer, as the case may be, will generally be obligated to
accept the transfer of all Receivables in the Account affected thereby. In
addition, in the event of a breach of certain representations and warranties,
the Seller may be obligated to accept the reassignment and transfer of the
Receivables transferred by it to the Trust, which reassignment will constitute
the sole remedy available to Certificateholders with respect to any such breach.
See "Description of the Certificates -- Representations, Warranties and
Covenants" and "Material Legal Aspects of the Receivables -- Consumer Protection
Laws."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables, if such laws
result in any Receivables being written off as uncollectible. See "Description
of the Certificates -- Receivables in Defaulted Accounts; Rebates and Fraudulent
Charges."
Proposed Legislation -- Limitation on Finance Charges. Congress and the
states may enact new laws and amendments to existing laws to regulate further
the credit card industry or to reduce finance charges or other fees or charges
applicable to credit card accounts. The potential effect of any such legislation
could be to reduce the yield on the Accounts. If such yield is reduced, a Pay
Out Event could occur, and a Rapid Amortization Period may commence. See
"Description of the Certificates -- Trust Pay Out Events."
Timing of Principal Payments Other Than at Expected Maturity. The
Receivables in the Trust may be paid at any time and there is no assurance that
there will be additional Receivables created in the Accounts the Receivables of
which are designated for inclusion in the Trust or that any particular pattern
of cardholder repayments will occur. The continuation of the Revolving Period of
a Series will be dependent upon the continued generation of new Receivables for
the Trust. A significant decline in the amount of Receivables generated in the
Accounts could result in the occurrence of a Series Pay Out Event for one or
more Series and the commencement of the Rapid Amortization Period for each such
Series. In addition, increased convenience use, where cardholders pay their
Account balances in full on or prior to the due date, which is generally the
25th day subsequent to the monthly billing date (the "Due Date"), and thus avoid
all finance charges on purchases, would decrease the effective yield on the
Accounts, and could cause the commencement of the Rapid Amortization Period for
one or more Series, as well as decreased protection to holders of Certificates
against defaults under the Accounts. Convenience use is more common among
cardholders who are not assessed any annual cardholder fee than among those who
pay such fees, and a substantial majority of the cardholders on the Accounts are
not charged an annual cardholder fee. Advanta National Bank, in the past,
temporarily waived authorized increases in finance charges on certain accounts
notwithstanding increases in
19
<PAGE> 81
the prime rate or the London interbank offered rate, and although the Bank is
not currently doing so, the Bank may decide to do so in the future. A decrease
in the rate of payment by cardholders or a decline in reborrowing could delay
the return of principal to the Certificateholders during the Amortization
Periods for each Series. See "Receivable Yield Considerations" in the Prospectus
Supplement. The Pooling and Servicing Agreement provides that the Seller will be
required to designate Additional Accounts the Receivables of which will be added
to the Trust in the event that the Seller Amount or the amount of the Principal
Receivables is not maintained at a certain minimum amount and may, under certain
circumstances, elect to add the Receivables in selected Accounts to the Trust.
If Additional Accounts are not designated by the Seller when required, a Series
Pay Out Event for one or more Series may occur and result in the commencement of
a Rapid Amortization Period for such Series. See "Description of the
Certificates -- Trust Pay Out Events" herein and "Description of the
Certificates -- Pay Out Events" in the Prospectus Supplement for a discussion of
other events which might lead to the commencement of the Rapid Amortization
Period for a Series.
Risks Presented by Social, Technological, Legal and Economic
Factors. Changes in use of credit and payment patterns by customers may result
from a variety of social, technological, legal and economic factors. Social
factors include the public's perceptions of the use of credit cards and the
changing attitudes regarding the stigma of personal bankruptcy. Technological
factors include new methods of payment, such as debit cards. Legal factors
include any changes in the current legal structure affecting the relative
positions of credit card issuers and obligors under credit card accounts.
Economic factors include the rate of inflation, unemployment levels and relative
interest rates. The Seller, however, is unable to determine and has no basis to
predict whether, or to what extent, social, technological, legal or economic
factors in any state will affect future use of credit or repayment patterns.
Limited Nature of Certificate Rating. Any rating assigned to the
Certificates of a Series or a Class of a Series by a Rating Agency will reflect
such Rating Agency's assessment solely of the likelihood that Certificateholders
will receive the payments of interest and principal required to be made under
the Pooling and Servicing Agreement and will be based primarily on the value of
the Receivables in the Trust and the availability of any Series Enhancement with
respect to such Series or Class of such Series. Any such rating will therefore
address credit risk and will not, unless otherwise specified in the related
Prospectus Supplement with respect to any Class or Series offered hereby,
address the likelihood that the principal of, or interest on, any certificates
of such Class or Series will be prepaid, paid on a scheduled date or paid on any
particular date before the applicable Stated Series Termination Date. In
addition, any such rating will not address the possibility of the occurrence of
a Pay Out Event with respect to such Class or Series or the possibility of the
imposition of United States withholding tax with respect to non-U.S.
Certificateholders. Further, the available amount of any Series Enhancement for
any such Series or Class may be limited and may be subject to reduction from
time to time as described in the related Prospectus Supplement. The rating will
not be a recommendation to purchase, hold or sell Certificates of such Series or
Class of such Series, and such rating will not comment as to the marketability
of such Certificates, any market price or suitability for a particular investor.
Reduction or Withdrawal of Ratings. There is no assurance that any rating
will remain for any given period of time or that any rating will not be lowered
or withdrawn entirely by a Rating Agency, if in such Rating Agency's judgment,
circumstances so warrant. Any such reduction or withdrawal of a rating, could
adversely affect the market value of the Certificates.
Effect of Addition of Trust Assets on Credit Quality. The Seller expects,
and in some cases will be obligated (subject to certain exceptions) to designate
Additional Accounts, the Receivables of which will be conveyed to the Trust.
Such Additional Accounts may include accounts originated using criteria
different from those that were applied to the Accounts designated on an earlier
date, because such accounts were originated at a different date or were acquired
from another institution. Consequently, there can be no assurance that
Additional Accounts designated in the future will be of the same credit quality
as Accounts designated on an earlier date. In addition, the Pooling and
Servicing Agreement provides that the Seller may add Participation Interests to
the Trust. The designation of Additional Accounts and Participation Interests
will be subject to the satisfaction of certain conditions described herein under
"Description of the Certificates -- Addition of Accounts" and "-- Automatic
Account Additions."
20
<PAGE> 82
Basis Risk. The majority of Accounts have finance charges set at a rate
above the London interbank offered rate or the prime rate. Any Class of
Certificates offered hereby may bear interest at a fixed-rate or a floating-rate
based on a different floating-rate index. If there is a decline in the London
interbank offered rate or such other specified index, the amount of collections
of Finance Charge Receivables on the Accounts may be reduced, whereas the
amounts payable as interest with respect to the Certificates and other amounts
required to be funded out of collections of Finance Charge Receivables may not
be similarly reduced.
Issuance of New Series; Effects on Timing or Amounts of Payments to
Certificateholders and Voting Rights. The Trust, as a master trust, has issued
Series prior to the date of this Prospectus and is expected to issue additional
Series from time to time. While the Principal Terms of any Series will be
specified in a Series Supplement, the provisions of a Series Supplement and,
therefore, the terms of any additional Series, will not be subject to the prior
review or consent of holders of the Certificates of any previously issued
Series. Such Principal Terms may include methods for allocating collections,
provisions creating different or additional security or other Series
Enhancement, provisions subordinating such Series to another Series or other
Series (if the Series Supplement relating to such Series so permits) to such
Series, and any other amendment or supplement to the Pooling and Servicing
Agreement which is made applicable only to such Series. Such Principal Terms,
including any subordination or other relationship of a Series to other
subsequently or previously issued Series, will be described in the Prospectus
Supplement relating to such Series. The issuance of any additional Series is
subject to the Rating Agency Condition and, if any Series outstanding was
characterized as debt at the time of its issuance, the delivery of a Tax
Opinion. There can be no assurance, however, that the Principal Terms of any
Series issued from time to time hereafter might not have an impact on the timing
and amount of payments received by a Certificateholder of any other Series. No
Series Supplement relating to a Series may change the terms of the Pooling and
Servicing Agreement applicable to the Certificates of any other Series, whether
such other Series have been issued before or after the Series to which such
Series Supplement relates. However, the Certificateholders of any Series issued
in addition to outstanding Series will have voting rights which, with respect to
certain votes, waivers or consents under the Pooling and Servicing Agreement,
will reduce the percentage interest represented by the Certificates of the
outstanding Series of the aggregate unpaid principal amount of the Certificates
of all Series that are entitled to vote. Such votes, waivers and consents
include directing the appointment of a successor Servicer following a Servicer
Default, amending the Pooling and Servicing Agreement and directing a
reassignment of the entire portfolio of Accounts. See "Description of the
Certificates -- New Issuances."
Optional Repurchase. The terms of any Series of Certificates may provide
that, at such time as the amount of the Certificates has been reduced to a
stated percentage of the original Investor Amount of such Series, the Seller
will be entitled to repurchase the remaining Certificates of such Series. The
amount of the Certificates of a Series which may remain outstanding at the time
of a repurchase will be specified on a Series by Series basis and, with respect
to any given Series, subject to the specific terms of such Series, it is
possible that the repurchase option could be exercised when 10% or more of the
principal amount of the Certificates of such Series remained outstanding. Such
repurchase may result in an early return of the Certificateholder's investment.
It is not expected that any premium will be paid to the Certificateholders in
the event of the exercise of the repurchase option and there can be no assurance
that a Certificateholder will be able to invest such early repayment amount at a
similar rate of return.
Risks Associated with Geographic Concentration. If the Trust contains a
high concentration of Receivables relating to cardholders located within a
single state or region in the United States, events in that state or region may
have a magnified effect on the Trust due to such concentration. The Prospectus
Supplement relating to a Series to be offered thereby and hereby will set forth
a then-current detailed geographic breakdown of the number of Accounts and the
amount of Receivables, each relating to the cardholders with addresses in each
applicable state containing a concentration of cardholders. See "The
Receivables -- Geographic Distribution of Accounts and Receivables" in the
related Prospectus Supplement. The Bank, however, is unable to determine and has
no basis to predict, with respect to any state or region, whether any such
events have occurred or may occur, or to what extent such events may affect the
Receivables or the payment of the Certificates, or what effect a change in the
geographic distribution of the Receivables in the future may have on the
Certificates.
21
<PAGE> 83
Allocations of Trust Assets Among One or More Series or Groups. To the
extent provided in any Series Supplement, or any amendment to the Pooling and
Servicing Agreement, portions of the Receivables or Participation Interests
conveyed to the Trust and all collections received with respect thereto may be
allocated to one or more Series or Groups as long as the Rating Agency Condition
is satisfied for such allocation and the Servicer shall have delivered an
officer's certificate to the Trustee to the effect that the Servicer reasonably
believes that such allocation will not have an Adverse Effect.
Effects of Book-Entry Registration. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series initially will be
represented by one or more Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Unless and until Definitive Certificates are issued
for a Series, Certificate Owners relating to such Series will not be recognized
by the Trustee as Certificateholders, as that term will be used in each
Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Certificateholders indirectly through DTC, CEDEL or
Euroclear and their participating organizations. See "Description of the
Certificates -- Book-Entry Registration" and "-- Definitive Certificates."
FORMATION OF THE TRUST
The Trust was formed, in accordance with the laws of the State of New York,
pursuant to the Pooling and Servicing Agreement. The Trust, when created, was
known as ADVANTA Credit Card Master Trust II. At the time of the creation of the
Trust, Advanta National Bank transferred to the Trust, without recourse, all of
its right, title and ownership interest in and to all Receivables in the Initial
Accounts and, with respect to all Additional Accounts designated by Advanta
National Bank prior to the Transfer described below, Advanta National Bank
transferred to the Trust, without recourse, all of its right, title and
ownership interest in and to all Receivables in such Additional Accounts. Since
the Transfer, the Bank has transferred and will transfer to the Trust, without
recourse, all of its right, title and ownership interest in and to all
Receivables arising and created under the Accounts. Such Receivables have been
and will be transferred to the Trust in exchange for the certificates of Series
already outstanding and other Series to be issued plus the Seller Certificates
representing the Sellers' Interest and other certificated or uncertificated
interests in the Trust. The Trust assets consist of the Receivables, all monies
due or to become due thereunder and all amounts received with respect thereto,
all proceeds of the Receivables, Recoveries, the right to receive certain
Interchange attributed to charges for merchandise and services, and proceeds of
credit insurance policies relating to the Receivables, all monies and other
property constituting Eligible Investments on deposit in, credited to or held in
certain bank accounts of the Trust and the benefits of any Series Enhancements
issued with respect to any Series (the drawing on or payment of such Series
Enhancement being available only to Certificateholders of the Series to which
such Series Enhancement relates). The Trust assets may also include
Participation Interests.
The Trust has not and will not engage in any activity other than acquiring
and holding the Receivables, issuing Certificates and certain uncertificated
interests with respect to each Series issued by the Trust, the Bank Certificate
and Supplemental Certificates, making payments thereon, obtaining Series
Enhancement applicable to any Series and activities related thereto. As a
consequence, the Trust is not expected to have any need for, or sources of,
capital resources other than the assets of the Trust.
TRANSFER AND ASSIGNMENT
The Trust was created in 1993 and from such formation until February 20,
1998 was known as ADVANTA Credit Card Master Trust II and Advanta National Bank
was Seller and Servicer under the Pooling and Servicing Agreement.
THE TRANSFER
On October 28, 1997, Advanta Corp. and Fleet Financial Group, Inc. ("Fleet
Financial Group") entered into a Contribution Agreement (the "Contribution
Agreement") pursuant to which they agreed that Advanta Corp. and certain of its
subsidiaries, including Advanta National Bank (the "Advanta Contributors"), and
22
<PAGE> 84
Fleet Financial Group and certain of its subsidiaries (the "Fleet
Contributors"), would 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"), initially
in exchange for a 4.99% membership interest in the LLC to the Advanta
Contributors and 95.01% membership interest to the Fleet Contributors and the
assumption of certain liabilities, and, prior to such contribution, the LLC
would direct the Fleet Contributors and the Advanta Contributors to transfer to
the Bank certain of those assets and liabilities, including their credit card
accounts and the assets and liabilities of Advanta National Bank relating to the
ADVANTA Credit Card Master Trust II. On February 20, 1998 the Advanta
Contributors and the Fleet Contributors transferred to the Bank those assets and
liabilities (collectively, the "Transfer").
AMENDMENT TO POOLING AND SERVICING AGREEMENT
Immediately prior to the Transfer, Advanta National Bank and the Trustee
entered into Amendment Number 3 to Amended and Restated Pooling and Servicing
Agreement ("Amendment Number 3") pursuant to which the Pooling and Servicing
Agreement was amended to provide, among other things, that (1) the Bank
Certificate could be transferred to a member of the affiliated group of which
Fleet Financial Group is the common parent or to the Bank in connection with a
servicing transfer to the Bank, (2) Advanta National Bank could assign and
delegate to the Bank all of Advanta National Bank's rights and obligations under
the Pooling and Servicing Agreement and each Series Supplement as Seller and as
Servicer and (3) the name of the Trust would be changed to Fleet Credit Card
Master Trust II upon the assignment and delegation to the Bank.
ASSIGNMENT AND ASSUMPTION AGREEMENT
Also on February 20, 1998, immediately after the effectiveness of Amendment
Number 3, Advanta National Bank, the Bank, the LLC and the Trustee entered into
an Assignment and Assumption Agreement (the "Assignment Agreement") pursuant to
which Advanta National Bank assigned and transferred to the Bank all of Advanta
National Bank's rights and interests as Seller and Servicer under the Pooling
and Servicing Agreement and each Series Supplement thereto and delegated to the
Bank all of Advanta National Bank's duties and obligations as Seller and
Servicer under the Pooling and Servicing Agreement and under each of the
outstanding Series Supplements. Pursuant to the Assignment Agreement, the Bank
accepted all of Advanta National Bank's rights and interests as Seller and
Servicer and accepted and assumed all of Advanta National Bank's liabilities
under and assumed and agreed to perform each and every covenant and obligation
of the Seller and of the Servicer contained in the Pooling and Servicing
Agreement and the Series Supplements. Pursuant to the Assignment Agreement, the
Bank Certificate was assigned and transferred to the Bank. Pursuant to the
Assignment Agreement, Advanta National Bank was released as Seller and Servicer
and has no further obligations or liabilities under the Pooling and Servicing
Agreement or the Series Supplements and the Bank has become the sole Seller and
Servicer.
In addition, ownership of the Accounts has been transferred to the Bank,
and, pursuant to the Assignment Agreement, the Bank has sold, transferred,
assigned, set over and otherwise conveyed to the Trustee on behalf of the Trust,
for the benefit of the Certificateholders, all of the Bank's right, title and
interest in and to the Receivables in the Accounts. The Bank has also granted to
the Trustee on behalf of the Trust for the benefit of the Certificateholders, a
first priority perfected security interest in all of the Bank's right, title and
interest in and to the Receivables in the Accounts.
RIGHTS AGREEMENT
In connection with the Transfer, the Bank and the LLC entered into a Rights
Agreement dated as of February 20, 1998 pursuant to which the Bank assigned and
transferred to the LLC all economic rights and interests in the assets of the
Bank acquired as a result of the Transfer, and the Bank assigned and transferred
to the LLC an economic interest in all liabilities assumed by the Bank as a
result of the Transfer. The Rights Agreement states that the economic interests
thereby transferred is the transfer of contractual rights between the Bank and
the LLC to receive payments or to pay obligations and not an ownership interest
in or a lien on
23
<PAGE> 85
any of the assets of the Trust and that the transfer of economic interests is
subject to any and all rights, liens and security interests granted to the
Trustee pursuant to the Pooling and Servicing Agreement.
LIMITED PARTNERSHIP
Effective May 26, 1998, the LLC was merged into a limited partnership known
as Fleet Credit Card Services, L.P. (the "Credit Card L.P."). A subsidiary of
the Bank is the general partner of Credit Card L.P.
THE BANK'S CREDIT CARD ACTIVITIES
GENERAL
The Receivables which have been conveyed or will be conveyed to the Trust
pursuant to the Pooling and Servicing Agreement have been or will be, except as
otherwise described in the Prospectus Supplement, generated from transactions
made by holders of selected MasterCard and VISA credit card accounts, which
accounts, prior to February 20, 1998 were part of a portfolio of accounts owned
by Advanta National Bank (the "Advanta Consumer Credit Card Portfolio") and
which on and after February 20, 1998 are part of a portfolio of accounts owned
by the Bank (the "Fleet Credit Card Portfolio"). The Bank, as a result of a
merger on November 14, 1997 with Fleet Bank (Delaware), National Association,
was the owner of a portfolio of credit card accounts originated or acquired by
the Bank or its predecessor (the "Existing Fleet Credit Card Portfolio"). On
February 20, 1998, Advanta National Bank transferred to the Bank an ownership
interest in substantially all of the accounts, which, as of such date,
constituted the Advanta Consumer Credit Card Portfolio. As a result, the Fleet
Credit Card Portfolio is a combined portfolio consisting of (i) the Existing
Fleet Credit Card Portfolio, (ii) substantially all of the Advanta Consumer
Credit Card Portfolio as it existed on February 20, 1998 and (iii) accounts
originated or acquired by the Bank on or after February 20, 1998. The accounts
in the Advanta Consumer Credit Card Portfolio included and the accounts in the
Fleet Credit Card Portfolio include premium and regular accounts. Both premium
and regular accounts undergo the same credit analysis, but premium accounts have
higher initial credit limits because of the higher incomes of the cardholders.
In addition, premium accounts generally offer a wider variety of services to the
cardholders and those that charge annual cardholder fees generally have higher
annual cardholder fees than regular accounts that have annual cardholder fees.
Servicing of the Fleet Credit Card Portfolio is performed primarily by the Bank
through its subsidiary Credit Card LP; however, certain data processing and
administrative functions associated with the servicing of the Fleet Consumer
Credit Card Portfolio are currently performed on behalf of the Bank by First
Data Resources, Inc. ("FDR"). See "Description of FDR." If FDR were to fail or
become insolvent, delays in processing and recovery of information with respect
to charges incurred by cardholders could occur, and the replacement of the
services that FDR currently provides to the Bank could be time-consuming. As a
result, delays in payments to Certificateholders of any Series outstanding at
such time could occur.
Set forth below is certain information relating to the activities of the
Bank. The Prospectus Supplement may update or supplement such information.
To the extent the Trust assets include any Participation Interests or
Receivables other than those of the type described herein, the Prospectus
Supplement will describe the nature and characteristics of such Participation
Interests or Receivables.
ACQUISITION AND USE OF CREDIT CARDS
Substantially all of the Bank's new accounts are generated through direct
mail and telemarketing solicitation of potential cardholders. Beginning in 1983
and continuing through 1987, Advanta National Bank acquired lists of potential
cardholders from various sources. The lists were delivered to a third-party
processor, which after deleting existing cardholders, sorted the names based on
addresses and delivered the names to a credit bureau. Credit bureaus were
selected based on Advanta National Bank's evaluation of their relative strength
in a geographic area. The credit bureau identified those individuals who met
Advanta National
24
<PAGE> 86
Bank's predetermined credit criteria. Selected demographic criteria were then
applied to determine the individuals to be solicited. Beginning in 1987, Advanta
National Bank began employing a more direct method of identifying potential
cardholders. The Bank, as successor to the consumer credit card business of
Advanta National Bank, engages the credit bureau to identify those individuals
in the credit bureau's own files who meet the Bank's credit and demographic
criteria. Prior to 1987, individuals solicited were offered Advanta National
Bank's credit cards, subject to Advanta National Bank's verification of
information regarding employment and income, which occurred only under certain
circumstances. Beginning in March 1987, Advanta National Bank obtained and the
Bank now obtains a second credit bureau report on each individual who responds
positively to a solicitation and offered or offers a credit card to that person
only if the second report confirms the individual's eligibility.
The criteria applied to evaluate potential cardholders, has since 1985,
included credit scoring using a model developed by the Fair, Isaacs Companies,
an independent firm experienced in developing credit scoring models. Credit
scoring evaluates a potential cardholder's credit profile to arrive at an
estimate of the associated credit risk. Credit scoring models are developed by
statistically evaluating common characteristics and their correlation with
credit risk. In 1997, Advanta National Bank began to use and the Bank has
continued the use of proprietary scoring models as a supplement to the credit
scoring generated by Advanta National Bank's and, now, the Bank's current
scoring models.
Potential cardholders must meet minimum credit and income level standards
established by the Bank to receive a specific credit limit. Cardholders not
meeting the minimum standards for the initial product offer are offered a
reduced credit limit for which they qualify. Generally, initial credit lines of
up to $6,000 and $3,500 are offered for premium and regular cards, respectively.
Beginning in May 1993, credit line offers of $7,500 and $10,000 have been tested
on a limited basis, with most credit line offers remaining at the $6,000 or less
level. Beginning in 1997, credit lines of up to $100,000 have been offered for
platinum card accounts. However, the credit lines issued on platinum card
accounts tend to be similar to the credit lines offered on other premium
accounts. Cardholders may request to have their credit line increased upon
completion of a full application. After a review of the full application and
credit bureau report, the Bank decides whether to extend additional credit.
Also, the Bank may initiate credit line increases for cardholders meeting
minimum standards for usage and payment history established by the Bank.
However, several risk based repricing initiatives were implemented in 1996 and
1997, during which time, no credit line increases were generally granted for
cardholders.
Accounts are opened with an initial term of one year. At the anniversary
date, accounts which meet certain criteria for usage and payment history are
reissued for one to three year terms.
Each cardholder is subject to an agreement governing the terms and
conditions of the related MasterCard or VISA account. Pursuant to each such
agreement, the Bank reserves the right, upon advance notice to the cardholder,
to change or terminate any terms, conditions, services or features of its
MasterCard and VISA accounts at any time, including increasing or decreasing
finance charges, other fees and charges or minimum payment terms. The agreement
with each cardholder provides that the Bank may apply such changes, when
applicable, to current outstanding balances as well as to future transactions.
However, the laws of the state in which particular cardholders reside may limit
the ability of the Bank to apply changes. For example, under applicable state
law, certain fees and charges are prohibited altogether. See "Risk
Factors -- Effects of Consumer Protection Laws on Certificateholders" and
"Certain Legal Aspects of the Receivables -- Consumer Protection Laws."
A cardholder may use the credit card for either purchases or cash advances.
Cardholders make purchases when using the credit card to buy goods or services.
A cash advance is made when a credit card is used to obtain cash from a
financial institution or an automated teller machine or when the cardholder uses
special drafts issued by the Bank to draw against the cardholder's credit line.
The Bank generally limits the amount of credit available for cash advances on
new accounts to 50% of the total credit line. The majority of the accounts, the
receivables of which are expected to be included in the Trust, are subject to
the 50% limitation.
When a cardholder uses the credit card issued by a bank under contract with
MasterCard International, Inc. or VISA USA, Inc. (a "member bank"), the seller
of goods or services or the provider of cash advances
25
<PAGE> 87
generally sells the resulting receivable to a merchant bank, which in turn sells
the receivable (usually indirectly, through a clearing corporation and its agent
bank) to the member bank for its face amount less interchange and other fees.
The member bank is usually required by its contracts with MasterCard
International, Inc. and VISA USA, Inc. to purchase and pay for daily all
receivables generated by use of credit cards issued by the member bank. If the
member bank were to fail to perform such obligations, MasterCard International,
Inc. or VISA USA, Inc. would have the right to cancel the credit cards issued by
the member bank.
BILLING AND PAYMENTS
The Bank, using FDR as its service bureau, generates and mails to
cardholders monthly statements summarizing account activity. For the majority of
accounts, cardholders receive a 25-day grace period on purchases. Prior to April
5, 1995, cardholders were required to make a minimum monthly payment equal to
finance and other charges, plus 1/60th of the principal balance for premium
cards and 1/48th of the principal balance for regular cards. If such amount was
less than a stated minimum monthly payment (generally $20), the stated minimum
monthly payment was due. For monthly statements from April 5, 1995 through June
1997, all cardholders were required to make a minimum monthly payment equal to
finance and other charges, plus 1/100th of their principal balance. In addition,
the stated minimum monthly payment was reduced from $20 to $10. From June 1997
to the present, most cardholders are now required to make a monthly payment
equal to 2% of their total balance.
All fees, charges and credit insurance premiums assessed by the Bank are
automatically charged to an account and are included in the account balance at
the end of each billing cycle. The accrued and unpaid finance charges assessed
by the Bank are calculated by multiplying the average daily balances of cash
advances and previously billed unpaid purchases in an account by the applicable
daily periodic rate then multiplying the resulting product by the number of days
in the billing cycle. Finance charges are not assessed in most circumstances on
purchases if all balances shown in the billing statement are paid by the Due
Date. Under certain conditions related to customer performance, the Bank may
immediately convert the annual percentage rate applicable to existing and future
balances to a higher rate.
The Bank primarily offers cards to customers without an annual fee. The
Bank also assesses miscellaneous transaction fees, including cash advance and
draft fees, late and overlimit charges, and returned check, returned draft, and
draft stop payment charges. Prior to June 1997, such miscellaneous fees did not
constitute a material portion of Finance Charge Receivables. However, since June
1997, such fees represent a greater portion of Finance Charge Receivables.
DESCRIPTION OF FDR
Certain data processing and administrative functions associated with the
servicing of the Fleet Consumer Credit Card Portfolio are currently being
performed on behalf of the Bank by FDR. FDR was established in 1968 as the data
processing unit of Midamerica Bankcard Association. According to FDR, it is the
leading provider of credit card processing, payment systems, electronic commerce
and information-based services to businesses and consumers, and, in 1996,
maintained data for 153 million credit and debit cards, authorized approximately
2.3 billion credit and debit card transactions for more than 1,400 financial
institutions, issued approximately 100 million credit and debit cards to
consumers, and processed 5.9 billion total card transactions for 500,000
merchants.
FDR's home office in the United States is located in Omaha, Nebraska.
DELINQUENCIES
On the date of this Prospectus, the accounts which have been designated as
Accounts and the Receivables of which are included in the Trust are accounts
which were included in the Advanta Consumer Credit Card Portfolio. The
discussion set forth in this paragraph relates to the policies currently in
effect with respect to such Accounts. Different policies may apply with respect
to accounts which were in the Existing Fleet Credit Card Portfolio or originated
thereafter and the Bank may, from time to time, revise its policies
26
<PAGE> 88
with respect to delinquencies. Currently, with respect to Accounts designated to
the Trust, each account is billed monthly on or about the same day of the month.
An account is "contractually delinquent" if the minimum payment indicated on the
cardholder's statement is not received by the Due Date. For purposes of
determining the delinquency of an account, the period from one monthly billing
statement to the next is considered a period of 30 days, regardless of the
actual number of days elapsed. Efforts to collect contractually delinquent
credit card receivables currently are made by the Bank's service center
personnel or the Bank's designees. Customer Assistance activities include
statement messages, formal collection letters and telephone calls. Customer
Assistance personnel initiate telephone contact with cardholders as early as one
day contractually delinquent. The intensity at which collection activity is
pursued depends on the risk the account presents to the Bank which is determined
by behavioral scoring and adaptive control techniques. In the event that initial
telephone contact fails to resolve the delinquency, the Bank continues to
contact the cardholder by telephone and by mail. Although such arrangements are
made infrequently, the Bank may also enter into arrangements with cardholders to
extend or otherwise change payment schedules. Delinquency levels are monitored
by management of both the Customer Assistance and Credit Policy departments of
the Bank and information is reported daily to senior management. Accounts are
charged off when they become 186 days contractually delinquent, at which time
non-bankrupt accounts are generally sold to outside third parties. The Bank
charges off accounts within 30 days after receipt of any notice that the
customer has died, and within 90 days after receipt of any notice of fraudulent
charges within such account. In August 1996, Advanta National Bank adopted a new
charge-off methodology related to bankrupt credit card accounts and such
methodology continues to be in use by the Bank. Under the previous methodology,
when notification was received that a cardholder had filed a bankruptcy
petition, the account was written off within 30 days of notification. Under the
new methodology, the Bank utilizes an investigative period of up to 90 days from
the date of such notification. The receivable, if not paid during such
investigative period, will be charged off unless the investigation shows that
the cardholder's obligation should not be discharged as the result of the
bankruptcy proceeding. In no event, under the new methodology, will the
receivable be charged off later than 186 days after the receivable is
contractually delinquent. The credit evaluation, servicing and charge-off
policies and collection practices of the Bank may change from time to time in
accordance with the Bank's business judgment and applicable laws and
regulations.
Information with respect to the delinquency and loss experience of the
Fleet Consumer Credit Card Portfolio, is contained in the Prospectus Supplement.
Such information sets forth delinquencies grouped by the number of days
Receivables are delinquent and the percentage of the portfolio which is
delinquent. The loss experience information will show the receivables
outstanding, the charge-offs in dollars and as a percentage of the receivables
outstanding. In addition, the Prospectus Supplement will include information on
the composition of the Trust Portfolio by period of delinquency.
INTERCHANGE
Creditors participating in the VISA and MasterCard International
associations receive certain fees ("Interchange") as partial compensation for
taking credit risk, absorbing fraud losses and funding receivables for a limited
period prior to initial billing. Under the VISA and MasterCard International
systems, a portion of the Interchange in connection with cardholder charges for
merchandise and services is passed from banks which clear the transactions for
merchants to credit card-issuing banks. Interchange approximates 1.4% of the
transaction amount. VISA and MasterCard International may from time to time
change the amount of Interchange reimbursed to banks issuing their credit cards.
In respect of Interchange attributed to the cardholder charges for merchandise
and services in the Accounts, collections of Finance Charge Receivables with
respect to any Monthly Period will be deemed to include Interchange as
calculated pursuant to the related Series Supplement for any Series.
COMPETITION
The bank credit card industry is highly competitive. There is increased
competitive use of advertising, target marketing and pricing competition in
interest rates and annual cardholder fees as both traditional and new credit
card issuers seek to expand or to enter the market. The Bank issues MasterCard
and VISA credit
27
<PAGE> 89
cards to customers nationwide competing with certain money center banks and
other large nationwide issuers, as well as with regional and local banks,
savings and loan associations, and other depository institutions, many of whom
have sizeable branch systems through which credit cards are marketed to the
institutions' customer bases. Certain major credit card issuers assess finance
charges for selected portions of their portfolios at rates significantly lower
than the rates currently being assessed on the Accounts. Advanta National Bank,
as predecessor to the Bank, primarily responded to the increased competition by
marketing cards to customers without an annual fee and the Bank has continued
that practice.
The Trust will be dependent upon the Bank's continued ability to generate
new Receivables. The Bank's ability to compete in the credit card industry will
directly affect its ability to generate new Receivables. Under limited
circumstances, if the rate at which new Receivables are generated declines
significantly, a Pay Out Event with respect to a Series could occur and the
Rapid Amortization Period with respect to such Series could commence.
USE OF PROCEEDS
The net proceeds from the sale of each Series offered hereby and by the
related Prospectus Supplement will be paid to the Seller. The Seller will use
such proceeds for general corporate purposes which will include making more
credit card loans.
THE BANK AND FLEET FINANCIAL GROUP
The Bank, which is a wholly-owned subsidiary of Fleet National Bank, is the
surviving bank of a merger consummated on November 14, 1997 between the Bank and
Fleet Bank (Delaware), National Association. The Bank is a limited purpose
credit card bank chartered under the laws of the United States.
The Bank is subject to the supervision and regulation of the Office of the
Comptroller of the Currency. The Bank's deposits are insured by the FDIC and the
Bank is a member bank of the Federal Reserve Bank of Boston.
Fleet Financial Group is a diversified financial services company organized
under the laws of the State of Rhode Island, with its principal executive office
located in Boston, Massachusetts. Fleet Financial Group was the 12th largest
bank holding company in the United States as of December 31, 1997 in terms of
total assets with total assets of $85.5 billion, total deposits of $63.7 billion
and total equity capital of $8.0 billion. The banking subsidiaries of Fleet
Financial Group are engaged in a general consumer and commercial banking and
investment management business throughout the states of Connecticut,
Massachusetts, New Jersey, New York, Rhode Island, Maine, New Hampshire and
Florida, and the nonbanking subsidiaries of Fleet Financial Group provide a
variety of financial services, including mortgage banking, asset-based lending,
consumer finance, real estate financing, securities brokerage services, capital
markets services, investment banking, investment advice and management, data
processing and student loan servicing.
The principal executive office of the Bank is located at 50 Kennedy Plaza,
18th Floor, Providence, Rhode Island 02903.
MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Seller represents and warrants in the Pooling and Servicing Agreement
that the transfer of the Receivables to the Trust constituted either a sale to
the Trust of all right, title and interest of the Seller in and to the
Receivables or a pledge of the Receivables which pledge is a first priority,
perfected security interest free and clear from liens arising from or through
the Seller, except for liens for municipal or other local taxes if such taxes
shall not at the time be due or payable or if the Seller is contesting the
validity of such taxes in good faith by appropriate proceedings and has set
aside on its books adequate reserves for such taxes, the interest of the holders
of the Bank Certificate and any Supplemental Certificates and the Seller's right
to receive interest
28
<PAGE> 90
and investment earnings (net of losses and investment expenses) in respect of
the Collection Account or any Series Account. For a discussion of the Trust's
rights arising from a breach of these warranties, see "Description of the
Certificates -- Representations, Warranties and Covenants."
The Seller represents and warrants that the Receivables are "accounts" or
"general intangibles" for purposes of the Uniform Commercial Code (the "UCC").
Both the sale of accounts and the transfer of accounts as security for an
obligation are treated under Article 9 of the UCC as creating a security
interest therein and are subject to its provisions, and the filing of
appropriate financing statements is required to perfect the security interest of
the Trust. If a transfer of general intangibles is deemed to create a security
interest, the UCC applies and filing of an appropriate financing statement is
also required in order to perfect the Trust's security interest in the
Receivables. Financing statements covering the Receivables have been and will be
filed with the appropriate governmental authority to protect the interests of
the Trust in the Receivables. If a transfer of general intangibles is deemed not
to create a security interest, the filing of a financing statement is not
required to protect the Trust's interest from third parties, although some other
action under applicable state law may be required.
There are certain limited circumstances in which a prior or subsequent
transferee of Receivables coming into existence after the date on which such
Receivables are transferred to the Trust could have an interest in such
Receivables with priority over the Trust's interest. Under the Pooling and
Servicing Agreement, however, the Seller warrants that the Receivables were
transferred to the Trust free and clear of the lien of any third party, except
for certain tax and governmental liens and other nonconsensual liens. In
addition, the Seller covenants that, except as permitted by the Pooling and
Servicing Agreement, it will not sell, pledge, assign, transfer or grant any
lien on any Receivable (or any interest therein) other than to the Trust. A tax
or other government lien or other nonconsensal lien on property of the Seller
arising prior to the time a Receivable comes into existence may also have
priority over the interest of the Trust in such Receivable. In addition, if the
FDIC were appointed as receiver or conservator of the Seller, certain
administrative expenses of the receiver or conservator may also have priority
over the interest of the Trust in the Receivables arising from the Accounts
owned by the Seller.
MATTERS RELATING TO RECEIVERSHIP
The Seller is chartered as a national banking association and is subject to
regulation and supervision by the Office of the Comptroller of the Currency,
which is authorized to appoint the FDIC as conservator or receiver of the Seller
upon the occurrence of certain events relating to the Seller's financial
condition.
The FDIA, as amended by FIRREA, sets forth certain powers that the FDIC
could exercise if it were appointed as receiver or conservator of the Seller.
Positions taken by the FDIC staff prior to the passage of FIRREA do not suggest
that the FDIC, as conservator or receiver for the Seller, would interfere with
the timely transfer to a Trust of payments collected on the Related Receivables.
If, however, the FDIC were to assert a contrary position, such as requiring the
Trustee to establish its right to those payments by submitting to and completing
the administrative claims procedure under the FDIA, or the conservator or
receiver were to request a stay of proceedings with respect to the Seller as
provided under the FDIA, delays in payments on the related Series of
Certificates and possible reductions in the amount of those payments could
occur. In addition, the FDIC, if appointed as conservator or receiver for the
Seller, has the power under the FDIA to repudiate contracts, including secured
contracts of the Seller. The FDIA provides that a claim for damages arising from
the repudiation of a contract is limited to "actual direct compensatory
damages." In the event the FDIC were to be appointed as conservator or receiver
of the Seller and were to repudiate the Pooling and Servicing Agreement, then
the amount payable out of available collateral to the Certificateholders could
be lower than the outstanding principal and accrued interest on the
Certificates.
The Pooling and Servicing Agreement provides that, upon the commencement of
an Insolvency Event with respect to the Seller, the Seller will promptly give
notice thereof to the Trustee, and a Trust Pay Out Event will occur. Under the
Pooling and Servicing Agreement, no new Principal Receivables will be
transferred to the Trust and, unless otherwise instructed within a specified
period by the holders of Certificates evidencing more than 50% of the Investor
Amount of each Series (or if any such Series has more than one
29
<PAGE> 91
Class, of each Class of such Series) and, if at such time there is more than one
Seller, any Seller which is not the subject of such Insolvency Event, and any
holder of a Supplemental Certificate and certain other parties specified in the
Series Supplements, or unless otherwise prohibited by law, the Trustee will
proceed to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds from the sale of the Receivables would then be treated by the Trustee
as collections on the Receivables. This procedure could be delayed as described
above. Upon the occurrence of a Pay Out Event, if a conservator or receiver is
appointed for the Seller and no Pay Out Event other than such conservatorship or
receivership or insolvency of the Seller exists, the conservator or receiver may
have the power to prevent the early sale, liquidation or disposition of
Receivables and the commencement of a Rapid Amortization Period with respect to
any outstanding Series. In addition, a conservator or receiver for the Seller
may have the power to cause early sale of the Receivables and the early payment
of the Certificates or to prohibit the continued transfer of Principal
Receivables to the Trust.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer, and no Servicer Default other than such
conservatorship or receivership or insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or
Certificateholders from effecting a transfer of servicing to a successor
Servicer.
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is extensively
regulated by Federal and state consumer protection laws. With respect to credit
cards issued by the Banks, the most significant of these laws include the
Federal Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit
Reporting Act, Fair Debt Collection Practice Act, Electronic Funds Transfer Act
and National Bank Act, as well as any relevant Delaware or Rhode Island laws and
comparable statutes in the states in which cardholders reside. These statutes
impose disclosure requirements when a credit card account is advertised, when it
is opened, at the end of monthly billing cycles, upon account renewal for
accounts on which annual fees are assessed, and at year end and, in addition,
limit cardholder liability for unauthorized use, prohibit certain discriminatory
practices in extending credit, and impose certain limitations on the type of
account-related charges that may be assessed. Federal legislation requires
credit card issuers to disclose to consumers the interest rates, annual
cardholder fees, grace periods, and balance calculation methods associated with
their credit card accounts. Cardholders are entitled under current law to have
payments and credits applied to the credit card account promptly, to receive
prescribed notices and to have billing errors resolved promptly.
The Trust may be liable for certain violations of consumer protection laws
that apply to the Receivables, either as assignee of the Seller with respect to
obligations arising before transfer of the Receivables to the Trust or as a
party directly responsible for obligations arising after the transfer. In
addition, a cardholder may be entitled to assert such violations by way of
set-off against his obligation to pay the amount of Receivables owing. The
Seller covenants in the Pooling and Servicing Agreement to accept the transfer
of all Receivables in an Account, under certain circumstances, if any Receivable
in such Account has not been created in compliance with the requirements of such
laws. The Seller has also agreed in the Pooling and Servicing Agreement to
indemnify the Trust for, among other things, any liability arising from such
violations. See "Description of the Certificates -- Representations, Warranties
and Covenants."
Application of federal and state bankruptcy and debtor relief laws would
adversely affect the interests of the Certificateholders if such laws result in
any Receivables being written off as uncollectible. See "Description of the
Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges."
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series pursuant to the Pooling and
Servicing Agreement (as supplemented by a Series Supplement thereto with respect
to each Series) between the Bank, as Seller of interests in the Receivables and
as Servicer of the Accounts and the Receivables, and Bankers Trust Company, as
Trustee for the Certificateholders of each Series. Pursuant to the Pooling and
Servicing Agreement, the Seller may execute further Series Supplements thereto
among the Seller, the Servicer and the
30
<PAGE> 92
Trustee in order to issue additional Series. See "-- New Issuances." The Trustee
will provide a copy of the Pooling and Servicing Agreement (without exhibits or
schedules), including any Series Supplements, to Certificateholders of any
Series without charge upon written request. A copy of the form of Pooling and
Servicing Agreement has been filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus forms a part.
The following summaries describe certain provisions common to each Series.
Information specific to a Series will be contained in the related Prospectus
Supplement. The following summaries together with information included elsewhere
in this Prospectus and the information with respect to a specific Series
contained in the related Prospectus Supplement describes the material terms of
the Certificates. Such summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the provisions of the
Pooling and Servicing Agreement and the Series Supplement relating to each
Series. When particular provisions or terms used in the Pooling and Servicing
Agreement or any Series Supplement are referred to herein, such provisions or
terms shall be as specified in the Pooling and Servicing Agreement or Series
Supplement.
GENERAL
The Pooling and Servicing Agreement does not limit the amount of
Certificates that can be issued thereunder and provides that any Series may be
issued thereunder up to the aggregate principal amount specified in the related
Series Supplement that may be entered into among the Seller, the Servicer and
the Trustee. Each Series will consist of one or more Classes, one or more of
which may be floating rate Certificates or fixed rate Certificates or other type
of Certificates as specified in the related Prospectus Supplement. A Series may
include a Class or Classes which are subordinated in right of payment of
principal and/or interest to another Class or other Classes of such Series or
any other Series. If so specified in a related Prospectus Supplement, such
subordinated Class or Classes may be offered hereby and by the related
Prospectus Supplement. Each Series will be issued in the minimum denominations
for each Class specified in the related Prospectus Supplement.
The Certificates of any Series will generally represent the right to
receive, to the extent of amounts then payable on the applicable Series of
Certificates, from the assets of the Trust, a floating percentage (in the case
of Principal Receivables during the Revolving Period of a Series and Finance
Charge Receivables and Defaulted Receivables during the Revolving Period and the
Amortization Period of a Series) or a fixed percentage (in the case of Principal
Receivables during any Amortization Period for a Series) (each, the "Series
Percentage") of all cardholder payments on the Receivables.
The Seller holds the interest in the Principal Receivables (the "Seller
Amount") not represented by the Certificates of all outstanding Series. 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 for any Series, the Invested Amount for such
Series will generally remain constant except in certain limited circumstances or
unless otherwise specified in the related Prospectus Supplement. See
"-- Defaulted Receivables; Rebates and Fraudulent Charges." 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.
When a Series is amortizing, the Invested Amount for such Series will generally
decline for each Monthly Period as cardholder payments of Principal Receivables
allocated to such Series are collected and held for distribution to the
Certificateholders or deposited in a Series Account for the benefit of such
Series or a Class of such Series for payment to the applicable
Certificateholders when due. As a result, the Seller Amount will generally
increase each month to reflect the reductions in the Invested Amount of a Series
and will also change to reflect the variations in the amount of Principal
Receivables.
The Trust assets will include the Receivables, all monies due or to become
due thereunder and all amounts received with respect thereto, all proceeds of
the Receivables, the right to receive certain Interchange, Recoveries, proceeds
of credit insurance policies relating to the Receivables, all monies and other
31
<PAGE> 93
property constituting Eligible Investments on deposit in, credited to or held in
certain bank accounts of the Trust and the benefits of any Series Enhancement
issued with respect to any Series (the drawing on or payment of such Series
Enhancement being available only to Certificateholders of such Series or Class
of such Series). The Trust assets may also include Participation Interests.
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Seller, the "Depository") except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, with respect to
each Series of Certificates, beneficial interests in the Certificates will be
available for purchase in minimum denominations of $1,000 and integral multiples
of $1,000 in excess thereof in book-entry form only. The Seller has been
informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is expected
to be the holder of record of each Series of Certificates. No Certificate Owner
acquiring an interest in the Certificates will be entitled to receive a
certificate representing such person's interest in the Certificates. Unless and
until Definitive Certificates are issued for any Series under the limited
circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants (as defined below), and all references herein to distributions,
notices, reports and statements to Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Certificates, as the case may be, for distribution to Certificate
Owners in accordance with DTC procedures. See "-- Book-Entry Registration" and
"-- Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or Cedel or Euroclear (in
Europe) if they are participants of such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
Unless and until Definitive Certificates are issued, it is anticipated that
the only Certificateholder of the Certificates will be Cede & Co. ("Cede") as
nominee of DTC. No Certificate Owner acquiring an interest in Certificates of a
Series which have been issued in book-entry form will be entitled to receive a
certificate representing such person's interest in the Certificates of such
Series unless and until Definitive Certificates are issued under the limited
circumstances described herein. All references herein to actions by
Certificateholders of a Series shall refer (unless Definitive Certificates are
so issued with respect to such Series) to actions taken by DTC, Cedel or
Euroclear upon instructions from DTC Participants, Cedel Participants or
Euroclear Participants, respectively, and all references herein to
distributions, notices, reports and statements to Certificateholders shall refer
to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates of such Series, as the case may be, for
distribution to Certificate Owners of such Series in accordance with DTC
procedures. See "-- Definitive Certificates." Distributions will be made to DTC
in immediately available funds.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities for its
participating organizations ("Participants") and facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes in accounts of its Participants, thereby eliminating the need
for physical movement of
32
<PAGE> 94
certificates. Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to others ("Indirect Participants") such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with,
Participants, either directly or indirectly.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC (other than Cedel Participants and Euroclear Participants), on the
one hand, and directly or indirectly through Cedel Participants or Euroclear
Participants, on the other, will be effected in DTC in accordance with DTC rules
on behalf of the relevant European international clearing system by its
Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
Certificate Owners of a Series that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Certificates of such Series may do so only through
Participants and Indirect Participants. In addition, Certificate Owners of a
Series will receive all distributions of principal of and interest on the
Certificates of such Series from the Paying Agent through the Participants who
in turn will receive them from DTC. Under a book-entry system, Certificate
Owners of a Series may experience some delay in their receipt of payments, since
such payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC
will forward such payments to its Participants, which thereafter will forward
the payments to Indirect Participants or Certificate Owners of such Series.
Certificate Owners of a Series will not be recognized by the Trustee as
Certificateholders of such Series, as such term is used in the Pooling and
Servicing Agreement, and Certificate Owners of a Series will only be permitted
to exercise the rights of Certificateholders of such Series indirectly through
DTC and its Participants, who in turn will exercise the rights of
Certificateholders of such Series through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates of a Series and is
required to receive and transmit distributions of principal of and interest on
the Certificates of such Series. Participants and Indirect Participants with
which Certificate Owners of a Series have accounts with respect to the
Certificates of such Series similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective Certificate
Owners. Accordingly, although Certificate Owners of a Series will not possess
Certificates of such Series, such Certificate Owners will receive payments and
will be able to transfer their interests.
Because DTC may only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner of a Series to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
33
<PAGE> 95
DTC has advised the Servicer that it will take any action permitted to be
taken by a Certificateholder of a Series under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose account
with DTC the Certificates of such Series are credited. Additionally, DTC has
advised the Servicer that it will take such actions with respect to specified
percentages of the applicable Investor Amount only at the direction of and on
behalf of Participants whose holdings include undivided interests that
constitute such specified percentages. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the clearance
and settlement of securities transactions between Cedel participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of 28 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulation by the Luxembourg Monetary institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any Series
of Certificates. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 32
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangement for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters of any Series of Certificates. Indirect access to the Euroclear
System is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
34
<PAGE> 96
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Federal Income Tax Consequences." Cedel or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a
Certificateholder under a related agreement on behalf of a Cedel Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Book-entry Certificates of a Series will be re-issued in fully registered,
certificated form ("Definitive Certificates"), to Certificate Owners of such
Series or their respective nominees rather than to DTC or its nominee, only if
(i) the Seller advises the Trustee in writing that DTC is no longer willing or
able properly to discharge its responsibilities as Depository with respect to
any Class of Certificates of such Series, and the Trustee or the Seller is
unable to locate a qualified successor, (ii) the Seller, at its option, advises
the Trustee that it elects to terminate the book-entry system with respect to
such Series or Class through DTC, or (iii) after the occurrence of a Servicer
Default, Certificate Owners of such Series or Class evidencing more than 50% of
the aggregate unpaid principal amount of such Series or Class advise the Trustee
and DTC through Participants in writing that the continuation of a book-entry
system with respect to the Certificates of such Series or Class through DTC (or
a successor thereto) is no longer in the best interest of the Certificate Owners
of such Certificates.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates of such Series. Upon
surrender by DTC of the definitive certificates representing the Certificates of
such Series or Class and instructions for re-registration, the Seller will
execute and the Trustee will authenticate and deliver such Certificates as
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as holders under the Pooling and Servicing
Agreement ("Holders").
Distribution of principal and interest on the Definitive Certificates of a
Series will be made by the Paying Agent for such Series directly to Holders of
such Series in accordance with the procedures set forth herein and in the
Pooling and Servicing Agreement. Interest payments and any principal payments on
each Distribution Date will be made to Holders in whose names the Definitive
Certificates were registered at the close of business on the related Record Date
for a Series. Distributions will be made by check mailed to the address of such
Holder as it appears on the register maintained by the Trustee. The final
payment on any Certificate (whether Definitive Certificates or the Certificates
registered in the name of Cede representing the Certificates), however, will be
made only upon presentation and surrender of such Certificate at the office or
agency specified in the notice of final distribution to respective
Certificateholders. The Trustee will provide such notice to registered
Certificateholders of such Series not later than the fifth day of the month of
such final distribution.
Definitive Certificates of a Series will be transferable and exchangeable
at the offices of the Transfer Agent and Registrar for such Series. No service
charge will be imposed for any registration of transfer or exchange, but the
Transfer Agent and Registrar of such Series may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
THE BANK CERTIFICATE; ADDITIONAL SELLERS
The Pooling and Servicing Agreement provides that the Seller may surrender
the Bank Certificate to the Trustee in exchange for a newly issued Bank
Certificate and one or more additional certificates (each, a "Supplemental
Certificate") for transfer or assignment to a person designated by the Seller
upon the
35
<PAGE> 97
execution and delivery of a supplement to the Pooling and Servicing Agreement
(which supplement will be subject to the amendment section of the Pooling and
Servicing Agreement to the extent that it amends any of the terms of the Pooling
and Servicing Agreement; see "-- Amendments"); provided, that (a) the Seller
shall have given written notice to each Rating Agency of such exchange, (b) the
Seller Amount (excluding the interest represented by any Supplemental
Certificate) shall not be less than 2% of the total amount of Principal
Receivables as of the date of, and after giving effect to, such exchange and (c)
if any Series of Certificates are outstanding that were characterized as debt at
the time of their issuance, the Seller shall have delivered to the Trustee and
each Rating Agency a Tax Opinion, dated the date of such exchange (or transfer
or exchange as provided below), with respect thereto. Any transfer or exchange
of a Supplemental Certificate is subject to the condition set forth in clause
(b) above.
The Bank Certificate (or any interest therein) may be transferred to an
entity that is a member of the "affiliated group" of which Fleet Financial Group
is the "common parent" (as such terms are defined in Section 1504(a) of the
Code); provided, that (i) if any Series of Certificates are outstanding that
were characterized as debt at their time of issuance, the Seller shall have
delivered to the Trustee and each Rating Agency a Tax Opinion, and (ii) any such
transferee will be deemed to be a "Seller" for purposes of the provisions of the
Pooling and Servicing Agreement regarding the Seller indemnification and
liquidation of the Receivables upon the occurrence of an Insolvency Event. See
"-- Liquidation of Receivables" and "-- Indemnification."
The Bank may designate affiliates of the Bank to be included as Seller
("Additional Sellers") under the Pooling and Servicing Agreement (by means of an
amendment to the Pooling and Servicing Agreement that will not require the
consent of any Certificateholder; see "-- Amendments") and, in connection with
such designation, the Seller shall surrender the Bank Certificate to the Trustee
in exchange for a newly issued Bank Certificate modified to reflect such
Additional Seller's interest in the Seller's Interest; provided, however, that
(i) the conditions set forth in the preceding two paragraphs with respect to the
issuance of a Supplemental Certificate or the transfer of the Bank Certificate,
as applicable, shall have been satisfied with respect thereto prior to such
designation and exchange and (ii) any applicable conditions described in
"-- Addition of Accounts" shall have been satisfied with respect to the transfer
of Receivables or Participation Interests by any Additional Seller to the Trust.
Following the inclusion of an Additional Seller, the Additional Seller will be
treated in the same manner as a Seller and each Additional Seller generally will
have the same obligations and rights as a Seller described herein.
INTEREST PAYMENTS
Each Class of a Series will accrue interest at the rate per annum specified
in, or in the manner determined in, the related Prospectus Supplement
(calculated on the basis specified in the related Prospectus Supplement).
Interest on all Certificates will be due and payable on the Distribution Dates
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, interest for a Class of a Series will be
calculated based on the Investor Amount of such Class at the end of the rate
determination period preceding the applicable Distribution Date.
To the extent provided in the related Prospectus Supplement, a Series may
include one or more Classes of floating rate Certificates. The interest rate on
floating rate Certificates will be a variable or adjustable rate. It is the
Bank's present intention, subject to changing market conditions, that the
floating interest rate formula or index be based on an established financial
index in the national or international financial markets. The Distribution Dates
for floating rate Certificates will be set forth in the related Prospectus
Supplement and need not be the same as the Distribution Dates for the other
Certificates of such Series, but may be either more or less frequent. For each
Class of floating rate Certificates, the related Prospectus Supplement will set
forth the initial floating rate certificate interest rate (or the method of
determining it), the dates or the method for determining the dates on which the
floating rate certificate interest rate is adjusted, and the formula, index or
other method by which such interest rate is determined on such dates.
36
<PAGE> 98
PRINCIPAL PAYMENTS
Unless otherwise specified in the related Prospectus Supplement, the
Revolving Period for a Class of Certificates begins on the Relevant Closing Date
and ends on the day before an Amortization Period or, if applicable, an
Accumulation Period (as defined in the related Prospectus Supplement) begins for
such Class. On each Distribution Date with respect to the Revolving Period,
collections of Principal Receivables allocable to the Certificateholders'
Interest of a Series will, subject to certain limitations, be paid to the
holders of the Seller Certificates, to amortizing or accumulating Series or
deposited in the Excess Funding Account. After an Amortization Period begins
with respect to any Class of Certificates, collections of Principal Receivables
allocable to such Class will no longer be paid to the holders of the Seller
Certificates, to amortizing or accumulating Series or deposited in the Excess
Funding Account but will generally either be deposited in the Collection Account
or a Series Account to be distributed to Certificateholders on a date or dates
specified in the related Prospectus Supplement or paid to such
Certificateholders on the Distribution Dates specified in the related Prospectus
Supplement following the commencement of the Amortization Period. To the extent
that collections of Principal Receivables are available, subject to any
controlled distribution amount or controlled deposit amount or other limitation
set forth in the related Prospectus Supplement, payments of principal will be
paid to Certificateholders of a Class until the Investor Amount of such Class
has been paid in full; provided, that if one or more Classes is subordinated in
right of payment of principal to another Class or Classes, the
Certificateholders of such subordinated Class or Classes will, to the extent
provided in the related Prospectus Supplement, receive payment only after the
Investor Amount of the senior Class or Classes has been paid in part or in full.
The extent of subordination of a Class of subordinated Certificates may be
limited as described in the related Prospectus Supplement.
Funds on deposit in the Collection Account or Series Account may be subject
to a guaranteed rate agreement or guaranteed investment contract or other
mechanism specified in the related Prospectus Supplement intended to assure a
minimum rate of return on the investment of such funds. In order to enhance the
likelihood of the payment in full of the principal amount of a Class of
Certificates at the end of an Accumulation Period, such Class of Certificates
may be subject to a maturity guaranty or other similar mechanism specified in
the related Prospectus Supplement.
SHARED PRINCIPAL COLLECTIONS
On each Distribution Date, (a) the Servicer will allocate Shared Principal
Collections to each Principal Sharing Series, pro rata, in proportion to the
Principal Shortfalls, if any, with respect to each such Series and (b) the
Servicer will withdraw from the Collection Account and pay to the holders of the
Seller Certificates an amount equal to the excess, if any, of (x) the aggregate
amount for all outstanding Series of collections of Principal Receivables which
the related Series Supplements specify are to be treated as "Shared Principal
Collections" for such Distribution Date over (y) the aggregate amount for all
outstanding Principal Sharing Series which the related Series Supplements
specify are "Principal Shortfalls" for such Distribution Date; provided,
however, that if on any Distribution Date the Seller Amount is less than or
equal to the Required Seller Amount, the Servicer will not distribute to the
holders of the Seller Certificates any Shared Principal Collections that
otherwise would be distributed to the holders of the Seller Certificates, but
will deposit such funds in the Excess Funding Account.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS
Collections of Finance Charge Receivables allocable to any Series in excess
of the amounts necessary to make required payments with respect to such Series
may, if specified in the related Series Supplement, be applied to cover
shortfalls, if any, with respect to amounts payable from collections of Finance
Charge Receivables allocable to any other Series then outstanding as provided in
the related Series Supplement.
COMPANION SERIES
If specified in the Prospectus Supplement relating to a Series, such Series
may be paired with another Series (each, a "Companion Series"), such that a
reduction in the Invested Amount of one such Series results
37
<PAGE> 99
in an increase in the Invested Amount of the other such Series. In general, a
Series may be issued as a Companion Series to enable the Trust to fund the
amount by which the Prior Series has amortized and will amortize in the future.
If a Pay Out Event occurs with respect to the Prior Series or the Companion
Series when the Prior Series is in an Amortization Period, the Series Percentage
for the allocation of collections of Principal Receivables for the Prior Series
may be reset to a lower percentage as set forth in the Prospectus Supplement for
the Prior Series and the Amortization Period for the Prior Series may be
lengthened. The full extent by which the Amortization Period for the Prior
Series may be lengthened will be dependent on a variety of factors and will not
be readily determinable by the extent by which the Series Percentage has been
changed. See "Risk Factors -- Timing of Principal Payments Other Than at
Expected Maturity" in the Prospectus and "Maturity Assumptions" in the
Prospectus Supplement for a discussion of such factors.
GROUPS
If specified in the Prospectus Supplements relating to any group of Series
(together, a "Group"), such Series may be allocated all collections with respect
to certain portions of the Receivables and any Participation Interests, provided
that the Rating Agency Condition is satisfied and that such grouping will not
result in an Adverse Effect.
NEW ISSUANCES
The Pooling and Servicing Agreement authorizes the Seller to execute and
direct the Trustee to authenticate and deliver three types of certificates: (i)
one or more Series of Certificates which are transferable and have the
characteristics described below, (ii) a Bank Certificate, evidencing the Bank's
interest, which will initially be held by the Bank and which is transferable in
certain circumstances to members of the affiliated group of which Fleet
Financial Group is the common parent and (iii) Supplemental Certificates
delivered in exchange for a portion of the Bank Certificate under certain
circumstances described in the Pooling and Servicing Agreement (each, a
"Supplemental Certificate," and, together with the Bank Certificate, the "Seller
Certificates"). The Bank Certificate and the Supplemental Certificates represent
the ownership interest in the remainder of the Trust assets not allocated
pursuant to the Pooling and Servicing Agreement to the Certificateholders'
Interest, including certain rights to receive collections with respect to the
Receivables and other amounts pursuant to the Pooling and Servicing Agreement
(the "Seller's Interest"). The Series Supplement for a Series will specify the
following principal terms with respect to any new Series: (i) its name or
designation, (ii) its initial Investor Amount and Series Investor Amount (or
method for calculating such amounts), (iii) its certificate rate (or method for
the determination thereof), (iv) the payment date or dates and the date or dates
from which interest shall accrue, (v) the method for allocating collections to
Certificateholders of such Series, (vi) the designation of any Series Accounts
to be used by such Series and the terms governing the operation of any such
Series Accounts, (vii) the method of calculating the servicing fee with respect
thereto, (viii) the terms of any form of Series Enhancement with respect
thereto, (ix) the terms on which the Certificates of such Series may be
exchanged for Certificates of another Series, repurchased by the Seller or
remarketed to other investors, (x) the Stated Series Termination Date of such
Series, (xi) the number of Classes of such Series and, if such Series consists
of more than one Class, the rights and priorities of each such Class, (xii) the
extent to which the Certificates of such Series will be issuable in temporary or
permanent global form (and, in such case, the depositary for such global
Certificate or Certificates, the terms and conditions, if any, upon which such
global Certificate may be exchanged, in whole or in part, for Definitive
Certificates, and the manner in which any interest payable on a temporary or
global Certificate will be paid), (xiii) whether such Certificates may be issued
as bearer certificates and any limitations imposed thereon, (xiv) the priority
of such Series with respect to any other Series, (xv) the Group, if any, to
which such Series belongs, (xvi) whether or not such Series is a Principal
Sharing Series, and (xvii) any other terms of such Series (all such terms the
"Principal Terms" of such Series). None of the Seller, the Servicer, the Trustee
or the Trust is required or intends to obtain the consent of any
Certificateholder of any outstanding Series to issue any additional Series.
However, as a condition of a New Issuance, the Rating Agency Condition must be
satisfied and if any outstanding Series was characterized as debt at the time of
its issuance, the Seller must deliver a Tax Opinion. The Seller may offer any
Series under a Disclosure Document in transactions either registered under the
Act, or exempt from registration thereunder,
38
<PAGE> 100
directly, through one or more underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise. Any such Series may be
issued in fully registered or book-entry form in minimum denominations
determined by the Seller.
The Pooling and Servicing Agreement permits New Issuances such that each
Series has a period during which amortization or accumulation of the principal
amount thereof is intended to occur which may have a different length and begin
on a different date than such periods for any other Series. Further, one or more
Series may be in their Amortization Periods or Accumulation Periods while other
Series are not. Thus, certain Series may not be amortizing or accumulating,
while other Series are amortizing or accumulating. Moreover, one or more Series,
or Classes of a Series, may have the benefits of forms of Series Enhancement
different from the forms of Series Enhancement available with respect to another
Class or Classes of any other Series. Under the Pooling and Servicing Agreement,
the Trustee will hold any form of Series Enhancement only on behalf of the
Certificateholders of the Series (or Class) with respect to which it relates.
Collections allocated to Finance Charge Receivables not used to pay interest on
the Certificates will be allocated as provided in the related Series Supplement.
There is no limit to the number of New Issuances that the Seller may perform
under the Pooling and Servicing Agreement. The Trust will terminate only as
provided in the Pooling and Servicing Agreement.
Under the Pooling and Servicing Agreement and pursuant to a Series
Supplement, a New Issuance may occur only upon satisfaction of the following
conditions: (i) on or before the fifth day immediately preceding the Relevant
Closing Date, the Seller shall have given the Trustee and the Servicer notice of
such issuance and its date; and on or before the tenth day immediately preceding
the Relevant Closing Date, the Seller shall have given each Rating Agency notice
of such issuance and its date and (ii) the Seller shall have delivered to the
Trustee (a) a related Series Supplement specifying the Principal Terms of the
new Series, (b) any agreement relating to the Series Enhancement, (c) written
confirmation from each Rating Agency that the New Issuance will not result in
the Rating Agency reducing or withdrawing its rating of any outstanding Series
or Class (the "Rating Agency Condition"), (d) an officer's certificate from the
Seller stating that the Seller reasonably believes that such issuance will not
cause a Pay Out Event to occur with respect to any Series, and (e) if any Series
of Certificates are outstanding that were characterized as debt at the time of
their issuance, a Tax Opinion. Upon satisfaction of such conditions, the Trustee
will execute the related Series Supplement and authenticate the Certificates of
the new Series upon execution thereof by the Bank.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
The Seller has transferred and assigned to the Trust all of its right,
title and interest in and to specifically identified Receivables existing in the
Accounts owned by the Seller on the day of the relevant transfer and assignment
and in and to all Receivables created in the Accounts thereafter and all
proceeds thereof.
In connection with a transfer of the Receivables to the Trust, the Seller
annotates and indicates in its computer files that the Receivables have been
conveyed to the Trust for the benefit of the Certificateholders. In addition,
the Seller provides to the Trustee a computer file or a microfiche list
containing a true and complete list of all Accounts owned by the Seller the
Receivables of which have been designated for inclusion in the Trust which
specifies for each such Account, its account number, the aggregate amount
outstanding and the aggregate amount of Principal Receivables outstanding as of
the Related Cut Off Date. The Seller will not deliver to the Trustee any other
records or agreements relating to such Accounts or the Receivables. The records
and agreements relating to such Accounts and the Receivables maintained by the
Seller or the Servicer will not be segregated by the Seller or the Servicer from
other documents and agreements relating to other credit card accounts and
receivables and will not be stamped or marked to reflect the transfer of the
Receivables to the Trust. The Seller has and will file UCC financing statements
meeting the requirements of applicable state law with respect to the
Receivables. See "Material Legal Aspects of the Receivables."
LIQUIDATION OF RECEIVABLES
If an Insolvency Event occurs with respect to the Seller, the Seller will
immediately cease to transfer Principal Receivables to the Trust and promptly
notify the Trustee thereof. Notwithstanding any cessation of
39
<PAGE> 101
the transfer to the Trust of additional Principal Receivables, Principal
Receivables transferred to the Trust prior to the occurrence of such Insolvency
Event and collections in respect of such Principal Receivables and Finance
Charge Receivables whenever created, accrued in respect of such Principal
Receivables, shall continue to be a part of the Trust. Within 15 days after
receipt of such notice by the Trustee of the occurrence of such Insolvency
Event, the Trustee shall (i) publish a notice in an authorized newspaper that an
Insolvency Event has occurred and that the Trustee intends to sell, dispose of
or otherwise liquidate the Receivables on commercially reasonable terms and in a
commercially reasonable manner and (ii) give notice to the Certificateholders
describing the applicable provisions of the Pooling and Servicing Agreement and
requesting instructions from the Certificateholders. Unless the Trustee has
received instructions within 90 days from the date notice is first published
from (x) Certificateholders evidencing more than 50% of the Investor Amount of
each Series or, with respect to any Series with two or more Classes, of each
Class, to the effect that such Certificateholders disapprove of the liquidation
of the Receivables and wish to continue having Principal Receivables transferred
to the Trust as before such Insolvency Event, and (y) if at such time there is
more than one Seller, any Seller which is not the subject of such Insolvency
Event, and any holder of a Supplemental Certificate and certain other parties
specified in the Series Supplements, to such effect, the Trustee shall promptly
sell, dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids. The Trustee may obtain a prior determination
from any applicable conservator, receiver or liquidator that the terms and
manner of any proposed sale, disposition or liquidation are commercially
reasonable. If a conservator or receiver is appointed for the Seller and no Pay
Out Event other than such conservatorship or receivership or insolvency of the
Seller exists, the conservator or receiver may have the power to prevent the
early sale, liquidation or disposition of Receivables.
The proceeds from the sale, disposition or liquidation of the Receivables
pursuant to the previous paragraph ("Insolvency Proceeds") shall be immediately
deposited in the Collection Account. The Trustee shall determine conclusively
the amount of the Insolvency Proceeds which are deemed to be Finance Charge
Receivables and Principal Receivables. The Insolvency Proceeds shall be
allocated and distributed to Certificateholders in accordance with the terms of
each Series Supplement and the Trust shall terminate immediately thereafter.
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Seller makes representations and warranties relating to the Receivables
as of the Relevant Closing Date and, with respect to Receivables in Additional
Accounts, as of the related Addition Date, to the effect, among other things,
that (i) the Pooling and Servicing Agreement, each Series Supplement and, in the
case of Additional Accounts, the related assignment document, each constitute
legal, valid and binding obligations of the Seller enforceable against the
Seller in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to
or affecting the enforcement of creditors' rights in general and the rights of
creditors of national banks under United States law and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity), (ii) the schedule of Accounts
referred to in the Pooling and Servicing Agreement is an accurate and complete
listing in all material respects of the Accounts owned by the Seller as of the
Related Cut Off Date and the information contained therein with respect to the
identity of such Accounts and the Receivables existing thereunder is true and
correct in all material respects as of the Related Cut Off Date, (iii) each
Receivable conveyed to the Trust by the Seller has been conveyed to the Trust
free and clear of any lien other than liens permitted by the Pooling and
Servicing Agreement, (iv) all authorizations, consents, orders or approvals of
or registrations or declarations with any governmental authority required to be
obtained, effected or given by the Seller in connection with the conveyance by
the Seller of Receivables to the Trust have been duly obtained, effected or
given and are in full force and effect, (v) either the Pooling and Servicing
Agreement and, in the case of Additional Accounts, the related assignment
document, each constitute a valid sale, transfer and assignment to the Trust of
all right, title and interest of the Seller in the Receivables conveyed to the
Trust by the Seller and the proceeds thereof or, if the Pooling and Servicing
Agreement or the related assignment document does not constitute a sale of such
property, it constitutes a grant of a "security interest" (as defined in the
UCC) in such property to the Trust, which, in the case of Receivables then
40
<PAGE> 102
existing and the proceeds thereof, is enforceable upon execution and delivery of
the Pooling and Servicing Agreement or the related assignment document as of the
applicable date and which will be enforceable with respect to such Receivables
thereafter created and the proceeds thereof upon such creation and that upon the
filing of financing statements required pursuant to the Pooling and Servicing
Agreement, the Trust shall have a first priority perfected security or ownership
interest in such property and proceeds except for (x) liens permitted under the
Pooling and Servicing Agreement, (y) the interest of the Seller as holder of the
Bank Certificate or any Supplemental Certificate and (z) the Seller's right to
receive interest accruing on and investment earnings if any in respect of the
Collection Account or any Series Account, as provided in the Pooling and
Servicing Agreement or the related Series Supplement, (vi) except as otherwise
expressly provided in the Pooling and Servicing Agreement or the related Series
Supplement, neither the Seller nor any person claiming through or under the
Seller has any claim to or interest in the Collection Account, the Excess
Funding Account, any Series Account or any Series Enhancement, (vii) as of the
Related Cut Off Date, each Initial Account or Additional Account owned by the
Seller is an Eligible Account, (viii) as of the Related Cut Off Date, each
Receivable contained in any related Account owned by the Seller and being
designated on such date is an Eligible Receivable, (ix) as of the date of the
creation of any new Receivable in an Account owned by the Seller, such
Receivable is an Eligible Receivable, and (x) no selection procedure has been
utilized by the Seller which it reasonably believes would result in the
selection of an Account that would be materially adverse to the interests of
Certificateholders of any Series.
In the event (i) any representation or warranty of the Seller contained in
clause (ii), (iii), (iv), (vii), (viii), (ix) or (x) above is not true and
correct in any material respect as of the date specified therein with respect to
any Receivable transferred to the Trust or an Account and as a result of such
breach any Receivables in the related Account become Defaulted Receivables or
the Trust's rights in, to or under such Receivables or the proceeds of such
Receivables are impaired or such proceeds are not available for any reason to
the Trust free and clear of any lien, unless cured within 60 days (or such
longer period, not in excess of 150 days, as may be agreed to by the Trustee)
after the earlier to occur of the discovery thereof by the Seller or receipt by
the Seller of notice thereof given by the Trustee, or (ii) a Receivable is
evidenced by an instrument or chattel paper to the extent (and subject to the
limitations) provided in the Pooling and Servicing Agreement with respect to any
Receivables transferred to the Trust, then the Seller shall accept reassignment
of all Receivables in the related Account ("Ineligible Receivables") on the
terms and conditions set forth below; provided, however, that such Receivables
will not be deemed to be Ineligible Receivables and will not be reassigned to
the Seller if, on any day prior to the end of such 60-day or longer period, (x)
either (A) in the case of an event described in clause (i) above the relevant
representation and warranty shall be true and correct in all material respects
as if made on such day or (B) in the case of an event described in clause (ii)
above the circumstances causing such Receivable to become an Ineligible
Receivable shall no longer exist and (y) the Seller shall have delivered to the
Trustee an officer's certificate describing the nature of such breach and the
manner in which the relevant representation and warranty became true and
correct. Such Ineligible Receivables shall be automatically removed from the
Trust by the Servicer deducting the portion of the Ineligible Receivables
reassigned to the Seller which are Principal Receivables from the aggregate
amount of Principal Receivables used to calculate the Seller Amount, the Series
Percentages and any other percentage used to allocate within or among Series
that is applicable to any Series. In the event that, following the exclusion of
such Principal Receivables from the calculation of the Seller Amount, the Seller
Amount would be less than the Required Seller Amount, not later than 12:00 noon,
New York City time, on the first Distribution Date following the Monthly Period
in which such reassignment obligation arises, the Seller shall make a deposit
into the Excess Funding Account in immediately available funds in an amount
equal to the amount by which the Seller Amount would be reduced below the
Required Seller Amount (up to the amount of such Principal Receivables).
Upon the deposit, if any, required to be made to the Excess Funding Account
as provided in the Pooling and Servicing Agreement and the reassignment of
Ineligible Receivables, the Trustee, on behalf of the Trust, shall automatically
and without further action be deemed to sell, transfer, assign, set over and
otherwise convey to the Seller or its designee, without recourse, representation
or warranty, all the right, title and interest of the Trust in and to such
Ineligible Receivables, all moneys due or to become due and all amounts received
with respect thereto and all proceeds thereof. The Trustee shall execute such
documents and instruments of
41
<PAGE> 103
transfer or assignment and take such other actions as shall reasonably be
requested by the Seller to effect the conveyance of Ineligible Receivables
pursuant to this Section. The obligation of the Seller to accept reassignment of
any Ineligible Receivables, and to make the deposits, if any, required to be
made to the Excess Funding Account as provided in the Pooling and Servicing
Agreement, shall constitute the sole remedy respecting the event giving rise to
such obligation available to Certificateholders (or the Trustee on behalf of the
Certificateholders.) The obligations of the Seller (including any Additional
Seller) to accept reassignment of the Receivables will be several and not joint
with respect to the Receivables transferred by the Seller to the Trust.
The Seller also makes representations and warranties to the Trust to the
effect, among other things, that as of the Relevant Closing Date with respect to
each Series (i) it is a national banking association or corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its organization or incorporation and has full corporate power,
authority and legal right to own its property and conduct its consumer revolving
lending business as such properties are presently owned and such business is
presently conducted, and to execute, deliver and perform its obligations under
the Pooling and Servicing Agreement and each Series Supplement and to execute
and deliver to the Trustee the Certificates pursuant thereto; (ii) it is duly
qualified to do business and is in good standing as a foreign corporation (or is
exempt from such requirements), and has obtained all necessary licenses and
approvals in each jurisdiction in which failure to so qualify or to obtain such
licenses and approvals would render any cardholder agreement relating to an
Account owned by it or any Receivable transferred to the Trust by it
unenforceable by the Seller, the Servicer or the Trustee or would have a
material adverse effect on the Certificateholders of any Series; provided,
however, that no representation or warranty will be made with respect to any
qualification, licenses or approvals which the Trustee has or may be required at
any time to obtain if any, in connection with the transactions contemplated by
the Pooling and Servicing Agreement; (iii) the execution and delivery of the
Pooling and Servicing Agreement and each Series Supplement by the Seller and the
execution and delivery to the Trustee of the Certificates by the Bank and the
consummation by the Seller of the transactions provided for in the Pooling and
Servicing Agreement and each Series Supplement have been duly authorized by the
Seller by all necessary corporate action on the part of the Seller and the
Pooling and Servicing Agreement and each Series Supplement will remain, from the
time of its execution, an official record of the Seller; (iv) the execution and
delivery by the Seller of the Pooling and Servicing Agreement, each Series
Supplement and the Certificates, the performance by the Seller of the
transactions contemplated by the Pooling and Servicing Agreement and each Series
Supplement and the fulfillment by the Seller of the terms thereof, will not
conflict with, result in any breach of any of the material terms and provisions
of, or constitute (with or without notice or lapse of time or both) a material
default under, any indenture, contract, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it or any of its
properties are bound; (v) the execution and delivery by it of the Pooling and
Servicing Agreement, each Series Supplement and the Certificates, the
performance by the Seller of the transactions contemplated by the Pooling and
Servicing Agreement and each Series Supplement and the fulfillment by the Seller
of the terms thereof will not conflict with or violate any requirements of law
applicable to the Seller, (vi) there are no proceedings or investigations,
pending or, to the best knowledge of the Seller, threatened against it, before
any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (a) asserting the invalidity of the Pooling and
Servicing Agreement, any Series Supplement or the Certificates, (b) seeking to
prevent the issuance of the Certificates or the consummation of any of the
transactions contemplated by the Pooling and Servicing Agreement, any Series
Supplement or the Certificates, (c) seeking any determination or ruling that, in
the reasonable judgment of the Seller, would materially and adversely affect the
performance by it of its obligations with respect to any Series under the
Pooling and Servicing Agreement or any Series Supplement, (d) seeking any
determination or ruling that would materially and adversely affect the validity
or enforceability of the Pooling and Servicing Agreement, any Series Supplement
or the Certificates, or (e) seeking to affect adversely the income tax
attributes of the Trust or the Certificates of any Series under the United
States federal or state income or franchise tax systems; (vii) all approvals,
authorizations, consents, orders or other actions of any person or of any
governmental body or official required in connection with the execution and
delivery by the Seller of the Pooling and Servicing Agreement and each Series
Supplement and the execution and delivery by the Bank of the Certificates, the
performance by the Seller of the transactions contemplated by
42
<PAGE> 104
the Pooling and Servicing Agreement and each Series Supplement and the
fulfillment by it of the terms thereof, have been obtained, except such as may
be required by state securities or "blue sky" laws in connection with the
distribution of the Certificates; (viii) no Insolvency Event with respect to the
Seller has occurred and the transfer of the Receivables by the Seller to the
Trust has not been made in contemplation of the occurrence thereof; and (ix) the
Seller is either an insured institution for the purposes of the Federal Deposit
Insurance Act or is a bankruptcy-remote entity.
The Pooling and Servicing Agreement provides that the representations and
warranties set forth in the immediately preceding paragraph will survive the
transfer and assignment by the Seller of the Receivables to the Trust. Upon
discovery by the Seller, the Servicer or the Trustee of a breach of any of the
representations and warranties by the Seller set forth in the preceding
paragraph, the party discovering such breach will give prompt written notice to
the others and the Seller will cooperate with the Servicer and the Trustee in
attempting to cure the breach.
An "Eligible Account" is defined in the Pooling and Servicing Agreement to
mean a revolving credit card account owned by the Bank and which account is
identified by the Seller as of the Related Cut Off Date as having the following
characteristics (a) is in existence and maintained by the Bank; (b) is payable
in United States dollars; (c) except as provided below, has not been identified
as an account the credit card or cards with respect to which have been reported
to the Bank as having been lost or stolen; (d) the obligor of which has
provided, as his or her billing address, an address located in the United States
(or its territories or possession or military address); (e) has an obligor who
has not been identified by the Bank as an employee of the Bank or any affiliate
thereof; (f) except as provided below, does not have any Receivables which are
Defaulted Receivables; and (g) except as provided below, does not have any
Receivables which have been identified by the Bank or the relevant obligor as
having been incurred as a result of fraudulent use of any related credit card.
The Pooling and Servicing Agreement provides that Eligible Accounts may
include Accounts, the Receivables of which have been written off, or with
respect to which the Seller believes the related obligor is bankrupt, or as to
which certain Receivables have been identified by the obligor as having been
incurred as a result of fraudulent use of any credit cards, or as to which any
credit cards have been reported to the Seller as lost or stolen, in each case as
of the Related Cut Off Date; provided that (a) the balance of all Receivables
included in such Accounts is reflected on the books and records of the Seller
(and is treated for purposes of the Pooling and Servicing Agreement) as "zero",
and (b) charging privileges with respect to all such Accounts have been canceled
in accordance with the relevant credit card guidelines.
An "Eligible Receivable" is defined in the Pooling and Servicing Agreement
to mean each Receivable (a) which has arisen under an Eligible Account, (b)
which was created in compliance with all requirements of law applicable to the
Seller, the failure to comply with which would have a material adverse effect
upon Certificateholders and pursuant to a credit card agreement which complies
with all requirements of law applicable to the Seller, the failure to comply
with which would have a material adverse effect upon Certificateholders, (c)
with respect to which all material consents, licenses, approvals or
authorizations of, or registrations or declarations with, any governmental
authority required to be obtained or given by the Seller in connection with the
creation of such Receivable or the execution, delivery and performance by the
Seller of its obligations, if any, under the related credit card agreement have
been duly obtained or given and are in full force and effect as of such date of
creation of such Receivable, (d) as to which, at the time of its transfer to the
Trust, the Seller or the Trust will have good and marketable title, free and
clear of all liens, encumbrances, charges and security interests (except for
certain tax liens permitted by the Pooling and Servicing Agreement), (e) which
has been the subject of either (i) a valid transfer and assignment from the
Seller to the Trust of all of the Seller's right, title and interest therein or
(ii) the grant of a first priority perfected security interest therein (and in
the proceeds thereof), effective until the termination of the Trust, (f) which
at and after the time of transfer to the Trust is the legal, valid and binding
payment obligation of the obligor thereon, legally enforceable against such
obligor in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity);
(g) which constitutes either an "account" or a "general intangible" under and as
defined in Article 9 of the UCC;
43
<PAGE> 105
(h) which, at the time of its transfer to the Trust, has not been waived or
modified except as permitted in accordance with the credit card guidelines and
which waiver or modification is reflected in the Servicer's computer file of
revolving credit card accounts; (i) which, at the time of its transfer to the
Trust, is not subject to any right of rescission, setoff, counterclaim or any
other defense of the obligor (including the defense of usury), other than
defenses arising out of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
in general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or equity) or as to
which the Servicer is required by the Pooling and Servicing Agreement to make an
adjustment; (j) as to which, at the time of its transfer to the Trust, the
Seller has satisfied all obligations to be fulfilled by the Seller at the time
it is transferred to the Trust; and (k) as to which, at the time of its transfer
to the Trust, the Seller has not taken any action which, or failed to take any
action the omission of which, would, at the time of its transfer to the Trust,
impair the rights of the Trust or the Certificateholders therein.
The Trustee will not make any initial or periodic general examination of
the Receivables or any records relating to the Receivables for the purpose of
establishing the presence or absence of defects, compliance with the Seller's
representations and warranties or for any other purpose. The Servicer, however,
has agreed to deliver to the Trustee on or before March 31 of each year an
opinion of counsel with respect to the validity of the security interest of the
Trust in and to the Receivables and certain other components of the Trust.
The Seller covenants in the Pooling and Servicing Agreement that, except as
otherwise required by any requirement of law, or as is deemed by the Seller in
its sole discretion to be necessary in order for the Seller to maintain its
lending business on a competitive basis, based on a good faith assessment by the
Seller of the nature of the competition in the lending business, it will not at
any time reduce the annual percentage rate at which periodic finance charges are
assessed on any Receivable or the other fees and charges assessed on the
Accounts owned by it if, as a result of such reduction, either (i) the Seller's
reasonable expectation is that such reduction would cause a Series Pay Out Event
to occur or (ii) such reduction is not also applied to any comparable segments
of consumer revolving credit card accounts owned by the Seller which have
characteristics the same as, or substantially similar to, such Accounts.
The Seller also covenants that it may only change the terms relating to any
of the Accounts owned by it if in the reasonable judgment of the Seller the
change is made applicable to the comparable segment of the consumer revolving
credit card accounts owned by the Seller with characteristics the same as, or
substantially similar to, the Accounts, subject to compliance with all
requirements of law.
ADDITION OF ACCOUNTS
Pursuant to the Pooling and Servicing Agreement, the Seller may (under
certain circumstances and subject to certain limitations and conditions) and,
under certain conditions, will be required to designate from time to time
additional Eligible Accounts to be included as Accounts ("Additional Accounts"),
and will convey to the Trust all Receivables of such Additional Accounts,
whether such Receivables are then existing or thereafter created. The date on
which Additional Accounts are transferred to the Trust is referred to herein as
the "Addition Date."
Each Additional Account must be an Eligible Account as of the Related Cut
Off Date. No selection procedures believed by the Seller to be adverse to the
interests of the Certificateholders will be utilized in selecting Additional
Accounts from the available Eligible Accounts in the Fleet Consumer Credit Card
Portfolio. However, since Additional Accounts selected from the Fleet Consumer
Credit Card Portfolio may not have been part of the Advanta Consumer Credit Card
Portfolio at the time of the initial transfer of Accounts to the Trust,
Additional Accounts may not be of the same credit quality as the Initial
Accounts. Additional Accounts may have been originated by Advanta National Bank
or an affiliate or by the Bank or an affiliate at a later date using credit
criteria different from those that were applied to the Initial Accounts or may
have been acquired by Advanta National Bank or the Bank or an affiliate from
another credit card issuer that had different credit criteria.
Required Additions. Generally, if either (x) the Seller Amount is less
than the Required Seller Amount or (y) the aggregate amount of Principal
Receivables is less than the Required Principal Balance, the Seller
44
<PAGE> 106
will be required to designate additional Eligible Accounts to be included as
Accounts in a sufficient amount such that, after giving effect to such addition,
the Seller Amount as of the close of business on the applicable Addition Date is
at least equal to the Required Seller Amount on such date and the aggregate
amount of Principal Receivables exceeds the Required Principal Balance. In lieu
of, or in addition to, so designating Additional Accounts, the Seller may,
subject to the conditions specified below and in the Pooling and Servicing
Agreement, convey to the Trust participations (including 100% participations)
representing undivided interests in a pool of assets primarily consisting of
revolving credit card receivables, consumer loan receivables (secured and
unsecured), and any interests in both such types of receivables, including
securities representing or backed by both such types of receivables, and other
self-liquidating financial assets (including "eligible assets" as such term is
defined in Rule 3a-7 under the Investment Company Act of 1940 (or any successor
to such Rule)) owned by the Seller or any affiliate of the Seller and
collections thereon ("Participation Interests").
"Required Seller Amount" means, with respect to any date, the product of
the Required Seller Percentage and the aggregate amount of Principal
Receivables.
"Required Seller Percentage" currently means 5%, provided 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.
"Required Principal Balance" means, with respect to any date, the sum of
the Series Investor Amounts for each Series minus the amount on deposit in the
Excess Funding Account.
"Series Investor Amount" means, for any Series, the amount set forth in the
related Series Supplement and, for each Series offered hereby, in the Prospectus
Supplement for such Series, but will generally be an amount equal to the
numerator of the Series Percentage for allocating collections of Principal
Receivables for such Series.
Restricted Additions. The Seller may from time to time, at its sole
discretion, subject to the conditions specified below, designate additional
Eligible Accounts to be included as Accounts or Participation Interests to be
included as Trust assets, in either case as of the applicable Addition Date.
Conditions to Required and Restricted Additions. On the Addition Date with
respect to any Additional Accounts or Participation Interests, the Trust shall
purchase the Receivables in such Additional Accounts or shall purchase such
Participation Interests, in each case as of the close of business on the
applicable Addition Date, subject to the satisfaction of the following
conditions: (i) on or before the tenth business day immediately preceding the
Addition Date, the Seller shall have given the Trustee, the Servicer and each
Rating Agency written notice that the Additional Accounts or Participation
Interests will be included and specifying the applicable Addition Date, the
Related Cut Off Date, and the approximate number of accounts expected to be
added and the approximate aggregate balances expected to be outstanding in the
accounts to be added (in case of Additional Accounts); (ii) in the case of
Additional Accounts, the Seller shall have delivered to the Trustee copies of
UCC-1 financing statements covering such Additional Accounts, if necessary to
perfect the Trust's interest in the Receivables arising therein; (iii) as of
each of the Related Cut Off Date and the Addition Date, no Insolvency Event with
respect to the Seller shall have occurred nor shall the transfer of the
Receivables arising in the Additional Accounts or of the Participation Interests
to the Trust have been made in contemplation of the occurrence thereof; (iv)
except in the case of certain required Additions, the Rating Agency Condition
shall have been satisfied; (v) the Seller shall have delivered to the Trustee an
officer's certificate, dated the Addition Date, stating that (x) in the case of
Additional Accounts, as of the applicable Related Cut Off Date, the Additional
Accounts are all Eligible Accounts, (y) to the extent applicable, the conditions
set forth in clauses (ii) through (iv) above have been satisfied and (z) the
Seller reasonably believes that (A) the addition of the Receivables arising in
the Additional Accounts or of the Participation Interests to the Trust will not,
based on the facts known to such officer at the time of such addition, then or
thereafter cause a Pay Out Event to occur with respect to any Series and (B) in
the case of Additional Accounts, no selection procedure was utilized by the
Seller which would result in a selection of Additional Accounts (from among the
available Eligible Accounts owned by the Seller) that would be materially
adverse to the interests of the Certificateholders of any Series as of the
Addition Date; (vi) the
45
<PAGE> 107
Seller shall have delivered to the Trustee and each Rating Agency an opinion of
counsel stating the validity and perfection of the transfer of the Receivables
created in such Additional Accounts to the Trustee; (vii) in the case of
designation of Additional Accounts, the Seller shall have delivered to the
Trustee (x) the computer file or microfiche list containing a true and complete
list of such Additional Accounts and (y) a duly executed, written assignment;
and (viii) unless each Rating Agency otherwise consents, the number of
Additional Accounts so designated with respect to a required addition with
respect to any of the three consecutive Monthly Periods commencing in January,
April, July and October of each calendar year, shall not exceed 15% of the
number of Accounts as of the first day of the calendar year during which such
Monthly Periods commence and the number of Additional Accounts so designated
during any calendar year shall not exceed 20% of the number of Accounts as of
the first day of such calendar year.
Acquisition of Participation Interests. If the Seller designates
Participation Interests to be included in the Trust and such Participation
Interests are issued by an entity other than the Seller or any affiliate
thereof, then such Participation Interests will (i) either (a) have been
previously registered under the Securities Act of 1933 or (b) be eligible for
sale under Rule 144(k); or (ii) will be acquired in bona fide secondary market
transactions not from the Seller or an affiliate.
AUTOMATIC ACCOUNT ADDITIONS
(i) The Seller may from time to time, at its sole discretion, subject to
and in compliance with the limitations specified in clause (ii) below and the
applicable conditions specified in clauses (iii) through (vii) below, designate
Eligible Accounts ("Automatic Additional Accounts") to be included as Accounts
as of the applicable Addition Date. For purposes of this paragraph, Eligible
Accounts are deemed to include only consumer revolving credit card accounts
which are originated by the Seller or any affiliate of the Seller.
(ii) Unless each Rating Agency otherwise consents, the number of Automatic
Additional Accounts designated with respect to any of the three consecutive
Monthly Periods commencing in January, April, July and October of each calendar
year, shall not exceed 15% of the number of Accounts as of the first day of the
calendar year during which such Monthly Periods commence and the number of
Automatic Additional Accounts designated during any such calendar year will not
exceed 20% of the number of Accounts as of the first day of such calendar year.
(iii) Within 30 days after the Addition Date with respect to any Automatic
Additional Accounts, the Seller will deliver to the Trustee and each Rating
Agency an opinion of counsel with respect to the Automatic Additional Accounts
included as Accounts on such Addition Date, confirming the validity and
perfection of the transfer of such Automatic Additional Accounts. If such
opinion of counsel with respect to any Automatic Additional Accounts is not so
received, the ability of the Seller to designate Automatic Additional Accounts
will be suspended until such time as each Rating Agency otherwise consents in
writing. If the Seller is unable to deliver an opinion of counsel with respect
to any Automatic Additional Account, such inability shall be deemed to be a
breach of the representation with respect to the Receivables in such Automatic
Additional Account, provided that the cure period for such breach will not
exceed 30 days.
(iv) The Seller shall have delivered to the Trustee copies of UCC-1
financing statements covering such Automatic Additional Accounts, if necessary
to perfect the Trust's interest in the Receivables arising therein.
(v) As of each of the Related Cut Off Date and the Addition Date, no
Insolvency Event with respect to the Seller shall have occurred nor shall the
transfer of the Receivables arising in the Automatic Additional Accounts to the
Trust have been made in contemplation of the occurrence thereof.
(vi) The Seller shall have delivered to the Trustee an officer's
certificate, dated the Addition Date, stating that (x) as of the applicable
Related Cut Off Date, such Automatic Additional Accounts are all Eligible
Accounts, (y) to the extent applicable, the conditions set forth in clauses (ii)
through (v) above have been satisfied and (z) the Seller reasonably believes
that (A) the addition by the Seller of the Receivables arising in such Automatic
Additional Accounts will not, based on the facts known to such officer at the
time of such addition, then or thereafter cause a Pay Out Event to occur with
respect to any Series and (B) no selection procedure was utilized by the Seller
which would result in a selection of Automatic Additional
46
<PAGE> 108
Accounts (from among the available Eligible Accounts owned by the Seller) that
would be materially adverse to the interests of the Certificateholders of any
Series as of the Addition Date.
(vii) The Seller shall have delivered to the Trustee (x) a computer file or
microfiche list containing a true and complete list of such Automatic Additional
Accounts and (y) a duly executed assignment of the Receivables arising in such
Automatic Additional Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth below, on any day of any Monthly Period
the Seller shall have the right to require the reassignment to it or its
designee of all the Trust's right, title and interest in, to and under the
Receivables then existing and thereafter created, all moneys due or to become
due and all amounts received with respect thereto and all proceeds thereof in or
with respect to the Accounts owned and designated by the Seller (the "Removed
Accounts") or Participation Interests designated by the Seller, upon
satisfaction of the following conditions:
(a) on or before the fifth business day immediately preceding the
Removal Date (the "Removal Notice Date"), the Seller shall have given the
Trustee, the Servicer, each Rating Agency and the provider of any Series
Enhancement written notice of such removal, specifying the date for removal
of the Removed Accounts or Participation Interests (the "Removal Date");
(b) with respect to Removed Accounts, on or prior to the date that is
ten business days after the Removal Date, the Seller will deliver to the
Trustee a computer file or microfiche list containing a true and complete
list of the Removed Accounts specifying for each such Account, as of the
last day of the Monthly Period preceding the Removal Notice Date (the
"Removal Cut Off Date"), its account number, the aggregate amount
outstanding in such Account and the aggregate amount of Principal
Receivables outstanding in such Account;
(c) with respect to Removed Accounts, the Seller shall have
represented and warranted as of the Removal Date that the list of Removed
Accounts delivered pursuant to paragraph (b) above, as of the Removal Cut
Off Date, is true and complete in all material respects;
(d) the Rating Agency Condition shall have been satisfied with respect
to such removal;
(e) the Seller shall have delivered to the Trustee an officer's
certificate, dated the Removal Date, to the effect that the Seller
reasonably believes that (i) such removal will not, based on the facts
known to such officer at the time of such certification, then or thereafter
cause a Pay Out Event to occur with respect to any Series and (ii) no
selection procedure was utilized by the Seller which would result in a
selection of Removed Accounts or Participation Interests that would be
materially adverse to the interests of the Certificateholders of any Series
as of the Removal Date; and
(f) as of the Removal Cut Off Date, no more than 10% of the
Receivables outstanding are more than thirty days contractually delinquent.
Upon satisfaction of the above conditions, the Trustee will execute and
deliver to the Seller or its designee a written reassignment and will, without
further action, be deemed to sell, transfer, assign, set over and otherwise
convey to the Seller or its designee, effective as of the Removal Date, without
recourse, representation or warranty, all the right, title and interest of the
Trust in and to the Participation Interests or Receivables arising in the
Removed Accounts, all moneys due and to become due and all amounts received with
respect thereto and all proceeds thereof.
SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
responsible for servicing and administering the Receivables in accordance with
the Servicer's customary and usual servicing procedures for servicing credit
card receivables comparable to the Receivables and in accordance with its credit
card guidelines.
47
<PAGE> 109
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Seller may, at its
sole discretion, at any time designate a specified fixed or variable percentage
(the "Discount Percentage"), of all or any specified portion of Principal
Receivables created after the effective date of such option (the "Discount
Option Date") to be treated as Finance Charge Receivables (the "Discount Option
Receivables"). In effect, if such option is exercised by the Seller, the
Principal Receivables are treated as having been transferred to the Trust at a
discount. The result of such discounting treatment is to increase the yield to
the Trust beyond the actual income performance of the Accounts. The Seller also
has the option of reducing or withdrawing the Discount Percentage, at any time,
on and after the Discount Option Date. The Pooling and Servicing Agreement
requires the Seller to provide to the Servicer, the Trustee and any Rating
Agency 30 days' prior written notice of the Discount Option Date and such
designation will become effective on such Discount Option Date (i) unless such
designation in the reasonable belief of the Seller would cause a Pay Out Event
with respect to any Series to occur, 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) only if the Rating Agency Condition is satisfied. On the date of processing
of any collections, the product of the Discount Percentage and collections of
Receivables that arise in the Accounts on such day on or after the date such
option is exercised that otherwise would be Principal Receivables will be deemed
"Discount Option Receivable Collections." An amount equal to the product of (i)
the Series Percentage with respect to Finance Charge Receivables for each Series
of Certificates issued and outstanding and (ii) the amount of such Discount
Option Receivables Collections will be deposited by the Servicer into the
Collection Account and an amount equal to the product of (iii) the Seller
Percentage and (iv) the amount of the Discount Option Receivable Collections
will be paid to the holders of the Seller Certificates. The former amount
deposited into the Collection Account will be applied as provided below
regarding collections of Finance Charge Receivables.
TRUST ACCOUNTS
The Servicer has caused to be established and maintained, in the name of
the Trustee, for the benefit of Certificateholders of all Series, a "Collection
Account", which at all times is required to be either (a) a segregated account
with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), and acting as a trustee for
funds deposited in such account, so long as any of the securities of such
depository institution shall have a credit rating from each Rating Agency in one
of its generic credit rating categories which signifies investment grade (an
"Eligible Deposit Account"). The Servicer has also caused to be established and
maintained, in the name of the Trustee, an "Excess Funding Account," which also
is required to be an Eligible Deposit Account. An "Eligible Institution" is
defined as (I) a depository institution, which may be the Trustee, organized
under the laws of the United States or any one of the states thereof, including
the District of Columbia (or any domestic branch of a foreign bank) which at all
times (a) has either (i) long-term unsecured debt rating of A1 or better by
Moody's Investors Service Inc. ("Moody's") or (ii) a certificate of deposit
rating of P-1 by Moody's, (b) has either (i) a long-term unsecured debt rating
of AAA by Standard & Poor's Ratings Group ("Standard & Poor's") or (ii) a
certificate of deposit rating of A-1+ by Standard & Poor's and (c) is a member
of the FDIC or (II) any other institution that is acceptable to each Rating
Agency. If so qualified, the Trustee or the Servicer may be considered an
Eligible Institution.
Funds in the Collection Account and the Excess Funding Account will be
invested, at the direction of the Servicer, in "Eligible Investments" consisting
of book-entry securities, negotiable instruments or securities represented by
instruments in bearer or registered form which evidence: (a) direct obligations
of, and obligations fully guaranteed as to timely payment of principal and
interest by, the United States of America; (b) demand deposits, time deposits or
certificates of deposit (having original maturities of no more than 365 days) of
depository institutions or trust companies incorporated under the laws of the
United States of America or any state thereof (or domestic branches of foreign
banks) and subject to supervision and examination by federal or state banking or
depository institution authorities; provided, that at the time of the Trust's
investment or contractual commitment to invest therein, the short-term debt
rating of such depository
48
<PAGE> 110
institution or trust company shall be in the highest investment category of each
Rating Agency; (c) commercial paper or other short-term obligations having, at
the time of the Trust's investment or contractual commitment to invest therein,
a rating from each Rating Agency in its highest investment category; (d) notes
or bankers' acceptances (having original maturities of no more than 365 days)
issued by any depository institution or trust company referred to in (b) above;
(e) investments in money market funds rated in the highest investment category
by each Rating Agency or otherwise approved in writing by each Rating Agency;
(f) time deposits, other than as referred to in clause (e) above, with a person
the commercial paper of which has a credit rating from each Rating Agency in its
highest investment category; or (g) any other investments approved in writing by
each Rating Agency. The Trustee, acting as the initial paying agent (together
with any successor thereto in such capacity and any entity specified in a Series
Supplement to act in such capacity for the related Series, collectively, the
"Paying Agent"), shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders of any Series pursuant to the related Series Supplement.
SERIES PERCENTAGE AND SELLER PERCENTAGE
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
between the Series, including each Class of each Series, and the Seller's
Interest all amounts collected with respect to Finance Charge Receivables,
Principal Receivables and all Defaulted Receivables. The Servicer will make each
allocation by reference to the applicable Series Percentage for each Series and
the Seller Percentage in each case. The Series Percentages for each Series will
be as set forth in the related Series Supplement and, with respect to each
Series offered hereby, in each Prospectus Supplement.
The Seller Percentage in all cases means the excess of 100% over the
aggregate Series Percentages of all Series then outstanding for each category of
Receivables.
APPLICATION OF COLLECTIONS
Except as provided below or in a Series Supplement, the Servicer will
deposit into the Collection Account, no later than the second business day
following the date of processing, any payment collected by the Servicer on the
Receivables; provided, however, that the Servicer need not deposit amounts
allocated to the Seller Certificates and certain amounts allocated to
Certificateholders of a Series, as specified in the related Series Supplement,
into the Collection Account, and provided, further, that for so long as the Bank
remains the Servicer and (x) maintains a certificate of deposit rating of A-1 or
better by Standard & Poor's and P-1 by Moody's (or such other rating below A-1
or P-1, as the case may be, that is satisfactory to each Rating Agency) or (y)
the Bank has provided to the Trustee a letter of credit covering the collection
risk of the Servicer acceptable to each Rating Agency, the Servicer need not
make daily deposits of collections into the Collection Account, but may make a
single monthly deposit into the Collection Account in immediately available
funds.
OPERATION OF EXCESS FUNDING ACCOUNT
On any Distribution Date on which the Seller Amount is less than the
Required Seller Amount, the Servicer will deposit any Shared Principal
Collections that would otherwise be distributed to the holders of the Seller
Certificates into the Excess Funding Account. The Servicer will determine, with
respect to each Distribution Date on which no Series is in an Amortization
Period, the amount by which the Seller Amount exceeds the Required Seller Amount
and will instruct the Trustee to withdraw such amount from the Excess Funding
Account, to the extent of the principal amount of funds on deposit therein, and
pay such amount to the holders of the Seller Certificates. The Servicer will
determine, with respect to each Distribution Date on which one or more Series is
in an Amortization Period, the aggregate amount of Principal Shortfalls, if any,
with respect to each Series that is a Principal Sharing Series and will instruct
the Trustee to withdraw such amount from the Excess Funding Account, to the
extent of the principal amount of funds on deposit therein, and allocate such
amount among each such Series as Shared Principal Collections.
49
<PAGE> 111
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
The term "Defaulted Receivables" means, for any Monthly Period, all
Principal Receivables which are charged off as uncollectible in such Monthly
Period in accordance with the Servicer's credit card guidelines and customary
and usual servicing procedures for servicing consumer revolving credit card and
other revolving credit account receivables comparable to the Receivables. A
Principal Receivable shall become a Defaulted Receivable on the day on which
such Principal Receivable is recorded as charged off on the Servicer's computer
master file of consumer revolving credit card accounts but, in any event, shall
be deemed a Defaulted Receivable no later than the day the related Account
becomes 186 days contractually delinquent unless the obligor cures such default
by making a partial payment which satisfies the criteria for curing
delinquencies set forth in the Servicer's applicable credit card guidelines. The
term "Defaulted Amount" means, with respect to any Monthly Period, an amount
(which shall not be less than zero) equal to (a) the amount of Principal
Receivables which became Defaulted Receivables in such Monthly Period, minus (b)
the amount of any Defaulted Receivables included in any Account the Receivables
in which the Seller or the Servicer became obligated to accept reassignment or
assignment in accordance with the terms of the Pooling and Servicing Agreement
during such Monthly Period; provided, however, that, if an Insolvency Event
occurs with respect to the Seller, the amount of such Defaulted Receivables
which are subject to reassignment to the Seller in accordance with the terms of
the Pooling and Servicing Agreement shall not be added to the sum so subtracted
and, if certain events involving insolvency occur with respect to the Servicer,
the amount of such Defaulted Receivables which are subject to reassignment or
assignment to the Servicer in accordance with the terms of the Pooling and
Servicing Agreement shall not be added to the sum so subtracted.
On each day that the Servicer adjusts downward the amount of any Receivable
because of a rebate, refund, unauthorized charge or billing error to a
cardholder, or because such Receivable was created in respect of merchandise
which was refused or returned by a cardholder, or if the Servicer otherwise
adjusts downward the amount of any Receivable without receiving collections
therefor or charging off such amount as uncollectible, then, in any such case,
the amount of Principal Receivables used to calculate the Seller Amount, the
Series Percentages and any other percentages used to allocate within or among
Series will be reduced by the amount of the adjustment. Similarly, the amount of
Principal Receivables used to calculate the Seller Amount, the Series
Percentages and any other percentage used to allocate within or among Series
will be reduced by the amount of any Receivable discovered to have been created
through a fraudulent or counterfeit charge. Furthermore, in the event that the
exclusion of such Principal Receivables from the calculation of the Seller
Amount at such time would cause the Seller Amount to be less than the Required
Seller Amount, the Seller shall be required to pay an amount equal to such
deficiency into the Excess Funding Account (up to the amount of such Principal
Receivables).
FINAL PAYMENT OF PRINCIPAL AND INTEREST; TERMINATION
Subject to prior termination as described herein and in the Prospectus
Supplement, the interest of the Certificateholders of a Series in the Trust will
terminate following the earliest of (i) the day after the Distribution Date on
which the final payment of principal and interest is made to the
Certificateholders of such Series, (ii) the date specified for termination in
the applicable Series Supplement ("Stated Series Termination Date" for such
Series) and (iii) the Trust Termination Date. In the event the Investor Amount
of any Series would be greater than zero on the Stated Series Termination Date
for such Series or such earlier date specified in the related Series Supplement,
the Trustee will sell or cause to be sold Principal Receivables and the related
Finance Charge Receivables (or interests therein), as specified in the Pooling
and Servicing Agreement and the related Series Supplement, in an amount equal to
100% of the Investor Amount of the Certificates of such Series and accrued and
unpaid interest thereon on such date (but not more than the applicable Series
Percentages of Receivables on such date for the Certificates of such Series).
The proceeds of such sale will be allocated and distributed in accordance with
the applicable Series Supplement.
The Trust will only terminate on the earliest to occur of (a) the day
following the payment date on which the aggregate Investor Amount and Series
Enhancement investor amounts, if any, of each Series is zero (provided that the
Seller has delivered a written notice to the Trustee electing to terminate the
Trust), (b) December 31, 2044, or (c) if the Receivables are sold, disposed of
or liquidated following the occurrence
50
<PAGE> 112
of an Insolvency Event as described under "-- Trust Pay Out Events", immediately
following such sale, disposition or liquidation (the "Trust Termination Date").
Upon termination of the Trust, all right, title and interest in the Receivables
and other funds of the Trust (other than amounts in accounts maintained by the
Trust for the final payment of principal and interest to Certificateholders)
will be conveyed and transferred to the Seller.
TRUST PAY OUT EVENTS
The Revolving Period for all outstanding Series will continue through a
date specified in the related Series Supplement unless a Trust Pay Out Event or
a Series specific pay out event (a "Series Pay Out Event") specified in the
related Series Supplement with respect to such Series (and for a Series offered
hereby, the related Prospectus Supplement) occurs prior to such date. A "Trust
Pay Out Event" occurs with respect to all Series upon the occurrence of any of
the following:
(a) an Insolvency Event relating to the Seller (including any Additional
Seller);
(b) the Trust shall become subject to regulation by the Commission as an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended; or
(c) the Seller (including any Additional Seller) is unable for any reason
to transfer Receivables to the Trust in accordance with the provisions
of the Pooling and Servicing Agreement.
A Series Pay Out Event occurs with respect to a specific Series if an event
designated as a Series Pay Out Event in the related Series Supplement and
described in the related Prospectus Supplement, occurs with respect to such
Series. A "Pay Out Event" means, with respect to any Series, a Trust Pay Out
Event or a Series Pay Out Event. On the date on which a Pay Out Event with
respect to a Series is deemed to have occurred, the Rapid Amortization Period
with respect to such Series will commence. In such event, distributions of
principal will be made to the Certificateholders of such Series in the priority
provided for in the related Series Supplement and described in the related
Prospectus Supplement. If, because of the occurrence of a Pay Out Event, the
Rapid Amortization Period begins earlier than the Scheduled Amortization Date or
the expected final payment date of such Series, Certificateholders of such
Series will begin receiving distributions of principal earlier than they
otherwise would have, which may shorten the final maturity of the Certificates
of such Series.
An "Insolvency Event" shall occur if the Seller (including if, at any such
time as there is more than one Seller, any Additional Seller) shall consent to
the appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Seller or of or relating to all or
substantially all of its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Seller; or the Seller shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make any assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations.
If an Insolvency Event occurs with respect to the Seller, the Seller will
immediately cease to transfer Principal Receivables to the Trust and promptly
notify the Trustee thereof. Notwithstanding any cessation of the transfer to the
Trust of additional Principal Receivables, Principal Receivables transferred to
the Trust prior to the occurrence of such Insolvency Event and collections in
respect of such Principal Receivables and Finance Charge Receivables whenever
created, accrued in respect of such Principal Receivables, shall continue to be
a part of the Trust. Within 15 days after receipt of such notice by the Trustee
of the occurrence of such Insolvency Event, the Trustee will (i) publish a
notice in an authorized newspaper that an Insolvency Event has occurred and that
the Trustee intends to sell, dispose of or otherwise liquidate the Receivables
on commercially reasonable terms and in a commercially reasonable manner and
(ii) give notice to the Certificateholders describing the applicable provisions
of the Pooling and Servicing Agreement and requesting instructions from the
Certificateholders. Unless the Trustee has received instructions within 90 days
from the
51
<PAGE> 113
date notice is first published from (x) Certificateholders evidencing more than
50% of the Investor Amount of each Series or, with respect to any Series with
two or more Classes, of each Class, to the effect that such Certificateholders
disapprove of the liquidation of the Receivables and wish to continue having
Principal Receivables transferred to the Trust as before such Insolvency Event,
and (y) if at such time there is more than one Seller, any Seller which is not
the subject of such Insolvency and any holder of a Supplemental Certificate and
certain other parties specified in the Series Supplements, to such effect, the
Trustee shall promptly sell, dispose of or otherwise liquidate the Receivables
in a commercially reasonable manner and on commercially reasonable terms, which
shall include the solicitation of competitive bids. The Trustee may obtain a
prior determination from any such conservator, receiver or liquidator that the
terms and manner of any proposed sale, disposition or liquidation are
commercially reasonable.
The proceeds from the sale, disposition or liquidation of the Receivables
pursuant to the previous paragraph ("Insolvency Proceeds") shall be immediately
deposited in the Collection Account. The Trustee shall determine conclusively
the amount of the Insolvency Proceeds which are deemed to be Finance Charge
Receivables and Principal Receivables. The Insolvency Proceeds shall be
allocated and distributed to Certificateholders in accordance with the terms of
each Series Supplement and the Trust shall terminate immediately thereafter.
If the portion of such proceeds allocated to the Certificateholders and the
proceeds of any collections on the Receivables in the Collection Account and the
amounts available under any Series Enhancement are not sufficient to pay in full
the remaining amount due on the Certificates, the Certificateholders will suffer
a corresponding loss. See "Certain Legal Aspects of the Receivables -- Certain
Matters Relating to Receivership" for a discussion of the impact of federal
legislation on the Trustee's ability to liquidate the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses for any Monthly Period will be a servicing fee (the "Servicing
Fee") payable monthly on the related Distribution Date in an amount equal to
one-twelfth of the product of (a) the weighted average of the applicable
servicing fee rates with respect to each Series outstanding (based upon the
applicable servicing fee rate for each Series and the Investor Amount of such
Series or other amount specified in the applicable Series Supplement) and (b)
the amount of Principal Receivables outstanding on the last day of the prior
Monthly Period. The Servicing Fee will be allocated among the Seller's Interest
and the Certificateholders' Interests of all Series. The share of the Servicing
Fee allocable to the Certificateholders' Interest of a particular Series (the
"Monthly Servicing Fee") will be determined in accordance with the applicable
Series Supplement. The remainder of the Servicing Fee shall be paid by the
Certificateholders of other Series and by the holders of the Seller Certificates
and in no event shall the Trust, the Trustee or the Certificateholders of any
Series be liable for the share of the Servicing Fee to be paid by the holders of
the Seller Certificates. Unless otherwise provided in any Series Supplement, in
the case of the first Monthly Period with respect to any Series, the Monthly
Servicing Fee shall accrue from the Closing Date with respect to such Series.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee, any Paying
Agent and transfer agent and registrar and independent accountants and other
fees which are not expressly stated in the Pooling and Servicing Agreement to be
payable by the Trust or the Certificateholders of a Series other than federal,
state, local and foreign income, franchise or other taxes, if any, or any
interest or penalties with respect thereto, imposed upon the Trust.
MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement, except upon determination that (i) the
performance of its duties under the Pooling and Servicing Agreement is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties thereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer will be evidenced by an opinion of counsel to such
52
<PAGE> 114
effect delivered to the Trustee. No such resignation will become effective until
the Trustee or a successor Servicer that is an Eligible Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
the Pooling and Servicing Agreement.
"Eligible Servicer" means the Trustee, or if the Trustee is not acting as
Servicer, an entity which, at the time of its appointment as Servicer, (i) is
servicing a portfolio of revolving credit card accounts, (ii) is legally
qualified and has the capacity to service the Accounts, (iii) has demonstrated
the ability to professionally and completely service a portfolio of similar
accounts in accordance with high standards of skill and care, (iv) is qualified
to use the software that is then being used to service the Accounts or obtains
the right to use, or has its own software, which is adequate to perform its
duties under the Pooling and Servicing Agreement, and (v) has a net worth of at
least $50,000,000 as of the end of its most recent fiscal quarter.
Pursuant to the Pooling and Servicing Agreement, the Bank, as Servicer has
the right to delegate any of its responsibilities and obligations as Servicer to
any entity that agrees to conduct such duties in accordance with the Pooling and
Servicing Agreement and the Seller's credit card guidelines; provided, that in
the case of a significant delegation to an entity other than Fleet Financial
Group, the Seller, any affiliate of the Seller, or FDR, (i) at least 30 days
prior written notice must be given to the Trustee and each Rating Agency of such
delegation and (ii) at or prior to the end of such 30-day period the Servicer
must determine that the Rating Agency Condition has been met. The Bank currently
conducts is servicing operations through Fleet Credit Card, LLC, a subsidiary of
the Bank and the Bank contracts with FDR to perform certain of its servicing
activities. Notwithstanding any such delegation to any entity, the Servicer will
continue to be liable for all of its obligations under the Pooling and Servicing
Agreement.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that the Seller will indemnify
and hold harmless the Trust and the Trustee, its officers, directors, employees
and agents from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of any acts, omissions or alleged acts or
omissions or otherwise arising out of or based upon the arrangement created by
the Pooling and Servicing Agreement or any Series Supplement, as though the
Pooling and Servicing Agreement or such Series Supplement created a general
partnership under the Delaware Uniform Partnership Law in which the Seller is
the general partner; provided, however, that the Seller will not indemnify the
Trustee if such acts, omissions or alleged acts or omissions constitute or are
caused by fraud, negligence, or willful misconduct by the Trustee; provided
further, without limiting the claims of third parties, that the Seller will not
indemnify the Trust, the Certificateholders or the Certificate Owners for any
liabilities, costs or expenses of the Trust with respect to any action taken by
the Trustee at the request of the Certificateholders; provided further, that the
Seller will not indemnify the Trust, the Certificateholders or the Certificate
Owners as to any losses, claims or damages incurred by any of them in their
capacities as investors, including, without limitation, losses incurred as a
result of Defaulted Receivables; and provided further, that the Seller will not
indemnify Certificateholders or the Certificate Owners for any liabilities,
costs or expenses of the Certificateholders or the Certificate Owners arising
under any tax law relating to any federal, state, local or foreign income or
franchise taxes or any other tax imposed on or measured by income (or any
interest or penalties with respect thereto or arising from a failure to comply
therewith) required to be paid by or for the account of the Certificateholders
or the Certificate Owners in connection herewith to any taxing authority. Any
such indemnification will not be payable from the Trust assets.
The Pooling and Servicing Agreement also provides that the Servicer will
indemnify and hold harmless the Trust and the Trustee from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of any acts
or omissions of the Servicer with respect to the Trust pursuant to the Pooling
and Servicing Agreement, including any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any action, proceeding or claim; provided, however, that the Servicer
will not indemnify: (i) the Trustee if such acts or omissions constitute or are
caused by fraud, negligence, or willful misconduct by the Trustee; (ii) the
Trust, the Certificateholders or the Certificate Owners for any liabilities,
costs or expenses of the Trust with respect to any action taken by the Trustee
at the request of the Certificateholders; (iii) the Trust, the
Certificateholders or the Certificate Owners as to any
53
<PAGE> 115
losses, claims or damages incurred by any of them in their capacities as
investors, including without limitation losses incurred as a result of Defaulted
Receivables; or (iv) the Trust, Certificateholders or Certificate Owners for any
liabilities, costs or expenses of the Trust, the Certificateholders or the
Certificate Owners arising under any tax law, including without limitation, any
Federal, state, local or foreign income or franchise taxes or any other tax
imposed on or measured by income (or any interest or penalties with respect
thereto) required to be paid by the Trust, the Certificateholders or the
Certificate Owners in connection herewith to any taxing authority. Any such
indemnifications will not be payable from the Trust assets.
SERVICER DEFAULT
In the event of any Servicer Default, so long as the Servicer Default shall
not have been remedied, the Trustee, or Certificateholders evidencing more than
50% of the aggregate Investor Amount of the Certificates of all Series, by
notice to the Servicer (and to the Trustee if given by Certificateholders) (a
"Termination Notice"), may terminate all but not less than all of the rights and
obligations of the Servicer as Servicer under the Pooling and Servicing
Agreement and in and to the Receivables and the proceeds thereof. The rights and
interest of the Seller under the Pooling and Servicing Agreement and in the
Seller Certificates will not be affected by such termination; provided, however,
if within 60 days of receipt of a Termination Notice, the Trustee does not
receive any bids from Eligible Servicers in accordance with the Pooling and
Servicing Agreement to act as a successor Servicer and receives an officer's
certificate of the Servicer to the effect that the Servicer cannot in good faith
cure the Servicer Default which gave rise to the Termination Notice, then the
Trustee will offer the Seller the right at its option to purchase the
Certificateholders' Interest on the next succeeding Distribution Date. The
purchase price for the Certificateholders' Interest will be equal to the sum of
the amounts specified therefor in the related Series Supplements. The Seller
will notify the Trustee in writing prior to the Record Date for the Distribution
Date of the purchase if they are exercising such option. If the Seller exercises
such option, the Seller will (i) if the Seller's short-term deposits or
long-term unsecured debt obligations are not rated at the time at least P-3 or
Baa3, respectively, by Moody's, deliver to the Trustee an opinion of counsel
(which must be an independent outside counsel), to the effect that the purchase
would not be considered a fraudulent conveyance and (ii) deposit the purchase
price into the Collection Account on such Distribution Date in immediately
available funds.
A "Servicer Default" refers to any of the following events:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Trustee pursuant to the
Pooling and Servicing Agreement or any Series Supplement on or before the
date occurring five business days after the date such payment, transfer,
deposit or such instruction or notice is required to be made or given, as
the case may be, under the terms of the Pooling and Servicing Agreement or
any Series Supplement;
(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set
forth in the Pooling and Servicing Agreement or any Series Supplement,
which has a material adverse effect on the Certificateholders of any Series
or Class and which failure continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Servicer by the Trustee, or to
the Servicer and the Trustee by Certificateholders evidencing more than 50%
of the aggregate Investor Amount of all Series then outstanding (or, with
respect to any failure that does not relate to all Series, the Series to
which such failure relates); or the Servicer shall delegate its duties
under the Pooling and Servicing Agreement except as permitted under the
terms thereof, a responsible officer of the Trustee has actual knowledge of
such delegation and such delegation continues unremedied for 15 days after
the date on which written notice thereof, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by Certificateholders evidencing more than 50% of
the aggregate Investor Amount of all Series;
(c) any representation, warranty or certification made by the Servicer
in the Pooling and Servicing Agreement or any Series Supplement or in any
certificate delivered pursuant to the Pooling and Servicing Agreement or
any Series Supplement shall prove to have been incorrect when made, which
has a material
54
<PAGE> 116
adverse effect on the Certificateholders of any Series or Class and which
continues to be incorrect in any material respect for a period of 60 days
after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Servicer by the Trustee, or to
the Servicer and the Trustee by Certificateholders evidencing more than 50%
of the aggregate Investor Amount of all Series then outstanding (or, with
respect to any such representation, warranty or certification that does not
relate to all Series, the Series to which such representation, warranty or
certification relates); or
(d) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property, or
a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or the Servicer shall admit in writing
its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make any assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations.
Notwithstanding the foregoing, a delay in or failure of performance under
clauses (a), (b) or (c), will not, for certain limited periods, constitute a
Servicer Default if such delay or failure (i) could not be prevented by the
exercise of reasonable diligence by the Servicer and (ii) was caused by an act
of God or the public enemy, acts of declared or undeclared war, terrorism,
public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence will
not relieve the Servicer from using its best efforts to perform its respective
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement and any Series Supplement and the Servicer will provide the
Trustee, each Rating Agency, the holders of the Seller Certificates and the
Certificateholders of all Series with an officer's certificate giving prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date of a Series, the Paying Agent will forward to each
Certificateholder of record of such Series a statement prepared by the Servicer
setting forth, among other things, (a) the total amount distributed to
Certificateholders of each Class of such Series, (b) the amount of any
distribution allocable to principal on such Certificates, (c) the amount of such
distribution allocable to interest on such Certificates, (d) the aggregate
amount of collections processed during the prior Monthly Period and allocated in
respect of the Certificates, (e) the amount of collections of Principal
Receivables processed during the prior Monthly Period and allocated in respect
of the Certificates, (f) the amount of collections of Finance Charge Receivables
processed during the prior Monthly Period and allocated in respect of the
Certificates, (g) the Series Percentage with respect to each Class of
Certificates with respect to Principal Receivables and Finance Charge
Receivables, each as of the end of the last day of the prior Monthly Period, (h)
the aggregate outstanding balance of Accounts which are 30 or more days
contractually delinquent, by class of delinquency, as of the end of the last day
of the prior Monthly Period, (i) the Defaulted Amount for the prior Monthly
Period, (j) the amount of the Monthly Servicing Fee for each Class for the prior
Monthly Period, and (k) the amount of any Series Enhancement, if any, available
with respect to each Class as of the close of business on such Distribution
Date.
On or before a date of each calendar year specified in the related
Prospectus Supplement, ending in the year following the Stated Series
Termination Date, the Paying Agent will furnish to each person who at any time
during the preceding calendar year was a Certificateholder of record of a Series
a statement prepared by the Servicer containing the information required to be
contained in the regular monthly report to Certificateholders of such Series, as
set forth in clauses (a), (b) and (c) above, aggregated for such calendar year
or the applicable portion thereof during which such person was a
Certificateholder, together with such other customary information (consistent
with the treatment of the Certificates as debt) as the Trustee or the
55
<PAGE> 117
Servicer deems necessary or desirable to enable the Certificateholders of such
Series to prepare their tax returns.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before November
30th of each calendar year, the Servicer will cause a firm of nationally
recognized independent public accountants (who may also render other services to
the Servicer or the Seller) to furnish a report (addressed to the Trustee) to
the effect that such firm has applied certain agreed-upon procedures to certain
documents and records relating to the servicing of the Receivables and that,
based upon such agreed-upon procedures, no matters came to their attention that
caused them to believe that such servicing (including the allocations of
collections) was not conducted in compliance with certain applicable terms and
conditions set forth in the Pooling and Servicing Agreement and any Series
Supplements except for such exceptions as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement. In
addition, on or before November 30 of each calendar year, such accountants will
compare the mathematical calculations of certain amounts contained in the
monthly Servicer's certificates delivered during the period covered by such
report with the computer reports of the Servicer which were the source of such
amounts and deliver a report to the Trustee confirming that such amounts are in
agreement except for such exceptions as they believe to be immaterial and such
other exceptions which shall be set forth in such report.
The Pooling and Servicing Agreement provides for delivery to the Trustee on
or before November 30 of each calendar year of a statement signed by an
authorized officer of the Servicer to the effect that the Servicer has, or has
caused to be, fully performed its obligations in all material respects under the
Pooling and Servicing Agreement and any Series Supplements throughout the
preceding year or, if there has been a default in the performance of any such
obligations, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling and Servicing Agreement or any Series Supplement may be amended
from time to time (including in connection with the provision of additional
Series Enhancement for the benefit of the Certificateholders of any Series (or
the reduction of such Series Enhancement), the addition of a Participation
Interest to the Trust or the designation of an Additional Seller) by the Seller
(including, if applicable, any Additional Seller being designated), the Servicer
and the Trustee, without Certificateholder consent, provided that the Seller has
delivered to the Trustee an officer's certificate to the effect that the Seller
reasonably believes that such amendment will not have an Adverse Effect and that
the Rating Agency Condition has been satisfied.
The Pooling and Servicing Agreement or any Series Supplement may also be
amended by the Seller, the Servicer and the Trustee with the consent of the
holders of Certificates evidencing not less than 66 2/3% of the aggregate
Investor Amount of all adversely affected Series of Certificates for the purpose
of adding any provisions to, changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or any Series Supplement or of
modifying in any manner the rights of Certificateholders. No such amendment,
however, may (a) reduce in any manner the amount of or delay the timing of
distributions to be made to Certificateholders or deposits of amounts to be so
distributed or the amount available under any Series Enhancement without the
consent of each affected Certificateholder, (b) change the definition of or the
manner of calculating the interest of any Certificateholder without the consent
of each affected Certificateholder, (c) reduce the aforesaid percentage required
to consent to any such amendment without the consent of each Certificateholder
or (d) adversely affect the rating of any Series or Class by each Rating Agency
without the consent of Certificateholders of such Series or Class evidencing not
less than 66 2/3% of the aggregate Investor Amount of such Series or Class. Any
amendment shall be deemed not to adversely affect any outstanding Series with
respect to which the Seller delivers an opinion of counsel that such amendment
will not have an Adverse Effect with respect to such Series. Promptly following
the execution of any such
56
<PAGE> 118
amendment, the Trustee will furnish written notice (provided to the Trustee by
the Servicer) of the substance of such amendment to each Certificateholder.
DEFEASANCE
Pursuant to the Pooling and Servicing Agreement, the Seller may terminate
its substantive obligations in respect of any Series or all outstanding Series
(the "Defeased Series") by depositing with the Trustee (such deposit to be made
from other than the Seller's or any affiliate of the Seller's funds), under the
terms of an irrevocable trust agreement satisfactory to the Trustee, monies or
Eligible Investments (or a combination thereof) sufficient to make all remaining
scheduled interest and principal payments on the Defeased Series on the dates
scheduled for such payments and to pay all amounts owing to any provider of
Series Enhancement with respect to such Defeased Series. To achieve that end,
the Seller has the right to use collections on Receivables allocated to the
Defeased Series and available to purchase additional Receivables to be applied
to purchase Eligible Investments rather than additional Receivables. Prior to
its first exercise of its right to substitute monies or Eligible Investments for
Receivables, the Seller shall deliver to the Trustee a Tax Opinion with respect
to such deposit and termination of obligations and to the Servicer and the
Trustee written notice from each Rating Agency that the Rating Agency Condition
shall have been satisfied. In addition, the Seller must comply with certain
other requirements set forth in the Pooling and Servicing Agreement, including
requirements that the Seller deliver to the Trustee an opinion of counsel to the
effect that the deposit and termination of obligations will not require the
Trust to register as an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and that the Seller deliver to the
Trustee and certain providers of Series Enhancement a certificate of an
authorized officer stating that, based on the facts known to such officer at the
time, in the reasonable opinion of the Seller, such deposit and termination of
obligations will not at the time of its occurrence cause a Pay Out Event or an
event that, after the giving of notice or the lapse of time, would constitute a
Pay Out Event, to occur with respect to any Series. If the Seller discharges its
substantive obligations in respect of the Defeased Series, any Series
Enhancement for the affected Series might no longer be available to make
payments with respect thereto.
LIST OF CERTIFICATEHOLDERS
Upon application of Certificateholders of record representing undivided
interests in the Trust aggregating not less than 10% of the aggregate unpaid
principal amount of any Series or all Series, as applicable, the Trustee will,
having been adequately indemnified by such Certificateholders, within five
business days of such request, afford such Certificateholders access during
business hours to the current list of registered Certificateholders of such
Series or all Series, as applicable, for purposes of communicating with other
Certificateholders with respect to their rights under the Pooling and Servicing
Agreement or any Series Supplement or the Certificates.
THE TRUSTEE
Bankers Trust Company will be Trustee under the Pooling and Servicing
Agreement. The Seller, the Servicer and their respective affiliates may from
time to time enter into normal banking and trustee relationships with the
Trustee and its affiliates. The Trustee, the Seller, the Servicer and any of
their respective affiliates may hold Certificates in their own names. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee shall have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Pooling and Servicing Agreement shall be conferred or
imposed upon the Trustee and such separate trustee or co-trustee jointly, or, in
any jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement, is legally unable to act or if the Trustee
becomes bankrupt or insolvent. In such circumstances, the Servicer will be
obligated to appoint a successor Trustee. Any
57
<PAGE> 119
resignation or removal of the Trustee and appointment of a successor Trustee
does not become effective until acceptance of the appointment by the successor
Trustee.
ENHANCEMENT
GENERAL
For any Series, Series Enhancement may be provided with respect to one or
more Classes thereof. Series Enhancement may be in the form of the subordination
of one or more Classes of the Certificates of such Series, a letter of credit,
the establishment of a cash collateral guaranty or account, a collateral
interest, a surety bond, insurance, the use of cross support features or any
combination of the foregoing. If so specified in the related Prospectus
Supplement, any form of Series Enhancement may be structured so as to be drawn
upon by more than one Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Series Enhancement will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur which exceed the amount
covered by the Series Enhancement or which are not covered by the Series
Enhancement, Certificateholders will bear their allocable share of deficiencies.
If Series Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable under
such Series Enhancement, (b) any conditions to payment thereunder not otherwise
described herein, (c) the conditions (if any) under which the amount payable
under such Series Enhancement may be reduced and under which such Series
Enhancement may be terminated or replaced and (d) any provisions of any
agreement relating to such Series Enhancement material to the Certificateholders
of such Series. Additionally, the related Prospectus Supplement may set forth
certain information with respect to the issuer of any third-party Series
Enhancement, including (i) a brief description of its principal business
activities, (ii) its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business, (iii) if
applicable, the identity of regulatory agencies which exercise primary
jurisdiction over the conduct of its business and (iv) its total assets, and its
stockholders' or policyholders' surplus, if applicable, as of the date specified
in the Prospectus Supplement.
SUBORDINATION
If so specified in the related Prospectus Supplement, one or more Classes
of a Series may be subordinated to one or more other Classes of a Series. If so
specified in the related Prospectus Supplement, the rights of the holders of the
subordinated Certificates or uncertificated interests to receive distributions
of principal and/or interest on any Distribution Date will be subordinated to
such rights of the holders of the Certificates which are senior to such
subordinated Certificates or uncertificated interests to the extent set forth in
the related Prospectus Supplement. The amount of subordination will decrease
whenever certain amounts otherwise payable to the holders of subordinated
Certificates or uncertificated interests are paid to the holders of the
Certificates which are senior to such subordinated Certificates or
uncertificated interests.
LETTER OF CREDIT
If so specified in the related Prospectus Supplement, a letter of credit
with respect to a Series or Class of Certificates may be issued by the bank or
financial institution specified in the related Prospectus Supplement (the "L/C
Bank"). Under the letter of credit, the L/C Bank will be obligated to honor
drawings thereunder in an aggregate fixed dollar amount, net of unreimbursed
payments thereunder, equal to the amount described in the related Prospectus
Supplement. The amount available under the letter of credit will be reduced to
the extent of the unreimbursed payments thereunder.
58
<PAGE> 120
CASH COLLATERAL GUARANTY OR ACCOUNT
If specified in the related Prospectus Supplement, the Certificates of any
Class or Series may have the benefit of a Cash Collateral Guaranty issued
pursuant to a trust agreement between a cash collateral depositor, a cash
collateral trustee and the Seller and the Servicer or a Cash Collateral Account
directly. The Cash Collateral Guaranty will generally be an obligation of the
cash collateral trust and not of the cash collateral depositor, the cash
collateral trustee (except to the extent of amounts on deposit in the cash
collateral account), the Trustee or the Bank as Seller and Servicer.
The Servicer will determine on each Determination Date with respect to the
Series enhanced by the Cash Collateral Guaranty or the Cash Collateral Account
whether a deficiency exists with respect to the payment of interest and/or
principal on the Certificates so enhanced. If the Servicer determines that a
deficiency exists, it shall instruct the Trustee to draw an amount equal to such
deficiency from the Cash Collateral Guaranty or the Cash Collateral Account, up
to the maximum amount available thereunder.
COLLATERAL INTEREST
If so specified in the Prospectus Supplement, support for a Series of
Certificates or one or more Classes thereof may be provided initially by an
uncertificated, subordinated interest in the Trust (the "Collateral Interest")
in an amount initially equal to a percentage of the Certificates of such Series
specified in the Prospectus Supplement.
SURETY BOND OR INSURANCE POLICY
If so specified in the related Prospectus Supplement, insurance with
respect to a Series or Class of Certificates may be provided by one or more
insurance companies. Such insurance will guarantee, with respect to one or more
Classes of the related Series, distributions of interest or principal in the
manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond may be
purchased for the benefit of the holders of any Series or Class of such Series
to assure distributions of interest or principal with respect to such Series or
Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
SPREAD ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes of a Series may be provided by the periodic deposit of
certain available excess cash flow from the Trust assets into an account (the
"Spread Account") intended to assure the subsequent distribution of interest and
principal on the Certificates of such Class or Series in the manner specified in
the related Prospectus Supplement.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a discussion of the material federal income tax
consequences relating to the purchase, ownership and disposition of a
Certificate offered hereby, which discussion has been prepared by Orrick,
Herrington & Sutcliffe LLP, special federal income tax counsel to the Seller
("Special Tax Counsel"). Additional material federal income tax considerations,
if any, relevant to a particular Series will be set forth in the related
Prospectus Supplement. Special Tax Counsel is of the opinion that this
discussion is correct in all material respects. As more fully described below,
Special Tax Counsel is also of the opinion that the offered Certificates will be
characterized as debt for federal income tax purposes and that the Trust will
not be treated as an association or publicly traded partnership taxable as a
corporation for such purposes. Except as provided in a related Prospectus
Supplement, Special Tax Counsel will render no other opinions to the Seller with
respect to the offered Certificates or the Trust. This discussion is intended as
an explanatory discussion of the possible effects of the classification of the
offered Certificates as debt to investors generally and related tax matters
affecting investors generally, but does not purport to furnish information in
the level of detail or with
59
<PAGE> 121
the attention to an investor's specific tax circumstances that would be provided
by an investor's tax advisor. This discussion is based on current law, which is
subject to changes that could prospectively or retroactively modify or adversely
affect the tax consequences summarized below. The discussion does not address
all of the tax consequences relevant to a particular Certificate Owner in light
of that Certificate Owner's circumstances, and some Certificate Owners may be
subject to special tax rules and limitations not discussed below. Each
prospective Certificate Owner is urged to consult its own tax adviser in
determining the federal, state, local and foreign income and any other tax
consequences of the purchase, ownership and disposition of a Certificate.
For purposes of this discussion, "U.S. Person" means a citizen or resident
of the United States, a corporation or partnership organized in or under the
laws of the United States, any state thereof, or any political subdivision of
either (including the District of Columbia), or an estate or trust the income of
which is includible in gross income for U.S. federal income tax purposes
regardless of its source. The term "U.S. Certificate Owner" means any U.S.
Person and any other person to the extent that the income attributable to its
interest in a Certificate is effectively connected with that person's conduct of
a U.S. trade or business.
TREATMENT OF THE CERTIFICATES AS DEBT
The Seller expresses in the Pooling and Servicing Agreement the intent that
for federal, state and local income and franchise tax purposes, the Certificates
will be debt secured by the Receivables. The Seller, by entering into the
Pooling and Servicing Agreement, and each investor, by the acceptance of a
beneficial interest in a Certificate, will agree to treat the Certificates as
debt for federal, state and local income and franchise tax purposes. However,
the Pooling and Servicing Agreement generally refers to the transfer of
Receivables as a "sale," and because different criteria are used in determining
the non-tax accounting treatment of the transaction, the Seller will treat the
Pooling and Servicing Agreement for certain non-tax accounting purposes as
causing a transfer of an ownership interest in the Receivables and not as
creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form and non-tax
characterization of a transaction, while relevant factors, are not conclusive
evidence of its economic substance. In appropriate circumstances, the courts
have allowed taxpayers as well as the Internal Revenue Service (the "IRS") to
treat a transaction in accordance with its economic substance as determined
under federal income tax law, even though the participants in the transaction
have characterized it differently for non-tax purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the seller has relinquished (and the purchaser has obtained)
substantial incidents of ownership in the property. Among those factors, the
primary ones examined are whether the purchaser has the opportunity to gain if
the property increases in value, and has the risk of loss if the property
decreases in value. Except to the extent otherwise specified in the related
Prospectus Supplement, Special Tax Counsel is of the opinion that, under current
law as in effect on the Relevant Closing Date, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
regulation, revenue ruling or judicial decision, for federal income tax purposes
the Certificates will not constitute an ownership interest in the Receivables,
but properly will be characterized as debt. Except where indicated to the
contrary, the following discussion assumes that the Certificates are debt for
federal income tax purposes.
TREATMENT OF THE TRUST
General. The Pooling and Servicing Agreement permits the issuance of
Certificates and certain other interests in the Trust (including Collateral
Interests), each of which may be treated for federal income tax purposes either
as debt or as equity interests in the Trust. If all of the Certificates and
other interests (other than the Bank Certificate) in the Trust were
characterized as debt, the Trust might be characterized as a security
arrangement for debt collateralized by the Receivables and issued directly by
the Seller (or other holders of the Bank Certificate). Under such a view, the
Trust would be disregarded for federal income tax purposes. Alternatively, if
some of the Seller Certificates, the Certificates and other interests in the
Trust were
60
<PAGE> 122
characterized as equity therein, the Trust might be characterized as a separate
entity owning the Receivables, issuing its own debt, and jointly owned by the
Seller (or other holders of the Bank Certificate) and any other holders of
equity interests in the Trust. However, Special Tax Counsel is of the opinion
that, under the current law as in effect on the Relevant Closing Date, any such
entity constituted by the Trust will not be an association or publicly traded
partnership taxable as a corporation.
Possible Treatment of the Trust as a Partnership or a Publicly Traded
Partnership. Although, as described above, Special Tax Counsel is of the
opinion that the Certificates will properly be treated as debt for federal
income tax purposes and that the Trust will not be treated as an association or
publicly traded partnership taxable as a corporation for such purposes, such
opinions will not bind the IRS and thus no assurance can be given that such
treatment will prevail. If the IRS were to contend successfully that some or all
of the Seller Certificates, the Certificates or other interest in the Trust
(including any Collateral Interest) were equity in the Trust for federal income
tax purposes, all or a portion of the Trust could be classified as a partnership
or a publicly trade partnership taxable as a corporation for such purposes.
Because Special Tax Counsel is of the opinion that the Certificates will be
characterized as debt for federal income tax purposes and because any holder of
an interest in a Collateral Interest will agree to treat that interest as debt
for such purposes, no attempt will be made to comply with any tax reporting
requirements that would apply as a result of such alternative characterizations.
If the Trust were treated in whole or in part as a partnership in which
some or all holders of interests in the publicly offered Certificates were
partners, that partnership could be classified as a publicly traded partnership
and so could be taxable as a corporation. Further, regulations published by the
Treasury Department (the "Regulations") could cause the Trust to constitute a
publicly traded partnership even if all holders of interests in the publicly
offered Certificates are treated as holding debt. The Regulations generally
apply to taxable years beginning after December 31, 1995 and, accordingly, could
affect the classification of presently existing entities and the ongoing tax
treatment of already completed transactions. Although the Regulations provide
for a 10-year grandfather period for a partnership actively engaged in an
activity before December 4, 1995, it is not clear whether the Trust would
qualify for the grandfather period. If the Trust were classified as a publicly
traded partnership, whether by reason of the treatment of publicly offered
Certificates as equity or by reason of the Regulations, it would avoid taxation
as a corporation if its income was not derived in the conduct of a "financial
business;" however, whether the income of the Trust would be so classified is
unclear.
Under the Code and the Regulations, a partnership will be classified as a
publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Seller intends to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
traded Certificates. Although the Seller expects such measures will ultimately
be successful, certain of the actions that may be necessary for avoiding the
treatment of such interests as "readily tradable" on a "secondary market" or its
"substantial equivalent" are not fully within the control of the Seller. As a
result, there can be no assurance that the measures the Seller intends to take
will in all circumstances be sufficient to prevent the Trust from being
classified as a publicly traded partnership under the Regulations.
If the Trust were treated as a partnership other than a publicly traded
partnership taxable as a corporation, that partnership would not be subject to
federal income tax. Rather, each item of income, gain, loss and deduction of the
partnership generated through the ownership of the related Receivables would be
taken into account directly in computing taxable income of the Seller (or the
holder of the Bank Certificate) and any Certificate Owners treated as partners
in accordance with their respective partnership interests therein. The amounts
and timing of income reportable by any Certificate Owners treated as partners
would likely differ from that reportable by such Certificate Owners had they
been treated as owning debt. In addition, if the Trust were treated in whole or
in part as a partnership other than a publicly traded partnership, income
derived from the partnership by any Certificate Owner that is a pension fund or
other tax-exempt entity may be treated as unrelated business taxable income.
Partnership characterization also may have adverse state and local income or
franchise tax consequences for a Certificate Owner. Further, if the Trust were
treated in whole or in part as a partnership and the number of holders of
interests in the publicly offered
61
<PAGE> 123
Certificates and other interests in the Trust treated as partners equaled or
exceeded 100, the Seller may cause the Trust to elect to be an "electing large
partnership." The consequence of such election to investors could include the
determination of certain tax items at the partnership level and the disallowance
of otherwise allowable deductions. No representation is made as to whether any
such election will be made.
If the arrangement created by the Pooling and Servicing Agreement were
treated in whole or in part as a publicly traded partnership taxable as a
corporation, that entity would be subject to federal income tax at corporate tax
rates on its taxable income generated by ownership of the related Receivables.
That tax could result in reduced distributions to Certificate Owners. No
distributions from the Trust would be deductible in computing the taxable income
of the corporation, except to the extent that any Certificates were treated as
debt of the corporation and distributions to the related Certificate Owners were
treated as payments of interest thereon. In addition, distributions to
Certificate Owners not treated as holding debt would be dividend income to the
extent of the current and accumulated earnings and profits of the corporation
(and Certificate Owners may not be entitled to any dividends received deduction
in respect of such income).
TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
General. Stated interest on a beneficial interest in a Certificate will be
includible in gross income in accordance with a U.S. Certificate Owner's method
of accounting.
Original Issue Discount. If the Certificates are issued with original
issue discount ("OID"), the provisions of sections 1271 through 1273 and 1275 of
the Internal Revenue Code of 1986 (the "Code") will apply to the Certificates.
Under those provisions, a U.S. Certificate Owner (including a cash basis holder)
generally would be required to accrue the OID on its interest in a Certificate
in income for federal income tax purposes on a constant yield basis, resulting
in the inclusion of OID in income somewhat in advance of the receipt of cash
attributable to that income. In general, a Certificate will be treated as having
OID to the extent that its "stated redemption price" exceeds its "issue price,"
if such excess is more than 0.25 percent multiplied by the weighted average life
of the Certificate (determined by taking into account only the number of
complete years following issuance until payment is made for any partial
principal payments). Under section 1272(a)(6) of the Code, special provisions
apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. However, no
regulations have been issued interpreting those provisions, and the manner in
which those provisions would apply to the Certificates is unclear. Additionally,
the IRS could take the position based on Treasury regulations that none of the
interest payable on a Certificate is "unconditionally payable" and hence that
all of such interest should be included in the Certificate's stated redemption
price at maturity. If sustained, such treatment should not significantly affect
the tax liability of most Certificate Owners, but prospective U.S. Certificate
Owners should consult their own tax advisers concerning the impact to them in
their particular circumstances.
Market Discount. A U.S. Certificate Owner who purchases an interest in a
Certificate at a discount that exceeds any unamortized OID may be subject to the
"market discount" rules of sections 1276 through 1278 of the Code. These rules
provide, in part, that gain on the sale or other disposition of a Certificate
and partial principal payments on a Certificate are treated as ordinary income
to the extent of accrued market discount. The market discount rules also provide
for deferral of interest deductions with respect to debt incurred to purchase or
carry a Certificate that has market discount.
Market Premium. A U.S. Certificate Owner who purchases an interest in a
Certificate at a premium may elect to offset the premium against interest income
over the remaining term of the Certificate in accordance with the provisions of
section 171 of the Code.
SALE OR EXCHANGE OF CERTIFICATES
Upon a disposition of an interest in a Certificate, a U.S. Certificate
Owner generally will recognize gain or loss equal to the difference between the
amount realized on the disposition and the U.S. Certificate Owner's adjusted
basis in its interest in the Certificate. The adjusted basis in the interest in
the Certificate will equal its cost, increased by any OID or market discount
includible in income with respect to the interest in the Certificate prior to
its sale and reduced by any principal payments previously received with respect
to the
62
<PAGE> 124
interest in the Certificate and any amortized premium. Subject to the market
discount rules, gain or loss will be capital gain or loss if the interest in the
Certificate was held as a capital asset. Capital losses generally may be used
only to offset capital gains.
NON-U.S. CERTIFICATE OWNERS
In general, a non-U.S. Certificate Owner will not be subject to U.S.
federal income tax on interest (including OID) on a beneficial interest in a
Certificate unless (i) the non-U.S. Certificate Owner actually or constructively
owns 10 percent or more of the total combined voting power of all classes of
stock of the Seller entitled to vote (or of a profits or capital interest of the
Trust if characterized as a partnership), (ii) the non-U.S. Certificate Owner is
a controlled foreign corporation that is related to the Seller (or the Trust if
treated as a partnership) through stock ownership, (iii) the
non-U.S.,Certificate Owner is a bank described in Code Section 881(c)(3)(A),
(iv) such interest is contingent interest described in Code Section 871(h)(4),
or (v) the non-U.S. Certificate Owner bears certain relationships to any holder
of either the Seller Certificates other than the Seller or any other interest in
the Trust not properly characterized as debt. To qualify for the exemption from
taxation, under currently applicable procedures, the last U.S. Person in the
chain of payment prior to payment to a non-U.S. Certificate Owner (the
"Withholding Agent") must have received (in the year in which a payment of
interest or principal occurs or in either of the two preceding years) a
statement that (i) is signed by the non-U.S. Certificate Owner under penalties
of perjury, (ii) certifies that the non-U.S. Certificate Owner is not a U.S.
Person and (iii) provides the name and address of the non-U.S. Certificate
Owner. The statement may be made on a Form W-8 or substantially similar
substitute form, and the non-U.S. Certificate Owner must inform the Withholding
Agent of any change in the information on the statement within 30 days of the
change. If a Certificate is held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide a signed statement to the Withholding Agent. However, in that case, the
signed statement must be accompanied by a Form W-8 or substitute form provided
by the non-U.S. Certificate Owner to the organization or institution holding the
Certificate on behalf of the non-U.S. Certificate Owner. The U.S. Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof. The U.S. Treasury Department recently issued final regulations
which will revise some of the foregoing procedures whereby a non-U.S.
Certificate Owner may establish an exemption from withholding beginning January
1, 1999. Non-U.S. Certificate Owners should consult their tax advisors
concerning the impact to them, if any, of such procedures.
Generally, any gain or income realized by a non-U.S. Certificate Owner upon
retirement or disposition of an interest in a Certificate will not be subject to
U.S. federal income tax, provided that (i) in the case of a Certificate Owner
that is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such retirement or
disposition occurs and (ii) in the case of gain representing accrued interest,
the conditions described in the preceding paragraph for exemption from
withholding are satisfied. Certain exceptions may be applicable, and an
individual non-U.S. Certificate Owner should consult a tax advisor.
If the Certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. Certificate Owner to be treated as
engaged in a trade or business in the United States. In that event, the non-U.S.
Certificate Owner would be required to file a federal income tax return and, in
general, would be subject to U.S. federal income tax (including the branch
profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or distributions
made to a foreign partner. That withholding may be at a rate as high as 39.6
percent. If some or all of the Certificates were treated as stock in a
corporation, any related dividend distributions to a non-U.S. Certificate Owner
generally would be subject to withholding of tax at the rate of 30 percent,
unless that rate were reduced by an applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31 percent may
apply to payments made in respect of a Certificate to a registered owner who is
not an "exempt recipient" and who fails to provide certain
63
<PAGE> 125
identifying information (such as the registered owner's taxpayer identification
number) in the manner required. Generally, individuals are not exempt recipients
whereas corporations and certain other entities are exempt recipients. Payments
made in respect of a U.S. Certificate Owner must be reported to the IRS, unless
the U.S. Certificate Owner is an exempt recipient or otherwise establishes an
exemption. Compliance with the identification procedures (described in the
preceding section) would establish an exemption from backup withholding for a
non-U.S. Certificate Owner who is not an exempt recipient.
In addition, upon the sale of a Certificate to (or through) a "broker," the
broker must withhold 31 percent of the entire purchase price, unless either (i)
the broker determines that the seller is a corporation or other exempt recipient
or (ii) the seller provides certain identifying information in the required
manner, and in the case of a non-U.S. Certificate Owner certifies that the
seller is a non-U.S. Certificate Owner (and certain other conditions are met).
Such a sale must also be reported by the broker to the IRS, unless either (i)
the broker determines that the seller is an exempt recipient or (ii) the seller
certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status normally would be made
on Form W-8 under penalties of perjury, although in certain cases it may be
possible to submit other documentary evidence. As defined by Treasury
regulations, the term "broker" includes all persons who stand ready to effect
sales made by others in the ordinary course of a trade or business, as well as
brokers and dealers registered as such under the laws of the United States or a
state. These requirements generally will apply to a U.S. office of a broker, and
the information reporting requirements generally will apply to a foreign office
of a U.S. broker as well as to a foreign office of a foreign broker (i) that is
a controlled foreign corporation within the meaning of section 957(a) of the
Code or (ii) 50 percent or more of whose gross income from all sources for the
three year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the foreign broker has been in
existence) was effectively connected with the conduct of a trade or business
within the United States.
Any amounts withheld under the backup withholding rules from a payment to a
Certificate Owner would be allowed as a refund or a credit against such
Certificate Owner's U.S. federal income tax, provided that the required
information is furnished to the IRS.
Recently issued final Treasury regulations will revise some of the
foregoing information reporting and backup withholding procedures beginning
January 1, 1999. Certificate Owners should consult their tax advisors concerning
the impact to them, if any, of such revised procedures.
STATE AND LOCAL TAXATION
The discussion above does not address the taxation of the Trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
Certificates under any state or local tax law. Each investor should consult its
own tax adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
This section provides a brief summary of the material provisions of ERISA
and the Code which should be considered by potential investors if such investors
contemplate acquisition of the Certificates as an investment of a Plan, as
defined below. Additional information with respect to each Series and the
Classes thereof will be included in the related Prospectus Supplement.
Section 406 of ERISA and Section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities, employee annuity plans and Keogh plans (each, a "Plan") from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code
(collectively, "Parties in Interest") with respect to the Plan. ERISA also
imposes certain duties on persons who are fiduciaries of Plans subject to ERISA
or Section 4975 of the Code and prohibits certain transactions between a Plan
and Parties in Interest with respect to such Plans. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of a Plan is considered to be a fiduciary of such Plan (subject to
certain exceptions not here relevant). A violation of these "prohibited
transaction" rules may generate excise
64
<PAGE> 126
tax and other liabilities under ERISA and Section 4975 of the Code for such
persons, unless a statutory regulatory or administrative exemption is available.
Plans that are governmental plans (as defined in Section 3(32) of ERISA) and
certain church plans (as defined in Section 3(33) of ERISA) are not subject to
ERISA requirements.
Plan fiduciaries must determine whether the acquisition and holding of the
Certificates of a Series and the operations of the Trust would result in direct
or indirect prohibited transactions under ERISA or Section 4975 of the Code. The
operations of the Trust could result in prohibited transactions if Plans that
purchase the Certificates of a Series are deemed to own an interest in the
underlying assets of the Trust. There may also be an improper delegation of the
responsibility to manage Plan assets if Plans that purchase the Certificates are
deemed to own an interest in the underlying assets of the Trust.
Pursuant to a regulation (the "Regulation") issued by the Department of
Labor ("DOL") concerning the definition of what constitutes the "plan assets" of
a Plan, the assets and properties of certain entities (including certain
insurance company general accounts) in which a Plan makes an equity investment
could be deemed to be assets of the Plan in certain circumstances. Accordingly,
if Plans purchase Certificates of a Series, the Trust could be deemed to hold
"plan assets" unless one of the exceptions under the Regulation is applicable to
the Trust.
The Regulation only applies to the purchase by a Plan of an "equity
interest" in an entity. Because the Certificates will represent beneficial
interests in a Trust, and despite the agreement of the Seller and the
Certificate Owners to treat each Series of Certificates as debt instruments, the
Certificates are likely to be considered equity interests in the Trust for
purposes of the Regulation, with the result that the assets of the Trust are
likely to be treated as "plan assets" of the investing Plans for purposes of
ERISA and Section 4975 of the Code, unless either of the following exceptions
applies. The Regulation contains an exception that provides that if a Plan
acquires a "publicly-offered security," the issuer of the security is not deemed
to hold plan assets. A publicly-offered security is a security that is (i)
freely transferable, (ii) part of a class of securities that is owned by 100 or
more investors independent of the issuer and of one another at the conclusion of
the initial public offering of such securities and (iii) either is (A) part of a
class of securities registered under Section 12(b) or 12(g) of the Exchange Act
or (B) sold to the Plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Act and the class of
securities of which such security is a part is registered under the Exchange Act
within 120 days (or such later time as may be allowed by the Commission) after
the end of the fiscal year of the issuer during which the offering of such
securities to the public occurred. In addition, the Regulation provides that, if
at all times more than 75% of the value of each class of equity interests in the
trust (e.g. each Class of Certificates) is held by investors other than "benefit
plan investors" (which is defined in the Regulation as including Plans and other
employee benefit plans not subject to ERISA, such as governmental or foreign
plans, as well as entities holding assets deemed to be "plan assets"), the
investing Plan's assets will not include any of the underlying assets of the
Trust.
No assurance can be made with respect to any offering of any Class of the
Certificates of any Series that the conditions which would allow the Trust's
assets not to be "plan assets" will be met, although the intention of the
Underwriters (but not their assurance) as to whether interests in each Class of
the Certificates of a particular Series will be held by at least 100 independent
investors at the conclusion of the offering for such Series, and therefore
qualify as publicly-offered securities eligible for the exception under the
Regulation, will be set forth in the related Prospectus Supplement.
If interests in a Class of the Certificates of a Series fail to meet the
criteria of publicly-offered securities and the Trust's assets are deemed to
include assets of Plans that hold Certificates of such Class, transactions
involving the Trust and "Parties in Interest" with respect to such Plans might
be prohibited under Section 406 of ERISA and Section 4975 of the Code unless an
exemption is applicable. In addition, any Seller or any Underwriter of such
Series may be considered to be a Party in Interest or fiduciary with respect to
an investing Plan. Accordingly, an investment of "plan assets" of a Plan such
Class of Certificates may result in a prohibited transaction under ERISA and
Section 4975 of the Code unless such investment is subject to a statutory or
administrative exemption. Thus, for example, if a participant in any Plan is a
cardholder of one of
65
<PAGE> 127
the Accounts, under DOL interpretations the purchase of interests in such Class
of Certificates by such Plan could constitute a prohibited transaction. Five
class exemptions issued by the DOL that could apply in such event are DOL
Prohibited Transaction Exemption ("PTCE") 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-House Asset Managers), PTCE 95-60 (Class Exemption
for Certain Transactions Involving Insurance Company General Accounts), PTCE
91-38 (Class Exemption for Certain Transactions Involving Bank Collective
Investment Funds), PTCE 90-1 (Class Exemption for Certain Transactions Involving
Insurance Company Pooled Separate Accounts) and PTCE 84-14 (Class Exemption for
Plan Asset Transactions Determined by Independent Qualified Professional Asset
Managers). There is no assurance that these exemptions, even if all of the
conditions specified therein are satisfied, or any other exemption will apply to
all transactions involving the Trust's assets.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Certificates (or any interest therein) on behalf or with "plan
assets" of any Plan should consult their own counsel regarding whether the Trust
assets represented by the Certificates would be considered "plan assets," the
consequences that would apply if the Trust's assets were considered "plan
assets," and the possibility of exemptive relief from the prohibited transaction
rules.
The Small Business Job Protection Act of 1996 added new Section 401(c) of
ERISA relating to the status of the assets of insurance company general accounts
under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the DOL
was required to issue final regulations (the "General Account Regulations") not
later than December 31, 1997 with respect to insurance policies or annuity
contracts issued on or before December 31, 1998 that are supported by an
insurer's general account. The General Account Regulations are to provide
guidance on which assets held by the insurer constitute "plan assets" for
purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code. The DOL issued proposed regulations under Section 401(c) on December
22, 1997, but the required final regulations have not been issued as of the date
hereof. The assets of a general account that support insurance polices or
annuity contracts (other than "guaranteed benefit polices" within the meaning of
Section 401(b)(2) of ERISA) (i) issued to Plans after December 31, 1998 or (ii)
issued to Plans on or before December 31, 1998 for which the insurance company
does not comply with the General Account Regulations, may be treated as "plan
assets". However, except in the case of avoidance of the General Account
Regulations and actions brought by the Secretary of Labor relating to certain
breaches of fiduciary duties that also constitute breaches of state or federal
criminal law, until the date that is 18 months after the General Account
Regulations become final, no liability under the fiduciary responsibility and
prohibited transaction provisions of ERISA and Section 4975 may result on the
basis of a claim that the assets of the general account of an insurance company
constitute the "plan assets" of any Plan. The "plan assets" status of insurance
company separate accounts is unaffected by new Section 401(c) of ERISA, and
separate account assets continue to be treated as the plan assets of any plan
invested in a separate account.
If the assets of a general account invested in the Certificates are treated
as "plan assets" of any Plan or the protections of Section 401(c) of ERISA
become unavailable, certain violations of the prohibited transaction rules may
be deemed to occur as a result of the operation of the Trust. Insurance
companies contemplating the investment of general account assets in the
Certificates should consult with their legal advisors concerning the impact of
Section 401(c) of ERISA, including the status of assets of the general account
as "plan assets" after December 31, 1998, and accordingly, the general account's
ability to continue to hold the Certificates after the date that is 18 months
after the General Account Regulations become final.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion of
the Plan's assets in the Certificates. Accordingly, among other factors, Plan
fiduciaries and other Plan investors should consider whether the investment (i)
satisfies the diversification requirements of ERISA or other applicable law,
(ii) is in accordance with the Plan's governing instruments, and (iii) is
prudent in light of the "Risk Factors" and other factors discussed herein and in
the related Prospectus Supplement.
66
<PAGE> 128
PLAN OF DISTRIBUTION
The Certificates of any Series offered hereby and by the related Prospectus
Supplement may be offered by the underwriter or underwriters named in the
related Prospectus Supplement as agent or underwriter, or through underwriting
syndicates represented by such underwriter or underwriters (collectively, the
"Underwriters").
UNDERWRITING
The Prospectus Supplement relating to a Series will set forth the terms of
the offering of such Series and each Class within such Series, including the
name or names of the Underwriters, the proceeds to and their intended use by the
Seller, and either the initial public offering price, the discounts and
commissions to the Underwriters and any discounts or concessions allowed or
reallowed to certain dealers, or the method by which the price at which the
Underwriters will sell the Certificates of such Series will be determined.
The Underwriters will be obligated, subject to certain conditions, to
purchase all of the Certificates described in the Prospectus Supplement relating
to a Series if any such Certificates are purchased. The Certificates may be
acquired by the Underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Seller may also sell the Certificates offered hereby and by means of
the related Prospectus Supplements from time to time in negotiated transactions
or otherwise, at prices determined at the time of sale. Such transactions may be
effected by selling Certificates to or through dealers and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Seller and any purchasers of Certificates for whom they may
act as agents.
The place and time of delivery for the Series in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
It is anticipated that certain legal matters relating to the issuance of
the Certificates of any Series will be passed upon for the Bank by counsel named
in the Prospectus Supplement and, with respect to the federal tax consequences
of such issuance, by Special Tax Counsel. Certain legal matters relating to the
issuance of the Certificates of a Series and ERISA matters will be passed upon
for the Underwriters by the counsel named in the Prospectus Supplement.
67
<PAGE> 129
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE NO.
---- ---------
<S> <C>
Accounts.................................................... 1, 5
Accumulation Period......................................... 11
Act......................................................... 2
Addition Date............................................... 44
Additional Accounts......................................... 44
Additional Sellers.......................................... 36
Advanta Contributors........................................ 22
Advanta Consumer Credit Card Portfolio...................... 5, 24
Advanta National Bank....................................... 4
Adverse Effect.............................................. 12
Amendment Number 3.......................................... 4, 23
Amortization Period......................................... 11
Assignment Agreement........................................ 23
Automatic Additional Accounts............................... 46
Bank........................................................ 1
Bank Certificate............................................ 7
Cash Collateral Account..................................... 14
Cash Collateral Guaranty.................................... 14
Cede........................................................ 9, 32
Cedel....................................................... 34
Cedel Participants.......................................... 34
Certificate Owner........................................... 9
Certificateholders.......................................... 6
Certificateholders' Interest................................ 6
Certificates................................................ 1, 5
Class....................................................... 6
Code........................................................ 62
Collateral Interest......................................... 14, 59
Collection Account.......................................... 10, 48
Commission.................................................. 2
Companion Series............................................ 12, 37
Contribution Agreement...................................... 22
Controlled Amortization Period.............................. 11
Cooperative................................................. 34
Credit Card L.P............................................. 24
Defaulted Amount............................................ 50
Defaulted Receivables....................................... 50
Defeased Series............................................. 57
Definitive Certificate...................................... 9
Definitive Certificates..................................... 35
Depositaries................................................ 32
Depository.................................................. 32
Disclosure Document......................................... 8
Discount Option Date........................................ 48
Discount Option Receivable Collections...................... 48
Discount Option Receivables................................. 48
Discount Percentage......................................... 48
</TABLE>
68
<PAGE> 130
<TABLE>
<CAPTION>
TERM PAGE NO.
---- ---------
<S> <C>
Distribution Date........................................... 10
DOL......................................................... 65
DTC......................................................... 9
Due Date.................................................... 19
Eligible Account............................................ 43
Eligible Deposit Account.................................... 48
Eligible Institution........................................ 48
Eligible Investments........................................ 48
Eligible Receivable......................................... 43
Eligible Servicer........................................... 53
ERISA....................................................... 16
Euroclear................................................... 34
Euroclear Operator.......................................... 34
Euroclear Participants...................................... 34
Excess Funding Account...................................... 48
Exchange Act................................................ 2
Existing Fleet Credit Card Portfolio........................ 24
FDIA........................................................ 18
FDIC........................................................ 1, 7
FDR......................................................... 24
Finance Charge Receivables.................................. 8
FIRREA...................................................... 18
Fleet Contributors.......................................... 23
Fleet Credit Card Portfolio................................. 5, 24
Fleet Financial Group....................................... 7, 22
Full Invested Amount........................................ 12
Funding Period.............................................. 12
General Account Regulations................................. 66
Group....................................................... 12, 38
Holders..................................................... 35
Indirect Participants....................................... 33
Ineligible Receivables...................................... 41
Initial Accounts............................................ 5, 8
Insolvency Event............................................ 51
Insolvency Proceeds......................................... 40, 52
Interchange................................................. 27
Interest Period............................................. 10
Invested Amount............................................. 6
Investor Amount............................................. 6
IRS......................................................... 60
L/C Bank.................................................... 14, 58
Limited Amortization Period................................. 11
LLC......................................................... 4, 23
MasterCard(R)............................................... 5
Monthly Period.............................................. 10
Monthly Servicing Fee....................................... 52
Moody's..................................................... 48
New Issuance................................................ 7
OID......................................................... 62
</TABLE>
69
<PAGE> 131
<TABLE>
<CAPTION>
TERM PAGE NO.
---- ---------
<S> <C>
Optional Amortization Period................................ 11
Participants................................................ 32
Participation Interests..................................... 5, 45
Parties in Interest......................................... 64
Pay Out Event............................................... 51
Paying Agent................................................ 49
Plan........................................................ 64
Pooling and Servicing Agreement............................. 4
Pre-Funding Account......................................... 12
Pre-Funding Amount.......................................... 12
Principal Amortization Period............................... 11
Principal Receivables....................................... 8
Principal Sharing Series.................................... 11
Principal Shortfalls........................................ 11, 37
Principal Terms............................................. 38
Prior Series................................................ 12
PTCE........................................................ 66
Rapid Amortization Period................................... 11
Rating Agency............................................... 16
Rating Agency Condition..................................... 7, 39
Receivables................................................. 1, 5
Recoveries.................................................. 8
Regulation.................................................. 65
Regulations................................................. 61
Related Cut-Off Date........................................ 8
Relevant Closing Date....................................... 10
Removal Cut-Off Date........................................ 47
Removal Date................................................ 47
Removal Notice Date......................................... 47
Removed Accounts............................................ 47
Required Principal Balance.................................. 45
Required Seller Amount...................................... 45
Required Seller Percentage.................................. 45
Revolving Period............................................ 10
Scheduled Amortization Date................................. 11
Seller...................................................... 4, 36
Seller Amount............................................... 6, 31
Seller Certificates......................................... 7, 38
Seller Percentage........................................... 31
Sellers' Interest........................................... 6, 31, 38
Series...................................................... 1, 6
Series Account.............................................. 6
Series Enhancement.......................................... 5, 13
Series Investor Amount...................................... 45
Series Pay Out Event........................................ 51
Series Percentage........................................... 31
Series Supplement........................................... 4
Servicer.................................................... 4
Servicer Default............................................ 54
</TABLE>
70
<PAGE> 132
<TABLE>
<CAPTION>
TERM PAGE NO.
---- ---------
<S> <C>
Servicing Fee............................................... 52
Shared Principal Collections................................ 11, 37
Special Tax Counsel......................................... 59
Spread Account.............................................. 15, 59
Standard & Poor's........................................... 48
Stated Series Termination Date.............................. 15, 50
Supplemental Certificate.................................... 7, 35, 38
Tax Opinion................................................. 8
Termination Notice.......................................... 54
Terms and Conditions........................................ 34
Transfer.................................................... 22
Trust....................................................... 1, 4
Trust Pay Out Event......................................... 51
Trust Termination Date...................................... 15, 51
U.S. Certificate Owner...................................... 60
U.S. Person................................................. 60
UCC......................................................... 29
Underwriters................................................ 67
Visa(R)..................................................... 5
Withholding Agent........................................... 63
</TABLE>
71
<PAGE> 133
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain circumstances, the globally offered Fleet Credit Card
Master Trust II Asset Backed Securities (the "Global Securities") to be issued
in Series from time to time (each, a "Series") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to issues of Certificates by ADVANTA Credit
Card Master Trust II prior to the change of the Trust to Fleet Credit Card
Master Trust II. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior Advanta
Credit Card Master Trust II issues in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
I-1
<PAGE> 134
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until Global Securities
are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. The payment will then be reflected in the
account of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would
I-2
<PAGE> 135
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless, under applicable law, (i) each clearing system, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business in the chain of intermediaries between such beneficial
owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons generally can obtain a complete exemption
from the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Request for Taxpayer
Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States, any state thereof, or any political subdivision of either
(including the District of Columbia) or (iii) an estate or trust the income of
which is includible in gross income for United States tax purposes regardless of
its source. This summary does not deal with all aspects of U.S. federal income
tax withholding that may be relevant to foreign holders of the Global
Securities. Investors are advised to consult their own tax advisors for specific
tax advice concerning their
I-3
<PAGE> 136
holding and disposing of the Global Securities. Further, the IRS has recently
finalized new regulations that will revise some aspects of the current system
for withholding on amounts paid to foreign persons. Under these regulations,
interest or OID paid to a nonresident alien would continue to be exempt from
U.S. withholding taxes (including backup withholding) provided that the holder
complies with the new procedures.
I-4
<PAGE> 137
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Statement Fee.................................. $ 295**
Printing and Engraving Expenses............................. *
Trustee's Fees and Expenses................................. *
Legal Fees and Expenses..................................... *
Blue Sky Fees and Expenses.................................. *
Accountants' Fees and Expenses.............................. *
Rating Agency Fees.......................................... *
Miscellaneous Fees and Expenses............................. *
--------
Total............................................. $ *
========
</TABLE>
- ---------------
* To be filed by amendment.
** Actual
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Association (the "Articles") of Fleet Bank (RI), National
Association (the "Bank") provide that each person who was or is made a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(each a "proceeding"), by reason of the fact that he or she is or was a
director, officer or employee of the Bank or is or was serving at the request of
the Bank as a director, officer, employee or agent of another corporation or of
a partnership, joint venture, limited liability company, trust, or other
enterprise, shall be indemnified and held harmless by the Bank to the fullest
extent authorized by the law of the state in which the Bank's ultimate parent
company is incorporated, expect as provided below. The Bank may, by action of
its Board of Directors, grant rights to indemnification to agents of the Bank
and to any director, officer, employee or agent of any of its subsidiaries with
the same scope and effect as the foregoing indemnification of directors and
officers.
The Articles provide, however, that (i) no person shall be indemnified
against expenses, penalties or other payments incurred in an administrative
proceeding or action institute by a federal bank regulatory agency that results
in a final order assessing civil money penalties against that person, requiring
affirmative action by that person in the form of payments to the Bank or
removing or prohibiting that person from service with the Bank and (ii) no
person shall be indemnified here the Articles to the extent such indemnification
would violate or conflict with any applicable federal statute or any applicable
final regulation or interpretation adopted by the Office of the Comptroller of
the Currency ("OCC") or the Federal Deposit Insurance Corporation ("FDIC").
The Articles also provide that the Bank may purchase, maintain and make
payment or reimbursement for reasonable premiums on, insurance to protect itself
and any director, officer, employee or agent of the Bank or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Bank would have the power to indemnify
such person against such person against such expense, liability or loss under
the law of the state in which the Bank's ultimate parent is incorporated;
provided, however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
The Bank's ultimate parent company is incorporated in the State of Rhode
Island. The laws of the State of Rhode Island provide that Rhode Island
corporations may indemnify directors, officers, employees or agents against
judgments, fines, reasonable costs, expenses and counsel fees paid or incurred
in connection with any
II-1
<PAGE> 138
proceeding to which such director, officer, employee or agent or his legal
representative may be a party (or for testifying when not a party) by reason of
his being a director, officer, employee or agent, provided that such director,
officer, employee or agent shall have acted in good faith and shall have
reasonably believed (a) if he was acting in his official capacity that his
conduct was in the corporation's best interests, (b) in all other cases that his
conduct was at least not opposed to its best interests, and (c) in the case of
any criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. With respect to possible indemnification of directors, officers and
controlling persons of the Bank for liabilities arising under the Securities Act
of 1933 (the "Act") pursuant to such provisions, the Bank is aware that the
Securities and Exchange Commission has publicly taken the position that such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
ITEM 16. EXHIBITS.
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement for the Certificates**
4.1 -- Amended and Restated Pooling and Servicing Agreement**
4.2 -- Amendment Number 1 to the Amended and Restated Pooling and
Servicing Agreement**
4.3 -- Amendment Number 2 to the Amended and Restated Pooling and
Servicing Agreement**
4.4 -- Amendment Number 3 to the Amended and Restated Pooling and
Servicing Agreement**
4.5 -- Assignment and Assumption Agreement**
4.6 -- Form of Series Supplement to Pooling and Servicing
Agreement**
5.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to legality**
8.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to federal tax matters
23.1 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in
its opinion filed as Exhibit 5.1)**
23.2 -- Consents of Orrick, Herrington & Sutcliffe LLP (included in
its opinion filed as Exhibit 8.1)
24.1 -- Powers of Attorney (included in Page II-4)**
</TABLE>
- ---------------
** Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant on behalf of the Fleet Credit Card Master Trust
II (the "Trust") hereby undertakes as follows:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement; (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (a)(1)(i) and (a)(1)(ii)
will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering hereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
II-2
<PAGE> 139
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described
under Item 15 above, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final adjudication
of each issue.
(d) That, for the purpose of determining any liability under the
Securities Act of 1933, each posteffective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering hereof.
II-3
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it (i) has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3, (ii) reasonably believes that
the security rating requirement contained in Transaction Requirement B.5 of Form
S-3 will be met by the time of the sale of the securities registered hereunder
and (iii) has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Horsham, Pennsylvania, on July 2, 1998.
FLEET BANK (RI), NATIONAL ASSOCIATION
as Depositor to the Trust and as
Servicer on behalf
of the Trust
By: /s/ MICHAEL COCO
------------------------------------
Name: Michael Coco
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed on July 2, 1998 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman, President, Chief Executive Officer
- ----------------------------------------------------- and Director
Name: Joseph W. Saunders
* Principal Financial Officer and Principal
- ----------------------------------------------------- Accounting Officer
Name: John K. Bray
* Director
- -----------------------------------------------------
Name: Robert B. Hedges, Jr.
* Director
- -----------------------------------------------------
Name: Eugene M. McQuade
* Director
- -----------------------------------------------------
Name: Brian T. Moynihan
* Director
- -----------------------------------------------------
Name: H. Jay Sarles
* Director
- -----------------------------------------------------
Name: Hayden D. Watson
* Director
- -----------------------------------------------------
Name: Michael R. Zucchini
*By: /s/ MICHAEL COCO
------------------------------------------------
Michael Coco
Attorney-in-Fact
</TABLE>
*Note: Powers of Attorney appointing Joseph W. Saunders, John K. Bray and
Michael Coco, or any of them acting singly, to execute the Registration
Statement and any amendments thereto on behalf of the above-named
individuals were previously filed with the Securities and Exchange
Commission.
II-4
<PAGE> 141
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement for the Certificates**
4.1 -- Amended and Restated Pooling and Servicing Agreement**
4.2 -- Amendment Number 1 to the Amended and Restated Pooling and
Servicing Agreement**
4.3 -- Amendment Number 2 to the Amended and Restated Pooling and
Servicing Agreement**
4.4 -- Amendment Number 3 to the Amended and Restated Pooling and
Servicing Agreement**
4.5 -- Assignment and Assumption Agreement**
4.6 -- Form of Series Supplement to the Pooling and Servicing
Agreement**
5.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to legality**
8.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to federal tax matters
23.1 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in
opinion filed as Exhibit 5.1)**
23.2 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in
opinion filed as Exhibit 8.1)
24.1 -- Powers of Attorney (included on Page II-4)**
</TABLE>
- ---------------
** Previously filed.
II-5
<PAGE> 1
Exhibit 8.1
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
July 2, 1998
Fleet Bank (RI), National Association
50 Kennedy Plaza
Providence, Rhode Island 02903
Re: FLEET CREDIT CARD MASTER TRUST II
FLEET BANK (RI), NATIONAL ASSOCIATION (SELLER AND SERVICER)
REGISTRATION STATEMENT ON FORM S-3 NOS. 333-52583 AND
333-52583-01
Ladies and Gentlemen:
We have acted as counsel for Fleet Bank (RI), National
Association, a national banking association (the "Bank"), in connection with the
preparation of the Registration Statement on Form S-3 (the "Registration
Statement") filed on May 13, 1998 with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"), for the registration
under the Act of Asset Backed Certificates (collectively, the "Certificates") to
be issued from time to time in series (each, a "Series") and representing an
undivided interest in Fleet Credit Card Master Trust II (the "Trust"). Such
Certificates will be issued pursuant to a pooling and servicing agreement (the
"Pooling and Servicing Agreement"), between the Bank, as Seller and Servicer by
assignment from the previous seller and servicer, and Bankers Trust Company, as
Trustee.
We hereby confirm that the statements set forth in the
prospectus relating to the Certificates (the "Prospectus") forming a part of the
Registration Statement under the headings "Summary of Terms --Tax Status" and
"Federal Income Tax Consequences," and the statements set forth in the
representative form of prospectus supplement relating to the Certificates (the
"Prospectus Supplement") forming a part of the Registration Statement under the
headings "Summary of Terms -- Tax Status" and "Federal Income Tax Consequences,"
which statements have been prepared by us, to the extent that they constitute
matters of law or legal conclusions with respect thereto, are correct in all
material respects, and we hereby adopt and confirm the opinions set forth
therein.
We note that the Prospectus and form of Prospectus Supplement
do not relate to a specific transaction. Accordingly, the above-referenced
description of federal income tax consequences and opinions may, under certain
circumstances, require modification in the context of an actual transaction. We
hereby undertake, for so long as we continue to be employed as special tax
counsel to the Bank, to include any such modifications in a subsequently filed
tax opinion.
<PAGE> 2
Fleet Bank (RI), National Association
July 2, 1998
Page 2
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. In giving such consent, we do not admit that we
are "experts" within the meaning of the term used in the Act or the rules and
regulations of the Securities and Exchange Commission issued thereunder, with
respect to any part of the Registration Statement, including this opinion as an
exhibit or otherwise.
Very truly yours,
/s/ ORRICK, HERRINGTON & SUTCLIFFE LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
