1
SUBJECT TO COMPLETION, DATED JULY 12, 1999
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 12, 1999
--------------------
[FLEET LOGO]
FLEET CREDIT CARD MASTER TRUST II
ISSUER
FLEET BANK (RI), NATIONAL ASSOCIATION
SELLER AND SERVICER
$415,000,000 CLASS A ASSET BACKED CERTIFICATES, SERIES 1999-B
$37,500,000 CLASS B ASSET BACKED CERTIFICATES, SERIES 1999-B
CLASS A CERTIFICATES CLASS B CERTIFICATES
------------------------------ ------------------------------
Certificate rate One-Month LIBOR plus % One-Month LIBOR plus %
annually annually
Interest paid Monthly, beginning Monthly, beginning
September 15, 1999 September 15, 1999
Expected final distribution July 15, 2004 July 15, 2004
date
Legal final maturity January 15, 2007 January 15, 2007
Price to public per % %
certificate
Underwriting discount per % %
certificate
Proceeds to seller per % %
certificate
The total price to public is $ , the total amount of the underwriting
discount is $ . The total amount of proceeds plus accrued interest and
before deduction of expenses is $ .
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-10 IN THIS PROSPECTUS
SUPPLEMENT
AND PAGE 8 IN THE PROSPECTUS.
The certificates are not deposits and neither the certificates nor the
underlying accounts or receivables are insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency.
The certificates will represent interests in the trust only and will not
represent interests in or obligations of Fleet Bank (RI), National Association
or any of its affiliates.
CREDIT ENHANCEMENT:
- - The Class B certificates will be subordinated to the Class A certificates.
- - The Trust is also issuing a collateral interest in the amount of $47,500,000.
The collateral interest will be subordinated to both the Class A certificates
and the Class B certificates.
- - The Seller will establish a cash collateral account in the amount of
$7,500,000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE CERTIFICATES OR DETERMINED THAT
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriters of the Class A Certificates
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
Underwriter of the Class B Certificates
MERRILL LYNCH & CO.
July , 1999
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS
NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE CERTIFICATES UNTIL WE
DELIVER A FINAL PROSPECTUS SUPPLEMENT AND AN ACCOMPANYING PROSPECTUS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE NOT AN OFFER TO SELL NOR ARE THEY
SEEKING AN OFFER TO BUY THESE CERTIFICATES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the Series 1999-B certificates in two
separate documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
your Series 1999-B certificates and (b) this prospectus supplement, which
describes the specific terms of your Series 1999-B certificates. This prospectus
supplement may be used to sell the Class A certificates and the Class B
certificates only if accompanied by the prospectus.
This prospectus supplement and the prospectus relate to the offering of
Class A certificates and Class B certificates only. The collateral interest is
not offered by this prospectus supplement and prospectus.
IF THE TERMS OF YOUR CERTIFICATES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents in the accompanying prospectus provide the pages on which these
captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement and the accompanying prospectus are defined under the
caption "Index of Principal Terms" beginning on page S-50 in this document and
under the caption "Index of Principal Terms" beginning on page 66 in the
accompanying prospectus.
----------------------
S-2
3
TABLE OF CONTENTS
PAGE
----
SUMMARY OF TERMS...................... S-4
The Trust........................... S-4
The Trustee......................... S-4
Seller And Servicer................. S-4
Seller........................... S-4
Servicer......................... S-4
The Bank......................... S-4
The Receivables..................... S-4
Offered Securities.................. S-4
Certificates..................... S-4
Distribution Dates............... S-4
Interest......................... S-5
Principal........................ S-5
The Collateral Interest............. S-5
Credit Enhancement.................. S-5
Cash Collateral Account.......... S-5
Subordination Of Classes......... S-6
Available Enhancement............ S-6
The Sellers' Interest............... S-6
Allocations......................... S-6
Among Series..................... S-6
Among Classes.................... S-6
Application Of Collections.......... S-7
Finance Charge Collections....... S-7
Excess Spread And Excess Finance
Charges........................ S-7
Principal Collections............ S-7
Pay Out Events...................... S-8
Optional Repurchase................. S-8
Registration........................ S-8
Tax Status.......................... S-9
Erisa Considerations................ S-9
Certificate Ratings................. S-9
Exchange Listing.................... S-9
Additional Information.............. S-9
RISK FACTORS.......................... S-10
Ability To Resell Series 1999-B
Certificates Not Assured......... S-10
Credit Enhancement May Not Be
Sufficient To Prevent Loss....... S-10
Class B Certificates Are
Subordinated To The Class A
Certificates; Trust Assets May Be
Diverted From Class B To Pay
Class A.......................... S-10
Ratings Can Be Lowered Or Withdrawn
After You Purchase Your
Certificates And The Market Value
Of Your Certificates May Be
Reduced.......................... S-11
INTRODUCTION.......................... S-12
PAGE
----
THE BANK'S CREDIT CARD ACTIVITIES..... S-12
General............................. S-12
Billing and Payment................. S-13
Delinquency and Loss Experience..... S-13
Interchange......................... S-15
Year 2000 Readiness................. S-15
Litigation.......................... S-16
THE RECEIVABLES....................... S-16
MATURITY ASSUMPTIONS.................. S-20
RECEIVABLE YIELD CONSIDERATIONS....... S-22
DESCRIPTION OF THE CERTIFICATES....... S-23
General............................. S-23
Registration of Certificates........ S-24
Interest Payments................... S-24
Principal Payments.................. S-27
Postponement of Accumulation
Period........................... S-29
Subordination....................... S-29
Allocation Percentages.............. S-30
Reallocation of Cash Flows.......... S-32
Application of Collections.......... S-34
Principal Funding Account........... S-39
Reserve Account..................... S-40
Paired Series....................... S-41
Shared Collections of Principal
Receivables...................... S-41
The Cash Collateral Account......... S-42
Amounts Available as Enhancement.... S-42
Allocation of Investor Default
Amount........................... S-43
Optional Repurchase................. S-44
Pay Out Events...................... S-45
Servicing Compensation and Payment
of Expenses...................... S-46
FEDERAL INCOME TAX CONSEQUENCES....... S-46
ERISA CONSIDERATIONS.................. S-47
Class A Certificates................ S-47
Class B Certificates................ S-47
Consultation with Counsel........... S-48
UNDERWRITING.......................... S-48
LEGAL MATTERS......................... S-49
INDEX OF PRINCIPAL TERMS.............. S-50
OTHER SERIES ISSUED................... I-1
RECEIVABLES IN ADDITIONAL ACCOUNTS
CONVEYED TO THE TRUST............... II-1
S-3
4
SUMMARY OF TERMS
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. THIS SUMMARY PROVIDES GENERAL, SIMPLIFIED DESCRIPTIONS OF
MATTERS WHICH, IN SOME CASES, ARE HIGHLY TECHNICAL AND COMPLEX. MORE DETAIL IS
PROVIDED IN OTHER SECTIONS OF THIS DOCUMENT AND IN THE PROSPECTUS.
DO NOT RELY UPON THIS SUMMARY FOR A FULL UNDERSTANDING OF THE MATTERS YOU NEED
TO CONSIDER IN CONNECTION WITH ANY POTENTIAL INVESTMENT IN THE SERIES 1999-B
CERTIFICATES. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE SERIES
1999-B CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS.
THE TRUST
Fleet Credit Card Master Trust II will issue the certificates.
The trust has issued numerous series of certificates, will issue the Series
1999-B certificates and expects to issue additional series. The certificates of
each series will represent an ownership interest in the assets of the trust.
THE TRUSTEE
The trustee is Bankers Trust Company.
SELLER AND SERVICER
SELLER
Fleet Bank (RI), National Association originates and acquires credit card
accounts. As seller, the bank sells the receivables to the trust.
SERVICER
The bank also is the servicer. As the servicer, the bank collects payments on
the receivables and allocates the collections among the interests in the trust.
THE BANK
The bank is a special purpose credit card bank. Its principal offices are
located at 111 Westminster Street, Providence, Rhode Island 02903. The telephone
number is (401) 278-5451.
THE RECEIVABLES
The primary assets of the trust are receivables in MasterCard(R) and VISA(R)(1)
revolving credit card accounts. The receivables consist of principal receivables
and finance charge receivables.
- ---------------
(1) MasterCard(R) and VISA(R) are federally registered servicemarks of
MasterCard International Inc. and VISA U.S.A., Inc. respectively.
The following information is as of May 31, 1999:
- - Principal receivables in the trust: $9,042,828,603.
- - Finance charge receivables in the trust: $242,041,134.
- - Accounts designated to the trust: 6,325,803.
See "The Receivables" in this prospectus supplement.
OFFERED SECURITIES
CERTIFICATES
Fleet Credit Card Master Trust II is offering:
- - $415,000,000 of Class A certificates; and
- - $37,500,000 of Class B certificates.
The Series 1999-B certificates include both Class A and Class B.
Beneficial interests in these certificates may be purchased in minimum
denominations of $1,000 and integral multiples of $1,000.
The seller expects that the trust will issue the Series 1999-B certificates on
July , 1999.
DISTRIBUTION DATES
The first distribution date will be September 15, 1999.
Distribution dates for the Series 1999-B certificates will be the 15th day of
each month if the 15th day is a business day. If the 15th is not a business day,
the distribution date will be the following business day.
S-4
5
INTEREST
Interest on the Series 1999-B certificates will be paid on each distribution
date.
You may obtain the interest rates for the current interest period and the
immediately preceding interest period by telephoning the trustee at (800)
735-7777.
Class A
The Class A certificates will bear interest at LIBOR as determined each month
plus % per annum.
Class B
The Class B certificates will bear interest at LIBOR as determined each month
plus % per annum.
See "Description of the Certificates--Interest Payments" in this prospectus
supplement for a description of how and when LIBOR will be determined.
PRINCIPAL
The seller expects that principal on the Series 1999-B certificates will be
distributed on the date noted below; however, principal may, in fact, be
distributed earlier or later. You will not be entitled to any premium for early
or late payment of principal.
If certain adverse events known as pay out events occur, principal may be
distributed earlier than expected.
If collections of the credit card receivables are less than expected or are
collected more slowly than expected, then principal repayment may be delayed.
Class A
The seller expects that principal of the Class A certificates will be
distributed on the July 2004 distribution date.
Class B
The seller expects that principal of the Class B certificates will be
distributed on the July 2004 distribution date; however, no principal will be
paid on the Class B certificates unless the Class A certificates are paid in
full.
Accumulation Period
We are scheduled to begin accumulating collections of principal receivables on
October 1, 2003 for later distribution to you. The servicer may, however, elect
to delay the beginning of the accumulation period to a date not later than June
1, 2004.
See "Description of the Certificates--Principal Payments," and "--Postponement
of Accumulation Period" in this prospectus supplement.
Legal Final Maturity
If the Series 1999-B certificates are not paid on their expected final
distribution dates, collections of receivables will continue to be used to pay
principal on the Series 1999-B certificates until the certificates are paid or
until January 15, 2007, whichever occurs first. January 15, 2007 is the legal
final maturity date for Series 1999-B.
See "Maturity Assumptions," and "Description of the Certificates--Allocation
Percentages," and "--Principal Payments" in this prospectus supplement.
THE COLLATERAL INTEREST
At the same time as the Series 1999-B certificates are issued, the trust
will issue an undivided interest in the trust called a collateral interest in
the amount of $47,500,000 as part of Series 1999-B. The collateral interest is
not offered by this document.
CREDIT ENHANCEMENT
CASH COLLATERAL ACCOUNT
The Seller will establish a cash collateral account to provide credit
enhancement for the Series 1999-B certificates and the collateral interest.
$7,500,000 will be deposited into the cash collateral account when the Series
1999-B certificates are issued. The cash collateral account will be used to make
payments on the Series 1999-B certificates and to cover the collateral
interest's portion of the
S-5
6
servicing fee if collections of receivables allocated to Series 1999-B are
insufficient to make required payments.
SUBORDINATION OF CLASSES
The collateral interest and the Class B certificates are subordinated to the
Class A certificates.
The collateral interest is also subordinated to the Class B certificates.
See "Description of the Certificates--Reallocation of Cash Flows," "--The Cash
Collateral Account" and "--Allocation of Investor Default Amount" in this
prospectus supplement.
AVAILABLE ENHANCEMENT
The enhancement available to you will be the lesser of (a) the combined amount
of the collateral interest and the amount in the cash collateral account and (b)
the required enhancement amount.
See "Description of the Certificates--Amounts Available as Enhancement" in this
prospectus supplement.
THE SELLERS' INTEREST
The interest in the trust not represented by your series or by any other series
is the sellers' interest. The sellers' interest is represented by the seller
certificates, including the bank certificate and any supplemental certificates.
The bank certificate is held by the bank. The bank may sell a portion of the
sellers' interest to other investors. If a portion of the sellers' interest is
sold to anyone other than the seller or its affiliates, the interest will be
represented by a supplemental certificate. No supplemental certificates are
currently outstanding.
The sellers' interest does not provide credit enhancement for your series or any
other series.
ALLOCATIONS
AMONG SERIES
Each month the bank, as servicer, will allocate collections received among:
- - Series 1999-B;
- - other outstanding series; and
- - the sellers' interest in the trust.
The amount allocated to your series will be determined based mainly upon the
ratio of the invested amount of your series to the total amount of principal
receivables in the trust.
You are entitled to receive payments of interest and principal only from
collections and other trust assets allocated to your series.
The invested amount is the primary basis for allocations to your series. The
invested amount is the sum of the Class A invested amount, the Class B invested
amount and the collateral invested amount.
At the time of issuance of the Series 1999-B certificates, the invested amount
for Series 1999-B will be $500,000,000.
AMONG CLASSES
From the amounts allocated to your series, the servicer will further allocate
among the Class A certificates, the Class B certificates and the collateral
interest on the basis of the invested amount of each class and the invested
amount of the collateral interest. Initially the invested amount of each class
will be equal to the original principal amount of such class and the initial
invested amount of the collateral interest will be equal to the original
principal amount of the collateral interest.
See "Description of the Certificates--Allocation Percentages" in this prospectus
supplement.
The invested amount of a series or a class will decline as a result of the
accumulation of principal collections in the principal funding account or
principal payments. The invested amount also may decline if collections of
receivables allocated to your series are not sufficient to make certain required
payments and there is not enough money in the cash collateral account to make
such payments. If the invested amount of your series or class declines, there
may be a reduction in amounts allocated and available for payment to you.
For a description of the events which may lead to these reductions, see
"Description of the Certificates--Reallocation of Cash Flows" in this prospectus
supplement.
S-6
7
APPLICATION OF COLLECTIONS
FINANCE CHARGE COLLECTIONS
- - Collections of finance charge receivables and certain other amounts allocated
to the Class A certificates will be used to pay interest on the Class A
certificates, to pay Class A's portion of the servicing fee and to cover Class
A's portion of receivables that are written off as uncollectible. Any
remaining amount will become excess spread and be applied as described below.
- - Collections of finance charge receivables allocated to the Class B
certificates will be used to pay interest on the Class B certificates and to
pay Class B's portion of the servicing fee. Any remaining amount will become
excess spread and be applied as described below.
- - Collections of finance charge receivables allocated to the collateral interest
will be used to pay the collateral interest's portion of the servicing fee if
the bank or the trustee is no longer the servicer. Any remaining amount will
become excess spread and be applied as described below.
See "Description of the Certificates--Application of Collections--Payment of
Interest, Fees and Other Items" in this prospectus supplement.
EXCESS SPREAD AND EXCESS FINANCE CHARGES
Each month the excess spread and excess finance charges will be used in the
following order of priority:
- - first to make up deficiencies for Class A,
- - then to make up deficiencies for Class B, including covering Class B's portion
of receivables written off as uncollectible,
- - then to pay interest on the collateral interest,
- - then to pay the collateral interest's portion of the servicing fee, or, if the
bank or the trustee is no longer the servicer, then to pay any portion of the
collateral interest's servicing fee not paid as described above under
"--Finance Charge Collections,"
- - then to cover the collateral interest's portion of receivables that are
written off as uncollectible,
- - then to reimburse any previous reductions in the collateral invested amount,
- - then to make a deposit to the cash collateral account if the amount in the
cash collateral account is less than required,
- - then, in limited circumstances, to fund a reserve account to cover interest
payment shortfalls for Class A,
- - then to pay any amounts owed under the loan agreement for the collateral
interest and to make any deposit into the spread account required by the loan
agreement or under limited circumstances, deposited in the cash collateral
account,
- - then, if applicable, to pay amounts due to the cash collateral depositor, and
- - finally to other series or to the holders of the seller certificates.
See "Description of the Certificates-- Application of Collections--Excess
Spread; Excess Finance Charges" in this prospectus supplement.
PRINCIPAL COLLECTIONS
So long as no pay out event has occurred, your series' share of principal
collections, including shared principal collections from other series, will be
applied each month as follows:
- - First, principal collections allocated to the collateral interest and the
Class B certificates may be reallocated, if necessary, to make required
payments on the Class A certificates and the Class B certificates which were
not made from finance charge collections, excess spread, excess finance
charges or amounts on deposit in the cash collateral account.
- - During the revolving period, no principal will be paid to you or accumulated
in a trust account.
- - During the accumulation period, principal collections allocated or available
to the Class A certificates and the Class B certificates will be deposited in
the principal funding account, up to a controlled deposit amount, for payment
first to the Class A certificateholders and then to the Class B
certificateholders on the expected final distribution date.
S-7
8
- - On any distribution date, if the combined amount on deposit in the cash
collateral account plus the collateral invested amount exceeds the required
enhancement amount, principal collections allocated to the collateral interest
in the amount of the excess may be paid to the holder of the collateral
interest and will not be available to the holders of the certificates.
- - Any remaining principal collections will be first made available to other
series and then paid to the holders of the seller certificates or deposited in
the excess funding account.
If a pay out event occurs, the rapid amortization period will begin and all of
the principal collections allocated or available to the Class A certificates and
the Class B certificates, except amounts required to be reallocated, will be
applied each month to pay principal on your series. Class A will be paid first,
and then Class B.
See "Description of the Certificates--Principal Payments," "--Application of
Collections" and "--Shared Collections of Principal Receivables" in this
prospectus supplement.
PAY OUT EVENTS
Pay out events are adverse events that result in the end of the revolving period
or the accumulation period and the beginning of a rapid amortization period.
The following are pay out events:
- - the seller fails to make required payments, fails to make required deposits,
or violates other covenants and agreements;
- - the representations and warranties of the seller are materially incorrect;
- - the seller does not transfer additional assets to the trust when required;
- - the percentage obtained from your series allocation of the yield on the trust
portfolio and investment earnings from the principal funding account and
withdrawals from the reserve account, after taking into account the amount of
the receivables that are written off as uncollectible allocated to Series
1999-B, averaged over any three consecutive months is less than the weighted
average interest rate for Series 1999-B, calculated by taking into account the
interest rate for Class A, Class B and the collateral interest, plus the
servicing fee rate for Series 1999-B averaged over the same three months;
- - certain defaults of the servicer;
- - the Class A certificates and the Class B certificates are not paid in full on
their expected final distribution date;
- - the occurrence of certain events of insolvency or receivership relating to the
seller, including any additional sellers;
- - the seller is unable to transfer receivables to the trust as required under
the pooling and servicing agreement; or
- - the trust becomes an "investment company" under the Investment Company Act of
1940.
For a more detailed discussion of the pay out events, see "Description of the
Certificates--Pay Out Events" in this prospectus supplement. In addition, see
"Description of the Certificates--Trust Pay Out Events" in the accompanying
prospectus.
OPTIONAL REPURCHASE
The bank has the option to repurchase your certificates when the invested amount
for your series has been reduced to 5% or less of the initial invested amount.
See "Description of the Certificates--Optional Repurchase" in this prospectus
supplement and "Risk Factors--If Optional Repurchase Occurs, it Will Result in
an Early Return of Principal and a Reinvestment Risk" in the accompanying
prospectus.
REGISTRATION
The Series 1999-B certificates will be in book-entry form and will be registered
in the name of Cede & Co., as the nominee of The Depository Trust Company.
Except in certain limited circumstances, you will not receive a definitive
certificate representing your interest.
See "Description of the Certificates--Definitive Certificates" in the
accompanying prospectus.
S-8
9
You may elect to hold your certificates through DTC in the United States, or
Cedelbank, societe anonyme or the Euroclear System in Europe.
See "Description of the Certificates--Book-Entry Registration" and "--Definitive
Certificates" in the accompanying prospectus.
TAX STATUS
Orrick, Herrington & Sutcliffe LLP, as special tax counsel to the bank, is of
the opinion that under existing law your certificates will be characterized as
debt for federal income tax purposes. By your acceptance of a Series 1999-B
certificate, you will agree to treat your certificates as debt for federal,
state and local income and franchise tax purposes.
See "Federal Income Tax Consequences" in the accompanying prospectus for
additional information concerning the application of federal income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this prospectus supplement and the accompanying prospectus, the Class A
certificates are eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts.
The Class B certificates are not eligible for purchase by persons investing
assets of employee benefit plans or individual retirement accounts.
CERTIFICATE RATINGS
The Class A certificates will be rated in the highest rating category by at
least one nationally recognized rating organization and the Class B certificates
will be rated in one of the three highest rating categories by at least one
nationally recognized rating organization.
See "Risk Factors--Ratings Can Be Lowered or Withdrawn After You Purchase Your
Certificates And The Market Value Of Your Certificates May Be Reduced" in this
prospectus supplement.
EXCHANGE LISTING
We will apply to list the Class A certificates and the Class B certificates on
the Luxembourg Stock Exchange. We cannot guaranty that the application for the
listing will be accepted. You should consult with Bankers Trust Luxembourg S.A.,
the Luxembourg listing agent for the certificates, 14 Boulevard F.D. Roosevelt,
L-2450 Luxembourg, phone number (352) 46 02 41, to determine whether or not the
Series 1999-B certificates are listed on the Luxembourg Stock Exchange.
ADDITIONAL INFORMATION
For more information, you can call (215) 444-6800 and direct your inquiries to
the Fleet Credit Card Securitization Department.
S-9
10
RISK FACTORS
In the accompanying prospectus you will find a section called "Risk
Factors." The information in that section applies generally to all series,
including yours. The information in this section applies more specifically to
your series.
You should consider the risk factors discussed under the caption "Risk
Factors" in the prospectus and the risk factors discussed below in this section
before deciding whether to purchase any of the Series 1999-B certificates.
ABILITY TO RESELL SERIES 1999-B If you purchase Series 1999-B certificates, you may not
CERTIFICATES NOT ASSURED be able to sell them. There is currently no secondary
market for the certificates. A secondary market for your
certificates may not develop. If a secondary market does
develop, it may not continue or it may not provide
sufficient liquidity to allow you to resell all or a
part of your certificates if you want to do so. The
underwriters of the Class A certificates and the
underwriter of the Class B certificates may assist in
resales of the certificates, but they are not required
to do so.
CREDIT ENHANCEMENT MAY NOT BE SUFFICIENT Credit enhancement provided for your series of
TO PREVENT LOSS certificates is limited. The only sources of payment for
your certificates are the assets of the trust allocated
to your series. If problems develop with the
receivables, such as an increase in losses on the
receivables or if there are problems in the collection
and transfer of the receivables to the trust, it is
possible that you may not receive the full amount of
interest and principal that you would otherwise receive.
See "Description of the Certificates--Subordination,"
"--Allocation Percentages," "--Reallocation of Cash
Flows," "--Allocation of Investor Default Amount" and
"--The Cash Collateral Account" in this prospectus
supplement.
CLASS B CERTIFICATES ARE SUBORDINATED TO If you purchase a Class B certificate, your right to
THE CLASS A CERTIFICATES; TRUST ASSETS MAY receive principal payments is subordinated to the
BE DIVERTED FROM CLASS B TO PAY CLASS A payment in full of the Class A certificates. No
principal will be paid to you until the full amount of
principal has been paid on the Class A certificates.
In addition, if Class A's share of collections of
finance charge receivables and certain other amounts
allocated to Series 1999-B, excess spread, excess
finance charges, funds in the cash collateral account
and the collateral interest's share of principal
collections are not sufficient to make all required
payments for the Class A certificates, collections of
principal receivables allocated to Class B may be
diverted to Class A. If this occurs, the Class B
invested amount and future allocations to Class B would
be reduced.
S-10
11
Also, if Class A's share of losses on the receivables
exceeds the collections and credit enhancement available
to cover those losses, and the collateral invested
amount is reduced to zero, the Class B invested amount
will be reduced to avoid reducing the Class A invested
amount. If this occurs, the Class B invested amount and
future allocations to Class B would be reduced.
As a result of the subordination, you may receive
payments of interest or principal later than you expect
or you may not receive the full amount of expected
principal and interest.
RATINGS CAN BE LOWERED OR WITHDRAWN AFTER The ratings assigned to the Series 1999-B certificates
YOU PURCHASE YOUR CERTIFICATES AND THE are based upon many factors, including the credit
MARKET VALUE OF YOUR CERTIFICATES MAY BE quality of the receivables and the amount of credit
REDUCED enhancement provided. The ratings are not a
recommendation to purchase, hold or sell any of the
Series 1999-B certificates. The ratings also are not
intended and should not be relied upon to determine the
marketability of the Series 1999-B certificates, the
market value of the Series 1999-B certificates or
whether the Series 1999-B certificates are a suitable
investment for you.
Any rating agency may lower its rating or withdraw its
rating entirely if, in the sole judgment of the rating
agency, the credit quality of the certificates has
declined or is in question. If any rating assigned to
your certificates is lowered or withdrawn, the market
value of your certificates may be reduced.
S-11
12
INTRODUCTION
The following provisions of this Prospectus Supplement contain more
detailed information concerning the asset backed certificates offered hereby.
The certificates will be issued by Fleet Credit Card Master Trust II (the
"TRUST") pursuant to the terms of an 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") originally between a predecessor in interest to Fleet
Bank (RI), National Association, as Seller and Servicer, and Bankers Trust
Company, as trustee (together with any successors, the "TRUSTEE"). Fleet Bank
(RI) National Association (the "BANK"), in its capacity as Seller under the
Master Pooling and Servicing Agreement and the Series Supplement, is referred to
as the "SELLER," and in its capacity as servicer, the Bank is referred to as the
"SERVICER." The term "SELLER" also includes any Additional Sellers as described
under the caption "Description of the Certificates--The Bank Certificate;
Additional Sellers" in the Prospectus. The term "SERVICER" also refers to any
successor to the Bank, as Servicer.
The Bank is an indirect, wholly-owned subsidiary of Fleet Financial Group
("FFG"). See "The Bank and Fleet Financial Group" in the accompanying
Prospectus. On March 14, 1999, FFG and BankBoston Corporation announced that
they had reached an agreement to merge. The merger is expected to be completed
in the fourth quarter of 1999.
The Trust will issue $415,000,000 of its Class A Floating Rate Asset Backed
Certificates, Series 1999-B (the "CLASS A CERTIFICATES") and $37,500,000 of its
Class B Floating Rate Asset Backed Certificates, Series 1999-B (the "CLASS B
CERTIFICATES") and there will be created as part of 1999-B a third class of
interests in the Trust which shall be in the amount of $47,500,000 and be known
as the Collateral Interest, Series 1999-B (the "COLLATERAL INTEREST"). The Class
A Certificates and the Class B Certificates are, collectively, the "SERIES
1999-B CERTIFICATES" or the "CERTIFICATES." The Series 1999-B Certificates and
the Collateral Interest are, collectively, the "SERIES 1999-B INTERESTS." The
Series in which the Series 1999-B Interests are issued is known as "SERIES
1999-B." The date on which the Series 1999-B Interests are issued is the
"CLOSING DATE." The Closing Date is expected to be July , 1999.
The Series 1999-B Interests will be issued pursuant to the Master Pooling
and Servicing Agreement and the Series 1999-B Supplement (the "SERIES
SUPPLEMENT"). The Master Pooling and Servicing Agreement, together with the
Series Supplement, is the "POOLING AND SERVICING AGREEMENT." Certain terms for
the Collateral Interest will be contained in the Loan Agreement among the Bank,
as Seller and Servicer, the Trustee, and the holder of the Collateral Interest
(the "COLLATERAL INTEREST HOLDER"), dated as of the Closing Date (the "LOAN
AGREEMENT").
Series 1999-B will be the twentieth Series issued by the Trust. Of the
Series, fourteen, including Series 1999-B, will be outstanding on the Closing
Date. Series 1999-B will be the fourteenth Series outstanding included in a
group of Series ("GROUP ONE") issued by the Trust from time to time. See Annex
I. Annex I is hereby incorporated into this Prospectus Supplement by reference.
Additional Series are expected to be issued from time to time by the Trust.
The Certificates offered by this Prospectus Supplement and the accompanying
Prospectus are investment grade asset-backed securities within the meaning of
the Securities Act of 1933, as amended (the "ACT") and the rules promulgated
thereunder.
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 on
February 20, 1998, the owner of a portfolio of credit card accounts originated
or acquired by the Bank or its predecessor (the "FLEET "B" 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
S-12
13
the Advanta Consumer Credit Card Portfolio. Those accounts transferred to the
Bank from Advanta National Bank plus accounts acquired or originated by the Bank
since the Transfer are herein referred to as the "FLEET "A" CREDIT CARD
PORTFOLIO." The total "FLEET CREDIT CARD PORTFOLIO" includes the Fleet "B"
Credit Card Portfolio and the Fleet "A" Credit Card Portfolio. All Accounts
assigned to the Trust prior to January 31, 1999 were selected from the Fleet "A"
Credit Card Portfolio. Accounts selected from the Fleet "B" Credit Card
Portfolio were first added to the Trust as of January 31, 1999. Since January
31, 1999, accounts selected for assignment to the Trust have been selected from
the entire Fleet Credit Card Portfolio.
As of March 31, 1999, the Fleet Credit Card Portfolio included receivables
which were transferred to Fleet Credit Card Master Trust I in an aggregate
amount equal to approximately $468 million ("MASTER TRUST I SALES"). As of March
31, 1999, the Fleet Credit Card Portfolio also included approximately $9,447
million of receivables which were transferred to the Fleet Credit Card Master
Trust II (the "MASTER TRUST II SALES"). On April 16, 1999, Fleet Credit Card
Master Trust I terminated and from and after such date none of the receivables
in the Fleet Credit Card Portfolio are Master Trust I Sales.
Additional Accounts have been designated for inclusion in the Trust from
time to time as set forth in Annex II. Annex II is hereby incorporated into this
Prospectus Supplement by reference.
As of March 31, 1999, the Fleet "B" Credit Card Portfolio represented
approximately 16% of the total amount of receivables in the Fleet Credit Card
Portfolio.
The Bank is a member of VISA U.S.A. Inc. and MasterCard International
Incorporated.
BILLING AND PAYMENT
The majority of the accounts in the Fleet Credit Card Portfolio are subject
to finance charges at prime indexed or London interbank offered rate indexed
variable rates ranging from 3.9% to 22.9% for purchases and cash advances. For
more information, see "The Bank's Credit Card Activities--Billing and Payments"
in the accompanying Prospectus.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for the
Fleet Credit Card Portfolio beginning on February 20, 1998. Information prior to
February 20, 1998 is shown pro forma as if the Bank had purchased the Advanta
Consumer Credit Card Portfolio as of the beginning of 1996.
The Accounts in the Trust Portfolio were, prior to February 20, 1998,
selected from accounts in the Advanta Consumer Credit Card Portfolio and for the
period from February 20, 1998 to January 31, 1999 were selected from the Fleet
"A" Credit Card Portfolio. Commencing on January 31, 1999, Accounts added to the
Trust have been selected from the Fleet "B" Credit Card Portfolio as well as the
Fleet "A" Credit Card Portfolio. In each case, the Accounts selected must meet
the requirements of Eligible Accounts in the Pooling and Servicing Agreement.
See "Description of the Certificates--Representations, Warranties and Covenants"
and "--Addition of Accounts" in the Prospectus. See also "The Receivables" in
this Prospectus Supplement.
S-13
14
There can be no assurance that the delinquency and loss experience for the
Receivables will be similar to the historical experience set forth in the
following tables.
DELINQUENCY EXPERIENCE
FLEET CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
AS OF DECEMBER 31,
AS OF MARCH 31, ---------------------------------------
1999(1) 1998(1) 1997(1) 1996(1)
--------------- ----------- ----------- -----------
Receivables Outstanding(2)(3)............. $12,638,731 $14,524,541 $13,937,589 $15,347,191
Receivables Contractually Delinquent as a
Percentage of Receivables
Outstanding(2):
30-59 days.............................. 1.67% 1.58% 1.77% 1.56%
60-89 days.............................. 1.11% 1.07% 1.13% 1.03%
90 or more days......................... 2.39% 2.29% 2.39% 2.14%
----------- ----------- ----------- -----------
Total..................................... 5.17% 4.94% 5.29% 4.73%
=========== =========== =========== ===========
- ------------
(1) Includes the receivables transferred in connection with the Master Trust I
Sales and Master Trust II Sales.
(2) Receivables Outstanding and Receivables Contractually Delinquent include the
Fleet "A" Credit Card Portfolio and Fleet "B" Credit Card Portfolio
beginning on February 20, 1998. Information prior to February 20, 1998 is
shown pro forma as if the Bank had purchased the Advanta Consumer Credit
Card Portfolio as of the beginning of 1996. Receivables Outstanding and
Receivables Contractually Delinquent related to the credit card portfolio
acquired by FFG as a result of the purchase of NatWest Bank, N.A. are
included beginning in June, 1997.
(3) Receivables Outstanding consists of all amounts due from cardholders as
posted to the accounts.
LOSS EXPERIENCE
FLEET CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------------------------
1999 1998 1997 1996
--------------- ----------- ----------- -----------
Average Receivables
Outstanding(1)(2)(3)........... $13,505,343 $14,380,316 $13,950,913 $14,266,600
Gross Losses(2)(4)............... $ 265,502 $ 1,034,996 $ 1,052,527 $ 572,511
Recoveries(2).................... $ 18,906 $ 91,664 $ 84,439 $ 28,059
Net Losses....................... $ 246,596 $ 943,332 $ 968,088 $ 544,452
Net Losses as a Percentage of
Average Receivables
Outstanding.................... 7.30%(5) 6.56%(5) 6.94%(5) 3.82%(5)
- ------------
(1) Includes the receivables transferred in connection with the Master Trust I
Sales and Master Trust II Sales.
(2) Average Receivables Outstanding, Gross Losses and Recoveries include the
Fleet "A" Credit Card Portfolio and Fleet "B" Credit Card Portfolio
beginning on February 20, 1998. Information prior to February 20, 1998 is
shown pro forma as if the Bank had purchased the Advanta Consumer Credit
Card Portfolio as of the beginning of 1996. Average Receivables Outstanding,
Gross Losses and Recoveries related to the credit card portfolio acquired by
FFG as a result of the purchase of NatWest Bank, N.A. are included beginning
in June, 1997.
(3) Average Receivables Outstanding is the sum of receivables outstanding at the
beginning and end of each month during the period indicated, divided by
twice the number of months in the period indicated.
(4) Gross Losses are presented net of adjustments made pursuant to the Bank's
normal servicing procedures, including removal of incorrect or disputed
finance charges and reversal of annual cardholder fees on cardholder
accounts which have been closed. Losses do not include accrued finance
charges that have been charged-off or fraud losses.
(5) Beginning in August 1996, a new charge-off methodology related to bankrupt
credit card accounts was adopted and, as of October 1, 1998, further changes
to such methodology were adopted and commencing on October 1, 1998, the Bank
revised its policy concerning the charge-off of delinquent accounts. See
"The Bank's Credit Card Activities--Delinquencies" in the Prospectus.
S-14
15
The causes of the increase in the charge-offs from 1996 to 1997 include the
following factors: continuing increases in the level of consumer bankruptcies,
the seasoning of the portfolio and a general trend in the credit card industry
towards higher gross charge-offs. A number of initiatives have been undertaken
to stem losses, including improving the collection process by further
customizing collection methods, more quickly identifying and intervening on
potentially troubled accounts by means of advanced computer-based behavior
prediction programs and tightening underwriting standards.
In February 1999, the Federal Financial Institutions Examination Council
adopted a revised policy statement on the classifications of retail credit. The
revised policy statement provides uniform guidelines for charge-off of loans to
delinquent, bankrupt and deceased borrowers and for reaging, extending,
deferring or rewriting of delinquent accounts. In order to comply with this
policy, the Bank, as Servicer, is accelerating charge-off of some delinquent
loans. Implementation began in April 1999 and will continue through December
1999. The Servicer does not expect this implementation to have an effect upon
the payment of principal and interest on the Certificates. This statement is a
forward-looking statement, subject to risks and uncertainties.
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 on
the Business Day immediately preceding the Distribution Date an amount equal to
one-twelfth of 1.25% of the outstanding balance of the Principal Receivables
allocable to Series 1999-B at the end of the last day of the preceding Monthly
Period.
YEAR 2000 READINESS
The Year 2000 project for Fleet Financial Group ("FFG"), the Bank's holding
company, is directed by a Year 2000 Executive Management Steering Committee
consisting of its President and Vice Chairmen. They provide direct oversight of
the Year 2000 initiative and are updated monthly on the project's progress. The
Bank's Board of Directors receives project updates on a quarterly basis.
The Bank has completed its assessment of Year 2000 issues and arranged for
the required resources to complete the necessary remediation efforts. The Bank
has utilized both internal and external resources to reprogram, or replace, and
test the software and hardware for Year 2000 modifications.
The Bank has remediated, tested and returned to service all of its internal
systems. These systems can process dates and data into the year 2000 and beyond.
The Bank relies on several third party service providers for key business
processes. It continues to work closely with these companies to monitor the
progress of their Year 2000 efforts. On behalf of the Bank, FFG's executive
management has conducted on-site visits with its most critical service providers
to discuss and assess their Year 2000 readiness. In addition, FFG is receiving
written and verbal verification from its significant third party service
providers and vendors as to their Year 2000 readiness.
The Bank began Year 2000 testing with several of these key vendors in the
third quarter of 1998 and completed testing by the end of the second quarter of
1999. Validation of Year 2000 readiness of all the Bank's vendors continues with
a particular focus on the readiness and alternatives, where possible, for
vendors that have been identified as critical.
While the Bank continues to discuss these matters with, obtain written
certification from and test the systems of such other companies as to the Year
2000 compliance, there can be no assurance that any potential impact associated
with incompatible systems after December 31, 1999 would not have a material
adverse effect on the Bank's business, financial condition or results of
operations.
FFG and the Bank have established business continuity plans. The
corporation has assessed these plans for the possible impact of Year 2000
anticipated failures. It has adjusted its business continuity plans where
appropriate and possible for those scenarios that may have the most severe
impact on its operations. This
S-15
16
activity was substantially completed by the end of the second quarter of 1999
and validation of the plans is currently underway.
LITIGATION
On January 22, 1999, Fleet Financial Group, Inc., Fleet National Bank,
Fleet Bank (RI), National Association, Fleet Credit Card Services, LP and Fleet
Credit Card Holdings, Inc. (collectively referred to as "Fleet") brought suit
against Advanta Corp., and certain of its subsidiaries (collectively referred to
as "Advanta"). The action arose out of a February, 1998 transaction in which
Fleet Financial Group, Inc. and Fleet Credit Card LLC, the predecessor in
interest to Fleet Credit Card Services, LP, acquired most of the consumer credit
card business of Advanta National Bank. Advanta answered Fleet's complaint,
denying the principal allegations and asserting a variety of counterclaims.
The litigation is presently in the early stages of the discovery process.
Due to the nature of Advanta's pleadings, the limited discovery that has
occurred to date concerning Advanta's claims, and the general unpredictability
of the litigation process, it is impossible, at this time, to predict the
ultimate outcome of the litigation. However, Fleet intends to vigorously pursue
its claims and contest the claims asserted by Advanta. Fleet Financial Group,
Inc. does not expect this action to have any material adverse impact on its
business.
THE RECEIVABLES
The Receivables in the first Accounts designated to the Trust (the "INITIAL
ACCOUNTS") were conveyed to the Trust on December 3, 1993 (the "INITIAL CLOSING
DATE"). The Initial Accounts were selected from Advanta National Bank's 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 accounts designated to the Trust after the Initial
Accounts (the "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
"A" Credit Card Portfolio from February 20, 1998 to January 31, 1999, and
commencing on January 31, 1999, Additional Accounts have been selected from the
entire Fleet Credit Card Portfolio, including both the Fleet "A" Credit Card
Portfolio and the Fleet "B" Credit Card Portfolio. In each case such Additional
Accounts are required to satisfy the Criteria as applied on the relevant cut-off
date (the "RELEVANT CUT-OFF DATE"). The Initial Accounts and the Receivables
therein and all Additional Accounts and the Receivables therein 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"
and are set forth in the accompanying 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 accompanying 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. As noted above, Eligible
Accounts must, as of the Relevant Cut-Off Date, have a billing address in the
United States, its territories or possessions or a military address and, as
shown in this section in the table captioned "Geographic Distribution of
Accounts and Receivables--Trust Portfolio," as of May 31, 1999, 99.9% of the
Accounts and 99.9% of the Receivables had billing addresses in one of the 50
states or the District of Columbia.
Pursuant to the Pooling and Servicing Agreement, the Seller may be
obligated (subject to certain limitations and conditions) to designate
Additional Accounts to be included as Accounts and to convey to the Trust all
Receivables of such Additional Accounts, or may elect to automatically designate
Additional
S-16
17
Accounts and convey the Receivables therein whether such Receivables are then
existing or thereafter created. See "Description of the Certificates--General"
and "--Addition of Accounts" in the accompanying 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
existing 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 are Eligible Receivables. See "Description of the
Certificates--Representations, Warranties and Covenants" in the accompanying
Prospectus.
The Receivables (including receivables in the Additional Accounts the
receivables of which are expected to be conveyed to the Trust during the period
from May 31, 1999 through the Closing Date), as of May 31, 1999, totaled
$10,291,191,640 in 6,818,642 Accounts. The Accounts had an average credit limit
of $6,603. The percentage of the aggregate total Receivables balance to the
aggregate total credit limit was 22.9%. The average age of the Accounts was
approximately 43.3 months.
The Receivables balance as of May 31, 1999 (not including receivables to be
added to the Trust thereafter) totaled $9,284,869,737. The Receivables balance
as of July 11, 1999, (not including receivables to be added thereafter) totaled
$9,862,657,853. As of July 11, 1999, the balance of Receivables in the Trust
which were 30 days or more contractually delinquent was $469,805,662.
The following tables summarize the Trust Portfolio (including receivables
in the Additional Accounts the receivables of which are expected to be conveyed
to the Trust during the period from May 31, 1999 through the Closing Date) by
various criteria as of the close of business on May 31, 1999. 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
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------- --------- ---------- --------------- -----------
Credit balance........................... 167,103 2.5% $ (16,206,681) (0.2)%
$0.00.................................... 3,056,934 44.8 0 0.0
$0.01 to $1,000.00....................... 1,153,437 16.9 394,620,057 3.8
$1,000.01 to $2,500.00................... 737,205 10.8 1,264,052,985 12.3
$2,500.01 to $5,000.00................... 993,699 14.6 3,678,765,260 35.8
$5,000.01 to $7,500.00................... 491,204 7.2 2,992,779,984 29.1
Over $7,500.00........................... 219,060 3.2 1,977,180,035 19.2
--------- ----- --------------- -----
Total.................................... 6,818,642 100.0% $10,291,191,640 100.0%
========= ===== =============== =====
S-17
18
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- -------------------- --------- ---------- --------------- -----------
$0.00 to $1,000.00....................... 77,227 1.1% $ 12,297,038 0.1%
$1,000.01 to $2,500.00................... 455,929 6.7 367,587,799 3.6
$2,500.01 to $5,000.00................... 2,006,213 29.4 2,596,481,963 25.2
$5,000.01 to $7,500.00................... 2,140,056 31.4 3,197,519,269 31.1
Over $7,500.00........................... 2,139,217 31.4 4,117,305,571 40.0
--------- ----- --------------- -----
Total.................................... 6,818,642 100.0% $10,291,191,640 100.0%
========= ===== =============== =====
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------------------- --------- ---------- --------------- -----------
Not Delinquent........................... 6,566,153 96.3% $ 9,304,416,541 90.4%
1 to 29 days............................. 153,330 2.3 544,591,345 5.3
30 to 59 days............................ 36,905 0.5 148,213,456 1.4
60 to 89 days............................ 22,128 0.3 97,719,811 1.0
90 to 119 days........................... 15,675 0.2 74,581,970 0.7
120 to 149 days.......................... 12,531 0.2 60,932,515 0.6
150 to 179 days.......................... 10,406 0.2 52,287,268 0.5
180 or more.............................. 1,514 0.0 8,448,734 0.1
--------- ----- --------------- -----
Total.................................... 6,818,642 100.0% $10,291,191,640 100.0%
========= ===== =============== =====
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
AGE (IN MONTHS) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------- --------- ---------- --------------- -----------
Not more than 6 Months................... 419,066 6.1% $ 850,694,001 8.3%
Over 6 to 12 Months...................... 695,798 10.2 1,146,882,589 11.1
Over 12 to 24 Months..................... 1,750,601 25.7 2,234,850,904 21.7
Over 24 to 36 Months..................... 687,092 10.1 931,320,226 9.0
Over 36 to 48 Months..................... 1,263,229 18.5 1,652,118,884 16.1
Over 48 to 60 Months..................... 724,426 10.6 1,255,840,736 12.2
Over 60 to 84 Months..................... 530,161 7.8 915,587,569 8.9
Over 84 Months........................... 748,269 11.0 1,303,896,731 12.7
--------- ----- --------------- -----
Total.................................... 6,818,642 100.0% $10,291,191,640 100.0%
========= ===== =============== =====
S-18
19
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS AND RECEIVABLES
TRUST PORTFOLIO(1)
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----- --------- ----------- --------------- -----------
Alabama.......................................... 72,146 1.1% $ 113,028,449 1.1%
Alaska........................................... 10,306 0.1 17,600,166 0.1
Arizona.......................................... 100,463 1.5 157,615,270 1.5
Arkansas......................................... 54,140 0.8 92,883,928 0.9
California....................................... 912,629 13.4 1,401,898,234 13.6
Colorado......................................... 111,268 1.6 156,908,402 1.5
Connecticut...................................... 154,401 2.3 252,101,839 2.4
Delaware......................................... 17,284 0.3 25,963,985 0.3
District of Columbia............................. 11,676 0.2 18,282,033 0.2
Florida.......................................... 404,520 5.9 608,789,902 5.9
Georgia.......................................... 134,597 2.0 204,641,706 2.0
Hawaii........................................... 23,356 0.3 40,068,032 0.4
Idaho............................................ 26,520 0.4 38,109,042 0.4
Illinois......................................... 262,267 3.8 368,377,450 3.6
Indiana.......................................... 120,616 1.8 173,202,250 1.7
Iowa............................................. 75,106 1.1 100,777,345 1.0
Kansas........................................... 64,792 1.0 99,391,428 1.0
Kentucky......................................... 73,401 1.1 109,780,836 1.1
Louisiana........................................ 87,872 1.3 132,575,583 1.3
Maine............................................ 23,566 0.3 44,869,743 0.4
Maryland......................................... 134,109 2.0 196,868,643 1.9
Massachusetts.................................... 275,474 4.0 429,301,258 4.2
Michigan......................................... 211,007 3.1 305,550,180 3.0
Minnesota........................................ 135,840 2.0 181,261,632 1.8
Mississippi...................................... 37,587 0.6 57,633,642 0.6
Missouri......................................... 131,716 1.9 196,906,103 1.9
Montana.......................................... 17,874 0.3 23,462,592 0.2
Nebraska......................................... 38,051 0.6 50,316,744 0.5
Nevada........................................... 53,442 0.8 93,543,783 0.9
New Hampshire.................................... 44,526 0.7 73,638,680 0.7
New Jersey....................................... 275,304 4.0 401,871,208 3.9
New Mexico....................................... 31,215 0.5 47,757,781 0.5
New York......................................... 633,835 9.3 991,023,850 9.6
North Carolina................................... 131,653 1.9 201,707,642 2.0
North Dakota..................................... 13,012 0.2 17,674,074 0.1
Ohio............................................. 253,880 3.7 377,467,884 3.7
Oklahoma......................................... 74,195 1.1 117,105,226 1.1
Oregon........................................... 76,421 1.1 110,979,009 1.1
Pennsylvania..................................... 293,951 4.3 413,231,114 4.0
Rhode Island..................................... 51,264 0.8 79,127,334 0.8
South Carolina................................... 60,716 0.9 93,713,201 0.9
South Dakota..................................... 13,155 0.2 18,035,914 0.2
Tennessee........................................ 104,566 1.5 162,966,469 1.6
Texas............................................ 452,707 6.6 733,695,206 7.1
Utah............................................. 35,942 0.5 48,372,537 0.5
Vermont.......................................... 14,271 0.2 22,177,701 0.2
Virginia......................................... 172,274 2.5 263,000,747 2.6
Washington....................................... 125,897 1.8 186,158,244 1.8
West Virginia.................................... 29,969 0.4 43,441,179 0.4
Wisconsin........................................ 133,555 2.0 164,049,081 1.6
Wyoming.......................................... 10,893 0.1 16,280,605 0.1
All Others....................................... 9,415 0.1 16,006,754 0.1
--------- ----- --------------- -----
Total............................................ 6,818,642 100.0% $10,291,191,640 100.0%
========= ===== =============== =====
- ------------
(1) All data as of May 31, 1999 (including Receivables then in the Trust and
Receivables in Additional Accounts to be added thereafter through the
Closing Date).
S-19
20
MATURITY ASSUMPTIONS
The Pooling and Servicing Agreement provides that the holders of the Class
A Certificates (the "CLASS A CERTIFICATEHOLDERS") will not receive payments of
principal until the July 2004 Distribution Date (the "CLASS A EXPECTED FINAL
DISTRIBUTION DATE"), on which date it is expected that the full principal amount
of the Class A Certificates will be paid; however, payment may begin prior to
such date if a Pay Out Event occurs that results in the start of the Rapid
Amortization Period. The Pooling and Servicing Agreement also provides that the
holders of the Class B Certificates (the "CLASS B CERTIFICATEHOLDERS," and
together with the Class A Certificateholders, the "CERTIFICATEHOLDERS") will not
receive payments of principal until the July 2004 Distribution Date (the "CLASS
B EXPECTED FINAL DISTRIBUTION DATE"), on which date it is expected that the full
principal amount of the Class B Certificates will be paid; however, principal
payments may begin prior to such date if a Pay Out Event occurs that results in
the start of the Rapid Amortization Period. No principal payments will be made
to the Class B Certificateholders unless the Class A Investor Amount is paid in
full. Unless and until a Pay Out Event occurs, on each Distribution Date for the
Accumulation Period, monthly deposits of principal equal to the least of (a)
Available Investor Principal Collections and (b) the sum of (i) the Controlled
Accumulation Amount for such Distribution Date and (ii) any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date (such sum,
the "CONTROLLED DEPOSIT AMOUNT") and (c) the Invested 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 Class A Expected Final Distribution Date and that a single principal payment
will also be made to Class B Certificateholders in an amount equal to the Class
B Investor Amount on the Class B Expected Final Distribution Date, no assurance
can be given in that regard.
In addition to Pay Out Events which apply to all Series, other Pay Out
Events may occur with respect to Series 1999-B 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) if the
Seller Amount is less than the Required Seller Amount on the last day of any
Monthly Period (as determined on the third Business Day preceding the following
Distribution Date (the "DETERMINATION DATE"), 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 by the tenth Business Day
following such Determination Date, or (ii) if the aggregate amount of Principal
Receivables is less than the Required Principal Balance on the last day of any
Monthly Period (as determined on the following Determination Date), 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 by the tenth Business Day following such
Determination Date, (d) the average of the Net Portfolio Yield for any three
consecutive Monthly Periods being a rate which is less than the Base Rate
averaged over 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 Investor Amount on the Class B Expected Final Distribution
Date.
The term "NET PORTFOLIO YIELD" for any Monthly Period, means the annualized
percentage equivalent of a fraction, the numerator of which is the sum of (a)
the amount of collections of Finance Charge Receivables during such Monthly
Period allocable to the Certificates and to the Collateral Interest, including
any other amounts that are to be treated as collections of Finance Charge
Receivables under the Pooling and Servicing Agreement, after subtracting
therefrom the Investor Default Amount for such Monthly Period, plus (b) the
amount of any Principal Funding Investment Proceeds for such Distribution Date,
plus (c) the amount of funds, if any, to be withdrawn from the Reserve Account
that, pursuant to the Series 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 of a fraction, the numerator of which is equal to the sum
of (i) the Class A Monthly Interest, (ii) the Class B Monthly Interest, (iii)
the Collateral Monthly Interest and (iv) the Monthly Servicing Fee, each for the
S-20
21
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 Series 1999-B and all other Series,
automatically upon (a) the occurrence of 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,
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 this Prospectus Supplement.
Upon the occurrence of a Pay Out Event which applies to Series 1999-B or to
all Series, a Rapid Amortization Period will begin. The "RAPID AMORTIZATION
PERIOD" means the period beginning with the occurrence of a Pay Out Event and
ending on the earlier of (i) the payment in full of the Class A Investor Amount,
the Class B Investor Amount and the Collateral Invested Amount and (ii) the
Series 1999-B Termination Date. 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 Investor Amount, as applicable, is paid in full.
Allocations of Principal Receivables will be based on the Principal Allocation
Percentage. See "Description of the Certificates--Allocation Percentages" in
this Prospectus Supplement.
The following table sets forth the highest and lowest cardholder monthly
payment rates and the average of the cardholder monthly payment rates for the
Fleet Credit Card Portfolio. Information prior to February 20, 1998 is pro forma
as if the Bank had purchased the Advanta Consumer Credit Card Portfolio as of
the beginning of 1996. The rates are calculated as a percentage of the 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 on the Accounts.
MONTHLY PAYMENT RATES
FLEET CREDIT CARD PORTFOLIO(1)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------
1999(1) 1998(1) 1997(1) 1996(1)
------------------ ------- ------- -------
Lowest........................................ 12.04% 10.84% 9.93% 8.56%
Highest....................................... 13.64% 12.36% 12.29% 10.28%
Monthly Average............................... 12.58% 11.57% 11.09% 9.55%
- ------------
(1) Payment rate calculations include collections of both the Fleet "A" Credit
Card Portfolio and Fleet "B" Credit Card Portfolio beginning on February 20,
1998. Information prior to February 20, 1998 is shown pro forma as if the
Bank had purchased the Advanta Consumer Credit Card Portfolio as of the
beginning of 1996. Collections related to the credit card portfolio acquired
by FFG as a result of the purchase of NatWest Bank, N.A. are included
beginning in June, 1997.
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 from 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 Investor 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
S-21
22
timing of payments received by Certificateholders. Further, if a Pay Out Event
occurs, the average life and maturity of the Series 1999-B Certificates could be
significantly reduced.
RECEIVABLE YIELD CONSIDERATIONS
The following table provides yield information for the three months ended
March 31, 1999 and each of the years ended December 31, 1998, 1997 and 1996.
Information prior to February 20, 1998 is shown pro forma as if the Bank had
purchased the Advanta Consumer Credit Card Portfolio as of the beginning of
1996.
The historical yield figures in the table are calculated on an accrual
basis. Collections on the Receivables will be on a cash basis and may not
reflect the historical yield experience in the table. For example, during
periods of increasing delinquencies accrual yields may exceed cash yields as
amounts collected on credit card receivables lag behind amounts accrued and
billed to cardholders. Conversely, as delinquencies decrease, cash yields may
exceed accrual yields as amounts 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, the percentage of
cardholders who pay their balances in full each month and do not incur finance
charges and any restrictions which may be imposed by future legislation or
regulations. 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 accompanying Prospectus.
REVENUE FROM FINANCE CHARGES AND FEES
FLEET CREDIT CARD PORTFOLIO(1)
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 31, ---------------------------------
1999(2) 1998(2) 1997(2) 1996(2)
--------------- ------- ------- -------
Average Monthly Accrued Fees and
Charges(3)(4)(5)......................... $41.67(7) $36.07(1) $36.99(1) $30.12(1)
Average Account Balance(3)(6).............. 2,670 2,798 2,783 2,778
Yield From Fees and Charges(4)(5).......... 18.73%(7) 15.47%(1) 15.95%(1) 13.01%(1)
- ---------------
(1) The amounts shown, except for the three months ended March 31, 1999, do not
include revenue attributed to Interchange.
(2) Includes the receivables transferred in connection with the Master Trust I
Sales and Master Trust II Sales.
(3) Average Monthly Accrued Fees and Charges and Average Account Balances
include information from both the Fleet "A" Credit Card Portfolio and Fleet
"B" Credit Card Portfolio beginning on February 20, 1998. Information prior
to February 20, 1998 is shown pro forma as if the Bank had purchased the
Advanta Consumer Credit Card Portfolio as of the beginning of 1996. Fees,
charges and account balances related to the credit card portfolio acquired
by FFG as a result of the purchase of NatWest Bank, N.A. are included
beginning in June, 1997.
(4) Fees and Charges for each of the years ended December 31, 1996, 1997 and
1998 are comprised of finance charges, annual cardholder fees and certain
other service charges. Fees and charges for the three months ended March 31,
1999 are comprised of finance charges, annual cardholder fees and all other
service charges plus revenue attributed to Interchange.
(5) Average Monthly Accrued Fees and Charges and Yield from Fees and Charges are
presented net of adjustments made pursuant to normal servicing procedures,
including removal of incorrect or disputed finance charges and reversal of
finance charges accrued on charged-off accounts.
(6) Average Account Balance includes purchases, cash advances and billed and
unpaid finance and other charges, and is calculated based on the average of
the opening monthly account balances for accounts with balances during the
periods shown.
(7) Beginning January 1, 1999 revenue from Interchange and fees not previously
included have been included in fees and charges and in calculating the yield
from fees and charges. For the three months ended March 31, 1999, if fees
and charges had not included revenue attributed to Interchange and the
additional fees, the average monthly accrued fees and charges would have
been $36.25 and the yield from fees and charges would have been 16.30%.
The yields shown in the above table are comprised of three components:
finance charges, annual cardholder fees and other service charges, such as late
charges. In addition, for the three months ended March 31, 1999 the yield
includes Interchange and fees not previously included. 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. The Bank currently assesses annual cardholder fees of
S-22
23
$10 to $50 for certain of its credit card accounts. Most accounts included in
the Fleet Credit Card Portfolio and originated since March 1987 do not carry an
annual cardholder fee. See "The Banks' Credit Card Activities" in the
accompanying Prospectus. As account balances increase, an annual cardholder fee,
which remains constant, represents a smaller percentage of the aggregate account
balance.
The increase in yields demonstrated in the above table from 1996 to 1997 is
the result of actions taken by the Bank's predecessor as Seller and Servicer to
improve the revenue produced by its credit card business. Several risk based
repricing initiatives were implemented by Advanta National Bank in 1996 and
1997. During this period, the Bank did not implement risk based repricing
initiatives in the Fleet "B" Credit Card Portfolio. In May 1997, the average
percentage rate on a majority of receivables in the Advanta Consumer Credit Card
Portfolio was increased on average from 200 to 300 basis points. In addition,
late, overlimit and nonsufficient funds fees, cash advance fees, and certain
other fees were either increased or added. Due to scaled down marketing efforts,
there was also a lower percentage of teaser rate credit cards in the Advanta
Consumer Credit Card Portfolio in 1997 as compared to prior years.
The increase in yields demonstrated in the above table from December 31,
1998 to March 31, 1999 is the result of several changes implemented by the Bank.
As of January 1, 1999, the Bank, in calculating fees and charges has included
Interchange and service charges not previously included. Other factors affecting
the increase include the Bank's continued use of risk based repricing.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Master Pooling and
Servicing Agreement 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 and the Trustee may execute further supplements thereto in
order to issue additional Series. See "Description of the Certificates--New
Issuances" in the accompanying Prospectus. The Trustee will provide a copy of
the Master Pooling and Servicing Agreement (without exhibits or schedules),
including any relevant Series Supplement, 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 and the Collateral Interest 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 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 cardholder
payments on the Receivables. See "--Allocation Percentages" in this Prospectus
Supplement. For any Monthly Period, the portion of the Principal Receivables and
any amounts on deposit in, credited to or held in the Excess Funding Account
represented by the Certificates and the Collateral Interest (the "INVESTED
AMOUNT") will be equal to $500,000,000, which is the initial invested amount of
the Certificates and the Collateral Interest on the Closing Date (the "INITIAL
INVESTED AMOUNT"), minus the principal amount on deposit in the Principal
Funding Account, minus the amount of principal payments paid to the
Certificateholders and the Collateral Interest Holder (collectively, the "SERIES
1999-B HOLDERS") and minus any unreimbursed reductions in the Invested Amount.
See "Description of the Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges" in the accompanying Prospectus and "Description of the
Certificates--Allocation of Investor Default Amount" in this Prospectus
Supplement.
Each Certificate represents the right to receive monthly payments of
interest for each Interest Period at the applicable Certificate Rate from
collections of Finance Charge Receivables and certain other amounts and, in
certain circumstances, amounts withdrawn from the Cash Collateral Account and
the Reserve Account (provided that amounts withdrawn from the Reserve Account
are only available to the Class A Certificates) and Reallocated Principal
Collections, and deposits or payments of principal during the
S-23
24
Accumulation Period or the Rapid Amortization Period funded from Available
Investor Principal Collections (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, credited to or held in the Excess Funding Account, if any (the
"SELLER AMOUNT"), not represented by the Certificates, the Collateral Interest
and the certificates of and uncertificated interests in other Series, if any.
The Seller holds an undivided interest in the Trust (the "SELLERS' INTEREST"),
including the right to a percentage (the "SELLER PERCENTAGE") of all cardholder
payments on the Receivables.
During the Revolving Period, the Invested Amount will remain constant
except in certain limited circumstances. See "Description of the
Certificates--Defaulted Receivables; Rebates and Fraudulent Charges" in the
accompanying Prospectus and "Description of the Certificates--Allocation of
Investor Default Amount" in this Prospectus Supplement. 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 Collateral Interest Holder.
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 January 2007 Distribution Date and
(iii) the termination of the Trust (the earliest of (i), (ii) and (iii) being
the "SERIES 1999-B TERMINATION DATE"). All principal and interest will be due
and payable no later than the Series 1999-B Termination Date. See "Description
of the Certificates--Final Payment of Principal and Interest; Termination" in
the accompanying Prospectus.
REGISTRATION OF CERTIFICATES
The Certificates initially will be represented by certificates registered
in the name of Cede & Co., 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 in the Prospectus. Investor Certificateholders may elect to hold their
Investor Certificates through DTC (in the United States) or Cedelbank or
Euroclear (in Europe). See "Description of the Certificates--Definitive
Certificates" in the accompanying Prospectus.
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. Interest payments on the Certificates will be made
on September 15, 1999 and on the 15th day of each month thereafter, or if any
such day is not a Business Day, on the next succeeding Business Day (each a
"DISTRIBUTION DATE"). 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. Class A Monthly Interest and Class B Monthly Interest due but not paid
on any Distribution Date will be payable on the next succeeding Distribution
Date together with additional interest on such amount at the applicable
Certificate Rate plus 2.0%.
Interest on the Class A Certificates and the Class B Certificates will be
calculated on the basis of the actual number of days in the related Interest
Period and a 360-day year. The Class A Certificates will bear interest at the
rate of % per annum above the London interbank offered quotations for United
States dollar deposits ("LIBOR") for a period of the Designated Maturity
determined as set forth below (the "CLASS A CERTIFICATE RATE"). The Class B
Certificates will bear interest at the rate of % per annum above
S-24
25
LIBOR for a period of the Designated Maturity determined as set forth below (the
"CLASS B CERTIFICATE RATE").
The "INTEREST PERIOD" for 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 September 14, 1999, the day preceding the initial Distribution Date. The
term "BUSINESS DAY" means any day other than a Saturday, Sunday or day on which
banking institutions in New York, New York, Providence, Rhode Island (or for the
determination of LIBOR, London, England) or any other state where 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" for any Distribution Date will be the
immediately preceding calendar month, except for the initial Monthly Period,
which will begin on the Closing Date and end on August 31, 1999). The "RECORD
DATE" for any Distribution Date will be the last Business Day of the month
preceding such Distribution Date.
The Trustee will determine LIBOR on July , 1999 for the period from the
Closing Date through September 14, 1999, and for each Interest Period
thereafter, on the second Business Day prior to every Distribution Date on which
such Interest Period begins, commencing with the September 1999 Distribution
Date (each a "LIBOR DETERMINATION DATE").
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a period of the Designated Maturity which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such date. If such rate
does not appear on Telerate Page 3750, the rate for that LIBOR Determination
Date will be determined on the basis of the rates at which deposits in United
States dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on that day to prime banks in the London interbank market for a
period of the Designated Maturity. The Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for that LIBOR Determination
Date will be the arithmetic mean of the quotations. If fewer than two quotations
are provided as requested, the rate for that LIBOR Determination Date will be
the arithmetic mean of the rates quoted by the Reference Banks, selected by the
Servicer, at approximately 11:00 a.m., New York City time, on that day for loans
in United States dollars to leading European banks for a period of the
Designated Maturity.
"DESIGNATED MATURITY" means, as of any LIBOR Determination Date, one month;
provided, that LIBOR for the initial Interest Period will be determined by
straight-line interpolation (based on the actual number of days in the initial
Interest Period) between two rates determined in accordance with the definition
of LIBOR, one of which will be determined for a Designated Maturity of one month
and the other of which will be determined for a Designated Maturity of two
months.
"TELERATE PAGE 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"REFERENCE BANKS" means three major banks in the London interbank market
selected by the Servicer.
The determination of LIBOR by the Trustee and the Trustee's subsequent
calculation of the applicable Certificate Rate for the relevant Interest Periods
shall (in the absence of manifest error) be final and binding on each
Certificateholder. The Class A Certificate Rate or Class B Certificate Rate
applicable to the then current and the immediately preceding Interest Periods
may be obtained by telephoning the Trustee at its Corporate Trust Office at
(800) 735-7777.
On each Distribution Date, Class A Monthly Interest and Class A Monthly
Interest previously due but not distributed to the Class A Certificateholders
will be paid to the Class A Certificateholders from Class A Available Funds for
the related Monthly Period. To the extent Class A Available Funds for such
Monthly Period are insufficient to pay such interest, Excess Spread, and, if
necessary, 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 1999-B ("EXCESS FINANCE
CHARGES"), funds
S-25
26
on deposit in the Cash Collateral Account and Reallocated Principal Collections
allocable first to the Collateral Invested Amount and then to the Class B
Invested Amount will be used to make such payments.
"CLASS A AVAILABLE FUNDS" means, for any Monthly Period, an amount equal to
the sum of (a) the Class A Floating Percentage of collections of Finance Charge
Receivables allocated to the Series 1999-B Certificates for such Monthly Period
(including 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, for
such Distribution Date and (c) the amount of funds, if any, to be withdrawn from
the Reserve Account that, pursuant to the Series Supplement, are required to be
included in Class A Available Funds for 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 1999-B and, if necessary, funds on deposit
in the Cash Collateral Account and Reallocated Principal Collections allocable
to the Collateral Invested Amount (in each case to the extent not used to make
distributions for the Class A Certificates) will be used to make such payment.
"CLASS B AVAILABLE FUNDS" means, for any Monthly Period, an amount equal to
the Class B Floating Percentage of collections of Finance Charge Receivables
allocated to the Series 1999-B Certificates for such Monthly Period (including
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, for any Distribution Date, an amount
equal to the product of (i)(A) a fraction, the numerator of which is the actual
number of days in the period from and including the preceding Distribution Date
to but excluding such Distribution Date and the denominator of which is 360,
times (B) the Class A Certificate Rate and (ii) the outstanding principal amount
of the Class A Certificates as of the preceding Record Date; provided, however,
with respect to the first Distribution Date, Class A Monthly Interest shall be
equal to the interest accrued on the outstanding principal amount of the Class A
Certificates at the applicable Class A Certificate Rate for the period from the
Closing Date through September 14, 1999 (calculated on the basis of the actual
number of days in such period and a year of 360 days).
"CLASS B MONTHLY INTEREST" means, for any Distribution Date, an amount
equal to the product of (i)(A) a fraction, the numerator of which is the actual
number of days in the period from and including the preceding Distribution Date
to but excluding such Distribution Date and the denominator of which is 360,
times (B) the Class B Certificate Rate and (ii) the outstanding principal amount
of the Class B Certificates as of the preceding Record Date; provided, however,
with respect to the first Distribution Date, Class B Monthly Interest shall be
equal to the interest accrued on the outstanding principal amount of the Class B
Certificates at the applicable Class B Certificate Rate for the period from the
Closing Date through September 14, 1999 (calculated on the basis of the actual
number of days in such period and a year of 360 days).
"COLLATERAL AVAILABLE FUNDS" means, for any Monthly Period, an amount equal
to the Collateral Floating Percentage of the collections of Finance Charge
Receivables allocated to Series 1999-B (including any amounts that are to be
treated as collections of Finance Charge Receivables in accordance with the
Pooling and Servicing Agreement).
"COLLATERAL MONTHLY INTEREST" means, for any Distribution Date, an amount
equal to the product of (i) (A) a fraction, the numerator of which is the actual
number of days in the period from and including the preceding Distribution Date
to but excluding such Distribution Date and the denominator of which is 360,
times (B) the Collateral Rate and (ii) the outstanding principal amount of the
Collateral Interest as of the preceding Record Date; provided, however, for the
first Distribution Date, Collateral Monthly Interest will be equal to the
interest accrued on the outstanding principal amount of the Collateral Interest
at the applicable
S-26
27
Collateral Rate for the period from the Closing Date through September 14, 1999
(calculated on the basis of the actual number of days in such period and a year
of 360 days).
"COLLATERAL INTEREST RATE" means a rate specified in the Loan Agreement
such rate not to exceed LIBOR for a period of the Designated Maturity plus 2%
per annum.
PRINCIPAL PAYMENTS
During the period (the "REVOLVING PERIOD") that begins on the Closing Date
and ends on the day before the earlier of (i) the start of the Accumulation
Period, or (ii) the start of the Rapid Amortization Period, no principal
payments will be made to or for the benefit of the Certificateholders or
deposited into an account to be accumulated and subsequently used to pay the
Certificateholders. On each Distribution Date for the Revolving Period,
collections of Principal Receivables allocable to the undivided interest in the
assets of the Trust represented by the Certificates and the Collateral Interest
will, subject to certain limitations, including the allocation of any
Reallocated Principal Collections for the related Monthly Period to pay the
Class A Required Amount or the Class B Required Amount and payments of
Collateral Monthly Principal, be treated as Shared Principal Collections.
Collateral Monthly Principal will be applied in accordance with the Loan
Agreement. See "Description of the Certificates--Shared Principal Collections"
in the accompanying Prospectus.
The accumulation period for the Series 1999-B Interests (the "ACCUMULATION
PERIOD") is scheduled to begin at the close of business on September 30, 2003.
Subject to the conditions described in this Prospectus Supplement under
"--Postponement of Accumulation Period," the beginning of the Accumulation
Period may be delayed to no later than the close of business on May 31, 2004.
The first principal payment will be made to the Class A Certificateholders on
the earlier of the (i) July 2004 Distribution Date ("CLASS A EXPECTED FINAL
DISTRIBUTION DATE") or (ii) the Distribution Date in the month following the
month in which the Rapid Amortization Period begins. Principal is also expected
to be paid to the Class B Certificateholders on the July 2004 Distribution Date
(the "CLASS B EXPECTED FINAL DISTRIBUTION DATE"); however, if the amount on
deposit in the Principal Funding Account is not sufficient to pay the
Certificates in full, it will be applied first to pay the Class A Certificates.
No principal will be payable to the Class B Certificateholders unless the Class
A Investor Amount is paid in full or funds are available with which to make such
payment in full.
On each Distribution Date for the Accumulation Period prior to the date on
which the Class A Investor Amount and the Class B Investor Amount are paid in
full, an amount equal to the least of (a) Available Investor Principal
Collections on deposit in the Collection Account for such Distribution Date, (b)
the applicable Controlled Deposit Amount for such Distribution Date and (c) the
sum of the Class A Invested Amount and the Class B Invested Amount, will be
deposited in the Principal Funding Account for payment to the Class A
Certificateholders and the Class B Certificateholders. Amounts deposited into
the Principal Funding Account during the Accumulation Period to pay principal of
the Certificates will be paid first to the Class A Certificateholders and then
Class B Certificateholders, on the Class A Expected Final Distribution Date and
the Class B Expected Final Distribution Date or, if earlier, the first
Distribution Date in the Rapid Amortization Period.
"AVAILABLE INVESTOR PRINCIPAL COLLECTIONS" means, for any Monthly Period,
an amount equal to the sum of (a)(i) an amount equal to the Investor Principal
Collections for such Monthly Period, minus (ii) the amount of Reallocated
Principal Collections for such Monthly Period used to fund the Class A Required
Amount or the Class B Required Amount (excluding Reallocated Principal
Collections that have resulted in a reduction of the Collateral Invested Amount)
plus (b) any Shared Principal Collections from other Series in Group One that
are allocated to Series 1999-B, plus (c) any other amounts which pursuant to the
Series Supplement are to be treated as Available Investor Principal Collections
for the related Distribution Date, plus (d) an amount equal to the excess, if
any, of Collateral Principal Collections over Collateral Monthly Principal.
"INVESTOR PRINCIPAL COLLECTIONS" for any Monthly Period means an amount
equal to the product of (i) the Invested Principal Collections for such Monthly
Period and (ii) the sum of the Class A Principal
S-27
28
Percentage and the Class B Principal Percentage for such Monthly Period. The
"INVESTED PRINCIPAL COLLECTIONS" for any Monthly Period, means an amount equal
to the Principal Allocation Percentage of all Collections of Principal
Receivables received during that Monthly Period.
"COLLATERAL PRINCIPAL COLLECTIONS" means, for any Monthly Period, the
Invested Principal Collections less the Investor Principal Collections, plus the
amount, if any, of Excess Spread and Excess Finance Charges to be distributed
pursuant to clauses (8) and (9) of "--Application of Collections--Excess Spread;
Excess Finance Charges" on the related Distribution Date, minus the amount of
Reallocated Principal Collections for that 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 for the Rapid Amortization Period until the Class
A Investor Amount has been paid in full or the Series 1999-B Termination Date
occurs, the Class B 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 Investor Amount is paid in full and the Series 1999-B Termination Date.
"CLASS A MONTHLY PRINCIPAL" for any Distribution Date for the Accumulation
Period or the Rapid Amortization Period will equal the least of (i) the
Available Investor Principal Collections on deposit in the Collection Account
for that Distribution Date, (ii) for each Distribution Date for the 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" for 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 for that
Distribution Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal on such Distribution Date),
(ii) for each Distribution Date with respect to the Accumulation Period, the
Controlled Deposit Amount for such Distribution Date (minus the portion of such
Controlled Deposit Amount for such Distribution Date applied to Class A Monthly
Principal on such Distribution Date) and (iii) the Class B Invested Amount on
such Distribution Date.
"COLLATERAL MONTHLY PRINCIPAL" means (i) on any Distribution Date prior to
the Distribution Date on which the Class B Invested Amount is paid in full, an
amount equal to the lesser of (A) Collateral Principal Collections with respect
to such Distribution Date plus Available Investor Principal Collections (not
including any amounts specified in clause (d) of the definition of "Available
Investor Principal Collections") not applied to Class A Monthly Principal or
Class B Monthly Principal on such Distribution Date and (B) the Enhancement
Surplus on such Distribution Date, if any, (ii) beginning with the Distribution
Date on which the Class B Invested Amount is paid in full, an amount equal to
the sum of the Available Investor Principal Collections (not including any
amounts specified in clause (d) of the definition of "Available Investor
Principal Collections") for that Distribution Date (minus the portion of such
Available Investor Principal Collections applied to Class A Monthly Principal
and Class B Monthly Principal on such Distribution Date) and the Collateral
Principal Collections with respect to such Distribution Date; and (iii) on any
Distribution Date, in addition to the amounts, if any, set forth in items (i)
and (ii), at the option of the Seller, and after receipt by the Servicer and the
Trustee of a written determination by each Rating Agency that such action will
not result in a reduction or withdrawal of the then current ratings of the Class
A Certificates of the Class B Certificates, an amount established by the Seller
and consistent with any restrictions set forth in the determination of the
Rating Agency; provided, however, with respect to any Distribution Date,
Collateral Monthly Principal will not exceed the Collateral Invested Amount.
"ENHANCEMENT SURPLUS" means, with respect to any Distribution Date, the
excess, if any, of (a) the amount on deposit in the Cash Collateral Account plus
the Collateral Invested Amount over (b) the Required Enhancement Amount.
S-28
29
"CONTROLLED ACCUMULATION AMOUNT" means (a) for any Distribution Date for
the Accumulation Period, the sum of the Class A Initial Invested Amount and the
Class B Initial Invested Amount divided by nine (subject to adjustment in
connection with the postponement of the Accumulation Period).
"DEFICIT CONTROLLED ACCUMULATION AMOUNT" means (a) on the first
Distribution Date for the Accumulation Period the excess, if any, of the
Controlled Accumulation Amount for such Distribution Date over the amount
distributed from the Collection Account as Class A Monthly Principal and Class B
Monthly Principal for such Distribution Date and (b) on each subsequent
Distribution Date for the 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 and Class B
Monthly Principal for such subsequent Distribution Date.
"CONTROLLED DEPOSIT AMOUNT" means, for any Distribution Date relating to
the Accumulation Period, an amount equal to the sum of (i) the Controlled
Accumulation Amount on such Distribution Date and (ii) any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.
POSTPONEMENT OF ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
start of the Accumulation Period and extend the length of the Revolving Period,
subject to certain conditions, including those set forth below. The Servicer may
make such election only if the Accumulation Period Length (determined as
described below) is less than nine months. On each Determination Date, until the
Accumulation Period begins, the Servicer will determine the "ACCUMULATION PERIOD
LENGTH," which is the number of months expected to be required to fully fund the
Principal Funding Account to pay the Class A Investor Amount no later than the
Class A Expected Final Distribution Date and the Class B Investor Amount no
later than the Class B 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 12 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 Accumulation Period. If the Accumulation Period Length is
less than nine months, the Servicer may, at its option, postpone the start of
the Accumulation Period such that the number of months included in the
Accumulation Period will be equal to or exceed the Accumulation Period Length.
The effect of the foregoing calculation is to permit the reduction of the length
of the Accumulation Period based on the investor interest of certain other
Series that are scheduled to be in their revolving periods during the
Accumulation Period and on increases in the principal payment rate occurring
after the Closing Date. The length of the Accumulation Period will not be less
than one month.
SUBORDINATION
The Class B Certificateholders' Interest and the Collateral Interest will
be subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Collateral Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain principal payments otherwise allocable to the
Class B Certificateholders may be reallocated to the Class A Certificateholders
and the Class B Invested Amount may be reduced. Similarly, certain principal
payments allocable to the Collateral Interest may be reallocated to the Class A
Certificateholders and the Class B Certificateholders and the Collateral
Invested Amount may be reduced. To the extent the Class B Invested Amount is
reduced, the percentage of collections of Finance Charge Receivables allocated
to the Class B Certificateholders in subsequent Monthly Periods will be reduced.
Moreover, to the extent the amount of such reduction in the Class B Invested
Amount is not reimbursed, the amount of principal distributable to the Class B
Certificateholders will be reduced. See "--Allocation Percentages,"
"--Reallocation of Cash Flows," and "--Application of Collections--Excess
Spread; Excess Finance Charges" in this Prospectus Supplement.
S-29
30
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
among the Class A Certificates, the Class B Certificates, the Collateral
Interest, the certificateholders' interest for all other Series issued and
outstanding and the Sellers' Interest, all collections of Finance Charge
Receivables, Principal Receivables and the Defaulted Amount for each Monthly
Period. Each "MONTHLY PERIOD" will be the period from and including the first
day of a calendar month to and including the last day of the calendar month
(other than the initial Monthly Period which will start on the Closing Date and
end on August 31, 1999).
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to Series 1999-B based on the
Floating Allocation Percentage. The "FLOATING ALLOCATION PERCENTAGE" means, for
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 for 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 among the Class A Certificateholders, the
Class B Certificateholders and the Collateral Interest Holder in accordance with
the Class A Floating Percentage, the Class B Floating Percentage and the
Collateral Floating Percentage, respectively.
The "CLASS A FLOATING PERCENTAGE" means, for 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 for the first Monthly Period, the Initial Invested Amount).
The "CLASS B FLOATING PERCENTAGE" means, for 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 for the first Monthly Period, the Initial Invested Amount).
The "COLLATERAL FLOATING PERCENTAGE" means, for any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is equal to the Collateral Invested Amount as of the
close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Collateral Initial Invested Amount) and
the denominator of which is equal to the Invested Amount as of the close of
business on such day (or for the first Monthly Period, the Initial Invested
Amount).
Collections of Principal Receivables will be allocated to Series 1999-B
based on the Principal Allocation Percentage. The "PRINCIPAL ALLOCATION
PERCENTAGE" means, for any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is (a)
during the Revolving Period, the Invested Amount as of the last day of the
immediately preceding Monthly Period (or, in the case of the first Monthly
Period, the Closing Date) and (b) during the Accumulation Period or the Rapid
Amortization Period, the Invested Amount as of the last day of the Revolving
Period or if the numerator has been reduced as described below in this paragraph
during an Accumulation Period and a Rapid Amortization Period begins, as of the
last day of the Accumulation Period and the denominator of which is the greater
of (i) the sum of the total amount of Principal Receivables in the Trust as of
the last day of the immediately preceding Monthly Period and the principal
amount on deposit in the Excess Funding Account
S-30
31
as of such last day (or, in the case of the first Monthly Period, the Closing
Date) and (ii) the sum of the numerators used to calculate the Series
Percentages applicable to Principal Receivables for all Series outstanding as of
the date as to which such determination is being made; provided, however, that
during the Accumulation Period, on any date, at the option of the Servicer, the
numerator of the Principal Allocation Percentage may be reduced below the
numerator used in the previous Monthly Period, to an amount not less than the
greater of (x) the Invested Amount as of the last day of the immediately
preceding Monthly Period (less the amount of any distributions of principal made
to Series 1999-B Certificateholders since the last day of the immediately
preceding Monthly Period) and (y) an amount that if used as the numerator of the
Principal Allocation Percentage for the reminder of the Accumulation Period,
based on certain assumptions set forth in the Series Supplement, would assure
that Available Investor Principal Collections for Series 1999-B would equal at
least 125% of the Controlled Accumulation Amount for each Monthly Period for so
long as the Invested Amount is greater than zero; provided further, however,
that such ratio is subject to adjustment to give effect to designations of
Additional Accounts.
Such amounts allocated to the Certificateholders will be further allocated
between the Class A Certificates and the Class B Certificates based on the Class
A Principal Percentage and the Class B Principal Percentage.
The "CLASS A PRINCIPAL PERCENTAGE" means, for 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) after the Revolving 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, for 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) after 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
Revolving Period, and the denominator of which is the Invested Amount as of such
last day.
Collections of Principal Receivables allocable to Series 1999-B and not
allocated to the Class A Certificateholders or the Class B Certificateholders
will be allocated, in an amount up to the Collateral Invested Amount, to the
Collateral Interest Holder.
As used in this Prospectus Supplement, the following terms have the
meanings indicated:
"CLASS A INVESTED AMOUNT" for any date means an amount equal to (i)
$415,000,000 (the "CLASS A INITIAL INVESTED AMOUNT"), minus (ii) the aggregate
amount of principal payments made to the Class A Certificateholders on or prior
to such date, minus (iii) 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 (iv) the principal amount on deposit in the
Principal Funding Account on such date (the "PRINCIPAL FUNDING ACCOUNT
BALANCE"), but not in excess of the Class A Initial Invested Amount.
"CLASS B INVESTED AMOUNT" for any date means an amount equal to (i)
$37,500,000 (the "CLASS B INITIAL INVESTED AMOUNT"), minus (ii) the aggregate
amount of principal payments made to Class B Certificateholders on or prior to
such date, minus (iii) the excess, if any, of the aggregate amount of Class B
Investor Charge-Offs for all prior Distribution Dates over the aggregate amount
of reimbursement of Class B Investor Charge-Offs for all Distribution Dates
prior to such date, minus (iv) the aggregate amount of Reallocated Principal
Collections for all prior Distribution Dates which have been used to fund the
Class A
S-31
32
Required Amount with respect to such Distribution Dates (excluding any
Reallocated Principal Collections that have resulted in a reduction of the
Collateral Invested Amount), minus (v) 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," in this Prospectus Supplement, and plus (vi) the
aggregate amount of Excess Spread and Excess Finance Charges allocated to Series
1999-B and applied on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (iii), (iv) and
(v) and minus (vii) the positive difference, if any, between the Principal
Funding Account Balance and the Class A Investor Amount on such date; provided,
however, that the Class B Invested Amount may not be reduced below zero.
"COLLATERAL INVESTED AMOUNT" for any date means an amount equal to (i)
$47,500,000 (the "COLLATERAL INITIAL INVESTED AMOUNT"), minus (ii) the aggregate
amount of principal payments made with respect to the Collateral Interest prior
to such date, minus (iii) the aggregate amount of Reallocated Principal
Collections allocable to the Collateral Invested Amount for all prior
Distribution Dates which have been used to fund the Class A Required Amount or
the Class B Required Amount, minus (iv) an amount equal to the aggregate amount
by which the Collateral Invested Amount has been reduced to fund the Class A
Investor Default Amount and the Class B Investor Default Amount on all prior
Distribution Dates as described under "--Allocation of Investor Default Amount"
in this Prospectus Supplement minus (v) an amount equal to the product of the
Collateral Floating Percentage and the Investor Default Amount (the "COLLATERAL
DEFAULT AMOUNT") with respect to any Distribution Date that is not funded out of
Excess Spread and Excess Finance Charges allocated to Series 1999-B 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 (iii),
(iv) and (v); provided, however, that the Collateral Invested Amount may not be
reduced below zero.
"INVESTED AMOUNT," for any date means an amount equal to the sum of the
Class A Invested Amount, the Class B Invested Amount and the Collateral Invested
Amount.
"CLASS A INVESTOR AMOUNT" for any date means an amount equal to the sum of
the Class A Invested Amount plus the Principal Funding Account Balance (but not
in excess of the Class A Initial Invested Amount).
"CLASS B INVESTOR AMOUNT" for any date means an amount equal to the sum of
the Class B Invested Amount plus the positive difference, if any, between the
Principal Funding Account Balance and the Class A Investor Amount on such date.
"INVESTOR AMOUNT," for any date means an amount equal to the sum of the
Class A Investor Amount, the Class B Investor Amount and the Collateral Invested
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 the 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 1999-B and available for such purpose
will be used to fund the Class A Required Amount for 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
S-32
33
fund the remaining Class A Required Amount. If such Excess Spread and Excess
Finance Charges and amounts, if any, on deposit in the Cash Collateral Account
are insufficient to fund the Class A Required Amount, collections of Principal
Receivables allocable first to the Collateral Interest and then to the Class B
Certificates for the related Monthly Period ("REALLOCATED PRINCIPAL
COLLECTIONS") will then be used to fund the remaining Class A Required Amount.
If Reallocated Principal Collections with respect to the related Monthly Period,
together with Excess Spread and Excess Finance Charges allocated to Series
1999-B and amounts, if any, on deposit in the Cash Collateral Account are
insufficient to fund the Class A Required Amount for such related Monthly
Period, then the Collateral Invested Amount will be reduced by the amount of
such excess (but not by more than the Class A Investor Default Amount for such
Distribution Date). In the event that such reduction would cause the Collateral
Invested Amount to be a negative number, the Collateral Invested Amount will be
reduced to zero, and the Class B Invested Amount will be reduced by the amount
by which the Collateral Invested Amount would have been reduced below zero (but
not by more than the excess of the Class A Investor Default Amount, if any, for
such Distribution Date over the amount of such reduction, if any, of the
Collateral Invested Amount with respect to such Distribution Date). In the event
that such reduction would cause the Class B Invested Amount to be a negative
number, the Class B Invested Amount will be reduced to zero, and the Class A
Invested Amount will be reduced by the amount by which the Class B Invested
Amount would have been reduced below zero (but not by more than the excess, if
any, of the Class A Investor Default Amount for such Distribution Date over the
amount of the reductions, if any, of the Collateral Invested Amount and the
Class B Invested Amount with respect to such Distribution Date as described
above). Any such reduction in the Class A Invested Amount may 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" in this Prospectus Supplement.
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
Distribution Date.
If the Class B Required Amount is greater than zero, Excess Spread and
Excess Finance Charges allocated to Series 1999-B not required to pay the Class
A Required Amount or reimburse Class A Investor Charge-Offs will be used to fund
the Class B Required Amount with respect to such Distribution Date. If such
Excess Spread and Excess Finance Charges available to fund the remaining Class B
Required Amount with respect to such Distribution Date are less than the Class B
Required Amount, amounts, if any, on deposit in the Cash Collateral Account not
required to fund the Class A Required Amount will then be used to fund the
remaining Class B Required Amount. If such Excess Spread and Excess Finance
Charges and amounts, if any, on deposit in the Cash Collateral Account are
insufficient to pay the Class B Required Amount, Reallocated Principal
Collections allocable to the Collateral Interest not required to pay the Class A
Required Amount will then be used to fund the remaining Class B Required Amount.
If such Reallocated Principal Collections allocable to the Collateral Interest
are insufficient to fund the remaining Class B Required Amount, then the
Collateral Invested Amount remaining after any adjustments made for the benefit
of the Class A Certificateholders will be reduced by the amount of such
insufficiency (but not by more than the Class B Investor Default Amount for such
Distribution Date). In the event that such a reduction would cause the
Collateral Invested Amount to be a negative number, the Collateral Invested
Amount will be reduced to zero, and the Class B Invested Amount will be reduced
by the amount by which the Collateral Invested Amount would have been reduced
below zero (but not by more than the excess of the Class B Investor Default
Amount for such Distribution Date over the amount of such reduction of the
Collateral Invested Amount). Any such reduction in the Class B Invested Amount
may have the effect of slowing or reducing the return of principal and interest
to the Class B Certificateholders. In such case, the Class B Certificateholders
S-33
34
will bear directly the credit and other risks associated with their interests in
the Trust. See "--Allocation of Investor Default Amount" in this Prospectus
Supplement.
Reductions of the Class A Invested Amount or Class B Invested Amount will
thereafter be reimbursed and the Class A Invested Amount or Class B Invested
Amount 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" in this Prospectus Supplement. When such reductions of the
Class A Invested Amount and Class B Invested Amount have been fully reimbursed,
reductions of the Collateral Invested Amount will be reimbursed until reimbursed
in full in a similar manner.
APPLICATION OF COLLECTIONS
Application of Collections to the Collection Account. Except under the
conditions described in the accompanying Prospectus under "Description of the
Certificates--Application of Collections," the Servicer will apply, or will
instruct the Trustee to apply, on or prior to the close of business on the
second Business Day following the date of processing of any collections, all
collections and other funds to be deposited into the Collection Account that are
allocated to the Certificates and the Collateral Interest as follows:
(1) during the Revolving Period, an amount equal to the Floating
Allocation Percentage of the collections of Finance Charge Receivables
processed on such date will be allocated to the Certificates and the
Collateral Interest, and of that allocation, the following amounts will be
deposited and retained in the Collection Account: (A) prior to the LIBOR
Determination Date occurring in the current Monthly Period, the entire
amount of such allocation and (B) on and after such LIBOR Determination
Date, the difference between (x) Monthly Interest for the related
Distribution Date (plus, if the Bank is not the Servicer, the Monthly
Servicing Fee for such Monthly Period) and (y) the amounts previously
deposited in the Collection Account for such Monthly Period pursuant to
this clause (1);
(2) during the Accumulation Period or Rapid Amortization Period, an
amount equal to the Floating Allocation Percentage of the collections of
Finance Charge Receivables processed on such date will be allocated to the
Certificates and the Collateral Interest and deposited and retained in the
Collection Account;
(3) during the Revolving Period, an amount equal to the Principal
Allocation Percentage of collections of Principal Receivables processed on
such date will be allocated to the Certificates and the Collateral Interest
and first, if any other Principal Sharing Series in Group One is
outstanding and in its amortization period or accumulation period, retained
in the Collection Account for application, to the extent necessary, to
other Series in Group One on the related Distribution Date, and second paid
to the holders of the Seller Certificates; provided that such amount will
be paid to the holders of the Seller Certificates only if the Seller Amount
is greater than the Required Seller Amount and 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 and for so long as the Total Enhancement is less
than the Required Enhancement Amount, an amount equal to the sum of (x) the
Collateral Floating Percentage of the product of the Principal Allocation
Percentage and the collections of Principal Receivables and (y) the Class B
Principal Percentage of the product of the Principal Allocation Percentage
and the collections of Principal Receivables ("SUBORDINATE PRINCIPAL
COLLECTIONS") will be deposited and retained in the Collection Account;
(4) during the Accumulation Period, an amount equal to the Principal
Allocation Percentage of collections of Principal Receivables processed on
such date (for any such date, a "PERCENTAGE ALLOCATION") will be allocated
to the Certificates and the Collateral Interest and deposited and retained
in the Collection Account; provided, however, that if the sum of such
Percentage Allocations with respect to the same Monthly Period exceeds the
Controlled Deposit Amount for the related Distribution Date, then such
excess shall not be treated as a Percentage Allocation and shall be first,
if any other Principal
S-34
35
Sharing Series in Group One is outstanding and in its amortization period
or accumulation period, retained in the Collection Account for application,
to the extent necessary, as Shared Principal Collections to other Series in
Group One on the related Distribution Date, and second paid to the holders
of the Seller Certificates only if the Seller Amount on such Date of
Processing is greater than the Required Seller Amount and 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 and for so long as
the Total Enhancement is less than the Required Enhancement Amount,
Subordinate Principal Collections will be deposited and retained in the
Collection Account; and
(5) during the Rapid Amortization Period, an amount equal to the
Principal Allocation Percentage of the collections of Principal Receivables
processed on such date will be allocated to the Certificates and the
Collateral Interest and deposited and retained in the Collection Account;
provided, however, that after the date on which an amount of such
collections equal to the Investor Amount has been deposited into the
Collection Account and allocated to the Certificates and the Collateral
Interest, such amount in excess of the Investor Amount will be first, if
any other Principal Sharing Series in Group One is outstanding and in its
amortization period or accumulation period, retained in the Collection
Account for application, to the extent necessary, as Shared Principal
Collections to other Series in Group One on the related Distribution Date,
and second paid to the holders of the Seller Certificates only if the
Seller Amount is greater than the Required Seller Amount and 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.
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 each Distribution Date 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;
(2) on each Distribution Date after the Reserve Account Funding Date,
all net investment income accrued since the preceding Distribution Date on
funds on deposit in the Reserve Account will be retained in the Reserve
Account (to the extent that the amount on deposit in the Reserve Account is
less than the Required Reserve Account Amount) and the balance, if any,
will be deposited in the Collection Account for distribution as collections
of Finance Charge Receivables allocable to the Certificateholders and the
Collateral Interest Holder; and
(3) on or before each Distribution Date for the Accumulation Period and
on the first Distribution Date for the Rapid Amortization Period, if
applicable, an amount equal to the lesser of (a) the Available Reserve
Account Amount for such Distribution Date and (b) the excess, if any, of a
portion of the Class A Monthly Interest determined in accordance with the
Series Supplement over the Principal Funding Investment Proceeds for 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.
S-35
36
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 and Collateral Available Funds (see
"--Interest Payments" above) in the following priority:
(A) On each Distribution Date, an amount equal to the Class A Available
Funds for 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 Class A Monthly Interest
that was due but not paid to the Class A Certificateholders on a prior
Distribution Date at a rate equal to the Class A Certificate Rate plus
2% per annum ("CLASS A ADDITIONAL INTEREST"), and any Class A Additional
Interest previously due but not distributed to the Class A
Certificateholders on a prior Distribution Date 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;
(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 Class B Monthly Interest
that was due but not paid to the Class B Certificateholders on a prior
Distribution Date at a rate equal to the Class B Certificate Rate plus
2% per annum ("CLASS B ADDITIONAL INTEREST"), and any Class B Additional
Interest previously due but not distributed to the Class B
Certificateholders on a prior Distribution Date 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; and
(3) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charges" below.
(C) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be withdrawn
from the Collection Account and distributed in the following priority:
(1) if the Bank or the Trustee is no longer the Servicer, an amount
equal to the Collateral Servicing Fee for such Distribution Date, plus
the amount of any Collateral Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer; 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) immediately above.
S-36
37
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 1999-B 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 1999-B, such Excess Spread and Excess Finance Charges shall be
applied first to pay amounts due on such Distribution Date pursuant to
clause (A)(1) above under "--Payment of Interest, Fees and Other Items,"
second to pay the Class A Servicing Fee pursuant to clause (A)(2) above
under "--Payment of Interest, Fees and Other Items" and third to pay the
Class A Investor Default Amount for such Distribution Date pursuant to
clause (A)(3) above under "--Payment of Interest, Fees and Other Items;"
(2) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Available Investor Principal Collections for such Distribution
Date as described under "--Payments of Principal" below;
(3) an amount equal to any deficiency pursuant to clauses (B)(1) and (2)
above under "--Payment of Interest, Fees and Other Items" will be used to
fund such deficiency, provided, that in the event such deficiency for such
Distribution Date exceeds the remaining amount of Excess Spread and Excess
Finance Charges allocated to Series 1999-B, such Excess Spread and Excess
Finance Charges will 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 (iii), (iv) and (v) 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) will be treated as a
portion of Available Investor Principal Collections for such Distribution
Date;
(6) an amount equal to Collateral Monthly Interest for such Distribution
Date, plus the amount of any Collateral Monthly Interest previously due but
not paid to the Collateral Interest Holder on a prior Distribution Date,
plus any additional interest with respect to Collateral Monthly Interest
that was due but not paid to the Collateral Interest Holder on a prior
Distribution Date at a rate equal to the Collateral Rate ("COLLATERAL
ADDITIONAL INTEREST"), and any Collateral Additional Interest previously
due but not distributed to the Collateral Interest Holder on a prior
Distribution Date will be distributed to the Collateral Interest Holder for
application in accordance with the Loan Agreement;
(7) an amount equal to the Collateral Servicing Fee for such
Distribution Date (or if neither the Bank nor the Trustee is the Servicer,
the amount of any Collateral Servicing Fee due but not paid from Collateral
Available Funds) and the amount of any Collateral Servicing Fee due but not
paid to the Servicer on a prior Distribution Date will be paid to the
Servicer;
(8) an amount equal to the Collateral Default Amount for such
Distribution Date will be treated as a portion of Collateral Principal
Collections for such Distribution Date;
(9) an amount equal to the aggregate amount by which the Collateral
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of "Collateral Invested Amount" under "--Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be treated as a
portion of Collateral Principal Collections for such Distribution Date;
S-37
38
(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)
will be deposited to the Cash Collateral Account;
(11) an amount up to the excess, if any, of the Required Reserve Account
Amount over the principal amount on deposit in the Reserve Account will be
deposited in the Reserve Account;
(12) an amount equal to the aggregate of any other amounts then owed to
the Collateral Interest Holder pursuant to the Loan Agreement (excluding
amounts required to be deposited in the Spread Account under and as defined
in the Loan Agreement) shall be applied in accordance with the Loan
Agreement and amounts required to be deposited into the Spread Account
shall be deposited in that account or deposited under limited circumstances
as provided in the Loan Agreement in the Cash Collateral Account;
(13) if applicable, an amount equal to the aggregate of any amounts then
due to the depositor of funds into the Cash Collateral Account (or any
successor or assignee thereto) pursuant to an agreement, as amended from
time to time, among the Seller, the Servicer, such depositor and the
Trustee (to the extent such amounts are payable under the terms of such
agreement out of Excess Spread) will be distributed to the depositor or its
designee for application in accordance with such agreement; and
(14) 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
Charge Collections" in the accompanying Prospectus.
Cash Collateral Account; Reallocated Principal Collections. On or before
each Distribution Date after giving effect to the distributions above under
"--Excess Spread; Excess Finance Charges," the Trustee, acting pursuant to the
Servicer's instructions, will apply the Available Cash Collateral Amount on such
Distribution Date and Reallocated Principal Collections for the related Monthly
Period to make the following distributions in the following priority:
(1) if the amount of Excess Spread and Excess Finance Charges allocated
to Series 1999-B for the related Monthly Period is less than the amounts
specified in clauses (1) through (5) and (7) above under "--Excess Spread;
Excess Finance Charges," an amount equal to such deficiency, not to exceed
the Available Cash Collateral Amount, will be withdrawn from the Cash
Collateral Account and distributed to fund such deficiency in the order of
priority set forth in clauses (1) through (5) and (7) above under "--Excess
Spread; Excess Finance Charges";
(2) if the sum of (x) the amount of Excess Spread and Excess Finance
Charges allocated to Series 1999-B for the related Monthly Period and (y)
the Available Cash Collateral Amount on such Distribution Date is less than
the Class A Required Amount, Reallocated Principal Collections, up to the
amount of such deficiency, will be withdrawn from the Collection Account
and distributed to fund such deficiency in the order of priority set forth
in clause (1) above under "--Excess Spread; Excess Finance Charges";
(3) if the sum of (x) the amount of Excess Spread and Excess Finance
Charges allocated to Series 1999-B for the related Monthly Period not
required to fund the Class A Required Amount or reimburse Class A Investor
Charge-Offs and (y) the Available Cash Collateral Amount not required to
fund the Class A Required Amount is less than the Class B Required Amount,
Reallocated Principal Collections allocable to the Collateral Interest not
required to fund the Class A Required Amount, up to the amount of such
deficiency, will be withdrawn from the Collection Account and distributed
to fund such deficiency in the order of priority set forth in clauses (3)
and (4) above under "--Excess Spread; Excess Finance Charges."
S-38
39
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 for the Revolving Period, all the
Available Investor Principal Collections, that are not allocated as part of
Collateral Monthly Principal to make a payment on the Collateral Interest
will be treated as Shared Principal Collections and applied as described
under "Description of the Certificates--Shared Principal Collections" in
the accompanying Prospectus;
(2) on each Distribution Date for 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 each Distribution Date beginning on the earlier to
occur of the Class A Expected Final Distribution Date or the first
Distribution Date for the Rapid Amortization Period;
(ii) after giving effect to the distribution referred to in clause
(i) above, an amount equal to the Class B Monthly Principal will be
deposited in the Principal Funding Account for payment to the Class B
Certificateholders on each Distribution Date beginning on the earlier to
occur of the Class B Expected Final Payment Date (but only if the Class
A Investor Amount is paid in full on such date) and the first
Distribution Date for the Rapid Amortization Period on which the Class A
Investor Amount is paid in full;
(iii) the balance, if any, will be allocated to Collateral Monthly
Principal if so required by the definition of Collateral Monthly
Principal; 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 accompanying
Prospectus.
On each Distribution Date, the Trustee, acting under the Servicer's
instructions, will distribute Collateral Principal Collections (see "--Principal
Payments" above) on deposit in the Collection Account in the following priority:
(3) on each Distribution Date for the Revolving Period, all the
Collateral Principal Collections will be distributed or deposited in the
following priority:
(i) an amount equal to Collateral Monthly Principal for such
Distribution Date, up to the Collateral Invested Amount on such
Distribution Date, will be applied in accordance with the Loan
Agreement; and
(ii) the balance, if any, will be treated as Available Investor
Principal Collections and applied as described in clause (1) above;
(4) on each Distribution Date for the Accumulation Period or the Rapid
Amortization Period, all the Collateral Principal Collections will be
distributed or deposited in the following priority:
(i) an amount equal to Collateral Monthly Principal for such
Distribution Date, up to the Collateral Invested Amount on such
Distribution Date, will be applied in accordance with the Loan
Agreement; and
(ii) the balance, if any, will be treated as Available Investor
Principal Collections and applied as described in clause (2) above.
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series Supplement, the Servicer will establish and maintain
the principal funding account as a segregated trust account held for the benefit
of the Class A Certificateholders and the Class B Certificateholders (the
"PRINCIPAL FUNDING ACCOUNT"). During the Accumulation Period the Trustee at the
S-39
40
direction of the Servicer will transfer Available Investor Principal Collections
to the Principal Funding Account as described under "--Application of
Collections--Payments of Principal" in this Prospectus Supplement.
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 for each Distribution Date.
RESERVE ACCOUNT
Pursuant to the Series Supplement, the Servicer will establish and maintain
the reserve account as a segregated trust account held for the benefit of the
Class A Certificateholders (the "RESERVE ACCOUNT"). The Reserve Account is
established to assist with the subsequent distribution of interest on the Class
A Certificates during the 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 Series 1999-B (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 for the Monthly Period which begins no later than three months
prior to the Monthly Period in which, as of the related Determination Date, the
Accumulation Period is scheduled to begin, or such earlier date as the Servicer
may determine. The "REQUIRED RESERVE ACCOUNT AMOUNT" for any Distribution Date
on or after the Reserve Account Funding Date will be equal to (a) the product of
(i) 0.5% of the Class A Investor Amount as of the preceding Distribution Date
(after giving effect to all changes therein on such date) and (ii) a fraction,
the numerator of which is the number of Monthly Periods scheduled to be included
in the Accumulation Period as of such date, and the denominator of which is
nine, provided, that if such numerator is one, the Required Reserve Account
Amount will be zero, or (b) any other amount designated by the Seller, provided,
that if such designation is of a lesser amount, the Seller shall have provided
the Servicer and the Trustee with evidence that the Rating Agency Condition has
been satisfied and the Seller shall have delivered to the Trustee a certificate
of an authorized officer to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of the Seller, such designation
will not cause a Pay Out Event or an event that, after the giving of notice or
the lapse of time, would cause a Pay Out Event to occur. On each Distribution
Date, after giving effect to any deposit to be made to, and any withdrawal to be
made from, the Reserve Account, the Trustee will withdraw from the Reserve
Account an amount equal to the excess, if any, of the amount on deposit in the
Reserve Account over the Required Reserve Account Amount and will pay such
amount to the Collateral Interest Holder for application in accordance with the
Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account with respect to any Distribution
Date (after giving effect to any deposits to, or withdrawals from, the Reserve
Account to be made on such Distribution Date) will be invested by the Trustee at
the direction of the Servicer in Eligible Investments. The interest and other
investment income (net of investment expenses and losses) earned on such
investments will be retained in the Reserve Account (to the extent the amount on
deposit is less than the Required Reserve Account Amount) or deposited in the
Collection Account and treated as collections of Finance Charge Receivables
allocable to Series 1999-B.
On the Determination Date before each Distribution Date for the
Accumulation Period and on the first Distribution Date for 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 for 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 for 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
S-40
41
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 Accumulation Period has not begun, the occurrence of a Pay Out Event
or, if the Accumulation Period has begun, 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
holders 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 Series 1999-B 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 may 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 holders of the Series 1999-B
Certificates. Upon payment in full of the Series 1999-B 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
accompanying 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 holder of a Series 1999-B Certificate
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.
SHARED COLLECTIONS OF PRINCIPAL RECEIVABLES
To the extent that collections of Principal Receivables allocated to the
Series 1999-B Certificates or the Collateral Interest are not needed to make
payments to or for the benefit of the Certificateholders or the Collateral
Interest Holder, such collections may be applied to cover principal payments due
to or for the benefit of other Principal Sharing Series in Group One. Any such
application of collections will not result in a reduction of the Invested Amount
of the Series 1999-B Certificates and the Collateral Interest.
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 the holders of the certificates
and other interests of such other Series ("SHARED PRINCIPAL COLLECTIONS"), will
be applied, if necessary, to cover payments of principal due to holders of the
Series 1999-B Certificates and Collateral Interest during the Accumulation
Period. There can be no assurance that such Shared Principal Collections will be
available to cover payments of principal or deposits due on any Distribution
Date for 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 Investor
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 Series 1999-B will
be reduced.
S-41
42
THE CASH COLLATERAL ACCOUNT
A cash collateral account (the "CASH COLLATERAL ACCOUNT") will be held for
the benefit of the Certificateholders and the Collateral Interest Holder as
their interests appear in the Series Supplement. Funds on deposit in the Cash
Collateral Account will be invested in certain Eligible Investments. On each
Distribution Date, all interest and earnings (net of losses and investment
expenses) accrued since the preceding Distribution Date on funds on deposit in
the Cash Collateral Account will be applied in accordance with the Loan
Agreement. The Cash Collateral Account will be funded by the Bank on the Closing
Date in the initial amount of $7,500,000.
The "REQUIRED CASH COLLATERAL AMOUNT" for any day of determination is the
Required Enhancement Amount less the Collateral Invested Amount; provided that
for the first two Distribution Dates for Series 1999-B following the Closing
Date, the Required Cash Collateral Amount shall not exceed the product of (1)
1.50% and (2) the Invested Amount.
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.
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" above in
the order of priority specified therein.
Under circumstances specified in the Loan Agreement, the Seller or the
Collateral Interest Holder will have the option to elect to deposit amounts held
pursuant to the Loan Agreement into the Cash Collateral Account, which will
result in a reduction of the Collateral Invested Amount. Any such election will
have the effect of converting all or a portion of the Enhancement in the form of
the Collateral Invested Amount into Enhancement in the form of amounts on
deposit in the Cash Collateral Account.
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. In addition, if on any Distribution Date the amount on
deposit in the Cash Collateral Account exceeds the Required Cash Collateral
Amount, such excess will be withdrawn and applied in accordance with the Loan
Agreement.
AMOUNTS AVAILABLE AS ENHANCEMENT
On each Distribution Date, the amount of enhancement (the "ENHANCEMENT")
available to the Certificateholders will equal the lesser of (i) the sum of the
Collateral Invested 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" for any Distribution Date means the
greater of (i) the product of (a) the sum of (I) the Class A Invested Amount and
(II) the Class B Invested Amount, each as of such Distribution Date after taking
into account distributions made on such Distribution Date minus the amount of
funds on deposit in the Cash Collateral Account after taking into account all
deposits and withdrawals on such Distribution Date, and (b) a fraction, the
numerator of which is 11.0% and the denominator of which is the excess of 100%
over 11.0% and (ii) the sum of (A) the product of (I) $500,000,000, (II) 1.0%
and (III) a fraction the numerator of which is equal to the Available Cash
Collateral Amount as of the immediately preceding Distribution Date and the
denominator of which is the Total Enhancement for such Distribution Date and (B)
the product of (I) $500,000,000, (II) 3.0% and (III) a fraction the numerator of
which is equal to the Collateral Invested Amount as of the immediately preceding
Distribution Date and the denominator of which is the Total Enhancement for such
Distribution Date; provided, however, that (i) if
S-42
43
certain withdrawals are made from the Cash Collateral Account or if a Series
1999-B Pay Out Event or a Trust Pay Out Event occurs or if there are certain
reductions in the Collateral Invested Amount, the Required Enhancement Amount
for such Distribution Date shall equal the Required Enhancement Amount for the
Distribution Date immediately preceding the occurrence of such drawing or such
Series 1999-B Pay Out Event or a Trust Pay Out Event or reduction in Collateral
Invested Amount, (ii) in no event shall the Required Enhancement Amount exceed
the sum of the Class A Invested Amount and the Class B Invested Amount on any
such date, and (iii) the Required Enhancement Amount may be reduced without the
consent of the Certificateholders, if the Seller shall have received written
notice from each Rating Agency that such reduction will not result in the
reduction or withdrawal of the then current rating of the Certificates and the
Seller shall have delivered to the Trustee a certificate of an authorized
officer to the effect that, based on the facts known to such officer at such
time, in the reasonable belief of the Seller, such reduction will not cause a
Trust Pay Out Event or an event that, after the giving of notice or the lapse of
time, would constitute a Series 1999-B Pay Out Event to occur.
"TOTAL ENHANCEMENT" with respect to any Distribution Date means the sum of
the Available Cash Collateral Amount and the Collateral Invested Amount as of
the immediately preceding Distribution Date.
For 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 1999-B will be used first to increase the Collateral
Invested Amount to the extent of any prior unreimbursed reductions in the
Collateral Invested Amount and then deposited into the Cash Collateral Account
to the extent of such shortfall. See "Description of the
Certificates--Application of Collections--Excess Spread; Excess Finance Charges"
in this Prospectus Supplement. On any Distribution Date, to the extent that the
sum of the amount on deposit in the Cash Collateral Account plus the Collateral
Invested Amount exceeds the Required Enhancement Amount, the excess may be paid
to the Collateral Interest Holder and will not be available to the
Certificateholders. See "Description of the Certificates--the Cash Collateral
Account" in this Prospectus Supplement.
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 Collateral Interest Holder (the
"COLLATERAL DEFAULT AMOUNT") on each Distribution Date in an amount equal to the
product of the Collateral Floating Percentage applicable during the related
Monthly Period and the Investor Default Amount for such Monthly Period.
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 1999-B or from amounts, if any, on deposit
in the Cash Collateral Account and Reallocated Principal Collections and applied
as described above under "--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 1999-B or from amounts, if any, on deposit in the Cash Collateral Account
and Reallocated Principal Collections allocable to the Collateral Invested
S-43
44
Amount and applied as described above under "--Application of
Collections--Excess Spread; Excess Finance Charges" and "--Reallocation of Cash
Flows."
An amount equal to the Collateral Default Amount for each Monthly Period
will be paid from Excess Spread and Excess Finance Charges allocated to Series
1999-B as described above under "--Application of Collections--Excess Spread;
Excess Finance Charges."
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 1999-B, amounts, if any, on deposit in the Cash Collateral
Account and Reallocated Principal Collections, the Collateral Invested Amount
will be reduced by the amount of such excess, but not by more than the Class A
Investor Default Amount for such Distribution Date. In the event that such
reduction would cause the Collateral Invested Amount to be a negative number,
the Collateral Invested Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the Collateral Invested Amount
would have been reduced below zero, but not by more than the excess, if any, of
the Class A Investor Default Amount for such Distribution Date over the amount
of such reduction, if any, of the Collateral Invested Amount with respect to
such Distribution Date. In the event that such reduction would cause the Class B
Invested Amount to be a negative number, the Class B Invested Amount will be
reduced to zero, and the Class A Invested Amount will be reduced by the amount
by which the Class B Invested Amount would have been reduced below zero, but not
by more than the excess, if any, of the Class A Investor Default Amount for such
Distribution Date over the amount of the reductions, if any, of the Collateral
Invested Amount and the Class B Invested Amount with respect to such
Distribution Date as described above (a "CLASS A INVESTOR CHARGE-OFF"), which
may 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 1999-B and available for such purpose as described above
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 1999-B and not required to pay the Class A Required Amount,
amounts, if any, on deposit in the Cash Collateral Account not required to pay
the Class A Required Amount and Reallocated Principal Collections allocable to
the Collateral Interest and not required to pay the Class A Required Amount,
then the Collateral Invested Amount will be reduced by the amount of such
excess. In the event that such reduction would cause the Collateral Invested
Amount to be a negative number, the Collateral Invested Amount will be reduced
to zero, and the Class B Invested Amount will be reduced by the amount by which
the Collateral Invested Amount would have been reduced below zero, but not by
more than the excess, if any, of the Class B Investor Default Amount for such
Distribution Date over the amount of such reduction, if any, of the Collateral
Invested Amount with respect to such Distribution Date (a "CLASS B INVESTOR
CHARGE-OFF"), which may have the effect of slowing or reducing the return of
principal to the Class B Certificateholders. If the Class B Invested Amount has
been reduced by the amount of any Class B Investor Charge-Offs, it will
thereafter be increased on any Distribution Date (but not by an amount in excess
of the aggregate Class B Investor Charge-Offs) by the amount of Excess Spread
and Excess Finance Charges allocated to Series 1999-B and available for such
purpose as described above under "--Application of Collections--Excess Spread;
Excess Finance Charges."
OPTIONAL REPURCHASE
On any date occurring on or after the date that the Investor Amount is
reduced to 5% or less of the Initial Invested 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 Collateral Interest will be equal
to the Invested Amount on such Distribution Date on which such purchase occurs
(if the purchase is on a Distribution Date and, if not, the Invested Amount for
the Distribution Date following such repurchase) plus, in each case, accrued and
unpaid interest on the Certificates plus accrued and unpaid interest on the
Collateral Interest. Following any such repurchase, the Certificateholders will
have no further rights with respect to the
S-44
45
Receivables; provided, however, that such repurchase in no way impacts the
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 September 30, 2003 (or such
later date resulting from postponement of the Accumulation Period), unless a Pay
Out Event occurs prior to such date. A "PAY OUT EVENT" for Series 1999-B refers
to any of the following events, which are applicable only to Series 1999-B
(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 Series 1999-B Holders (which determination will be made
without reference to whether any funds are available pursuant to any credit
enhancement) and continues unremedied for a period of 60 days after written
notice of such failure shall have been given to the Seller by the Trustee,
or to the Seller and the Trustee by Series 1999-B Holders aggregating not
less than 50% of the outstanding principal balance of the Series 1999-B
Interests;
(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 holders of the Certificates aggregating
not less than 50% of the outstanding principal balance of the Certificates
and as a result the interests of the Certificateholders are materially and
adversely affected (which determination shall be made, for so long as the
Collateral Invested Amount is greater than zero without reference to
whether any funds are available pursuant to any credit 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 Receivables in Additional Accounts to the
Trust on or prior to the tenth Business Day following the related
Determination Date 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 Receivables in Additional Accounts to the
Trust on or prior to the tenth Business Day following the related
Determination Date 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 (which determination shall be made, for so
long as the Collateral Invested Amount is greater than zero, without
reference to whether any funds are available pursuant to any credit
enhancement); or
(f) the Class A Investor Amount is not paid in full on the Class A
Expected Final Distribution Date or the Class B Investor Amount is not paid
in full on the Class B Expected Final Distribution Date.
S-45
46
A Pay Out Event for all Series refers to any of the following events, which are
applicable to Series 1999-B 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 of 1940, as amended; 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 the Certificateholders and the
Collateral Interest Holder evidencing undivided interests aggregating more than
50% of the aggregate unpaid principal amount of the Series 1999-B Interests, by
written notice to the Seller and the Servicer (and to the Trustee if given by
the Certificateholders and the Collateral Interest Holder), declare that a Pay
Out Event has occurred with respect to the Series 1999-B 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 Collateral Interest Holder immediately upon
the occurrence of such event. Upon the occurrence of a Pay Out Event, the Rapid
Amortization Period will commence. In such event, distributions of principal to
the Certificateholders in the priority provided for above will begin on the
first Distribution Date following the month in which the Pay Out Event occurred.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Series 1999-B Interests for
any Distribution Date (the "MONTHLY SERVICING FEE") will be equal to one-twelfth
of the product of (a) 2.0% (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 for 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 for the first Distribution Date, the Class A Servicing Fee will be
$ . The share of the Monthly Servicing Fee allocable to the Class B
Certificateholders for any Distribution Date (the "CLASS B SERVICING FEE") will
be equal to one-twelfth of the product of (a) the Class B Floating Percentage,
(b) the Servicing Fee Rate and (c) the Servicing Base Amount; provided, however,
that for the first Distribution Date, the Class B Servicing Fee will be
$ . The share of the Servicing Fee allocable to the Collateral Interest
Holder for any Distribution Date (the "COLLATERAL SERVICING FEE") will be equal
to one-twelfth of the product of (a) the Collateral Floating Percentage, (b) the
Servicing Fee Rate and (c) the Servicing Base Amount; provided, however, that
for the first Distribution Date, the Collateral Servicing Fee will be
$ . The Class A Servicing Fee, the Class B Servicing Fee and the
Collateral Servicing Fee shall be payable to the Servicer solely to the extent
amounts are available for distribution as described under "--Application of
Collections--Payment of Interest, Fees and Other Items," "--Cash Collateral
Account; Reallocated Principal Collections," and "--Excess Spread; Excess
Finance Charges" in this Prospectus Supplement.
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 Bank ("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
accompanying Prospectus.
S-46
47
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and section 4975 of the Code prohibit certain pension, profit
sharing or other employee benefit plans, individual retirement accounts or
annuities and employee annuity plans and Keogh plans (collectively, "PLANS")
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. A violation of
these "prohibited transaction" rules may generate excise 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
government 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.
CLASS A CERTIFICATES
A violation of the prohibited transaction rules could occur if the Class A
Certificates were to be purchased with "plan assets" of any Plan if the Seller,
the Trustee, any of the Underwriters or any of their affiliates were a Party in
Interest with respect to such Plan, unless a statutory, regulatory or
administrative exemption is available or an exemption applies under a regulation
(the "PLAN ASSET REGULATION") issued by the Department of Labor ("DOL"). The
Seller, the Trustee, the Underwriters and their affiliates are likely to be
Parties in Interest with respect to many Plans. Before purchasing the Class A
Certificates, a Plan fiduciary or other Plan investor should consider whether a
prohibited transaction might arise by reason of a relationship between the Plan
and the Seller, the Trustee, any Underwriter or any of their affiliates and
consult their counsel regarding the purchase in light of the considerations
described below and in the accompanying Prospectus.
Under certain circumstances, the Plan Asset Regulation treats the assets in
which a Plan holds an equity interest as "plan assets" of such Plan. Because the
Class A Certificates will represent beneficial interests in the Trust, and
despite the agreement of the Seller and the Certificate Owners to treat the
Class A Certificates as debt instruments, the Class A Certificates are likely to
be considered equity interests in the Trust for purposes of the Plan Asset
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 the exception for "publicly-offered securities"
is applicable as described in the accompanying Prospectus. It is anticipated
that the Class A Certificates will meet the criteria for treatment as
"publicly-offered securities" as described in the accompanying Prospectus. No
restrictions will be imposed on the transfer of the Class A Certificates. It is
expected that the Class A Certificates will be held by at least 100 Independent
Investors at the conclusion of the initial public offering although no assurance
can be given, and no monitoring or other measures will be taken to ensure, that
such condition is met. The Class A Certificates will be sold as part of the
offering pursuant to an effective registration statement under the Act and then
will be timely registered under the Exchange Act.
If the forgoing exception under the Plan Asset Regulation were not
satisfied, transactions involving the Trust and Parties in Interest with respect
to a Plan that purchases or holds Class A Certificates might be prohibited under
section 406 of ERISA and/or section 4975 of the Code and result in excise tax
and other liabilities under ERISA and section 4975 of the Code unless an
exemption were available. The five DoL class exemptions described in the
accompanying Prospectus may not provide relief for all transactions involving
the assets of the Trust even if they would otherwise apply to the purchase of a
Class A Certificate by a Plan.
CLASS B CERTIFICATES
The Class B Underwriter does not expect that the Class B Certificates will
be held by at least 100 such persons and, therefore, does not expect that such
Class B Certificates will qualify as "publicly-offered securities" under the
Plan Asset Regulation. Accordingly, the Class B Certificates may not be acquired
or held by, on behalf of, or with "plan assets" of any Plan. 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 limitation.
S-47
48
CONSULTATION WITH COUNSEL
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Class A Certificates on behalf of or with "plan assets" of any
Plan should consult their own counsel regarding whether the Trust's assets
represented by the Class A 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.
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 Class A Certificates. Accordingly, among other factors,
Plan fiduciaries and other Plan investors should consider whether the investment
(i) satisfies the diversification requirement 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 in this
Prospectus Supplement and the accompanying Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
relating to the Class A Certificates and the Class B Certificates, the
"UNDERWRITING AGREEMENT," the Bank has agreed to sell to the underwriters named
below (the "CLASS A UNDERWRITERS"), and each of the Class A Underwriters has
agreed to purchase from the Bank, the principal amount of Class A Certificates
set forth opposite its name below:
PRINCIPAL AMOUNT OF
CLASS A UNDERWRITERS CLASS A CERTIFICATES
- -------------------- --------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $
Chase Securities Inc. ...................................... $
Credit Suisse First Boston Corporation...................... $
Morgan Stanley & Co. Incorporated........................... $
Salomon Smith Barney Inc. .................................. $
------------
$
------------
The Seller has been advised by the Class A Underwriters that the Class A
Underwriters propose initially to offer the Class A Certificates to the public
at the price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of % of the
principal amount of the Class A Certificates. The Class A Underwriters may allow
and such dealers may reallow a concession not in excess of % of the
principal amount of the Class A Certificates to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Bank has agreed to sell to the underwriter named below (the
"CLASS B UNDERWRITER" and together with the Class A Underwriters, the
"UNDERWRITERS"), and the Class B Underwriter has agreed to purchase from the
Bank, the principal amount of Class B Certificates set forth opposite its name
below:
PRINCIPAL AMOUNT OF
CLASS B UNDERWRITER CLASS B CERTIFICATES
- ------------------- --------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $
The Seller has been advised by the Class B Underwriter that the Class B
Underwriter proposes initially to offer the Class B Certificates to the public
at the price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of % of the
principal amount of the Class B Certificates. The Class B Underwriter may allow
and such dealers may reallow a concession not in excess of % of the
principal amount of the Class B Certificates to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
S-48
49
The Underwriters will be compensated as set forth in the following table:
UNDERWRITERS' AMOUNT
DISCOUNTS AND PER $1,000 TOTAL
COMMISSIONS OF PRINCIPAL AMOUNT
------------- ------------ ------------
Class A Certificates......................... % $ $
Class B Certificates......................... % $ $
-------- ------------
$ $
======== ============
Additional offering expenses are estimated to be $700,000. The Underwriters
have agreed to reimburse the Seller for certain expenses of the issuance and
distribution of the Certificates.
The Seller has agreed that it will indemnify the Underwriters against
certain liabilities, including liabilities under the Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
Each Underwriter has represented and agreed that (a) it has complied and
will comply with all applicable provisions of the Financial Services Act of 1986
and the Public Offers of Securities Regulations 1995 (the "REGULATIONS") with
respect to anything done by it in relation to the Certificates in, from or
otherwise involving the United Kingdom; (b) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Certificates to a person who is of a kind
described in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on; and (c) if it is an authorized person
under Chapter III of part I of the Financial Services Act 1986, it has only
promoted and will only promote (as that term is defined in Regulation 1.02(2) of
the Financial Services (Promotion of Unregulated Schemes) Regulations 1991) to
any person in the United Kingdom the scheme described in this Prospectus
Supplement and the Prospectus if that person is of a kind described either in
Section 76(2) of the Financial Services Act 1986 or in Regulation 1.04 of the
Financial Services (Promotion of Unregulated Schemes) Regulations 1991; and (d)
it is a person of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Certificates in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the Certificates so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of the
Certificates in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the Underwriters
to reclaim a selling concession from a syndicate member when the Certificates
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
Certificates to be higher than they would otherwise be in the absence of such
transactions. Neither the Bank nor the Underwriters represents that the
Underwriters will engage in any such transactions or that such transactions,
once commenced, will not be discontinued without notice at any time.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Seller by Linda Morris, Esq., Vice President, Secretary and
General Counsel, Fleet Bank (RI), National Association, and by Orrick,
Herrington & Sutcliffe LLP, Washington, D.C., special counsel to the Seller. In
addition certain legal matters, including matters related to Rhode Island law,
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
will be passed upon for the Underwriters by Mayer, Brown & Platt, Chicago,
Illinois.
S-49
50
INDEX OF PRINCIPAL TERMS
TERM PAGE
- ---- ----
Accumulation Period............... S-27
Accumulation Period Length........ S-29
Act............................... S-12
Additional Accounts............... S-16
Available Cash Collateral
Amount.......................... S-42
Available Enhancement Amount...... S-42
Available Investor Principal
Collections..................... S-27
Available Reserve Account
Amount.......................... S-41
Bank.............................. S-12
Base Rate......................... S-20
Business Day...................... S-25
Cash Collateral Account........... S-42
Certificate Owner................. S-24
Certificateholders................ S-20
Certificates...................... S-12
Class A Additional Interest....... S-36
Class A Available Funds........... S-26
Class A Certificate Rate.......... S-24
Class A Certificateholders........ S-20
Class A Certificates.............. S-12
Class A Expected Final
Distribution Date............... S-20, S-27
Class A Floating Percentage....... S-30
Class A Initial Invested Amount... S-31
Class A Invested Amount........... S-31
Class A Investor Amount........... S-32
Class A Investor Charge-Off....... S-44
Class A Investor Default Amount... S-43
Class A Monthly Interest.......... S-26
Class A Monthly Principal......... S-28
Class A Principal Percentage...... S-31
Class A Required Amount........... S-32
Class A Servicing Fee............. S-46
Class A Underwriters.............. S-48
Class B Additional Interest....... S-36
Class B Available Funds........... S-26
Class B Certificate Rate.......... S-25
Class B Certificateholders........ S-20
Class B Certificates.............. S-12
Class B Expected Final
Distribution Date............... S-20, S-27
Class B Floating Percentage....... S-30
Class B Initial Invested Amount... S-31
Class B Invested Amount........... S-31
Class B Investor Amount........... S-32
TERM PAGE
- ---- ----
Class B Investor Charge-Off....... S-44
Class B Investor Default Amount... S-43
Class B Monthly Interest.......... S-26
Class B Monthly Principal......... S-28
Class B Principal Percentage...... S-31
Class B Required Amount........... S-33
Class B Servicing Fee............. S-46
Class B Underwriter............... S-48
Closing Date...................... S-12
Collateral Additional Interest.... S-37
Collateral Available Funds........ S-26
Collateral Default Amount......... S-32, S-43
Collateral Floating Percentage.... S-30
Collateral Initial Invested
Amount.......................... S-32
Collateral Interest............... S-12
Collateral Interest Holder........ S-12
Collateral Interest Rate.......... S-27
Collateral Invested Amount........ S-32
Collateral Monthly Interest....... S-26
Collateral Monthly Principal...... S-28
Collateral Principal
Collections..................... S-28
Collateral Servicing Fee.......... S-46
Controlled Accumulation Amount.... S-29
Controlled Deposit Amount......... S-20, S-29
Criteria.......................... S-16
Deficit Controlled Accumulation
Amount.......................... S-29
Definitive Certificate............ S-24
Designated Maturity............... S-25
Determination Date................ S-20
Distribution Date................. S-24
DoL............................... S-47
DTC............................... S-24
Eligible Account.................. S-16
Enhancement....................... S-42
Enhancement Surplus............... S-28
ERISA............................. S-47
Excess Finance Charges............ S-25
Excess Spread..................... S-36
FFG............................... S-12, S-15
Fleet "A" Credit Card Portfolio... S-13
Fleet "B" Credit Card Portfolio... S-12
Fleet Credit Card Portfolio....... S-13
Floating Allocation Percentage.... S-30
S-50
51
TERM PAGE
- ---- ----
Group One......................... S-12
Initial Accounts.................. S-16
Initial Closing Date.............. S-16
Initial Cut-Off Date.............. S-16
Initial Invested Amount........... S-23
Interest Period................... S-25
Invested Amount................... S-23, S-32
Invested Principal Collections.... S-28
Investor Amount................... S-32
Investor Default Amount........... S-43
Investor Principal Collections.... S-27
LIBOR............................. S-24, S-25
LIBOR Determination Date.......... S-25
Loan Agreement.................... S-12
Master Pooling and Servicing
Agreement....................... S-12
Master Trust I Sales.............. S-13
Master Trust II Sales............. S-13
Monthly Period.................... S-25, S-30
Monthly Servicing Fee............. S-46
Net Portfolio Yield............... S-20
Paired Series..................... S-41
Parties in Interest............... S-47
Pay Out Event..................... S-45
Percentage Allocation............. S-34
Plan Asset Regulation............. S-47
Plans............................. S-47
Pooling and Servicing Agreement... S-12
Principal Allocation Percentage... S-30
Principal Funding Account......... S-39
Principal Funding Account
Balance......................... S-31
Principal Funding Investment
Proceeds........................ S-40
Rapid Amortization Period......... S-21
Reallocated Principal
Collections..................... S-33
Record Date....................... S-25
TERM PAGE
- ---- ----
Reference Banks................... S-25
Regulations....................... S-49
Relevant Cut-Off Date............. S-16
Required Cash Collateral Amount... S-42
Required Enhancement Amount....... S-42
Required Reserve Account Amount... S-40
Reserve Account................... S-40
Reserve Account Funding Date...... S-40
Revolving Period.................. S-27
Seller............................ S-12
Seller Amount..................... S-24
Seller Percentage................. S-24
Sellers' Interest................. S-24
Series 1999-B..................... S-12
Series 1999-B Certificates........ S-12
Series 1999-B Holders............. S-23
Series 1999-B Interests........... S-12
Series 1999-B Termination Date.... S-24
Series Investor Amount............ S-32
Series Percentage................. S-23
Series Supplement................. S-12
Servicer.......................... S-12
Servicing Base Amount............. S-46
Servicing Fee Rate................ S-46
Shared Principal Collections...... S-41
Special Tax Counsel............... S-46
Subordinate Principal
Collections..................... S-34
Telerate Page 3750................ S-25
Total Enhancement................. S-43
Trust............................. S-12
Trust Portfolio................... S-16
Trustee........................... S-12
Underwriters...................... S-48
Underwriting Agreement............ S-48
S-51
52
ANNEX I
OTHER SERIES ISSUED
The Certificates will be the twentieth Series to be issued by the Trust.
The table below sets forth the principal characteristics of the thirteen other
Series heretofore issued by the Trust and currently outstanding. Such Series are
the Series 1994-B Certificates, the Series 1995-A Certificates, the Series
1995-C Certificates, the Series 1995-D 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, the Series 1998-A
Certificates and the Series 1999-A Certificates. 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.
SERIES 1994-B
Initial Invested Amount......................... $450,000,000
Initial Pre-Funded Amount....................... $300,000,000
Invested Amount as of May 31, 1999.............. $587,933,333
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 1995-A
Initial Invested Amount......................... $600,000,000
Initial Pre-Funded Amount....................... $100,000,000
Invested Amount as of May 31, 1999.............. $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-C
Initial Invested Amount......................... $375,000,000
Initial Pre-Funded Amount....................... $200,000,000
Investor Amount as of May 31, 1999.............. $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
I-1
53
SERIES 1995-D
Initial Invested Amount......................... $450,000,000
Initial Pre-Funded Amount....................... $150,000,000
Investor Amount as of May 31, 1999.............. $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
SERIES 1995-F
Initial Invested Amount......................... $750,000,000
Initial Pre-Funded Amount....................... $100,000,000
Investor Amount as of May 31, 1999.............. $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 May 31, 1999.............. $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 May 31, 1999.............. $500,000,000
Class A-1 Certificate Rate...................... 6.0% per annum
Class A-2 Certificate Rate...................... One Month LIBOR plus .23% per annum
Class B Certificate Rate........................ One Month LIBOR plus .35% per annum
Collateral Rate................................. No higher than One Month LIBOR plus 1.00% per
annum
Initial Enhancement Amount...................... $43,750,000
Series Servicing Fee Rate....................... 2% per annum
Series 1996-A Termination Date.................. November 2005 Distribution Date
Series Issuance Date............................ January 18, 1996
I-2
54
SERIES 1996-B
Initial Invested Amount......................... $750,000,000
Investor Amount as of May 31, 1999.............. $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 May 31, 1999.............. $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 May 31, 1999.............. $700,000,000
Class A Certificate Rate........................ One Month LIBOR plus .15% per annum
Class B Certificate Rate........................ One Month LIBOR plus .30% per annum
Collateral Rate................................. No higher than One Month LIBOR plus 1.00% per
annum
Initial Enhancement Amount...................... $70,000,000
Series Servicing Fee Rate....................... 2% per annum
Series 1996-D Termination Date.................. June 2005 Distribution Date
Series Issuance Date............................ June 18, 1996
SERIES 1996-E
Initial Invested Amount......................... $450,000,000
Initial Pre-Funded Amount....................... $50,000,000
Investor Amount as of May 31, 1999.............. $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% per
annum
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
I-3
55
SERIES 1998-A
Initial Invested Amount......................... $862,500,000
Initial Pre-Funded Amount....................... $287,500,000
Investor Amount as of May 31, 1999.............. $1,150,000,000
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...................... $120,750,000
Series Servicing Fee Rate....................... 2% per annum
Series 1998-A Termination Date.................. July 2003 Distribution Date
Series Issuance Date............................ February 6, 1998
SERIES 1999-A
Initial Invested Amount......................... $600,000,000
Investor Amount as of May 31, 1999.............. $600,000,000
Class A Certificate Rate........................ One Month LIBOR plus .11% per annum
Class B Certificate Rate........................ One Month LIBOR plus .33% per annum
Class C Interest................................ No higher than One Month LIBOR plus 2.00% per
Annum
Initial Enhancement Amount...................... $66,000,000
Series Servicing Fee Rate....................... 2% per annum
Series 1999-A Termination Date.................. September 2004 Distribution Date
Series Issuance Date............................ March 23, 1999
I-4
56
ANNEX II
RECEIVABLES IN ADDITIONAL ACCOUNTS
CONVEYED TO THE TRUST
NUMBER OF RECEIVABLES
ASSIGNMENT DATE RECEIVABLES ADDITIONAL IN ADDITIONAL
NUMBER TRANSFERRED TO TRUST RELEVANT CUT-OFF DATE ACCOUNTS(1) ACCOUNTS(1)
- ---------- -------------------- --------------------- ----------- -------------
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, 1997 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 246,990 $363,909,199
39 April 14, 1998 March 31, 1998 227,285 $907,447,235
40 May 14, 1998 April 30, 1998 249,490 $602,772,032
41 July 1, 1998 May 31, 1998 284,855 $582,539,789
42 September 1, 1998 July 31, 1998 209,559 $500,442,550
II-1
57
NUMBER OF RECEIVABLES
ASSIGNMENT DATE RECEIVABLES ADDITIONAL IN ADDITIONAL
NUMBER TRANSFERRED TO TRUST RELEVANT CUT-OFF DATE ACCOUNTS(1) ACCOUNTS(1)
- ---------- -------------------- --------------------- ----------- -------------
43 October 1, 1998 August 31, 1998 126,098 $364,789,653
44 November 13, 1998 October 31, 1998 276,577 $648,197,959
45 December 14, 1998 November 30, 1998 65,326 $166,800,025
46 December 31, 1998 November 30, 1998 79,855 $210,815,757
47 January 28, 1999 December 31, 1998 77,427 $197,913,305
48 January 31, 1999 December 31, 1998 312,662 $704,718,352
49 February 16, 1999 January 31, 1999 189,409 $393,818,299
50 March 10, 1999 January 31, 1999 145,162 $248,815,264
51 March 24, 1999 February 28, 1999 152,894 $206,886,377
52 April 14, 1999 March 31, 1999 56,776 $105,666,192
53 April 16, 1999 March 31, 1999 124,643 $304,064,904
54 May 14, 1999 April 30, 1999 95,437 $123,248,542
55 June 1, 1999 April 30, 1999 400,682 $925,598,651
56 July 19, 1999 May 31, 1999 89,208 $118,401,838
- ------------
(1) The amounts shown are as of the Relevant Cut-Off Date.
II-2
58
Prospectus
--------------------
[FLEET LOGO]
FLEET CREDIT CARD MASTER TRUST II
ISSUER
FLEET BANK (RI), NATIONAL ASSOCIATION
SELLER AND SERVICER
ASSET-BACKED CERTIFICATES
THE TRUST--
- - may periodically issue asset-backed certificates in one or more series with
one or more classes; and
- - will own--
- receivables in a portfolio of revolving credit card accounts;
- payments due on those receivables; and
- other property described in this prospectus and in the accompanying
prospectus supplement.
THE CERTIFICATES--
- - will represent interests in the trust and will be paid only from the trust
assets;
- - offered with this prospectus will be rated in one of the four highest rating
categories by at least one nationally recognized rating organization;
- - may have one or more forms of enhancement; and
- - will be issued as part of a designated series which may include one or more
classes of certificates and enhancement.
THE CERTIFICATEHOLDERS--
- - will receive interest and principal payments from a varying percentage of
credit card account collections.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 8 IN THIS PROSPECTUS.
A certificate is not a deposit and neither the certificates nor the underlying
accounts or receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
The certificates will represent interests in the trust only and will not
represent interests in or obligations of Fleet Bank (RI), National Association
or any of its affiliates.
This prospectus may be used to offer and sell certificates of a series only if
accompanied by the prospectus supplement for that series.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS OR
THE PROSPECTUS SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
JULY 12, 1999
59
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to particular series
of certificates, including your series, and (b) the accompanying prospectus
supplement, which will describe the specific terms of your series of
certificates, including:
- the terms, including interest rates, for each class;
- the timing of interest and principal payments;
- information about the receivables;
- information about credit enhancement, if any, for each class; and
- the method for selling the certificates.
IF THE DESCRIPTION OF THE TERMS OF A PARTICULAR SERIES OF CERTIFICATES
VARIES BETWEEN THE DESCRIPTION CONTAINED IN THIS PROSPECTUS AND THE DESCRIPTION
IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN
THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
We include cross references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following table of contents and the table of contents
included in the accompanying prospectus supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Principal Terms," beginning
on page 66 in this prospectus.
2
60
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY...................... 5
The Trust............................. 5
Trust Assets.......................... 5
Information About The Receivables..... 5
Servicer.............................. 6
Allocation Of Trust Assets............ 6
Interest Payments On The
Certificates....................... 6
Principal Payments On The
Certificates....................... 6
Revolving Period................... 6
Accumulation and Amortization
Periods.......................... 6
Rapid Amortization Period.......... 7
Shared Excess Finance Charge
Collections ....................... 7
Shared Principal Collections.......... 7
Credit Enhancement.................... 7
Certificate Ratings................... 7
RISK FACTORS............................ 8
Competition in the Credit Card
Industry Could Lead to Early
Payment of Your Certificates....... 8
A Change in the Terms of the
Receivables May Adversely Affect
the Amount or Timing of Collections
and May Cause an Early Payment of
Your Certificates or a Downgrade... 8
If the Transfer of Receivables Were
Held to Be Merely a Grant of a
Security Interest, Other Interests
May Have Priority Over Your
Certificates....................... 8
If a Conservator or Receiver Is
Appointed for the Bank, Assets
Could Be Sold at a Loss, Payment
May Be Accelerated, Delayed or
Reduced and Protections Provided to
Certificateholders May Be
Overridden......................... 9
Consumer Protection Laws May Restrict
the Bank's Ability to Collect
Receivables and Maintain Yield on
the Portfolio and Lead to an Early
Pay Out or Inability to Pay
Certificates in Full............... 10
Principal May Be Paid Earlier Than
Expected Creating a Reinvestment
Risk to Certificateholders or Later
Than Expected Resulting in a
Failure to Receive Payment When
Expected........................... 11
Social, Economic and Geographic
Factors Affect Credit Card Payments
and Are Unpredictable and May Cause
a Delay or Default in Payment...... 11
Credit Ratings Assigned to Your
Certificates Are Limited in
Nature............................. 12
Credit Quality of Trust Assets May Be
Eroded By the Addition of New
Assets 12
PAGE
----
Credit Card Rates May Decline Without
a Corresponding Change in Amounts
Needed to Pay Certificates......... 12
Issuance of Additional Series by the
Trust May Adversely Affect Your
Payments or Rights................. 13
If Optional Repurchase Occurs, it Will
Result in an Early Return of
Principal and a Reinvestment Risk.. 13
If Credit Card Account Holders Are
Concentrated in One State or
Geographic Location, Laws, Economic
Downturn or Natural Disasters in
that Area May Adversely Affect
Collections of Receivables......... 13
If the Bank Elects to Treat a Portion
of Principal Receivables as Finance
Charge Receivables, Principal
Payments Could Be Delayed.......... 13
Amounts in Prefunding Account Not
Invested in Receivables May Result
in Early Return of Principal and
Reinvestment Risk.................. 14
You Will Not Be Recognized as the
Owner of Certificates on the
Records of the Trustee and Will Not
Be Able to Exercise Rights Directly
as a Certificateholder............. 14
Trust Assets May Be Allocated to One
or More Specific Series or Groups
and Not Be Available to Your
Series............................. 14
FORMATION OF THE TRUST.................. 15
TRANSFER AND ASSIGNMENT................. 16
The Transfer.......................... 16
Amendment to Pooling and Servicing
Agreement.......................... 16
Assignment and Assumption Agreement... 16
Rights Agreement...................... 17
THE BANK'S CREDIT CARD ACTIVITIES....... 17
General............................... 17
Acquisition and Use of Credit Cards... 18
Billing and Payments.................. 20
Description of FDR.................... 21
Delinquencies......................... 21
Interchange........................... 22
Competition........................... 22
USE OF PROCEEDS......................... 23
THE BANK AND FLEET FINANCIAL GROUP...... 23
3
61
PAGE
----
MATERIAL LEGAL ASPECTS OF THE
RECEIVABLES........................... 23
Transfer of Receivables............... 23
Matters Relating to Receivership...... 24
Consumer Protection Laws.............. 25
DESCRIPTION OF THE CERTIFICATES 25
General............................... 26
Book-Entry Registration............... 28
Definitive Certificates............... 31
The Bank Certificate; Additional
Sellers............................ 32
Interest Payments..................... 33
Principal Payments.................... 33
Shared Principal Collections.......... 34
Sharing of Excess Finance Charge
Collections........................ 34
Companion Series...................... 34
New Issuances......................... 34
Transfer and Assignment of
Receivables........................ 36
Liquidation of Receivables............ 36
Representations, Warranties and
Covenants 37
Addition of Accounts.................. 41
Acquisition of Participation
Interest........................... 42
Automatic Account Additions........... 42
Removal of Accounts................... 43
Servicing Procedures.................. 44
Discount Option....................... 44
Trust Accounts........................ 45
Series Percentage and Seller
Percentage......................... 46
Application of Collections............ 46
Operation of Excess Funding Account... 46
Defaulted Receivables; Rebates and
Fraudulent Charges................. 47
Final Payment of Principal and
Interest; Termination.............. 47
Trust Pay Out Events.................. 48
Servicing Compensation and Payment of
Expenses........................... 49
Matters Regarding the Servicer........ 50
Indemnification....................... 50
Servicer Default...................... 51
PAGE
----
Report to Certificateholders.......... 52
Evidence as to Compliance............. 53
Amendments............................ 53
Defeasance............................ 54
List of Certificateholders............ 54
The Trustee........................... 54
ENHANCEMENT............................. 55
General............................... 55
Subordination......................... 55
Letter of Credit...................... 56
Cash Collateral Guaranty or Account... 56
Collateral Interest................... 56
Surety Bond or Insurance Policy....... 56
Spread Account........................ 56
CERTIFICATE RATING...................... 56
FEDERAL INCOME TAX CONSEQUENCES......... 57
General............................... 57
Treatment of the Certificate as Debt.. 57
Treatment of the Trust................ 58
Taxation of Interest Income of U.S.
Certificate Owners................. 59
Sale or Exchange of Certificates...... 60
Non-U.S. Certificate Owners........... 60
Information Reporting and Backup
Withholding........................ 61
State and Local Taxation.............. 62
ERISA CONSIDERATIONS.................... 62
PLAN OF DISTRIBUTION.................... 64
UNDERWRITING............................ 64
LEGAL MATTERS........................... 65
REPORTS TO CERTIFICATEHOLDERS 65
WHERE YOU CAN FIND MORE INFORMATION..... 65
INDEX OF PRINCIPAL TERMS................ 66
GLOBAL CLEARANCE, SETTLEMENT AND TAX
DOCUMENTATION
PROCEDURES..............................A-1
4
62
PROSPECTUS SUMMARY
- - THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF THE
CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT.
- - THIS SUMMARY PROVIDES AN OVERVIEW OF THE TRUST ASSETS INCLUDING, IN
PARTICULAR, THE RECEIVABLES AND HOW SUCH RECEIVABLES WILL BE ALLOCATED AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF SUCH INFORMATION IN THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT.
THE TRUST
Fleet Credit Card Master Trust II was formed in 1993 pursuant to a pooling and
servicing agreement. The pooling and servicing agreement is between Fleet Bank
(RI), National Association, as seller and servicer, and Bankers Trust Company,
as trustee.
Prior to February 20, 1998, the trust was known as ADVANTA Credit Card Master
Trust II and the seller and servicer under the pooling and servicing agreement
was Advanta National Bank. On February 20, 1998, Advanta National Bank
transferred its rights, interests and obligations under the pooling and
servicing agreement to Fleet Bank (RI), National Association and the bank has,
since that date, served as seller and servicer.
- - The trust is a master trust in which multiple series of certificates may be
issued. Each series is issued pursuant to a supplement to the pooling and
servicing agreement. The terms of a series are set forth in the series
supplement.
- - Some classes or series may not be offered by this prospectus; for example,
they may be offered in a private placement.
See "Formation of the Trust" and "Transfer and Assignment" in this prospectus.
TRUST ASSETS
The bank and its predecessors have transferred to the trust the receivables in
certain MasterCard(R) and VISA(R)(1) revolving credit card accounts. All new
receivables generated in those accounts will be transferred automatically to the
trust. The receivables transferred to the trust are the primary trust assets.
The bank will periodically designate additional accounts to the trust.
Receivables in such additional accounts will be transferred to the trust and
receivables generated in the new accounts will be transferred automatically to
the trust. The total amount of receivables in the trust will fluctuate daily as
new receivables are generated and payments are received on accounts. Additional
assets may be transferred to the trust.
See "The Bank's Credit Card Activities" and "Description of the
Certificates--Addition of Accounts" in this prospectus.
Additional trust assets may include:
- - monies and investments in the trust's bank accounts;
- - revolving credit card accounts affiliated with programs other than MasterCard
and VISA or credit card accounts in programs created for a specific company;
- - participations in other pools of revolving credit card receivables or consumer
loan receivables, secured and unsecured arising as a result of advances made
on bank cards, private label cards, corporate cards and unsecured revolving
lines of credit; and
- - instruments and rights providing credit enhancement to a series or class.
INFORMATION ABOUT THE RECEIVABLES
The receivables arise in accounts selected and assigned to the trust from the
bank's credit card portfolio. The selection is based on criteria established in
the pooling and servicing agreement.
The bank's credit card portfolio is a combined portfolio. The portfolio includes
(1) credit card
- ---------------
1 MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and VISA U.S.A., Inc., respectively.
5
63
accounts owned by Advanta National Bank on February 20, 1998, (2) credit card
accounts owned by the bank on February 20, 1998 and (3) credit card accounts
originated or acquired by the bank after February 20, 1998.
See "The Bank's Credit Card Activities" in this prospectus.
SERVICER
The bank services the receivables under the terms of the pooling and servicing
agreement. In limited cases, the bank may resign or be removed and either the
trustee or a third party may be appointed as the new servicer. The servicer
receives a servicing fee from the trust. Each series is obligated to pay a
portion of the servicing fee.
See "Description of the Certificates--Servicing Compensation and Payment of
Expenses" and "--Matters Regarding the Servicer" in this prospectus.
ALLOCATION OF TRUST ASSETS
The trust assets are allocated among the series of certificates outstanding and
the interest of the bank represented by the seller certificates. The seller
certificates represent the remaining interest in the assets of the trust not
represented by the certificates and other interests issued by the trust to
investors.
Certificateholders are only entitled to amounts allocated to their series equal
to the interest and principal payments on their certificates.
See "Description of the Certificates--Series Percentage and Seller Percentage"
in this prospectus.
INTEREST PAYMENTS ON THE
CERTIFICATES
Each certificate of a series will represent the right to receive payments of
interest as described in the prospectus supplement for such series. If a series
of certificates consists of more than one class, each class may differ in, among
other things, priority of payments, payment dates, interest rates, method for
computing interest and rights to credit enhancement.
Each class of certificates may have fixed, floating or any other type of
interest rate. Generally, interest will be paid monthly, quarterly or on other
scheduled dates over the life of the certificates.
See "Description of the Certificates--Interest Payments" and "Enhancement" in
this prospectus.
PRINCIPAL PAYMENTS ON THE
CERTIFICATES
Each certificate of a series will represent the right to receive payments of
principal as described in the prospectus supplement prepared in connection with
such series. If a series of certificates consists of more than one class, each
class may differ in, among other things, the amounts allocated for principal
payments, priority of payments, payment dates, maturity, and rights to series
enhancement.
REVOLVING PERIOD
Each series of certificates will begin with a period during which the trust will
not pay or accumulate principal for payment to the certificateholders. The
period when no principal is paid or accumulated is known as the revolving
period. The trust, during the revolving period, will usually pay available
principal to the bank as holder of the sellers' interest, but may pay amounts
due to holders of certificates of other series.
ACCUMULATION AND AMORTIZATION PERIODS
Following the revolving period, each class of certificates will have one or a
combination of the following periods in which:
- - principal is accumulated in specified amounts per month and paid on a
scheduled date;
- - principal is paid in fixed amounts at scheduled intervals;
- - principal is paid in varying amounts at scheduled intervals;
- - principal is paid, at the option of the bank, in amounts and on dates
designated by the bank; or
- - principal is paid in varying amounts each month based on the amount of
principal receivables collected following certain adverse events.
The time at which principal payments will begin and the period over which
principal payments will be made will vary from one series to another and within
a series from one class to another. The principal payment provisions for each
series and class will be included in the prospectus supplement prepared for such
series.
6
64
RAPID AMORTIZATION PERIOD
If a pay out event has occurred with respect to a series, a rapid amortization
period begins and the trust will pay all available principal to the
certificateholders of that series on each distribution date. If the series has
more than one class, each class may have a different priority for payment.
A pay out event may affect one or more series.
See "Description of Certificates--Trust Pay Out Events" in this prospectus for a
discussion of the events that might lead to a rapid amortization period.
SHARED EXCESS FINANCE CHARGE
COLLECTIONS
Any series may be included in a group of series. If specified in the related
prospectus supplement, amounts designated as excess spread for a series and not
needed for that series, will be excess finance collections which may be applied
to cover shortfalls of other series in the same group.
See "Description of the Certificates--Sharing of Excess Finance Charge
Collections" "--Applications of Collections" and "--Defaulted Receivables;
Rebates and Fraudulent Charges" in this prospectus.
SHARED PRINCIPAL COLLECTIONS
If specified in the accompanying prospectus supplement, to the extent that
collections of principal receivables allocated to any series are not needed for
that series, those collections may be applied to cover principal payments for
other series in the same group.
See "Description of the Certificates--Shared Principal Collections" in this
prospectus.
CREDIT ENHANCEMENT
Each class of a series may be entitled to credit enhancement.
Credit enhancement for the certificates of any class may take the form of one or
more of the following:
- - subordination
- - collateral interest
- - insurance policy
- - cash collateral guaranty or account
- - letter of credit
- - surety bond
- - spread account
- - reserve account
- - swap arrangements
The type, characteristics and amount of any credit enhancement will be:
- - based on several factors, including the characteristics of the receivables and
accounts at the time a series of certificates is issued, and
- - established based on the requirements of the rating agencies.
See "Enhancement" in this prospectus.
CERTIFICATE RATINGS
Any certificate offered by this prospectus and an accompanying prospectus
supplement will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization.
A rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning agency. Each rating should be
evaluated independently of any other rating.
See "Risk Factors--Credit Ratings Assigned to Your Certificates Are Limited in
Nature" in this prospectus.
7
65
RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING FACTORS BEFORE YOU DECIDE WHETHER OR NOT TO
PURCHASE THE CERTIFICATES.
COMPETITION IN THE CREDIT The bank credit card industry is highly
CARD INDUSTRY COULD LEAD TO competitive. There is increased competitive use
EARLY PAYMENT OF YOUR of advertising, target marketing and pricing
CERTIFICATES competition in interest rates and annual
cardholder fees as both traditional and new
credit card issuers seek to expand or to enter
the market and compete for customers. As a result
of this competition, certain major credit card
issuers offer credit cards to selected customers
at interest rates lower than the rates assessed
on the credit card accounts assigned to the
trust. Since 1987, Advanta National Bank, the
bank's predecessor, and the bank have responded
to this increased competition by marketing cards
to customers without an annual fee and by
attempting to offer lower interest rates than
those available from other competitors.
Historically, Advanta National Bank and the bank
used and the bank continues to use direct mail
solicitation to acquire accounts.
The competitive nature of the credit card
industry, resulting in lower interest rates on
credit cards, may result in a reduced amount of
finance charge receivables collected and
available to pay interest on the certificates and
the competitive environment may affect the bank's
ability to originate new accounts and generate
new receivables. Such events could cause a pay
out event to occur and an early amortization of
the certificates.
See "The Bank's Credit Card
Activities--Competition" in this prospectus.
A CHANGE IN THE TERMS OF THE As owner of the accounts, the bank retains the
RECEIVABLES MAY ADVERSELY right to change various account terms including
AFFECT THE AMOUNT OR TIMING finance charges, other fees and the required
OF COLLECTIONS AND MAY CAUSE monthly minimum payment. Such changes may be
AN EARLY PAYMENT OF YOUR voluntary on the part of the bank or may be
CERTIFICATES OR A DOWNGRADE forced by law or market conditions. Changes in
interest and fees could decrease the effective
yield on the accounts and this could result in an
early amortization of your certificates. Changes
could also cause a reduction in the credit
ratings on your certificates.
See "Description of the
Certificates--Representations, Warranties and
Covenants" in this prospectus.
IF THE TRANSFER OF The seller has represented in the pooling and
RECEIVABLES WERE servicing agreement that the transfer of the
HELD TO BE MERELY A GRANT receivables to the trust is either a sale or the
OF A SECURITY INTEREST, grant of a pledge of the receivables. In order to
OTHER INTERESTS MAY HAVE protect the purchasers of the certificates, the
PRIORITY OVER YOUR bank has taken and will take the necessary
CERTIFICATES actions to ensure that if the transfer is
determined by a court to be a grant of a security
interest and not a transfer of the receivables to
the trust, the trust will have a "first priority
perfected security interest" in the receivables.
However, there are circumstances where,
regardless of the first priority perfected
security interest, other creditors may take
priority over your interests:
- a tax, government or other nonconsensual lien
on the bank's property arising before new
receivables come into existence may have
priority over the trust's interests in the
receivables,
8
66
- if the FDIC were appointed conservator or
receiver of the bank, the FDIC's administrative
expenses may be paid before the
certificateholders are paid,
- if there is an insolvency of the bank, the
operation of insolvency laws and procedures
could cause delays in payment on your
certificates,
- the bank, as servicer, is permitted to collect
receivables and hold such collections for a
period of time before depositing such amounts
into the collection account; if the bank were
to become insolvent, or, in certain
circumstances, if certain time periods were to
pass, the trust may not have a perfected claim
on amounts held by the bank and not deposited
into the collection account, which may result
in a loss to the certificateholders.
See "Material Legal Aspects of the
Receivables--Transfer of Receivables" in this
prospectus.
IF A CONSERVATOR OR RECEIVER The Federal Deposit Insurance Act, as amended by
IS APPOINTED FOR THE BANK, the Financial Institutions Reform, Recovery and
ASSETS COULD BE SOLD AT A Enforcement Act of 1989, and policy statements
LOSS, PAYMENT MAY BE issued by the FDIC, provide that the FDIC should
ACCELERATED, DELAYED OR respect a security interest granted by a bank
REDUCED AND PROTECTIONS where the security interest (a) is validly
PROVIDED TO perfected before the bank's insolvency and (b)
CERTIFICATEHOLDERS MAY BE was not taken in contemplation of the bank's
OVERRIDDEN insolvency or with the intent to hinder, delay or
defraud the bank or its creditors.
FDIC staff positions taken prior to the passage
of FIRREA do not suggest that the FDIC would
interrupt the timely transfer to the trust of
payments collected on the receivables.
If the FDIC were to assert a different position,
payments of principal and interest on your
certificates could be delayed and possibly
reduced. For example, under the FDIA, the FDIC
could--
- require the trustee to go through an
administrative claims procedure to establish
its right to those payments;
- request a stay of proceedings with respect to
the bank; or
- reject the bank's sales contract and limit the
trust's resulting claim to "actual direct
compensatory damages."
If a conservator or receiver were appointed for
the bank, this could cause an early amortization
of principal on all outstanding series. Under the
terms of the pooling and servicing agreement, new
principal receivables would not be transferred to
the trust. The trustee would sell the receivables
unless a sufficient amount of the holders of
certificates, and anyone else authorized to vote
on those matters, gave the trustee other
instructions. The trust would then terminate
earlier than was planned and you could have a
loss if the sale of the receivables produced
insufficient amounts to pay you in full. However,
the conservator or receiver may have the power--
- regardless of the terms of the pooling and
servicing agreement, (a) to prevent the early
amortization, (b) to prevent the early sale of
the receivables and termination of the trust or
(c) to require
9
67
new principal receivables to continue being
transferred to the trust; or
- regardless of the instructions of those
authorized to direct the trustee's actions
under the pooling and servicing agreement, (a)
to require the early sale of the receivables,
(b) to require termination of the trust and
retirement of the certificates or (c) to
prohibit the continued transfer of principal
receivables to the trust.
In addition, if a conservator or receiver is
appointed for the servicer, the conservator or
receiver may have the power to prevent either the
trustee or the certificateholders from appointing
a new servicer.
See "Material Legal Aspects of the
Receivables--Matters Relating to Receivership."
CONSUMER PROTECTION LAWS MAY Federal and state consumer protection laws
RESTRICT THE BANK'S ABILITY regulate the creation and enforcement of consumer
TO COLLECT RECEIVABLES AND loans. The trust may be liable for violations of
MAINTAIN YIELD ON THE such laws that apply to the receivables, either
PORTFOLIO AND LEAD TO AN as assignee of the bank with respect to the
EARLY PAY OUT OR INABILITY obligations arising before the transfer of the
TO PAY CERTIFICATES IN FULL receivables to the trust or as a party directly
responsible for obligations arising after the
transfer. In addition, Congress, the states and
regulatory agencies could further regulate the
credit card industry in ways that would make it
more difficult for the servicer to collect
payments on the receivables or that would
restrict the finance charges and other fees that
the bank can charge to the accounts. For example,
if the bank were required to reduce its finance
charges and other fees, resulting in a
corresponding decrease of the effective yield on
the accounts designated to the trust, this could
lead to a pay out event, resulting in the payment
of principal sooner than expected. One bill
currently pending before Congress, for example,
would, if it were to be enacted in its current
form, among other things, reduce the bank's
ability to impose overlimit fees.
The bank makes representations and warranties
relating to compliance with the requirements of
law. The bank also makes certain representations
and warranties in the pooling and servicing
agreement 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. If any such representation or warranty
is breached, the only remedy is that the seller
or the servicer must accept the transfer and
reassignment of receivables affected by the
violation.
See "Description of the
Certificates--Representation, Warranties and
Covenants" and "Material Legal Aspects of the
Receivables--Consumer Protection Laws" in this
prospectus.
Receivables may also be written off as
uncollectible if a debtor seeks relief under
federal or state bankruptcy laws. This could
result in a loss of available funds to pay the
certificateholders.
10
68
See "Description of the Certificates--Receivables
in Defaulted Accounts; Rebates and Fraudulent
Charges" in this prospectus.
PRINCIPAL MAY BE PAID EARLIER The receivables in the trust may be paid at any
THAN EXPECTED CREATING A time and there is no assurance that new
REINVESTMENT RISK TO receivables will be generated or will be
CERTIFICATEHOLDERS OR LATER generated at levels needed to maintain the trust.
THAN EXPECTED RESULTING IN A To prevent the early amortization of the
FAILURE TO RECEIVE PAYMENT certificates, new receivables must be generated
WHEN EXPECTED and added to the trust. The trust is required to
maintain a certain minimum amount of receivables.
Such generation of new receivables is affected in
part, by the bank's ability to compete in the
current industry environment and by customers
changing borrowing and payment patterns. If there
is a decline in the generation of new receivables
you may be repaid your principal prior to the
expected date.
One development which affects the level of
finance charge collections is the increased
convenience use of credit cards. Convenience use
means that the customers pay their account
balances in full on or prior to the due date. The
customer, therefore, avoids all finance charges
on his account. This decreases the effective
yield on the accounts and could cause an early
amortization of certificates. Convenience use is
more common among cardholders who are not
assessed an annual fee than among those who pay
such fees. A substantial majority of the
cardholders on the accounts designated to the
trust are not charged an annual cardholder fee.
The pooling and servicing agreement requires that
the balance of principal receivables in the trust
not fall below a specified level. If the level of
principal receivables does fall below the
required level, an early amortization of
certificates will occur. To maintain the level of
principal receivables in the trust, the bank
periodically adds receivables through the
designation of additional accounts for inclusion
in the trust. If the bank is not able to add
additional accounts when required, an early
amortization will occur.
See "Description of the Certificates--Trust Pay
Out Events" in this prospectus and "Description
of the Certificates--Pay Out Events" in the
accompanying prospectus supplement.
Changes in finance charges also will affect
payment patterns on the receivables and thus may
result in a decline in yield. During the
amortization periods, this may adversely affect
the repayment of principal.
See "Receivable Yield Considerations" in the
accompanying prospectus supplement.
SOCIAL, ECONOMIC AND Changes in credit card use, payment patterns and
GEOGRAPHIC FACTORS the rate of defaults by cardholders may result
AFFECT CREDIT CARD from a variety of social, economic and geographic
PAYMENTS AND ARE factors. Social factors include changes in
UNPREDICTABLE AND consumer confidence levels and attitude toward
MAY CAUSE A DELAY OR incurring debt, the public's perception of the
DEFAULT IN PAYMENT use of credit cards and changing attitudes
regarding the stigma of personal bankruptcy.
Economic factors include the rate of inflation,
the unemployment rates and relative interest
rates offered for various types of loans.
Moreover, adverse changes in economic conditions
in states where cardholders are located could
11
69
have a direct impact on the timing and amount of
payments on the certificates of any series.
See "The Bank's Credit Card Activities" in this
prospectus and the accompanying prospectus
supplement.
CREDIT RATINGS ASSIGNED TO Each credit rating assigned to your certificates
YOUR CERTIFICATES ARE reflects the rating agency's assessment only of
LIMITED IN NATURE the likelihood that interest and principal will
be paid when required under the pooling and
servicing agreement, not when expected. These
ratings are based on the rating agencies'
determination of the value of receivables in the
trust and the availability of any credit
enhancement.
The ratings do not address the following:
- the likelihood that the principal or interest
on your certificate will be prepaid, paid on a
scheduled date or paid on any particular date
before the termination date of your series,
- the possibility that your certificates will be
paid early or the possibility of the imposition
of United States withholding tax for non-U.S.
Certificateholders,
- the marketability of the certificates, or any
market price, or
- that an investment in the certificates is a
suitable investment for you.
A rating is not a recommendation to purchase,
hold or sell certificates of a series or class of
a series.
CREDIT QUALITY OF TRUST The bank expects that it will periodically add
ASSETS MAY BE ERODED BY additional accounts to the trust and may, at
THE ADDITION OF NEW ASSETS times be obligated to add additional accounts.
Additional accounts may include accounts which
were originated using criteria that are different
than those applicable to the accounts currently
designated to the trust. There are many reasons
which could cause such differences, including the
fact that the additional accounts were originated
at a different date or were acquired from an
institution which used different underwriting
standards or procedures. Consequently, there is
no assurance that future additional accounts will
have the same credit quality as those currently
designated to the trust.
In addition, the pooling and servicing agreement
allows the bank to add participation interests in
other assets to the trust. The addition of such
participation interests and of additional
accounts will be subject to the satisfaction of
certain conditions described in this prospectus
under "Description of the Certificates--Addition
of Accounts" and "--Automatic Account Additions."
CREDIT CARD RATES MAY DECLINE The majority of accounts have finance charges set
WITHOUT A CORRESPONDING at a rate above the London interbank offered rate
CHANGE IN AMOUNTS NEEDED TO or the prime rate. Certificates may bear interest
PAY CERTIFICATES at a fixed-rate or at a floating-rate based on
another specified index. Thus, if the London
interbank offered rate or other specified rate
declines, finance charge collections will
decline; however, there may not be a
corresponding decrease in the interest rates on
the certificates. The effect of lower finance
charges without a corresponding reduction in the
rates on the certificates could cause
certificates to be paid early.
12
70
ISSUANCE OF ADDITIONAL SERIES The trust is a master trust and has issued other
BY THE TRUST MAY ADVERSELY series of certificates and is expected to issue
AFFECT YOUR PAYMENTS OR additional series from time to time. All of such
RIGHTS certificates are payable from the receivables in
the trust. The trust may issue additional series
with terms that are different from your series
without the prior review or consent of any
certificateholders. It is a condition to the
issuance of each new series that each rating
agency that has rated an outstanding series,
confirms in writing that the issuance of the new
series will not result in a reduction or
withdrawal of its rating. However, the terms of a
new series could affect the timing and amounts of
payments on any other outstanding series,
including your series. The owners of the
certificates of any new series will have voting
rights which will reduce the percentage interest
represented by your series. Such voting rights
may relate to the ability to approve waivers and
give consents. The actions which may be affected
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" in this prospectus.
IF OPTIONAL REPURCHASE When the amount of certificates of a series is
OCCURS, IT WILL RESULT reduced to a stated percentage of such series'
IN AN EARLY RETURN OF original amount, the bank may repurchase the
PRINCIPAL AND A remaining certificates of such series. It is
REINVESTMENT RISK possible, if so provided in the applicable series
supplement, that the repurchase option could be
exercised when 10% or more of the principal
amount of such series remains outstanding. Such
repurchase may result in an early return of your
investment. It is not expected that any premium
will be paid in the event of the exercise of the
repurchase option and there can be no assurance
that you will be able to invest such early
repayment amount at a similar rate of return.
IF CREDIT CARD ACCOUNT If the trust contains a high concentration of
HOLDERS ARE CONCENTRATED receivables relating to cardholders located
IN ONE STATE OR GEOGRAPHIC within a single state or region of the United
LOCATION, LAWS, ECONOMIC States, events in that state or region may have a
DOWNTURN OR NATURAL magnified effect on the trust due to such
DISASTERS IN THAT AREA MAY concentration. The prospectus supplement of a
ADVERSELY AFFECT COLLECTIONS series will contain a then-current detailed
OF RECEIVABLES geographic breakdown of the number of accounts
and the amount of receivables relating to
cardholders with addresses in each applicable
state.
See "The Receivables--Geographic Distribution of
Accounts and Receivables" in the accompanying
prospectus supplement.
The bank has no way of predicting how a future
geographic event or a change in the geographic
distribution of the receivables may affect the
certificates.
IF THE BANK ELECTS TO TREAT A The documents relating to the certificates permit
PORTION OF PRINCIPAL the bank to cause a percentage of principal
RECEIVABLES AS FINANCE receivables to be treated as finance charge
CHARGE RECEIVABLES, PRINCIPAL receivables. The bank may elect to use such a
PAYMENTS COULD BE DELAYED discount and may decide, without notice to or the
consent of any holders of certificates, to reduce
the discount or discontinue the use of the
discount. Any election by the bank to discount
the principal receivables will result in an
increase in the amount of finance charge
receivables and a reduction in the amount of
principal receivables and the collection of
13
71
principal receivables from that which would
otherwise occur. This may result in delayed
principal payments on the certificates. Use of
the discount will also reduce the sellers'
interest in the trust, thereby making certain pay
out events based in part on the amount of
collections of finance charge receivables less
likely to occur and increasing the likelihood
that the bank will have to designate more
accounts to the trust or that a pay out event
will occur based on the sellers' interest or the
amount of principal receivables in the trust. Any
subsequent reduction or withdrawal of the percent
used in discounting the principal receivables
would have the opposite effect.
AMOUNTS IN PREFUNDING ACCOUNT The bank may, in connection with any series,
NOT INVESTED IN RECEIVABLES create a prefunding account and deposit a portion
MAY RESULT IN EARLY RETURN OF of the proceeds of the series into the account.
PRINCIPAL AND REINVESTMENT Moneys in the account will be invested in
RISK additional principal receivables. However, any
money in the prefunding account not used by a
specific date must be paid to the holders of the
certificates of that series. This will result in
an early return of principal. The bank does not
expect to pay a prepayment penalty or premium in
such event. If you receive an early payment you
may not be able to reinvest at a rate equivalent
to the rate on the certificates which were paid
early.
YOU WILL NOT BE RECOGNIZED AS If so stated in the accompanying prospectus
THE OWNER OF CERTIFICATES ON supplement, the certificates of each series
THE RECORDS OF THE TRUSTEE initially will be represented by one or more
AND WILL NOT BE ABLE TO certificates registered in the name of Cede, the
EXERCISE RIGHTS DIRECTLY nominee for DTC, and will not be registered in
AS A CERTIFICATEHOLDER the names of the certificate owners or their
nominees. Unless 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 is
used in the governing documents. As a result you
will only be able to exercise the rights of
certificateholders indirectly through DTC,
Cedelbank or Euroclear and their participating
organizations.
See "Description of Certificates--Book-Entry
Registration" and "--Definitive Certificates" in
this prospectus.
TRUST ASSETS MAY BE ALLOCATED A series supplement or an amendment to the
TO ONE OR MORE SPECIFIC pooling and servicing agreement may provide that
SERIES OR GROUPS AND NOT BE portions of the receivables or participation
AVAILABLE TO YOUR SERIES interests in the trust be allocated to one or
more series or groups. If such an allocation were
to occur, and if the allocation was not to your
series or a group in which your series is
included, your series would not be able to
benefit from such receivables or participation
interests. Such an allocation is dependent upon:
- satisfying the rating agency condition, and
- delivering an officer's certificate of the
trustee by the servicer that states that the
servicer reasonably believes that the
allocation will not have an adverse effect.
14
72
FORMATION OF THE TRUST
Fleet Credit Card Master Trust II (formerly known as ADVANTA Credit Card
Master Trust II)(the "TRUST") was formed, in accordance with the laws of the
State of New York, 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 (the "POOLING AND SERVICING AGREEMENT"). The Pooling and Servicing
Agreement is between Fleet Bank (RI), National Association, (the "BANK") as
Seller and Servicer, and Bankers Trust Company, as Trustee (together with any
successors thereto, the "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").
The Trust from time to time issues, in series (each a "SERIES"), asset
backed securities. Each Series is issued pursuant to the terms of a supplement
(each a "SERIES SUPPLEMENT") to the Pooling and Servicing Agreement. The Pooling
and Servicing Agreement and any Series Supplement are sometimes referred to as
the "POOLING AND SERVICING AGREEMENT."
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 a portfolio of credit card receivables arising under selected consumer
revolving credit card Accounts (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 from
time to time in the ordinary course of business in the accounts which have been
designated to the Trust. The Initial Accounts together with accounts thereafter
designated to the Trust (the "ADDITIONAL ACCOUNTS") are collectively referred to
as the "ACCOUNTS." The Accounts are MasterCard and VISA credit card accounts or
other consumer revolving credit card accounts in portfolios of consumer
revolving credit card accounts originated or acquired by the Bank. The amounts
owed by the obligors on such accounts are the "RECEIVABLES" and constitute the
primary assets of the Trust. 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 Receivables consist of amounts charged by cardholders for merchandise
and services and cash advances (the "PRINCIPAL RECEIVABLES"), plus the related
periodic finance charges, annual membership fees and annual service charges,
late fees, overlimit fees, cash advances fees, all other fees and charges with
respect to Accounts designated by the Seller to be included as Finance Charge
Receivables and Recoveries with respect to Defaulted Receivables (collectively,
the "FINANCE CHARGE RECEIVABLES").
The Trust assets consist and will consist of (1) the Receivables, (2) all
monies due or to become due thereunder and all amounts received with respect
thereto and all proceeds of the Receivables, (3) amounts recovered with respect
to Receivables which had been charged-off ("RECOVERIES"), (4) the right to
receive certain fees ("INTERCHANGE") received by the Bank, 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 charges
for merchandise and services in the Accounts, (5) proceeds of credit insurance
policies relating to the Receivables, (6) all monies and other property
constituting Eligible Investments on deposit in, credited to or held in bank
accounts of the Trust and (7) 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 participations
(including 100% participations) representing undivided interests in a pool of
assets consisting of revolving credit card receivables or consumer loan
receivables (secured or unsecured) arising as a result of advances made on bank
cards, private label cards, corporate cards and unsecured revolving lines of
credit.
15
73
The investor certificates and interests in the trust which are treated as
investor certificates, including the investor certificates offered pursuant to
this Prospectus and the accompanying Prospectus Supplement (the "CERTIFICATES")
represent undivided interests in the Trust. Certificates of a Series represent
the right to receive, to the extent necessary to make the required payments on
the Certificates, a portion of collections allocable to the Certificateholders
of such Series, funds on deposit in the Collection Account and in the Excess
Funding Account allocable to Certificateholders of such Series, funds on deposit
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"). The term "CERTIFICATEHOLDER"
refers to the registered owners of the Certificates or, with respect to any
Certificates in bearer form, if any, the bearer thereof. See "Description of the
Certificates" in this Prospectus.
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
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
16
74
(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 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.
Subsequent to the Transfer, the LLC converted into a limited partnership
which is known as the Fleet Credit Card Services, L.P. (the "CREDIT CARD LP"). A
subsidiary of the Bank is the general partner of Credit Card LP.
THE BANK'S CREDIT CARD ACTIVITIES
GENERAL
The Bank currently is the seller and the servicer under the Pooling and
Servicing Agreement. The Bank, as seller, together with any successor thereto
and any Additional Sellers, is the "SELLER." The Bank, as servicer together with
any successor thereto, is the "SERVICER."
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 (herein referred to as the "FLEET "B" 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 Fleet
"B" Credit Card Portfolio and (ii) the "FLEET "A" CREDIT CARD PORTFOLIO"
consisting of substantially all of the Advanta Consumer Credit Card Portfolio as
it existed on February 20, 1998 plus accounts originated or acquired by the Bank
on or after February 20, 1998.
17
75
Since the Transfer, the Bank has undertaken a program to review and conform
the policies and practices which apply to the Fleet "A" Credit Card Portfolio
and the Fleet "B" Credit Card Portfolio. Beginning in October 1998, while
certain differences in policies and practices continued to exist, the Bank began
to manage the Fleet "A" Credit Card Portfolio and the Fleet "B" Credit Card
Portfolio using common policies and practices. The accounts in the Fleet "B"
Credit Card Portfolio were originated or acquired under policies and practices
that were, in certain respects, different from those applicable to the Fleet "A"
Credit Card Portfolio and certain administrative and operational policies
relating to the Fleet "B" Credit Card Portfolio were also different from those
applicable to the Fleet "A" Credit Card Portfolio. Certain of those differences
are described below under the caption "--Acquisition and Use of Credit
Cards--Fleet "B" Credit Card Portfolio."
The accounts in the Advanta Consumer Credit Card Portfolio included and the
accounts in the Fleet Credit Card Portfolio include premium and standard
accounts. Both premium and standard 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 standard
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 Credit Card
Portfolio are currently performed on behalf of the Bank by First Data Resources,
Inc. ("FDR"). See "--Description of FDR" in this Prospectus. 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 accompanying 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 accompanying
Prospectus Supplement will describe the nature and characteristics of such
Participation Interests or Receivables.
ACQUISITION AND USE OF CREDIT CARDS
The information under this caption "--Acquisition and Use of Credit Cards"
applies generally to practices which were used by Advanta National Bank in the
administration of the Advanta Consumer Credit Card Portfolio and which continue
to be the practices used by the Bank in the management of the Fleet Credit Card
Portfolio except that certain information which applies specifically to the
Fleet "B" Credit Card Portfolio is described below under the caption
"--Acquisition and Use of Credit Cards--Fleet "B" Credit Card Portfolio."
Substantially all new accounts are generated through direct mail and
telemarketing solicitation of potential cardholders. Solicitations are either
prequalified or non-prequalified. All of the credit cards originated are
unsecured. For prequalified solicitations, the Bank engages a third-party
service to identify those individuals who meet the Bank's credit and demographic
criteria. Once a list of such individuals is obtained, the Bank delivers the
list to third party vendors who prepare the solicitation materials. If an
individual responds to a prequalified solicitation, the Bank obtains a second
credit bureau report and offers a credit card to the applicant only if such
report confirms the applicant's eligibility. For responses to non-prequalified
solicitations, credit bureau reports are obtained for all applicants.
Growth Strategy and Origination. The Bank acquires credit card accounts
through several programs such as balance transfer programs, value added programs
and acquiring credit card portfolios from other financial institutions. These
programs, excluding portfolio acquisitions, emphasize segmentation and use
direct mail, telemarketing and the internet as channels to market the Bank's
products. The Bank's products include standard and premium credit cards with
either the VISA or MasterCard affiliation. Management believes
18
76
that these account origination programs and varied products help to create and
maintain a balanced portfolio and provide a process to sustain growth for the
Bank.
Advanta National Bank historically emphasized direct solicitation as a
source of new accounts as its expertise increased through experience and the
benefit of numerous marketing, credit and risk management tests. Currently, the
Bank conducts national direct mail, telemarketing and internet solicitations.
The Bank carefully targets consumers through various data-mining methods and
targeting models in its direct mail and telemarketing solicitations. The Bank
aligns the product offering with the target customer segment along with the
number and sequence of offers in order to maximize market penetration, response
rates and usage.
Underwriting Procedures. The Bank uses internally developed credit scoring
models as well as proprietary scoring models developed by the Fair, Isaacs
Companies, an independent firm experienced in developing credit scoring models,
in evaluating the credit risk of each applicant. Credit scoring models are
developed by statistically evaluating common characteristics and their
correlation with credit risk. Application of a credit scoring system is intended
to provide a general indication, based on the information available, of an
applicant's willingness and ability to repay his or her obligations, and an
estimate of the credit risk associated with such applicant. The Bank uses
proprietary scoring models as a supplement to the credit scoring models. Most
applications are scored on the basis of information received from an independent
credit reporting agency. In certain cases, in accordance with criteria
established by Bank management, employment and earnings are verified by
telephone. Credit limits are determined from various credit and profitability
models.
For prequalified solicitations, the Bank generally purchases the names of
potential cardholders who meet established credit criteria from credit bureaus.
These lists are matched against internal and external sources and edited to
ensure optimal quality and accuracy. The Bank then mails prequalified
solicitation packages requiring only the signature and brief amount of
information from the potential cardholder. Notwithstanding the
prequalifications, some applications are rejected upon receipt of information
from the applicant.
For non-prequalified solicitations, the Bank purchases the names of
potential cardholders from a variety of sources and then edits the list
utilizing internal and external sources to ensure quality and accuracy. The
potential cardholders on the final list are mailed solicitation packages which
include full applications. Respondents to such solicitations are approved or
declined based on criteria which are substantially similar to the criteria used
to approve or decline respondents to prequalified solicitations.
Potential cardholders must meet minimum credit standards established by the
Bank to receive a specific credit limit. Cardholders not meeting the minimum
standards for the initial product offering are offered a reduced credit limit
for which they qualify. The Bank generally offers an initial credit line of
$3,500 for standard cards and $7,500 for premium cards although higher and lower
limits are also offered for such cards. Since 1997, substantially higher credit
lines have been offered for platinum card accounts. Generally, platinum card
accounts have credit lines which are not significantly different than the credit
lines offered on other premium accounts with similar credit quality. 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. Risk based repricing has been
in place since 1996. Credit line increases are granted to accountholders who
have demonstrated good credit behavior and appropriate usage patterns.
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.
Terms and Uses of Credit Cards. 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. See "Risk Factors--Consumer Protection Laws May Restrict
the Bank's Ability to Collect
19
77
Receivables and Maintain Yield on the Portfolio and Lead to an Early Pay Out or
Inability to Pay Certificates in Full" and "Material Legal Aspects of the
Receivables--Consumer Protection Laws" in this Prospectus.
A cardholder may use the credit card for either purchases, balance
transfers and cash advances. Cardholders make purchases when using the credit
card to buy goods or services. Balance transfers result when cardholders request
to move balances from other credit cards or loans to the credit card account
held with the Bank. 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.
Fleet "B" Credit Card Portfolio. The accounts in the Fleet "B" Credit Card
Portfolio were originated or acquired by the Bank or its predecessor or another
affiliate of Fleet Financial Group prior to the Transfer. Prior to the Transfer,
new accounts were originated primarily through direct mail solicitation or by
"take-one" applications available at the various offices of the Bank and other
Fleet Financial Group affiliates. Direct mail solicitation was focused primarily
on the northeastern region of the United States. The lists of persons to whom
mailed solicitations were sent were purchased from various marketing sources and
derived from internal banking and mortgage customer lists. Substantially all of
such solicitations were prequalified. The underwriting process for the Fleet "B"
Credit Card Portfolio used the proprietary scoring models developed by the Fair,
Isaacs Companies and, in addition, the Bank or its predecessor originating the
accounts used internally generated models using risk and bankruptcy scores.
Credit limits were determined from credit models in conjunction with income
levels and debt repayment scenarios.
In addition to accounts originated through the solicitation method
described above, accounts included in the Fleet "B" Credit Card Portfolio were
added to the portfolio by acquisition from other institutions.
Prior to the Transfer, the Bank and its predecessor offered standard cards,
gold cards and other premium cards. The standard cards generally offered credit
limits up to $5,000, gold cards generally were offered with credit limits up to
$12,500 and certain platinum cards were offered with substantially higher credit
limits. Credit limit increases were not granted until behavioral scores and
delinquency histories were reviewed. If the cardholder did not meet the criteria
the credit increase request would be denied until either the cardholder's income
increased or the cardholder's profile improved. There were no repricing
initiatives. Pricing was based on risk profiles, not repricing strategies.
Accounts were opened with an initial term of from one to three years.
Historically, with respect to accounts in the Fleet "B" Credit Card
Portfolio, 100% of the credit line was available for cash advances. The majority
of the accounts in the Fleet "B" Credit Card Portfolio have no annual fee.
Beginning in the fourth quarter of 1998, the accounts in the Fleet "B"
Credit Card Portfolio adopted the terms and policies of the Fleet "A" Credit
Card Portfolio. Credit limits for standard cards, gold cards and platinum cards
from the Fleet "B" Credit Card Portfolio now are as described above under "The
Bank's Credit Card Activities -- Acquisition and Use of Credit
Cards -- Underwriting Procedures," and cash advances are generally limited to
50% of the total credit line. Some of the accounts have since been repriced
based on the pricing strategies of the Fleet "A" Credit Card Portfolio.
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. For monthly
statements from April 5, 1995, through June 1997, Advanta National Bank required
that its cardholders make a minimum monthly payment equal to finance charges 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 have been 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
20
78
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 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, with respect to accounts in the
Advanta Consumer Credit Card Portfolio, miscellaneous fees did not constitute a
material portion of Finance Charge Receivables. However, since June 1997, such
fees have represented a greater portion of Finance Charge Receivables.
DESCRIPTION OF FDR
Certain data processing and administrative functions associated with the
servicing of the Fleet Credit Card Portfolio are currently being performed on
behalf of the Bank by FDR. FDR was established in 1969 as the data processing
unit of Mid-America Bankcard Association. In 1980, American Express acquired FDR
and in 1992, FDR became an independent company as a subsidiary of First Data
Corp. According to FDR, it is a leading global provider of comprehensive
transaction processing products and services to credit, debit, commercial,
private label and oil card issuers.
FDR's home office in the United States is located in Omaha, Nebraska.
DELINQUENCIES
The discussion set forth in this paragraph and the following paragraph
relates to the policies currently in effect with respect to Accounts designated
to the Trust and provides some discussion of some of the changes which have
occurred over time. The Bank may, from time to time, further revise its policies
relating to the Accounts including its policies 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. Collections activities include statement messages, formal collection
letters and telephone calls. Collections personnel initiate telephone contact
with cardholders as early as five days 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
collections and credit policy departments of the Bank and information is
reported daily to senior management. Prior to October 1, 1998, accounts in the
Fleet "A" Credit Card Portfolio were charged-off when they became 186 days
contractually delinquent. Beginning on October 1, 1998, the Bank revised such
policy and as of October 1, 1998 commenced charging-off such accounts when they
become 180 days delinquent. When accounts are charged-off as delinquent, such
accounts which are 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 changed its charge-off methodology related to bankrupt credit card
accounts and such methodology was used by the Bank for the Fleet "A" Credit Card
Portfolio until October 1, 1998, when further changes to the policy became
effective. Under the methodology used prior to August 1996, when notification
was received that a cardholder had filed a bankruptcy petition, the account was
written off within 30 days of notification. Under the methodology used from
August 1996, to October 1, 1998, the Bank after the Transfer and Advanta
National Bank prior to the Transfer used an investigative period of up to 90
days from the date of such
21
79
notification. The receivable, if not paid during such investigative period, was
charged-off unless the investigation showed that the cardholder's obligation
should not be discharged as the result of the bankruptcy proceeding. Effective
October 1, 1998, accounts are charged-off within 60 days from the date of
notification that the cardholder has filed a bankruptcy petition. This policy
with respect to the Fleet "A" Credit Card Portfolio was implemented over a
period of three months with the charge-off period being 80 days during October
1998, 70 days during November 1998, and 60 days as of December 1, 1998.
The Bank, as servicer of the Fleet "B" Credit Card Portfolio, used a
charge-off policy under which accounts were charged-off when they became 180
days contractually delinquent and were charged-off within 60 days from the date
of notification that the cardholder had filed a bankruptcy petition.
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 Credit Card Portfolio, is contained in the accompanying 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 shows the receivables outstanding,
the charge-offs in dollars and as a percentage of the receivables outstanding.
In addition, the accompanying 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.
Collections of Finance Charge Receivables will be deemed to include Interchange
attributed to the cardholder charges for merchandise and services in the
Accounts, 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 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 which have sizable 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.
22
80
USE OF PROCEEDS
The net proceeds from the sale of each Series offered by this Prospectus
and 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 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 a wholly-owned subsidiary of Fleet National Bank. Fleet
National Bank is a wholly-owned subsidiary of Fleet Financial Group, Inc.
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 9th largest bank
holding company in the United States as of March 31, 1999, in terms of total
assets with total assets of $106.2 billion, total deposits of $67.6 billion and
total equity capital of $9.6 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 111 Westminster
Street, 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 certain potential tax and governmental liens and other
nonconsensual liens, the interest of the holders of the Bank Certificate and any
Supplemental Certificates and the Seller's right to receive interest and
investment earnings (net of losses and investment expenses) in respect of the
Collection Account or any Series Account. See "Description of the
Certificates--Representations, Warranties and Covenants" for a discussion of the
Trust's rights arising from a breach of these warranties.
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 the 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
23
81
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 nonconsensual lien on property of the Seller
arising prior to the time a Receivable comes into existence may have priority
over the interest of the Trust in such Receivable. In addition, through fraud or
negligence of the Seller, a subsequent transferee of the Receivables may also
have priority over the interests of the Trust. Furthermore, 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 Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended
("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 the 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 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 addition, while the Seller is the Servicer, cash collections held by the
Seller may, subject to certain conditions, be commingled and used for the
benefit of the Seller prior to the date on which such collections are required
to be deposited in the Collection Account. In the event of the conservatorship
or receivership of the Seller 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.
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 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
24
82
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. 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, and may have the power to require
that new Receivables continue to be purchased by the Trust. In addition, a
conservator or receiver for the Seller may have the power to cause the 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 Bank, 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 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" in this Prospectus.
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 charged-off as uncollectible. See "Description of the
Certificates--Defaulted Receivables; Rebates and Fraudulent Charges" in this
Prospectus.
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 Trustee in order to issue additional
Series. See "--New Issuances" in this Prospectus. The Trustee will provide a
copy of the Pooling and Servicing Agreement (without exhibits or schedules),
including any series supplement with respect to a Series (each, a "SERIES
SUPPLEMENT"), to Certificateholders of any Series without charge upon written
request. A copy of the form of Pooling and Servicing Agreement has been filed
25
83
with the Securities and Exchange Commission (the "SEC") as an exhibit to the
Registration Statement of which this Prospectus forms a part.
The following summaries describe certain provisions common to all 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 of
Certificates issued by the Trust (each, a "SERIES") may be issued pursuant to a
Series Supplement 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 (each, a "CLASS"),
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 investor certificates issued by the Trust, including the Certificates,
represent interests in the Trust, which, with respect to each Series, shall
consist of the right to receive, to the extent of amounts then payable on the
applicable Series of Certificates, from the portion of collections 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 deposits 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 if such Series and funds available pursuant to any related
Series Enhancement (collectively, with respect to all Series, the
"CERTIFICATEHOLDERS' INTEREST"), 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, a "SERIES
PERCENTAGE") of all cardholder payments on the Receivables.
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
the Trust at such time and (b) the principal amount on deposit in the Excess
Funding Account at such time, minus the sum of the amount of Principal
Receivables and the amount on deposit 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. The Sellers'
Interest includes the right to a percentage (the "SELLER PERCENTAGE") of all
cardholder payments on the Receivables.
26
84
Each Series will commence with a period of time from the closing date for
such Series (the "RELEVANT CLOSING DATE") to the day immediately preceding the
commencement of an Amortization Period (the "REVOLVING PERIOD") during which no
principal will be paid on the Certificates of such Series and no amounts will be
accumulated to pay principal on such Series. The Revolving Period for a Series
shall end, and an amortization period or accumulation period shall commence,
either upon the occurrence of a Pay Out Event with respect to such Series or the
commencement of an Amortization Period. The term "AMORTIZATION PERIOD" means,
with respect to any Series, the period during which collections of Principal
Receivables are to be used to pay principal on the Certificates of such Series
or are to be accumulated in an account to be used at a future date to pay
principal on the Certificates of such Series. The term Amortization Period
includes an Accumulation Period, as described below, as well as any controlled
amortization period, principal amortization period, rapid amortization period,
optional amortization period, limited amortization period or other amortization
period as defined with respect to a Series in the related Series Supplement and
any Rapid Amortization Period, as described below. An "ACCUMULATION PERIOD"
means, for any Series, a period determined as provided in the related Series
Supplement during which collections of Principal Receivables are deposited into
an account to be used at a future date to make payments on the Certificates of
such Series. A "RAPID AMORTIZATION PERIOD" commences upon the occurrence of a
Pay Out Event and means the resulting period during which available collections
of Principal Receivables are used, on a monthly basis, to pay principal on the
Certificates of those Series to which the Pay Out Event relates. A Rapid
Amortization period continues until the earlier of the payment in full of the
Certificates of the Series to which the Pay Out Event relates or the occurrence
of the Series Termination Date. References in this Prospectus to "SCHEDULED
AMORTIZATION DATE" means, for any Series, the date on which principal payments
on the Certificates are, under the terms of the related Series Supplement,
scheduled to begin on the date on which the first amounts are, under the terms
of the related Series Supplement scheduled to be deposited into an account to be
accumulated and used in the future to pay principal on the Certificates of such
Series.
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" in this Prospectus.
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.
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 "--Interest
Payments" in this Prospectus.
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
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.
If so specified in the related Prospectus Supplement, Certificates of each
Series initially will be represented by certificates registered in the name of
the nominee of Depository Trust Company ("DTC") (together with any successor
depository selected by the Seller, the "DEPOSITORY") except as set forth below.
If
27
85
so 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 owner of beneficial interests in the
Certificates (a "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" in this Prospectus.
If so specified in the related Prospectus Supplement 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
If so 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 Cedelbank or Euroclear (in Europe) if they are
participants of such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedelbank and
Euroclear will hold omnibus positions on behalf of the Cedelbank Customers and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedelbank'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, Cedelbank or
Euroclear upon instructions from DTC Participants, Cedelbank Customers 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" in this Prospectus. 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 (the "EXCHANGE ACT"). 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 certificates. Participants include
securities brokers and dealers (who may include the underwriters of any Series),
banks, trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
("INDIRECT PARTICIPANTS") such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with, Participants,
either directly or indirectly.
28
86
DTC management is aware that some computer applications and systems used
for processing data were written using two digits rather than four to define the
applicable year, and therefore may not recognize a date using "00" as the Year
2000. This could result in the inability of these systems to properly process
transactions with dates in the Year 2000 and thereafter. DTC has developed and
is implementing a program to address this problem so that its applications and
systems relating to the payment of distributions (including principal and income
payments) to securityholders, book-entry deliveries and settlement of trades
within DTC continue to function properly. This program includes a technical
assessment and a remediation plan, each of which is complete. DTC plans to
implement a testing phase of this program which is expected to be completed
within appropriate time frames.
In addition, DTC is contacting (and will continue to contact) third party
vendors that provide services to DTC to determine the extent of their Year 2000
compliance, and DTC will develop contingency plans as it deems appropriate to
address failures in Year 2000 compliance on the part of third party vendors.
However, there can be no assurance that the systems of third party vendors will
be timely converted and will not adversely affect the proper functioning of
DTC's services.
The information set forth in the preceding two paragraphs has been provided
by DTC for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. The Seller makes
no representations as to the accuracy or completeness of such information.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedelbank Customers and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC (other than Cedelbank Customers and Euroclear Participants), on the
one hand, and directly or indirectly through Cedelbank Customers 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. Cedelbank Customers and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedelbank or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedelbank Customer or Euroclear Participant on such business day. Cash received
in Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank Customer or a Euroclear Participant to a DTC Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedelbank 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. It
is anticipated that the only "Certificateholder" will be Cede, as nominee of
DTC. 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
29
87
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.
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.
Cedelbank, societe anonyme ("CEDELBANK") is incorporated under the laws of
Luxembourg as a professional depository. Cedelbank holds securities for its
participating organizations ("CEDELBANK CUSTOMERS") and facilitates the
clearance and settlement of securities transactions between Cedelbank Customers
through electronic book-entry changes in accounts of Cedelbank Customers,
thereby eliminating the need for physical movement of certificates. Transactions
may be settled in Cedelbank in any of 34 currencies, including United States
dollars. Cedelbank provides to its Cedelbank Customers, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Cedelbank interfaces with domestic markets in several countries. As a registered
bank in Luxembourg, Cedelbank is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Sector. Cedelbank Customers are
world-wide financial institutions, 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 Cedelbank is also available to other institutions, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedelbank Customer, 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 34
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in more than 25 countries generally similar to
the arrangements for cross-market transfers with DTC described above. The
Euroclear System is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office (the "EUROCLEAR OPERATOR" or "EUROCLEAR"), under
contract with Euroclear Clearance System, Societe Cooperative., a Belgian
cooperative corporation (the "COOPERATIVE"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative Board establishes policy for the Euroclear System.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters of any
30
88
Series of Certificates. Indirect access to the Euroclear System is also
available to other firms that maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System (collectively, the "TERMS
AND CONDITIONS"). The Terms and Conditions govern transfers of securities and
cash within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedelbank or
Euroclear will be credited to the cash accounts of Cedelbank Customers 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" in this Prospectus. Cedelbank
or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Pooling and Servicing
Agreement on behalf of a Cedelbank Customer 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, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among participants
of DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued at
any time.
See Annex I for additional information concerning global clearance,
settlement and tax documentation procedures. Annex I is hereby incorporated into
this Prospectus by reference.
In the event that any of DTC, Cedelbank or Euroclear should discontinue its
services, the Seller would seek an alternative depository (if available) or
cause the issuance of Definitive Certificates to Certificate Owners or their
nominees in the manner described under "--Definitive Certificates" in this
Prospectus.
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").
31
89
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 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" in this Prospectus);
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" in this Prospectus.
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" in this Prospectus) 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 Sellers' 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" in this Prospectus 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
the Seller and each Additional Seller generally will have the same obligations
and rights as the Seller described herein.
32
90
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.
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. If so specified in the
related Prospectus Supplement, interest for a Class of a Series will be
calculated based on the outstanding principal 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.
PRINCIPAL PAYMENTS
If so specified in the related Prospectus Supplement, the Revolving Period
for a Class of Certificates begins on the closing date with respect to a Series
(the "RELEVANT CLOSING DATE") and ends on the day before an Amortization Period
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.
33
91
SHARED PRINCIPAL COLLECTIONS
On each Distribution Date, (a) the Servicer will 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 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 a
Group 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 in such Group then
outstanding as provided in the related Series Supplement.
COMPANION SERIES
If specified in the Prospectus Supplement relating to a Series, such Series
of Certificates (each, a "COMPANION SERIES"), may be 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 one
such Series results 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--Principal May Be Paid
Earlier Than Expected Creating a Reinvestment Risk to Certificateholders or
Later Than Expected Resulting in a Failure to Receive Payment When Expected in
this Prospectus and "Maturity Assumptions" in the accompanying Prospectus
Supplement for a discussion of such factors.
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 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"). 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 "SELLERS' 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
34
92
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 of Certificates
(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
Prospectus or other disclosure document (a "DISCLOSURE DOCUMENT") in
transactions either registered under the Securities Act of 1933, as amended (the
"ACT"), or exempt from registration thereunder, directly, 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 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 outstanding agreement relating to the Series Enhancement,
(c) written confirmation from each rating organization rating any outstanding
Series (each a "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, 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
35
93
corporation and such New Issuance will not cause an event in which gain or loss
would be recognized by any Certificateholders of the Trust (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,
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 cut-off date selected by the Seller. 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"
in this Prospectus.
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 the transfer to the
Trust of additional Principal Receivables, Principal Receivables transferred to
the Trust prior to the occurrence of such Insolvency Event, 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
36
94
Receivables and which are deemed to be 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 its 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
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
37
95
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 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 the Pooling and Servicing Agreement. 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
38
96
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 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 Seller 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 Seller; (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 Seller 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 Seller as an employee of the Seller 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 Seller or the relevant obligor
as having been incurred as a result of fraudulent use of any related credit
card.
39
97
The Pooling and Servicing Agreement provides that Eligible Accounts may
include Accounts, the Receivables of which have been charged-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 at the time of such transfer or thereafter 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; (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
40
98
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 also 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 Credit Card
Portfolio. However, since Additional Accounts selected from the Fleet 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 by the Bank or an affiliate of either of them 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 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 consisting of revolving credit card receivables or
consumer loan receivables (secured and unsecured) arising as a result of
advances made on bank cards, private label cards, corporate cards, and unsecured
revolving lines of credit, and any interests in both such types of receivables
("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 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") 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
41
99
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 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 INTEREST
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, as
amended or (b) be eligible for sale under Rule 144(k); and (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
42
100
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 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
43
101
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.
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Seller may designate
at any time and from time to time a percentage or percentages, which may be a
fixed percentage or a variable percentage based on a formula (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"). If
such option is exercised by the Seller, the Principal Receivables will be
treated as having been transferred to the Trust at a discount. The Seller also
has the option of reducing or withdrawing the Discount Percentage, at any time
and from time to 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, on or after the Discount
Option Date, the product of the Discount Percentage and collections of
Receivables, which Receivables arose on or after the Discount Option Date and
which would otherwise 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
44
102
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.
The Seller may have different reasons to designate a Discount Percentage.
For example, since the majority of the Accounts have finance charges that are
indexed to specific variable rates, the finance charges on the Accounts, and the
collections of Finance Charge Receivables on the Accounts, may decline as
interest rates decline. The Certificates of a Series may have interest rates
that are fixed or that are indexed to a different variable rate. If the finance
charges on the Accounts are significantly reduced without a corresponding
reduction in the interest rate on a Series of Certificates, a Series Pay Out
Event based in part on the amount of collections of Finance Charge Receivables
and the interest rate on the Certificates could occur. The Seller could avoid
the occurrence of such a Series Pay Out Event by designating a Discount
Percentage, thereby causing an increase in the amount of collections of Finance
Charge Receivables. The Seller, however, is under no obligation to designate a
Discount Percentage at any time, and there can be no assurance that the Seller
would designate a Discount Percentage to avoid the occurrence of a Pay Out
Event.
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. Additional accounts may be created in connection with any
Series and for the benefit of such Series. Such accounts are "SERIES ACCOUNTS."
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 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
45
103
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 Sellers'
Interest all amounts collected with respect to Finance Charge Receivables and
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 Seller may also cause deposits
to be made to the Excess Funding Account on any Business Day. 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.
So long as the Bank remains as the Servicer and maintains a certificate of
deposit rating of P-1 or better by Moody's and the Seller makes deposits into
the Excess Funding Account on each Business Day if the Seller Amount on such
date is less than the Required Seller Amount, then the Servicer will, as
described in the next sentence, direct the distribution of the excess amount
from the Excess Funding Account on any Business Day when an excess exists. If
the conditions in the previous sentence are met, then the Servicer will on each
Business Day, whether or not a Distribution Date, determine the amount, if any,
by which the Seller
46
104
Amount exceeds the Required Seller Amount and instruct the Trustee to withdraw
the excess 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 on the next Business Day. Before directing a
distribution on a date other than a Distribution Date, if any Series is in an
Amortization Period, the Servicer is required to determine, on the basis of
collections received prior to such Business Day, that no Principal Shortfall
will exist for any Principal Sharing Series on the next Distribution Date.
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
of 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 accompanying
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
47
105
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 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 SEC 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
48
106
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 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 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 "Material Legal Aspects of the Receivables--Matters
Relating to Receivership" in this Prospectus 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
49
107
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
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 Credit Card, LP. A subsidiary of the
Bank is the general partner of Credit Card LP. 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.
50
108
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 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
51
109
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 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.
REPORT TO CERTIFICATEHOLDERS
The Seller expects that, 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
52
110
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) in the paragraph above,
aggregated for such calendar year or the applicable portion thereof during which
such person was a Certificateholder, together with such other customary
information (consistent with the treatment of the Certificates as debt) as the
Trustee or the Servicer deems necessary or desirable to enable the
Certificateholders of such Series to prepare their tax returns.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before November 30
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
53
111
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 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
54
112
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 resignation or removal of the
Trustee and appointment of a successor Trustee does not become effective until
acceptance of the appointment by the successor Trustee.
ENHANCEMENT
GENERAL
For any Series, enhancement ("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.
For any Series, the Series Enhancement may not provide protection against
all risks of loss and may 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.
55
113
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.
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 guaranty (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 be
secured by the deposit of cash or certain permitted investments in an account (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 prior to each Distribution 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 related 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 (a "COLLATERAL INTEREST") in
an amount initially equal to a percentage of the Certificates of such Series
specified in the related Prospectus Supplement.
SURETY BOND OR INSURANCE POLICY
If so specified in the related Prospectus Supplement, insurance with
respect to a Series or 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.
CERTIFICATE RATING
Any rating of the Certificates by a Rating Agency will indicate:
- its view on the likelihood that Certificateholders will receive required
interest and principal payments; and
56
114
- its evaluation of the Receivables and the availability of any credit
enhancement for the Certificates.
Among the things a rating will not indicate are:
- the likelihood that interest or principal payments will be paid on a
scheduled date;
- the likelihood that a Pay Out Event will occur;
- the likelihood that a United States withholding tax will be imposed on
non-U.S. Certificateholders;
- the marketability of the Certificates;
- the market price of the Certificates; or
- whether the Certificates are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the
Certificates. A rating may be lowered or withdrawn at any time by a Rating
Agency.
The Seller will request a rating of the Certificates offered by this
Prospectus and the accompanying Prospectus Supplement from at least one Rating
Agency. Rating agencies other than those requested could assign a rating to the
Certificates and such a rating could be lower than any rating assigned by a
Rating Agency chosen by the Seller.
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 the 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 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 CERTIFICATE 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
57
115
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 accompanying
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 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 interests 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.
58
116
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 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.
59
117
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 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-
60
118
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 generally beginning January 1, 2001. 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 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
61
119
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 generally
beginning January 1, 2001. 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 or with "plan
assets" 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 the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and section 4975 of the Code prohibit certain pension, profit
sharing or other employee benefit plans, individual retirement accounts or
annuities and employee annuity plans and Keogh plans (collectively, "PLANS")
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. A violation of
these "prohibited transaction" rules may generate excise 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.
Subject to the considerations described below and except to the extent
otherwise specified in the accompanying Prospectus Supplement, the Seller
anticipates that the most senior Class of each Series of Certificates will be
eligible for purchase by Plan investors.
A violation of the prohibited transaction rules could occur if any Series
of Certificates were to be purchased with "plan assets" of any Plan and the
Seller, the Trustee, any underwriters of such Series or any of their affiliates
were a Party in Interest with respect to such Plan, unless a statutory,
regulatory or administrative exemption is available or an exception applies
under a regulation (the "PLAN ASSET REGULATION") issued by the Department of
Labor (the "DOL"). The Seller, the Trustee, any underwriters of a Series and
their affiliates are likely to be Parties in Interest with respect to many
Plans. Before purchasing Certificates, a Plan fiduciary or other Plan investor
should consider whether a prohibited transaction might arise by reason of the
relationship between the Plan and the Seller, the Trustee, any underwriters of
such Series or any of their affiliates and consult their counsel regarding the
purchase in light of the considerations described below. The DoL has issued five
class exemptions that may apply to otherwise prohibited transactions arising
from the purchase or holding of the Certificates: DoL Prohibited Transaction
Class Exemptions ("PTCES") 84-14 (Class Exemption for Plan Asset Transactions
Determined by Independent Qualified Professional Asset Managers), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts), 91-38 (Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds), 95-60 (Class Exemption for Certain Transactions
Involving
62
120
Insurance Company General Accounts), and 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-House Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan holds an equity interest as "plan assets" of such
Plan. Because the Certificates will represent beneficial interests in the 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 Plan Asset
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 first exception applies to a "publicly-offered security." A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who were independent of the issuer
and of one another ("INDEPENDENT INVESTORS") and (c) either is (i) part of a
class of securities registered under section 12(b) or 12(g) of the Exchange Act,
or (ii) sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities 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 SEC)
after the end of the fiscal year of the issuer during which the offering of such
securities to the public occurred. For purposes of the 100 Independent Investor
criterion, except to the extent otherwise disclosed in the accompanying
Prospectus Supplement, each Class of Certificates should be deemed to be a
"class" of securities that would be tested separately from any other securities
that may be issued by the Trust. The accompanying Prospectus Supplement will
indicate whether it is anticipated that each Class of Certificates will meet the
foregoing criteria for treatment as "publicly-offered securities." No
restrictions will be imposed on the transfer of the Certificates. Except to the
extent otherwise disclosed in the accompanying Prospectus Supplement, the Seller
expects that the most senior Class of each Series of Certificates will be held
by at least 100 Independent Investors at the conclusion of the initial public
offering although no assurance can be given, and no monitoring or other measures
will be taken to ensure, that such condition is met. Unless otherwise disclosed
in the accompanying Prospectus Supplement, the most senior Class of each Series
of Certificates will be sold as part of an offering pursuant to an effective
registration statement under the Act and then will be timely registered under
the Exchange Act.
The second exception applies if equity participation in the entity by
"benefit plan investors" (i.e., 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") is not "significant." Benefit plan
investors' equity participation in the Trust is not significant on any date on
which any Series of Certificates is issued and outstanding if, immediately after
the most recent acquisition of any equity interest in the Trust, less than 25%
of the value of each class of equity interests in the Trust (excluding interests
held by the Seller, the Trustee or their affiliates) is held by benefit plan
investors. No assurance can be given by the Seller as to whether the value of
each class of equity interests in the Trust held by benefit plan investors will
be "significant" upon completion of the offering of any Series of Certificates
or thereafter, and no monitoring or other measures will be taken with respect to
the satisfaction of the conditions to this exception.
If neither of the foregoing exceptions under the Plan Asset Regulation were
satisfied with respect to the Trust and the Trust were considered to hold "plan
assets," transactions involving the Trust and Parties in Interest with respect
to a Plan that is a Certificate Owner might be prohibited under section 406 of
ERISA and/or section 4975 of the Code and result in excise tax and other
liabilities under ERISA and section 4975 of the Code unless an exemption were
available. The five DoL class exemptions mentioned above may not provide relief
for all transactions involving the assets of the Trust even if they would
otherwise apply to the purchase of a Certificate by a Plan.
The Certificates of any Series may not be purchased with the assets of a
Plan if the Seller, the Servicer, the Trustee or any of their affiliates (a) has
investment or administrative discretion with respect to such Plan assets; (b)
has authority or responsibility to give, or regularly gives, investment advice
with respect to such Plan assets, for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a
63
121
primary basis for investment decisions with respect to such Plan assets, and
(ii) will be based on the particular investment needs of such Plan; or (c)
unless PTCE 90-1, 91-38 or 95-60 is applicable, is an employer maintaining or
contributing to such Plan.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Certificates 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. In addition, based on
the reasoning of the United States Supreme Court's decision in John Hancock Mut.
Life. Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86 (1993), under certain
circumstances assets in the general account of an insurance company may be
deemed to be plan assets for certain purposes, and under such a reasoning a
purchase of Certificates with assets of an insurance company's general account
may subject the insurance company to the prohibited transaction and other
fiduciary responsibility rules of ERISA with respect to such assets. Insurance
company general account investors should also consider the effect of the
enactment of section 401(c) of ERISA and any regulations issued under section
401(c). 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 requirement 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 in this Prospectus and
in the accompanying Prospectus Supplement.
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 accompanying Prospectus
Supplement.
64
122
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 related 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 related
Prospectus Supplement. Prior to the sale of each Series of Certificates, the
Seller will cause a legality opinion to be filed with the SEC with respect to
such Series.
REPORTS TO CERTIFICATEHOLDERS
The Servicer will prepare monthly and annual reports that will contain
information about the Trust. Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
Unless and until Definitive Certificates are issued, the reports will be sent to
the Trustee and in turn sent to Cede & Co., which is the nominee of The
Depository Trust Company and the registered holder of the Certificates. No
financial reports will be sent to you. See "Description of the
Certificates--Book-Entry Registration," "--Reports to Certificateholders" and
"--Evidence as to Compliance" in this Prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Certificates with the
SEC. This Prospectus is part of the registration statement, but the registration
statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and
special reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room of the SEC in Washington, D.C. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the SEC. Please call the SEC at (800) SEC-0330 for further information and
the operation of the public reference room. Our SEC filings are also available
to the public on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. This information incorporated by reference is considered
to be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in this
Prospectus or the accompanying Prospectus Supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf of the Trust until we terminate our offering of the
Certificates.
As a recipient of this Prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing or
calling us at: Fleet Bank (RI), National Association, 200 Tournament Drive,
Suite 303, Horsham, PA 19044-2303, Attn: Credit Card Securitization Department;
(215) 444-6800.
65
123
INDEX OF PRINCIPAL TERMS
PAGE
----
Accounts............................ 15
Accumulation Period................. 27
Act................................. 35
Addition Date....................... 41
Additional Accounts................. 15, 41
Additional Sellers.................. 32
Advanta Consumer Credit Card
Portfolio ........................ 17
Advanta Contributors................ 16
Advanta National Bank............... 15
Adverse Effect...................... 41
Amendment Number 3.................. 16
Amortization Period................. 27
Assignment Agreement................ 17
Automatic Additional Accounts....... 42
Bank................................ 15
Bank Certificate.................... 34
Cash Collateral Account............. 56
Cash Collateral Guaranty............ 56
Cede................................ 28
Cedelbank........................... 30
Cedelbank Customers................. 30
Certificate Owner................... 28
Certificateholder................... 16
Certificateholders' Interest........ 16, 26
Certificates........................ 16
Class............................... 26
Code................................ 60
Collateral Interest................. 56
Collection Account.................. 45
Companion Series.................... 34
Contribution Agreement.............. 16
Cooperative......................... 30
Credit Card LP...................... 17
Defaulted Amount.................... 47
Defaulted Receivables............... 47
Defeased Series..................... 54
Definitive Certificates............. 31
Depositaries........................ 28
Depository.......................... 27
Disclosure Document................. 35
Discount Option Date................ 44
Discount Option Receivable
Collections ...................... 44
Discount Option Receivables......... 44
Discount Percentage................. 44
Distribution Date................... 33
DoL................................. 62
PAGE
----
DTC................................. 27
Eligible Account.................... 39
Eligible Deposit Account............ 45
Eligible Institution................ 45
Eligible Investments................ 45
Eligible Receivable................. 40
Eligible Servicer................... 50
ERISA............................... 62
Euroclear........................... 30
Euroclear Operator.................. 30
Euroclear Participants.............. 30
Excess Funding Account.............. 45
Exchange Act........................ 28
FDIA................................ 24
FDR................................. 18
Finance Charge Receivables.......... 15
FIRREA.............................. 24
Fleet "A" Credit Card Portfolio..... 17
Fleet "B" Credit Card Portfolio..... 17
Fleet Contributors.................. 16
Fleet Credit Card Portfolio......... 17
Fleet Financial Group............... 16
Holders............................. 31
Independent Investors............... 63
Indirect Participants............... 28
Ineligible Receivables.............. 38
Initial Accounts.................... 15
Insolvency Event.................... 48
Insolvency Proceeds................. 36, 49
Interchange......................... 15, 22
Interest Period..................... 27
Invested Amount..................... 26
Investor Amount..................... 26
IRS................................. 58
L/C Bank............................ 56
LLC................................. 16
Monthly Period...................... 27
Monthly Servicing Fee............... 49
Moody's............................. 45
New Issuance........................ 35
OID................................. 60
Participants........................ 28
Participation Interests............. 41
Parties in Interest................. 62
Pay Out Event....................... 48
Paying Agent........................ 46
66
124
INDEX OF PRINCIPAL TERMS
(CONTINUED)
PAGE
----
Plan Asset Regulation............... 62
Plans............................... 62
Pooling and Servicing Agreement..... 15
Principal Receivables............... 15
Principal Sharing Series............ 34
Principal Shortfalls................ 34
Principal Terms..................... 35
Prior Series........................ 34
PTCEs............................... 62
Rapid Amortization Period........... 27
Rating Agency....................... 35
Rating Agency Condition............. 35
Receivables......................... 15
Recoveries.......................... 15
Regulations......................... 59
Relevant Closing Date............... 27, 33
Removal Cut-Off Date................ 44
Removal Date........................ 43
Removal Notice Date................. 43
Removed Accounts.................... 43
Required Principal Balance.......... 41
Required Seller Amount.............. 41
Required Seller Percentage.......... 41
Revolving Period.................... 27
Scheduled Amortization Date......... 27
SEC................................. 26
Seller.............................. 17
Seller Amount....................... 26
Seller Certificates................. 34
Seller Percentage................... 26
Sellers' Interest................... 26, 34
PAGE
----
Series.............................. 15, 26
Series Account...................... 16
Series Accounts..................... 45
Series Enhancement.................. 55
Series Investor Amount.............. 41
Series Pay Out Event................ 48
Series Percentage................... 26
Series Supplement................... 15, 25
Servicer............................ 17
Servicer Default.................... 51
Servicing Fee....................... 49
Shared Principal Collections........ 34
Special Tax Counsel................. 57
Spread Account...................... 56
Standard & Poor's................... 45
Stated Series Termination Date...... 47
Supplemental Certificate............ 32, 34
Tax Opinion......................... 36
Termination Notice.................. 51
Terms and Conditions................ 31
Transfer............................ 16
Trust............................... 15
Trust Pay Out Event................. 48
Trust Termination Date.............. 48
Trustee............................. 15
U.S. Certificate Owner.............. 57
U.S. Person......................... 57
UCC................................. 23
Underwriters........................ 64
Withholding Agent................... 60
67
125
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"), Cedelbank 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 Cedelbank 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 Cedelbank or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank 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, Cedelbank 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 (other than
through accounts at Cedelbank or Euroclear) will follow the settlement practices
applicable to U.S. corporate debt obligations. Investor securities custody
accounts will be credited with their holdings against payment in same-day funds
on the settlement date.
Investors electing to hold their Global Securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Global Securities will be credited to
the securities custody accounts on the business day following the settlement
date against payment for value on the settlement date.
SECONDARY MARKET TRADING
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trading of any Global Securities where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants (other than Citibank, N.A. ("CITIBANK") and Morgan Guaranty Trust
Company of New York ("MORGAN") as depositories for Cedelbank and Euroclear,
respectively) will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
A-1
126
Trading between Cedelbank Customers and/or Euroclear
Participants. Secondary market trading between Cedelbank Customers and/or
Euroclear Participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
Trading between DTC seller and Cedelbank or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
(other than Citibank and Morgan as depositories for Cedelbank and Euroclear,
respectively) to the account of a Cedelbank Customer or a Euroclear Participant,
the purchaser must send instructions to Cedelbank prior to settlement date
12:30. Cedelbank or Euroclear, as the case may be, will instruct Citibank or
Morgan, respectively, to receive the Global Securities against payment. Payment
will then be made by Citibank or Morgan, as the case may be, to the DTC
Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedelbank Customer's or Euroclear Participant's
account. Credit for the Global Securities will appear the next day (European
time) and 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 Cedelbank or Euroclear cash
debit will be valued instead as of the actual settlement date.
Cedelbank Customers and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedelbank or Euroclear. Under this approach,
they may take on credit exposure to Cedelbank or Euroclear until Global
Securities are credited to their accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank Customers or Euroclear Participants can elect not to
pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedelbank Customers or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedelbank
Customer's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
Citibank or Morgan for the benefit of Cedelbank Customers or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently from a trade between two DTC Participants.
Trading between Cedelbank or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedelbank Customers and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through Citibank or Morgan, to another DTC Participant. The seller must send
instructions to Cedelbank before settlement date 12:30. In these cases,
Cedelbank or Euroclear will instruct Citibank or Morgan, as appropriate, to
credit the Global Securities to the DTC Participant's account against payment.
The payment will then be reflected in the account of the Cedelbank Customer or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedelbank Customer's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). If the Cedelbank Customer or Euroclear Participant has a line of
credit with its respective clearing system and elects to draw on such line of
credit in anticipation of receipt of the sale proceeds in its account, the back-
valuation may substantially reduce or offset any overdraft charges incurred over
that one-day period. If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the Cedelbank
Customer's or Euroclear Participant's account would instead be valued as of the
actual settlement date.
A-2
127
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through
Cedelbank 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 currently 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 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.
A-3
128
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEET CREDIT CARD MASTER TRUST II
ISSUER
--------------------
[FLEET LOGO]
FLEET BANK (RI), NATIONAL ASSOCIATION
SELLER AND SERVICER
SERIES 1999-B
$415,000,000
CLASS A FLOATING RATE ASSET-BACKED CERTIFICATES
$37,500,000
CLASS B FLOATING RATE ASSET-BACKED CERTIFICATES
------------------------
PROSPECTUS SUPPLEMENT
------------------------
Underwriters of the Class A certificates
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
Underwriter of the Class B certificates
MERRILL LYNCH & CO.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE SERIES 1999-B CERTIFICATES IN ANY STATE WHERE THE
OFFER IS NOT PERMITTED.
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS IS CORRECT AS OF ANY DATE AFTER THE DATES ON
THEIR COVERS. WE NOTE THAT IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE REQUIRED BY LAW TO BE DELIVERED,
WE WILL UPDATE THE RELEVANT INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS TO INCORPORATE THE MATERIAL CHANGE.
Until , 1999, all dealers that effect transactions in the
Class A certificates or the Class B certificates, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------