The information in this prospectus supplement and the accompanying prospectus is not complete and may be
changed. This prospectus supplement and the accompanying prospectus are not an offer to sell these
securities and are not seeking an offer to buy these securities in any state where the offer or sale is
prohibited.
SUBJECT TO COMPLETION DATED JANUARY 9, 2007
Prospectus Supplement dated January [•], 2007 to Prospectus dated January 9, 2007
|
 |
FIA Card Services, National Association
Sponsor, Servicer and Originator
BA Credit Card Funding, LLC
Transferor and Depositor
BA Credit Card Trust
Issuing Entity
BAseries
The issuing entity will issue and sell: Class A(2007-1) Notes
Principal amount $400,000,000
Interest rate [•]% per year
Interest payment dates 15th day of each month,
beginning in March 2007
Expected principal payment date January 17, 2017
Legal maturity date June 17, 2019
Expected issuance date January [•], 2007
Price to public $[•] (or [•]%)
Underwriting discount $[•] (or [•]%)
Proceeds to the issuing entity $[•] (or [•]%)
The Class A(2007-1) notes are a tranche of the Class A notes of the BAseries.
Credit Enhancement: Interest and principal on the Class B notes and the Class C notes of the BAseries
are subordinated to payments on the Class A notes as described herein and in the accompanying prospectus.
The Class A(2007-1) notes will have the benefit of an interest rate swap agreement provided by Bank of
America, N.A., as derivative counterparty.
______________________________________________________________________________________________________________________________
You should consider the discussion under "Risk Factors" beginning on page S-8 of this prospectus supplement and page 28 of
the accompanying prospectus before you purchase any notes.
The primary asset of the issuing entity is the collateral certificate, Series 2001-D. The collateral certificate represents
an undivided interest in BA Master Credit Card Trust II. Master Trust II's assets include receivables arising in a
portfolio of unsecured consumer revolving credit card accounts. The notes are obligations of the issuing entity only and
are not obligations of BA Credit Card Funding, LLC, FIA Card Services, National Association, their affiliates or any other
person. Each tranche of notes will be secured by specified assets of the issuing entity as described in this prospectus
supplement and in the accompanying prospectus. Noteholders will have no recourse to any other assets of the issuing entity
for payment of the BAseries notes.
The notes are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency or
instrumentality.
______________________________________________________________________________________________________________________________
Neither the SEC nor any state securities commission has approved the notes or determined that this
prospectus supplement or the prospectus is truthful, accurate or complete. Any representation to the
contrary is a criminal offense.
Underwriters
Banc of America Securities LLC
Barclays Capital
Citigroup
Credit Suisse
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
We provide information to you about the notes in two separate documents:
(a) this prospectus supplement, which will describe the specific terms of the Class A(2007-1)
notes, and
(b) the accompanying prospectus, which provides general information about the BAseries notes
and each other series of notes which may be issued by the BA Credit Card Trust, some of which may not
apply to the BAseries or the Class A(2007-1) notes.
References to the prospectus mean the prospectus accompanying this prospectus supplement.
This prospectus supplement may be used to offer and sell the Class A(2007-1) notes only if
accompanied by the prospectus.
This prospectus supplement supplements disclosure in the prospectus.
You should rely only on the information provided in this prospectus supplement and the
prospectus including any information incorporated by reference. We have not authorized anyone to
provide you with different information.
We are not offering the Class A(2007-1) notes in any state where the offer is not permitted.
We do not claim the accuracy of the information in this prospectus supplement or the prospectus as of
any date other than the dates stated on their respective covers.
We include cross-references in this prospectus supplement and in the prospectus to captions in
these materials where you can find further related discussions. The Table of Contents in this
prospectus supplement and in the prospectus provide the pages on which these captions are located.
Parts of this prospectus supplement and the prospectus use defined terms. You can find a
listing of defined terms in the "Glossary of Defined Terms" beginning on page 176 in the prospectus.
________
S-2
TABLE OF CONTENTS
Page
Class A(2007-1) Summary...........................S-4
Risk Factors......................................S-8
Transaction Parties..............................S-10
BA Credit Card Trust........................S-10
BA Master Credit Card Trust II..............S-10
BA Credit Card Funding, LLC.................S-10
FIA and Affiliates..........................S-11
Use of Securitization as a
Source of Funding.......................S-11
The Bank of New York........................S-12
Wilmington Trust Company....................S-12
Derivative Counterparty.....................S-12
The Class A(2007-1) Notes........................S-13
Securities Offered..........................S-14
The BAseries................................S-14
Interest....................................S-15
Principal...................................S-15
Nominal Liquidation Amount..................S-16
Subordination; Credit Enhancement...........S-16
Required Subordinated Amount................S-18
Revolving Period............................S-19
Early Redemption of Notes...................S-19
Optional Redemption by the Issuing Entity...S-20
Events of Default...........................S-20
Issuing Entity Accounts.....................S-20
Security for the Notes......................S-21
Limited Recourse to the Issuing Entity......S-21
Derivative Agreement........................S-21
Accumulation Reserve Account................S-25
Shared Excess Available Funds...............S-25
Stock Exchange Listing......................S-26
Ratings.....................................S-26
Underwriting.....................................S-26
Annex I:
The Master Trust II Portfolio...................A-I-1
General....................................A-I-1
Delinquency and Principal Charge-Off
Experience.............................A-I-1
Revenue Experience.........................A-I-3
Interchange................................A-I-5
Principal Payment Rates....................A-I-5
Renegotiated Loans and
Re-Aged Accounts........................A-I-6
The Receivables............................A-I-6
Annex II:
Outstanding Series, Classes and
Tranches of Notes......................A-II-1
Annex III:
Outstanding Master Trust II Series............A-III-1
S-3
Class A(2007-1) Summary
This summary does not contain all the information you may need to make an informed investment
decision. You should read this prospectus supplement and the prospectus in their entirety before you
purchase any notes.
Only the Class A(2007-1) notes are being offered through this prospectus supplement and the
prospectus. Other series, classes and tranches of BA Credit Card Trust notes, including other tranches
of notes that are included in the BAseries as a part of the Class A notes or other notes that are
included in the Class A(2007-1) tranche, may be issued by the BA Credit Card Trust in the future without
the consent of, or prior notice to, any noteholders.
Other series of certificates of master trust II may be issued without the consent of, or prior
notice to, any noteholders or certificateholders.
Transaction Parties
Issuing Entity of the Notes BA Credit Card Trust
Issuing Entity of the Collateral Certificate BA Master Credit Card Trust II
Sponsor, Servicer and Originator FIA Card Services, National Association
Transferor and Depositor BA Credit Card Funding, LLC
Master Trust II Trustee, Indenture Trustee The Bank of New York
Owner Trustee Wilmington Trust Company
Derivative Counterparty Bank of America, N.A.
Assets
Primary Asset of the Issuing Entity Master trust II, Series 2001-D Collateral Certificate
Collateral Certificate Undivided interest in master trust II
Primary Assets of Master Trust II Receivables in unsecured revolving credit card accounts
Accounts and Receivables (as of beginning Principal receivables: $83,607,927,315
of the day on January 1, 2007) Finance charge receivables: $1,275,952,648
Account average principal balance: $1,754
Account average credit limit: $14,161
Account average age: approximately 87
months
Account billing addresses: all 50 States plus
the District of
Columbia and Puerto
Rico
Aggregate total receivable balance as a
percentage of aggregate total credit limit: 12.57%
Accounts (as of September 30, 2006) With regard to statements prepared for
cardholders during September 2006 only,
accounts that had cardholders that made
the minimum payment under the terms of the
related credit card agreement: 3.49%
With regard to statements prepared for
cardholders during September 2006 only,
accounts that had cardholders that paid
their full balance under the terms of the
related credit card agreement: 10.17%
S-4
Asset Backed Securities Offered Class A(2007-1)
Class Class A
Series BAseries
Initial Principal Amount $400,000,000
Initial Nominal Liquidation Amount $400,000,000
Expected Issuance Date January [•], 2007
Credit Enhancement Subordination of the Class B and the Class C notes
Credit Enhancement Amount Required Subordinated Amount
Required Subordinated Amount of Class B Notes Applicable required subordination percentage of Class B notes
multiplied by the adjusted outstanding dollar principal amount
of the Class A(2007-1) notes.
Required Subordination Percentage of Class B 8.72093%. However, see "The Class A(2007-1) Notes—Required
Notes Subordinated Amount" for a discussion of the calculation of the
applicable stated percentage and the method by which the
applicable stated percentage may be changed in the future.
Required Subordinated Amount of Class C Notes Applicable required subordination percentage of Class C notes
multiplied by the adjusted outstanding dollar principal amount
of the Class A(2007-1) notes.
Required Subordination Percentage of Class C 7.55814%. However, see "The Class A(2007-1) Notes—Required
Notes Subordinated Amount" for a discussion of the calculation of the
applicable stated percentage and the method by which the
applicable stated percentage may be changed in the future.
Accumulation Reserve Account Targeted Deposit 0.5% of the outstanding dollar principal amount of the
Class A(2007-1) notes.
Risk Factors Investment in the Class A(2007-1) notes involves risks. You
should consider carefully the risk factors beginning on page
S-8 in this prospectus supplement and page 28 in the prospectus.
Interest
Interest Rate [•]% per year.
Distribution Dates March 15, 2007 and the 15th day of each following calendar month
(or the next Business Day if the 15th is not a Business Day).
Interest Accrual Method 30/360
Interest Accrual Periods From and including the issuance date to but excluding the 15th
day of the calendar month in which the first interest payment
date occurs and then from and including the 15th day of each
calendar month to but excluding the 15th day in the next
calendar month.
Interest Payment Dates Each distribution date starting on March 15, 2007
First Interest Payment Date March 15, 2007
First Interest Payment $[•]
Business Day New York, New York and Newark, Delaware
Principal
Expected Principal Payment Date January 17, 2017
Legal Maturity Date June 17, 2019
Revolving Period End Between 12 and 1 months prior to expected principal payment date
Servicing Fee 2% of the nominal liquidation amount
S-5
Anticipated Ratings The Class A(2007-1) notes must be rated by at least one of the
following nationally recognized rating agencies:
Moody's: Aaa
Standard & Poor's: AAA
Fitch: AAA
Derivative Agreement The Class A(2007-1) notes will have the benefit of an interest
rate swap agreement (referred to as the derivative agreement)
provided by Bank of America, N.A., as derivative counterparty.
Under the derivative agreement, for each Transfer Date:
o the derivative counterparty will make a payment to the
issuing entity, based on the outstanding dollar principal
amount of the Class A(2007-1) notes, at a rate equal to
[•]% per year; and
o the issuing entity will make a payment to the
derivative counterparty, based on the outstanding dollar
principal amount of the Class A(2007-1) notes, at a rate
not to exceed one-month LIBOR (for the related interest
period) plus [•]% per year.
For a more detailed discussion of the derivative agreement, see
"The Class A(2007-1) Notes—Derivative Agreement."
Early Redemption Events Early redemption events applicable to the Class A(2007-1) notes
include the following: (i) the occurrence of the expected
principal payment date for such notes; (ii) each of the Pay Out
Events described under "Master Trust II—Pay Out Events" in the
prospectus; (iii) the issuing entity becoming an "investment
company" within the meaning of the Investment Company Act of
1940, as amended; and (iv) for any date the amount of Excess
Available Funds for the BAseries averaged over the 3 preceding
calendar months is less than the Required Excess Available Funds
for the BAseries for such date. See "The Indenture—Early
Redemption Events" in the prospectus.
If an early redemption event (other than clause (iii) above)
applicable to the Class A(2007-1) notes occurs and the
derivative agreement has not been terminated or an interest
reserve account event has not occurred, Available Principal
Amounts allocable to the Class A(2007-1) notes together with any
amounts in the principal funding subaccount for the Class
A(2007-1) notes will not be paid to the holders of the Class
A(2007-1) notes, but instead will be retained in the principal
funding subaccount and paid to the Class A(2007-1) noteholders
on the expected principal payment date of the Class A(2007-1)
notes. See "The Class A(2007-1) Notes—Early Redemption of Notes."
If following an early redemption event for the Class A(2007-1)
notes (i) the derivative agreement terminates, (ii) an interest
reserve account event occurs, (iii) the issuing entity becomes
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended or (iv) an event of default and
acceleration of the Class A(2007-1) notes occurs, Available
Principal Amounts will be paid to the Class A(2007-1)
noteholders. See "The Class A(2007-1) Notes—Early Redemption of
Notes."
S-6
See "The Class A(2007-1) Notes—Derivative Agreement" for a
description of the events leading to the occurrence of an
interest reserve account event.
Events of Default Events of default applicable to the Class A(2007-1) notes
include the following: (i) the issuing entity's failure, for a
period of 35 days, to pay interest upon such notes when such
interest becomes due and payable; (ii) the issuing entity's
failure to pay the principal amount of such notes on the
applicable legal maturity date; (iii) the issuing entity's
default in the performance, or breach, of any other of its
covenants or warranties, as discussed in the prospectus; and
(iv) the occurrence of certain events of bankruptcy, insolvency,
conservatorship or receivership of the issuing entity. See "The
Indenture—Events of Default" in the prospectus.
Optional Redemption If the nominal liquidation amount is less than 5% of the highest
outstanding dollar principal amount.
ERISA Eligibility Yes, subject to important considerations described under
"Benefit Plan Investors" in the prospectus (investors are
cautioned to consult with their counsel).
Tax Treatment Debt for U.S. federal income tax purposes, subject to important
considerations described under "Federal Income Tax Consequences"
in the prospectus (investors are cautioned to consult with their
tax counsel).
Stock Exchange Listing The issuing entity will apply to list the Class A(2007-1) notes
on a stock exchange in Europe. The issuing entity cannot
guarantee that the application for the listing will be accepted
or that, if accepted, the listing will be maintained. To
determine whether the Class A(2007-1) notes are listed on a
stock exchange you may contact the issuing entity c/o Wilmington
Trust Company, Rodney Square North, 1100 N. Market Street,
Wilmington, Delaware 19890-0001, telephone number:
(302) 651-1000.
Clearance and Settlement DTC/Clearstream/Euroclear
S-7
Risk Factors
The risk factors disclosed in this section and in "Risk Factors" in the accompanying prospectus
describe the principal risk factors of an investment in the Class A(2007-1) notes.
The derivative agreement can affect the amount of credit enhancement available to the
notes.
Since the derivative counterparty makes payments under the derivative agreement based
on a fixed rate for the related Transfer Date and the issuing entity makes payments
under the derivative agreement based on a floating rate for the related Transfer Date,
it is possible that the amount owing to the derivative counterparty for any Transfer
Date could exceed the amount owing to the issuing entity for the related Transfer Date
and that a net derivative payment will be owing by the issuing entity to the
derivative counterparty. If a net derivative payment is owing by the issuing entity to
the derivative counterparty for any Transfer Date, the derivative counterparty will be
entitled to that payment from Available Funds and certain other available amounts
otherwise allocated to the Class A(2007-1) notes and deposited into the interest
funding subaccount for the Class A(2007-1) notes. If deposits to the interest funding
subaccount for net derivative payments are made out of reallocated Available Principal
Amounts, the amount of credit enhancement supporting the Class A(2007-1) notes may be
reduced.
A payment default under the derivative agreement or a termination of the derivative
agreement may result in early or reduced payment on the notes.
If the long-term, senior unsecured debt rating of the derivative counterparty is
reduced below "BBB-" by Standard & Poor's or below "Baa3" by Moody's, or if either
rating is withdrawn by Standard & Poor's or Moody's, the derivative counterparty will
be directed to assign its rights and obligations under the derivative agreement to a
replacement derivative counterparty. You should be aware that there may not be a
suitable replacement derivative counterparty. In addition, we cannot assure you that
any assignment of the derivative counterparty's rights and obligations will occur.
A payment default by the derivative counterparty or the issuing entity may result in
the termination of the derivative agreement.
The derivative agreement may also be terminated upon the occurrence of certain other
events described under "The Class A(2007-1) Notes—Derivative Agreement."
Although the rating agencies have not relied on the ratings of the derivative
counterparty in rating any notes, but rather have relied on the value of the
receivables and the benefits of the applicable credit enhancement, we cannot assure
you that interest on the Class A(2007-1) notes can be paid if a payment default by the
derivative counterparty occurs.
S-8
The occurrence of certain events may result in early payment on the notes.
The occurrence of the issuing entity becoming an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (an "investment company
early redemption event") will cause Available Principal Amounts allocable to the Class
A(2007-1) notes, including amounts on deposit in the related principal funding
subaccount, if any, to be paid to the Class A(2007-1) noteholders as described under
"The Indenture—Early Redemption Events" in the prospectus. The occurrence of an early
redemption event other than an investment company early redemption event will cause
Available Principal Amounts allocable to the Class A(2007-1) notes to be accumulated
in the related principal funding subaccount and not paid to the Class A(2007-1)
noteholders until the expected principal payment date for the Class A(2007-1) notes,
unless any of the following events occurs: the derivative agreement is terminated, an
interest reserve account event occurs (as described under "The Class A(2007-1)
Notes—Derivative Agreement"), an investment company early redemption event occurs or an
event of default and acceleration of the Class A(2007-1) notes occurs. Upon the
occurrence of any such event, such amounts will not be accumulated, but instead will
be paid to the Class A(2007-1) noteholders. We cannot assure you that any of these
events will not occur prior to the expected principal payment date. See "The Class
A(2007-1) Notes—Derivative Agreement" in this prospectus supplement and "The
Indenture—Events of Default" and "Master Trust II—Pay Out Events" in the prospectus.
S-9
Transaction Parties
BA Credit Card Trust
The notes will be issued by BA Credit Card Trust (referred to as the issuing entity). For a
description of the limited activities of the issuing entity, see "Transaction Parties—BA Credit Card
Trust" in the prospectus.
BA Master Credit Card Trust II
BA Master Credit Card Trust II (referred to as master trust II) issued the collateral
certificate. See "Transaction Parties—BA Master Credit Card Trust II" and "Master Trust II" in the
prospectus. The collateral certificate is the issuing entity's primary source of funds for the payment
of principal of and interest on the notes. The collateral certificate is an investor certificate that
represents an undivided interest in the assets of master trust II. Master trust II's assets primarily
include receivables from selected MasterCard®, Visa® and American Express® unsecured revolving credit
card accounts that meet the eligibility criteria for inclusion in master trust II. These eligibility
criteria are discussed under "Master Trust II—Addition of Master Trust II Assets."
The credit card receivables in master trust II consist primarily of finance charge receivables
and principal receivables. Finance charge receivables include periodic finance charges, cash advance
fees, late charges and certain other fees billed to cardholders, annual membership fees and recoveries
on receivables in Defaulted Accounts. Principal receivables include amounts charged by cardholders for
merchandise and services, amounts advanced to cardholders as cash advances and all other fees billed to
cardholders that are not considered finance charge receivables.
In addition, Funding is permitted to add to master trust II participation interests in pools of
assets that primarily consist of receivables arising under revolving credit card accounts owned by FIA
and collections on such receivables.
See "Annex I: The Master Trust II Portfolio" in this prospectus supplement for detailed
financial information on the receivables and the accounts.
The collateral certificate is the certificate comprising the Series 2001-D certificate issued
by master trust II. Other series of certificates may be issued by master trust II in the future without
prior notice to or the consent of any noteholders or certificateholders. See "Annex III: Outstanding
Master Trust II Series" in this prospectus supplement for information on the other outstanding series
issued by master trust II.
BA Credit Card Funding, LLC
BA Credit Card Funding, LLC (referred to as Funding), a limited liability company formed under
the laws of Delaware and a subsidiary of Banc of America Consumer Card Services, LLC, an indirect
subsidiary of FIA, is the transferor and depositor to master trust II. Funding is also the holder of
the Transferor Interest in master trust II and the beneficiary of the issuing entity. On the
Substitution Date, Funding was substituted for FIA as the transferor of
S-10
receivables to master trust II, as holder of the Transferor Interest in master trust II, and as beneficiary of the issuing entity
pursuant to the trust agreement. See "Transaction Parties—BA Credit Card Funding, LLC" in the
prospectus for a description of Funding and its responsibilities.
FIA and Affiliates
FIA Card Services, National Association (referred to as FIA) is a national banking
association. FIA is an indirect subsidiary of Bank of America Corporation.
FIA formed master trust II on August 4, 1994. Prior to the substitution of Funding as
transferor of receivables to master trust II, which coincided with the merger of Bank of America,
National Association (USA) with and into FIA, FIA transferred receivables to master trust II. In
addition, prior to this substitution and merger, FIA was the holder of the Transferor Interest in master
trust II, the transferor of the collateral certificate to the issuing entity pursuant to the trust
agreement, and the sole beneficiary of the issuing entity. At the time of this substitution and merger,
FIA's economic interest in the Transferor Interest in master trust II was transferred to Funding through
Banc of America Consumer Card Services, LLC (referred to as BACCS). In addition, from and after this
substitution and merger, FIA has transferred, and will continue to transfer, to BACCS the receivables
arising in certain of the U.S. consumer credit card accounts originated or acquired by FIA. BACCS has
sold and may continue to sell receivables to Funding for addition to master trust II. The receivables
transferred to master trust II have been and will continue to be generated from transactions made by
cardholders of selected MasterCard, Visa and American Express credit card accounts from the portfolio of
MasterCard, Visa and American Express accounts originated or acquired by FIA (such portfolio of accounts
is referred to as the Bank Portfolio).
BACCS is a limited liability company formed under the laws of North Carolina and an indirect
subsidiary of FIA.
FIA is responsible for servicing, managing and making collections on the credit card
receivables in master trust II. See "Transaction Parties—FIA and Affiliates" in the prospectus for a
description of FIA, BACCS and each of their respective responsibilities.
See "Transaction Parties—FIA and Affiliates" and "FIA's Credit Card Activities" in the
prospectus for a discussion of FIA's servicing practices and its delegation of servicing functions to
its operating subsidiary Banc of America Card Servicing Corporation.
Use of Securitization as a Source of Funding
FIA has been securitizing credit card receivables since 1986. FIA created master trust II on
August 4, 1994. BA Credit Card Trust, the issuing entity, was created on May 4, 2001. In addition to
sponsoring the securitization of the credit card receivables in master trust II, FIA and its affiliates
are the sponsors to other master trusts securitizing other consumer and small business lending products.
FIA uses a variety of funding sources to meet its liquidity goals. Funding sources for FIA
have included, but are not limited to, securitization and debt issuances.
S-11
The Bank of New York
The Bank of New York, a New York banking corporation, is the indenture trustee under the
indenture for the notes and the trustee under the pooling and servicing agreement (referred to herein
and in the prospectus as the master trust II agreement) for the master trust II investor certificates.
See "The Indenture—Indenture Trustee" in the prospectus for a description of the limited powers and
duties of the indenture trustee and "Master Trust II—Master Trust II Trustee" in the prospectus for a
description of the limited powers and duties of the master trust II trustee. See "Transaction
Parties—The Bank of New York" in the prospectus for a description of The Bank of New York.
Wilmington Trust Company
Wilmington Trust Company, a Delaware banking corporation, is the owner trustee of the issuing
entity. See "Transaction Parties—Wilmington Trust Company" in the prospectus for a description of the
ministerial powers and duties of the owner trustee and for a description of Wilmington Trust Company.
Derivative Counterparty
Bank of America, N.A. (referred to as the derivative counterparty) is a national banking
association organized under the laws of the United States, with its principal executive offices located
in Charlotte, North Carolina. The derivative counterparty is a wholly-owned indirect subsidiary of Bank
of America Corporation (the "Corporation") and is engaged in a general consumer banking, commercial
banking and trust business, offering a wide range of commercial, corporate, international, financial
market, retail and fiduciary banking services. As of September 30, 2006, the derivative counterparty had
consolidated assets of $1,186 billion, consolidated deposits of $721 billion and stockholder's equity of
$110 billion based on regulatory accounting principles.
The Corporation is a bank holding company and a financial holding company, with its principal
executive offices located in Charlotte, North Carolina. Additional information regarding the Corporation
is set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2005, together
with any subsequent documents it filed with the Securities and Exchange Commission (the "SEC") pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Recent Developments: On January 1, 2006, the Corporation completed its merger with MBNA
Corporation.
Additional information regarding the foregoing is available from the filings made by the
Corporation with the SEC, which filings can be inspected and copied at the public reference facilities
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549, United States, at prescribed rates.
In addition, the SEC maintains a website at http://www.sec.gov, which contains reports, proxy statements
and other information regarding registrants that file such information electronically with the SEC.
S-12
The information concerning the Corporation, the derivative counterparty and the foregoing
mergers contained herein is furnished solely to provide limited introductory information and does not
purport to be comprehensive. Such information is qualified in its entirety by the detailed information
appearing in the documents and financial statements referenced herein.
Moody's currently rates the derivative counterparty's long-term debt as "Aa1" and short-term
debt as "P-1." The outlook is Stable. Standard & Poor's rates the derivative counterparty's long-term
debt as "AA" and its short-term debt as "A-1+." Ratings are on CreditWatch Positive. Fitch rates
long-term debt of the derivative counterparty as "AA-" and short-term debt as "F1+." The outlook is
Positive. Further information with respect to such ratings may be obtained from Moody's, Standard &
Poor's and Fitch, respectively. No assurances can be given that the current ratings of the derivative
counterparty's instruments will be maintained.
The derivative counterparty will provide copies of the most recent Bank of America Corporation
Annual Report on Form 10-K, any subsequent reports on Form 10-Q, and any required reports on Form 8-K
(in each case as filed with the Commission pursuant to the Exchange Act), and the publicly available
portions of the most recent quarterly Call Report of the derivative counterparty delivered to the
Comptroller of the Currency, without charge, to each person to whom this document is delivered, on the
written request of such person. Written requests should be directed to:
Bank of America Corporate Communications
100 North Tryon Street, 18th Floor
Charlotte, North Carolina 28255
Attention: Corporate Communications
The delivery of this prospectus supplement shall not create any implication that there has been
no change in the affairs of the Corporation or the derivative counterparty since the date hereof, or
that the information with respect to the Corporation or the derivative counterparty contained or
referred to herein is correct as of any time subsequent to the dates referred to herein.
The information in the preceding eight paragraphs has been provided by the derivative
counterparty. The issuing entity makes no representations as to the accuracy or completeness of such
information.
The Class A(2007-1) Notes
The Class A(2007-1) notes will be issued by the issuing entity pursuant to the indenture and
the BAseries indenture supplement. The following discussion and the discussions under "The Notes" and
"The Indenture" in the prospectus summarize the material terms of the Class A(2007-1) notes, the
indenture and the BAseries indenture supplement. These summaries do not purport to be complete and are
qualified in their entirety by reference to the provisions of the Class A(2007-1) notes, the indenture
and the BAseries indenture supplement. So long as the conditions to issuance are met or waived,
additional Class A(2007-1) notes may be issued on any date or in any amount. There is no limit on the
total dollar principal amount of Class A(2007-1)
S-13
notes that may be issued. See "The Notes—Issuances of
New Series, Classes and Tranches of Notes" in the prospectus for a description of the conditions to issuance.
Securities Offered
The Class A(2007-1) notes are part of a series of notes called the BAseries. The BAseries
consists of Class A notes, Class B notes and Class C notes. The Class A(2007-1) notes are a tranche of
Class A notes of the BAseries. The Class A(2007-1) notes are issued by, and are obligations of, the BA
Credit Card Trust.
On the expected issuance date, the Class A(2007-1) notes are expected to be the sixty-third
tranche of Class A notes outstanding in the BAseries.
The BAseries
The BAseries notes will be issued in classes. Each class of notes has multiple tranches, which
may be issued at different times and have different terms (including different interest rates, interest
payment dates, expected principal payment dates, legal maturity dates or other characteristics).
Whenever a "class" of notes is referred to in this prospectus supplement or the prospectus, it includes
all tranches of that class of notes, unless the context otherwise requires.
Notes of any tranche can be issued on any date so long as a sufficient amount of subordinated
notes or other acceptable credit enhancement has been issued and is outstanding. See "The
Notes—Issuances of New Series, Classes and Tranches of Notes" in the prospectus. The expected principal
payment dates and legal maturity dates of tranches of senior and subordinated classes of the BAseries
may be different. Therefore, subordinated notes may have expected principal payment dates and legal
maturity dates earlier than some or all senior notes of the BAseries. Subordinated notes will generally
not be paid before their legal maturity date unless, after payment, the remaining outstanding
subordinated notes provide the credit enhancement required for the senior notes.
In general, the subordinated notes of the BAseries serve as credit enhancement for all of the
senior notes of the BAseries, regardless of whether the subordinated notes are issued before, at the
same time as, or after the senior notes of the BAseries. However, certain tranches of senior notes may
not require subordination from each class of notes subordinated to it. For example, a tranche of
Class A notes may be credit enhanced solely from Class C notes. In this example, the Class B notes will
not provide credit enhancement for that tranche of Class A notes. The amount of credit exposure of any
particular tranche of notes is a function of, among other things, the total outstanding principal amount
of notes issued, the required subordinated amount, the amount of usage of the required subordinated
amount and the amount on deposit in the senior tranches' principal funding subaccounts.
As of the date of this prospectus supplement, the BAseries is the only issued and outstanding
series of the issuing entity. See "Annex II: Outstanding Series, Classes and Tranches of Notes" for
information on the other outstanding notes issued by the issuing entity.
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Interest
Interest on the Class A(2007-1) notes will accrue at the fixed rate specified on the cover page
of this prospectus supplement.
Interest on the Class A(2007-1) notes for any interest payment date will equal one-twelfth of
the product of:
o the Class A(2007-1) note interest rate multiplied by
o the outstanding dollar principal amount of the Class A(2007-1) notes as of the related
record date.
The payment of interest on the Class A(2007-1) notes on any payment date is senior to the
payment of interest on Class B and Class C notes of the BAseries on that date. Generally, no payment of
interest will be made on any Class B BAseries note until the required payment of interest has been made
to all Class A BAseries notes. Likewise, generally, no payment of interest will be made on any Class C
BAseries note until the required payment of interest has been made to all Class A and Class B BAseries
notes. However, funds on deposit in the Class C reserve account will be available only to holders of
Class C notes to cover shortfalls of interest on Class C notes on any interest payment date.
The issuing entity will pay interest on the Class A(2007-1) notes solely from the portion of
BAseries Available Funds and from other amounts that are available to the Class A(2007-1) notes under
the indenture and the BAseries indenture supplement after giving effect to all allocations and
reallocations. If those sources are not sufficient to pay the interest on the Class A(2007-1) notes,
Class A(2007-1) noteholders will have no recourse to any other assets of the issuing entity, FIA, BACCS,
Funding or any other person or entity for the payment of interest on those notes.
Principal
The issuing entity expects to pay the stated principal amount of the Class A(2007-1) notes in
one payment on its expected principal payment date, and is obligated to do so if funds are available for
that purpose. If the stated principal amount of the Class A(2007-1) notes is not paid in full on the
expected principal payment date due to insufficient funds, noteholders will generally not have any
remedies against the issuing entity until the legal maturity date of the Class A(2007-1) notes.
In addition, if the stated principal amount of the Class A(2007-1) notes is not paid in full on
the expected principal payment date, then an early redemption event will occur for the
Class A(2007-1) notes and principal and interest payments on the Class A(2007-1) notes will be made
monthly until they are paid in full or until the legal maturity date occurs, whichever is earlier.
Principal of the Class A(2007-1) notes will begin to be paid earlier than the expected
principal payment date if any other early redemption event or an event of default and
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acceleration occurs for the Class A(2007-1) notes. See "The Notes—Early Redemption of Notes," "The Indenture—Early
Redemption Events" and "—Events of Default" in the prospectus.
The issuing entity will pay principal on the Class A(2007-1) notes solely from the portion of
BAseries Available Principal Amounts and from other amounts which are available to the Class A(2007-1)
notes under the indenture and the BAseries indenture supplement after giving effect to all allocations
and reallocations. If those sources are not sufficient to pay the principal of the Class A(2007-1)
notes, Class A(2007-1) noteholders will have no recourse to any other assets of the issuing entity,
Funding, BACCS, FIA or any other person or entity for the payment of principal on those notes.
Nominal Liquidation Amount
The nominal liquidation amount of a tranche of notes corresponds to the portion of the investor
interest of the collateral certificate that is available to support that tranche of notes. Generally,
the nominal liquidation amount is used to determine the amount of Available Principal Amounts and
Available Funds that are available to pay principal of and interest on the notes. For a more detailed
discussion of nominal liquidation amount, see "The Notes—Stated Principal Amount, Outstanding Dollar
Principal Amount and Nominal Liquidation Amount" in the prospectus.
Subordination; Credit Enhancement
Credit enhancement for the Class A(2007-1) notes will be provided through subordination. The
amount of subordination available to provide credit enhancement to any tranche of notes is limited to
its available subordinated amount. If the available subordinated amount for any tranche of notes has
been reduced to zero, losses will be allocated to that tranche of notes pro rata based on its nominal
liquidation amount. The nominal liquidation amount of those notes will be reduced by the amount of
losses allocated to it and it is unlikely that those notes will receive their full payment of principal.
Principal and interest payments on Class B and Class C BAseries notes are subordinated to
payments on Class A BAseries notes as described above under "—Interest" and
"—Principal." Subordination of Class B and Class C BAseries notes provides credit enhancement for
Class A BAseries notes.
Principal and interest payments on Class C BAseries notes are subordinated to payments on
Class A and Class B BAseries notes as described above under "—Interest" and
"—Principal." Subordination of Class C BAseries notes provides credit enhancement for Class A and Class
B BAseries notes.
BAseries Available Principal Amounts allocable to subordinated classes of BAseries notes may be
reallocated to pay interest on senior classes of BAseries notes or to pay a portion of the master trust
II servicing fee allocable to the BAseries, subject to certain limitations. See "Sources of Funds to
Pay the Notes—Deposit and Application of Funds for the BAseries—Application of BAseries Available
Principal Amounts" in the prospectus. The nominal liquidation amount of the subordinated notes will be
reduced by the amount of those reallocations. In addition, charge-offs due to uncovered defaults on principal receivables in
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master trust II allocable to the BAseries generally are reallocated from the
senior classes to the subordinated classes of the BAseries. See "Sources of Funds to Pay the
Notes—Deposit and Application of Funds for the BAseries—Allocations of Reductions from Charge-Offs" in
the prospectus. The nominal liquidation amount of the subordinated notes will be reduced by the amount
of charge-offs reallocated to those subordinated notes. See "The Notes—Stated Principal Amount,
Outstanding Dollar Principal Amount and Nominal Liquidation Amount—Nominal Liquidation Amount" and
"Master Trust II—Defaulted Receivables; Rebates and Fraudulent Charges" in the prospectus.
BAseries Available Principal Amounts remaining after any reallocations described above will be
applied to make targeted deposits to the principal funding subaccounts of senior notes before being
applied to make targeted deposits to the principal funding subaccounts of the subordinated notes if the
remaining amounts are not sufficient to make all required targeted deposits.
In addition, principal payments on subordinated classes of BAseries notes are subject to the
principal payment rules described below in "—Required Subordinated Amount."
In the BAseries, payment of principal may be made on a subordinated class of notes before
payment in full of each senior class of notes only under the following circumstances:
o If after giving effect to the proposed principal payment the outstanding subordinated notes
are still sufficient to support the outstanding senior notes. See "Sources of Funds to Pay
the Notes—Deposit and Application of Funds for the BAseries—Targeted Deposits of BAseries
Available Principal Amounts to the Principal Funding Account" and "—Allocation to Principal
Funding Subaccounts" in the prospectus. For example, if a tranche of Class A notes has
been repaid, this generally means that, unless other Class A notes are issued, at least
some Class B notes and Class C notes may be repaid when they are expected to be repaid even
if other tranches of Class A notes are outstanding.
o If the principal funding subaccounts for the senior classes of notes have been sufficiently
prefunded as described in "Sources of Funds to Pay the Notes—Deposit and Application of
Funds for the BAseries—Targeted Deposits of BAseries Available Principal Amounts to the
Principal Funding Account—Prefunding of the Principal Funding Account for Senior Classes"
in the prospectus.
o If new tranches of subordinated notes are issued so that the subordinated notes that have
reached their expected principal payment date are no longer necessary to provide the
required subordination.
o If the subordinated tranche of notes reaches its legal maturity date and there is a sale of
credit card receivables as described in "Sources of Funds to Pay the Notes—Sale of Credit
Card Receivables" in the prospectus.
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Required Subordinated Amount
In order to issue notes of a senior class of the BAseries, the required subordinated amount of
subordinated notes for those senior notes must be outstanding and available on the issuance date.
Generally, the required subordinated amount of subordinated notes for each tranche of Class A BAseries
notes is equal to a stated percentage of the adjusted outstanding dollar principal amount of that
tranche of Class A notes. For the Class A(2007-1) notes, the required subordinated amount of Class B
notes is equal to 8.72093% of the adjusted outstanding dollar principal amount of the Class A(2007-1)
notes, and the required subordinated amount of Class C notes is equal to 7.55814% of the adjusted
outstanding dollar principal amount of the Class A(2007-1) notes.
Similarly, the required subordinated amount of Class C notes for each tranche of Class B
BAseries notes is generally equal to a stated percentage of its adjusted outstanding dollar principal
amount. However, the required subordinated amount of Class C notes for any tranche of Class B BAseries
notes may be adjusted to reflect its pro rata share of the portion of the adjusted outstanding dollar
principal amount of all Class B BAseries notes that is not providing credit enhancement to the Class A
notes.
For an example of the calculations of the BAseries required subordinated amounts, see the chart
titled "BAseries Required Subordinated Amounts" in the prospectus.
Reductions in the adjusted outstanding dollar principal amount of a tranche of senior notes of
the BAseries will generally result in a reduction in the required subordinated amount for that tranche.
Additionally, a reduction in the required subordinated amount of Class C notes for a tranche of Class B
BAseries notes may occur due to:
o a decrease in the aggregate adjusted outstanding dollar principal amount of Class A
BAseries notes,
o a decrease in the Class A required subordinated amount of Class B notes for outstanding
tranches of Class A BAseries notes, or
o the issuance of additional Class B BAseries notes;
any of which would reduce the amount of credit enhancement provided by an individual tranche of Class B
BAseries notes to the Class A BAseries notes. However, if an early redemption event or event of default
and acceleration for any tranche of Class B BAseries notes occurs, or if on any day its usage of the
required subordinated amount of Class C notes exceeds zero, the required subordinated amount of Class C
notes for that tranche of Class B notes will not decrease after that early redemption event or event of
default and acceleration or after the date on which its usage of the required subordinated amount of
Class C notes exceeds zero.
The percentages used in, or the method of calculating, the required subordinated amounts
described above may change without the consent of any noteholders if the rating agencies consent. In
addition, the percentages used in, or the method of calculating, the required subordinated amount of
subordinated notes of any tranche of BAseries notes (including other tranches in the same class) may be
different than the percentages used in, or the method of
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calculating, the required subordinated amounts for the Class A(2007-1) notes. In addition, if the rating agencies consent,
the issuing entity, without the consent of any noteholders, may utilize forms of credit enhancement other than subordinated
notes in order to provide senior classes of notes with the required credit enhancement.
No payment of principal will be made on any Class B BAseries note unless, following the
payment, the remaining available subordinated amount of Class B BAseries notes is at least equal to the
required subordinated amount of Class B notes for the outstanding Class A BAseries notes less any usage
of the required subordinated amount of Class B notes for the outstanding Class A BAseries notes.
Similarly, no payment of principal will be made on any Class C BAseries note unless, following the
payment, the remaining available subordinated amount of Class C BAseries notes is at least equal to the
required subordinated amount of Class C notes for the outstanding Class A and Class B BAseries notes
less any usage of the required subordinated amount of Class C notes for the outstanding Class A and Class
B BAseries notes. However, there are some exceptions to this rule. See "—Subordination; Credit
Enhancement" above and "The Notes—Subordination of Interest and Principal" in the prospectus.
Revolving Period
Until principal amounts are needed to be accumulated to pay the Class A(2007-1) notes,
principal amounts allocable to the Class A(2007-1) notes will either be applied to other BAseries notes
which are accumulating principal or paid to Funding as holder of the Transferor Interest. This period
is commonly referred to as the revolving period. Unless an early redemption event or event of default
for the Class A(2007-1) notes occurs, the revolving period is expected to end twelve calendar months
prior to the expected principal payment date. However, if the servicer reasonably expects that less
than twelve months will be required to fully accumulate principal amounts in an amount equal to the
outstanding dollar principal amount of the Class A(2007-1) notes, the end of the revolving period may be
delayed. See "Sources of Funds to Pay the Notes—Deposit and Application of Funds for the
BAseries—Targeted Deposits of BAseries Available Principal Amounts to the Principal Funding
Account—Budgeted Deposits" in the prospectus.
Early Redemption of Notes
The early redemption events applicable to all notes, including the Class A(2007-1) notes, are
described in "The Notes—Early Redemption of Notes" and "The Indenture—Early Redemption Events" in the
prospectus.
If an early redemption event (other than the issuing entity becoming an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, referred to herein as an
investment company early redemption event) applicable to the Class A(2007-1) notes occurs and the
derivative agreement has not been terminated, an interest reserve account event has not occurred and an
event of default and acceleration of the Class A(2007-1) notes has not occurred, Available Principal
Amounts allocable to the Class A(2007-1) notes together with any amounts in the principal funding
subaccount for the Class A(2007-1) notes will not be paid to the holders of the Class A(2007-1) notes as
described under "The Indenture—Early Redemption of the Notes" in the prospectus, but instead will be
retained in the principal funding
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subaccount and paid to the holders of the Class A(2007-1) notes on the
expected principal payment date of the Class A(2007-1) notes. However, if following an early redemption
event (i) the derivative agreement terminates, (ii) an interest reserve account event occurs, (iii) an
investment company early redemption event occurs or (iv) an event of default and acceleration of the
Class A(2007-1) notes occurs, such amounts will not be accumulated in the principal funding subaccount
for the Class A(2007-1) notes, but instead will be paid to the Class A(2007-1) noteholders on each
interest payment date.
See "The Indenture—Early Redemption Events" in the prospectus for a description of the
investment company early redemption event and "—Derivative Agreement" below for a description of an
interest reserve account event and the derivative agreement termination events.
Optional Redemption by the Issuing Entity
Funding, so long as it is an affiliate of the servicer, has the right, but not the obligation,
to direct the issuing entity to redeem the Class A(2007-1) notes in whole but not in part on any day on
or after the day on which the nominal liquidation amount of the Class A(2007-1) notes is reduced to less
than 5% of their highest outstanding dollar principal amount. This repurchase option is referred to as
a clean-up call.
The issuing entity will not redeem subordinated notes if those notes are required to provide
credit enhancement for senior classes of notes of the BAseries.
If the issuing entity is directed to redeem the Class A(2007-1) notes, it will notify the
registered holders at least thirty days prior to the redemption date. The redemption price of a note
will equal 100% of the outstanding principal amount of that note, plus accrued but unpaid interest on
the note to but excluding the date of redemption.
If the issuing entity is unable to pay the redemption price in full on the redemption date,
monthly payments on the Class A(2007-1) notes will thereafter be made until either the principal of and
accrued interest on the Class A(2007-1) notes are paid in full or the legal maturity date occurs,
whichever is earlier. Any funds in the principal funding subaccount and the interest funding subaccount
for the Class A(2007-1) notes will be applied to make the principal and interest payments on the notes
on the redemption date.
Events of Default
The Class A(2007-1) notes are subject to certain events of default described in "The
Indenture—Events of Default" in the prospectus. For a description of the remedies upon the occurrence of
an event of default, see "The Indenture—Events of Default Remedies" and "Sources of Funds to Pay the
Notes—Sale of Credit Card Receivables" in the prospectus.
Issuing Entity Accounts
The issuing entity has established a principal funding account, an interest funding account, an
accumulation reserve account and a Class C reserve account for the benefit of the BAseries. The
principal funding account, the interest funding account, and the accumulation reserve account will have
subaccounts for the Class A(2007-1) notes.
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Each month, distributions on the collateral certificate and other amounts will be deposited in
the issuing entity accounts and allocated to the notes as described in the prospectus.
Security for the Notes
The Class A(2007-1) notes are secured by a shared security interest in:
o the collateral certificate;
o the collection account;
o the applicable principal funding subaccount;
o the applicable interest funding subaccount;
o the applicable accumulation reserve subaccount; and
o the applicable derivative agreement.
However, the Class A(2007-1) notes are entitled to the benefits of only that portion of the
assets allocated to them under the indenture and the BAseries indenture supplement.
See "Sources of Funds to Pay the Notes—The Collateral Certificate" and "—Issuing Entity
Accounts" in the prospectus.
Limited Recourse to the Issuing Entity
The sole sources of payment for principal of or interest on the Class A(2007-1) notes are
provided by:
o the portion of the Available Principal Amounts and Available Funds allocated to the
BAseries and available to the Class A(2007-1) notes, and
o funds in the applicable issuing entity accounts for the Class A(2007-1) notes.
Class A(2007-1) noteholders will have no recourse to any other assets of the issuing entity,
FIA, BACCS, Funding or any other person or entity for the payment of principal of or interest on the
Class A(2007-1) notes.
However, following a sale of credit card receivables (i) due to an insolvency of Funding,
(ii) due to an event of default and acceleration for the Class A(2007-1) notes or (iii) on the legal
maturity date for the Class A(2007-1) notes, as described in "Sources of Funds to Pay the Notes—Sale of
Credit Card Receivables" in the prospectus, the Class A(2007-1) noteholders have recourse only to the
proceeds of that sale.
Derivative Agreement
The amount payable by the derivative counterparty to the issuing entity under the derivative
agreement will be, for each Transfer Date, an amount equal to one-twelfth of the
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product of (a) [•]% and (b) the outstanding dollar principal amount of the Class A(2007-1) notes at the end of the prior month
(or, with respect to the Transfer Date related to the initial interest period, the initial dollar
principal amount of the Class A(2007-1) notes). In the case of the first Transfer Date, such amounts
will include accrued amounts for the period from and including the issuance date to but excluding the
first interest payment date. Payments from the derivative counterparty to the issuing entity will be
calculated on the basis of a 360-day year and twelve 30-day months.
The amount payable by the issuing entity to the derivative counterparty under the derivative
agreement will be, for each Transfer Date, an amount equal to the product of:
(i) a fraction, the numerator of which is the actual number of days in the interest period
relating to such Transfer Date, and the denominator of which is 360;
(ii) a rate not to exceed LIBOR prevailing on the related LIBOR determination date with
respect to such interest period plus [•]% per year; and
(iii) the outstanding dollar principal amount of the Class A(2007-1) notes at the end of the
prior month (or, with respect to the Transfer Date related to the initial interest
period, the initial dollar principal amount of the Class A(2007-1) notes).
An "interest period" begins on and includes an interest payment date and ends on but excludes
the next interest payment date. However, the first interest period will begin on and include the
issuance date. "LIBOR" is the London interbank offered rate for U.S. dollar deposits for a one-month
period as of each LIBOR determination date. A "LIBOR determination date" means January [•], 2007 for the
period from and including the issuance date to but excluding March 15, 2007 and for each interest period
thereafter, the second London business day prior to the interest payment date on which such interest
period commences. A "London business day" means any Business Day on which dealings in deposits in United
States dollars are transacted in the London interbank market.
For each Transfer Date, the net derivative receipt, if any, will be treated as Available Funds.
The net derivative payment, if any, will be paid to the derivative counterparty out of Available Funds
and certain other available amounts allocated to the Class A(2007-1) notes and deposited into the
related interest funding subaccount, including amounts on deposit in the accumulation reserve subaccount
and reallocated Available Principal Amounts, based on the respective amounts due as described under
"Sources of Funds to Pay the Notes—Deposit and Application of Funds for the BAseries—Targeted Deposits of
BAseries Available Funds to the Interest Funding Account" in the prospectus.
The "net derivative payment," for any Transfer Date, means, (a) if the netting provisions of
the derivative agreement apply, the amount by which the floating amount for such date exceeds the fixed
amount for such date, and (b) otherwise, an amount equal to the floating amount for such date.
The "net derivative receipt," for any Transfer Date, means, (a) if the netting provisions of
the derivative agreement apply, the amount by which the fixed amount for such date exceeds the
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floating amount for such date, and (b) otherwise, an amount equal to the fixed amount for such date.
The netting provisions of the derivative agreement will apply unless the issuing entity elects
gross payments to be made pursuant to the provisions of the derivative agreement. If the issuing entity
elects gross payments under the derivative agreement, the issuing entity's obligation to pay the
floating amount on any Transfer Date to the derivative counterparty pursuant to the terms of the
derivative agreement is conditioned upon the prior receipt of the fixed amount from the derivative
counterparty for such date.
The "fixed amount," for any Transfer Date, means an amount equal to the fixed amount (including
any termination payments pursuant to the derivative agreement) payable by the derivative counterparty to
the issuing entity for such date pursuant to the terms of the derivative agreement.
The "floating amount," for any Transfer Date, means an amount equal to the floating amount
payable by the issuing entity to the derivative counterparty for such date pursuant to the derivative
agreement minus the excess of (i) the targeted amount of principal funding subaccount earnings for the
Class A(2007-1) notes for the related month over (ii) the sum of the amount actually earned on such
funds for the related month, plus amounts withdrawn from the applicable accumulation reserve subaccount,
plus collections of finance charge receivables allocable to the designated portion of the Transferor
Interest, if any, plus amounts withdrawn from a derivative reserve account, in each case, to cover
shortfalls on principal funding subaccount earnings, if any. The floating amount does not include any
termination payments payable by the issuing entity to the derivative counterparty pursuant to the
derivative agreement.
The derivative agreement will terminate by its terms, whether or not the Class A(2007-1) notes
have been paid in full prior to such termination, upon the earliest to occur of:
(i) the termination of the issuing entity pursuant to the terms of the indenture;
(ii) the payment in full of the Class A(2007-1) notes;
(iii) the expected principal payment date for the Class A(2007-1) notes;
(iv) the insolvency, conservatorship or receivership of the derivative counterparty;
(v) the failure on the part of the issuing entity or the derivative counterparty to make
any payment under the derivative agreement within the applicable grace period, if any;
(vi) illegality on the part of the issuing entity or the derivative counterparty to be a
party to, or perform an obligation under, the derivative agreement;
(vii) either the issuing entity or the derivative counterparty will, or there is a
substantial likelihood that it will, be required to pay certain taxes or deduct or
withhold part of payment received for or on account of a tax;
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(viii) failure of the derivative counterparty to provide certain organizational or financial
information to the issuing entity to the extent that the aggregate significance
percentage of all the derivative products provided by the derivative counterparty or
its affiliates to the issuing entity is 10% or more; and
(ix) the issuing entity amends the master trust II agreement, the Series 2001-D supplement,
the trust agreement, the indenture or the BAseries indenture supplement without the
consent of the derivative counterparty in a manner that would have an adverse effect
on the derivative counterparty or would adversely impact the issuing entity's ability
to perform under the derivative agreement.
In the event that the derivative agreement terminates prior to the payment in full of the Class
A(2007-1) notes, applications of Available Funds to fund targeted deposits to the interest funding
subaccount will be made without the benefit of any net derivative receipts that might have been due for
any future Transfer Dates.
If (i) the derivative counterparty's or a replacement derivative counterparty's short-term
credit rating from Standard & Poor's is below "A-1", (ii) in the case of a replacement derivative
counterparty that does not have a short-term credit rating from Standard & Poor's, such derivative
counterparty's long-term, senior, unsecured debt rating from Standard & Poor's is below "A+", or (iii)
any such relevant rating is withdrawn by Standard & Poor's, the derivative counterparty will be required
within 30 days from the date of such rating or withdrawal to fund an interest reserve account in an
amount equal to one-twelfth of the product of (a) [•]% and (b) the outstanding dollar principal amount
of the Class A(2007-1) notes at the end of the month preceding such reduction or withdrawal (the
"required interest reserve amount"). On any Transfer Date after such deposit, if Standard & Poor's
short-term credit rating of the derivative counterparty or replacement derivative counterparty is "A-1"
or higher, or if Standard & Poor's long-term, senior, unsecured debt rating of a replacement derivative
counterparty that does not have a short-term credit rating from Standard & Poor's is "A+" or higher, the
issuing entity will distribute any amounts on deposit in the interest reserve account to the derivative
counterparty pursuant to the terms of the derivative agreement. The issuing entity will establish and
maintain the interest reserve account for the benefit of the Class A(2007-1) noteholders. There can be
no assurance that the derivative counterparty can or will adequately fund the interest reserve account.
If the derivative counterparty fails to adequately fund the interest reserve account within 30 days of
such reduction or withdrawal (an "interest reserve account event"), then (i) if an early redemption
event has not previously occurred, upon the occurrence of an early redemption event, Available Principal
Amounts allocable to the Class A(2007-1) notes, together with any amounts in the principal funding
subaccount for the Class A(2007-1) notes, will not be retained in such subaccount and will be paid to
the Class A(2007-1) noteholders or (ii) if an early redemption event has previously occurred, upon the
occurrence of such interest reserve account event, any amounts in the principal funding subaccount for
the Class A(2007-1) notes will not be retained in such account and will, together with Available
Principal Amounts allocable to the Class A(2007-1) notes, if any, be paid to the Class A(2007-1)
noteholders.
All amounts on deposit in the interest reserve account on any Transfer Date (after giving
effect to any deposits to the interest reserve account to be made on such Transfer Date) will be
invested in Permitted Investments. Investment earnings on amounts on deposit in the interest
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reserve account will be retained in the interest reserve account (to the extent the amount on deposit is less
than the required interest reserve amount) or paid to the derivative counterparty.
On the Transfer Date on or following the termination of the derivative agreement due to a
default by the derivative counterparty, the issuing entity will withdraw an amount equal to the net
derivative receipt, if any, for such Transfer Date, plus the amount of any net derivative receipt
previously due but not paid, from funds on deposit in the interest reserve account, if any, and treat
such amounts as Available Funds as described under "Sources of Funds to Pay the Notes—Deposit and
Application of Funds for the BAseries—BAseries Available Funds" in the prospectus as if such amounts
were a net derivative receipt received from the derivative counterparty. The interest reserve account
will thereafter be terminated.
Upon the termination of the interest reserve account, any remaining amounts that had been on
deposit therein will be paid to the derivative counterparty.
In the event the long-term, senior, unsecured debt rating of the derivative counterparty or a
replacement derivative counterparty is reduced below "BBB-" by Standard & Poor's or below "Baa3" by
Moody's, or is withdrawn by either Standard & Poor's or Moody's, the issuing entity will direct the
derivative counterparty to assign its rights and obligations under the derivative agreement to a
replacement derivative counterparty. There can be no assurance that a successor derivative counterparty
will be found or that such assignment can be made.
The rating agencies have not relied on the ratings of the derivative counterparty in rating the
Class A(2007-1) notes but rather on the value of the receivables in master trust II and the terms of the
applicable credit enhancements.
The aggregate "significance percentage" of the derivative agreement, as calculated in
accordance with Item 1115 of Regulation AB, is less than 10%.
Accumulation Reserve Account
The issuing entity will establish an accumulation reserve subaccount to cover shortfalls in
investment earnings on amounts (other than prefunded amounts) on deposit in the principal funding
subaccount for the Class A(2007-1) notes.
The amount targeted to be deposited in the accumulation reserve subaccount for the Class
A(2007-1) notes is zero, unless more than one budgeted deposit is required to accumulate and pay the
principal of the Class A(2007-1) notes on its expected principal payment date, in which case, the amount
targeted to be deposited is 0.5% of the outstanding dollar principal amount of the Class A(2007-1)
notes, or another amount designated by the issuing entity. See "Sources of Funds to Pay the
Notes—Deposit and Application of Funds for the BAseries—Targeted Deposits to the Accumulation Reserve
Account" in the prospectus.
Shared Excess Available Funds
The BAseries will be included in "Group A." In addition to the BAseries, the issuing entity
may issue other series of notes that are included in Group A. As of the date of this prospectus
supplement, the BAseries is the only series of notes issued by the issuing entity.
S-25
To the extent that Available Funds allocated to the BAseries are available after all required
applications of those amounts as described in "Sources of Funds to Pay the Notes—Deposit and Application
of Funds for the BAseries—Application of BAseries Available Funds" in the prospectus, these unused
Available Funds, referred to as shared excess available funds, will be applied to cover shortfalls in
Available Funds for other series of notes in Group A. In addition, the BAseries may receive the
benefits of shared excess available funds from other series in Group A, to the extent Available Funds
for those other series of notes are not needed for those series. See "Sources of Funds to Pay the
Notes—The Collateral Certificate," and
"—Deposit and Application of Funds for the BAseries—Shared Excess Available Funds" in the prospectus.
Stock Exchange Listing
The issuing entity will apply to list the Class A(2007-1) notes on a stock exchange in Europe.
The issuing entity cannot guarantee that the application for the listing will be accepted or that, if
accepted, the listing will be maintained. To determine whether the Class A(2007-1) notes are listed on
a stock exchange you may contact the issuing entity c/o Wilmington Trust Company, Rodney Square North,
1100 N. Market Street, Wilmington, Delaware 19890-0001, telephone number: (302) 651-1000.
Ratings
The issuing entity will issue the Class A(2007-1) notes only if they are rated at least "AAA"
or "Aaa" or its equivalent by at least one nationally recognized rating agency.
Other tranches of Class A notes may have different rating requirements from the
Class A(2007-1) notes.
A rating addresses the likelihood of the payment of interest on a note when due and the
ultimate payment of principal of that note by its legal maturity date. A rating does not address the
likelihood of payment of principal of a note on its expected principal payment date. In addition, a
rating does not address the possibility of an early payment or acceleration of a note, which could be
caused by an early redemption event or an event of default. A rating is not a recommendation to buy,
sell or hold notes and may be subject to revision or withdrawal at any time by the assigning rating
agency. Each rating should be evaluated independently of any other rating.
See "Risk Factors—If the ratings of the notes are lowered or withdrawn, their market value
could decrease" in the prospectus.
Underwriting
Subject to the terms and conditions of the underwriting agreement for the
Class A(2007-1) notes, the issuing entity has agreed to sell to each of the underwriters named below,
and each of those underwriters has severally agreed to purchase, the principal amount of the Class
A(2007-1) notes set forth opposite its name:
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Principal
Underwriters Amount
______________________
Banc of America Securities LLC.......................................................... $ 100,000,000
Barclays Capital Inc. .................................................................. 100,000,000
Citigroup Global Markets Inc. .......................................................... 100,000,000
Credit Suisse Securities (USA) LLC...................................................... 100,000,000
______________________
Total.......................................................................... $ 400,000,000
======================
The several underwriters have agreed, subject to the terms and conditions of the underwriting
agreement, to purchase all $400,000,000 of the aggregate principal amount of the Class A(2007-1) notes
if any of the Class A(2007-1) notes are purchased.
The underwriters have advised the issuing entity that the several underwriters propose to offer
the Class A(2007-1) notes to the public at the public offering price determined by the several
underwriters and set forth on the cover page of this prospectus supplement and to offer the
Class A(2007-1) notes to certain dealers at that public offering price less a concession not in excess of
[•]% of the principal amount of the Class A(2007-1) notes. The underwriters may allow, and those
dealers may reallow to other dealers, a concession not in excess of [•]% of the principal amount.
After the initial public offering, the public offering price and other selling terms may be
changed by the underwriters.
Each underwriter of the Class A(2007-1) notes has agreed that:
o it has complied and will comply with all applicable provisions of the Financial Services
and Markets Act 2000 (the "FSMA") with respect to anything done by it in relation to the
Class A(2007-1) notes in, from or otherwise involving the United Kingdom; and
o it has only communicated or caused to be communicated and it will only communicate or cause
to be communicated any invitation or inducement to engage in investment activity (within
the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale
of any Class A(2007-1) notes in circumstances in which Section 21(1) of the FSMA does not
apply to the issuing entity.
In connection with the sale of the Class A(2007-1) notes, the underwriters may engage in:
o over-allotments, in which members of the syndicate selling the Class A(2007-1) notes sell
more notes than the issuing entity actually sold to the syndicate, creating a syndicate
short position;
o stabilizing transactions, in which purchases and sales of the Class A(2007-1) notes may be
made by the members of the selling syndicate at prices that do not exceed a specified
maximum;
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o syndicate covering transactions, in which members of the selling syndicate purchase the
Class A(2007-1) notes in the open market after the distribution has been completed in order
to cover syndicate short positions; and
o penalty bids, by which the underwriter reclaims a selling concession from a syndicate
member when any of the Class A(2007-1) notes originally sold by that syndicate member are
purchased in a syndicate covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids may cause the
price of the Class A(2007-1) notes to be higher than it would otherwise be. These transactions, if
commenced, may be discontinued at any time.
The issuing entity, Funding and FIA will, jointly and severally, indemnify the underwriters and
their controlling persons against certain liabilities, including liabilities under applicable securities
laws, or contribute to payments the underwriters may be required to make in respect of those liabilities.
Banc of America Securities LLC, one of the underwriters of the Class A(2007-1) notes, is an
affiliate of each of FIA, Funding and the derivative counterparty. Affiliates of FIA, Funding, Banc of
America Securities LLC and the derivative counterparty may purchase all or a portion of the
Class A(2007-1) notes.
Proceeds to the issuing entity from the sale of the Class A(2007-1) notes and the underwriting
discount are set forth on the cover page of this prospectus supplement. Proceeds to the issuing entity
from the sale of the Class A(2007-1) notes will be paid to Funding. See "Use of Proceeds" in the
prospectus. Additional offering expenses, which will be paid by Funding, are estimated to be $700,000.
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Annex I
The Master Trust II Portfolio
The information provided in this Annex I is an integral part of the prospectus supplement, and
is incorporated by reference into the prospectus supplement.
General
The receivables conveyed to master trust II arise in accounts selected from the Bank Portfolio
on the basis of criteria set forth in the master trust II agreement as applied on the Cut-Off Date or,
for additional accounts, as of the date of their designation. The transferor has the right, subject to
certain limitations and conditions set forth therein, to designate from time to time additional accounts
and to transfer to master trust II all receivables of those additional accounts. Any additional
accounts designated must be Eligible Accounts as of the date the transferor designates those accounts as
additional accounts. See "Receivables Transfer Agreements Generally" and "Master Trust II—The
Receivables" in the prospectus.
As owner of the credit card accounts, FIA retains the right to change various credit card
account terms (including finance charges and other fees it charges and the required minimum monthly
payment). FIA has no restrictions on its ability to change the terms of the credit card accounts except
as described in this prospectus supplement or in the accompanying prospectus. See "Risk Factors—FIA may
change the terms of the credit card accounts in a way that reduces or slows collections. These changes
may result in reduced, accelerated or delayed payments to you" in the prospectus. Changes in relevant
law, changes in the marketplace or prudent business practices could cause FIA to change credit card
account terms. See "FIA's Credit Card Activities—Origination, Account Acquisition, Credit Lines and Use
of Credit Card Accounts" in the prospectus for a description of how credit card account terms can be
changed.
Static pool information regarding the performance of the receivables in master trust II is
being provided through an Internet Web site at http://bofa.com/cardabs. See "Where You Can Find More
Information" in the accompanying prospectus. Static pool information regarding the performance of the
receivables in master trust II was not organized or stored within FIA's computer systems for periods
prior to January 1, 2006 and cannot be obtained without unreasonable expense or effort. Since January
1, 2006, FIA has stored static pool information relating to delinquency, charge-off, yield and payment
rate performance for the receivables in master trust II and, beginning with the calendar quarter ended
March 31, 2006, this information is presented through the above-referenced Internet Web site and will be
updated on a quarterly basis. FIA anticipates that this information will ultimately be presented for
the five most recent calendar years of account originations. As a result, the full array of static pool
information relating to the Master Trust II Portfolio will not be available until 2011.
Delinquency and Principal Charge-Off Experience
FIA's procedures for determining whether an account is contractually delinquent, including a
description of its collection efforts with regard to delinquent accounts, are described under "FIA's
Credit Card Portfolio—Delinquencies and Collection Efforts" in the prospectus. Similarly, FIA's
procedures for charging-off and writing-off accounts is described under "FIA's Credit Card
Portfolio—Charge-Off Policy" in the prospectus.
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The following table sets forth the delinquency experience for cardholder payments on the credit
card accounts comprising the Master Trust II Portfolio for each of the dates shown. The receivables
outstanding on the accounts consist of all amounts due from cardholders as posted to the accounts as of
the date shown. We cannot provide any assurance that the delinquency experience for the receivables in
the future will be similar to the historical experience set forth below.
Delinquency Experience
Master Trust II Portfolio
(Dollars in Thousands)
September 30, December 31,
_______________________________________________________________________________________________
2006 2005 2004
_______________________________________________________________________________________________
Percentage Percentage of Percentage
of Total Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
_______________________________________________________________________________________________
Receivables Outstanding... $ 80,407,712 $ 73,475,619 $ 73,981,346
Receivables Delinquent:
30-59 Days............. $ 1,222,951 1.52% $ 998,589 1.35% $ 1,171,256 1.58%
60-89 Days............. 734,444 0.91 621,535 0.85 798,616 1.08
90-119 Days............ 544,741 0.68 490,511 0.67 615,720 0.83
120-149 Days........... 471,010 0.59 455,614 0.62 547,761 0.74
150-179 Days........... 503,602 0.63 475,357 0.65 544,124 0.74
180 or More Days....... 853 0.00 1,104 0.00 1,986 0.00
Total............... -------------- ------------- ----------------- -------------- ---------------- -------------
$ 3,477,601 4.33% $ 3,042,710 4.14% $ 3,679,463 4.97%
December 31,
_______________________________________________________________________________________________
2003 2002 2001
_______________________________________________________________________________________________
Percentage Percentage of Percentage
of Total Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
_______________________________________________________________________________________________
Receivables Outstanding... $ 77,426,846 $ 72,696,743 $ 66,500,791
Receivables Delinquent:
30-59 Days............. $ 1,202,508 1.55% $ 1,343,708 1.85% $ 1,247,086 1.88%
60-89 Days............. 825,924 1.07 833,204 1.15 708,484 1.07
90-119 Days............ 714,683 0.93 673,670 0.93 687,073 1.03
120-149 Days........... 671,119 0.87 624,003 0.86 328,551 0.49
150-179 Days........... 597,052 0.77 548,596 0.75 442,299 0.67
180 or More Days....... 3,510 0.00 9,778 0.01 15,744 0.02
Total............... -------------- ------------- ----------------- -------------- ---------------- -------------
$ 4,014,796 5.19% $ 4,032,959 5.55% $ 3,429,237 5.16%
The following table sets forth the principal charge-off experience for cardholder payments on
the credit card accounts comprising the Master Trust II Portfolio for each of the
A-I-2
periods shown. Charge-offs consist of write-offs of principal receivables. If accrued finance charge receivables that
have been written off were included in total charge-offs, total charge-offs would be higher as an
absolute number and as a percentage of the average of principal receivables outstanding during the
periods indicated. Average principal receivables outstanding is the average of the daily principal
receivables balance during the periods indicated. We cannot provide any assurance that the charge-off
experience for the receivables in the future will be similar to the historical experience set forth
below.
Principal Charge-Off Experience
Master Trust II Portfolio
(Dollars in Thousands)
Nine Months
Ended
September 30, Year Ended December 31,
2006 2005 2004
____________________________________________________
Average Principal Receivables Outstanding............ $ 74,240,395 $ 68,633,103 $ 72,347,604
Total Charge-Offs.................................... $ 1,831,997 $ 4,028,454 $ 3,996,412
Total Charge-Offs as a percentage of Average Principal
Receivables Outstanding........................ 3.29% 5.87% 5.52%
Year Ended December 31,
2003 2002 2001
____________________________________________________
Average Principal Receivables Outstanding............ $ 70,695,439 $ 65,393,297 $ 59,261,613
Total Charge-Offs.................................... $ 4,168,622 $ 3,629,682 $ 3,102,804
Total Charge-Offs as a percentage of Average Principal
Receivables Outstanding........................ 5.90% 5.55% 5.24%
Total charge-offs as a percentage of average principal receivables outstanding for the months
ended October 31, 2006 and November 30, 2006 were 3.72% and 4.47%, respectively, each calculated as an
annualized figure. Total charge-offs are total principal charge-offs before recoveries and do not
include any charge-offs of finance charge receivables or the amount of any reductions in average daily
principal receivables outstanding due to fraud, returned goods, customer disputes or other miscellaneous
adjustments. Recoveries are a component of yield and are described below in "—Revenue Experience."
Revenue Experience
The following table sets forth the revenue experience for the credit card accounts from finance
charges, fees paid and interchange in the Master Trust II Portfolio for each of the periods shown.
The revenue experience in the following table is calculated on a cash basis. Yield from
finance charges and fees and recoveries is the result of dividing finance charges and fees and
recoveries (net of expenses) by average daily principal receivables outstanding during the periods
indicated. Finance charges and fees are comprised of monthly cash collections of periodic finance
charges and other credit card fees including interchange.
A-I-3
Each month, FIA allocates amounts recovered (net of expenses) between its U.S. credit card and
consumer loan portfolios pro rata based on each portfolio's charge-offs during the prior month relative
to the combined charge-offs for both portfolios during the prior month. Once recoveries have been so
allocated to the U.S. credit card portfolio, the total amount of those recoveries that are allocated to
the Master Trust II Portfolio is determined by dividing the average total principal receivables for the
Master Trust II Portfolio for the related calendar month by the average total principal receivables for
the U.S. credit card portfolio for the same calendar month. Under the master trust II agreement,
recoveries allocated to the Master Trust II Portfolio and transferred to Funding under the receivables
purchase agreement are treated as collections of finance charge receivables.
Revenue Experience
Master Trust II Portfolio
(Dollars in Thousands)
Nine Months Ended
September 30, Year Ended December 31,
2006
2005 2004
_________________________________________________________
Finance Charges and Fees............................. $ 10,162,601 $ 12,730,706 $ 12,565,091
Recoveries........................................... $ 205,295 $ 312,462 $ 275,246
Yield from Finance Charges and Fees and Recoveries... 18.62% 19.00% 17.75%
Year Ended December 31,
2003 2002 2001
_________________________________________________________
Finance Charges and Fees............................. $ 12,172,680 $ 11,538,974 $ 11,476,244
Recoveries........................................... $ 252,765 $ 194,977 $ 10,574
Yield from Finance Charges and Fees and Recoveries... 17.58% 17.94% 19.38%
The yield on a cash basis will be affected by numerous factors, including the monthly periodic
finance charges on the receivables, the amount of fees, changes in the delinquency rate on the
receivables, the percentage of cardholders who pay their balances in full each month and do not incur
monthly periodic finance charges, and the percentage of credit card accounts bearing finance charges at
promotional rates. See "Risk Factors" in the prospectus.
The revenue from periodic finance charges and fees—other than annual fees—depends in part upon
the collective preference of cardholders to use their credit cards as revolving debt instruments for
purchases and cash advances and to pay account balances over several months—as opposed to convenience
use, where cardholders pay off their entire balance each month, thereby avoiding periodic finance
charges on their purchases—and upon other credit card related services for which the cardholder pays a
fee. Revenues from periodic finance charges and fees also depend on the types of charges and fees
assessed on the credit card accounts. Accordingly, revenue will be affected by future changes in the
types of charges and fees assessed on the accounts and on the types of additional accounts added from
time to time. These revenues could
A-I-4
be adversely affected by future changes in fees and charges assessed
by FIA and other factors. See "FIA's Credit Card Activities" in the prospectus.
Interchange
A percentage of the interchange for the Bank Portfolio attributed to cardholder charges for
goods and services in the accounts of master trust II will be transferred from FIA, through BACCS and
Funding, to master trust II. This interchange will be allocated to each series of master trust II
investor certificates based on its pro rata portion as measured by its Investor Interest of cardholder
charges for goods and services in the accounts of master trust II relative to the total amount of
cardholder charges for goods and services in the MasterCard, Visa and American Express credit card
accounts owned by FIA, as reasonably estimated by FIA.
MasterCard, Visa and American Express may from time to time change the amount of interchange
reimbursed to banks issuing their credit cards. Interchange will be treated as collections of finance
charge receivables. Under the circumstances described herein, interchange will be used to pay a portion
of the Investor Servicing Fee required to be paid on each Transfer Date. See "Master Trust II—Servicing
Compensation and Payment of Expenses" and "FIA's Credit Card Activities—Interchange" in the prospectus.
Principal Payment Rates
The following table sets forth the highest and lowest cardholder monthly principal payment
rates for the Master Trust II Portfolio during any month in the periods shown and the average cardholder
monthly principal payment rates for all months during the periods shown, in each case calculated as a
percentage of total beginning monthly account principal balances during the periods shown. Principal
payment rates shown in the table are based on amounts which are deemed payments of principal receivables
with respect to the accounts.
Cardholder Monthly Principal Payment Rates
Master Trust II Portfolio
Nine Months
Ended
September 30, Year Ended December 31,
2006
2005 2004 2003 2002 2001
___________________________________________________________________________________
Lowest Month............ 16.21% 15.31% 13.95% 12.73% 12.93% 12.28%
Highest Month........... 18.20% 17.15% 16.47% 14.71% 14.40% 13.76%
Monthly Average......... 16.99% 16.30% 15.05% 13.84% 13.63% 13.03%
FIA's billing and payment procedures are described under "FIA's Credit Card Portfolio—Billing
and Payments" in the prospectus. We cannot provide any assurance that the cardholder monthly principal
payment rates in the future will be similar to the historical experience set forth above. In addition,
the amount of collections of receivables may vary from month to month due to seasonal variations,
general economic conditions and payment habits of individual cardholders.
A-I-5
Funding, as transferor, has the right, subject to certain limitations and conditions, to
designate certain removed credit card accounts and to require the master trust II trustee to reconvey
all receivables in those removed credit card accounts to the transferor. Once an account is removed,
receivables existing or arising under that credit card account are not transferred to master trust II.
Renegotiated Loans and Re-Aged Accounts
FIA may modify the terms of its credit card agreements with cardholders who have experienced
financial difficulties by offering them renegotiated loan programs, which include placing them on
nonaccrual status, reducing interest rates, or providing any other concession in terms. In addition, a
cardholder's account may be re-aged to remove existing delinquency. For a detailed description of
renegotiated loans and re-aged accounts, see "FIA's Credit Card Portfolio—Renegotiated Loans and Re-Aged
Accounts" in the prospectus.
The Receivables
The following tables summarize the Master Trust II Portfolio by various criteria as of the
beginning of the day on January 1, 2007. Because the future composition of the Master Trust II
Portfolio may change over time, neither these tables nor the information contained in "Class A(2007-1)
Summary—Assets—Accounts and Receivables" describe the composition of the Master Trust II Portfolio at
any future time. If the composition of the Master Trust II Portfolio changes over time, noteholders
will not be notified of such change. For example, there can be no assurance that the anticipated
changes in servicing procedures as a result of the merger between Bank of America Corporation and MBNA
Corporation will not cause the composition of the Master Trust II Portfolio in the future to be
different than the composition of the Master Trust II Portfolio described in this section. See "Risk
Factors—FIA may change the terms of the credit card accounts in a way that reduces or slows
collections. These changes may result in reduced, accelerated or delayed payments to you" in the
prospectus. However, monthly reports containing information on the notes and the collateral securing
the notes will be filed with the Securities and Exchange Commission. See "Where You Can Find More
Information" in the prospectus for information as to how these reports may be accessed.
A-I-6
Composition by Account Balance
Master Trust II Portfolio
Percentage of Percentage of
Number of Total Number Total
Account Balance Range Accounts of Accounts Receivables Receivables
___________________________________________________________________________________________________________________
Credit Balance........................... 1,614,948 3.4% $ (119,944,165) (0.1)%
No Balance............................... 26,346,351 55.2 0 0.0
$ .01-$ 5,000.00.............. 14,071,748 29.5 20,218,060,469 23.8
$ 5,000.01-$10,000.00................... 3,245,660 6.8 23,184,843,928 27.3
$10,000.01-$15,000.00.................... 1,264,225 2.7 15,400,028,120 18.1
$15,000.01-$20,000.00.................... 560,369 1.2 9,656,830,495 11.4
$20,000.01-$25,000.00.................... 277,020 0.6 6,176,048,063 7.3
$25,000.01 or More....................... 296,073 0.6 10,368,013,053 12.2
Total............................... -------------- -------------- --------------------- --------------
47,676,394 100.0% $ 84,883,879,963 100.0%
Composition by Credit Limit
Master Trust II Portfolio
Percentage of Percentage of
Number of Total Number Total
Credit Limit Range Accounts of Accounts Receivables Receivables
___________________________________________________________________________________________________________________
Less than or equal to $5,000.00.......... 9,255,704 19.4% $ 5,663,634,650 6.7%
$ 5,000.01-$10,000.00................... 11,386,284 23.9 14,764,728,050 17.4
$10,000.01-$15,000.00.................... 9,335,532 19.6 15,931,009,145 18.8
$15,000.01-$20,000.00.................... 6,897,577 14.5 13,924,158,892 16.4
$20,000.01-$25,000.00.................... 5,112,822 10.7 12,501,607,500 14.7
$25,000.01 or More....................... 5,688,475 11.9 22,098,741,726 26.0
Total............................... --------------- -------------- -------------------- --------------
47,676,394 100.0% $ 84,883,879,963 100.0%
Composition by Period of Delinquency
Master Trust II Portfolio
Percentage of Percentage of
Period of Delinquency Number of Total Number Total
(Days Contractually Delinquent) Accounts of Accounts Receivables Receivables
___________________________________________________________________________________________________________________
Not Delinquent........................... 46,351,514 97.2% $ 77,039,300,685 90.8%
Up to 29 Days............................ 675,426 1.4 3,730,351,276 4.4
30 to 59 Days............................ 228,937 0.5 1,347,801,372 1.6
60 to 89 Days............................ 140,019 0.3 845,844,820 1.0
90 to 119 Days........................... 104,112 0.2 683,639,022 0.8
120 to 149 Days.......................... 88,178 0.2 600,686,662 0.7
150 to 179 Days.......................... 88,016 0.2 634,465,633 0.7
180 or More Days......................... 192 0.0 1,790,493 0.0
Total............................... -------------- --------------- -------------------- --------------
47,676,394 100.0% $ 84,883,879,963 100.0%
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Composition by Account Age
Master Trust II Portfolio
Percentage of Percentage of
Number of Total Number Total
Account Age Accounts of Accounts Receivables Receivables
___________________________________________________________________________________________________________________
Not More than 6 Months.................. 850,064 1.8% $ 1,894,301,465 2.2%
Over 6 Months to 12 Months.............. 1,408,774 3.0 3,383,467,279 4.0
Over 12 Months to 24 Months............. 3,722,851 7.8 7,606,654,530 9.0
Over 24 Months to 36 Months............. 4,953,707 10.4 8,832,362,396 10.4
Over 36 Months to 48 Months............. 5,339,004 11.2 8,510,336,890 10.0
Over 48 Months to 60 Months............. 4,190,794 8.8 6,594,240,491 7.8
Over 60 Months to 72 Months............. 3,809,396 8.0 6,247,288,772 7.4
Over 72 Months.......................... 23,401,804 49.0 41,815,228,140 49.2
Total.............................. -------------- --------------- -------------------- --------------
47,676,394 100.0% $ 84,883,879,963 100.0%
Geographic Distribution of Accounts
Master Trust II Portfolio
Percentage of Percentage of
Number of Total Number Total
State Accounts of Accounts Receivables Receivables
___________________________________________________________________________________________________________________
California.............................. 4,498,953 9.4% $ 9,011,747,558 10.6%
Florida................................. 3,798,377 8.0 6,411,549,201 7.6
New York................................ 3,142,952 6.6 5,563,440,738 6.6
Texas................................... 2,783,735 5.8 5,786,155,908 6.8
Pennsylvania............................ 2,737,865 5.7 4,043,885,784 4.8
New Jersey.............................. 2,038,494 4.3 3,597,647,448 4.2
Illinois................................ 1,869,567 3.9 3,232,211,806 3.8
Ohio.................................... 1,760,658 3.7 2,931,824,965 3.5
Virginia................................ 1,719,625 3.6 2,876,166,235 3.4
Georgia................................. 1,586,933 3.3 3,340,454,529 3.9
Other................................... 21,739,235 45.7 38,088,795,791 44.8
Total.............................. -------------- --------------- -------------------- --------------
47,676,394 100.0% $ 84,883,879,963 100.0%
Since the largest number of cardholders (based on billing address) whose accounts were included
in master trust II as of January 1, 2007 were in California, Florida, New York, Texas and Pennsylvania,
adverse changes in the economic conditions in these areas could have a direct impact on the timing and
amount of payments on the notes.
A-I-8
FICO. The following table sets forth the FICO®* score on each account in the Master Trust II
Portfolio, to the extent available, as refreshed during the six month period ended September 30, 2006.
Receivables, as presented in the following table, are determined as of September 30, 2006. A FICO score
is a measurement determined by Fair, Isaac & Company using information collected by the major credit
bureaus to assess credit risk. FICO scores may change over time, depending on the conduct of the debtor
and changes in credit score technology. Because the future composition and product mix of the Master
Trust II Portfolio may change over time, this table is not necessarily indicative of the composition of
the Master Trust II Portfolio at any specific time in the future.
Data from an independent credit reporting agency, such as FICO score, is one of several factors
that, if available, will be used by FIA in its credit scoring system to assess the credit risk
associated with each applicant. See "FIA's Credit Card Activities—Origination, Account Acquisition,
Credit Lines and Use of Credit Card Accounts" in the prospectus. At the time of account origination,
FIA will request information, including a FICO score, from one or more independent credit bureaus. FICO
scores may be different from one bureau to another. For some cardholders, FICO scores may be
unavailable. FICO scores are based on independent third party information, the accuracy of which cannot
be verified.
The table below sets forth refreshed FICO scores from a single credit bureau.
Composition by FICO Score
Master Trust II Portfolio
Percentage of Total
FICO Score Receivables Receivables
____________________________________________________________________________________________________________________
Over 720...................................................... $28,527,967,984 35.5%
661-720....................................................... 29,416,637,835 36.5
601-660....................................................... 12,995,101,158 16.2
Less than or equal to 600..................................... 6,610,329,951 8.2
Unscored...................................................... 2,857,675,347 3.6
TOTAL......................................................... ------------------------ ------------------------
$80,407,712,275 100.0%
A FICO score is an Equifax Beacon 96 FICO Score.
A "refreshed" FICO score means the FICO score determined by Equifax during the six month period
ended September 30, 2006.
A credit card account that is "unscored" means that a FICO score was not obtained for such
account during the six month period ended September 30, 2006.
___________________
*FICO® is a federally registered servicemark of Fair, Isaac & Company.
A-I-9
Annex II
Outstanding Series, Classes and Tranches of Notes
The information provided in this Annex II is an integral part of the prospectus supplement, and
is incorporated by reference into the prospectus supplement.
BAseries
Class A Notes
Expected
Issuance Nominal Principal Legal
Class A Date Liquidation Amount Note Interest Rate Payment Date Maturity Date
_______________________________________________________________________________________________________________________________________________
Class A(2001-2) 7/26/01 $ 500,000,000 One Month LIBOR + 0.25% July 2011 December 2013
Class A(2001-Emerald) 8/15/01 Up to $10,317,000,000(1) — — —
Class A(2001-5) 11/8/01 $ 500,000,000 One Month LIBOR + 0.21% October 2008 March 2011
Class A(2002-1) 1/31/02 $ 1,000,000,000 4.95% January 2007 June 2009
Class A(2002-2) 3/27/02 $ 656,175,000 Not to exceed Three Month LIBOR + 0.35%(2) February 17, 2012 July 17, 2014
Class A(2002-3) 4/24/02 $ 750,000,000 One Month LIBOR + 0.24% April 2012 September 2014
Class A(2002-4) 5/9/02 $ 1,000,000,000 One Month LIBOR + 0.11% March 2007 August 2009
Class A(2002-5) 5/30/02 $ 750,000,000 One Month LIBOR + 0.18% May 2009 October 2011
Class A(2002-7) 7/25/02 $ 497,250,000 Not to exceed Three Month LIBOR + 0.25%(3) July 17, 2009 December 19, 2011
Class A(2002-8) 7/31/02 $ 400,000,000 Three Month LIBOR + 0.15% July 2009 December 2011
Class A(2002-9) 7/31/02 $ 700,000,000 Three Month LIBOR + 0.09% July 2007 December 2009
Class A(2002-10) 9/19/02 $ 1,000,000,000 One Month LIBOR + 0.14% September 2007 February 2010
Class A(2002-11) 10/30/02 $ 490,600,000 Not to exceed Three Month LIBOR + 0.35%(4) October 19, 2009 March 19, 2012
Class A(2002-13) 12/18/02 $ 500,000,000 One Month LIBOR + 0.13% December 2007 May 2010
Class A(2003-1) 2/27/03 $ 500,000,000 3.30% February 2008 July 2010
Class A(2003-3) 4/10/03 $ 750,000,000 One Month LIBOR + 0.12% March 2008 August 2010
Class A(2003-4) 4/24/03 $ 750,000,000 One Month LIBOR + 0.22% April 2010 September 2012
Class A(2003-5) 5/21/03 $ 548,200,000 Not to exceed Three Month LIBOR + 0.35%(5) April 19, 2010 September 19, 2012
Class A(2003-6) 6/4/03 $ 500,000,000 2.75% May 2008 October 2010
Class A(2003-7) 7/8/03 $ 650,000,000 2.65% June 2008 November 2010
Class A(2003-8) 8/5/03 $ 750,000,000 One Month LIBOR + 0.19% July 2010 December 2012
Class A(2003-9) 9/24/03 $ 1,050,000,000 One Month LIBOR + 0.13% September 2008 February 2011
Class A(2003-10) 10/15/03 $ 500,000,000 One Month LIBOR + 0.26% October 2013 March 2016
Class A(2003-11) 11/6/03 $ 500,000,000 3.65% October 2008 March 2011
Class A(2003-12) 12/18/03 $ 500,000,000 One Month LIBOR + 0.11% December 2008 May 2011
Class A(2004-1) 2/26/04 $ 752,760,000 Not to exceed Three Month LIBOR + 0.30%(6) January 17, 2014 June 17, 2016
Class A(2004-2) 2/25/04 $ 600,000,000 One Month LIBOR + 0.15% February 2011 July 2013
Class A(2004-3) 3/17/04 $ 700,000,000 One Month LIBOR + 0.26% March 2019 August 2021
Class A(2004-4) 4/15/04 $ 1,350,000,000 2.70% April 2007 September 2009
Class A(2004-5) 5/25/04 $ 1,015,240,000 Not to exceed Three Month LIBOR + 0.25%(7) May 18, 2011 October 17, 2013
Class A(2004-6) 6/17/04 $ 500,000,000 One Month LIBOR + 0.14% June 2011 November 2013
Class A(2004-7) 7/28/04 $ 900,000,000 One Month LIBOR + 0.10% July 2009 December 2011
Class A(2004-8) 9/14/04 $ 500,000,000 One Month LIBOR + 0.15% August 2011 January 2014
Class A(2004-9) 10/1/04 $ 672,980,000 Not to exceed One Month LIBOR + 0.20%(8) September 19, 2011 February 20, 2014
Class A(2004-10) 10/27/04 $ 500,000,000 One Month LIBOR + 0.08% October 2009 March 2012
(continued on next page)
(1) Subject to increase.
(2) Class A(2002-2) noteholders will receive interest at 5.60% on an outstanding euro principal amount
of €750,000,000, pursuant to the terms of a currency and interest rate swap applicable only to the
Class A(2002-2) notes.
(3) Class A(2002-7) noteholders will receive interest at Three Month EURIBOR + 0.15% on an outstanding
euro principal amount of €500,000,000, pursuant to the terms of a currency and interest rate swap
applicable only to the Class A(2002-7) notes.
(4) Class A(2002-11) noteholders will receive interest at Three Month EURIBOR + 0.25% on an outstanding
euro principal amount of €500,000,000, pursuant to the terms of a currency and interest rate swap
applicable only to the Class A(2002-11) notes.
(5) Class A(2003-5) noteholders will receive interest at 4.15% on an outstanding euro principal amount
of €500,000,000, pursuant to the terms of a currency and interest rate swap applicable only to the
Class A(2003-5) notes.
(6) Class A(2004-1) noteholders will receive interest at 4.50% on an outstanding euro principal amount
of €600,000,000, pursuant to the terms of a currency and interest rate swap applicable only to the
Class A(2004-1) notes.
(7) Class A(2004-5) noteholders will receive interest at Three Month EURIBOR + 0.15% on an outstanding
euro principal amount of €850,000,000, pursuant to the terms of a currency and interest rate swap
applicable only to the Class A(2004-5) notes.
(8) Class A(2004-9) noteholders will receive interest at One Month EURIBOR + 0.11% on an outstanding
euro principal amount of €550,000,000, pursuant to the terms of a currency and interest rate swap
applicable only to the Class A(2004-9) notes.
A-II-1
BAseries
Class A Notes (continued from previous page)
Expected
Issuance Nominal Principal Legal
Class A Date Liquidation Amount Note Interest Rate Payment Date Maturity Date
______________________________________________________________________________________________________________________________________________
Class A(2005-1) 4/20/05 $ 750,000,000 4.20% April 2008 September 2010
Class A(2005-2) 5/19/05 $ 500,000,000 One Month LIBOR + 0.08% May 2012 October 2014
Class A(2005-3) 6/14/05 $ 600,000,000 4.10% May 2010 October 2012
Class A(2005-4) 7/7/05 $ 800,000,000 One Month LIBOR + 0.04% June 2010 November 2012
Class A(2005-5) 8/11/05 $ 1,500,000,000 One Month LIBOR + 0.00% July 2008 December 2010
Class A(2005-6) 8/25/05 $ 500,000,000 4.50% August 2010 January 2013
Class A(2005-7) 9/29/05 $ 1,000,000,000 4.30% September 2008 February 2011
Class A(2005-8) 10/12/05 $ 850,000,000 One Month LIBOR + 0.02% September 2009 February 2012
Class A(2005-9) 11/17/05 $ 1,000,000,000 One Month LIBOR + 0.04% November 2010 April 2013
Class A(2005-10) 11/29/05 $ 400,000,000 One Month LIBOR + 0.06% June 2013 November 2015
Class A(2005-11) 12/16/05 $ 500,000,000 One Month LIBOR + 0.04% December 2010 May 2013
Class A(2006-1) 2/15/06 $ 1,600,000,000 4.90% February 2009 July 2011
Class A(2006-2) 3/7/06 $ 550,000,000 One Month LIBOR + 0.06% January 2013 June 2015
Class A(2006-3) 3/30/06 $ 750,000,000 One Month LIBOR + 0.02% March 2010 August 2012
Class A(2006-4) 5/31/06 $ 2,500,000,000 One Month LIBOR - 0.01% April 2009 September 2011
Class A(2006-5) 6/9/06 $ 700,000,000 One Month LIBOR + 0.06% May 2013 October 2015
Class A(2006-6) 7/20/06 $ 2,000,000,000 One Month LIBOR + 0.03% June 2011 November 2013
Class A(2006-7) 7/28/06 $ 375,000,000 One Month LIBOR + 0.04% July 2014 December 2016
Class A(2006-8) 8/9/06 $ 725,000,000 One Month LIBOR + 0.03% December 2013 May 2016
Class A(2006-9) 8/30/06 $ 1,750,000,000 One Month LIBOR + 0.01% September 2010 February 2013
Class A(2006-10) 9/19/06 $ 750,000,000 One Month LIBOR - 0.02% September 2009 February 2012
Class A(2006-11) 9/26/06 $ 520,000,000 One Month LIBOR + 0.03% November 2013 April 2016
Class A(2006-12) 10/16/06 $ 1,000,000,000 One Month LIBOR + 0.02% October 2011 March 2014
Class A(2006-13) 11/14/06 $ 275,000,000 One Month LIBOR + 0.02% December 2013 May 2016
Class A(2006-14) 11/28/06 $ 1,350,000,000 One Month LIBOR + 0.06% November 2013 April 2016
Class A(2006-15) 12/13/06 $ 1,000,000,000 One Month LIBOR + 0.00% November 2011 April 2014
Class A(2006-16) 12/19/06 $ 1,000,000,000 4.72% December 2010 May 2013
A-II-2
BAseries
Class B Notes
Expected
Issuance Nominal Principal Legal
Class B Date Liquidation Amount Note Interest Rate Payment Date Maturity Date
_______________________________________________________________________________________________________________________________________________
Class B(2001-3) 12/20/01 $ 150,000,000 Not to exceed One Month LIBOR + 0.50% January 2007 June 2009
Class B(2002-1) 2/28/02 $ 250,000,000 5.15% February 2007 July 2009
Class B(2002-2) 6/12/02 $ 250,000,000 One Month LIBOR + 0.38% May 2007 October 2009
Class B(2002-4) 10/29/02 $ 200,000,000 One Month LIBOR + 0.50% October 2007 March 2010
Class B(2003-1) 2/20/03 $ 200,000,000 One Month LIBOR + 0.44% February 2008 July 2010
Class B(2003-2) 6/12/03 $ 200,000,000 One Month LIBOR + 0.39% May 2008 October 2010
Class B(2003-3) 8/20/03 $ 200,000,000 One Month LIBOR + 0.375% August 2008 January 2011
Class B(2003-4) 10/15/03 $ 331,650,000 Not to exceed Three Month LIBOR + 0.85%(1)September 18, 2013 February 17, 2016
Class B(2003-5) 10/2/03 $ 150,000,000 One Month LIBOR + 0.37% September 2008 February 2011
Class B(2004-1) 4/1/04 $ 350,000,000 4.45% March 2014 August 2016
Class B(2004-2) 8/11/04 $ 150,000,000 One Month LIBOR + 0.39% July 2011 December 2013
Class B(2005-1) 6/22/05 $ 125,000,000 One Month LIBOR + 0.29% June 2012 November 2014
Class B(2005-2) 8/11/05 $ 200,000,000 One Month LIBOR + 0.18% July 2010 December 2012
Class B(2005-3) 11/9/05 $ 150,962,500 Not to exceed One Month LIBOR + 0.40%(2) October 19, 2015 March 19, 2018
Class B(2005-4) 11/2/05 $ 150,000,000 4.90% October 2008 March 2011
Class B(2006-1) 3/3/06 $ 250,000,000 One Month LIBOR + 0.22% February 2013 July 2015
Class B(2006-2) 3/24/06 $ 500,000,000 Not to exceed One Month LIBOR + 0.25% March 2013 August 2015
Class B(2006-3) 8/22/06 $ 300,000,000 One Month LIBOR + 0.08% August 2009 January 2012
Class B(2006-4) 11/14/06 $ 250,000,000 One Month LIBOR + 0.08% October 2009 March 2012
_______________________
1 Class B(2003-4) noteholders will receive interest at 5.45% on an outstanding sterling principal amount of £200,000,000, pursuant to the
terms of a currency and interest rate swap applicable only to the Class B(2003-4) notes.
2 Class B(2005-3) noteholders will receive interest at Three Month EURIBOR + 0.30% on an outstanding euro principal amount of €125,000,000,
pursuant to the terms of a currency and interest rate swap applicable only to the Class B(2005-3) notes.
A-II-3
BAseries
Class C Notes
Issuance Nominal Liquidation Expected Principal
Class C Date Amount Note Interest Rate Payment Date Legal Maturity Date
_________________________________________________________________________________________________________________________________________________
Class C(2001-2) 7/12/01 $ 100,000,000 Not to exceed One Month LIBOR + 1.15% July 2008 December 2010
Class C(2001-5) 12/11/01 $ 150,000,000 One Month LIBOR + 1.22% January 2007 June 2009
Class C(2002-1) 2/28/02 $ 250,000,000 6.80% February 2012 July 2014
Class C(2002-2) 6/12/02 $ 100,000,000 Not to exceed One Month LIBOR + 0.95% May 2007 October 2009
Class C(2002-3) 6/12/02 $ 200,000,000 One Month LIBOR + 1.35% May 2012 October 2014
Class C(2002-4) 8/29/02 $ 100,000,000 One Month LIBOR + 1.20% August 2007 January 2010
Class C(2002-6) 10/29/02 $ 50,000,000 One Month LIBOR + 2.00% October 2012 March 2015
Class C(2002-7) 10/29/02 $ 50,000,000 6.70% October 2012 March 2015
Class C(2003-1) 2/4/03 $ 200,000,000 One Month LIBOR + 1.70% January 2010 June 2012
Class C(2003-2) 2/12/03 $ 100,000,000 One Month LIBOR + 1.60% January 2008 June 2010
Class C(2003-3) 5/8/03 $ 175,000,000 One Month LIBOR + 1.35% May 2008 October 2010
Class C(2003-4) 6/19/03 $ 327,560,000 Not to exceed Three Month LIBOR + 2.05%(1) May 17, 2013 October 19, 2015
Class C(2003-5) 7/2/03 $ 100,000,000 One Month LIBOR + 1.18% June 2008 November 2010
Class C(2003-6) 7/30/03 $ 250,000,000 One Month LIBOR + 1.18% July 2008 December 2010
Class C(2003-7) 11/5/03 $ 100,000,000 One Month LIBOR + 1.35% October 2013 March 2016
Class C(2004-1) 3/16/04 $ 200,000,000 One Month LIBOR + 0.78% February 2011 July 2013
Class C(2004-2) 7/1/04 $ 275,000,000 One Month LIBOR + 0.90% June 2014 November 2016
Class C(2005-1) 6/1/05 $ 125,000,000 One Month LIBOR + 0.41% May 2010 October 2012
Class C(2005-2) 9/22/05 $ 150,000,000 One Month LIBOR + 0.35% September 2010 February 2013
Class C(2005-3) 10/20/05 $ 300,000,000 One Month LIBOR + 0.27% October 2008 March 2011
Class C(2006-1) 2/17/06 $ 350,000,000 One Month LIBOR + 0.42% February 2013 July 2015
Class C(2006-2) 3/17/06 $ 225,000,000 One Month LIBOR + 0.30% March 2011 August 2013
Class C(2006-3) 5/31/06 $ 250,000,000 One Month LIBOR + 0.29% May 2011 October 2013
Class C(2006-4) 6/15/06 $ 375,000,000 One Month LIBOR + 0.23% June 2009 November 2011
Class C(2006-5) 8/15/06 $ 300,000,000 One Month LIBOR + 0.40% August 2013 January 2016
Class C(2006-6) 9/29/06 $ 250,000,000 Not to exceed One Month LIBOR + 0.40% September 2013 February 2016
Class C(2006-7) 10/16/06 $ 200,000,000 One Month LIBOR + 0.23% October 2009 March 2012
_______________________
1 Class C(2003-4) noteholders will receive interest at 6.10% on an outstanding sterling principal amount of £200,000,000, pursuant to the
terms of a currency and interest rate swap applicable only to the Class C(2003-4) notes.
A-II-4
Annex III
Outstanding Master Trust II Series
The information provided in this Annex III is an integral part of the prospectus supplement, and is incorporated by reference into
the prospectus supplement.
Issuance Scheduled Termination
# Series/Class Date Investor Interest Certificate Rate Payment Date Date
__________________________________________________________________________________________________________________________________________________
1 Series 1997-B 2/27/97
Class A — $850,000,000 One Month LIBOR + .16% March 2012 August 2014
Class B — $75,000,000 One Month LIBOR + .35% March 2012 August 2014
Collateral Interest — $75,000,000 — — —
2 Series 1997-D 5/22/97
Class A — $387,948,000 Three Month LIBOR + .05% May 2007 October 2009
Class B — $34,231,000 Not to Exceed Three Month LIBOR + .50% May 2007 October 2009
Collateral Interest — $34,231,000 — — —
3 Series 1997-H 8/6/97
Class A — $507,357,000 Three Month LIBOR + .07% September 2007 February 2010
Class B — $44,770,000 Not to Exceed Three Month LIBOR + .50% September 2007 February 2010
Collateral Interest — $44,770,000 — — —
4 Series 1997-O 12/23/97
Class A — $425,000,000 One Month LIBOR + .17% December 2007 May 2010
Class B — $37,500,000 One Month LIBOR + .35% December 2007 May 2010
Collateral Interest — $37,500,000 — — —
5 Series 1998-B 4/14/98
Class A — $550,000,000 Three Month LIBOR + .09% April 2008 September 2010
Class B — $48,530,000 Not to Exceed Three Month LIBOR + .50% April 2008 September 2010
Collateral Interest — $48,530,000 — — —
6 Series 1998-E 8/11/98
Class A — $750,000,000 Three Month LIBOR + .145% April 2008 September 2010
Class B — $66,200,000 Three Month LIBOR + .33% April 2008 September 2010
Collateral Interest — $66,200,000 — — —
7 Series 1999-B 3/26/99
Class A — $637,500,000 5.90% March 2009 August 2011
Class B — $56,250,000 6.20% March 2009 August 2011
Collateral Interest — $56,250,000 — — —
8 Series 1999-J 9/23/99
Class A — $850,000,000 7.00% September 2009 February 2012
Class B — $75,000,000 7.40% September 2009 February 2012
Collateral Interest — $75,000,000 — — —
9 Series 2000-D 5/11/00
Class A — $722,500,000 One Month LIBOR + .20% April 2007 September 2009
Class B — $63,750,000 One Month LIBOR + .43% April 2007 September 2009
Collateral Interest — $63,750,000 — — —
10 Series 2000-E 6/1/00
Class A — $500,000,000 7.80% May 2010 October 2012
Class B — $45,000,000 8.15% May 2010 October 2012
Collateral Interest — $45,000,000 — — —
11 Series 2000-H 8/23/00
Class A — $595,000,000 One Month LIBOR + .25% August 2010 January 2013
Class B — $52,500,000 One Month LIBOR + .60% August 2010 January 2013
Collateral Interest — $52,500,000 — — —
12 Series 2000-J 10/12/00
Class A Swiss Francs — CHF 1,000,000,000 4.125%
Class A — $568,990,043 Three Month LIBOR + .21% October 17, 2007 March 17, 2010
Class B — $50,250,000 One Month LIBOR + .44% October 2007 March 17, 2010
Collateral Interest — $50,250,000 — — —
13 Series 2000-L 12/13/00
Class A — $425,000,000 6.50% November 2007 April 2010
Class B — $37,500,000 One Month LIBOR + .50% November 2007 April 2010
Collateral Interest — $37,500,000 — — —
14 Series 2001-B 3/8/01
Class A — $637,500,000 One Month LIBOR + .26% March 2011 August 2013
Class B — $56,250,000 One Month LIBOR + .60% March 2011 August 2013
Collateral Interest — $56,250,000 — — —
15 Series 2001-C 4/25/01
Class A — $675,000,000 Three Month LIBOR - .125% April 2011 September 2013
Class B — $60,000,000 One Month LIBOR + .62% April 2011 September 2013
Collateral Interest — $60,000,000 — — —
16 Series 2001-D 5/24/01
— — — — —
Collateral Certificate(1)
_____________________________
1 The collateral certificate represents the sole asset of the BA Credit Card Trust. See "Annex II: Outstanding Series, Classes and Tranches
of Notes" for a list of outstanding notes issued by the issuing entity.
A-III-1
Prospectus Dated January 9, 2007
|
|
FIA Card Services, National Association
Sponsor, Servicer and Originator
BA Credit Card Funding, LLC
Transferor and Depositor
BA Credit Card Trust
Issuing Entity
The issuing entity—
o may periodically issue notes in one or more series, classes or tranches; and
o will own—
— the collateral certificate, Series 2001-D, representing an undivided interest in master
trust II, whose assets include the receivables arising in a portfolio of unsecured
revolving credit card accounts; and
— other property described under "Prospectus Summary—Sources of Funds to Pay the Notes" and
"Sources of Funds to Pay the Notes" in this prospectus and "Transaction Parties—BA Credit
Card Trust" in this prospectus and the accompanying prospectus supplement.
The notes—
o will be secured by the issuing entity's assets and will be paid only from proceeds of the issuing
entity's assets;
o offered with this prospectus and the related prospectus supplement will be rated in one of the four
highest rating categories by at least one nationally recognized rating agency; and
o may be issued as part of a designated series, class or tranche.
_____________________________________________________________________________________________________________________________
You should consider the discussion under "Risk Factors" beginning on page 28 of this prospectus and
any risk factors in the accompanying prospectus supplement before you purchase any notes.
The primary asset of the issuing entity is the collateral certificate, Series 2001-D. The collateral certificate
represents an undivided interest in BA Master Credit Card Trust II. Master trust II's assets include receivables arising
in a portfolio of unsecured consumer revolving credit card accounts. The notes are obligations of the issuing entity only
and are not obligations of BA Credit Card Funding, LLC, FIA Card Services, National Association, their affiliates or any
other person. Each tranche of notes will be secured by specified assets of the issuing entity as described in this
prospectus and in the accompanying prospectus supplement. Noteholders will have no recourse to any other assets of the
issuing entity for payment of the notes.
The notes are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency or
instrumentality.
_____________________________________________________________________________________________________________________________
Neither the SEC nor any state securities commission has approved these notes or determined that this
prospectus is truthful, accurate or complete. Any representation to the contrary is a criminal
offense.
Important Notice about Information Presented in this
Prospectus and the Accompanying Prospectus Supplement
We provide information to you about the notes in two separate documents: (a) this prospectus,
which provides general information about the BAseries notes and each other series of notes, some of
which may not apply to your series, class or tranche of notes, and (b) the accompanying prospectus
supplement, which will describe the specific terms of your series, class or tranche of notes, including:
o the timing of interest and principal payments;
o financial and other information about the issuing entity's assets;
o information about enhancement for your series, class or tranche;
o the ratings for your class or tranche; and
o the method for selling the notes.
This prospectus may be used to offer and sell any series, class or tranche of notes only if
accompanied by the prospectus supplement for that series, class or tranche.
If the terms of a particular series, class or tranche of notes vary between this prospectus and
the accompanying prospectus supplement, you should rely on the information in the accompanying
prospectus supplement.
You should rely only on the information provided in this prospectus and the accompanying
prospectus supplement, including the information incorporated by reference. We have not authorized
anyone to provide you with different information. We are not offering the notes in any state where the
offer is not permitted. We do not claim the accuracy of the information in this prospectus or the
accompanying prospectus supplement as of any date other than the dates stated on their respective covers.
Information regarding certain entities that are not affiliates of FIA Card Services, National
Association or BA Credit Card Funding, LLC has been provided in this prospectus. See in particular
"Transaction Parties—The Bank of New York" and "—Wilmington Trust Company." The information contained in
those sections of this prospectus was prepared solely by the party described in that section without any
input from FIA Card Services, National Association, BA Credit Card Funding, LLC or any of their
affiliates.
We include cross-references in this prospectus and in the accompanying prospectus supplement to
captions in these materials where you can find further related discussions. The Table of Contents in
this prospectus and in the accompanying prospectus supplement provide the pages on which these captions
are located.
Parts of this prospectus use defined terms. You can find a listing of defined terms in the
"Glossary of Defined Terms" beginning on page 176.
2
Forward-Looking Statements
This prospectus and the accompanying prospectus supplement, including information included or
incorporated by reference in this prospectus and the accompanying prospectus supplement, may contain
forward-looking statements. Such statements are subject to risks and uncertainties. Actual conditions,
events or results may differ materially from those set forth in such forward-looking statements. Words
such as "believe", "expect", "anticipate", "intend", "plan", "estimate", "could" or similar expressions
are intended to identify forward-looking statements but are not the only means to identify these
statements. Forward-looking statements speak only as of the date on which they are made. We undertake
no obligation to update publicly or revise any such statements. Factors which could cause the actual
financial and other results to differ materially from those projected by us in forward-looking
statements include, but are not limited to, the following:
o local, regional and national business, political or economic conditions may differ from
those expected;
o the effects and changes in trade, monetary and fiscal policies and laws, including the
interest rate policies of the Federal Reserve Board, may adversely affect Funding's or
FIA's business;
o the timely development and acceptance of new products and services may be different than
anticipated;
o technological changes instituted by Funding or FIA and by persons who may affect Funding's
or FIA's business may be more difficult to accomplish or more expensive than anticipated or
may have unforeseen consequences;
o the ability to increase market share and control expenses may be more difficult than
anticipated;
o competitive pressures among financial services companies may increase significantly;
o Funding's or FIA's reputation risk arising from negative public opinion;
o changes in laws and regulations may adversely affect Funding, FIA or their businesses;
o changes in accounting policies and practices, as may be adopted by regulatory agencies and
the Financial Accounting Standards Board, may affect expected financial reporting or
business results;
o the costs, effects and outcomes of litigation may adversely affect Funding, FIA or their
businesses; and
o Funding or FIA may not manage the risks involved in the foregoing as well as anticipated.
_________________________
3
TABLE OF CONTENTS
Page
Prospectus Summary...........................................7
Securities Offered........................................7
Risk Factors..............................................7
Issuing Entity............................................7
Funding...................................................7
Master Trust II...........................................7
FIA and Affiliates........................................8
Indenture Trustee.........................................9
Owner Trustee.............................................9
Series, Classes and Tranches of Notes....................11
BAseries Notes...........................................11
Interest Payments........................................12
Interest on BAseries Notes...............................12
Expected Principal Payment Date and Legal Maturity Date..12
Stated Principal Amount, Outstanding Dollar Principal
Amount and Nominal Liquidation Amount
of Notes.............................................12
Subordination............................................14
BAseries Credit Enhancement..............................15
BAseries Required Subordinated Amount....................15
Limit on Repayment of All Notes..........................16
Sources of Funds to Pay the Notes........................16
BAseries Class C Reserve Account.........................17
Flow of Funds and Application of Finance
Charge and Principal Collections.....................17
Revolving Period.........................................18
Early Redemption of Notes................................18
Optional Redemption by the Issuing Entity................19
Events of Default........................................19
Events of Default Remedies...............................20
Security for the Notes...................................21
Limited Recourse to the Issuing Entity...................21
BAseries Accumulation Reserve Account....................21
Shared Excess Available Funds............................22
Registration, Clearance and Settlement...................22
ERISA Eligibility........................................22
Tax Status...............................................22
Denominations............................................22
Risk Factors................................................28
Transaction Parties.........................................51
BA Credit Card Trust.....................................51
BA Master Credit Card Trust II...........................52
BA Credit Card Funding, LLC..............................53
FIA and Affiliates.......................................54
Mergers................................................55
Industry Developments..................................55
Litigation.............................................56
The Bank of New York.....................................56
Wilmington Trust Company.................................57
Use of Proceeds.............................................57
The Notes...................................................57
General..................................................58
Interest.................................................59
Principal................................................60
Stated Principal Amount, Outstanding Dollar
Principal Amount and Nominal
Liquidation Amount...................................62
Stated Principal Amount................................62
Outstanding Dollar Principal Amount....................62
Nominal Liquidation Amount.............................62
Final Payment of the Notes...............................65
Subordination of Interest and Principal..................66
Required Subordinated Amount.............................66
Early Redemption of Notes................................70
Issuances of New Series, Classes and Tranches of Notes...71
Payments on Notes; Paying Agent..........................74
Denominations............................................74
Record Date..............................................74
Governing Law............................................75
Form, Exchange and Registration and Transfer of Notes....75
Book-Entry Notes.........................................75
The Depository Trust Company.............................77
Clearstream, Luxembourg..................................77
Euroclear System.........................................78
Distributions on Book-Entry Notes........................79
Global Clearance and Settlement Procedures...............79
Definitive Notes.........................................80
Replacement of Notes.....................................81
Sources of Funds to Pay the Notes...........................81
The Collateral Certificate...............................81
Deposit and Application of Funds.........................84
Deposit and Application of Funds for the BAseries........85
BAseries Available Funds...............................85
Application of BAseries Available Funds................86
Targeted Deposits of BAseries Available Funds
to the Interest Funding Account....................87
Allocation to Interest Funding Subaccounts.............88
Payments Received from Derivative Counterparties
for Interest on Foreign Currency Notes.............89
4
Deposits of Withdrawals from the Class C Reserve
Account to the Interest Funding Account...........89
Limits on Reallocations of Charge-Offs to a
Tranche of Class C Notes from Tranches of
Class A and Class B...............................90
Limits on Reallocations of Charge-Offs to a
Tranche of Class B Notes from Tranches of
Class A Notes.....................................90
Allocations of Reimbursements of Nominal
Liquidation Amount Deficits.......................90
Application of BAseries Available Principal Amounts....91
Reductions to the Nominal Liquidation Amount
of Subordinated Classes from Reallocations of
BAseries Available Principal Amounts..............93
Limit on Allocations of BAseries Available
Principal Amounts and BAseries
Available Funds...................................95
Targeted Deposits of BAseries Available
Principal Amounts to the Principal
Funding Account...................................95
Allocation to Principal Funding Subaccounts............98
Limit on Deposits to the Principal Funding
Subaccount of Subordinated Notes; Limit on
Repayments of all Tranches........................99
Payments Received from Derivative
Counterparties for Principal.....................100
Payments Received from Supplemental Credit
Enhancement Providers or Supplemental
Liquidity Providers for Principal................100
Deposits of Withdrawals from the Class C
Reserve Account to the Principal
Funding Account..................................100
Withdrawals from Interest Funding Subaccounts.........100
Withdrawals from Principal Funding Account............101
Targeted Deposits to the Class C Reserve Account......103
Withdrawals from the Class C Reserve Account..........103
Targeted Deposits to the Accumulation Reserve Account.104
Withdrawals from the Accumulation Reserve Account.....104
Final Payment of the Notes............................105
Pro Rata Payments Within a Tranche....................106
Shared Excess Available Funds.........................106
Issuing Entity Accounts.................................106
Derivative Agreements...................................107
Supplemental Credit Enhancement Agreements and
Supplemental Liquidity Agreements................108
Sale of Credit Card Receivables.........................108
Sale of Credit Card Receivables for BAseries Notes....109
Limited Recourse to the Issuing Entity;
Security for the Notes...........................110
The Indenture..............................................111
Indenture Trustee.......................................111
Owner Trustee...........................................114
Issuing Entity Covenants................................114
Early Redemption Events.................................115
Events of Default.......................................117
Events of Default Remedies..............................117
Meetings................................................119
Voting..................................................120
Amendments to the Indenture and Indenture Supplements...120
Tax Opinions for Amendments.............................123
Addresses for Notices...................................124
Issuing Entity's Annual Compliance Statement............124
Indenture Trustee's Annual Report.......................124
List of Noteholders.....................................124
Reports.................................................124
FIA's Credit Card Activities...............................127
General.................................................127
Origination, Account Acquisition, Credit Lines and
Use of Credit Card Accounts.......................127
Interchange.............................................129
FIA's Credit Card Portfolio................................129
Billing and Payments....................................129
Risk Control and Fraud..................................130
Delinquencies and Collection Efforts....................131
Charge-Off Policy.......................................131
Renegotiated Loans and Re-Aged Accounts.................132
Receivables Transfer Agreements Generally..................132
The Receivables Purchase Agreement.........................133
Sale of Receivables.....................................133
Representations and Warranties..........................133
Repurchase Obligations..................................134
5
Reassignment of Other Receivables.......................135
Amendments..............................................135
Termination.............................................135
Master Trust II............................................135
General.................................................135
Master Trust II Trustee.................................136
The Receivables.........................................138
Investor Certificates...................................139
Conveyance of Receivables...............................140
Addition of Master Trust II Assets......................141
Removal of Accounts.....................................142
Collection and Other Servicing Procedures...............144
Master Trust II Accounts................................145
Investor Percentage.....................................145
Application of Collections..............................145
Defaulted Receivables; Rebates and Fraudulent Charges...148
Master Trust II Termination.............................149
Pay Out Events..........................................149
Servicing Compensation and Payment of Expenses..........151
New Issuances...........................................152
Representations and Warranties..........................153
Certain Matters Regarding the Servicer
and the Transferor................................156
Servicer Default........................................157
Evidence as to Compliance...............................158
Amendments to the Master Trust II Agreement.............160
Certificateholders Have Limited Control of Actions......162
Consumer Protection Laws...................................162
Federal Income Tax Consequences............................163
General.................................................163
Description of Opinions.................................164
Tax Characterization of the Issuing
Entity and the Notes..............................165
Consequences to Holders of the Offered Notes............166
State and Local Tax Consequences........................169
Benefit Plan Investors.....................................169
Prohibited Transactions.................................170
Potential Prohibited Transactions from
Investment in Notes...............................170
Prohibited Transactions between the Benefit
Plan and a Party in Interest......................170
Prohibited Transactions between the Issuing
Entity or Master Trust II and
a Party in Interest...............................171
Investment by Benefit Plan Investors....................172
Tax Consequences to Benefit Plans.......................172
Plan of Distribution.......................................172
Legal Matters..............................................173
Where You Can Find More Information........................174
Glossary of Defined Terms..................................176
6
Prospectus Summary
This summary does not contain all the information you may need to make an informed investment
decision. You should read this prospectus and the accompanying prospectus supplement in their entirety
before you purchase any notes. The accompanying supplement to this prospectus supplements disclosure in
this prospectus.
Securities Offered
The issuing entity will be offering notes. The notes will be issued pursuant to an indenture between
the issuing entity and The Bank of New York, as indenture trustee. In addition, each series of notes
will be issued pursuant to a supplement to the indenture between the issuing entity and the indenture
trustee. The BAseries notes will be issued pursuant to the indenture as supplemented by the
BAseries indenture supplement.
Risk Factors
Investment in notes involves risks. You should consider carefully the risk factors beginning on page 28
in this prospectus. In the event that an investment in any tranche of notes exhibits additional risks
to investors, additional risk factors will be described in the accompanying prospectus supplement. In
such an event, you should consider the risk factors in this prospectus and in the accompanying
prospectus supplement.
Issuing Entity
BA Credit Card Trust, a Delaware statutory trust, is the issuing entity of the notes. The address of
the issuing entity is BA Credit Card Trust, c/o Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001. Its telephone number is (302) 651-1000.
BA Credit Card Funding, LLC is the beneficiary of the issuing entity.
Funding
BA Credit Card Funding, LLC (referred to as Funding), a limited liability company formed under the laws
of Delaware and an indirect subsidiary of FIA, is the transferor and depositor of the issuing entity.
The address for Funding is Hearst Tower, 214 North Tryon Street, Suite #21-39, NC1-027-21-04, Charlotte,
North Carolina 28255 and its telephone number is (704) 683-4915. In addition, Funding is the holder of
the transferor interest in BA Master Credit Card Trust II and the beneficiary of the issuing entity.
On the substitution date, Funding was substituted for FIA as the transferor of receivables to master
trust II, as holder of the transferor interest in master trust II, and as beneficiary of the issuing
entity. See "Transaction Parties—BA Credit Card Funding, LLC."
Master Trust II
The issuing entity's primary asset will be the collateral certificate issued by BA Master Credit Card
Trust II (referred to as master trust II), a Delaware trust. The collateral certificate, an investor
certificate issued by master trust II, represents an undivided interest in the assets of master trust
II. For a description of the collateral certificate, see "Sources of Funds to Pay the Notes—The
Collateral Certificate." Master trust II's assets primarily include receivables from certain unsecured
revolving credit card accounts that meet the eligibility criteria for inclusion in master trust II.
These eligibility
7
criteria are discussed in "Master Trust II—Addition of Master Trust II Assets."
The credit card receivables in master trust II consist primarily of principal receivables and finance
charge receivables. Finance charge receivables include periodic finance charges, cash advance fees,
late charges and certain other fees billed to cardholders, annual membership fees, and recoveries on
receivables in Defaulted Accounts. Principal receivables include amounts charged by cardholders for
merchandise and services, amounts advanced to cardholders as cash advances, and all other fees billed to
cardholders that are not considered finance charge receivables.
In addition, Funding is permitted to add to master trust II participations representing interests in a
pool of assets primarily consisting of receivables arising under revolving credit card accounts owned by
FIA. For a description of master trust II, see "Master Trust II."
Funding may add additional receivables to master trust II at any time without limitation, provided the
receivables are eligible receivables, Funding does not expect the addition to cause a Pay Out Event, and
the rating agencies confirm the ratings on the outstanding investor certificates and notes. Under
certain limited circumstances, Funding may be required to add additional receivables to master trust II
to maintain the minimum transferor interest or to maintain a minimum required amount of principal
receivables in master trust II.
Funding may also remove receivables from master trust II provided Funding does not expect the removal to
cause a Pay Out Event and the rating agencies confirm the ratings on the outstanding investor
certificates and notes. The amount of any such removal is limited and may occur only once in a calendar
month. In addition, except in limited circumstances, the receivables removed from master trust II must
be selected randomly. However, if Funding breaches certain representations or warranties relating to
the eligibility of receivables added to master trust II, Funding may be required to immediately remove
those receivables from master trust II.
If the composition of master trust II changes over time due to Funding's ability to add and remove
receivables, noteholders will not be notified of that change. However, monthly reports containing
certain information relating to the notes and the collateral securing the notes will be filed with the
Securities and Exchange Commission. These reports will not be sent to noteholders. See "Where You Can
Find More Information" for information as to how these reports may be accessed.
FIA and Affiliates
FIA Card Services, National Association (referred to as FIA) is a national banking association. The
address of FIA's principal offices is 1100 North King Street, Wilmington, Delaware 19884. Its telephone
number is (800) 421-2110.
Prior to the substitution date, FIA formed master trust II and transferred credit card receivables
arising in accounts originated or acquired by FIA to master trust II. Currently, FIA originates and
owns credit card accounts from which receivables may be transferred to Banc of America Consumer Card
Services, LLC (referred to as BACCS), a limited liability company formed under the laws of North
Carolina and an indirect subsidiary of FIA. Certain of the receivables transferred to BACCS have been
sold, and may continue to be sold, to Funding for addition to master trust II. FIA is also the servicer
for master trust II and is
8
therefore responsible for servicing, managing and making collections on the
credit card receivables in master trust II. FIA has delegated certain of its servicing functions to
Banc of America Card Servicing Corporation (referred to as Servicing Corp.), a corporation formed under
the laws of Arizona and an affiliate of FIA. Notwithstanding this or any other delegation, FIA remains
obligated to service the receivables in master trust II. See "Transaction Parties—FIA and Affiliates."
Indenture Trustee
The Bank of New York, a New York banking corporation, is the indenture trustee under the indenture for
the notes.
Under the terms of the indenture, the role of the indenture trustee is limited. See "The
Indenture—Indenture Trustee."
See "Transaction Parties—The Bank of New York."
Owner Trustee
Wilmington Trust Company, a Delaware banking corporation, is the owner trustee of the issuing entity.
Under the terms of the trust agreement, the role of the owner trustee is limited. See "Transaction
Parties—BA Credit Card Trust."
See "Transaction Parties—Wilmington Trust Company."
9
10
Series, Classes and Tranches of Notes
The notes will be issued in series. Each series is secured by a shared security interest in the
collateral certificate and the collection account. It is expected that most series will consist of
multiple classes. A class designation determines the relative seniority for receipt of cash flows and
funding of uncovered defaults on principal receivables in master trust II allocated to the related
series of notes. For example, subordinated classes of notes provide credit enhancement for senior
classes of notes in the same series.
Some series of notes will be multiple tranche series, meaning that they may have classes consisting of
multiple tranches. Tranches of notes within a class may be issued on different dates and have different
stated principal amounts, rates of interest, interest payment dates, expected principal payment dates,
legal maturity dates and other material terms as described in the related prospectus supplement.
In a multiple tranche series, the expected principal payment dates and the legal maturity dates of the
senior and subordinated classes of such series may be different. As such, certain subordinated tranches
of notes may have expected principal payment dates and legal maturity dates earlier than some or all of
the senior notes of such series. However, subordinated notes will not be repaid before their legal
maturity dates, unless, after payment, the remaining subordinated notes provide the required enhancement
for the senior notes. In addition, senior notes will not be issued unless, after issuance, there are
enough outstanding subordinated notes to provide the required subordinated amount for the senior notes.
See "The Notes—Issuances of New Series, Classes and Tranches of Notes."
BAseries Notes
The BAseries is a multiple tranche series. Each class of notes in the BAseries may consist of multiple
tranches. Notes of any tranche can be issued on any date so long as there is sufficient credit
enhancement on that date, either in the form of outstanding subordinated notes or other forms of credit
enhancement. See "The Notes—Issuances of New Series, Classes and Tranches of Notes." The expected
principal payment dates and legal maturity dates of tranches of senior and subordinated classes of the
BAseries may be different. Therefore, subordinated notes may have expected principal payment dates and
legal maturity dates earlier than some or all of the senior notes of the BAseries. Subordinated notes
will generally not be paid before their legal maturity date unless, after payment, the remaining
outstanding subordinated notes provide the credit enhancement required for the senior notes.
In general, the subordinated notes of the BAseries serve as credit enhancement for all of the senior
notes of the BAseries, regardless of whether the subordinated notes are issued before, at the same time
as, or after the senior notes of the BAseries. However, certain tranches of senior notes may not
require subordination from each class of notes subordinated to it. For example, if a tranche of Class A
notes requires credit enhancement solely from Class C notes, the Class B notes will not, in that case,
provide credit enhancement for that tranche of Class A notes. The amount of credit exposure of any
particular tranche of notes is a function of, among other things, the total amount of notes issued, the
required subordinated amount, the amount of usage of the required subordinated amount and the amount on
deposit in the senior tranches' principal funding subaccounts.
11
This prospectus may relate to an offering of BAseries notes or the notes of any other series issued by
BA Credit Card Trust. Any offering of BAseries notes or any other series of notes through this
prospectus must be accompanied by a prospectus supplement.
Some series may not be multiple tranche series. For these series, there will be only one tranche per
class and each class will generally be issued on the same date. The expected principal payment dates
and legal maturity dates of the subordinated classes of such a series will either be the same as or
later than those of the senior classes of that series.
Interest Payments
Each tranche of notes, other than discount notes, will bear interest from the date and at the rate set
forth or as determined in the related prospectus supplement. Interest on the notes will be paid on the
interest payment dates specified in the related prospectus supplement.
Interest on BAseries Notes
The payment of interest on a senior class of BAseries notes on any payment date is senior to the payment
of interest on subordinated classes of BAseries notes on that date. Generally, no payment of interest
will be made on any Class B BAseries note until the required payment of interest has been made to the
Class A BAseries notes. Similarly, generally, no payment of interest will be made on any Class C
BAseries note until the required payment of interest has been made to the Class A and the Class B
BAseries notes. However, any funds on deposit in the Class C reserve account will be available only to
holders of Class C notes to cover shortfalls of interest on any interest payment date.
Expected Principal Payment Date and Legal Maturity Date
It is expected that the issuing entity will pay the stated principal amount of each note in one payment
on that note's expected principal payment date. The expected principal payment date of a note is
generally 29 months before its legal maturity date. The legal maturity date is the date on which a note
is legally required to be fully paid in accordance with its terms. The expected principal payment date
and legal maturity date for a note will be specified in the related prospectus supplement.
The issuing entity will be obligated to pay the stated principal amount of a note on its expected
principal payment date, or upon the occurrence of an early redemption event or event of default and
acceleration or other optional or mandatory redemption, only to the extent that funds are available for
that purpose and only to the extent that payment is permitted by the subordination provisions of the
senior notes of the same series. The remedies a noteholder may exercise following an event of default
and acceleration or on the legal maturity date are described in "The Indenture—Events of Default
Remedies" and "Sources of Funds to Pay the Notes—Sale of Credit Card Receivables."
Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal Liquidation Amount of Notes
Each note has a stated principal amount, an outstanding dollar principal amount and a nominal
liquidation amount.
o Stated Principal Amount. The stated principal amount of a note is the amount that is stated on the
face of the note to be payable to the holder. It can be
12
denominated in U.S. dollars or a foreign currency.
o Outstanding Dollar Principal Amount. For U.S. dollar notes (other than discount notes), the
outstanding dollar principal amount is the same as the initial dollar principal amount of the notes
(as set forth in the applicable supplement to this prospectus), less principal payments to
noteholders. For foreign currency notes, the outstanding dollar principal amount is the U.S.
dollar equivalent of the initial dollar principal amount of the notes (as set forth in the related
prospectus supplement), less dollar payments to derivative counterparties for principal. For
discount notes, the outstanding dollar principal amount is an amount stated in, or determined by a
formula described in, the related prospectus supplement.
In addition, a note may have an Adjusted Outstanding Dollar Principal Amount. The Adjusted Outstanding
Dollar Principal Amount is the same as the outstanding dollar principal amount, less any funds on
deposit in the principal funding subaccount for that note.
o Nominal Liquidation Amount. The nominal liquidation amount of a note is a U.S. dollar amount based
on the outstanding dollar principal amount of the note, but after deducting:
— that note's share of reallocations of Available Principal Amounts used to pay interest on
senior classes of notes or a portion of the master trust II servicing fee allocated to its
series;
— that note's share of charge-offs resulting from uncovered defaults on principal receivables in
master trust II; and
— amounts on deposit in the principal funding subaccount for that note;
and adding back all reimbursements from Excess Available Funds allocated to that note of
(i) reallocations of Available Principal Amounts used to pay interest on senior classes of notes or the
master trust II servicing fee or (ii) charge-offs resulting from uncovered defaults on principal
receivables in master trust II. Excess Available Funds are Available Funds that remain after the
payment of interest and other required payments for the notes.
The nominal liquidation amount of a note corresponds to the portion of the investor interest of the
collateral certificate that is allocated to support that note.
The aggregate nominal liquidation amount of all of the notes is equal to the Investor Interest of the
collateral certificate. The Investor Interest of the collateral certificate corresponds to the amount
of principal receivables in master trust II that is allocated to support the collateral certificate.
Anything that increases or decreases the aggregate nominal liquidation amount of the notes will also
increase or decrease the Investor Interest of the collateral certificate.
Upon a sale of credit card receivables held by master trust II (i) following the insolvency of Funding,
(ii) following an event of default and acceleration for a note, or (iii) on a note's legal maturity
date, each as described in "Sources of Funds to Pay the Notes—Sale of Credit Card Receivables," the
nominal liquidation amount of a note will be reduced to zero.
For a detailed discussion of nominal liquidation amount, see "The Notes—Stated Principal Amount,
Outstanding Dollar Principal Amount and Nominal Liquidation Amount—Nominal Liquidation Amount."
13
Subordination
Payment of principal of and interest on subordinated classes of notes will be subordinated to the
payment of principal of and interest on senior classes of notes except to the extent provided in this
prospectus and the accompanying prospectus supplement.
Available Principal Amounts allocable to the notes of a series may be reallocated to pay interest on
senior classes of notes in that series or a portion of the master trust II servicing fee allocable to
that series. In addition, the nominal liquidation amount of a subordinated class of notes will
generally be reduced for charge-offs resulting from uncovered defaults on principal receivables in
master trust II prior to any reductions in the nominal liquidation amount of the senior classes of notes
of the same series. While in a multiple tranche series, charge-offs from uncovered defaults on
principal receivables in master trust II allocable to the series initially will be allocated to each
tranche pro rata, these charge-offs will then be reallocated from tranches in the senior classes to
tranches in the subordinated classes to the extent credit enhancement in the form of subordination is
still available to such senior tranches.
In addition, Available Principal Amounts are first utilized to fund targeted deposits to the principal
funding subaccounts of senior classes before being applied to the principal funding subaccounts of the
subordinated classes.
In a multiple tranche series, subordinated notes that reach their expected principal payment date, or
that have an early redemption event, event of default or other optional or mandatory redemption, will
not be paid to the extent that those notes are necessary to provide the required subordination for
senior classes of notes of the same series. If a tranche of subordinated notes cannot be paid because
of the subordination provisions of its respective indenture supplement, prefunding of the principal
funding subaccounts for the senior notes of the same series will begin, as described in the related
prospectus supplement. After that time, the subordinated notes will be paid only to the extent that:
o the principal funding subaccounts for the senior classes of notes of that series are prefunded in
an amount such that the subordinated notes that have reached their expected principal payment date
are no longer necessary to provide the required subordination;
o new tranches of subordinated notes of that series are issued so that the subordinated notes that
have reached their expected principal payment date are no longer necessary to provide the required
subordination;
o enough notes of senior classes of that series are repaid so that the subordinated notes that have
reached their expected principal payment date are no longer necessary to provide the required
subordination; or
o the subordinated notes reach their legal maturity date.
On the legal maturity date of a tranche of notes, Available Principal Amounts, if any, allocable to that
tranche and proceeds from any sale of receivables will be paid to the noteholders of that tranche, even
if payment would reduce the amount of available subordination below the required subordination for the
senior classes of that series.
14
BAseries Credit Enhancement
Credit enhancement for the BAseries notes generally will be provided through subordination. If so
indicated in the related prospectus supplement, additional credit enhancement for Class C BAseries notes
will be provided by the Class C reserve account. The amount of subordination available to provide
credit enhancement to any tranche of BAseries notes is limited to its available subordinated amount. If
the available subordinated amount for any tranche of BAseries notes has been reduced to zero, losses
that otherwise would have been reallocated to subordinated notes will be borne by that tranche of
BAseries notes. The nominal liquidation amount of those notes will be reduced by the amount of losses
allocated to those notes, and it is unlikely that those notes will receive their full payment of
principal.
Subordinated classes of BAseries notes generally will not receive interest payments on any payment date
until the senior classes of BAseries notes have received their full interest payment on such date.
Available Principal Amounts allocable to the subordinated classes of BAseries notes may be applied to
make interest payments on the senior classes of BAseries notes or to pay a portion of the master trust
II servicing fee allocable to the BAseries. Available Principal Amounts remaining on any payment date
after any reallocations for interest on the senior classes of notes or for a portion of the master trust
II servicing fee allocable to the BAseries will be first applied to make targeted deposits to the
principal funding subaccounts of senior classes of BAseries notes on such date before being applied to
make required deposits to the principal funding subaccounts of the subordinated classes of
BAseries notes on such date.
In addition, principal payments on subordinated classes of BAseries notes are subject to the principal
payment rules described below in "—BAseries Required Subordinated Amount."
BAseries Required Subordinated Amount
In order to issue a senior class of BAseries notes, the required subordinated amount of subordinated
notes must be outstanding and available on the issuance date. Generally, the required subordinated
amount of a subordinated class of BAseries notes for any date is an amount equal to a stated percentage
of the Adjusted Outstanding Dollar Principal Amount of the senior tranche of notes for such date.
Generally, the required subordinated amount for a tranche of Class A BAseries notes is equal to a stated
percentage of the Adjusted Outstanding Dollar Principal Amount of that tranche of Class A notes.
Similarly, the Class B required subordinated amount of Class C notes for each tranche of Class B
BAseries notes is equal to a percentage of its Adjusted Outstanding Dollar Principal Amount. However,
the Class B required subordinated amount of Class C notes for any tranche of Class B BAseries notes may
be adjusted to reflect its pro rata share of the portion of the Adjusted Outstanding Dollar Principal
Amount of all Class B BAseries notes which is not providing credit enhancement to the Class A
BAseries notes.
The required subordinated amount for any tranche of BAseries notes will generally be determined as
depicted in the chart "BAseries Required Subordinated Amounts" below.
For a more detailed description of how to calculate the required subordinated amount of any tranche of
BAseries notes, see "The Notes—Required Subordinated Amount—BAseries."
15
Limit on Repayment of All Notes
You may not receive full repayment of your notes if:
o the nominal liquidation amount of your notes has been reduced by charge-offs due to uncovered
defaults on principal receivables in master trust II or as a result of reallocations of Available
Principal Amounts to pay interest on senior classes of notes or a portion of the master trust II
servicing fee, and those amounts have not been reimbursed from Available Funds; or
o receivables are sold (i) following the insolvency of Funding, (ii) following an event of default
and acceleration or (iii) on the legal maturity date, and the proceeds from the sale of
receivables, plus any available amounts on deposit in the applicable subaccounts allocable to your
notes are insufficient.
Sources of Funds to Pay the Notes
The issuing entity will have the following sources of funds to pay principal of and interest on the
notes:
o Collateral Certificate. The collateral certificate is an investor certificate issued as
"Series 2001-D" by master trust II to the issuing entity. It represents an undivided interest in
the assets of master trust II. Master trust II owns primarily receivables arising in selected
MasterCard, Visa and American Express revolving credit card accounts. FIA or Funding has
transferred, and Funding may continue to transfer, credit card receivables to master trust II in
accordance with the terms of the master trust II agreement. Both collections of principal
receivables and finance charge receivables will be allocated among holders of interests in master
trust II—including the collateral certificate—based generally on the investment in principal
receivables of each interest in master trust II. If collections of receivables allocable to the
collateral certificate are less than expected, payments of principal of and interest on the notes
could be delayed or remain unpaid.
At the time it was issued, the collateral certificate received an investment grade rating from at least
one nationally recognized rating agency.
o Derivative Agreements. Some notes may have the benefit of one or more derivative agreements,
including interest rate or currency swaps, or other agreements described in "Sources of Funds to
Pay the Notes—Derivative Agreements." A description of the specific terms of each derivative
agreement and each derivative counterparty will be included in the applicable prospectus supplement.
o Supplemental Credit Enhancement Agreements and Supplemental Liquidity Agreements. Some notes may
have the benefit of one or more additional forms of credit enhancement, referred to in this
prospectus and the applicable prospectus supplement as supplemental credit enhancement agreements,
such as letters of credit, cash collateral guarantees or accounts, surety bonds or insurance
policies. In addition, some notes may have the benefit of one or more forms of supplemental
liquidity agreements, such as a liquidity facility with various liquidity providers. Funding, FIA
or an affiliate may be the provider of any supplemental credit enhancement agreement or
supplemental liquidity agreement. A description of the specific
16
terms of any supplemental credit enhancement agreement or any supplemental liquidity agreement applicable to a series,
class or tranche of notes and a description of the related provider will be included in the applicable
prospectus supplement. See "The Notes—General" and "Sources of Funds to Pay the Notes—Supplemental
Credit Enhancement Agreements and Supplemental Liquidity Agreements" for a discussion of credit
enhancement, supplemental credit enhancement agreements and supplemental liquidity agreements.
o The Issuing Entity Accounts. The issuing entity will establish a collection account for the
purpose of receiving collections of finance charge receivables and principal receivables and other
related amounts from master trust II payable under the collateral certificate. If so specified in
the prospectus supplement, the issuing entity may establish supplemental accounts for any series,
class or tranche of notes.
Each month, distributions on the collateral certificate will be deposited into the collection account.
Those deposits will then be allocated among each series of notes and applied as described in the
accompanying prospectus supplement.
BAseries Class C Reserve Account
If indicated in the related prospectus supplement, the issuing entity will establish a Class C reserve
subaccount to provide credit enhancement solely for the holders of the related tranche of Class C
BAseries notes. The applicable Class C reserve subaccount will be funded as described in the related
prospectus supplement.
Funds on deposit in the Class C reserve subaccount for each tranche of Class C BAseries notes will be
available to holders of those notes to cover shortfalls of interest payable on interest payment dates.
Funds on deposit in the Class C reserve subaccount for each tranche of Class C BAseries notes will also
be available to holders of those notes to cover certain shortfalls in principal. Only the holders of
the related tranche of Class C BAseries notes will have the benefit of the related Class C reserve
subaccount. See "Sources of Funds to Pay the Notes—Deposit and Application of Funds for the
BAseries—Withdrawals from the Class C Reserve Account."
Flow of Funds and Application of Finance Charge and Principal Collections
For a detailed description of the application of collections, see "Master Trust II—Application of
Collections" and "Sources of Funds to Pay the Notes—Deposit and Application of Funds for the BAseries."
Finance charge collections and other amounts allocated to the BAseries, called BAseries Available Funds,
will generally be applied each month to make the payments or deposits depicted in the chart "Application
of BAseries Available Funds" below. See the chart "Application of Collections of Finance Charges and
Principal Payments Received by FIA as Servicer of Master Trust II" below for a depiction of how finance
charge collections are allocated by master trust II. For a detailed description of the application of
BAseries Available Funds, see "Sources of Funds to Pay the Notes—Deposit and Application of Funds for
the BAseries."
Principal collections and other amounts allocated to the BAseries, called BAseries Available Principal
Amounts, generally will be applied each month to
17
make the payments or deposits depicted in the chart "Application of BAseries Available Principal Amounts" below.
See the chart "Application of Collections of Finance Charges and Principal Payments Received by FIA as Servicer of Master Trust II"
below for a depiction of how principal collections are allocated by master trust II. For a detailed description of
the application of BAseries Available Principal Amounts, see "Sources of Funds to Pay the Notes—Deposit
and Application of Funds for the BAseries."
Revolving Period
Until principal amounts are needed to be accumulated to pay any tranche of BAseries notes, principal
amounts allocable to that tranche of notes will be applied to other BAseries notes which are
accumulating principal or paid to Funding as holder of the transferor interest. This period is commonly
referred to as the revolving period. Unless an early redemption event or event of default and
acceleration for the related tranche of BAseries notes occurs, the revolving period is expected to end
twelve calendar months prior to the expected principal payment date. However, if the issuing entity
reasonably expects to need less than twelve months to fully accumulate the outstanding dollar principal
amount of the related tranche of notes, the end of the revolving period may be delayed.
Early Redemption of Notes
The issuing entity will be required to redeem any note upon the occurrence of an early redemption event
relating to that note, but only to the extent funds are available for such redemption after giving
effect to all allocations and reallocations and, in the case of subordinated notes of a multiple tranche
series, only to the extent that payment is permitted by the subordination provisions of the senior notes
of the same series.
However, if so specified in the accompanying prospectus supplement, subject to certain exceptions, any
notes that have the benefit of a derivative agreement will not be redeemed prior to such notes' expected
principal payment date.
Early redemption events include the following:
o the occurrence of a note's expected principal payment date;
o each of the Pay Out Events applicable to the collateral certificate, as described under "Master
Trust II—Pay Out Events";
o the issuing entity becoming an "investment company" within the meaning of the Investment Company
Act of 1940, as amended; or
o any additional early redemption events specified in the accompanying prospectus supplement.
In addition to the early redemption events described above, if for any date the amount of Excess
Available Funds for the BAseries notes averaged over the three preceding calendar months is less than
the Required Excess Available Funds for the BAseries for such date, an early redemption event will occur
for all tranches of BAseries notes.
Excess Available Funds for any month equals the Available Funds allocated to the BAseries that month
after application for targeted deposits to the interest funding account, payment of the master trust II
servicing fee allocable to the BAseries, application to cover defaults on principal receivables in
master trust II allocable to the
18
BAseries and reimbursement of any deficits in the nominal liquidation amounts of notes.
Required Excess Available Funds for the BAseries is an amount equal to zero. This amount may be changed
provided the issuing entity (i) receives the consent of the rating agencies and (ii) reasonably believes
that the change will not have a material adverse effect on the BAseries notes.
See "The Notes—Early Redemption of Notes" and "The Indenture—Early Redemption Events."
Upon the occurrence of an early redemption event for any series, class or tranche of notes, those notes
will be entitled to receive payments of interest and principal each month, subject to the conditions
outlined in "The Notes—Early Redemption of Notes" and "The Indenture—Early Redemption Events."
It is not an event of default if the issuing entity fails to redeem a note because it does not have
sufficient funds available or because payment of the note is delayed because it is necessary to provide
required subordination for a senior class of notes.
Optional Redemption by the Issuing Entity
Funding, so long as it is an affiliate of the servicer, has the right, but not the obligation, to direct
the issuing entity to redeem any tranche of BAseries notes in whole but not in part on any day on or
after the day on which its nominal liquidation amount is reduced to less than 5% of its highest
outstanding dollar principal amount. This repurchase option is referred to as a clean-up call.
The issuing entity will not redeem subordinated BAseries notes if those notes are required to provide
credit enhancement for senior classes of BAseries notes. If the issuing entity is directed to redeem
any tranche of BAseries notes, it will notify the registered holders at least thirty days prior to the
redemption date. The redemption price of a note will equal 100% of the outstanding principal amount of
that note, plus accrued but unpaid interest on the note to but excluding the date of redemption.
If the issuing entity is unable to pay the redemption price in full on the redemption date, monthly
payments on the related tranche of BAseries notes will thereafter be made, subject to the principal
payment rules described above under "—Subordination," until either the principal of and accrued interest
on that tranche of notes are paid in full or the legal maturity date occurs, whichever is earlier. Any
funds in the principal funding subaccount and the interest funding subaccount and, in the case of Class
C BAseries notes, the Class C reserve subaccount, for the related tranche of BAseries notes will be
applied to make the principal and interest payments on these notes on the redemption date.
Events of Default
The documents that govern the terms and conditions of the notes include a list of adverse events known
as events of default.
Some events of default result in an automatic acceleration of the notes, and others result in the right
of the holders of the affected series, class or tranche of notes to demand acceleration after an
affirmative vote by holders of more than 50% of the outstanding dollar principal amount of the affected
series, class or tranche of notes.
19
Events of default for any series, class or tranche of notes include the following:
o for any tranche of notes, the issuing entity's failure, for a period of 35 days, to pay interest
upon such notes when such interest becomes due and payable;
o for any tranche of notes, the issuing entity's failure to pay the principal amount of such notes on
the applicable legal maturity date;
o the issuing entity's default in the performance, or breach, of any other of its covenants or
warranties in the indenture for a period of 60 days after either the indenture trustee or the
holders of 25% of the aggregate outstanding dollar principal amount of the outstanding notes of the
affected series, class or tranche has provided written notice requesting remedy of such breach,
and, as a result of such default, the interests of the related noteholders are materially and
adversely affected and continue to be materially and adversely affected during the 60 day period;
o the occurrence of certain events of bankruptcy, insolvency, conservatorship or receivership of the
issuing entity; and
o for any series, class or tranche of notes, any additional events of default specified in the
accompanying prospectus supplement.
An event of default relating to one series, class or tranche of notes will not necessarily be an event
of default for any other series, class or tranche of notes.
Upon the occurrence of an event of default and acceleration for any series, class or tranche of notes,
those notes will be entitled to receive payments of interest and principal each month, subject to the
conditions outlined in "The Indenture—Events of Default" and "—Events of Default Remedies."
Events of Default Remedies
After an event of default and acceleration of a series, class or tranche of notes, funds on deposit in
the applicable issuing entity accounts for the affected notes will be applied to pay principal of and
interest on those notes. Then, in each following month, Available Principal Amounts and Available Funds
allocated to those notes will be applied to make monthly principal and interest payments on those notes
until the earlier of the date those notes are paid in full or the legal maturity date of those notes.
However, subordinated notes of a multiple tranche series will receive payment of principal of those
notes prior to the legal maturity date of such notes only if and to the extent that funds are available
for that payment and, after giving effect to that payment, the required subordination will be maintained
for senior notes in that series.
If an event of default of a series, class or tranche of notes occurs and that series, class or tranche
of notes is accelerated, the indenture trustee may, and at the direction of the majority of the
noteholders of the affected series, class or tranche will, direct master trust II to sell credit card
receivables. However, this sale of receivables may occur only:
o if the conditions specified in "The Indenture—Events of Default Remedies" are satisfied and, for
subordinated notes of a multiple tranche series, only to the extent that payment is permitted by
the subordination provisions of the senior notes of the same series; or
o on the legal maturity date of those notes.
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The holders of the accelerated notes will be paid their allocable share of the proceeds of a sale of
credit card receivables. Upon the sale of the receivables, the nominal liquidation amount of those
accelerated notes will be reduced to zero. See "Sources of Funds to Pay the Notes—Sale of Credit Card
Receivables."
Security for the Notes
The notes of all series are secured by a shared security interest in the collateral certificate and the
collection account, but each tranche of notes is entitled to the benefits of only that portion of the
assets allocated to it under the indenture and the indenture supplement.
Each tranche of notes is also secured by:
o a security interest in any applicable supplemental account; and
o a security interest in any derivative agreement for that tranche.
Limited Recourse to the Issuing Entity
The sole source of payment for principal of or interest on a tranche of notes is provided by:
o the portion of collections of principal receivables and finance charge receivables received by the
issuing entity under the collateral certificate and available to that tranche of notes after giving
effect to all allocations and reallocations;
o funds in the applicable issuing entity accounts for that tranche of notes; and
o payments received under any applicable derivative agreement for that tranche of notes.
Noteholders will have no recourse to any other assets of the issuing entity or any other person or
entity for the payment of principal of or interest on the notes.
If there is a sale of credit card receivables (i) following the insolvency of Funding, (ii) following an
event of default and acceleration, or (iii) on the applicable legal maturity date, each as described in
"Sources of Funds to Pay the Notes—Sale of Credit Card Receivables," following such sale those
noteholders have recourse only to the proceeds of that sale, investment earnings on those proceeds and
any funds previously deposited in any applicable issuing entity account for such noteholders.
BAseries Accumulation Reserve Account
The issuing entity will establish an accumulation reserve subaccount for each tranche of BAseries notes
to cover shortfalls in investment earnings on amounts (other than prefunded amounts) on deposit in the
principal funding subaccount for such notes.
The amount targeted to be deposited in the accumulation reserve subaccount for each tranche of
BAseries notes is zero, unless more than one budgeted deposit is required to accumulate and pay the
principal of the related tranche of notes on its expected principal payment date, in which case, the
amount targeted to be deposited is 0.5% of the outstanding dollar principal amount of the related
tranche of notes, or such other amount designated by the issuing entity. See "Sources of Funds to Pay
the Notes—Deposit and Application of Funds for the BAseries—Targeted Deposits to the Accumulation
Reserve Account."
21
Shared Excess Available Funds
The BAseries will be included in "Group A." In addition to the BAseries, the issuing entity may issue
other series of notes that are included in Group A.
To the extent that Available Funds allocated to the BAseries are available after all required
applications of such amounts as described in "Sources of Funds to Pay the Notes—Deposit and Application
of Funds for the BAseries—Application of BAseries Available Funds," these unused Available Funds, called
shared excess available funds, will be applied to cover shortfalls in Available Funds for other
series of notes in Group A. In addition, the BAseries may receive the benefits of shared excess
available funds from other series in Group A, to the extent Available Funds for such other series of
notes are not needed for such series. See "Sources of Funds to Pay the Notes—The Collateral
Certificate,"
"—Deposit and Application of Funds" and "—Deposit and Application of Funds for the BAseries—Shared
Excess Available Funds."
Registration, Clearance and Settlement
The notes offered by this prospectus will be registered in the name of The Depository Trust Company or
its nominee, and purchasers of notes will be entitled to receive a definitive certificate only under
limited circumstances. Owners of notes may elect to hold their notes through The Depository Trust
Company in the United States or through Clearstream, Luxembourg or the Euroclear System in Europe.
Transfers will be made in accordance with the rules and operating procedures of those clearing systems.
See "The Notes—Book-Entry Notes."
ERISA Eligibility
The indenture permits benefit plans to purchase notes of every class offered pursuant to this prospectus
and a related prospectus supplement. A fiduciary of a benefit plan should consult its counsel as to
whether a purchase of notes by the plan is permitted by ERISA and the Internal Revenue Code. See
"Benefit Plan Investors."
Tax Status
Subject to important considerations described under "Federal Income Tax Consequences" in this
prospectus, Orrick, Herrington & Sutcliffe LLP, as special tax counsel to the issuing entity, is of the
opinion that, for United States federal income tax purposes (1) the notes will be treated as
indebtedness and (2) the issuing entity will not be an association or a publicly traded partnership
taxable as a corporation. In addition, noteholders will agree, by acquiring notes, to treat the notes
as debt for federal, state and local income and franchise tax purposes.
Denominations
The notes offered by this prospectus will be issued in denominations of $5,000 and multiples of $1,000
in excess of that amount.
22
23
24
Fees and Expenses Payable from BAseries Available Funds and
BAseries Available Principal Amounts
______________________________________________________________________________________________________________________
Fees and Expenses Payable from BAseries Available Funds:
o Servicing Fee: 2% of Nominal Liquidation Amount - paid to the servicer
______________________________________________________________________________________________________________________
For any month, the servicing fee is paid immediately after Class C interest payments or deposits. For a
depiction of the application of BAseries Available Funds, see the chart entitled "Application of
BAseries Available Funds" above. The servicing fee compensates the servicer for its expenses in
connection with servicing the receivables, including expenses associated with collecting, allocating and
distributing collections on the receivables and other expenses payable by the servicer, such as fees and
disbursements of the master trust II trustee, the owner trustee and the indenture trustee. See "Master
Trust II—Servicing Compensation and Payment of Expenses."
______________________________________________________________________________________________________________________
Fees and Expenses Payable from BAseries Available Principal Amounts:
o Servicing Fee Shortfalls: any accrued but unpaid servicing fees - paid to the servicer
______________________________________________________________________________________________________________________
For any month, servicing fee shortfalls, if any, are paid immediately after any Class B interest
shortfalls are paid. For a depiction of the application of BAseries Available Principal Amounts, see
the chart entitled "Application of BAseries Available Principal Amounts" above.
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BAseries Required Subordinated Amounts
The chart and the accompanying discussion below present only one example of how required
subordinated amounts (each, "RSA") would be calculated for a hypothetical amount of outstanding BAseries
notes. This example is illustrative only. The stated percentages used in this example are applicable
to the calculation of each RSA for these hypothetical notes only. The dollar amounts used in this
example are illustrative only and are not intended to represent any allocation of classes and tranches
of BAseries notes outstanding at any time (including, but not limited to, the RSA required for any
unencumbered tranche of Class B notes). For a detailed description of RSA generally, see "Prospectus
Summary—BAseries Required Subordinated Amount" and "The Notes—Required Subordinated Amount," and the
related prospectus supplement.
In addition, the issuing entity may change the RSA for any tranche of notes at any time,
without the consent of any noteholders, so long as the issuing entity has met certain conditions
described in "The Notes—Required Subordinated Amount."
Generally, the required subordinated amount of a subordinated class of notes for any date is an amount
equal to a stated percentage of the adjusted outstanding dollar principal amount of the senior tranche
of notes for such date.
In the example above:
o For the $1,000,000,000 of Class A notes, the RSA of subordinated notes is $162,790,700. Of that
amount, the RSA of Class B notes is $87,209,300 (which is 8.72093% of $1,000,000,000) and the RSA
of Class C notes is $75,581,400 (which is 7.55814% of $1,000,000,000).
26
o Encumbered Class B notes consist of that portion of the Class B notes that provide credit
enhancement to the Class A notes (which is equal to the Class A RSA of Class B notes or
$87,209,300) and share the same credit enhancement as the Class A notes. Therefore, for the
$87,209,300 of encumbered Class B notes, the RSA of Class C notes is $87,209,300 (which is 8.72093%
of $1,000,000,000 or 100% of $87,209,300).
o Unencumbered Class B notes consist of that portion of the Class B notes that do not provide credit
enhancement to the Class A notes. This unencumbered amount is equal to the aggregate amount of
Class B notes ($100,000,000) minus the encumbered Class B notes ($87,209,300). For the $12,790,700
of unencumbered Class B notes, the RSA of Class C notes is $1,037,084 (which is 8.10811% of
$12,790,700).
o The total Class B RSA of Class C notes equals the sum of the Class B RSA of Class C notes for the
encumbered Class B notes and the unencumbered Class B notes (which is the sum of $87,209,300 and
$1,037,084, or $88,246,384).
o Encumbered Class C notes consist of that portion of the Class C notes that provide credit
enhancement to the Class A or the Class B notes (which is equal to the greater of the Class A RSA
of Class C notes and the Class B RSA of Class C Notes, or $88,246,384).
o Unencumbered Class C notes consist of that portion of the Class C notes that do not provide credit
enhancement to the Class A or Class B notes. This unencumbered amount is equal to the aggregate
amount of Class C notes ($100,000,000) minus the encumbered Class C notes ($88,246,384), or
$11,753,616.
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Risk Factors
The risk factors disclosed in this section of the prospectus and in the accompanying prospectus
supplement describe the principal risk factors of an investment in the notes.
Some interests could have priority over the master trust II
trustee's interest in the receivables or the indenture trustee's
interest in the collateral certificate, which could cause delayed
or reduced payments to you.
Representations and warranties are made that the master trust II
trustee has a perfected interest in the receivables and that the
indenture trustee has a perfected interest in the collateral
certificate. If any of these representations and warranties were
found not to be true, however, payments to you could be delayed or
reduced.
The transaction documents permit liens for municipal or other
local taxes to have priority over the master trust II trustee's
perfected interest in the receivables. If any of these tax liens
were to arise, you could suffer a loss on your investment.
If a conservator, a receiver, or a bankruptcy trustee were
appointed for FIA, BACCS, Funding, master trust II, or the issuing
entity, and if the administrative expenses of the conservator, the
receiver, or the bankruptcy trustee were found to relate to the
receivables, the collateral certificate, or the transaction
documents, those expenses could be paid from collections on the
receivables before the master trust II trustee or the indenture
trustee receives any payments, which could result in losses on
your investment.
The master trust II trustee and the indenture trustee may not have
a perfected interest in collections commingled by the servicer
with its own funds or in interchange commingled by FIA with its
own funds, which could cause delayed or reduced payments to you.
The servicer is obligated to deposit collections into the master
trust II collection account no later than the second business day
after the date of processing for those collections. If conditions
specified in the transaction documents are met, however, the
servicer is permitted to hold all collections received during a
monthly period and to make only a single deposit of those
collections on the following transfer date. In addition, FIA
always is permitted to make only a single transfer of all
interchange received during a monthly period on the following
28
transfer date. See "Master Trust II—Application of Collections"
and "FIA's Credit Card Activities—Interchange."
All collections that the servicer is permitted to hold are
commingled with its other funds and used for its own benefit.
Similarly, all interchange that FIA receives prior to the related
transfer date is commingled with its other funds and used for its
own benefit. The master trust II trustee and the indenture
trustee may not have a perfected interest in these amounts, and
thus payments to you could be delayed or reduced if the servicer
or FIA were to enter conservatorship or receivership, were to
become insolvent, or were to fail to perform its obligations under
the transaction documents.
The conservatorship, receivership, bankruptcy, or insolvency of
FIA, BACCS, Funding, master trust II, the issuing entity, or any
of their affiliates could result in accelerated, delayed, or
reduced payments to you.
FIA is a national banking association, and its deposits are
insured by the Federal Deposit Insurance Corporation (FDIC). If
certain events were to occur relating to FIA's financial condition
or the propriety of its actions, the FDIC may be appointed as
conservator or receiver for FIA.
Prior to October 20, 2006, FIA treated both its transfer of the
receivables to the master trust II trustee and its transfer of the
collateral certificate to the issuing entity as sales for
accounting purposes. From and after October 20, 2006, FIA treats
its transfer of the receivables to BACCS as a sale. Arguments may
be made, however, that any of these transfers constitutes only the
grant of a security interest under applicable law.
Nevertheless, the FDIC has issued a regulation surrendering
certain rights to reclaim, recover, or recharacterize a financial
institution's transfer of financial assets such as the receivables
and the collateral certificate if:
o the transfer involved a securitization of the financial
assets and meets specified conditions for treatment as a sale
under relevant accounting principles;
o the financial institution received adequate consideration for
the transfer;
o the parties intended that the transfer constitute a sale for
accounting purposes; and
29
o the financial assets were not transferred fraudulently, in
contemplation of the financial institution's insolvency, or
with the intent to hinder, delay, or defraud the financial
institution or its creditors.
The transfers by FIA of the receivables and the collateral
certificate are intended to satisfy all of these conditions.
If a condition required under the FDIC's regulation were found not
to have been met, however, the FDIC could seek to reclaim,
recover, or recharacterize FIA's transfer of the receivables or
the collateral certificate. The FDIC may not be subject to an
express time limit in deciding whether to take these actions, and
a delay by the FDIC in making a decision could result in losses on
your investment. If the FDIC were successful in any of these
actions, moreover, you may not be entitled under applicable law to
the full amount of your damages.
Even if the conditions set forth in the regulation were satisfied
and the FDIC did not reclaim, recover, or recharacterize FIA's
transfer of the receivables or the collateral certificate,
distributions to you could be adversely affected if FIA entered
conservatorship or receivership.
For instance, the FDIC may argue that a statutory injunction
automatically prevents the master trust II trustee, the indenture
trustee, and the noteholders from exercising their rights,
remedies, and interests for up to 90 days. The FDIC also may be
able to obtain a stay of any action to enforce the transaction
documents, the collateral certificate, or the notes. Further, the
FDIC may require that its claims process be followed before
payments on the receivables or the collateral certificate are
released. The delay caused by any of these actions could result
in losses to you.
The FDIC, moreover, may have the power to choose whether or not
the terms of the transaction documents will continue to apply.
Thus, regardless of what the transaction documents provide, the
FDIC could:
o authorize FIA to assign or to stop performing its obligations
under the transaction documents, including its obligations to
service the receivables, to make payments or deposits, or to
provide administrative services for Funding or the issuing
entity;
30
o prevent the appointment of a successor servicer or the
appointment of a successor provider of administrative
services for Funding or the issuing entity;
o alter the terms on which FIA continues to service the
receivables, to provide administrative services for Funding
or the issuing entity, or to perform its other obligations
under the transaction documents, including the amount or the
priority of the fees paid to FIA;
o prevent or limit the commencement of an early redemption of
the notes, or instead do the opposite and require the early
redemption to commence;
o prevent or limit the early liquidation of the receivables or
the collateral certificate and the termination of master
trust II or the issuing entity, or instead do the opposite
and require those to occur; or
o prevent or limit continued transfers of receivables or
continued distributions on the collateral certificate, or
instead do the opposite and require those to continue.
If any of these events were to occur, payments to you could be
accelerated, delayed, or reduced. In addition, these events could
result in other parties to the transaction documents being excused
from performing their obligations, which could cause further
losses on your investment. Distributions to you also could be
adversely affected if the FDIC were to argue that any term of the
transaction documents violates applicable regulatory requirements.
BACCS and Funding are indirect subsidiaries of FIA. Certain
banking laws and regulations may apply not only to FIA but to its
subsidiaries as well. If BACCS or Funding were found to have
violated any of these laws or regulations, you could suffer a loss
on your investment.
In the receivership of an unrelated national bank, the FDIC
successfully argued that certain of its rights and powers extended
to a statutory trust formed and owned by that national bank in
connection with a securitization of credit card receivables. If
FIA were to enter conservatorship or receivership, the FDIC could
argue that its rights and powers extend to BACCS, Funding, master
trust II, or the issuing entity. If the FDIC were to take this
position and seek to repudiate or otherwise affect the rights of
the master trust II trustee, the
31
indenture trustee, or the
noteholders under any transaction document, losses to you could
result.
In addition, no assurance can be given that the FDIC would not
attempt to exercise control over the receivables, the collateral
certificate, or the other assets of BACCS, Funding, master
trust II, or the issuing entity on an interim or a permanent
basis. If this were to occur, payments to you could be delayed or
reduced.
If BACCS or any affiliate affected by these transactions were to
become the debtor in a bankruptcy case, moreover, the bankruptcy
court could exercise control over the receivables or the
collateral certificate on an interim or a permanent basis.
Although steps have been taken to minimize this risk, BACCS or an
affiliate as debtor-in-possession or another interested party
could argue that:
o BACCS did not sell receivables to Funding but instead
borrowed money from Funding and granted a security interest
in the receivables;
o Funding, master trust II, or the issuing entity, and its
assets (including the receivables or the collateral
certificate), should be substantively consolidated with the
bankruptcy estate of BACCS or an affiliate; or
o the receivables or the collateral certificate are necessary
for BACCS or an affiliate to reorganize.
If these or similar arguments were made, whether successfully or
not, distributions to you could be adversely affected.
Further, if BACCS or an affected affiliate were to enter
bankruptcy, any action to enforce the transaction documents, the
collateral certificate, or the notes could be prohibited without
the permission of the bankruptcy court, resulting in delayed or
reduced payments to you. Noteholders also may be required to
return distributions already received if BACCS or an affected
affiliate were to become the debtor in a bankruptcy case.
A court overseeing the bankruptcy case of BACCS or an affected
affiliate may have the power to choose whether or not the terms of
the transaction documents will continue to apply. Thus,
regardless of what the transaction documents provide, the court
could:
32
o authorize BACCS or an affiliate to assign or to stop
performing its obligations under the transaction documents,
including its obligations to make payments or deposits or to
repurchase receivables;
o alter the terms on which BACCS or an affiliate continues to
perform its obligations under the transaction documents,
including the amount or the priority of the fees paid to
BACCS or an affiliate;
o prevent or limit the commencement of an early redemption of
the notes, or instead do the opposite and require the early
redemption to commence;
o prevent or limit the early liquidation of the receivables or
the collateral certificate and the termination of master
trust II or the issuing entity, or instead do the opposite
and require those to occur; or
o prevent or limit continued transfers of receivables or
continued distributions on the collateral certificate, or
instead do the opposite and require those to continue.
If any of these events were to occur, payments to you could be
accelerated, delayed, or reduced. In addition, these events could
result in other parties to the transaction documents being excused
from performing their obligations, which could cause further
losses on your investment.
Funding, master trust II, and the issuing entity have been
established so as to minimize the risk that any of them would
become insolvent or enter bankruptcy. Still, each of them may be
eligible to file for bankruptcy, and no assurance can be given
that the risk of insolvency or bankruptcy has been eliminated. If
Funding, master trust II, or the issuing entity were to become
insolvent or were to enter bankruptcy, you could suffer a loss on
your investment. Risks also exist that, if Funding, master trust
II, or the issuing entity were to enter bankruptcy, any of the
others and its assets (including the receivables or the collateral
certificate) would be treated as part of the bankruptcy estate.
Regardless of any decision made by the FDIC or any ruling made by
a court, moreover, the mere fact that FIA, BACCS, Funding, master
trust II, the issuing entity, or any of their affiliates has
become insolvent or has entered conservatorship, receivership, or
bankruptcy could have an adverse effect on the
33
value of the receivables and the collateral certificate and
on the liquidity and the value of the notes.
There also may be other possible effects of a conservatorship,
receivership, bankruptcy, or insolvency of FIA, BACCS,
Funding, master trust II, the issuing entity, or any of their
affiliates that could result in delays or reductions in payments
to you.
The conservatorship, receivership, bankruptcy, or insolvency of
other parties to the transactions could result in accelerated,
delayed, or reduced payments to you.
Other parties to the transactions, such as subservicers, may have
material roles. In addition, funds to make payments on the notes
may be supplied by derivative counterparties or by enhancement or
liquidity providers. If any of these parties were to enter
conservatorship, receivership, or bankruptcy or were to become
insolvent, payments to you could be adversely affected.
Regulatory action could result in losses or delays in payment.
FIA is regulated and supervised by the Office of the Comptroller
of the Currency (OCC) and the FDIC. These regulatory authorities,
and possibly others, have broad powers of enforcement over FIA and
its affiliates.
If any of these regulatory authorities were to conclude that an
obligation under the transaction documents constituted an unsafe
or unsound practice or violated any law, regulation, written
condition, or agreement applicable to FIA or its affiliates, that
regulatory authority may have the power to order FIA or the
related affiliate to rescind the transaction document, to refuse
to perform the obligation, to amend the terms of the obligation,
or to take any other action considered appropriate by that
authority. In addition, FIA or the related affiliate probably
would not be liable to you for contractual damages for complying
with such an order, and you likely would have no recourse against
the regulatory authority. Therefore, if such an order were
issued, payments to you could be accelerated, delayed, or reduced.
In one case, the OCC issued a cease and desist order against a
national banking association that was found to have been servicing
credit card receivables on terms that were inconsistent with safe
and sound banking practices. That order required the financial
institution to immediately resign as servicer and to cease
performing its duties as servicer within approximately 120
34
days, to immediately withhold and segregate funds from collections for
payment of its servicing fee (despite the priority of payments in
the securitization documents and the perfected security interest
of the related trust in those funds), and to increase its
servicing fee percentage above that specified in the
securitization documents. We have no reason to believe that its
servicing arrangements are contrary to safe and sound banking
practices or otherwise violate any law, regulation, written
condition, or agreement applicable to FIA or its affiliates. If a
regulatory authority were to conclude otherwise, however, you
could suffer a loss on your investment.
Changes to consumer protection laws may impede collection efforts
or alter timing and amount of collections which may result in an
acceleration of, or reduction in, payments on your notes.
Receivables that do not comply with consumer protection laws may
not be valid or enforceable under their terms against the obligors
of those receivables.
Federal and state consumer protection laws regulate the creation
and enforcement of consumer loans. Congress and the states could
further regulate the credit card and consumer credit industry in
ways that make it more difficult for the servicer to collect
payments on the receivables or that reduce the finance charges and
other fees that FIA as owner of the accounts can charge on credit
card account balances. For example, if FIA were required to
reduce its finance charges and other fees, resulting in a
corresponding decrease in the credit card accounts' effective
yield, this could lead to an early redemption event and could
result in an acceleration of payment or reduced payments on your
notes. See "Consumer Protection Laws" in this prospectus.
If a cardholder sought protection under federal or state
bankruptcy or debtor relief laws, a court could reduce or
discharge completely the cardholder's obligations to repay amounts
due on its account and, as a result, the related receivables would
be written off as uncollectible. The noteholders could suffer a
loss if no funds are available from credit enhancement or other
sources. See "Master Trust II—Defaulted Receivables; Rebates and
Fraudulent Charges" in this prospectus.
35
Competition in the credit card and consumer lending industry may
result in a decline in ability to generate new receivables. This
may result in the payment of principal earlier or later than the
expected principal payment date, or in reduced principal payments.
The credit card industry is highly competitive. As new credit
card companies enter the market and companies try to expand their
market share, effective advertising, target marketing and pricing
strategies grow in importance. Additionally, the acceptance and
use of other consumer loan products, such as mortgage and home
equity products, for consumer spending has increased significantly
in recent years. FIA's ability to compete in this environment
will affect its ability to generate new receivables and affect
payment patterns on the receivables. If the rate at which FIA
generates new receivables declines significantly, FIA might be
unable to transfer additional receivables to BACCS for transfer to
Funding and inclusion in master trust II, and a Pay Out Event
could occur, resulting in payment of principal sooner than
expected or in reduced amounts. If the rate at which FIA
generates new receivables decreases significantly at a time when
noteholders are scheduled to receive principal payments,
noteholders might receive principal payments more slowly than
planned or in reduced amounts.
Payment patterns of cardholders may not be consistent over time
and variations in these payment patterns may result in reduced
payment of principal, or receipt of payment of principal earlier
or later than expected.
Collections of principal receivables available to pay your notes
on any principal payment date or to make deposits into an issuing
entity account will depend on many factors, including:
o the rate of repayment of credit card balances by cardholders,
which may be slower or faster than expected which may cause
payment on the notes to be earlier or later than expected;
o the extent of credit card usage by cardholders, and the
creation of additional receivables in the accounts designated
to master trust II; and
o the rate of default by cardholders.
36
Changes in payment patterns and credit card usage result from a
variety of economic, competitive, political, social and legal
factors. Economic factors include the rate of inflation,
unemployment levels and relative interest rates. The availability
of incentive or other award programs may also affect cardholders'
actions. Competitive factors include not only attractive terms
and conditions offered by other credit card lenders, but also the
attractiveness of other consumer lending products, such as
mortgages and home equity loans. Social factors include consumer
confidence levels and the public's attitude about incurring debt
and the consequences of personal bankruptcy. In addition, acts of
terrorism and natural disasters in the United States and the
political and military response to any such events may have an
adverse effect on general economic conditions, consumer confidence
and general market liquidity.
We cannot predict how any of these or other factors will affect
repayment patterns or credit card use and, consequently, the
timing and amount of payments on your notes. Any reductions in
the amount, or delays in the timing, of interest or principal
payments will reduce the amount available for distribution on the
notes.
Allocations of defaulted principal receivables and reallocation of
Available Principal Amounts could result in a reduction in payment
on your notes.
FIA, as servicer, will write off the principal receivables arising
in credit card accounts in the Master Trust II Portfolio if the
principal receivables become uncollectible as determined under
FIA's policies and procedures. Your notes will be allocated a
portion of these defaulted principal receivables. In addition,
Available Principal Amounts may be reallocated to pay interest on
senior classes of notes or to pay a portion of the master trust II
servicing fee. You may not receive full repayment of your notes
and full payment of interest due if (i) the nominal liquidation
amount of your notes has been reduced by charge-offs resulting
from uncovered Default Amounts on principal receivables in master
trust II or as the result of reallocations of Available Principal
Amounts to pay interest and a portion of the master trust II
servicing fee, and (ii) those amounts have not been reimbursed
from Available Funds. For a discussion of nominal liquidation
amount, see "The Notes—Stated Principal Amount, Outstanding Dollar
Principal Amount and Nominal Liquidation Amount—Nominal
Liquidation Amount."
37
Only some of the assets of the issuing entity are available for
payments on any tranche of notes.
The sole sources of payment of principal of and interest on your
tranche of notes are provided by:
o the portion of the Available Principal Amounts and Available
Funds allocated to the BAseries and available to your tranche
of notes after giving effect to any reallocations and
payments and deposits for senior notes;
o funds in the applicable issuing entity accounts for your
tranche of notes; and
o payments received under any applicable derivative agreement,
supplemental credit enhancement agreement or supplemental
liquidity agreement for your tranche of notes.
As a result, you must rely only on the particular allocated assets
as security for your tranche of notes for repayment of the
principal of and interest on your notes. You will not have
recourse to any other assets of the issuing entity or any other
person for payment of your notes. See "Sources of Funds to Pay
the Notes."
In addition, if there is a sale of credit card receivables due to
the insolvency of Funding, due to an event of default and
acceleration or on the applicable legal maturity date, as
described in "Sources of Funds to Pay the Notes—Sale of Credit
Card Receivables," your tranche of notes has recourse only to the
proceeds of that sale, any amounts then on deposit in the issuing
entity accounts allocated to and held for the benefit of your
tranche of notes, and any amounts payable under any applicable
derivative agreement.
Class B notes and Class C notes are subordinated and bear losses
before Class A notes.
Class B notes of the BAseries are subordinated in right of payment
of principal and interest to Class A notes, and Class C notes of
the BAseries are subordinated in right of payment of principal and
interest to Class A notes and Class B notes.
In the BAseries, Available Funds are first used to pay interest
due to Class A noteholders, next to pay interest due to Class B
noteholders, and then to pay interest due to Class C noteholders.
If Available Funds are not sufficient to pay interest on all
classes of notes, the notes may not receive full payment of interest if, in
38
the case of Class A and Class B notes, reallocated
Available Principal Amounts, and in the case of Class C notes,
amounts on deposit in the applicable Class C reserve subaccount,
are insufficient to cover the shortfall.
In the BAseries, Available Principal Amounts may be reallocated to
pay interest on senior classes of notes of the BAseries and to pay
a portion of the master trust II servicing fee allocable to the
BAseries to the extent that Available Funds are insufficient to
make such payments. In addition, charge-offs due to defaulted
principal receivables in master trust II allocable to the
BAseries generally are reallocated from the senior classes to the
subordinated classes of the BAseries. If these reallocations of
Available Principal Amounts and charge-offs are not reimbursed
from Available Funds, the full stated principal amount of the
subordinated classes of notes will not be repaid. See "The
Notes—Stated Principal Amount, Outstanding Dollar Principal Amount
and Nominal Liquidation Amount—Nominal Liquidation Amount" and
"Sources of Funds to Pay the Notes—Deposit and Application of
Funds for the BAseries—Application of BAseries Available Principal
Amounts."
In addition, after application to pay interest on senior classes
of notes or to pay a portion of the master trust II servicing fee
allocable to the BAseries, Available Principal Amounts are first
used to pay principal due to Class A noteholders, next to pay
principal due to Class B noteholders, and then to pay principal
due to Class C noteholders.
If there is a sale of the credit card receivables owned by master
trust II due to an insolvency of Funding or due to an event of
default and acceleration relating to the BAseries, the net
proceeds of the sale allocable to principal payments for the
collateral certificate will generally be used first to pay amounts
due to Class A noteholders, next to pay amounts due to Class B
noteholders, and then, to pay amounts due to Class C noteholders.
This could cause a loss to Class A, Class B or Class C noteholders
if the amount available to them is not enough to pay the Class A,
Class B or Class C notes in full.
Payment of Class B notes and Class C notes may be delayed or
reduced due to the subordination provisions.
For the BAseries, subordinated notes, except as noted in the
following paragraph, will be paid principal only to the extent
that sufficient funds are available and such notes are not needed
to provide the required subordination for senior classes of notes
39
of the BAseries. In addition, Available Principal Amounts
allocated to the BAseries will be applied first to pay shortfalls
in interest on senior classes of notes, then to pay a portion of
the shortfall in the master trust II servicing fee allocable to
the BAseries, and then to make targeted deposits to the principal
funding subaccounts of senior classes of notes before being
applied to make required deposits to the principal funding
subaccounts of the subordinated notes.
If subordinated notes reach their expected principal payment date,
or an early redemption event, event of default and acceleration,
or other optional or mandatory redemption occurs relating to those
subordinated notes prior to the legal maturity date, and cannot be
paid because of the subordination provisions of the
BAseries indenture supplement, prefunding of the principal funding
subaccounts for the senior notes of the BAseries will begin, as
described in "Sources of Funds to Pay the Notes—Deposit and
Application of Funds for the BAseries—Targeted Deposits of
BAseries Available Principal Amounts to the Principal Funding
Account," and no Available Principal Amounts will be deposited
into the principal funding subaccount of, or used to make
principal payments on, the subordinated notes. After that time,
the subordinated notes will be paid only if, and to the extent
that:
o enough senior notes are repaid so that the subordinated notes
are no longer necessary to provide the required subordination;
o new subordinated notes are issued so that the subordinated
notes which are payable are no longer necessary to provide
the required subordination;
o the principal funding subaccounts for the senior notes are
prefunded so that the subordinated notes are no longer
necessary to provide the required subordination; or
o the subordinated notes reach their legal maturity date.
This may result in a delay to, or reduction to or loss of,
principal payments to holders of subordinated notes. See "Sources
of Funds to Pay the Notes—Deposit and Application of Funds for the
BAseries—Targeted Deposits of BAseries Available Principal Amounts
to the Principal Funding Account— Prefunding of the Principal
Funding Account for Senior Classes."
40
Class A and Class B notes of the BAseries can lose their
subordination under some circumstances resulting in delayed or
reduced payments to you.
Subordinated notes of the BAseries may have expected principal
payment dates and legal maturity dates earlier than some or all of
the notes of the senior classes.
If notes of a subordinated class reach their expected principal
payment date at a time when they are needed to provide the
required subordination for the senior classes of the BAseries and
the issuing entity is unable to issue additional notes of that
subordinated class or obtain acceptable alternative forms of
credit enhancement, prefunding of the senior classes will begin
and such subordinated notes will not be paid on their expected
principal payment date. The principal funding subaccounts for the
senior classes will be prefunded with Available Principal Amounts
allocable to the BAseries and available for that purpose in an
amount necessary to permit the payment of those subordinated notes
while maintaining the required subordination for the senior
classes. See "Sources of Funds to Pay the Notes—Deposit and
Application of Funds for the BAseries—Targeted Deposits of
BAseries Available Principal Amounts to the Principal Funding
Account."
There will generally be a 29-month period between the expected
principal payment date and the legal maturity date of the
subordinated notes to prefund the principal funding subaccounts of
the senior classes, if necessary. Notes of a subordinated class
which have reached their expected principal payment date will not
be paid until the remaining subordinated notes provide the
required subordination for the senior notes, which payment may be
delayed further as other subordinated notes reach their expected
principal payment date. The subordinated notes will be paid on
their legal maturity date, to the extent that any funds are
available for that purpose from proceeds of the sale of
receivables or otherwise, whether or not the senior classes of
notes have been fully prefunded.
If the rate of repayment of principal receivables in master trust
II were to decline during this prefunding period, then the
principal funding subaccounts for the senior classes of notes may
not be fully prefunded before the legal maturity date of the
subordinated notes. In that event and only to the extent not
fully prefunded, the senior classes would not have the required
subordination beginning on the legal maturity date of those
subordinated notes unless additional subordinated notes of that
41
class were issued or enough senior notes have matured so that the
remaining outstanding subordinated notes provide the necessary
subordination.
The table under "Annex I: The Master Trust II Portfolio—Principal
Payment Rates" in the accompanying prospectus supplement sets
forth the highest and lowest cardholder monthly principal payment
rates for the Master Trust II Portfolio during the periods shown
in such table. Principal payment rates may change due to a
variety of factors including economic, social and legal factors,
changes in the terms of credit card accounts by FIA, or the
addition of credit card accounts to the Master Trust II Portfolio
with different characteristics. There can be no assurance that
the rate of principal repayment will remain in this range in the
future.
Yield and payments on the receivables could decrease, resulting in
the receipt of principal payments earlier than the expected
principal payment date.
There is no assurance that the stated principal amount of your
notes will be paid on its expected principal payment date.
A significant decrease in the amount of credit card receivables in
master trust II for any reason could result in an early redemption
event and in early payment of your notes, as well as decreased
protection to you against defaults on the credit card
receivables. In addition, the effective yield on the credit card
receivables in master trust II could decrease due to, among other
things, a change in periodic finance charges on the credit card
accounts, an increase in the level of delinquencies or increased
convenience use of the card whereby cardholders pay their credit
card balance in full each month and incur no finance charges.
This could reduce the amount of Available Funds. If the amount of
Excess Available Funds for any three consecutive calendar months
is less than the Required Excess Available Funds for those three
months, an early redemption event will occur and could result in
an early payment of your notes. See "The Notes—Early Redemption
of Notes."
See "—Competition in the credit card and consumer lending industry
may result in a decline in ability to generate new receivables.
This may result in the payment of principal earlier or later than
the expected principal payment date, or in reduced amounts" and
"—Class A and Class B notes of the BAseries can lose their
subordination under some circumstances resulting in delayed or
reduced payments to you" above for a discussion of
42
other circumstances under which you may receive principal payments
earlier or later than the expected principal payment date.
The note interest rate and the receivables interest rate may reset
at different times or fluctuate differently, resulting in a delay
or reduction in payments on your notes.
Some credit card accounts may have finance charges set at a
variable rate based on a designated index (for example, the prime
rate). A series, class or tranche of notes may bear interest
either at a fixed rate or at a floating rate based on a different
index. If the rate charged on the credit card accounts declines,
collections of finance charge receivables allocated to the
collateral certificate may be reduced without a corresponding
reduction in the amounts payable as interest on the notes and
other amounts paid from collections of finance charge
receivables. This could result in delayed or reduced principal
and interest payments to you.
Issuance of additional notes or master trust II investor
certificates may affect your voting rights and the timing and
amount of payments to you.
The issuing entity expects to issue notes from time to time, and
master trust II may issue new investor certificates from time to
time. The issuing entity may also "reopen" or later issue
additional notes in your tranche of BAseries notes. New notes and
master trust II investor certificates may be issued without notice
to existing noteholders, and without your or their consent, and
may have different terms from outstanding notes and investor
certificates. For a description of the conditions that must be
met before master trust II can issue new investor certificates or
the issuing entity can issue new notes, see "Master Trust II—New
Issuances" and "The Notes—Issuances of New Series, Classes and
Tranches of Notes."
The issuance of new notes or master trust II investor certificates
could adversely affect the timing and amount of payments on
outstanding notes. For example, if notes in your series issued
after your notes have a higher interest rate than your notes, this
could result in a reduction in the Available Funds used to pay
interest on your notes. Also, when new notes or investor
certificates are issued, the voting rights of your notes will be
diluted. See "—You may have limited or no ability to control
actions under the indenture and the master trust II agreement.
This may result in, among other things, accelerated payment of
43
principal when it is in your interest to receive payment of
principal on the expected principal payment date, or it may result
in payment of principal not being accelerated when it is in your
interest to receive early payment of principal" below.
Addition of credit card accounts to master trust II and attrition
of credit card accounts and receivables from master trust II may
decrease the credit quality of the assets securing the repayment
of your notes. If this occurs, your receipt of payments of
principal and interest may be reduced, delayed or accelerated.
The assets of master trust II, and therefore the assets allocable
to the collateral certificate held by the issuing entity, change
every day. These changes may be the result of cardholder actions
and preferences, marketing initiatives by FIA and other card
issuers or other factors, including but not limited to, reductions
in card usage, changes in payment patterns for revolving balances,
closing of accounts in the Master Trust II Portfolio, and
transfers or conversions of accounts in the Master Trust II
Portfolio to new card accounts and other products. Funding may
choose, or may be required, to add credit card receivables to
master trust II. The credit card accounts from which these
receivables arise may have different terms and conditions from the
credit card accounts already designated for master trust II. For
example, the new credit card accounts may have higher or lower
fees or interest rates, or different payment terms. In addition,
FIA may transfer the receivables in credit card accounts purchased
by FIA to BACCS for transfer to Funding and for inclusion in
master trust II if certain conditions are satisfied. Those
accounts purchased by FIA will have been originated using the
account originator's underwriting criteria, not those of FIA.
That account originator's underwriting criteria may be different
than those of FIA.
We cannot guarantee that new credit card accounts will be of the
same credit quality as the credit card accounts currently or
historically designated for master trust II. If the credit
quality of the assets in master trust II were to deteriorate, the
issuing entity's ability to make payments on the notes could be
adversely affected and your receipt of payments of principal and
interest may be reduced, delayed or accelerated. See "Master
Trust II—Addition of Master Trust II Assets" in this prospectus.
You will not be notified of, nor will you have any right to
consent to, the addition of any receivables in additional accounts
to master trust II.
44
FIA may not be able to generate new receivables or designate new
credit card accounts to master trust II when required by the
master trust II agreement. This could result in an acceleration
of or reduction in payments on your notes.
The issuing entity's ability to make payments on the notes will be
impaired if sufficient new credit card receivables are not
generated by FIA. Due to regulatory restrictions or for other
reasons, FIA may be prevented from generating sufficient new
receivables or designating new credit card accounts which are to
be added to master trust II. We do not guarantee that new credit
card accounts or receivables will be created, that any credit card
account or receivable created will be eligible for inclusion in
master trust II, that they will be added to master trust II, or
that credit card receivables will be repaid at a particular time
or with a particular pattern.
The master trust II agreement provides that Funding must transfer
additional credit card receivables to master trust II if the total
amount of principal receivables in master trust II falls below
specified percentages of the total investor interests of investor
certificates in master trust II. There is no guarantee that
Funding will have enough receivables to add to master trust II.
If Funding does not make an addition of receivables within five
Business Days after the date it is required to do so, a Pay Out
Event relating to the collateral certificate will occur. This
would constitute an early redemption event and could result in an
early payment of or reduction in payments on your notes. See
"Master Trust II—Addition of Master Trust II Assets," "—Pay Out
Events" and "The Indenture—Early Redemption Events."
FIA may change the terms of the credit card accounts in a way that
reduces or slows collections. These changes may result in
reduced, accelerated or delayed payments to you.
The receivables are transferred to master trust II, but FIA
continues to own the related credit card accounts. As owner of
the credit card accounts, FIA retains the right to change various
credit card account terms (including finance charges and other
fees it charges and the required minimum monthly payment). An
early redemption event could occur if FIA reduced the finance
charges and other fees it charges and a corresponding decrease in
the collection of finance charges and fees resulted. In addition,
changes in the credit card account terms may alter payment
patterns. If payment rates decrease significantly at a time when
you are scheduled to receive principal, you might receive
principal more slowly than planned.
45
FIA will not reduce the interest rate it charges on the
receivables or other fees if that action would cause a Pay Out
Event or cause an early redemption event relating to the notes
unless FIA is required by law or determines it is necessary to
make such change to maintain its credit card business, based on
its good faith assessment of its business competition.
FIA will not change the terms of the credit card accounts or its
servicing practices (including changes to the required minimum
monthly payment and the calculation of the amount or the timing of
finance charges, other fees and charge-offs) unless FIA reasonably
believes a Pay Out Event would not occur for any master trust II
series of investor certificates and an early redemption event
would not occur for any tranche of notes and takes the same action
on other substantially similar credit card accounts, to the extent
permitted by those credit card accounts.
For a discussion of early redemption events, see the accompanying
prospectus supplement.
FIA has no restrictions on its ability to change the terms of the
credit card accounts except as described above or in the
accompanying prospectus supplement. Changes in relevant law,
changes in the marketplace or prudent business practices could
cause FIA to change credit card account terms. See "FIA's Credit
Card Activities—Origination, Account Acquisition, Credit Lines and
Use of Credit Card Accounts" for a description of how credit card
account terms can be changed.
If representations and warranties relating to the receivables are
breached, payments on your notes may be reduced.
Funding, as transferor of the receivables, makes representations
and warranties relating to the validity and enforceability of the
receivables arising under the credit card accounts in the Master
Trust II Portfolio, and as to the perfection and priority of the
master trust II trustee's interests in the receivables. Funding
will make similar representations and warranties to the extent
that receivables are included as assets of the issuing entity.
Prior to the Substitution Date, FIA made similar representations
and warranties regarding the receivables that were transferred by
FIA to master trust II. However, the master trust II trustee will
not make any examination of the receivables or the related assets
for the purpose of determining the presence of defects, compliance
with the representations and warranties or for any other purpose.
46
If a representation or warranty relating to the receivables in the
Master Trust II Portfolio is violated, the related obligors may
have defenses to payment or offset rights, or creditors of Funding
or FIA may claim rights to the master trust II assets. If a
representation or warranty is violated, Funding or, with respect
to receivables transferred to master trust II prior to the
Substitution Date, FIA, may have an opportunity to cure the
violation. If it is unable to cure the violation, subject to
certain conditions described under "Master Trust
II—Representations and Warranties" in this prospectus, Funding or,
with respect to receivables transferred to master trust II prior
to the Substitution Date, FIA, must accept reassignment of each
receivable affected by the violation. These reassignments are the
only remedy for breaches of representations and warranties, even
if your damages exceed your share of the reassignment price. See
"Master Trust II—Representations and Warranties" in this
prospectus.
There is no public market for the notes. As a result you may be
unable to sell your notes or the price of the notes may suffer.
The underwriters of the notes may assist in resales of the notes
but they are not required to do so. A secondary market for any
notes may not develop. If a secondary market does develop, it
might not continue or it might not be sufficiently liquid to allow
you to resell any of your notes.
In addition, some notes have a more limited trading market and
experience more price volatility. There may be a limited number
of buyers when you decide to sell those notes. This may affect
the price you receive for the notes or your ability to sell the
notes. You should not purchase notes unless you understand and
know you can bear the investment risks.
You may not be able to reinvest any early redemption proceeds in a
comparable security.
If your notes are redeemed at a time when prevailing interest
rates are relatively low, you may not be able to reinvest the
redemption proceeds in a comparable security with an effective
interest rate equivalent to that of your notes.
47
If the ratings of the notes are lowered or withdrawn, their market
value could decrease.
The initial rating of a note addresses the likelihood of the
payment of interest on that note when due and the ultimate payment
of principal of that note by its legal maturity date. The ratings
do not address the likelihood of payment of principal of that note
on its expected principal payment date. In addition, the ratings
do not address the possibility of early payment or acceleration of
a note, which could be caused by an early redemption event or an
event of default. See "The Indenture—Early Redemption Events" and
"—Events of Default."
The ratings of a series, class or tranche of notes are not a
recommendation to buy, hold or sell that series, class or tranche
of notes. The ratings of the notes may be lowered or withdrawn
entirely at any time by the applicable rating agency without
notice from FIA, Funding or the issuing entity to noteholders of
the change in rating. The market value of that series, class or
tranche of notes could decrease if the ratings are lowered or
withdrawn.
You may have limited or no ability to control actions under the
indenture and the master trust II agreement. This may result in,
among other things, accelerated payment of principal when it is in
your interest to receive payment of principal on the expected
principal payment date, or it may result in payment of principal
not being accelerated when it is in your interest to receive early
payment of principal.
Under the indenture, some actions require the consent of
noteholders holding all or a specified percentage of the aggregate
outstanding dollar principal amount of notes of a series, class or
tranche. These actions include consenting to amendments relating
to the collateral certificate. In the case of votes by series or
votes by holders of all of the notes, the outstanding dollar
principal amount of the senior-most classes of notes will
generally be substantially greater than the outstanding dollar
principal amount of the subordinated classes of notes.
Consequently, the noteholders of the senior-most class of notes
will generally have the ability to determine whether and what
actions should be taken. The subordinated noteholders will
generally need the concurrence of the senior-most noteholders to
cause actions to be taken.
The collateral certificate is an investor certificate under the
master trust II agreement, and noteholders have indirect consent
48
rights under the master trust II agreement. See "The
Indenture—Voting." Under the master trust II agreement, some
actions require the vote of a specified percentage of the
aggregate principal amount of all of the investor certificates.
These actions include consenting to amendments to the master trust
II agreement. While the outstanding principal amount of the
collateral certificate is currently larger than the outstanding
principal amount of the other series of investor certificates
issued by master trust II, noteholders may need the concurrence of
the holders of the other investor certificates to cause actions to
be taken. Additionally, other series of investor certificates may
be issued by master trust II in the future without the consent of
any noteholders. See "Transaction Parties—BA Master Credit Card
Trust II." If new series of investor certificates are issued, the
holders of investor certificates—other than the collateral
certificate—may have the ability to determine generally whether
and how actions are taken regarding master trust II. As a result,
the noteholders, in exercising their voting powers under the
collateral certificate, will generally need the concurrence of the
holders of the other investor certificates to cause actions to be
taken. In addition, for the purposes of any vote to liquidate the
assets in master trust II, the noteholders will be deemed to have
voted against any such liquidation.
If an event of default occurs, your remedy options may be limited
and you may not receive full payment of principal and accrued
interest.
Your remedies may be limited if an event of default affecting your
series, class or tranche of notes occurs. After the occurrence of
an event of default affecting your series, class or tranche of
notes and an acceleration of your notes, any funds in an issuing
entity account for that series, class or tranche of notes will be
applied to pay principal of and interest on that series, class or
tranche of notes. Then, in each following month, Available
Principal Amounts and Available Funds will be deposited into the
applicable issuing entity account, and applied to make monthly
principal and interest payments on that series, class or tranche
of notes until the legal maturity date of that series, class or
tranche of notes.
However, if your notes are subordinated notes of a multiple
tranche series, you generally will receive payment of principal of
those notes only if and to the extent that, after giving effect to
that payment, the required subordination will be maintained for
the senior classes of notes in that series.
49
Following an event of default and acceleration, holders of the
affected notes will have the ability to direct a sale of credit
card receivables held by master trust II only under the limited
circumstances as described in "The Indenture—Events of Default,"
"—Events of Default Remedies" and "Sources of Funds to Pay the
Notes—Sale of Credit Card Receivables."
However, following an event of default and acceleration relating
to subordinated notes of a multiple tranche series, if the
indenture trustee or a majority of the noteholders of the affected
class or tranche directs master trust II to sell credit card
receivables, the sale will occur only if, after giving effect to
that payment, the required subordination will be maintained for
the senior notes in that series by the remaining notes or if such
sale occurs on the legal maturity date. However, if principal of
or interest on a tranche of notes has not been paid in full on its
legal maturity date, the sale will automatically take place on
that date regardless of the subordination requirements of any
senior classes of notes.
Even if a sale of receivables is permitted, we can give no
assurance that the proceeds of the sale will be enough to pay
unpaid principal of and interest on the accelerated notes.
50
Transaction Parties
BA Credit Card Trust
The notes will be issued by BA Credit Card Trust (referred to as the issuing entity). The
issuing entity's principal offices are located at Rodney Square North, 1100 N. Market Street,
Wilmington, Delaware 19890-0001, in care of Wilmington Trust Company, as owner trustee. Its telephone
number is (302) 651-1000.
The issuing entity's activities will be limited to:
o acquiring and holding the collateral certificate, other certificates of beneficial interest
in master trust II, and the other assets of the issuing entity and the proceeds from these
assets, and granting a security interest in these assets;
o issuing notes;
o making payments on the notes; and
o engaging in other activities that are necessary or incidental to accomplish these limited
purposes, and which are not contrary to maintaining the status of the issuing entity as a
"qualifying special purpose entity" under applicable accounting literature.
The assets of the issuing entity will consist primarily of:
o the collateral certificate;
o derivative agreements that the issuing entity will enter into from time to time to manage
interest rate or currency risk relating to certain series, classes or tranches of notes;
o supplemental credit enhancement agreements or supplemental liquidity agreements that the
issuing entity will enter into from time to time for certain series, classes or tranches of
notes; and
o funds on deposit in the issuing entity accounts.
See "Sources of Funds to Pay the Notes" in this prospectus for greater detail regarding the
assets of the issuing entity.
The issuing entity was initially capitalized by a $1 contribution from the beneficiary. It is
not expected that the issuing entity will have any other significant assets or means of capitalization.
The fiscal year for the issuing entity will end on June 30 of each year.
UCC financing statements have been filed to perfect the ownership or security interests of the
issuing entity and the indenture trustee described herein. See "Risk Factors" for a discussion of risks
associated with the issuing entity and the assets of the issuing entity, and see
51
"The Indenture—Issuing Entity Covenants" and "Master Trust II—Representations and Warranties"
for a discussion of covenants regarding the perfection of security interests.
The issuing entity will operate pursuant to a trust agreement between Funding and Wilmington
Trust Company, a Delaware banking corporation, which is the owner trustee. The issuing entity does not
have any officers or directors. Currently, its sole beneficiary is Funding. The powers and duties of
the owner trustee are ministerial only. Accordingly, the beneficiary will direct the owner trustee in
the management of the issuing entity and its assets.
Funding and the owner trustee may amend the trust agreement without the consent of the
noteholders or the indenture trustee so long as the amendment is not reasonably expected to
(i) adversely affect in any material respect the interests of the noteholders, or (ii) significantly
change the purpose and powers of the issuing entity, as set forth in the trust agreement. Accordingly,
neither the indenture trustee nor any holder of any note will be entitled to vote on any such amendment.
In addition, if holders of not less than (a) in the case of a significant change in the purpose
and powers of the issuing entity which is not reasonably expected to have a material adverse effect on
the noteholders, a majority of the aggregate outstanding dollar principal amount of the notes affected
by an amendment consent, and (b) in all other cases, 66 2/3% of the aggregate outstanding dollar
principal amount of the notes affected by an amendment consent, the trust agreement may be amended for
the purpose of (i) adding, changing or eliminating any provisions of the trust agreement or of modifying
the rights of those noteholders or (ii) significantly changing the purposes and powers of the issuing
entity. However, the trust agreement may not be amended without the consent of the holders of all of
the notes then outstanding if the proposed amendment would (i) increase or reduce in any manner the
amount of, or accelerating or delaying the timing of, collections of payments in respect of the
collateral certificate or distributions that are required to be made for the benefit of the noteholders,
or (ii) reduce the aforesaid percentage of the outstanding dollar principal amount of the notes, the
holders of which are required to consent to any such amendment.
See "The Indenture—Tax Opinions for Amendments" for additional conditions to amending the trust
agreement.
BA Master Credit Card Trust II
BA Master Credit Card Trust II (referred to as master trust II) issued the collateral
certificate. The collateral certificate is the issuing entity's primary source of funds for the payment
of principal of and interest on the notes. The collateral certificate is an investor certificate that
represents an undivided interest in the assets of master trust II. Master trust II's assets primarily
include receivables from selected MasterCard, Visa and American Express unsecured revolving credit card
accounts that meet the eligibility criteria for inclusion in master trust II. These eligibility
criteria are discussed in this prospectus under "Master Trust II—Addition of Master Trust II Assets."
The credit card receivables in master trust II consist primarily of principal receivables and
finance charge receivables. Finance charge receivables include periodic finance charges,
52
cash advance fees, late charges and certain other fees billed to cardholders, annual membership fees, and recoveries
on receivables in Defaulted Accounts. Principal receivables include amounts charged by cardholders for
merchandise and services and amounts advanced to cardholders as cash advances and all other fees billed
to cardholders that are not considered finance charge receivables.
The percentage of the interchange attributed to cardholder charges for goods and services in
the accounts designated to master trust II will be transferred to master trust II. Interchange arising
under the related accounts will be treated as collections of finance charge receivables and used to pay
a portion of the servicing fee paid to the servicer. See "FIA's Credit Card Activities—Interchange" for
a discussion of interchange.
Member banks participating in the Visa, MasterCard and American Express associations receive
certain fees called interchange from Visa, MasterCard and American Express as partial compensation for
taking credit risk, absorbing fraud losses and funding receivables for a limited period prior to initial
billing. Under the Visa, MasterCard and American Express systems, a portion of this interchange in
connection with cardholder charges for goods and services is passed from banks which clear the
transactions for merchants to credit card issuing banks. Interchange fees are set annually by Visa,
MasterCard and American Express and are based on the number of credit card transactions and the amount
charged per transaction.
In addition, Funding is permitted to add to master trust II participations representing
interests in a pool of assets primarily consisting of receivables arising under revolving credit card
accounts owned by FIA.
For detailed financial information on the receivables and the accounts, see the accompanying
prospectus supplement.
The collateral certificate is the certificate comprising the Series 2001-D certificate issued
by master trust II. Other series of certificates may be issued by master trust II in the future without
prior notice to or the consent of any noteholders or certificateholders. See the accompanying
prospectus supplement for information on the other outstanding series issued by master trust II.
BA Credit Card Funding, LLC
BA Credit Card Funding, LLC (referred to as Funding) is a limited liability company formed
under the laws of Delaware and a subsidiary of Banc of America Consumer Card Services, LLC (referred to
as BACCS), an indirect subsidiary of FIA. Funding is the transferor and depositor to master trust II.
Funding is also the holder of the Transferor Interest in master trust II and the beneficiary of the
issuing entity. On the Substitution Date, Funding was substituted for FIA as the transferor of
receivables to master trust II, as holder of the Transferor Interest in master trust II, and as
beneficiary of the issuing entity pursuant to the trust agreement. As the transferor under master trust
II, Funding purchases from BACCS receivables arising in certain credit card accounts owned by FIA.
Funding may then, subject to certain conditions, add those receivables to master trust II.
53
Funding was created for the limited purpose of (i) purchasing from BACCS receivables arising in
certain credit card accounts originated or acquired by FIA, and (ii) transferring those receivables to
master trust II. Funding has and will continue to purchase and transfer receivables for addition to
master trust II. Since its formation, Funding has been engaged in these activities as (i) the purchaser
of receivables from BACCS, (ii) the transferor of receivables to master trust II pursuant to the master
trust II agreement, (iii) the beneficiary of the issuing entity pursuant to the trust agreement, and
(iv) the beneficiary and transferor that executes underwriting, subscription and purchase agreements in
connection with each issuance of notes.
A description of Funding's obligations as transferor of the receivables to master trust II can
be found in "Master Trust II—Conveyance of Receivables," "—Addition of Master Trust II Assets,"
"—Removal of Accounts" and "—Representations and Warranties." Funding's obligations under the trust
agreement are to record the transfer of the collateral certificate to the issuing entity and to take all
actions necessary to perfect and maintain the perfection of the issuing entity's interest in the
collateral certificate, including the filing of UCC financing statements for that transfer.
FIA and Affiliates
FIA Card Services, National Association (referred to as FIA) is a national banking
association. FIA is an indirect subsidiary of Bank of America Corporation. FIA conducts nationwide
consumer lending programs, principally comprised of activities related to credit cards.
FIA formed master trust II on August 4, 1994. Prior to the substitution of Funding as
transferor of receivables to master trust II, which coincided with the merger of Bank of America,
National Association (USA) with and into FIA, FIA transferred receivables to master trust II. In
addition, prior to this substitution and merger, FIA was the holder of the Transferor Interest in master
trust II, the transferor of the collateral certificate to the issuing entity pursuant to the trust
agreement, and the sole beneficiary of the issuing entity. At the time of this substitution and merger,
FIA's economic interest in the Transferor Interest in master trust II was initially transferred to
Funding through Banc of America Consumer Card Services, LLC (referred to as BACCS). In addition, from
and after this substitution and merger, FIA has transferred, and will continue to transfer, to BACCS the
receivables arising in certain of the U.S. consumer credit card accounts originated or acquired by FIA.
BACCS has sold and may continue to sell receivables to Funding for addition to master trust II. The
receivables transferred to master trust II have been and will continue to be generated from transactions
made by cardholders of selected MasterCard, Visa and American Express credit card accounts from the
portfolio of MasterCard, Visa and American Express accounts originated or acquired by FIA (such
portfolio of accounts is referred to as the Bank Portfolio).
BACCS is a limited liability company formed under the laws of North Carolina and an indirect
subsidiary of FIA.
FIA is responsible for servicing, managing and making collections on the credit card
receivables in master trust II. See "Master Trust II—Collection and Other Servicing Procedures." FIA
currently services the Bank Portfolio in the manner described in "FIA's
54
Credit Card Activities." FIA has delegated, pursuant to a subservicing agreement, certain of its servicing functions to Banc of
America Card Servicing Corporation (referred to as Servicing Corp.), a corporation formed under the laws
of Arizona on January 7, 2005. Servicing Corp. is an operating subsidiary controlled by FIA. Servicing
Corp. was formed in connection with an internal restructuring of the credit card business within Bank of
America Corporation. Servicing Corp.'s activities are primarily related to performing the consumer
credit card processing and servicing functions for the credit card business within FIA. The
subservicing agreement will be in effect until the termination of the master trust II agreement, unless
terminated by either party upon at least 45-days prior written notice to the other party. Additionally,
FIA has the ability to terminate the subservicing agreement for cause at any time. Despite this
delegation, FIA remains the servicer of master trust II. See "FIA's Credit Card Portfolio" for a
description of FIA's general policies and procedures for its credit card portfolio.
One or more other affiliates of FIA may provide complimentary technology, network and
operational support to Servicing Corp.
Mergers
On January 1, 2006, MBNA Corporation merged with Bank of America Corporation. As a result of
the merger, MBNA America Bank, National Association became an indirect subsidiary of Bank of America
Corporation. On June 10, 2006, MBNA America Bank, National Association changed its name to FIA Card
Services, National Association. On October 20, 2006, Bank of America, National Association (USA)
(referred to as BANA(USA)), an indirect subsidiary of Bank of America Corporation, merged with and into
FIA Card Services, National Association.
FIA's business may be adversely impacted by difficulties or delays in integrating the business
of Bank of America Corporation and BANA(USA) into FIA. FIA's businesses and practices may be adversely
impacted as a result of the mergers, including, but not limited to, servicing technology systems,
marketing, credit card origination and underwriting. It is also anticipated that certain of FIA's
businesses and practices may be changed, replaced or reorganized as a result of the mergers. See "FIA's
Credit Card Activities." See "Risk Factors—FIA may change the terms of the credit card accounts in a
way that reduces or slows collections. These changes may result in reduced, accelerated or delayed
payments to you."
Industry Developments
FIA issues credit cards on MasterCard's and Visa's networks. MasterCard and Visa are facing
significant litigation and increased competition. In 2003, MasterCard and Visa settled a suit by
Wal-Mart and other merchants who claimed that MasterCard and Visa unlawfully tied acceptance of debit
cards to acceptance of credit cards. Under the settlement MasterCard and Visa are required to, among
other things, allow merchants to accept MasterCard or Visa branded credit cards without accepting their
debit cards (and vice versa), reduce the prices charged to merchants for off-line signature debit
transactions for a period of time, and pay amounts totaling $3.05 billion into a settlement fund.
MasterCard and Visa are also parties to suits in various state courts mirroring the allegations brought
by Wal-Mart and the other merchants.
55
In October 2004, the United States Supreme Court let stand a federal court decision in a suit
brought by the U.S. Department of Justice, in which MasterCard and Visa rules prohibiting banks that
issue cards on MasterCard and Visa networks from issuing cards on other networks (the "association
rules") were found to have violated federal antitrust laws. This decision effectively permits banks that
issue cards on Visa's or MasterCard's networks, such as FIA and Bank of America Corporation's other
banking subsidiaries, to issue cards on competitor networks. Discover and American Express have
initiated separate civil lawsuits against MasterCard and Visa claiming substantial damages stemming from
the association rules. MasterCard and Visa are also parties to suits alleging that MasterCard's and
Visa's currency conversion practices are unlawful.
The costs associated with these and other matters could cause MasterCard and Visa to invest
less in their networks and marketing efforts and could adversely affect the interchange paid to their
member banks, including FIA.
Litigation
In June, August, September and November 2005, certain retail merchants filed numerous purported
class action lawsuits in federal courts, alleging that MasterCard and Visa and their member banks,
including FIA and BANA(USA), conspired to charge retailers excessive interchange in violation of federal
antitrust laws. In October 2005, certain of the lawsuits were consolidated in In Re: Payment Card Fee
and Merchant Discount Antitrust Litigation, in the U.S. District Court for the Eastern District of New
York. The plaintiffs seek unspecified treble damages, injunctive relief, attorney fees and costs.
On April 24, 2006, plaintiffs filed a first consolidated and amended putative class action
complaint re-alleging the claims in the original complaint and alleging, among other additional claims,
that defendants violated federal and California antitrust laws by combining to impose certain fees and
to adopt rules and practices of Visa and MasterCard that are alleged to constitute restraints of trade.
Plaintiffs filed a supplemental complaint alleging as additional claims (i) federal antitrust
claims arising out of MasterCard's initial public offering and (ii) a fraudulent conveyance claim under
New York Debtor and Creditor Law. Plaintiffs seek unspecified treble damages and injunctive relief.
The Bank of New York
The Bank of New York, a New York banking corporation, is the indenture trustee under the
indenture for the notes and the trustee under the master trust II agreement for the master trust II
investor certificates. Its principal corporate trust office is located at 101 Barclay Street, Floor 4
West, Attention: Corporate Trust Administration—Asset Backed Securities, New York, New York 10286. See
"The Indenture—Indenture Trustee" for a description of the limited powers and duties of the indenture
trustee and "Master Trust II—Master Trust II Trustee" for a description of the limited powers and duties
of the master trust II trustee.
The Bank of New York has and currently is serving as indenture trustee and trustee for numerous
securitization transactions and programs involving pools of credit card receivables.
56
The Bank of New York has provided the above information for purposes of complying with
Regulation AB. Other than the above two paragraphs, The Bank of New York has not participated in the
preparation of, and is not responsible for, any other information contained in this prospectus or the
accompanying prospectus supplement.
FIA, the servicer, Funding, the issuing entity, and their respective affiliates may from time
to time enter into normal banking and trustee relationships with The Bank of New York and its affiliates.
Wilmington Trust Company
Wilmington Trust Company, a Delaware banking corporation, is the owner trustee of the issuing
entity. Under the terms of the trust agreement, the powers and duties of the owner trustee are
ministerial only. See "—BA Credit Card Trust" above.
Wilmington Trust Company is a Delaware banking corporation with trust powers incorporated in
1903. Wilmington Trust Company's principal place of business is located at 1100 North Market Street,
Wilmington, Delaware 19890. Wilmington Trust Company has served as owner trustee in numerous
asset-backed securities transactions involving credit card receivables.
Wilmington Trust Company is subject to various legal proceedings that arise from time to time
in the ordinary course of business. Wilmington Trust Company does not believe that the ultimate
resolution of any of these proceedings will have a materially adverse effect on its services as owner
trustee.
Wilmington Trust Company has provided the above information for purposes of complying with
Regulation AB. Other than the above two paragraphs, Wilmington Trust Company has not participated in
the preparation of, and is not responsible for, any other information contained in this prospectus or
the accompanying prospectus supplement.
FIA, the servicer, Funding, the issuing entity, and their respective affiliates may from time
to time enter into normal banking and trustee relationships with Wilmington Trust Company and its
affiliates.
Use of Proceeds
The net proceeds from the sale of each series, class and tranche of notes offered hereby will
be paid to Funding. Funding will use such proceeds for its general corporate purposes.
The Notes
The notes will be issued pursuant to the indenture and a related indenture supplement. The
following discussion and the discussions under "The Indenture" in this prospectus and certain sections
in the related prospectus supplement summarize the material terms of the notes, the indenture and the
indenture supplements. These summaries do not purport to be complete and are qualified in their
entirety by reference to the provisions of the notes, the indenture and
57
the indenture supplements. The indenture does not limit the aggregate stated principal amount of
notes that may be issued.
The notes will be issued in series. Each series of notes will represent a contractual debt
obligation of the issuing entity which shall be in addition to the debt obligations of the issuing
entity represented by any other series of notes. Each series will be issued pursuant to the indenture
and an indenture supplement, copies of the forms of which are filed as exhibits to the registration
statement of which this prospectus is a part. Each prospectus supplement will describe the provisions
specific to the related series, class or tranche of notes.
The following summaries describe certain provisions common to each series of notes.
General
Each series of notes is expected to consist of multiple classes of notes. Some series, if so
specified in the accompanying prospectus supplement, may be multiple tranche series, meaning they have
classes consisting of multiple tranches. Whenever a "class" of notes is referred to in this prospectus
or any prospectus supplement, it also includes all tranches of that class, unless the context otherwise
requires.
The issuing entity may issue different tranches of notes of a multiple tranche series at the
same time or at different times, but no senior tranche of notes of a series may be issued unless a
sufficient amount of subordinated notes (or other form of credit enhancement) of that series will be
issued on that date or has previously been issued and is outstanding and available as subordination (or
other credit enhancement) for such senior tranche of notes. See "—Required Subordinated Amount."
If so specified in the related prospectus supplement, the notes of a series may be included in
a group of series for purposes of sharing Available Principal Amounts and Available Funds.
The issuing entity may offer notes denominated in U.S. dollars or any foreign currency. We
will describe the specific terms of any note denominated in a foreign currency in the related prospectus
supplement.
If so specified in the related prospectus supplement, the noteholders of a particular series,
class or tranche may have the benefit of a derivative agreement, as described in this prospectus under
"Sources of Funds to Pay the Notes—Derivative Agreements." The specific terms of each derivative
agreement and a description of each counterparty will be included in the related prospectus supplement.
In addition, if so specified in the related prospectus supplement, the noteholders of a particular
series, class or tranche may have the benefit of a supplemental credit enhancement agreement or
supplemental liquidity agreement, as described in this prospectus under "Sources of Funds to Pay the
Notes—Supplemental Credit Enhancement Agreements and Supplemental Liquidity Agreements." The specific
terms of each such agreement and a description of any provider of enhancement or liquidity will be
included in the related prospectus supplement.
The issuing entity will pay principal of and interest on a series, class or tranche of notes
solely from the portion of Available Funds and Available Principal Amounts which are allocable
58
to that series, class or tranche of notes after giving effect to all allocations and reallocations, amounts in
any issuing entity accounts relating to that series, class or tranche of notes, and amounts received
under any derivative agreement relating to that series, class or tranche of notes. If those sources are
not sufficient to pay the notes, those noteholders will have no recourse to any other assets of the
issuing entity or any other person or entity for the payment of principal of or interest on those notes.
Holders of notes of any outstanding series, class or tranche will not have the right to prior
review of, or consent to, any subsequent issuance of notes.
The BAseries
The BAseries notes will be issued pursuant to the indenture and an indenture supplement. The
BAseries will be included in Excess Available Funds Group A for the purpose of sharing excess available
funds.
The BAseries notes will be issued in classes. Each class of notes will have multiple tranches
which may be issued at different times and have different terms. No senior class of the BAseries may be
issued unless a sufficient amount of subordinated notes or other acceptable credit enhancement has
previously been issued and is outstanding. See "—Required Subordinated Amount—BAseries" and "—Issuances
of New Series, Classes and Tranches of Notes—New Issuances of BAseries Notes" below.
The issuing entity will pay principal of and interest on a tranche of BAseries notes solely
from the portion of BAseries Available Funds and BAseries Available Principal Amounts and from other
amounts which are available under the indenture and the BAseries indenture supplement after giving
effect to all allocations and reallocations. If those sources are not sufficient to pay that tranche of
BAseries notes, the noteholders of that tranche of BAseries notes will have no recourse to any other
assets of the issuing entity or any other person or entity for the payment of principal of or interest
on those notes.
Interest
Interest will accrue on the notes, except on discount notes, from the relevant issuance date at
the applicable note rate, which may be a fixed, floating or other type of rate as specified in the
accompanying prospectus supplement. Interest will be distributed or deposited for noteholders on the
dates described in the related prospectus supplement. Interest payments or deposits will be funded from
Available Funds allocated to the notes during the preceding month or months, from any applicable credit
enhancement, if necessary, and from certain other amounts specified in the accompanying prospectus
supplement.
For each issuance of fixed rate notes, we will designate in the related prospectus supplement
the fixed rate of interest at which interest will accrue on those notes. For each issuance of floating
rate notes, we will designate in the related prospectus supplement the interest rate index or other
formula on which the interest is based. A discount note will be issued at a price lower than the stated
principal amount payable on the expected principal payment date of that note. Until the expected
principal payment date for a discount note, accreted principal will be capitalized as part of the
principal of the note and reinvested in the collateral certificate, so
59
long as an early redemption event or an event of default and acceleration has not occurred. If applicable, the related prospectus
supplement will specify the interest rate to be borne by a discount note after an event of default or
after its expected principal payment date.
Each payment of interest on a note will include all interest accrued from the preceding
interest payment date—or, for the first interest period, from the issuance date—through the day
preceding the current interest payment date, or any other period as may be specified in the related
prospectus supplement. We refer to each period during which interest accrues as an "interest period."
Interest on a note will be due and payable on each interest payment date.
If interest on a note is not paid within 35 days after such interest is due, an event of
default will occur relating to that tranche of notes. See "The Indenture—Events of Default."
BAseries
In connection with the BAseries, interest payments on Class B notes and Class C notes of the
BAseries are subordinated to interest payments on Class A notes of the BAseries. Subordination of Class
B notes and Class C notes of the BAseries provides credit enhancement for Class A notes of the BAseries.
Interest payments on Class C notes of the BAseries are subordinated to interest payments on
Class A notes and Class B notes of the BAseries. Subordination of Class C notes of the
BAseries provides credit enhancement for Class A notes and Class B notes of the BAseries.
Principal
The timing of payment of principal of a note will be specified in the related prospectus
supplement.
Principal of a note may be paid later than its expected principal payment date if sufficient
funds are not allocated from master trust II to the collateral certificate or are not allocable to the
series, class or tranche of the note to be paid. It is not an event of default if the principal of a
note is not paid on its expected principal payment date. However, if the principal amount of a note is
not paid in full by its legal maturity date, an event of default will occur relating to that tranche of
notes. See "The Indenture—Events of Default."
Principal of a note may be paid earlier than its expected principal payment date if an early
redemption event or an event of default and acceleration occurs. See "The Indenture—Early Redemption
Events" and "—Events of Default."
See "Risk Factors" in this prospectus and any risk factors in the accompanying prospectus
supplement for a discussion of factors that may affect the timing of principal payments on the notes.
BAseries
In connection with the BAseries, principal payments on Class B notes and Class C notes of the
BAseries are subordinated to payments on Class A notes of the BAseries. Subordination
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of Class B notes and Class C notes of the BAseries provides credit enhancement for Class A notes of the BAseries.
Principal payments on Class C notes of the BAseries are subordinated to payments on Class A
notes and Class B notes of the BAseries. Subordination of Class C notes of the BAseries provides credit
enhancement for Class A notes and Class B notes of the BAseries.
In addition, in the case of a discount BAseries note, the accreted principal of that note
corresponding to capitalized interest will be senior or subordinated to the same extent that principal
is senior or subordinated.
BAseries Available Principal Amounts may be reallocated to pay interest on senior classes of
notes or to pay a portion of the master trust II servicing fee allocable to the BAseries, subject to
certain limitations. In addition, charge-offs due to uncovered defaults on principal receivables in
master trust II allocable to the BAseries generally are reallocated from the senior classes to the
subordinated classes of the BAseries. See "—Stated Principal Amount, Outstanding Dollar Principal
Amount and Nominal Liquidation Amount—Nominal Liquidation Amount" and "Master Trust II—Defaulted
Receivables; Rebates and Fraudulent Charges."
In the BAseries, payment of principal may be made on a subordinated class of notes before
payment in full of each senior class of notes only under the following circumstances:
o If after giving effect to the proposed principal payment there is still a sufficient amount
of subordinated notes to support the outstanding senior notes. See "Sources of Funds to
Pay the Notes—Deposit and Application of Funds for the BAseries—Targeted Deposits of
BAseries Available Principal Amounts to the Principal Funding Account" and "—Allocation to
Principal Funding Subaccounts." For example, if a tranche of Class A notes has been
repaid, this generally means that, unless other Class A notes are issued, at least some
Class B notes and Class C notes may be repaid when such Class B notes and Class C notes are
expected or required to be repaid even if other tranches of Class A notes are outstanding.
o If the principal funding subaccounts for the senior classes of notes have been sufficiently
prefunded as described in "Sources of Funds to Pay the Notes—Deposit and Application of
Funds for the BAseries—Targeted Deposits of BAseries Available Principal Amounts to the
Principal Funding Account—Prefunding of the Principal Funding Account for Senior Classes."
o If new tranches of subordinated notes are issued so that the subordinated notes that have
reached their expected principal payment date are no longer necessary to provide the
required subordination.
o If the subordinated tranche of notes reaches its legal maturity date and there is a sale of
credit card receivables as described in "Sources of Funds to Pay the Notes—Sale of Credit
Card Receivables."
BAseries Available Principal Amounts remaining after any reallocations for interest on the
senior notes or for a portion of the master trust II servicing fee allocable to the BAseries will
61
be applied to make targeted deposits to the principal funding subaccounts of senior notes before being
applied to make targeted deposits to the principal funding subaccounts of the subordinated notes if such
remaining amounts are not sufficient to make all required targeted deposits.
Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal Liquidation Amount
Each note has a stated principal amount, an outstanding dollar principal amount and a nominal
liquidation amount.
Stated Principal Amount
The stated principal amount of a note is the amount that is stated on the face of the notes to
be payable to the holder. It can be denominated in U.S. dollars or in a foreign currency.
Outstanding Dollar Principal Amount
For U.S. dollar notes (other than discount notes), the outstanding dollar principal amount is
the initial dollar principal amount (as set forth in the applicable supplement to this prospectus) of
the notes, less principal payments to the noteholders. For foreign currency notes, the outstanding
dollar principal amount is the U.S. dollar equivalent of the initial dollar principal amount (as set
forth in the applicable supplement to this prospectus) of the notes, less dollar payments to derivative
counterparties or, in the event the derivative agreement is non-performing, less dollar payments
converted to make payments to noteholders, each relating to principal. For discount notes, the
outstanding dollar principal amount is an amount stated in, or determined by a formula described in, the
related prospectus supplement. The outstanding dollar principal amount of a discount note will increase
over time as principal accretes. The outstanding dollar principal amount of any note will decrease as a
result of each payment of principal of the note.
In addition, a note may have an Adjusted Outstanding Dollar Principal Amount. The Adjusted
Outstanding Dollar Principal Amount of a note is the outstanding dollar principal amount, less any funds
on deposit in the principal funding subaccount for that note. The Adjusted Outstanding Dollar Principal
Amount of any note will decrease as a result of each deposit into the principal funding subaccount for
such note.
Nominal Liquidation Amount
The nominal liquidation amount of a note is a U.S. dollar amount based on the initial
outstanding dollar principal amount of that note, but with some reductions—including reductions from
reallocations of Available Principal Amounts, allocations of charge-offs for uncovered defaults
allocable to the collateral certificate and deposits in a principal funding subaccount for such note—and
increases described below. The aggregate nominal liquidation amount of all of the notes will always be
equal to the Investor Interest of the collateral certificate, and the nominal liquidation amount of any
particular note corresponds to the portion of the Investor Interest of the collateral certificate that
would be allocated to that note if master trust II were liquidated.
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The nominal liquidation amount of a note may be reduced as follows:
o If Available Funds allocable to a series of notes are insufficient to fund the portion of
defaults on principal receivables in master trust II allocable to such series of notes
(which will be allocated to each series of notes pro rata based on the Weighted Average
Available Funds Allocation Amount of all notes in such series) such uncovered defaults will
result in a reduction of the nominal liquidation amount of such series. Within each
series, subordinated classes of notes will bear the risk of reduction in their nominal
liquidation amount due to charge-offs resulting from uncovered defaults before senior
classes of notes.
In a multiple tranche series, while these reductions will be initially allocated pro rata
to each tranche of notes, they will then be reallocated to the subordinated classes of
notes in that series in succession, beginning with the most subordinated classes. However,
these reallocations will be made from senior notes to subordinated notes only to the extent
that such senior notes have not used all of their required subordinated amount. For any
tranche, the required subordinated amount will be specified in the related prospectus
supplement. For multiple tranche series, these reductions will generally be allocated
within each class pro rata to each outstanding tranche of the related class based on the
Weighted Average Available Funds Allocation Amount of such tranche. Reductions that cannot
be reallocated to a subordinated tranche will reduce the nominal liquidation amount of the
tranche to which the reductions were initially allocated.
o If Available Principal Amounts are reallocated from subordinated notes of a series to pay
interest on senior notes, any shortfall in the payment of the master trust II servicing fee
or any other shortfall of Available Funds which Available Principal Amounts are reallocated
to cover, the nominal liquidation amount of those subordinated notes will be reduced by the
amount of the reallocations. The amount of the reallocation of Available Principal Amounts
will be applied to reduce the nominal liquidation amount of the subordinated classes of
notes in that series in succession, to the extent of such senior tranches' required
subordinated amount of the related subordinated notes, beginning with the most subordinated
classes. No Available Principal Amounts will be reallocated to pay interest on a senior
class of notes or any portion of the master trust II servicing fee if such reallocation
would result in the reduction of the nominal liquidation amount of such senior class of
notes. For a multiple tranche series, these reductions will generally be allocated within
each class pro rata to each outstanding tranche of the related class based on the Weighted
Average Available Funds Allocation Amount of such tranche.
o The nominal liquidation amount of a note will be reduced by the amount on deposit in its
respective principal funding subaccount.
o The nominal liquidation amount of a note will be reduced by the amount of all payments of
principal of that note.
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o Upon a sale of credit card receivables after the insolvency of Funding, an event of default
and acceleration or on the legal maturity date of a note, the nominal liquidation amount of
such note will be automatically reduced to zero. See "Sources of Funds to Pay the
Notes—Sale of Credit Card Receivables."
The nominal liquidation amount of a note can be increased in two ways.
o For discount notes, the nominal liquidation amount will increase over time as principal
accretes, to the extent that Available Funds are allocated for that purpose.
o If Available Funds are available, they will be applied to reimburse earlier reductions in
the nominal liquidation amount from charge-offs for uncovered defaults on principal
receivables in master trust II, or from reallocations of Available Principal Amounts from
subordinated classes to pay shortfalls of Available Funds. Within each series, the
increases will be allocated first to the senior-most class with a deficiency in its nominal
liquidation amount and then, in succession, to the subordinated classes with a deficiency
in the nominal liquidation amount. In a multiple tranche series, the increases will be
further allocated to each tranche of a class pro rata based on the deficiency in the
nominal liquidation amount in each tranche.
In most circumstances, the nominal liquidation amount of a note, together with any accumulated
Available Principal Amounts held in a principal funding subaccount, will be equal to the outstanding
dollar principal amount of that note. However, if there are reductions in the nominal liquidation
amount as a result of reallocations of Available Principal Amounts from that note to pay interest on
senior classes or the master trust II servicing fee, or as a result of charge-offs for uncovered
defaults on principal receivables in master trust II allocable to the collateral certificate, there will
be a deficit in the nominal liquidation amount of that note. Unless that deficiency is reimbursed
through the reinvestment of Available Funds in the collateral certificate, the stated principal amount
of that note will not be paid in full.
A subordinated note's nominal liquidation amount represents the maximum amount of Available
Principal Amounts that may be reallocated from such note to pay interest on senior notes or the master
trust II servicing fee of the same series and the maximum amount of charge-offs for uncovered defaults
on the principal receivables in master trust II that may be allocated to such note. The nominal
liquidation amount is also used to calculate the amount of Available Principal Amounts that can be
allocated for payment of principal of a class or tranche of notes, or paid to the counterparty to a
derivative agreement, if applicable. This means that if the nominal liquidation amount of a class or
tranche of notes has been reduced by charge-offs for uncovered defaults on principal receivables in
master trust II or by reallocations of Available Principal Amounts to pay interest on senior notes or
the master trust II servicing fee, the holders of notes with the reduced nominal liquidation amount will
receive less than the full stated principal amount of their notes, either because the amount of dollars
allocated to pay them is less than the outstanding dollar principal amount of the notes, or because the
amount of dollars allocated to pay the counterparty to a derivative agreement is less than the amount
necessary to obtain enough of the applicable foreign currency for payment of their notes in full.
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The nominal liquidation amount of a note may not be reduced below zero, and may not be
increased above the outstanding dollar principal amount of that note, less any amounts on deposit in the
applicable principal funding subaccount.
If a note held by Funding, the issuing entity or any of their affiliates is canceled, the
nominal liquidation amount of that note is automatically reduced to zero, with a corresponding automatic
reduction in the Investor Interest of the collateral certificate.
The cumulative amount of reductions of the nominal liquidation amount of any class or tranche
of notes due to the reallocation of Available Principal Amounts to pay Available Funds shortfalls will
be limited as described in the related prospectus supplement.
Allocations of charge-offs for uncovered defaults on principal receivables in master trust II
and reallocations of Available Principal Amounts to cover Available Funds shortfalls reduce the nominal
liquidation amount of outstanding notes only and do not affect notes that are issued after that time.
Final Payment of the Notes
Noteholders will not receive payment of principal in excess of the highest outstanding dollar
principal amount of that series, class or tranche, or in the case of foreign currency notes, any amount
received by the issuing entity under a derivative agreement for principal.
Following the insolvency of Funding, following an event of default and acceleration, or on the
legal maturity date of a series, class or tranche of notes, credit card receivables in an aggregate
amount not to exceed the nominal liquidation amount, plus any past due, accrued and additional interest,
of the related series, class or tranche will be sold by master trust II. The proceeds of such sale will
be applied to the extent available to pay the outstanding principal amount of, plus any accrued, past
due and additional interest on, those notes on the date of the sale.
A series, class or tranche of notes will be considered to be paid in full, the holders of those
notes will have no further right or claim, and the issuing entity will have no further obligation or
liability for principal or interest, on the earliest to occur of:
o the date of the payment in full of the stated principal amount of and all accrued, past due
and additional interest on those notes;
o the date on which the outstanding dollar principal amount of the notes is reduced to zero
and all accrued, past due and additional interest on those notes is paid in full;
o the legal maturity date of those notes, after giving effect to all deposits, allocations,
reallocations, sale of credit card receivables and payments to be made on that date; or
o the date on which a sale of receivables has taken place for such tranche, as described in
"Sources of Funds to Pay the Notes—Sale of Credit Card Receivables."
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Subordination of Interest and Principal
Interest and principal payments on subordinated classes of notes of a series may be
subordinated as described in the related prospectus supplement.
Available Principal Amounts may be reallocated to pay interest on senior classes of notes of,
or a portion of the master trust II servicing fee allocated to, that series. In addition, subordinated
classes of notes bear the risk of reduction in their nominal liquidation amount due to charge-offs for
uncovered defaults on principal receivables in master trust II before senior classes of notes. In a
multiple tranche series, charge-offs from uncovered defaults on principal receivables in master trust II
are generally allocated first to each class of a series and then reallocated to the subordinated classes
of such series, reducing the nominal liquidation amount of such subordinated classes to the extent
credit enhancement in the form of subordination is still available for the senior classes. See "—Stated
Principal Amount, Outstanding Dollar Principal Amount and Nominal Liquidation Amount—Nominal Liquidation
Amount" above.
Required Subordinated Amount
The required subordinated amount of a senior class or tranche of notes is the amount of a
subordinated class that is required to be outstanding and available to provide subordination for that
senior class or tranche on the date when the senior class or tranche of notes is issued. Such amount
will be specified in the applicable prospectus supplement. No notes of a series may be issued unless
the required subordinated amount for that class or tranche of notes is available at the time of its
issuance, as described in the related prospectus supplement. The required subordinated amount is also
used, in conjunction with usage, to determine whether a subordinated class or tranche of a multiple
tranche series may be repaid before its legal maturity date while senior notes of that series are
outstanding.
The issuing entity may change the required subordinated amount for any tranche of notes at any
time, without the consent of any noteholders, so long as the issuing entity has (i) received
confirmation from the rating agencies that have rated any outstanding notes of the related series that
the change in the required subordinated amount will not result in the reduction, qualification or
withdrawal of the ratings of any outstanding notes in that series, and (ii) delivered to the indenture
trustee and the rating agencies a master trust II tax opinion and issuing entity tax opinion, as
described under "The Indenture—Tax Opinions for Amendments."
BAseries
In order to issue notes of a senior class of the BAseries, the required subordinated amount of
subordinated notes for those senior notes must be outstanding and available on the issuance date.
The required subordinated amount of a tranche of a senior class of notes of the BAseries is the
aggregate nominal liquidation amount of a subordinated class that is required to be outstanding and
available on the date when a tranche of a senior class of notes is issued. Generally, the required
subordinated amount of subordinated notes for each tranche of Class A BAseries notes is equal to a
stated percentage of the Adjusted Outstanding Dollar Principal Amount of that tranche of Class A notes.
The required subordinated amount of Class B notes for
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each tranche of Class A BAseries notes is equal to
8.72093% of the Adjusted Outstanding Dollar Principal Amount of that tranche of Class A notes, and the
required subordinated amount of Class C notes is equal to 7.55814% of the Adjusted Outstanding Dollar
Principal Amount of that tranche of Class A notes.
Similarly, the required subordinated amount of Class C notes for each tranche of Class B
BAseries notes is generally equal to a stated percentage of its Adjusted Outstanding Dollar Principal
Amount. However, the required subordinated amount of Class C notes for any tranche of Class B
BAseries notes may be adjusted to reflect its pro rata share of the portion of the Adjusted Outstanding
Dollar Principal Amount of all Class B BAseries notes which is not providing credit enhancement to the
Class A notes. The required subordinated amount of Class C notes for each tranche of Class B
BAseries notes, at any time, is generally equal to the sum of:
(i) an amount equal to 8.10811% (referred to as the unencumbered percentage) of that
tranche's pro rata share of the excess, if any, of the aggregate Adjusted Outstanding
Dollar Principal Amount of all Class B BAseries notes over the required subordinated
amount of Class B notes for all Class A BAseries notes; and
(ii) an amount equal to 100% (referred to as the encumbered percentage) of the remainder of
the Adjusted Outstanding Dollar Principal Amount of that tranche of Class B notes.
Therefore, for any tranche of Class B notes, the percentage used to calculate the required
subordinated amount will increase (but will never exceed 100%) if the share of that tranche of Class B
notes that is providing credit enhancement to Class A BAseries notes increases; and decrease (but will
never be less than 8.10811%) if the share of that tranche of Class B notes that is providing credit
enhancement to Class A BAseries notes decreases.
For example, if the Adjusted Outstanding Dollar Principal Amount of all Class B BAseries notes
is equal to the required subordinated amount of Class B notes for all Class A BAseries notes, then the
required subordinated amount of Class C notes for any tranche of Class B BAseries notes will be equal to
100% of the Adjusted Outstanding Dollar Principal Amount of that tranche of Class B notes. Similarly,
if the required subordinated amount of Class B notes for all Class A BAseries notes is equal to zero,
then the required subordinated amount of Class C notes for any tranche of Class B BAseries notes will be
equal to 8.10811% of the Adjusted Outstanding Dollar Principal Amount of that tranche of Class B notes.
Reductions in the Adjusted Outstanding Dollar Principal Amount of a tranche of senior notes of
the BAseries will generally result in a reduction in the required subordinated amount for that tranche.
Additionally, a reduction in the required subordinated amount of Class C notes for a tranche of Class B
BAseries notes may occur due to:
o a decrease in the aggregate Adjusted Outstanding Dollar Principal Amount of Class A
BAseries notes,
o a decrease in the Class A required subordinated amount of Class B notes for outstanding
tranches of Class A BAseries notes, or
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o the issuance of additional Class B BAseries notes;
any of which would reduce the amount of credit enhancement provided by an individual tranche of Class B
BAseries notes to the Class A BAseries notes. However, if an early redemption event or event of default
and acceleration for any tranche of Class B BAseries notes occurs, or if on any day its usage of the
required subordinated amount of Class C notes exceeds zero, the required subordinated amount of Class C
notes for that tranche of Class B notes will not decrease after that early redemption event or event of
default and acceleration or after the date on which its usage of the required subordinated amount of
Class C notes exceeds zero.
The issuing entity may change the required subordinated amount for any tranche of notes of the
BAseries, or the method of computing the required subordinated amount, at any time without the consent
of any noteholders so long as the issuing entity has:
o received confirmation from each rating agency that has rated any outstanding notes that the
change will not result in the reduction, qualification or withdrawal of its then-current
rating of any outstanding notes in the BAseries;
o delivered an opinion of counsel that for federal income tax purposes (1) the change will
not adversely affect the tax characterization as debt of any outstanding series or class of
investor certificates issued by master trust II that were characterized as debt at the time
of their issuance, (2) following the change, master trust II will not be treated as an
association, or a publicly traded partnership, taxable as a corporation, and (3) such
change will not cause or constitute an event in which gain or loss would be recognized by
any holder of an investor certificate issued by master trust II; and
o delivered an opinion of counsel that for federal income tax purposes (1) the change will
not adversely affect the tax characterization as debt of any outstanding series, class or
tranche of notes of the issuing entity that were characterized as debt at the time of their
issuance, (2) following the change, the issuing entity will not be treated as an
association, or publicly traded partnership, taxable as a corporation, and (3) such change
will not cause or constitute an event in which gain or loss would be recognized by any
holder of such notes.
In addition, the percentages used in, or the method of calculating, the required subordinated amount of
subordinated notes of any tranche of BAseries notes (including other tranches in the same class) may be
different than the percentages used in, or the method of calculating, the required subordinated amounts
for any tranche of a senior class of BAseries notes. In addition, if the rating agencies consent and
without the consent of any noteholders, the issuing entity may utilize forms of credit enhancement other
than subordinated notes in order to provide senior classes of notes with the required credit enhancement.
In order to issue Class A notes, the issuing entity must calculate the available amount of
Class B notes and Class C notes. The issuing entity will first calculate the amount of Class B notes
available for such new tranche of Class A notes. This is done by computing the following:
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o the aggregate nominal liquidation amount of all tranches of outstanding Class B notes on
that date, after giving effect to any issuances, deposits, allocations, reallocations or
payments for Class B notes to be made on that date; minus
o the aggregate amount of the Class A required subordinated amount of Class B notes for all
other Class A notes which are outstanding on that date, after giving effect to any
issuances, deposits, allocations, reallocations or payments for Class A notes to be made on
that date.
The calculation in the prior paragraph will also be made in the same manner for calculating the
amount of Class C notes available for Class A notes.
Additionally, in order to issue Class A notes, the issuing entity must calculate the amount of
Class C notes available for Class B notes. This is done by computing the following:
o the aggregate nominal liquidation amount of all tranches of outstanding Class C notes on
that date, after giving effect to any issuances, deposits, allocations, reallocations or
payments for Class C notes to be made on that date; minus
o the aggregate amount of the Class A required subordinated amount of Class C notes for all
tranches of Class A notes for which the Class A required subordinated amount of Class B
notes is equal to zero which are outstanding on that date, after giving effect to any
issuances, deposits, allocations, reallocations or payments for Class A notes to be made on
that date.
In order to issue Class B notes, the issuing entity must calculate the available amount of
Class C notes. This is done by computing the following:
o the aggregate nominal liquidation amount of all tranches of Class C notes which are
outstanding on that date, after giving effect to any issuances, deposits, allocations,
reallocations or payments for Class C notes to be made on that date; minus
o the sum of:
— the aggregate amount of the Class B required subordinated amount of Class C
notes for all other tranches of Class B notes which are outstanding on that
date, after giving effect to any issuances, deposits, allocations,
reallocations or payments for any BAseries notes to be made on that date; plus
— the aggregate amount of the Class A required subordinated amount of Class C
notes for all tranches of Class A notes for which the Class A required
subordinated amount of Class B notes is equal to zero which are outstanding on
that date, after giving effect to any issuances, deposits, allocations,
reallocations or payments for those Class A notes to be made on that date.
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No payment of principal will be made on any Class B BAseries note unless, following the
payment, the remaining available subordinated amount of Class B BAseries notes is at least equal to the
required subordinated amount of Class B notes for the outstanding Class A BAseries notes less any usage
of the required subordinated amount of Class B notes for the outstanding Class A BAseries notes.
Similarly, no payment of principal will be made on any Class C BAseries note unless, following the
payment, the remaining available subordinated amount of Class C BAseries notes is at least equal to the
required subordinated amount of Class C notes for the outstanding Class A and Class B BAseries notes
less any usage of the required subordinated amount of Class C notes for the outstanding Class A and
Class B BAseries notes.
However, there are some exceptions to this rule. In the BAseries, payment of principal may be
made on a subordinated class of notes before payment in full of each senior class of notes only under
the following circumstances:
o If after giving effect to the proposed principal payment there is still a sufficient amount
of subordinated notes to support the outstanding senior notes. See "Sources of Funds to
Pay the Notes—Deposit and Application of Funds for the BAseries—Targeted Deposits of
BAseries Available Principal Amounts to the Principal Funding Account" and "—Allocation to
Principal Funding Subaccounts." For example, if a tranche of Class A notes has been
repaid, this generally means that, unless other Class A notes are issued, at least some
Class B notes and Class C notes may be repaid when they are expected to be repaid even if
other tranches of Class A notes are outstanding.
o If the principal funding subaccounts for the senior classes of notes have been sufficiently
prefunded as described in "Sources of Funds to Pay the Notes—Deposit and Application of
Funds for the BAseries—Targeted Deposits of BAseries Available Principal Amounts to the
Principal Funding Account—Prefunding of the Principal Funding Account for Senior Classes."
o If new tranches of subordinated notes are issued so that the subordinated notes that have
reached their expected principal payment date are no longer necessary to provide the
required subordination.
o If the subordinated tranche of notes reaches its legal maturity date and there is a sale of
credit card receivables as described in "Sources of Funds to Pay the Notes—Sale of Credit
Card Receivables."
Early Redemption of Notes
Each series, class and tranche of notes will be subject to mandatory redemption on its expected
principal payment date, which will generally be 29 months before its legal maturity date. In addition,
if any other early redemption event occurs, the issuing entity will be required to redeem each series,
class or tranche of the affected notes before the expected principal payment date of that series, class
or tranche of notes; however, for any such affected notes with the benefit of a derivative agreement,
subject to certain exceptions, such redemption will not occur earlier than such notes' expected
principal payment date if so specified in the
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accompanying prospectus supplement. The issuing entity
will give notice to holders of the affected notes before an early redemption date. See "The
Indenture—Early Redemption Events" for a description of the early redemption events and their
consequences to noteholders.
Whenever the issuing entity redeems a series, class or tranche of notes, it will do so only to
the extent of Available Funds and Available Principal Amounts allocated to that series, class or tranche
of notes, and only to the extent that the notes to be redeemed are not required to provide required
subordination for senior notes. A noteholder will have no claim against the issuing entity if the
issuing entity fails to make a required redemption of notes before the legal maturity date because no
funds are available for that purpose or because the notes to be redeemed are required to provide
subordination for senior notes. The failure to redeem before the legal maturity date under these
circumstances will not be an event of default.
If so specified in the accompanying prospectus supplement, the transferor, so long as it is an
affiliate of the servicer, may direct the issuing entity to redeem the notes of any series, class or
tranche before its expected principal payment date. The accompanying prospectus supplement will
indicate at what times and under what conditions the issuing entity may exercise that right of
redemption and if the redemption may be made in whole or in part, as well as other terms of the
redemption. The issuing entity will give notice to holders of the affected notes before any optional
redemption date.
Issuances of New Series, Classes and Tranches of Notes
The issuing entity may issue new notes of any series, class or tranche only if the conditions
of issuance are met (or waived as described below). These conditions include:
o first, on or before the third Business Day before a new issuance of notes, the issuing
entity gives the indenture trustee and the rating agencies written notice of the issuance;
o second, on or prior to the date that the new issuance is to occur, the issuing entity
delivers to the indenture trustee and each rating agency a certificate to the effect that:
— the issuing entity reasonably believes that the new issuance will not at the time of
its occurrence or at a future date (i) cause an early redemption event or event of
default, (ii) adversely affect the amount of funds available to be distributed to
noteholders of any series, class or tranche of notes or the timing of such
distributions, or (iii) adversely affect the security interest of the indenture
trustee in the collateral securing the outstanding notes;
— all instruments furnished to the indenture trustee conform to the requirements of the
indenture and constitute sufficient authority under the indenture for the indenture
trustee to authenticate and deliver the notes;
— the form and terms of the notes have been established in conformity with the
provisions of the indenture;
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— all laws and requirements relating to the execution and delivery by the issuing entity
of the notes have been complied with, the issuing entity has the power and authority
to issue the notes, and the notes have been duly authorized and delivered by the
issuing entity, and, assuming due authentication and delivery by the indenture
trustee, constitute legal, valid and binding obligations of the issuing entity
enforceable in accordance with their terms (subject to certain limitations and
conditions), and are entitled to the benefits of the indenture equally and ratably
with all other notes, if any, of such series, class or tranche outstanding subject to
the terms of the indenture, each indenture supplement and each terms document; and
— the issuing entity shall have satisfied such other matters as the indenture trustee
may reasonably request;
o third, the issuing entity delivers to the indenture trustee and the rating agencies an
opinion of counsel that for federal income tax purposes (i) the new issuance will not
adversely affect the tax characterization as debt of any outstanding series or class of
investor certificates issued by master trust II that were characterized as debt at the time
of their issuance, (ii) following the new issuance, master trust II will not be treated as
an association, or a publicly traded partnership, taxable as a corporation, and (iii) the
new issuance will not cause or constitute an event in which gain or loss would be
recognized by any holder of an investor certificate issued by master trust II;
o fourth, the issuing entity delivers to the indenture trustee and the rating agencies an
opinion of counsel that for federal income tax purposes (i) the new issuance will not
adversely affect the tax characterization as debt of any outstanding series, class or
tranche of notes that were characterized as debt at the time of their issuance,
(ii) following the new issuance, the issuing entity will not be treated as an association,
or publicly traded partnership, taxable as a corporation, (iii) such issuance will not
cause or constitute an event in which gain or loss would be recognized by any holder of
such outstanding notes, and (iv) except as provided in the related indenture supplement,
following the new issuance of a series, class or tranche of notes, the newly issued series,
class or tranche of notes will be properly characterized as debt;
o fifth, the issuing entity delivers to the indenture trustee an indenture supplement and
terms document relating to the applicable series, class or tranche of notes;
o sixth, no Pay Out Event with respect to the collateral certificate has occurred or is
continuing as of the date of the new issuance;
o seventh, in the case of foreign currency notes, the issuing entity appoints one or more
paying agents in the appropriate countries;
o eighth, each rating agency that has rated any outstanding notes has provided confirmation
that the new issuance of notes will not cause a reduction, qualification or withdrawal of
the ratings of any outstanding notes rated by that rating agency;
o ninth, the provisions governing required subordinated amounts are satisfied; and
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o tenth, any other conditions in the accompanying prospectus supplement are satisfied.
If the issuing entity obtains confirmation from each rating agency that has rated any
outstanding notes that the issuance of a new series, class or tranche of notes will not cause a
reduction, qualification or withdrawal of the ratings of any outstanding notes rated by that rating
agency, then any of the conditions described above (other than the third, fourth and fifth conditions)
may be waived.
The issuing entity and the indenture trustee are not required to provide prior notice to,
permit any prior review by, or obtain the consent of any noteholder of any series, class or tranche to
issue any additional notes of any series, class or tranche.
There are no restrictions on the timing or amount of any additional issuance of notes of an
outstanding tranche of a multiple tranche series, so long as the conditions described above are met or
waived. As of the date of any additional issuance of an outstanding tranche of notes, the stated
principal amount, outstanding dollar principal amount and nominal liquidation amount of that tranche
will be increased to reflect the principal amount of the additional notes. If the additional notes are
a tranche of notes that has the benefit of a derivative agreement, the issuing entity will enter into a
derivative agreement for the benefit of the additional notes. The targeted deposits, if any, to the
principal funding subaccount will be increased proportionately to reflect the principal amount of the
additional notes.
The issuing entity may from time to time, without notice to, or the consent of, the registered
holders of a series, class or tranche of notes, create and issue additional notes equal in rank to the
series, class or tranche of notes offered by the accompanying prospectus supplement in all respects—or
in all respects except for the payment of interest accruing prior to the issue date of the further
series, class or tranche of notes or the first payment of interest following the issue date of the
further series, class or tranche of notes. These further series, classes or tranches of notes may be
consolidated and form a single series, class or tranche with the previously issued notes and will have
the same terms as to status, redemption or otherwise as the previously issued series, class or tranche
of notes. In addition, FIA or an affiliate may retain notes of a series, class or tranche upon initial
issuance or upon a reopening of a series, class or tranche of notes and may sell them on a subsequent
date.
When issued, the additional notes of a tranche will be identical in all material respects to
the other outstanding notes of that tranche and equally and ratably entitled to the benefits of the
indenture and the related indenture supplement applicable to such notes as the other outstanding notes
of that tranche without preference, priority or distinction.
New Issuances of BAseries Notes
The issuing entity may issue new classes and tranches of BAseries notes (including additional
notes of an outstanding tranche or class), so long as:
o the conditions to issuance listed above are satisfied;
o any increase in the targeted deposit amount of any Class C reserve subaccount caused by
such issuance will have been funded on or prior to such issuance date; and
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o in the case of Class A or Class B BAseries notes, the required subordinated amount is
available at the time of its issuance.
See "—Required Subordinated Amount" above and "Sources of Funds to Pay the Notes—Deposit and Application
of Funds for the BAseries—Targeted Deposits to the Class C Reserve Account."
The issuing entity and the indenture trustee are not required to provide prior notice to or
obtain the consent of any noteholder of any series, class or tranche to issue any additional
BAseries notes.
Payments on Notes; Paying Agent
The notes offered by this prospectus and the accompanying prospectus supplement will be
delivered in book-entry form and payments of principal of and interest on the notes will be made in U.S.
dollars as described under "—Book-Entry Notes" below unless the stated principal amount of the notes is
denominated in a foreign currency.
The issuing entity, the indenture trustee and any agent of the issuing entity or the indenture
trustee will treat the registered holder of any note as the absolute owner of that note, whether or not
the note is overdue and notwithstanding any notice to the contrary, for the purpose of making payment
and for all other purposes.
The issuing entity will make payments on a note to the registered holder of the note at the
close of business on the record date established for the related payment date.
The issuing entity will designate the corporate trust office of The Bank of New York in New
York City as its paying agent for the notes of each series. The issuing entity will identify any other
entities appointed to serve as paying agents on notes of a series, class or tranche in a supplement to
this prospectus. The issuing entity may at any time designate additional paying agents or rescind the
designation of any paying agent or approve a change in the office through which any paying agent acts.
However, the issuing entity will be required to maintain an office, agency or paying agent in each place
of payment for a series, class or tranche of notes.
After notice by publication, all funds paid to a paying agent for the payment of the principal
of or interest on any note of any series which remains unclaimed at the end of two years after the
principal or interest becomes due and payable will be paid to the issuing entity. After funds are paid
to the issuing entity, the holder of that note may look only to the issuing entity for payment of that
principal or interest.
Denominations
The notes offered by this prospectus will be issued in denominations of $5,000 and multiples of
$1,000 in excess of that amount.
Record Date
The record date for payment of the notes will be the last day of the month before the related
payment date.
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Governing Law
The laws of the State of Delaware will govern the notes and the indenture.
Form, Exchange and Registration and Transfer of Notes
The notes offered by this prospectus will be issued in registered form. The notes will be
represented by one or more global notes registered in the name of The Depository Trust Company, as
depository, or its nominee. We refer to each beneficial interest in a global note as a "book-entry
note." For a description of the special provisions that apply to book-entry notes, see "—Book-Entry
Notes" below.
A holder of notes may exchange those notes for other notes of the same class or tranche of any
authorized denominations and of the same aggregate stated principal amount, expected principal payment
date and legal maturity date, and of like terms.
Any holder of a note may present that note for registration of transfer, with the form of
transfer properly executed, at the office of the note registrar or at the office of any transfer agent
that the issuing entity designates. Unless otherwise provided in the note to be transferred or
exchanged, holders of notes will not be charged any service charge for the exchange or transfer of their
notes. Holders of notes that are to be transferred or exchanged will be liable for the payment of any
taxes and other governmental charges described in the indenture before the transfer or exchange will be
completed. The note registrar or transfer agent, as the case may be, will effect a transfer or exchange
when it is satisfied with the documents of title and identity of the person making the request.
The issuing entity will appoint The Bank of New York as the registrar for the notes. The
issuing entity also may at any time designate additional transfer agents for any series, class or
tranche of notes. The issuing entity may at any time rescind the designation of any transfer agent or
approve a change in the location through which any transfer agent acts. However, the issuing entity
will be required to maintain a transfer agent in each place of payment for a series, class or tranche of
notes.
Book-Entry Notes
The notes offered by this prospectus will be delivered in book-entry form. This means that,
except under the limited circumstances described below under "—Definitive Notes," purchasers of notes
will not be entitled to have the notes registered in their names and will not be entitled to receive
physical delivery of the notes in definitive paper form. Instead, upon issuance, all the notes of a
class will be represented by one or more fully registered permanent global notes, without interest
coupons.
Each global note will be deposited with a securities depository named The Depository Trust
Company and will be registered in the name of its nominee, Cede & Co. No global note representing
book-entry notes may be transferred except as a whole by DTC to a nominee of DTC, or by a nominee of DTC
to another nominee of DTC. Thus, DTC or its nominee will be the only registered holder of the notes and
will be considered the sole representative of the beneficial owners of notes for purposes of the
indenture.
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The registration of the global notes in the name of Cede & Co. will not affect beneficial
ownership and is performed merely to facilitate subsequent transfers. The book-entry system, which is
also the system through which most publicly traded common stock is held, is used because it eliminates
the need for physical movement of securities. The laws of some jurisdictions, however, may require some
purchasers to take physical delivery of their notes in definitive form. These laws may impair the
ability to own or transfer book-entry notes.
Purchasers of notes in the United States may hold interests in the global notes through DTC,
either directly, if they are participants in that system—such as a bank, brokerage house or other
institution that maintains securities accounts for customers with DTC or its nominee—or otherwise
indirectly through a participant in DTC. Purchasers of notes in Europe may hold interests in the global
notes through Clearstream, Luxembourg, or through Euroclear Bank S.A./N.V., as operator of the Euroclear
system.
Because DTC will be the only registered owner of the global notes, Clearstream, Luxembourg and
Euroclear will hold positions through their respective U.S. depositories, which in turn will hold
positions on the books of DTC.
As long as the notes are in book-entry form, they will be evidenced solely by entries on the
books of DTC, its participants and any indirect participants. DTC will maintain records showing:
o the ownership interests of its participants, including the U.S. depositories; and
o all transfers of ownership interests between its participants.
The participants and indirect participants, in turn, will maintain records showing:
o the ownership interests of their customers, including indirect participants, that hold the
notes through those participants; and
o all transfers between these persons.
Thus, each beneficial owner of a book-entry note will hold its note indirectly through a
hierarchy of intermediaries, with DTC at the "top" and the beneficial owner's own securities
intermediary at the "bottom."
The issuing entity, the indenture trustee and their agents will not be liable for the accuracy
of, and are not responsible for maintaining, supervising or reviewing DTC's records or any participant's
records relating to book-entry notes. The issuing entity, the indenture trustee and their agents also
will not be responsible or liable for payments made on account of the book-entry notes.
Until Definitive Notes are issued to the beneficial owners as described below under
"—Definitive Notes," all references to "holders" of notes means DTC. The issuing entity, the indenture
trustee and any paying agent, transfer agent or securities registrar may treat DTC as the absolute owner
of the notes for all purposes.
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For beneficial owners of book-entry notes, the issuing entity will make all distributions of
principal and interest on their notes to DTC and will send all required reports and notices solely to
DTC as long as DTC is the registered holder of the notes. DTC and the participants are generally
required by law to receive and transmit all distributions, notices and directions from the indenture
trustee to the beneficial owners through the chain of intermediaries.
Similarly, the indenture trustee will accept notices and directions solely from DTC.
Therefore, in order to exercise any rights of a holder of notes under the indenture, each person owning
a beneficial interest in the notes must rely on the procedures of DTC and, in some cases, Clearstream,
Luxembourg or Euroclear. If the beneficial owner is not a participant in that system, then it must rely
on the procedures of the participant through which that person owns its interest. DTC has advised the
issuing entity that it will take actions under the indenture only at the direction of its participants,
which in turn will act only at the direction of the beneficial owners. Some of these actions, however,
may conflict with actions it takes at the direction of other participants and beneficial owners.
Notices and other communications by DTC to participants, by participants to indirect
participants, and by participants and indirect participants to beneficial owners will be governed by
arrangements among them.
Book-entry notes may be more difficult to pledge by beneficial owners because of the lack of a
physical note. Beneficial owners may also experience delays in receiving distributions on their notes
since distributions will initially be made to DTC and must be transferred through the chain of
intermediaries to the beneficial owner's account.
The Depository Trust Company
DTC is a limited-purpose trust company organized under the New York Banking Law and is a
"banking institution" within the meaning of the New York Banking Law. DTC is also a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered under Section 17A of the Securities Exchange Act of 1934. DTC
was created to hold securities deposited by its participants and to facilitate the clearance and
settlement of securities transactions among its participants through electronic book-entry changes in
accounts of the participants, thus eliminating the need for physical movement of securities. DTC is
indirectly owned by a number of its participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. The rules applicable to
DTC and its participants are on file with the Securities and Exchange Commission.
Clearstream, Luxembourg
Clearstream, Luxembourg is registered as a bank in Luxembourg and is regulated by the Banque
Centrale du Luxembourg, the Luxembourg Central Bank, which supervises Luxembourg banks. Clearstream,
Luxembourg holds securities for its customers and facilitates the clearance and settlement of securities
transactions by electronic book-entry transfers between their accounts. Clearstream, Luxembourg
provides various services, including safekeeping, administration, clearance and settlement of
internationally traded securities and securities
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lending and borrowing. Clearstream, Luxembourg also
deals with domestic securities markets in over 30 countries through established depository and custodial
relationships. Clearstream, Luxembourg has established an electronic bridge with Euroclear in Brussels
to facilitate settlement of trades between Clearstream, Luxembourg and Euroclear. Clearstream,
Luxembourg currently accepts over 110,000 securities issues on its books.
Clearstream, Luxembourg's customers are worldwide financial institutions including
underwriters, securities brokers and dealers, banks, trust companies and clearing corporations.
Clearstream, Luxembourg's U.S. customers are limited to securities brokers and dealers and banks.
Currently, Clearstream, Luxembourg has approximately 2,000 customers located in over 80 countries,
including all major European countries, Canada, and the United States. Indirect access to Clearstream,
Luxembourg is available to other institutions that clear through or maintain a custodial relationship
with an account holder of Clearstream, Luxembourg.
Euroclear System
Euroclear was created in 1968 to hold securities for participants of Euroclear and to clear and
settle transactions between Euroclear participants through simultaneous electronic book- entry delivery
against payment. This system eliminates the need for physical movement of securities and any risk from
lack of simultaneous transfers of securities and cash. Euroclear includes various other services,
including securities lending and borrowing and interfaces with domestic markets in several countries.
The Euroclear operator is Euroclear Bank S.A./N.V. The Euroclear operator conducts all operations. All
Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear
operator. The Euroclear operator establishes policy for Euroclear on behalf of Euroclear participants.
Euroclear participants include banks, including central banks, securities brokers and dealers and other
professional financial intermediaries and may include the underwriters. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial relationship with a Euroclear
participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear operator are governed by the
Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear
System, and applicable Belgian law. These Terms and Conditions govern transfers of securities and cash
within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments for
securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution
of specific securities 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.
This information about DTC, Clearstream, Luxembourg and Euroclear has been provided by each of
them for informational purposes only and is not intended to serve as a representation, warranty or
contract modification of any kind.
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Distributions on Book-Entry Notes
The issuing entity will make distributions of principal of and interest on book-entry notes to
DTC. These payments will be made in immediately available funds by the issuing entity's paying agent,
The Bank of New York, at the office of the paying agent in New York City that the issuing entity
designates for that purpose.
In the case of principal payments, the global notes must be presented to the paying agent in
time for the paying agent to make those payments in immediately available funds in accordance with its
normal payment procedures.
Upon receipt of any payment of principal of or interest on a global note, DTC will immediately
credit the accounts of its participants on its book-entry registration and transfer system. DTC will
credit those accounts with payments in amounts proportionate to the participants' respective beneficial
interests in the stated principal amount of the global note as shown on the records of DTC. Payments by
participants to beneficial owners of book-entry notes will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of those participants.
Distributions on book-entry notes held beneficially through Clearstream, Luxembourg will be
credited to cash accounts of Clearstream, Luxembourg participants in accordance with its rules and
procedures, to the extent received by its U.S. depository.
Distributions on book-entry notes held beneficially through Euroclear will be credited to the
cash accounts of Euroclear participants in accordance with the Terms and Conditions, to the extent
received by its U.S. depository.
In the event Definitive Notes are issued, distributions of principal and interest on Definitive
Notes will be made directly to the holders of the Definitive Notes in whose names the Definitive Notes
were registered at the close of business on the related record date.
Global Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately available funds. Secondary market
trading between DTC participants will occur in the ordinary way in accordance with DTC's rules and will
be settled in immediately available funds using DTC's Same-Day Funds Settlement System. Secondary
market trading between Clearstream, Luxembourg participants and/or Euroclear participants will occur in
the ordinary way in accordance with the applicable rules and operating procedures of Clearstream,
Luxembourg and Euroclear and will be settled using the procedures applicable to conventional eurobonds
in immediately available funds.
Cross-market transfers between persons holding directly or indirectly through DTC, on the one
hand, and directly or indirectly through Clearstream, Luxembourg or Euroclear participants, on the
other, will be effected in DTC in accordance with DTC's rules on behalf of the relevant European
international clearing system by the U.S. depositories. However, cross-market transactions of this type
will require delivery of instructions to the relevant European international clearing system by the
counterparty in that system in accordance with its rules and
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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 U.S. depository to take
action to effect final settlement on its behalf by delivering or receiving notes in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream,
Luxembourg participants and Euroclear participants may not deliver instructions directly to DTC.
Because of time-zone differences, credits to notes received in Clearstream, Luxembourg or
Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities
settlement processing and will be credited the business day following a DTC settlement date. The
credits to or any transactions in the notes settled during processing will be reported to the relevant
Euroclear or Clearstream, Luxembourg participants on that business day. Cash received in Clearstream,
Luxembourg or Euroclear as a result of sales of notes by or through a Clearstream, Luxembourg
participant or a Euroclear participant to a DTC participant will be received with value on the DTC
settlement date, but will be available in the relevant Clearstream, Luxembourg or Euroclear cash account
only as of the business day following settlement in DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to these procedures in order to
facilitate transfers of notes among participants of DTC, Clearstream, Luxembourg and Euroclear, they are
under no obligation to perform or continue to perform these procedures and these procedures may be
discontinued at any time.
Definitive Notes
Beneficial owners of book-entry notes may exchange those notes for Definitive Notes registered
in their name only if:
o DTC is unwilling or unable to continue as depository for the global notes or ceases to be a
registered "clearing agency" and the issuing entity is unable to find a qualified
replacement for DTC;
o the issuing entity, in its sole discretion, elects to terminate the book-entry system
through DTC; or
o any event of default has occurred relating to those book-entry notes and beneficial owners
evidencing not less than 50% of the unpaid outstanding dollar principal amount of the notes
of that class advise the indenture trustee and DTC that the continuation of a book-entry
system is no longer in the best interests of those beneficial owners.
If any of these three events occurs, DTC is required to notify the beneficial owners through
the chain of intermediaries that the Definitive Notes are available. The appropriate global note will
then be exchangeable in whole for Definitive Notes in registered form of like tenor and of an equal
aggregate stated principal amount, in specified denominations. Definitive Notes will be registered in
the name or names of the person or persons specified by DTC in a written instruction to the registrar of
the notes. DTC may base its written instruction upon
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directions it receives from its participants.
Thereafter, the holders of the Definitive Notes will be recognized as the "holders" of the notes under
the indenture.
Replacement of Notes
The issuing entity will replace at the expense of the holder any mutilated note upon surrender
of that note to the indenture trustee. The issuing entity will replace at the expense of the holder any
notes that are destroyed, lost or stolen upon delivery to the indenture trustee of evidence of the
destruction, loss or theft of those notes satisfactory to the issuing entity and the indenture trustee.
In the case of a destroyed, lost or stolen note, the issuing entity and the indenture trustee may
require the holder of the note to provide an indemnity satisfactory to the indenture trustee and the
issuing entity before a replacement note will be issued, and the issuing entity may require the payment
of a sum sufficient to cover any tax or other governmental charge, and any other expenses (including the
fees and expenses of the indenture trustee) in connection with the issuance of a replacement note.
Sources of Funds to Pay the Notes
The Collateral Certificate
The primary source of funds for the payment of principal of and interest on the notes will be
the collateral certificate issued by master trust II to the issuing entity. The following discussion
and certain discussions in the related prospectus supplement summarize the material terms of the
collateral certificate. These summaries do not purport to be complete and are qualified in their
entirety by reference to the provisions of the master trust II agreement and the collateral
certificate. For a description of master trust II and its assets, see "Master Trust II." The
collateral certificate is the only master trust II investor certificate issued pursuant to Series 2001-D.
The collateral certificate represents an undivided interest in the assets of master trust II.
The assets of master trust II consist primarily of credit card receivables arising in selected
MasterCard, Visa and American Express revolving credit card accounts owned by FIA. The amount of credit
card receivables in master trust II will fluctuate from day to day as new receivables are generated or
added to or removed from master trust II and as other receivables are collected, charged off as
uncollectible, or otherwise adjusted.
The collateral certificate has no specified interest rate. The issuing entity, as holder of
the collateral certificate, is entitled to receive its allocable share of defaults and of collections of
finance charge receivables and principal receivables payable by master trust II.
Finance charge receivables are all periodic finance charges, cash advance fees and late charges
on amounts charged for merchandise and services and some other fees designated by FIA, annual membership
fees, and recoveries on receivables in Defaulted Accounts. Principal receivables are all amounts
charged by cardholders for merchandise and services, amounts advanced to cardholders as cash advances
and all other fees billed to cardholders that are not considered finance charge receivables.
Interchange, which represents fees received by FIA from MasterCard, Visa and American Express as partial
compensation for taking credit risk, absorbing fraud losses and funding receivables for a limited period
before initial billing, is treated as
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collections of finance charge receivables. Interchange varies from approximately 1% to 2% of the transaction amount,
but these amounts may be changed by MasterCard, Visa or American Express.
Each month, master trust II will allocate collections of finance charge receivables and
principal receivables and defaults to the investor certificates outstanding under master trust II,
including the collateral certificate.
Allocations of defaults and collections of finance charge receivables are made pro rata among
each series of investor certificates issued by master trust II, including the collateral certificate,
based on its respective Investor Interest, and Funding, as transferor, based on the Transferor
Interest. In general, the Investor Interest of each series of investor certificates (including the
collateral certificate) issued by master trust II will equal the stated dollar amount of the investor
certificates (including the collateral certificate) issued to investors in that series, less
unreimbursed charge-offs for uncovered defaults on principal receivables in master trust II allocated to
those investors, reallocations of collections of principal receivables to cover certain shortfalls in
collections of finance charge receivables and principal payments deposited to a master trust II
principal funding account or made to those investors.
The collateral certificate has a fluctuating Investor Interest, representing the investment of
that certificate in principal receivables. The Investor Interest of the collateral certificate will
equal the total nominal liquidation amount of the outstanding notes secured by the collateral
certificate. For a discussion of Investor Interest, see the definition of "Investor Interest" in the
glossary. The Transferor Interest, which is owned by Funding, represents the interest in the principal
receivables in master trust II not represented by any master trust II series of investor certificates.
For example, if the total principal receivables in master trust II at the end of the month is 500, the
Investor Interest of the collateral certificate is 100, the Investor Interests of the other investor
certificates are 200 and the Transferor Interest is 200, the collateral certificate is entitled, in
general, to 1/5—or 100/500—of the defaults and collections of finance charge receivables for the
applicable month.
Collections of principal receivables are allocated similarly to the allocation of collections
of finance charge receivables when no principal amounts are needed for deposit into a principal funding
account or needed to pay principal to investors. However, collections of principal receivables are
allocated differently when principal amounts need to be deposited into master trust II principal funding
accounts or paid to master trust II investors. When the principal amount of a master trust II investor
certificate other than the collateral certificate begins to accumulate or amortize, collections of
principal receivables continue to be allocated to the series as if the Investor Interest of that
series had not been reduced by principal collections deposited to a master trust II principal funding
account or paid to master trust II investors. During this time, allocations of collections of principal
receivables to the investors in a series of certificates issued by master trust II, other than the
collateral certificate, is based on the Investor Interest of the series "fixed" at the time immediately
before the first deposit of principal collections into a principal funding account or the time
immediately before the first payment of principal collections to investors.
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The collateral certificate is allocated collections of principal receivables at all times based
on an Investor Interest calculation which is an aggregate of the nominal liquidation amounts for each
individual class or tranche of notes. For classes and tranches of notes which do not require principal
amounts to be deposited into a principal funding account or paid to noteholders, the nominal liquidation
amount calculation will be "floating," i.e. calculated as of the end of the prior month. For classes or
tranches of notes which require principal amounts to be deposited into a principal funding account or
paid to noteholders, the nominal liquidation amount will be "fixed" immediately before the issuing
entity begins to allocate Available Principal Amounts to the principal funding subaccount for that class
or tranche, i.e. calculated as of the end of the month prior to any reductions for deposits or payments
of principal.
For a detailed description of the percentage used in allocating finance charge collections and
defaults to the collateral certificate, see the definition of "Floating Investor Percentage" in the
glossary. For a detailed description of the percentage used in allocating principal collections to the
collateral certificate, see the definition of "Principal Investor Percentage" in the glossary.
If collections of principal receivables allocated to the collateral certificate are needed for
reallocation to cover certain shortfalls in Available Funds, to pay the notes, or to make a deposit into
the issuing entity accounts within a month, they will be deposited into the issuing entity's collection
account. Otherwise, collections of principal receivables allocated to the collateral certificate will
be reallocated to other series of master trust II investor certificates which have principal collection
shortfalls—which does not reduce the Investor Interest of the collateral certificate—or reinvested in
master trust II to maintain the Investor Interest of the collateral certificate. If the collateral
certificate has a shortfall in collections of principal receivables and other series of investor
certificates issued by master trust II have excess collections of principal receivables, a portion of
the excess collections of principal receivables allocated to other series of investor certificates
issued by master trust II will be reallocated to the collateral certificate and any other master trust
II investor certificate which may have a shortfall in collections of principal receivables. The
collateral certificate's share of the excess collections of principal receivables from the other
series will be paid to the issuing entity and treated as Available Principal Amounts.
The collateral certificate will also be allocated a portion of the net investment earnings, if
any, on amounts in the master trust II finance charge account and the master trust II principal account,
as more specifically described below in "—Deposit and Application of Funds." Such net investment
earnings will be treated as Available Funds.
Upon a sale of credit card receivables, or interests therein, following an insolvency of
Funding, following an event of default and acceleration, or on the applicable legal maturity date for a
series, class or tranche of notes, as described in the accompanying prospectus supplement, the portion
of the nominal liquidation amount, and thereby the portion of the Investor Interest, related to that
series, class or tranche will be reduced to zero and that series, class or tranche will no longer
receive any allocations of collections of finance charge receivables or principal receivables from
master trust II and any allocations of Available Funds or Available Principal Amounts from the issuing
entity.
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Following a Pay Out Event with respect to the collateral certificate, which is an early
redemption event for the notes, all collections of principal receivables for any month allocated to the
Investor Interest of the collateral certificate will be used to cover principal payments to the issuing
entity as holder of the collateral certificate.
For a detailed description of the application of collections and allocation of defaults by
master trust II, see "Master Trust II—Application of Collections" and "—Defaulted Receivables; Rebates
and Fraudulent Charges" in this prospectus.
Deposit and Application of Funds
Collections of finance charge receivables allocated and paid to the issuing entity, as holder of the
collateral certificate, as described in "—The Collateral Certificate" above and "Master Trust
II—Application of Collections" in this prospectus, will be treated as Available Funds. Those Available
Funds will be allocated pro rata to each series of notes in an amount equal to the sum of:
o the sum of the Daily Available Funds Amounts for each day during such month for that
series of notes,
o that series's pro rata portion of the net investment earnings, if any, in the master trust
II finance charge account that are allocated to the collateral certificate with respect to
the related Transfer Date, based on the ratio of the aggregate amount on deposit in the
master trust II finance charge account for that series of notes to the aggregate amount on
deposit in the master trust II finance charge account for all series of notes, and
o that series's pro rata portion of the net investment earnings, if any, in the master trust
II principal account that are allocated to the collateral certificate with respect to the
related Transfer Date, based on the ratio of the aggregate amount on deposit in the master
trust II principal account for that series of notes to the aggregate amount on deposit in
the master trust II principal account for all series of notes.
Collections of principal receivables allocated and paid to the issuing entity, as holder of the
collateral certificate, as described in "—The Collateral Certificate" above and "Master Trust
II—Application of Collections" in this prospectus, will be treated as Available Principal Amounts. Such
Available Principal Amounts, after any reallocations of Available Principal Amounts, will be allocated
to each series of notes with a monthly principal payment for such month in an amount equal to:
o such series's monthly principal payment; or
o in the event that Available Principal Amounts for any month are less than the aggregate
monthly principal payments for all series of notes, Available Principal Amounts will be
allocated to each series of notes with a monthly principal payment for such month to the
extent needed by each such series to cover its monthly principal payment in an amount equal
to the lesser of (a) the sum of the Daily Principal Amounts for each day during such month
for such series of notes and (b) the monthly principal payment for such series of notes for
such month.
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If Available Principal Amounts for any month are less than the aggregate monthly principal
payments for all series of notes, and any series of notes has excess Available Principal Amounts
remaining after its application of its allocation described above, then any such excess will be applied
to each series of notes to the extent such series still needs to cover a monthly principal payment pro
rata based on the ratio of the Weighted Average Principal Allocation Amount for the related series of
notes for such month to the Weighted Average Principal Allocation Amount for all series of notes with an
unpaid monthly principal payment for such month.
In the case of a series of notes having more than one class or tranche, Available Principal
Amounts and Available Funds allocated to that series will be further allocated and applied to each class
or tranche in the manner and order of priority described in the accompanying prospectus supplement.
Deposit and Application of Funds for the BAseries
The indenture specifies how Available Funds (primarily consisting of collections of finance
charge receivables allocated and paid to the collateral certificateholder) and Available Principal
Amounts (primarily consisting of collections of principal receivables allocated and paid to the
collateral certificateholder) will be allocated among the multiple series of notes secured by the
collateral certificate. The BAseries indenture supplement specifies how BAseries Available Funds (which
are the BAseries's share of Available Funds plus other amounts treated as BAseries Available Funds) and
BAseries Available Principal Amounts (which are the BAseries's share of Available Principal Amounts plus
other amounts treated as BAseries Available Principal Amounts) will be deposited into the issuing entity
accounts established for the BAseries to provide for the payment of interest on and principal of
BAseries notes as payments become due. In addition, the BAseries indenture supplement specifies how
defaults on principal receivables in master trust II and the master trust II servicing fee will be
allocated to the collateral certificate and the BAseries. The following sections summarize those
provisions.
BAseries Available Funds
BAseries Available Funds will consist of the following amounts:
o The BAseries's share of collections of finance charge receivables allocated and paid to the
collateral certificateholder and investment earnings on funds held in the collection
account. See "—Deposit and Application of Funds" above.
o Withdrawals from the accumulation reserve subaccount. If the number of months targeted to
accumulate budgeted deposits of BAseries Available Principal Amounts for the payment of
principal on a tranche of notes is greater than one month, then the issuing entity will
begin to fund an accumulation reserve subaccount for such tranche. See "—Targeted Deposits
of BAseries Available Principal Amounts to the Principal Funding Account" below. The
amount targeted to be deposited in the accumulation reserve account for each month,
beginning with the third month prior to the first Transfer Date on which BAseries Available
Principal Amounts are to be accumulated
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for such tranche, will be an amount equal to 0.5%
of the outstanding dollar principal amount of such tranche of notes.
On each Transfer Date, the issuing entity will calculate the targeted amount of principal
funding subaccount earnings for each tranche of notes, which will be equal to the amount
that the funds (other than prefunded amounts) on deposit in each principal funding
subaccount would earn at the interest rate payable by the issuing entity—taking into
account payments due under applicable derivative agreements—on the related tranche of
notes. As a general rule, if the amount actually earned on such funds on deposit is less
than the targeted amount of earnings, then the amount of such shortfall will be withdrawn
from the applicable accumulation reserve subaccount and treated as BAseries Available Funds
for such month.
o Additional finance charge collections allocable to the BAseries. The issuing entity will
notify the servicer from time to time of the aggregate prefunded amount on deposit in the
principal funding account. Whenever there are any prefunded amounts on deposit in any
principal funding subaccount, master trust II will designate an amount of the Transferor
Interest equal to such prefunded amounts. On each Transfer Date, the issuing entity will
calculate the targeted amount of principal funding subaccount prefunded amount earnings for
each tranche of notes, which will be equal to the amount that the prefunded amounts on
deposit in each principal funding subaccount would earn at the interest rate payable by the
issuing entity—taking into account payments due under applicable derivative agreements—on
the related tranche of notes. As a general rule, if the amount actually earned on such
funds on deposit is less than the targeted amount of earnings, collections of finance
charge receivables allocable to such designated portion of the Transferor Interest up to
the amount of the shortfall will be treated as BAseries Available Funds. See "Master Trust
II—Application of Collections" in this prospectus.
o Investment earnings on amounts on deposit in the principal funding account, interest
funding account, and accumulation reserve account for the BAseries.
o Any shared excess available funds allocable to the BAseries. See "—Shared Excess Available
Funds" below.
o Amounts received from derivative counterparties. Payments received under derivative
agreements for interest on notes of the BAseries payable in U.S. dollars will be treated as
BAseries Available Funds.
Application of BAseries Available Funds
On each Transfer Date, the indenture trustee will apply BAseries Available Funds as follows:
o first, to make the targeted deposits to the interest funding account to fund the payment of
interest on the notes and certain payments due to derivative counterparties;
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o second, to pay the BAseries's share of the master trust II servicing fee, plus any
previously due and unpaid master trust II servicing fee allocable to the BAseries, to the
servicer;
o third, to be treated as BAseries Available Principal Amounts in an amount equal to the
amount of defaults on principal receivables in master trust II allocated to the
BAseries for the preceding month;
o fourth, to be treated as BAseries Available Principal Amounts in an amount equal to the
Nominal Liquidation Amount Deficits, if any, of BAseries notes;
o fifth, to make the targeted deposit to the accumulation reserve account, if any;
o sixth, to make the targeted deposit to the Class C reserve account, if any;
o seventh, to make any other payment or deposit required by any class or tranche of
BAseries notes;
o eighth, to be treated as shared excess available funds; and
o ninth, to the issuing entity.
See the chart titled "Application of BAseries Available Funds" after the "Prospectus Summary"
for a depiction of the application of BAseries Available Funds.
Targeted Deposits of BAseries Available Funds to the Interest Funding Account
The aggregate deposit targeted to be made each month to the interest funding account will be
equal to the sum of the interest funding account deposits targeted to be made for each tranche of notes
set forth below. The deposit targeted for any month will also include any shortfall in the targeted
deposit from any prior month which has not been previously deposited.
o Interest Payments. The deposit targeted for any tranche of outstanding interest-bearing
notes on each Transfer Date will be equal to the amount of interest accrued on the
outstanding dollar principal amount of that tranche during the period from and including
the first Monthly Interest Accrual Date in the prior month to but excluding the first
Monthly Interest Accrual Date for the current month.
o Amounts Owed to Derivative Counterparties. If a tranche of notes has a Performing or
non-Performing derivative agreement for interest that provides for payments to the
applicable derivative counterparty, in addition to any applicable stated interest as
determined under the item above, the deposit targeted for that tranche of notes on each
Transfer Date for any payment to the derivative counterparty will be specified in the
BAseries indenture supplement.
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o Discount Notes. The deposit targeted for a tranche of discount notes on each Transfer Date
is the amount of accretion of principal of that tranche of notes from and including the
prior Monthly Principal Accrual Date—or in the case of the first Monthly Principal Accrual
Date, from and including the date of issuance of that tranche—to but excluding the first
Monthly Principal Accrual Date for the next month.
o Specified Deposits. If any tranche of notes provides for deposits in addition to or
different from the deposits described above to be made to the interest funding subaccount
for that tranche, the deposits targeted for that tranche each month are the specified
amounts.
o Additional Interest. The deposit targeted for any tranche of notes that has previously due
and unpaid interest for any month will include the interest accrued on that overdue
interest during the period from and including the first Monthly Interest Accrual Date in
the prior month to but excluding the first Monthly Interest Accrual Date for the current
month.
Each deposit to the interest funding account for each month will be made on the Transfer Date
in such month. A tranche of notes may be entitled to more than one of the preceding deposits.
A class or tranche of notes for which credit card receivables have been sold by master trust II
as described below in "—Sale of Credit Card Receivables" will not be entitled to receive any of the
preceding deposits to be made from BAseries Available Funds after the sale has occurred.
Allocation to Interest Funding Subaccounts
The aggregate amount to be deposited in the interest funding account will be allocated, and a
portion deposited in the interest funding subaccount established for each tranche of notes, as follows:
o BAseries Available Funds are at least equal to targeted amounts. If BAseries Available
Funds are at least equal to the sum of the deposits targeted by each tranche of notes as
described above, then that targeted amount will be deposited in the interest funding
subaccount established for each tranche.
o BAseries Available Funds are less than targeted amounts. If BAseries Available Funds are
less than the sum of the deposits targeted by each tranche of notes as described above,
then BAseries Available Funds will be allocated to each tranche of notes as follows:
— first, to cover the deposits for the Class A notes (including any applicable
derivative counterparty payments),
— second, to cover the deposits for the Class B notes (including any applicable
derivative counterparty payments), and
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— third, to cover the deposits for the Class C notes (including any applicable
derivative counterparty payments).
In each case, BAseries Available Funds allocated to a class will be allocated to each tranche
of notes within such class pro rata based on the ratio of:
— the aggregate amount of the deposits targeted for that tranche of notes, to
— the aggregate amount of the deposits targeted for all tranches of notes in such class.
Payments Received from Derivative Counterparties for Interest on Foreign Currency Notes
Payments received under derivative agreements for interest on foreign currency notes in the
BAseries will be applied as specified in the BAseries indenture supplement.
Deposits of Withdrawals from the Class C Reserve Account to the Interest Funding Account
Withdrawals made from any Class C reserve subaccount will be deposited into the applicable
interest funding subaccount to the extent described below under "—Withdrawals from the Class C Reserve
Account."
Allocations of Reductions from Charge-Offs On each Transfer Date when there is a charge-off for
uncovered defaults on principal receivables in master trust II allocable to the BAseries for the prior
month, that reduction will be allocated (and reallocated) on that date to each tranche of notes as set
forth below:
Initially, the amount of such charge-off will be allocated to each tranche of outstanding notes
pro rata based on the ratio of the Weighted Average Available Funds Allocation Amount for such tranche
for the prior month to the Weighted Average Available Funds Allocation Amount for the BAseries for the
prior month.
Immediately afterwards, the amount of charge-offs allocated to the Class A notes and Class B
notes will be reallocated to the Class C notes as set forth below, and the amount of charge-offs
allocated to the Class A notes and not reallocated to the Class C notes because of the limits set forth
below will be reallocated to the Class B notes as set forth below. In addition, charge-offs initially
allocated to Class A notes which are reallocated to Class B notes because of Class C usage limitations
can be reallocated to Class C notes if permitted as described below. Any amount of charge-offs which
cannot be reallocated to a subordinated class as a result of the limits set forth below will reduce the
nominal liquidation amount of the tranche of notes to which it was initially allocated.
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Limits on Reallocations of Charge-Offs to a Tranche of Class C Notes from Tranches of Class A
and Class B
Notes No reallocations of charge-offs from a tranche of Class A notes to Class C notes may
cause that tranche's Class A Usage of Class C Required Subordinated Amount to exceed that tranche's
Class A required subordinated amount of Class C notes.
No reallocations of charge-offs from a tranche of Class B notes to Class C notes may cause that
tranche's Class B Usage of Class C Required Subordinated Amount to exceed that tranche's Class B
required subordinated amount of Class C notes.
The amount of charge-offs permitted to be reallocated to tranches of Class C notes will be
applied to each tranche of Class C notes pro rata based on the ratio of the Weighted Average Available
Funds Allocation Amount of such tranche of Class C notes for the prior month to the Weighted Average
Available Funds Allocation Amount of all Class C notes in the BAseries for the prior month.
No such reallocation of charge-offs will reduce the nominal liquidation amount of any tranche
of Class C notes below zero.
Limits on Reallocations of Charge-Offs to a Tranche of Class B Notes from Tranches of Class A
Notes
No reallocations of charge-offs from a tranche of Class A notes to Class B notes may cause that
tranche's Class A Usage of Class B Required Subordinated Amount to exceed that tranche's Class A
required subordinated amount of Class B notes.
The amount of charge-offs permitted to be reallocated to tranches of Class B notes will be
applied to each tranche of Class B notes pro rata based on the ratio of the Weighted Average Available
Funds Allocation Amount for that tranche of Class B notes for the prior month to the Weighted Average
Available Funds Allocation Amount for all Class B notes in the BAseries for the prior month.
No such reallocation of charge-offs will reduce the nominal liquidation amount of any tranche
of Class B notes below zero.
For each tranche of notes, the nominal liquidation amount of that tranche will be reduced by an
amount equal to the charge-offs which are allocated or reallocated to that tranche of notes less the
amount of charge-offs that are reallocated from that tranche of notes to a subordinated class of notes.
Allocations of Reimbursements of Nominal Liquidation Amount Deficits
If there are BAseries Available Funds available to reimburse any Nominal Liquidation Amount
Deficits on any Transfer Date, such funds will be allocated to each tranche of notes as follows:
o first, to each tranche of Class A notes,
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o second, to each tranche of Class B notes, and
o third, to each tranche of Class C notes.
In each case, BAseries Available Funds allocated to a class will be allocated to each tranche
of notes within such class pro rata based on the ratio of:
— the Nominal Liquidation Amount Deficit of such tranche of notes, to
— the aggregate Nominal Liquidation Amount Deficits of all tranches of such class.
In no event will the nominal liquidation amount of a tranche of notes be increased above the
Adjusted Outstanding Dollar Principal Amount of such tranche.
Application of BAseries Available Principal Amounts
On each Transfer Date, the indenture trustee will apply BAseries Available Principal Amounts as
follows:
o first, for each month, if BAseries Available Funds are insufficient to make the full
targeted deposit into the interest funding subaccount for any tranche of Class A notes,
then BAseries Available Principal Amounts (in an amount not to exceed the sum of the
investor percentage of collections of principal receivables allocated to the Class B notes
and the Class C notes for each day during such month) will be allocated to the interest
funding subaccount of each such tranche of Class A notes pro rata based on, in the case of
each such tranche of Class A notes, the lesser of:
— the amount of the deficiency of the targeted amount to be deposited into the interest
funding subaccount of such tranche of Class A notes, and
— an amount equal to the sum of the Class A Unused Subordinated Amount of Class C notes
plus the Class A Unused Subordinated Amount of Class B notes for such tranche of
Class A notes (determined after giving effect to the allocation of charge-offs for
uncovered defaults on principal receivables in master trust II);
o second, for each month, if BAseries Available Funds are insufficient to make the full
targeted deposit into the interest funding subaccount for any tranche of Class B notes,
then BAseries Available Principal Amounts (in an amount not to exceed the sum of the
investor percentage of collections of principal receivables allocated to the Class B notes
and the Class C notes for each day during such month minus the aggregate amount of
BAseries Available Principal Amounts reallocated as described in the first clause above)
will be allocated to the interest funding subaccount of each such tranche of Class B notes
pro rata based on, in the case of each such tranche of Class B notes, the lesser of:
— the amount of the deficiency of the targeted amount to be deposited into the interest
funding subaccount of such tranche of Class B notes, and
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— an amount equal to the Class B Unused Subordinated Amount of Class C notes for such
tranche of Class B notes (determined after giving effect to the allocation of
charge-offs for uncovered defaults on principal receivables in master trust II and the
reallocation of BAseries Available Principal Amounts as described in the first clause
above);
o third, for each month, if BAseries Available Funds are insufficient to pay the portion of
the master trust II servicing fee allocable to the BAseries, then BAseries Available
Principal Amounts (in an amount not to exceed the sum of the investor percentage of
collections of principal receivables allocated to the Class B notes and the Class C notes
for each day during such month minus the aggregate amount of BAseries Available Principal
Amounts reallocated as described in the first and second clauses above) will be paid to the
servicer in an amount equal to, and allocated to each such tranche of Class A notes pro
rata based on, in the case of each tranche of Class A notes, the lesser of:
— the amount of the deficiency times the ratio of the Weighted Average Available Funds
Allocation Amount for such tranche for such month to the Weighted Average Available
Funds Allocation Amount for the BAseries for such month, and
— an amount equal to the Class A Unused Subordinated Amount of Class C notes plus the
Class A Unused Subordinated Amount of Class B notes for such tranche of Class A notes
(determined after giving effect to the allocation of charge-offs for uncovered
defaults on principal receivables in master trust II and the reallocation of
BAseries Available Principal Amounts as described in the first and second clauses
above);
o fourth, for each month, if BAseries Available Funds are insufficient to pay the portion of
the master trust II servicing fee allocable to the BAseries, then BAseries Available
Principal Amounts (in an amount not to exceed the sum of the investor percentage of
collections of principal receivables allocated to the Class B notes and the Class C notes
for each day during such month minus the aggregate amount of BAseries Available Principal
Amounts reallocated as described in the first, second and third clauses above) will be paid
to the servicer in an amount equal to, and allocated to each tranche of Class B notes pro
rata based on, in the case of each such tranche of Class B notes, the lesser of:
— the amount of the deficiency times the ratio of the Weighted Average Available Funds
Allocation Amount for such tranche for such month to the Weighted Average Available
Funds Allocation Amount for the BAseries for such month, and
— an amount equal to the Class B Unused Subordinated Amount of Class C notes for such
tranche of Class B notes (determined after giving effect to the allocation of
charge-offs for uncovered defaults on principal receivables in master trust II
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and the reallocation of BAseries Available Principal Amounts as described in the preceding
clauses);
o fifth, to make the targeted deposits to the principal funding account as described below
under "—Targeted Deposits of BAseries Available Principal Amounts to the Principal Funding
Account;" and
o sixth, to the issuing entity for reinvestment in the Investor Interest of the collateral
certificate.
See the chart titled "Application of BAseries Available Principal Amounts" after the
"Prospectus Summary" for a depiction of the application of BAseries Available Principal Amounts.
A tranche of notes for which credit card receivables have been sold by master trust II as
described in "—Sale of Credit Card Receivables" will not be entitled to receive any further allocations
of BAseries Available Funds or BAseries Available Principal Amounts.
The Investor Interest of the collateral certificate is the sum of the nominal liquidation
amounts of each tranche of notes issued by the issuing entity and outstanding and, therefore, will be
reduced by the amount of BAseries Available Principal Amounts used to make deposits into the interest
funding account, payments to the servicer and deposits into the principal funding account. If the
Investor Interest of the collateral certificate is reduced because BAseries Available Principal Amounts
have been used to make deposits into the interest funding account or payments to the servicer or because
of charge-offs due to uncovered defaults on principal receivables in master trust II, the amount of
Available Funds and Available Principal Amounts allocated to the collateral certificate and the amount
of BAseries Available Funds and BAseries Available Principal Amounts will be reduced unless the
reduction in the Investor Interest is reimbursed from amounts described above in the fourth item in
"—Application of BAseries Available Funds."
Reductions to the Nominal Liquidation Amount of Subordinated Classes from Reallocations of
BAseries Available Principal Amounts
Each reallocation of BAseries Available Principal Amounts deposited to the interest funding
subaccount of a tranche of Class A notes as described in the first clause of
"—Application of BAseries Available Principal Amounts" will reduce the nominal liquidation amount of the
Class C notes. However, the amount of such reduction for each such tranche of Class A notes will not
exceed the Class A Unused Subordinated Amount of Class C notes for such tranche of Class A notes.
Each reallocation of BAseries Available Principal Amounts deposited to the interest funding
subaccount of a tranche of Class A notes as described in the first clause of
"—Application of BAseries Available Principal Amounts" which does not reduce the nominal liquidation
amount of Class C notes pursuant to the preceding paragraph will reduce the nominal liquidation amount
of the Class B notes. However, the amount of such reduction for each such tranche of Class A notes will
not exceed the Class A Unused Subordinated Amount of Class B
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notes for such tranche of Class A notes,
and such reductions in the nominal liquidation amount of the Class B notes may be reallocated to the
Class C notes if permitted as described below.
Each reallocation of BAseries Available Principal Amounts deposited to the interest funding
subaccount of a tranche of Class B notes as described in the second clause of
"—Application of BAseries Available Principal Amounts" will reduce the nominal liquidation amount
(determined after giving effect to the preceding paragraphs) of the Class C notes.
Each reallocation of BAseries Available Principal Amounts paid to the servicer as described in
the third clause of "—Application of BAseries Available Principal Amounts" will reduce the nominal
liquidation amount (determined after giving effect to the preceding paragraphs) of the Class C notes.
However, the amount of such reduction for each such tranche of Class A notes will not exceed the Class A
Unused Subordinated Amount of Class C notes for such tranche of Class A notes (after giving effect to
the preceding paragraphs).
Each reallocation of BAseries Available Principal Amounts paid to the servicer as described in
the third clause of "—Application of BAseries Available Principal Amounts" which does not reduce the
nominal liquidation amount of Class C notes as described above will reduce the nominal liquidation
amount (determined after giving effect to the preceding paragraphs) of the Class B notes. However, the
amount of such reduction for each such tranche of Class A notes will not exceed the Class A Unused
Subordinated Amount of Class B notes for such tranche of Class A notes (after giving effect to the
preceding paragraphs), and such reductions in the nominal liquidation amount of the Class B notes may be
reallocated to the Class C notes if permitted as described below.
Each reallocation of BAseries Available Principal Amounts paid to the servicer as described in
the fourth clause of "—Application of BAseries Available Principal Amounts" will reduce the nominal
liquidation amount (determined after giving effect to the preceding paragraphs) of the Class C notes.
Subject to the following paragraph, each reallocation of BAseries Available Principal Amounts
which reduces the nominal liquidation amount of Class B notes as described above will reduce the nominal
liquidation amount of each tranche of the Class B notes pro rata based on the ratio of the Weighted
Average Available Funds Allocation Amount for such tranche of Class B notes for the related month to the
Weighted Average Available Funds Allocation Amount for all Class B notes for the related month.
However, any allocation of any such reduction that would otherwise have reduced the nominal liquidation
amount of a tranche of Class B notes below zero will be reallocated to the remaining tranches of Class B
notes in the manner set forth in this paragraph.
Each reallocation of BAseries Available Principal Amounts which reduces the nominal liquidation
amount of Class B notes as described in the preceding paragraph may be reallocated to the Class C notes
and such reallocation will reduce the nominal liquidation amount of the Class C notes. However, the
amount of such reallocation from each tranche of Class B notes will not exceed the Class B Unused
Subordinated Amount of Class C notes for such tranche of Class B notes.
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Each reallocation of BAseries Available Principal Amounts which reduces the nominal liquidation
amount of Class C notes as described above will reduce the nominal liquidation amount of each tranche of
the Class C notes pro rata based on the ratio of the Weighted Average Available Funds Allocation Amount
for such tranche of Class C notes for the related month to the Weighted Average Available Funds
Allocation Amount for all Class C notes for the related month. However, any allocation of any such
reduction that would otherwise have reduced the nominal liquidation amount of a tranche of Class C notes
below zero will be reallocated to the remaining tranches of Class C notes in the manner set forth in
this paragraph.
None of such reallocations will reduce the nominal liquidation amount of any tranche of Class B
or Class C notes below zero.
For each tranche of notes, the nominal liquidation amount of that tranche will be reduced by
the amount of reductions which are allocated or reallocated to that tranche less the amount of
reductions which are reallocated from that tranche to notes of a subordinated class.
Limit on Allocations of BAseries Available Principal Amounts and BAseries Available Funds
Each tranche of notes will be allocated BAseries Available Principal Amounts and
BAseries Available Funds solely to the extent of its nominal liquidation amount. Therefore, if the
nominal liquidation amount of any tranche of notes has been reduced due to reallocations of
BAseries Available Principal Amounts to cover payments of interest or the master trust II servicing fee
or due to charge-offs for uncovered defaults on principal receivables in master trust II, such tranche
of notes will not be allocated BAseries Available Principal Amounts or BAseries Available Funds to the
extent of such reductions. However, any funds in the applicable principal funding subaccount, any funds
in the applicable interest funding subaccount, any amounts payable from any applicable derivative
agreement, any funds in the applicable accumulation reserve subaccount, and in the case of Class C
notes, any funds in the applicable Class C reserve subaccount, will still be available to pay principal
of and interest on that tranche of notes. If the nominal liquidation amount of a tranche of notes has
been reduced due to reallocation of BAseries Available Principal Amounts to pay interest on senior
classes of notes or the master trust II servicing fee, or due to charge-offs for uncovered defaults on
principal receivables in master trust II, it is possible for that tranche's nominal liquidation amount
to be increased by allocations of BAseries Available Funds. However, there are no assurances that there
will be any BAseries Available Funds for such allocations.
Targeted Deposits of BAseries Available Principal Amounts to the Principal Funding Account
The amount targeted to be deposited into the principal funding account in any month will be the
highest of the following amounts. However, no amount will be deposited into the principal funding
subaccount for any subordinated note unless following such deposit the remaining available subordinated
amount is equal to the aggregate unused subordinated amount for all outstanding senior notes.
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o Principal Payment Date. For the month before any principal payment date of a tranche of
notes, the deposit targeted for that tranche of notes for that month is equal to the
nominal liquidation amount of that tranche of notes as of the close of business on the last
day of such month, determined after giving effect to any charge-offs for uncovered defaults
on principal receivables in master trust II and any reallocations, payments or deposits of
BAseries Available Principal Amounts occurring on the following Transfer Date.
o Budgeted Deposits. Each month beginning with the twelfth month before the expected
principal payment date of a tranche of notes, the deposit targeted to be made into the
principal funding subaccount for a tranche of notes will be one-twelfth of the expected
outstanding dollar principal amount of that tranche of notes as of its expected principal
payment date.
The issuing entity may postpone the date of the targeted deposits under the previous
sentence. If the issuing entity determines that less than twelve months would be required
to accumulate BAseries Available Principal Amounts necessary to pay a tranche of notes on
its expected principal payment date, using conservative historical information about
payment rates of principal receivables under master trust II and after taking into account
all of the other expected payments of principal of master trust II investor certificates
and notes to be made in the next twelve months, then the start of the targeted deposits may
be postponed each month by one month, with proportionately larger targeted deposits for
each month of postponement.
o Prefunding of the Principal Funding Account for Senior Classes. If the issuing entity
determines that any date on which principal is payable or to be deposited into a principal
funding subaccount for any tranche of Class C notes will occur at a time when the payment
or deposit of all or part of that tranche of Class C notes would be prohibited because it
would cause a deficiency in the remaining available subordination for the Class A notes or
Class B notes, the targeted deposit amount for the Class A notes and Class B notes will be
an amount equal to the portion of the Adjusted Outstanding Dollar Principal Amount of the
Class A notes and Class B notes that would have to cease to be outstanding in order to
permit the payment of or deposit for that tranche of Class C notes.
If the issuing entity determines that any date on which principal is payable or to be
deposited into a principal funding subaccount for any tranche of Class B notes will occur
at a time when the payment or deposit of all or part of that tranche of Class B notes would
be prohibited because it would cause a deficiency in the remaining available subordination
for the Class A notes, the targeted deposit amount for the Class A notes will be an amount
equal to the portion of the Adjusted Outstanding Dollar Principal Amount of the Class A
notes that would have to cease to be outstanding in order to permit the payment of or
deposit for that tranche of Class B notes.
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Prefunding of the principal funding subaccount for the senior tranches of the BAseries will
continue until:
— enough senior notes are repaid so that the subordinated notes that are payable are no
longer necessary to provide the required subordination for the outstanding senior
notes;
— new subordinated notes are issued so that the subordinated notes that are payable are
no longer necessary to provide the required subordination for the outstanding senior
notes; or
— the principal funding subaccounts for the senior notes are prefunded so that the
subordinated notes that are payable are no longer necessary to provide the required
subordination for the outstanding senior notes.
For purposes of calculating the prefunding requirements, the required subordinated amount of a
tranche of a senior class of notes of the BAseries will be calculated as described under "The
Notes—Required Subordinated Amount" based on its Adjusted Outstanding Dollar Principal Amount
on such date. However, if any early redemption event has occurred relating to the subordinated
notes or if the usage of the subordinated notes relating to such senior notes is greater than
zero, the required subordinated amount will be calculated based on the Adjusted Outstanding
Dollar Principal Amount of such tranche as of the close of business on the day immediately
preceding the occurrence of such early redemption event or the date on which the usage of the
subordinated notes exceeds zero.
When the prefunded amounts are no longer necessary, they will be withdrawn from the principal
funding account and applied in accordance with the description under
"—Withdrawals from Principal Funding Account—Withdrawals of Prefunded Amounts." The nominal
liquidation amount of the prefunded tranches will be increased by the amount removed from the
principal funding account.
If any tranche of senior notes becomes payable as a result of an early redemption event, event
of default or other optional or mandatory redemption, or upon reaching its expected principal
payment date, any prefunded amounts on deposit in its principal funding subaccount will be paid
to noteholders of that tranche and deposits to pay the notes will continue as necessary to pay
that tranche.
o Event of Default, Early Redemption Event or Other Optional or Mandatory Redemption. If any
tranche of notes has been accelerated after the occurrence of an event of default during
that month, or an early redemption event or other optional or mandatory redemption has
occurred relating to any tranche of notes, the deposit targeted for that tranche of notes
for that month and each following month will equal the nominal liquidation amount of that
tranche of notes as of the close of business on the last day of the preceding month,
determined after giving effect to reallocations, payments or deposits occurring on the
Transfer Date for that month.
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o Amounts Owed to Derivative Counterparties. If a tranche of U.S. dollar notes or foreign
currency notes that has a Performing or non-Performing derivative agreement for principal
that provides for a payment to the applicable derivative counterparty, the deposit targeted
for that tranche of notes on each Transfer Date for any payment to the derivative
counterparty will be specified in the BAseries indenture supplement.
Allocation to Principal Funding Subaccounts
BAseries Available Principal Amounts, after any reallocation to cover BAseries Available Funds
shortfalls, if any, will be allocated each month, and a portion deposited in the principal funding
subaccount established for each tranche of notes, as follows:
o BAseries Available Principal Amounts Equal Targeted Amounts. If BAseries Available
Principal Amounts remaining after giving effect to clauses one through four under
"—Application of BAseries Available Principal Amounts" are equal to the sum of the deposits
targeted by each tranche of notes, then the applicable targeted amount will be deposited in
the principal funding subaccount established for each tranche.
o BAseries Available Principal Amounts Are Less Than Targeted Amounts. If BAseries Available
Principal Amounts remaining after giving effect to clauses one through four under
"—Application of BAseries Available Principal Amounts" are less than the sum of the
deposits targeted by each tranche of notes, then BAseries Available Principal Amounts will
be deposited in the principal funding subaccounts for each tranche in the following
priority:
— first, the amount available will be allocated to the Class A notes,
— second, the amount available after the application above will be allocated to the
Class B notes, and
— third, the amount available after the applications above will be allocated to the
Class C notes.
In each case, BAseries Available Principal Amounts allocated to a class will be allocated to
each tranche of notes within such class pro rata based on the ratio of:
— the amount targeted to be deposited into the principal funding subaccount for the
applicable tranche of such class, to
— the aggregate amount targeted to be deposited into the principal funding subaccount
for all tranches of such class.
If the restrictions described in "—Limit on Deposits to the Principal Funding Subaccount of
Subordinated Notes; Limit on Repayments of all Tranches" prevent the deposit of BAseries Available
Principal Amounts into the principal funding subaccount of any subordinated note, the aggregate amount
of BAseries Available Principal Amounts available to make the targeted deposit for such subordinated
tranche will be allocated first to the Class A notes and
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then to the Class B notes, in each case pro rata based on the dollar amount of subordinated notes required to be outstanding for
the related senior notes. See "—Targeted Deposits of BAseries Available Principal Amounts to the Principal Funding
Account."
Limit on Deposits to the Principal Funding Subaccount of Subordinated Notes; Limit on
Repayments of all Tranches
Limit on Deposits to the Principal Funding Subaccount of Subordinated Notes. No
BAseries Available Principal Amounts will be deposited in the principal funding subaccount of any tranche
of Class B notes unless, following such deposit, the available subordinated amount of Class B notes is
at least equal to the required subordinated amount of Class B notes for all outstanding Class A notes
minus the Class A Usage of Class B Required Subordinated Amount for all Class A notes. For this
purpose, the available subordinated amount of Class B notes is equal to the aggregate nominal
liquidation amount of all other Class B notes of the BAseries which will be outstanding after giving
effect to the deposit into the principal funding subaccount of such tranche of Class B notes and all
other Class B notes which have a targeted deposit into the principal funding account for such month.
No BAseries Available Principal Amounts will be deposited in the principal funding subaccount
of any tranche of Class C notes unless, following such deposit:
— the available subordinated amount of Class C notes is at least equal to the required
subordinated amount of Class C notes for all outstanding Class A notes minus the
Class A Usage of Class C Required Subordinated Amount for all Class A notes; and
— the available subordinated amount of Class C notes is at least equal to the required
subordinated amount of Class C notes for all outstanding Class B notes minus the Class
B Usage of Class C Required Subordinated Amount for all Class B notes.
For this purpose, the available subordinated amount of Class C notes is equal to the aggregate
nominal liquidation amount of all other Class C notes of the BAseries which will be outstanding after
giving effect to the deposit into the principal funding subaccount of such tranche of Class C notes and
all other Class C notes which have a targeted deposit into the principal funding account for such month.
BAseries Available Principal Amounts will be deposited in the principal funding subaccount of a
subordinated note if and only to the extent that such deposit is not contrary to either of the preceding
two paragraphs and the prefunding target amount for each senior note is zero.
Limit on Repayments of all Tranches. No amounts on deposit in a principal funding subaccount
for any tranche of Class A notes or Class B notes will be applied to pay principal of that tranche or to
make a payment under a derivative agreement with respect to principal of that tranche in excess of the
highest outstanding dollar principal amount of that tranche (or, in the case of foreign currency notes,
such other amount that may be specified in the BAseries indenture supplement). In the case of any
tranche of Class C notes, no amounts on deposit in a principal funding subaccount or, if applicable, a
Class C reserve subaccount for any
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such tranche will be applied to pay principal of that tranche or to
make a payment under a derivative agreement with respect to principal of that tranche in excess of the
highest outstanding dollar principal amount of that tranche (or, in the case of foreign currency notes,
such other amount that may be specified in the BAseries indenture supplement).
Payments Received from Derivative Counterparties for Principal
Unless otherwise specified in the related indenture supplement, dollar payments for principal
received under derivative agreements of U.S. dollar notes in the BAseries will be treated as
BAseries Available Principal Amounts. Payments received under derivative agreements for principal of
foreign currency notes in the BAseries will be applied as specified in the BAseries indenture supplement.
Payments Received from Supplemental Credit Enhancement Providers or Supplemental Liquidity
Providers for Principal
Unless otherwise specified in the related indenture supplement, payments for principal received
from supplemental credit enhancement providers or supplemental liquidity providers for BAseries notes
will be treated as BAseries Available Principal Amounts.
Deposits of Withdrawals from the Class C Reserve Account to the Principal Funding Account
Withdrawals from any Class C reserve subaccount will be deposited into the applicable principal
funding subaccount for the applicable tranche of Class C notes to the extent described under
"—Withdrawals from the Class C Reserve Account."
Withdrawals from Interest Funding Subaccounts
After giving effect to all deposits of funds to the interest funding account in a month, the
following withdrawals from the applicable interest funding subaccount may be made, to the extent funds
are available, in the applicable interest funding subaccount. A tranche of notes may be entitled to
more than one of the following withdrawals in a particular month:
o Withdrawals for U.S. Dollar Notes. On each applicable interest payment date for each
tranche of U.S. dollar notes, an amount equal to interest due on the applicable tranche of
notes on the applicable interest payment date (including any overdue interest payments and
additional interest on overdue interest payments) will be withdrawn from that interest
funding subaccount and paid to the applicable paying agent.
o Withdrawals for Foreign Currency Notes with a Non-Performing Derivative Agreement. On each
applicable interest payment date for a tranche of foreign currency notes that has a
non-Performing derivative agreement for interest, the amount specified in the
BAseries indenture supplement will be withdrawn from that interest funding subaccount and,
if so specified in the applicable indenture supplement, converted to the applicable foreign
currency at the applicable spot exchange rate and remitted to the applicable paying agent.
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o Withdrawals for Discount Notes. On each applicable principal payment date, for each
tranche of discount notes, an amount equal to the amount of the accretion of principal of
that tranche of notes from the prior principal payment date—or, in the case of the first
principal payment date, the date of issuance of that tranche—to but excluding the
applicable principal payment date will be withdrawn from that interest funding subaccount
and invested in the Investor Interest of the collateral certificate.
o Withdrawals for Payments to Derivative Counterparties. On each date on which a payment is
required under the applicable derivative agreement, for any tranche of notes that has a
Performing or non-Performing derivative agreement for interest, an amount equal to the
amount of the payment to be made under the applicable derivative agreement (including, if
applicable, any overdue payment and any additional interest on overdue payments) will be
withdrawn from that interest funding subaccount and paid in accordance with the
BAseries indenture supplement.
If the aggregate amount available for withdrawal from an interest funding subaccount is less
than all withdrawals required to be made from that subaccount in a month after giving effect to all
deposits, then the amounts on deposit in that interest funding subaccount will be withdrawn and, if
payable to more than one person, applied pro rata based on the amounts of the withdrawals required to be
made. After payment in full of any tranche of notes, any amount remaining on deposit in the applicable
interest funding subaccount will be first applied to cover any interest funding subaccount shortfalls
for other tranches of notes in the manner described in "—Allocation to Interest Funding Subaccounts,"
second applied to cover any principal funding subaccount shortfalls in the manner described in
"—Allocation to Principal Funding Subaccounts," and third paid to the issuing entity.
Withdrawals from Principal Funding Account
After giving effect to all deposits of funds to the principal funding account in a month, the
following withdrawals from the applicable principal funding subaccount will be made to the extent funds
are available in the applicable principal funding subaccount. A tranche of notes may be entitled to
more than one of the following withdrawals in a particular month:
o Withdrawals for U.S. Dollar Notes with no Derivative Agreement for Principal. On each
applicable principal payment date, for each tranche of U.S. dollar notes that has no
derivative agreement for principal, an amount equal to the principal due on the applicable
tranche of notes on the applicable principal payment date will be withdrawn from the
applicable principal funding subaccount and paid to the applicable paying agent.
o Withdrawals for U.S. Dollar or Foreign Currency Notes with a Performing Derivative
Agreement for Principal. On each date on which a payment is required under the applicable
derivative agreement for any tranche of U.S. dollar or foreign currency notes that has a
Performing derivative agreement for principal, an amount equal to the amount of the payment
to be made under the applicable derivative agreement will be withdrawn from the applicable
principal funding subaccount and paid to the applicable derivative counterparty. The
issuing entity will direct the
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applicable derivative counterparty to remit its payments
under the applicable derivative agreement to the applicable paying agent.
o Withdrawals for Foreign Currency Notes with a non-Performing Derivative Agreement for
Principal. On each principal payment date for a tranche of foreign currency notes that has
a non-Performing derivative agreement for principal, an amount equal to the amount
specified in the applicable indenture supplement will be withdrawn from that principal
funding subaccount and, if so specified in the applicable indenture supplement, converted
to the applicable foreign currency at the prevailing spot exchange rate and paid to the
applicable paying agent.
o Withdrawals for U.S. Dollar Notes with a non-Performing Derivative Agreement for
Principal. On each principal payment date for a tranche of U.S. dollar notes with a
non-Performing derivative agreement for principal, the amount specified in the applicable
indenture supplement will be withdrawn from the applicable principal funding subaccount and
paid to the applicable paying agent.
o Withdrawals of Prefunded Amounts. If prefunding of the principal funding subaccounts for
senior classes of notes is no longer necessary as a result of payment of senior notes or
issuance of additional subordinated notes, as described under
"—Targeted Deposits of BAseries Available Principal Amounts to the Principal Funding
Account—Prefunding of the Principal Funding Account for Senior Classes," the prefunded
amounts will be withdrawn from the principal funding account and first, allocated among and
deposited to the principal funding subaccounts of the Class A notes up to the amount then
targeted to be on deposit in such principal funding subaccount; second, allocated among and
deposited to the principal funding subaccounts of the Class B notes up to the amount then
targeted to be on deposit in such principal funding subaccount; third, allocated among and
deposited to the principal funding subaccount of the Class C notes up to the amount then
targeted to be on deposit in such principal funding subaccount; and fourth, any remaining
amounts paid to master trust II to increase the Investor Interest of the collateral
certificate.
o Withdrawals on the Legal Maturity Date. On the legal maturity date of any tranche of
notes, amounts on deposit in the principal funding subaccount of such tranche may be
applied to pay principal of that tranche or to make a payment under a derivative agreement
with respect to principal of that tranche.
If the aggregate amount available for withdrawal from a principal funding subaccount for any
tranche of notes is less than all withdrawals required to be made from that principal funding subaccount
for that tranche in a month, then the amounts on deposit will be withdrawn and applied pro rata based on
the amounts of the withdrawals required to be made. Upon payment in full of any tranche of notes, any
remaining amount on deposit in the applicable principal funding subaccount will be first applied to
cover any interest funding subaccount shortfalls for other tranches of notes, second applied to cover
any principal funding subaccount shortfalls, and third paid to the issuing entity.
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Targeted Deposits to the Class C Reserve Account
The Class C reserve account will be funded on each Transfer Date, as necessary, from
BAseries Available Funds as described under "—Application of BAseries Available Funds." The aggregate
deposit targeted to be made to the Class C reserve account in each month will be the sum of the Class C
reserve subaccount deposits targeted to be made for each tranche of Class C notes as required under the
BAseries indenture supplement. The deposit targeted to be made to the Class C reserve subaccount in
each month for each tranche of Class C BAseries notes will be described in the applicable prospectus
supplement.
If the aggregate deposit made to the Class C reserve account is less than the sum of the
targeted deposits for each tranche of Class C notes, then the amount available will be allocated to each
tranche of Class C notes up to the targeted deposit pro rata based on the ratio of the Weighted Average
Available Funds Allocation Amount of that tranche for such month to the Weighted Average Available Funds
Allocation Amount of all tranches of Class C notes for such month that have a targeted amount to be
deposited in their Class C reserve subaccounts for that month. After the initial allocation, any excess
will be further allocated in a similar manner to those Class C reserve subaccounts which still have an
uncovered targeted deposit.
Withdrawals from the Class C Reserve Account
Withdrawals will be made from the Class C reserve account in the amount and manner required
under the BAseries indenture supplement.
Unless otherwise described in the applicable prospectus supplement, withdrawals will be made
from the Class C reserve subaccounts, but in no event more than the amount on deposit in the applicable
Class C reserve subaccount, in the following order:
o Payments of Interest, Payments Relating to Derivative Agreements for Interest and Accretion
on Discount Notes. If the amount on deposit in the interest funding subaccount for any
tranche of Class C notes is insufficient to pay in full the amounts for which withdrawals
are required, the amount of the deficiency will be withdrawn from the applicable Class C
reserve subaccount and deposited into the applicable interest funding subaccount.
o Payments of Principal and Payments Relating to Derivative Agreements for Principal. If, on
and after the earliest to occur of (i) the date on which any tranche of Class C notes is
accelerated pursuant to the indenture following an event of default relating to such
tranche, (ii) any date on or after the Transfer Date immediately preceding the expected
principal payment date on which the amount on deposit in the principal funding subaccount
for any tranche of Class C notes plus the aggregate amount on deposit in the Class C
reserve subaccount for such tranche of Class C notes equals or exceeds the outstanding
dollar principal amount of such Class C notes and (iii) the legal maturity date for any
tranche of Class C notes, the amount on deposit in the principal funding subaccount for any
tranche of Class C notes is insufficient to pay in full the amounts for which withdrawals
are required, the amount
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of the deficiency will be withdrawn from the applicable Class C
reserve subaccount and deposited into the applicable principal funding subaccount.
o Excess Amounts. If on any Transfer Date the aggregate amount on deposit in any Class C
reserve subaccount is greater than the amount required to be on deposit in the applicable
Class C reserve subaccount and such Class C notes have not been accelerated, the excess
will be withdrawn and first allocated among and deposited to the other Class C reserve
subaccounts in a manner similar to that described in the second paragraph of "—Targeted
Deposits to the Accumulation Reserve Account" and then paid to the issuing entity. In
addition, after payment in full of any tranche of Class C notes, any amount remaining on
deposit in the applicable Class C reserve subaccount will be applied in accordance with the
preceding sentence.
Targeted Deposits to the Accumulation Reserve Account
If more than one budgeted deposit is targeted for a tranche, the accumulation reserve
subaccount will be funded for such tranche no later than three months prior to the date on which a
budgeted deposit is first targeted for such tranche as described under "—Targeted Deposits of
BAseries Available Principal Amounts to the Principal Funding Account." The accumulation reserve
subaccount for a tranche of notes will be funded on each Transfer Date, as necessary, from
BAseries Available Funds as described under "—Application of BAseries Available Funds." The aggregate
deposit targeted to be made to the accumulation reserve account in each month will be the sum of the
accumulation reserve subaccount deposits targeted to be made for each tranche of notes.
If the aggregate amount of BAseries Available Funds available for deposit to the accumulation
reserve account is less than the sum of the targeted deposits for each tranche of notes, then the amount
available will be allocated to each tranche of notes up to the targeted deposit pro rata based on the
ratio of the Weighted Average Available Funds Allocation Amount for that tranche for that month to the
Weighted Average Available Funds Allocation Amount for all tranches of notes that have a targeted
deposit to their accumulation reserve subaccounts for that month. After the initial allocation, any
excess will be further allocated in a similar manner to those accumulation reserve subaccounts which
still have an uncovered targeted deposit.
Withdrawals from the Accumulation Reserve Account
Withdrawals will be made from the accumulation reserve subaccounts, but in no event more than
the amount on deposit in the applicable accumulation reserve subaccount, in the following order:
o Interest. On or prior to each Transfer Date, the issuing entity will calculate for each
tranche of notes the amount of any shortfall of net investment earnings for amounts on
deposit in the principal funding subaccount for that tranche (other than prefunded amounts)
over the amount of interest that would have accrued on such deposit if that tranche had
borne interest at the applicable note interest rate (or other rate specified in the
BAseries indenture supplement) for the prior month. If there is any such shortfall for
that Transfer Date, or any unpaid shortfall from any earlier Transfer Date, the
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issuing entity will withdraw the sum of those amounts from the accumulation reserve subaccount, to
the extent available, for treatment as BAseries Available Funds for such month.
o Payment to Issuing Entity. Upon payment in full of any tranche of notes, any amount on
deposit in the applicable accumulation reserve subaccount will be paid to the issuing
entity.
Final Payment of the Notes
Noteholders are entitled to payment of principal in an amount equal to the outstanding dollar
principal amount of their respective notes. However, BAseries Available Principal Amounts will be
allocated to pay principal on the notes only up to their nominal liquidation amount, which will be
reduced for charge-offs due to uncovered defaults of principal receivables in master trust II and
reallocations of BAseries Available Principal Amounts to pay interest on senior classes of notes or a
portion of the master trust II servicing fee allocable to such notes. In addition, if a sale of
receivables occurs, as described in "—Sale of Credit Card Receivables," the amount of receivables sold
will be limited to the nominal liquidation amount of, plus any accrued, past due or additional interest
on, the related tranche of notes. If the nominal liquidation amount of a tranche has been reduced,
noteholders of such tranche will receive full payment of principal only to the extent proceeds from the
sale of receivables are sufficient to pay the full principal amount, amounts are received from an
applicable derivative agreement or amounts have been previously deposited in an issuing entity account
for such tranche of notes.
On the date of a sale of receivables, the proceeds of such sale will be available to pay the
outstanding dollar principal amount of, plus any accrued, past due and additional interest on, that
tranche.
A tranche of notes will be considered to be paid in full, the holders of those notes will have
no further right or claim, and the issuing entity will have no further obligation or liability for
principal or interest, on the earliest to occur of:
o the date of the payment in full of the stated principal amount of and all accrued, past due
and additional interest on that tranche of notes;
o the date on which the outstanding dollar principal amount of that tranche of notes is
reduced to zero, and all accrued, past due or additional interest on that tranche of notes
is paid in full;
o the legal maturity date of that tranche of notes, after giving effect to all deposits,
allocations, reallocations, sales of credit card receivables and payments to be made on
that date; or
o the date on which a sale of receivables has taken place for such tranche, as described in
"—Sale of Credit Card Receivables."
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Pro Rata Payments Within a Tranche
All notes of a tranche will receive payments of principal and interest pro rata based on the
stated principal amount of each note in that tranche.
Shared Excess Available Funds
BAseries Available Funds for any month remaining after making the seventh application described
under "—Application of BAseries Available Funds" will be available for allocation to other series of
notes in Group A. Such excess including excesses, if any, from other series of notes in Group A, called
shared excess available funds, will be allocated to cover certain shortfalls in Available Funds for the
series in Group A, if any, which have not been covered out of Available Funds allocable to such series.
If these shortfalls exceed shared excess available funds for any month, shared excess available funds
will be allocated pro rata among the applicable series in Group A based on the relative amounts of those
shortfalls in Available Funds. To the extent that shared excess available funds exceed those
shortfalls, the balance will be paid to the issuing entity. For the BAseries, shared excess available
funds, to the extent available and allocated to the BAseries, will cover shortfalls in the first four
applications described in "—Application of BAseries Available Funds."
Issuing Entity Accounts
The issuing entity has established a collection account for the purpose of receiving payments
of finance charge collections and principal collections and other amounts from master trust II payable
under the collateral certificate.
If so specified in the accompanying prospectus supplement, the issuing entity may direct the
indenture trustee to establish and maintain in the name of the indenture trustee supplemental accounts
for any series, class or tranche of notes for the benefit of the related noteholders.
Each month, distributions on the collateral certificate will be deposited into one or more
supplemental accounts, to make payments of interest on and principal of the notes, to make payments
under any applicable derivative agreements, and for the other purposes as specified in the accompanying
prospectus supplement.
The supplemental accounts described in this section are referred to as issuing entity
accounts. Amounts maintained in issuing entity accounts may only be invested by the indenture trustee
at the written direction of the issuing entity, without independent verification of its authority, in
Permitted Investments.
Each month, distributions on the collateral certificate will be deposited into the collection
account, and then allocated to each series of notes (including the BAseries), and then allocated to the
applicable series principal funding account, the interest funding account, the accumulation reserve
account, the Class C reserve account and any other supplemental account, to make payments under any
applicable derivative agreements and additionally as specified in "—Deposit and Application of Funds."
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For the BAseries notes, the issuing entity will also establish a principal funding account, an
interest funding account and an accumulation reserve account for the benefit of the BAseries, which will
have subaccounts for each tranche of notes of the BAseries, and a Class C reserve account, which will
have subaccounts for each tranche of Class C notes of the BAseries.
For the BAseries funds on deposit in the principal funding account and the interest funding
account will be used to make payments of principal of and interest on the BAseries notes when such
payments are due. Payments of interest and principal will be due in the month when the funds are
deposited into the accounts, or in later months. If interest on a note is not scheduled to be paid
every month—for example, if interest on that note is payable quarterly, semiannually or at another
interval less frequently than monthly—the issuing entity will deposit accrued interest amounts funded
from BAseries Available Funds into the interest funding subaccount for that note to be held until the
interest is due. See "—Deposit and Application of Funds for the BAseries—Targeted Deposits of
BAseries Available Funds to the Interest Funding Account."
If the issuing entity anticipates that BAseries Available Principal Amounts will not be enough
to pay the stated principal amount of a note on its expected principal payment date, the issuing entity
may begin to apply BAseries Available Principal Amounts in months before the expected principal payment
date and deposit those funds into the principal funding subaccount established for that tranche to be
held until the expected principal payment date of that note. However, since funds in the principal
funding subaccount for tranches of subordinated notes will not be available for credit enhancement for
any senior classes of notes, BAseries Available Principal Amounts will not be deposited into the
principal funding subaccount for a tranche of subordinated notes if such deposit would reduce the
available subordination below the required subordination.
If the earnings on funds in the principal funding subaccount are less than the interest payable
on the portion of principal in the principal funding subaccount for the applicable tranche of notes, the
amount of such shortfall will be withdrawn from the accumulation reserve account to the extent
available, unless the amounts on deposit in the principal funding subaccount are prefunded amounts, in
which case additional finance charge collections will be allocable to the collateral certificate and the
BAseries and will be treated as BAseries Available Funds as described under "Deposit and Application of
Funds for the BAseries—BAseries Available Funds" and "Master Trust II—Application of Collections" in
this prospectus.
Derivative Agreements
Some notes may have the benefits of one or more derivative agreements, such as a currency swap,
an interest rate swap, a cap (obligating a derivative counterparty to pay all interest in excess of a
specified percentage rate), a collar (obligating a derivative counterparty to pay all interest below a
specified percentage rate and above a higher specified percentage rate) or a guaranteed investment
contract (obligating a derivative counterparty to pay a guaranteed rate of return over a specified
period) with various counterparties. In general, the issuing entity will receive payments from
counterparties to the derivative agreements in exchange for the issuing entity's payments to them, to
the extent required under the derivative agreements. Payments received from derivative counterparties
with respect to interest payments on dollar notes in a
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series, class or tranche will generally be treated as Available Funds for such series, class or tranche.
The specific terms of a derivative agreement applicable to a series, class or tranche of notes and a description of the related
counterparty will be included in the related prospectus supplement. Funding or its affiliates may be
derivative counterparties for any series, class or tranche of notes.
Supplemental Credit Enhancement Agreements and Supplemental Liquidity Agreements
Some notes may have the benefit of one or more additional forms of credit enhancement
agreements - referred to herein as "supplemental credit enhancement agreements" - such as letters of
credit, cash collateral guarantees or accounts, surety bonds or insurance policies with various credit
enhancement providers. In addition, some notes may have the benefit of one or more forms of
supplemental liquidity agreements - referred to herein as "supplemental liquidity agreements" - such as
a liquidity facility with various liquidity providers. The specific terms of any supplemental credit
enhancement agreement or supplemental liquidity agreement applicable to a series, class or tranche of
notes and a description of the related provider will be included in the prospectus supplement for a
series, class or tranche of notes. Funding or its affiliates may be providers of any supplemental
credit enhancement agreement or supplemental liquidity agreement.
Sale of Credit Card Receivables
In addition to a sale of receivables following an insolvency of Funding, if a series, class or
tranche of notes has an event of default and is accelerated before its legal maturity date, master trust
II will sell credit card receivables, or interests therein, if the conditions described in "The
Indenture—Events of Default" and "—Events of Default Remedies" are satisfied, and for subordinated notes
of a multiple tranche series, only to the extent that payment is permitted by the subordination
provisions of the senior notes of the same series. This sale will take place at the direction of the
indenture trustee or at the direction of the holders of a majority of aggregate outstanding dollar
principal amount of notes of that series, class or tranche.
Any sale of receivables for a subordinated tranche of notes in a multiple tranche series may be
delayed until the senior classes of notes of the same series are prefunded, enough notes of senior
classes are repaid, or new subordinated notes have been issued, in each case, to the extent that the
subordinated tranche is no longer needed to provide the required subordination for the senior notes of
that series. In a multiple tranche series, if a senior tranche of notes directs a sale of credit card
receivables, then after the sale that tranche will no longer be entitled to subordination from
subordinated classes of notes of the same series.
If principal of or interest on a tranche of notes has not been paid in full on its legal
maturity date, the sale will automatically take place on that date regardless of the subordination
requirements of any senior classes of notes. Proceeds from such sale will be immediately paid to the
noteholders of the related tranche.
The amount of credit card receivables sold will be up to the nominal liquidation amount of,
plus any accrued, past due and additional interest on, the related notes. The nominal liquidation
amount of such notes will be automatically reduced to zero upon such sale. No more
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Available Principal Amounts or Available Funds will be allocated to those notes. Noteholders will receive the proceeds of
such sale in an amount not to exceed the outstanding principal amount of, plus any past due, accrued and
additional interest on, such notes. Such notes are no longer outstanding under the indenture once the
sale occurs.
After giving effect to a sale of receivables for a series, class or tranche of notes, the
amount of proceeds on deposit in a principal funding account or subaccount may be less than the
outstanding dollar principal amount of that series, class or tranche. This deficiency can arise because
the nominal liquidation amount of that series, class or tranche was reduced before the sale of
receivables or because the sale price for the receivables was less than the outstanding dollar principal
amount and accrued, past due and additional interest. These types of deficiencies will not be
reimbursed.
Sale of Credit Card Receivables for BAseries Notes
Credit card receivables may be sold upon the insolvency of Funding, upon an event of default
and acceleration relating to a tranche of notes, and on the legal maturity date of a tranche of notes.
See "The Indenture—Events of Default" and "Master Trust II—Pay Out Events" in this prospectus.
If a tranche of notes has an event of default and is accelerated before its legal maturity
date, master trust II may sell credit card receivables in an amount up to the nominal liquidation amount
of the affected tranche plus any accrued, past due or additional interest on the affected tranche if the
conditions described in "The Indenture—Events of Default Remedies" are satisfied. This sale will take
place at the option of the indenture trustee or at the direction of the holders of a majority of
aggregate outstanding dollar principal amount of notes of that tranche. However, a sale will only be
permitted if at least one of the following conditions is met:
o the holders of 90% of the aggregate outstanding dollar principal amount of the accelerated
tranche of notes consent;
o the net proceeds of such sale (plus amounts on deposit in the applicable subaccounts and
payments to be received from any applicable derivative agreement) would be sufficient to
pay all amounts due on the accelerated tranche of notes; or
o if the indenture trustee determines that the funds to be allocated to the accelerated
tranche of notes, including BAseries Available Funds and BAseries Available Principal
Amounts allocable to the accelerated tranche of notes, payments to be received from any
applicable derivative agreement and amounts on deposit in the applicable subaccounts, may
not be sufficient on an ongoing basis to make all payments on the accelerated tranche of
notes as such payments would have become due if such obligations had not been declared due
and payable, and 66 (2)/3% of the noteholders of the accelerated tranche of notes consent
to the sale.
Any sale of receivables for a subordinated tranche of notes will be delayed if the
subordination provisions prevent payment of the accelerated tranche until a sufficient amount of senior
classes of notes are prefunded, or a sufficient amount of senior notes have been repaid, or a sufficient
amount of subordinated tranches have been issued, in each case, to the extent that the
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accelerated tranche of notes is no longer needed to provide the required subordination for the senior classes.
If principal of or interest on a tranche of notes has not been paid in full on its legal
maturity date (after giving effect to any allocations, deposits and distributions to be made on such
date), the sale will automatically take place on that date regardless of the subordination requirements
of any senior classes of notes. Proceeds from such a sale will be immediately paid to the noteholders
of the related tranche.
The amount of credit card receivables sold will be up to the nominal liquidation amount of,
plus any accrued, past due and additional interest on, the tranches of notes that directed the sale to
be made. The nominal liquidation amount of any tranche of notes that directed the sale to be made will
be automatically reduced to zero upon such sale. After such sale, no more BAseries Available Principal
Amounts or BAseries Available Funds will be allocated to that tranche.
If a tranche of notes directs a sale of credit card receivables, then after the sale that
tranche will no longer be entitled to credit enhancement from subordinated classes of notes of the same
series. Tranches of notes that have directed sales of credit card receivables are not outstanding under
the indenture.
After giving effect to a sale of receivables for a tranche of notes, the amount of proceeds may
be less than the outstanding dollar principal amount of that tranche. This deficiency can arise because
of a Nominal Liquidation Amount Deficit or if the sale price for the receivables was less than the
outstanding dollar principal amount. These types of deficiencies will not be reimbursed unless, in the
case of Class C notes only, there are sufficient amounts in the related Class C reserve subaccount.
Any amount remaining on deposit in the interest funding subaccount for a tranche of notes that
has received final payment as described in "—Deposit and Application of Funds for the BAseries—Final
Payment of the Notes" and that has caused a sale of receivables will be treated as BAseries Available
Funds and be allocated as described in "—Application of BAseries Available Funds."
Limited Recourse to the Issuing Entity; Security for the Notes
Only the portion of Available Funds and Available Principal Amounts allocable to a series,
class or tranche of notes after giving effect to all allocations and reallocations thereof, funds on
deposit in the applicable issuing entity accounts, any applicable derivative agreement and proceeds of
sales of credit card receivables provide the source of payment for principal of or interest on any
series, class or tranche of notes. Noteholders will have no recourse to any other assets of the issuing
entity or any other person or entity for the payment of principal of or interest on the notes.
The notes of all series are secured by a shared security interest in the collateral certificate
and the collection account, but each series, class or tranche of notes is entitled to the benefits of
only that portion of those assets allocated to it under the indenture and the related indenture
supplement. See "The Indenture—Issuing Entity Covenants" and "Master Trust II—
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Representations and Warranties" for a discussion of covenants regarding the perfection of security interests. Each series,
class or tranche of notes is also secured by a security interest in any applicable supplemental account
and any applicable derivative agreement.
The collateral certificate is allocated a portion of collections of finance charge receivables,
collections of principal receivables, its share of the payment obligation on the master trust II
servicing fee and its share of defaults on principal receivables in master trust II based on the
investor percentage. The BAseries and the other series of notes are secured by a shared security
interest in the collateral certificate and the collection account of the issuing entity, but each
series of notes (including the BAseries) is entitled to the benefits of only that portion of those assets
allocable to it under the indenture and the applicable indenture supplement. Therefore, only a portion
of the collections allocated to the collateral certificate are available to the BAseries. Similarly,
BAseries notes are entitled only to their allocable share of BAseries Available Funds,
BAseries Available Principal Amounts, amounts on deposit in the applicable issuing entity accounts, any
payments received from derivative counterparties (to the extent not included in BAseries Available
Funds) and proceeds of the sale of credit card receivables by master trust II. Noteholders will have no
recourse to any other assets of the issuing entity or any other person or entity for the payment of
principal of or interest on the notes.
Each tranche of notes of the BAseries is entitled to the benefits of only that portion of the
issuing entity's assets allocated to that tranche under the indenture and the BAseries indenture
supplement. Each tranche of notes is also secured by a security interest in the applicable principal
funding subaccount, the applicable interest funding subaccount, the applicable accumulation reserve
subaccount, in the case of a tranche of Class C notes, the applicable Class C reserve subaccount and any
other applicable supplemental account, and by a security interest in any applicable derivative agreement.
The Indenture
The notes will be issued pursuant to the terms of the indenture and a related indenture
supplement. The following discussion and the discussions under "The Notes" in this prospectus and
certain sections in the prospectus summary summarize the material terms of the notes, the indenture and
the indenture supplements. These summaries do not purport to be complete and are qualified in their
entirety by reference to the provisions of the notes, the indenture and the indenture supplements.
Indenture Trustee
The Bank of New York, a New York banking corporation, is the indenture trustee under the indenture for
the notes. See "Transaction Parties—The Bank of New York" for a description of The Bank of New York.
Under the terms of the indenture, the issuing entity has agreed to pay to the indenture trustee
reasonable compensation for performance of its duties under the indenture. The indenture trustee has
agreed to perform only those duties specifically set forth in the indenture.
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Many of the duties of the indenture trustee are described throughout this prospectus and the related
prospectus supplement. Under the terms of the indenture, the indenture trustee's limited
responsibilities include the following:
o to deliver to noteholders of record certain notices, reports and other documents received
by the indenture trustee, as required under the indenture;
o to authenticate, deliver, cancel and otherwise administer the notes;
o to maintain custody of the collateral certificate pursuant to the terms of the indenture;
o to establish and maintain necessary issuing entity accounts and to maintain accurate
records of activity in those accounts;
o to serve as the initial transfer agent, paying agent and registrar, and, if it resigns
these duties, to appoint a successor transfer agent, paying agent and registrar;
o to invest funds in the issuing entity accounts at the direction of the issuing entity;
o to represent the noteholders in interactions with clearing agencies and other similar
organizations;
o to distribute and transfer funds at the direction of the issuing entity, as applicable, in
accordance with the terms of the indenture;
o to periodically report on and notify noteholders of certain matters relating to actions
taken by the indenture trustee, property and funds that are possessed by the indenture
trustee, and other similar matters; and
o to perform certain other administrative functions identified in the indenture.
In addition, the indenture trustee has the discretion to require the issuing entity to cure a
potential event of default and to institute and maintain suits to protect the interest of the
noteholders in the collateral certificate. The indenture trustee is not liable for any errors of
judgment as long as the errors are made in good faith and the indenture trustee was not negligent. The
indenture trustee is not responsible for any investment losses to the extent that they result from
Permitted Investments.
If an event of default occurs, in addition to the responsibilities described above, the
indenture trustee will exercise its rights and powers under the indenture to protect the interests of
the noteholders using the same degree of care and skill as a prudent man would exercise in the conduct
of his own affairs. If an event of default occurs and is continuing, the indenture trustee will be
responsible for enforcing the agreements and the rights of the noteholders. See "The Indenture—Events
of Default Remedies." The indenture trustee may, under certain limited circumstances, have the right or
the obligation to do the following:
o demand immediate payment by the issuing entity of all principal and accrued interest on the
notes;
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o enhance monitoring of the securitization;
o protect the interests of the noteholders in the collateral certificate or the receivables
in a bankruptcy or insolvency proceeding;
o prepare and send timely notice to noteholders of the event of default;
o institute judicial proceedings for the collection of amounts due and unpaid;
o rescind and annul a declaration of acceleration of the notes by the noteholders following
an event of default; and
o cause master trust II to sell credit card receivables (see "Sources of Funds to Pay the
Notes—Sale of Credit Card Receivables").
Following an event of default, the majority holders of any series, class or tranche of notes
will have the right to direct the indenture trustee to exercise certain remedies available to the
indenture trustee under the indenture. In such case, the indenture trustee may decline to follow the
direction of the majority holders only if it determines that: (1) the action so directed is unlawful or
conflicts with the indenture, (2) the action so directed would involve it in personal liability, or
(3) the action so directed would be unjustly prejudicial to the noteholders not taking part in such
direction.
The issuing entity has agreed to pay the indenture trustee for all services rendered. The
issuing entity will also indemnify the indenture trustee for any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection with the administration of
the issuing entity. In certain instances, this indemnification will be higher in priority than payments
to noteholders. See "The Indenture—Events of Default Remedies."
The indenture trustee may resign at any time. The indenture trustee may be removed from any
series, class or tranche of notes at any time by majority of the noteholders of that series, class or
tranche. The issuing entity may also remove the indenture trustee if, among other things, the indenture
trustee is no longer eligible to act as trustee under the indenture or if the indenture trustee becomes
insolvent. In all circumstances, the issuing entity must appoint a successor indenture trustee for the
notes. Any resignation or removal of the indenture trustee and appointment of a successor indenture
trustee will not become effective until the successor indenture trustee accepts the appointment.
Any successor indenture trustee will execute and deliver to the issuing entity and its
predecessor indenture trustee an instrument accepting such appointment. The successor trustee must
(1) be a corporation organized and doing business under the laws of the United States of America or of
any state, (2) be authorized under such laws to exercise corporate trust powers, (3) have a combined
capital and surplus of at least $50,000,000, subject to supervision or examination by federal or state
authority, and (4) have a rating of at least BBB- by Standard & Poor's and at least BBB by Fitch. The
issuing entity may not, nor may any person directly or indirectly controlling, controlled by, or under
common control with the issuing entity, serve as indenture trustee.
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The issuing entity or its affiliates may maintain accounts and other banking or trustee
relationships with the indenture trustee and its affiliates.
Owner Trustee
Wilmington Trust Company, a Delaware banking corporation, is the owner trustee for the issuing
entity. See "Transaction Parties—BA Credit Card Trust" for a description of the ministerial nature of
the owner trustee's duties and "Transaction Parties—Wilmington Trust Company" for a description of
Wilmington Trust Company.
The owner trustee will be indemnified from and against all liabilities, obligations, losses,
damages, penalties, taxes, claims, actions, investigations, proceedings, costs, expenses or
disbursements of any kind arising out of, among other things, the trust agreement or any other related
documents (or the enforcement thereof), the administration of the issuing entity's assets or the action
or inaction of the owner trustee under the trust agreement, except for (1) its own willful misconduct,
bad faith or negligence, or (2) the inaccuracy of certain of its representations and warranties in the
trust agreement.
The owner trustee may resign at any time by giving 30 days' prior written notice to the
beneficiary. The owner trustee may also be removed as owner trustee if it becomes insolvent, it is no
longer eligible to act as owner trustee under the trust agreement or by a written instrument delivered
by the beneficiary to the owner trustee. The beneficiary must appoint a successor owner trustee. If a
successor owner trustee has not been appointed within 30 days after giving notice of resignation or
removal, the owner trustee or the beneficiary may apply to any court of competent jurisdiction to
appoint a successor owner trustee. This court-appointed owner trustee will only act in such capacity
until the time, if any, as a successor owner trustee is appointed by the beneficiary.
Any owner trustee will at all times (1) be a trust company or a banking corporation under the
laws of its state of incorporation or a national banking association, having all corporate powers and
all material government licenses, authorization, consents and approvals required to carry on a trust
business in the State of Delaware, (2) comply with the relevant provisions of the Delaware Statutory
Trust Act, (3) have a combined capital and surplus of not less than $50,000,000 (or have its obligations
and liabilities irrevocably and unconditionally guaranteed by an affiliated person having a combined
capital and surplus of at least $50,000,000), and (4) have (or have a parent which has) a rating of at
least Baa3 by Moody's, at least BBB- by Standard & Poor's or, if not rated, otherwise satisfactory to
each rating agency rating the outstanding notes. The owner trustee or the beneficiary may also deem it
necessary or prudent to appoint a co-trustee or separate owner trustee for the owner trustee under the
trust agreement.
Issuing Entity Covenants
The issuing entity will not, among other things:
o claim any credit on or make any deduction from the principal and interest payable on the
notes, other than amounts withheld in good faith from such payments under the Internal
Revenue Code or other applicable tax law,
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o voluntarily dissolve or liquidate, or
o permit (A) the validity or effectiveness of the indenture to be impaired, or permit the
lien created by the indenture to be amended, hypothecated, subordinated, terminated or
discharged, or permit any person to be released from any covenants or obligations with
respect to the notes under the indenture except as may be expressly permitted by the
indenture, (B) any lien, charge, excise, claim, security interest, mortgage or other
encumbrance (other than the lien created by the indenture) to be created on or extend to or
otherwise arise upon or burden the collateral securing the notes or proceeds thereof, or
(C) the lien of the indenture not to constitute a valid first priority security interest in
the collateral securing the notes.
The issuing entity may not engage in any activity other than the activities described in
"Transaction Parties—BA Credit Card Trust" in this prospectus. The issuing entity will not incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for
the notes.
The issuing entity will also covenant that if:
o the issuing entity defaults in the payment of interest on any series, class or tranche of
notes when such interest becomes due and payable and such default continues for a period of
35 days following the date on which such interest became due and payable, or
o the issuing entity defaults in the payment of the principal of any series, class or tranche
of notes on its legal maturity date,
and any such default continues beyond any specified period of grace provided for such series, class or
tranche of notes, the issuing entity will, upon demand of the indenture trustee, pay to the indenture
trustee, for the benefit of the holders of any such notes of the affected series, class or tranche, the
whole amount then due and payable on any such notes for principal and interest, with interest, to the
extent that payment of such interest will be legally enforceable, upon the overdue principal and upon
overdue installments of interest. In addition, the issuing entity will pay an amount sufficient to
cover the costs and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the indenture trustee, its agents and counsel and all other compensation
due to the indenture trustee. If the issuing entity fails to pay such amounts upon such demand, the
indenture trustee may institute a judicial proceeding for the collection of the unpaid amounts described
above.
Early Redemption Events
The issuing entity will be required to redeem in whole or in part, to the extent that funds are
available for that purpose and, for subordinated notes of a multiple tranche series, to the extent
payment is permitted by the subordination provisions of the senior notes of the same series, each
affected series, class or tranche of notes upon the occurrence of an early redemption event. Early
redemption events include the following:
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o for any tranche of notes, the occurrence of such note's expected principal payment date;
o each of the Pay Out Events applicable to the collateral certificate, as described under
"Master Trust II—Pay Out Events";
o the issuing entity becoming an "investment company" within the meaning of the Investment
Company Act of 1940, as amended; and
o for any series, class or tranche of notes, any additional early redemption event specified
in the accompanying prospectus supplement.
In addition, for a tranche of BAseries notes, if for any date the amount of Excess Available Funds
averaged over the three preceding calendar months is less than the Required Excess Available Funds for
such date, an early redemption event for that tranche of BAseries notes will occur.
The redemption price of a note so redeemed will be the outstanding principal amount of that
note, plus accrued, past due and additional interest to but excluding the date of redemption, which will
be the next payment date. If the amount of Available Funds and Available Principal Amounts allocable to
the series, class or tranche of notes to be redeemed, together with funds on deposit in the applicable
principal funding subaccount, interest funding subaccount and Class C reserve subaccount, and any
amounts payable to the issuing entity under any applicable derivative agreement, are insufficient to pay
the redemption price in full on the next payment date after giving effect to the subordination
provisions and allocations to any other notes ranking equally with that note, monthly payments on the
notes to be redeemed will thereafter be made on each principal payment date until the outstanding
principal amount of the notes plus all accrued, past due and additional interest are paid in full, or
the legal maturity date of the notes occurs, whichever is earlier. However, if so specified in the
accompanying prospectus supplement, subject to certain exceptions, any notes that have the benefit of a
derivative agreement will not be redeemed prior to such notes' expected principal payment date.
No Available Principal Amounts will be allocated to a series, class or tranche of notes with a
nominal liquidation amount of zero, even if the stated principal amount of that series, class or tranche
has not been paid in full. However, any funds previously deposited in the applicable principal funding
subaccount, interest funding subaccount and Class C reserve subaccount and any amounts received from an
applicable derivative agreement will still be available to pay principal of and interest on that series,
class or tranche of notes. In addition, if Available Funds are available, they can be applied to
reimburse reductions in the nominal liquidation amount of that series, class or tranche resulting from
reallocations of Available Principal Amounts to pay interest on senior classes of notes or the master
trust II servicing fee, or from charge-offs for uncovered defaults on principal receivables in master
trust II.
Payments on redeemed notes will be made in the same priority as described in the related
prospectus supplement. The issuing entity will give notice to holders of the affected notes before an
early redemption date.
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Events of Default
Each of the following events is an event of default for any affected series, class or tranche
of notes:
o for any tranche of notes, the issuing entity's failure, for a period of 35 days, to pay
interest on such notes when such interest becomes due and payable;
o for any tranche of notes, the issuing entity's failure to pay the principal amount of such
notes on the applicable legal maturity date;
o the issuing entity's default in the performance, or breach, of any other of its covenants
or warranties in the indenture, for a period of 60 days after either the indenture trustee
or the holders of at least 25% of the aggregate outstanding dollar principal amount of the
outstanding notes of the affected series, class or tranche has provided written notice
requiring remedy of such breach, and, as a result of such default, the interests of the
related noteholders are materially and adversely affected and continue to be materially and
adversely affected during the 60 day period;
o the occurrence of certain events of bankruptcy, insolvency, conservatorship or receivership
of the issuing entity; and
o for any series, class or tranche, any additional events of default specified in the
prospectus supplement relating to the series, class or tranche.
Failure to pay the full stated principal amount of a note on its expected principal payment
date will not constitute an event of default. An event of default relating to one series, class or
tranche of notes will not necessarily be an event of default relating to any other series, class or
tranche of notes.
Events of Default Remedies
The occurrence of some events of default involving the bankruptcy or insolvency of the issuing
entity results in an automatic acceleration of all of the notes. If other events of default occur and
are continuing for any series, class or tranche, either the indenture trustee or the holders of more
than a majority in aggregate outstanding dollar principal amount of the notes of that series, class or
tranche may declare by written notice to the issuing entity the principal of all those outstanding notes
to be immediately due and payable. This declaration of acceleration may generally be rescinded by the
holders of a majority in aggregate outstanding dollar principal amount of outstanding notes of that
series, class or tranche.
If a series, class or tranche of notes is accelerated before its legal maturity date, the
indenture trustee may at any time thereafter, and at the direction of the holders of a majority of
aggregate outstanding dollar principal amount of notes of that series, class or tranche at any time
thereafter will, direct master trust II to sell credit card receivables, in an amount up to the nominal
liquidation amount of the affected series, class or tranche of notes plus any accrued, past due and
additional interest on the affected series, class or tranche, as described in "Sources of
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Funds to Pay the Notes—Sale of Credit Card Receivables," but only if at least one of the following conditions is met:
o the noteholders of 90% of the aggregate outstanding dollar principal amount of the
accelerated series, class or tranche of notes consent; or
o the net proceeds of such sale (plus amounts on deposit in the applicable subaccounts and
payments to be received from any applicable derivative agreement) would be sufficient to
pay all outstanding amounts due on the accelerated series, class or tranche of notes; or
o if the indenture trustee determines that the funds to be allocated to the accelerated
series, class or tranche of notes may not be sufficient on an ongoing basis to make all
payments on such notes as such payments would have become due if such obligations had not
been declared due and payable, and the holders of not less than 66 (2)/3% of the aggregate
outstanding dollar principal amount of notes of the accelerated series, class or tranche,
as applicable, consent to the sale.
In addition, a sale of receivables following the occurrence of an event of default and
acceleration of a subordinated tranche of notes of a multiple tranche series may be delayed as described
under "Sources of Funds to Pay the Notes—Sale of Credit Card Receivables" if the payment is not
permitted by the subordination provisions of the senior notes of the same series.
If an event of default occurs relating to the failure to pay principal of or interest on a
series, class or tranche of notes in full on the legal maturity date, the issuing entity will
automatically direct master trust II to sell credit card receivables on that date, as described in
"Sources of Funds to Pay the Notes—Sale of Credit Card Receivables."
Any money or other property collected by the indenture trustee for a series, class or tranche
of notes in connection with a sale of credit card receivables following an event of default will be
applied in the following priority, at the dates fixed by the indenture trustee:
o first, to pay all compensation owed to the indenture trustee for services rendered in
connection with the indenture, reimbursements to the indenture trustee for all reasonable
expenses, disbursements and advances incurred or made in accordance with the indenture, or
indemnification of the indenture trustee for any and all losses, liabilities or expenses
incurred without negligence or bad faith on its part, arising out of or in connection with
its administration of the issuing entity;
o second, to pay the amounts of interest and principal then due and unpaid on the notes of
that series, class or tranche; and
o third, any remaining amounts will be paid to the issuing entity.
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If a sale of credit card receivables does not take place following an acceleration of a series,
class or tranche of notes, then:
o The issuing entity will continue to hold the collateral certificate, and distributions on
the collateral certificate will continue to be applied in accordance with the distribution
provisions of the indenture and the indenture supplement.
o Principal will be paid on the accelerated series, class or tranche of notes to the extent
funds are received from master trust II and available to the accelerated series, class or
tranche after giving effect to all allocations and reallocations and payment is permitted
by the subordination provisions of the senior notes of the same series.
o If the accelerated notes are a subordinated tranche of notes of a multiple tranche series,
and the subordination provisions prevent the payment of the accelerated subordinated
tranche, prefunding of the senior classes of that series will begin, as provided in the
applicable indenture supplement. Thereafter, payment will be made to the extent provided
in the applicable indenture supplement.
o On the legal maturity date of the accelerated notes, if the notes have not been paid in
full, the indenture trustee will direct master trust II to sell credit card receivables as
provided in the applicable indenture supplement.
The holders of a majority in aggregate outstanding dollar principal amount of any accelerated
series, class or tranche of notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the indenture trustee, or exercising any trust or power conferred
on the indenture trustee. However, this right may be exercised only if the direction provided by the
noteholders does not conflict with applicable law or the indenture or the related indenture supplement
or have a substantial likelihood of involving the indenture trustee in personal liability. The holder
of any note will have the right to institute suit for the enforcement of payment of principal of and
interest on such note on the legal maturity date expressed in such note.
Generally, if an event of default occurs and any notes are accelerated, the indenture trustee
is not obligated to exercise any of its rights or powers under the indenture unless the holders of
affected notes offer the indenture trustee reasonable indemnity. Upon acceleration of the maturity of a
series, class or tranche of notes following an event of default, the indenture trustee will have a lien
on the collateral for those notes ranking senior to the lien of those notes for its unpaid fees and
expenses.
The indenture trustee has agreed, and the noteholders will agree, that they will not at any
time institute against the issuing entity, Funding, BACCS or master trust II any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or similar law.
Meetings
The indenture trustee may call a meeting of the holders of notes of a series, class or tranche
at any time. The indenture trustee will call a meeting upon request of the issuing entity or the
holders of at least 10% in aggregate outstanding dollar principal amount of the outstanding
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notes of the series, class or tranche. In any case, a meeting will be called after notice is given to holders of
notes in accordance with the indenture.
The quorum for a meeting is a majority of the holders of the outstanding dollar principal
amount of the related series, class or tranche of notes, as the case may be, unless a higher percentage
is specified for approving action taken at the meeting, in which case the quorum is the higher
percentage.
Voting
Any action or vote to be taken by the holders of a majority, or other specified percentage, of
any series, class or tranche of notes may be adopted by the affirmative vote of the holders of a
majority, or the applicable other specified percentage, of the aggregate outstanding dollar principal
amount of the outstanding notes of that series, class or tranche, as the case may be. For a description
of the noteholders' actions and voting as they relate to master trust II, see "Risk Factors—You may have
limited or no ability to control actions under the indenture and the master trust II agreement. This
may result in, among other things, accelerated payment of principal when it is in your interest to
receive payment of principal on the expected principal payment date, or it may result in payment of
principal not being accelerated when it is in your interest to receive early payment of principal,"
"Master Trust II—Pay Out Events,"
"—Representations and Warranties," "—Servicer Default" and "—Amendments to the Master Trust II
Agreement."
Any action or vote taken at any meeting of holders of notes duly held in accordance with the
indenture will be binding on all holders of the affected notes or the affected series, class or tranche
of notes, as the case may be.
Notes held by the issuing entity, Funding or their affiliates will not be deemed outstanding
for purposes of voting or calculating a quorum at any meeting of noteholders.
Amendments to the Indenture and Indenture Supplements
The issuing entity and the indenture trustee may amend, supplement or otherwise modify the
indenture or any indenture supplement without the consent of any noteholders to provide for the issuance
of any series, class or tranche of notes (as described under "The Notes—Issuances of New Series, Classes
and Tranches of Notes") and to set forth the terms thereof.
In addition, upon delivery of a master trust II tax opinion and issuing entity tax opinion, as
described under "—Tax Opinions for Amendments" below, and upon delivery by the issuing entity to the
indenture trustee of an officer's certificate to the effect that the issuing entity reasonably believes
that such amendment will not and is not reasonably expected to (i) result in the occurrence of an early
redemption event or event of default, (ii) adversely affect the amount of funds available to be
distributed to the noteholders of any series, class or tranche of notes or the timing of such
distributions, or (iii) adversely affect the security interest of the indenture trustee in the
collateral securing the notes, the indenture or any indenture supplement may be amended, supplemented or
otherwise modified without the consent of any noteholders to:
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o evidence the succession of another entity to the issuing entity, and the assumption by such
successor of the covenants of the issuing entity in the indenture and the notes;
o add to the covenants of the issuing entity, or have the issuing entity surrender any of its
rights or powers under the indenture, for the benefit of the noteholders of any or all
series, classes or tranches;
o cure any ambiguity, correct or supplement any provision in the indenture which may be
inconsistent with any other provision in the indenture, or make any other provisions for
matters or questions arising under the indenture;
o add to the indenture certain provisions expressly permitted by the Trust Indenture Act of
1939, as amended;
o establish any form of note, or to add to the rights of the holders of the notes of any
series, class or tranche;
o provide for the acceptance of a successor indenture trustee under the indenture for one or
more series, classes or tranches of notes and add to or change any of the provisions of the
indenture as will be necessary to provide for or facilitate the administration of the
trusts under the indenture by more than one indenture trustee;
o add any additional early redemption events or events of default relating to the notes of
any or all series, classes or tranches;
o provide for the consolidation of master trust II and the issuing entity or the transfer of
assets in master trust II to the issuing entity after the termination of all series of
master trust II investor certificates (other than the collateral certificate);
o if one or more transferors are added to, or replaced under, the master trust II agreement,
or one or more beneficiaries are added to, or replaced under, the trust agreement, make any
necessary changes to the indenture or any other related document;
o provide for the addition of collateral securing the notes and the issuance of notes backed
by any such additional collateral;
o provide for additional or alternative credit enhancement for any tranche of notes; or
o qualify for sale treatment under generally accepted accounting principles.
The indenture or any indenture supplement may also be amended without the consent of the
indenture trustee or any noteholders upon delivery of a master trust II tax opinion and issuing entity
tax opinion, as described under "—Tax Opinions for Amendments" below, for the purpose of adding
provisions to, or changing in any manner or eliminating any of the provisions of, the indenture or any
indenture supplement or of modifying in any manner the rights of the holders of the notes under the
indenture or any indenture supplement, provided, however, that the issuing entity shall (i) deliver to
the indenture trustee and the owner trustee an officer's certificate to the
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effect that the issuing entity reasonably believes that such amendment will not and is not reasonably expected to
(a) result in the occurrence of an early redemption event or event of default, (b) adversely affect the amount of
funds available to be distributed to the noteholders of any series, class or tranche of notes or the
timing of such distributions, or (c) adversely affect the security interest of the indenture trustee in
the collateral securing the notes, and (ii) receive written confirmation from each rating agency that
such amendment will not result in the reduction, qualification or withdrawal of the ratings of any
outstanding notes which it has rated.
The issuing entity and the indenture trustee, upon delivery of a master trust II tax opinion
and issuing entity tax opinion, as described under "—Tax Opinions for Amendments," may modify and amend
the indenture or any indenture supplement, for reasons other than those stated in the prior paragraphs,
with prior notice to each rating agency and the consent of the holders of not less than 66 (2)/3% of the
outstanding dollar principal amount of each class or tranche of notes affected by that modification or
amendment. However, if the modification or amendment would result in any of the following events
occurring, it may be made only with the consent of the holders of 100% of each outstanding series, class
or tranche of notes affected by the modification or amendment:
o a change in any date scheduled for the payment of interest on any note, or the expected
principal payment date or legal maturity date of any note;
o a reduction of the stated principal amount of, or interest rate on, any note, or a change
in the method of computing the outstanding dollar principal amount, the Adjusted
Outstanding Dollar Principal Amount, or the nominal liquidation amount in a manner that is
adverse to any noteholder;
o a reduction of the amount of a discount note payable upon the occurrence of an early
redemption event or other optional or mandatory redemption or upon the acceleration of its
maturity;
o an impairment of the right to institute suit for the enforcement of any payment on any note;
o a reduction of the percentage in outstanding dollar principal amount of the notes of any
outstanding series, class or tranche, the consent of whose holders is required for
modification or amendment of any indenture supplement or for waiver of compliance with
provisions of the indenture or for waiver of defaults and their consequences provided for
in the indenture;
o a modification of any of the provisions governing the amendment of the indenture, any
indenture supplement or the issuing entity's agreements not to claim rights under any law
which would affect the covenants or the performance of the indenture or any indenture
supplement, except to increase any percentage of noteholders required to consent to any
such amendment or to provide that certain other provisions of the indenture cannot be
modified or waived without the consent of the holder of each outstanding note affected by
such modification;
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o permission being given to create any lien or other encumbrance on the collateral securing
any notes ranking senior to the lien of the indenture;
o a change in the city or political subdivision so designated for any series, class or
tranche of notes where any principal of, or interest on, any note is payable;
o a change in the method of computing the amount of principal of, or interest on, any note on
any date; or
o any other amendment other than those explicitly permitted by the indenture without the
consent of noteholders.
The holders of a majority in aggregate outstanding dollar principal amount of the notes of a
series, class or tranche, may waive, on behalf of the holders of all the notes of that series, class or
tranche, compliance by the issuing entity with specified restrictive provisions of the indenture or the
related indenture supplement.
The holders of a majority in aggregate outstanding dollar principal amount of the notes of an
affected series, class or tranche may, on behalf of all holders of notes of that series, class or
tranche, waive any past default under the indenture or the indenture supplement relating to notes of
that series, class or tranche. However, the consent of the holders of all outstanding notes of a
series, class or tranche is required to waive any past default in the payment of principal of, or
interest on, any note of that series, class or tranche or in respect of a covenant or provision of the
indenture that cannot be modified or amended without the consent of the holders of each outstanding note
of that series, class or tranche.
Tax Opinions for Amendments
No amendment to the indenture, any indenture supplement or the trust agreement will be
effective unless the issuing entity has delivered to the indenture trustee, the owner trustee and the
rating agencies an opinion of counsel that:
o for federal income tax purposes (1) the amendment will not adversely affect the tax
characterization as debt of any outstanding series or class of investor certificates issued
by master trust II that were characterized as debt at the time of their issuance, (2) the
amendment will not cause or constitute an event in which gain or loss would be recognized
by any holder of investor certificates issued by master trust II, and (3) following the
amendment, master trust II will not be an association, or publicly traded partnership,
taxable as a corporation; and
o for federal income tax purposes (1) the amendment will not adversely affect the tax
characterization as debt of any outstanding series, class or tranche of notes that were
characterized as debt at the time of their issuance, (2) following the amendment, the
issuing entity will not be treated as an association, or publicly traded partnership,
taxable as a corporation, and (3) the amendment will not cause or constitute an event in
which gain or loss would be recognized by any holder of any such note.
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Addresses for Notices
Notices to holders of notes will be given by mail sent to the addresses of the holders as they
appear in the note register.
Issuing Entity's Annual Compliance Statement
The issuing entity will be required to furnish annually to the indenture trustee a statement
concerning its performance or fulfillment of covenants, agreements or conditions in the indenture as
well as the presence or absence of defaults under the indenture.
Indenture Trustee's Annual Report
To the extent required by the Trust Indenture Act of 1939, as amended, the indenture trustee
will mail each year to all registered noteholders a report concerning:
o its eligibility and qualifications to continue as trustee under the indenture,
o any amounts advanced by it under the indenture,
o the amount, interest rate and maturity date or indebtedness owing by the issuing entity to
it in the indenture trustee's individual capacity,
o the property and funds physically held by it as indenture trustee,
o any release or release and substitution of collateral subject to the lien of the indenture
that has not previously been reported, and
o any action taken by it that materially affects the notes and that has not previously been
reported.
List of Noteholders
Three or more holders of notes of any series, each of whom has owned a note for at least six
months, may, upon written request to the indenture trustee, obtain access to the current list of
noteholders of the issuing entity for purposes of communicating with other noteholders concerning their
rights under the indenture or the notes. The indenture trustee may elect not to give the requesting
noteholders access to the list if it agrees to mail the desired communication or proxy to all applicable
noteholders.
Reports
Monthly reports containing information on the notes and the collateral securing the notes will
be filed with the Securities and Exchange Commission. These reports will be delivered to the master
trust II trustee and the indenture trustee, as applicable, on or before each Transfer Date. These
reports will not be sent to noteholders. See "Where You Can Find More Information" for information as
to how these reports may be accessed.
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Monthly reports, which will be prepared by FIA as servicer of master trust II, will contain the
following information regarding the collateral certificate for the related month:
o the amount of the current monthly distribution which constitutes Available Funds;
o the amount of the current monthly distribution which constitutes principal collections;
o the aggregate amount of principal collections processed during the related monthly period
and allocated to Series 2001-D;
o the aggregate amount of collections of finance charge receivables processed during the
related monthly period and allocated to Series 2001-D;
o the aggregate amount of principal receivables in master trust II as of the end of the day
on the last day of the related monthly period;
o the amount of principal receivables in master trust II represented by the Investor Interest
of Series 2001-D as of the end of the day on the last day of the related monthly period;
o the floating allocation investor interest (as defined in the master trust II agreement) as
of the end of the day on the last day of the related monthly period;
o the principal allocation investor interest (as defined in the master trust II agreement) as
of the end of the day on the last day of the related monthly period;
o the floating investor percentage for Series 2001-D for the related monthly period;
o the principal investor percentage for Series 2001-D for the related monthly period;
o the aggregate amount of shared principal collections applied as available investor
principal collections;
o the aggregate amount of outstanding balances in the accounts consisting of the Master Trust
II Portfolio which were delinquent as of the end of the day on the last day of the related
monthly period;
o the aggregate investor default amount for Series 2001-D for the related monthly period;
o the amount of the Investor Servicing Fee payable by master trust II to the servicer for the
related monthly period;
o the amount of the Net Servicing Fee payable by master trust II to the servicer for the
related monthly period;
o the amount of the servicer interchange payable by master trust II to the servicer for the
related monthly period;
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o any material breaches of pool asset representations and warranties or transaction
covenants, if applicable;
o any material modifications, extensions or waivers to pool asset terms, fees, penalties or
payments during the distribution period or that have cumulatively become material over
time, if applicable; and
o any material changes in the solicitation, credit granting, underwriting, origination,
acquisition or pool selection criteria or procedures, as applicable, to acquire new pool
assets, if applicable.
Monthly reports, which will be prepared by FIA as servicer, will contain the following
information for each tranche of BAseries notes for the related month:
o targeted deposits to interest funding sub-accounts;
o interest to be paid on the corresponding Distribution Date;
o targeted deposits to Class C reserve sub-accounts, if any;
o withdrawals to be made from Class C reserve sub-accounts, if any;
o targeted deposits to principal funding sub-accounts;
o principal to be paid on the Distribution Date, if any;
o stated principal amount, outstanding dollar principal amount and nominal liquidation amount
for the related monthly period;
o Class A Usage Amount of Class B notes and Class A Usage Amount of Class C notes;
o Class B Usage Amount of Class C notes;
o the nominal liquidation amount for each tranche of BAseries notes outstanding;
o Excess Available Funds and three-month average Excess Available Funds;
o the occurrence of any early redemption events;
o payments to enhancement providers, if any; and
o any new issuances of BAseries notes as applicable.
On or before January 31 of each calendar year, the paying agent, on behalf of the indenture
trustee, will furnish to each person who at any time during the prior calendar year was a noteholder of
record a statement containing the information required to be provided by an issuer of indebtedness under
the Internal Revenue Code. See "Federal Income Tax Consequences" in this prospectus.
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FIA's Credit Card Activities
General
The receivables conveyed or to be conveyed to master trust II by Funding pursuant to the master
trust II agreement have been or will be generated from transactions made by holders of selected
MasterCard, Visa and American Express credit card accounts from the portfolio of MasterCard, Visa and
American Express accounts owned by FIA, called the Bank Portfolio. FIA currently services the Bank
Portfolio in the manner described below. FIA has delegated certain of its servicing functions to Banc
of America Card Servicing Corporation (referred to as Servicing Corp.), an affiliate of FIA. See
"Transaction Parties—FIA and Affiliates."
Origination, Account Acquisition, Credit Lines and Use of Credit Card Accounts
FIA markets its credit card products primarily through endorsements from membership
associations, financial institutions, commercial firms and others. FIA directs its marketing efforts
primarily to members and customers of these endorsing organizations, and to targeted lists of people
with a strong common interest. FIA is the recognized leader in endorsed marketing, with endorsements
from thousands of organizations and businesses, including professional associations, financial
institutions, colleges and universities, sports teams, and major retailers.
FIA primarily uses direct mail, person-to-person marketing (such as event marketing), telesales
and Internet marketing to market its credit card products. Each year, FIA develops numerous marketing
campaigns, customized for FIA's endorsing organizations, generating direct mail pieces designed to
originate accounts and promote account usage. FIA conducts Internet marketing through a combination of
banner, e-mail, search engine and other advertisements.
Currently, the credit risk of lending to each applicant is evaluated through the combination of
human judgment and the application of various credit scoring models and other statistical techniques.
For credit card credit determinations, FIA considers an applicant's capacity and willingness to repay,
stability and other factors. Important information in performing this credit assessment includes an
applicant's income, debt-to-income levels, residence and employment stability, the rate at which new
credit is being acquired, and the manner in which the applicant has handled the repayment of previously
granted credit. An applicant who has favorable credit capacity and credit history characteristics is
more likely to be approved and to receive a relatively higher credit line assignment. Favorable
characteristics include appropriate debt-to-income levels, a long history of steady employment, and
little to no history of delinquent payments on other debt. FIA develops credit scoring models to
evaluate common applicant characteristics and their correlation to credit risk and utilizes models in
making credit assessments. The scoring models use the information available about the applicant on his
or her application and in his or her credit report to provide a general indication of the applicant's
credit risk. Models for credit scoring are developed and modified using statistics to evaluate common
applicant characteristics and their correlation to credit risk. Periodically, the scoring models are
validated and, if necessary, realigned to maintain their accuracy and reliability.
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Generally, a credit analyst decides whether or not to approve an account, although a
significant percentage of high risk applications are declined through an automated decisioning process.
A limited number of applications from cardholders who already have an account with FIA are approved
through an automated system based on the cardholder's favorable credit history with FIA. Most decisions
to approve a credit application are made by credit analysts who consider the credit factors described
above and assign credit lines based upon this assessment. Credit analysts are encouraged to call
applicants when they believe additional information, such as an explanation of delinquencies or debt
levels, may assist the analyst in making the appropriate credit decision. Credit analysts undergo a
comprehensive education program that focuses on evaluating an applicant's creditworthiness.
Following the merger between Bank of America Corporation and MBNA Corporation, FIA increased
its use of automated credit decisions based on credit scoring models and other scoring techniques for
account origination and approval practices. When the scoring system indicates that an applicant has low
credit risk, the approval of an account will be based in most instances on that automated credit risk
decision. However, as the scoring system indicates that an applicant presents a relatively higher
credit risk, the approval or rejection of an account is increasingly likely (when compared to a low
credit risk applicant) to involve human judgment. In those cases, a credit analyst will consider the
credit factors listed above in order to determine whether an account will be approved.
Credit limits are primarily determined based on income level, customer credit bureau history,
and relationship information, if applicable. Credit lines for existing customers are regularly reviewed
for credit line increases, and when appropriate, credit line decreases. FIA's Portfolio Risk Management
division independently assesses credit quality through review of new and existing extensions of credit
and trend reporting to ensure quality and consistency.
Once the credit analyst makes a decision, further levels of review are automatically triggered
based on an analysis of the risk of each decision. This analysis is derived from previous experiential
data and makes use of credit scores and other statistical techniques. Credit analysts also review
applications obtained through pre-approved offers to ensure adherence to credit standards and assign an
appropriate credit limit as an additional approach to managing credit risk. Some credit applications
that present low risk are approved through an automated decisioning process.
FIA and its affiliates have made portfolio acquisitions in the past and may make additional
acquisitions in the future. Prior to acquiring a portfolio, FIA reviews the historical performance and
seasoning of the portfolio (including the portfolio's delinquency and loss characteristics, average
balances, attrition rates, yield and collection performance) and reviews the account management and
underwriting policies and procedures of the entity selling the portfolio. Credit card accounts that
have been purchased by FIA were originally opened using criteria established by institutions other than
FIA and may not have been subject to the same credit review as accounts originated by FIA. Once these
accounts have been purchased and transferred to FIA for servicing, they are generally managed in
accordance with the same policies and procedures as accounts originated by FIA. It is expected that
portfolios of credit card accounts purchased by FIA from other credit card issuers will be added to
master trust II from time to time.
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Each cardholder is subject to an agreement with FIA setting forth the terms and conditions of
the related MasterCard, Visa or American Express account. FIA reserves the right to add or to change
any terms, conditions, services or features of its MasterCard, Visa or American Express accounts at any
time by giving notice to the customer, including increasing or decreasing periodic finance charges,
other charges and payment terms. The agreement with each cardholder provides that FIA may apply such
changes, when applicable, to current outstanding balances as well as to future transactions. The
cardholder can reject certain changes in terms by giving timely written notification to FIA and then no
longer using the account.
Interchange
Member banks participating in the Visa, MasterCard and American Express associations receive
certain fees called interchange from Visa, MasterCard and American Express as partial compensation for
taking credit risk, absorbing fraud losses and funding receivables for a limited period prior to initial
billing. Under the Visa, MasterCard and American Express systems, a portion of this interchange in
connection with cardholder charges for goods and services is passed from banks which clear the
transactions for merchants to credit card issuing banks. Interchange fees are set annually by Visa,
MasterCard and American Express and are based on the number of credit card transactions and the amount
charged per transaction. The percentage of the interchange attributed to cardholder charges for goods
and services in the related accounts in master trust II will be transferred to master trust II.
Interchange varies from 1% to 2% of the transaction amount, but these amounts may be changed by
MasterCard, Visa or American Express. Interchange arising under the related accounts will be
transferred from FIA, through BACCS and Funding, to master trust II and allocated to the collateral
certificate for treatment as collections of finance charge receivables.
FIA's Credit Card Portfolio
FIA primarily relies on endorsement marketing in the acquisition of credit card accounts, but
also engages in targeted direct response marketing and portfolio acquisitions. For a description of
FIA's marketing, underwriting and credit risk control policies, see "FIA's Credit Card
Activities—Origination, Account Acquisition, Credit Lines and Use of Credit Card Accounts."
Billing and Payments
FIA and its service bureaus, as applicable, generate and mail to cardholders monthly statements
summarizing account activity and processes cardholder monthly payments.
Cardholders generally are required to make a monthly minimum payment at least equal to interest
and late fees assessed that month plus 1% of the remaining balance on the account. However, certain
eligible cardholders are given the option periodically to take a payment deferral. The required monthly
minimum payment described in this paragraph represents an increase from the prior method for calculating
the required monthly minimum payment. This change became effective for new credit card accounts
beginning in the third quarter of 2005, and became effective for existing credit card accounts in
December 2005. These changes generally increase the payment amounts required from accounts that represent greater risk, such as
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overlimit accounts. Increasing the monthly minimum payments generally
(i) reduces the amount of principal receivables in the Bank Portfolio and the Master Trust II Portfolio,
(ii) reduces the finance charges on those principal receivables in future periods, and (iii) increases
the number of payment defaults by cardholders. The impact of such change on the payment of principal
and interest on the Bank Portfolio and the Master Trust II Portfolio depends on the actual payment
patterns of cardholders, whether or not cardholders who pay down the account balance more quickly reuse
the available credit, and other factors that are difficult to predict or quantify.
The finance charges on purchases, which are assessed monthly, are calculated by multiplying the
account's average daily purchase balance by the applicable daily periodic rate, and multiplying the
result by the number of days in the billing cycle. Finance charges are calculated on purchases from the
date of the purchase or the first day of the billing cycle in which the purchase is posted to the
account, whichever is later. Monthly periodic finance charges are generally not assessed on new
purchases if, for each billing cycle, all balances shown on the previous billing statement are paid by
the due date, which is generally at least 20 days after the billing date. Monthly periodic finance
charges are not assessed in most circumstances on previous purchases if all balances shown on the two
previous billing statements are paid by their respective due dates.
The finance charges, which are assessed monthly on cash advances (including balance transfers),
are calculated by multiplying the account's average cash advance balance by the applicable daily
periodic rate, and multiplying the result by the number of days in the billing cycle. Finance charges
are calculated on cash advances (including balance transfers) from the date of the transaction.
Currently, FIA generally treats the day on which a cash advance check is deposited or cashed as the
transaction date for such check.
During 2004, FIA implemented strategies to decrease the number of accounts that have been
overlimit for consecutive periods. These strategies included eliminating charging overlimit fees for
accounts that have been overlimit for consecutive periods and holding the minimum payment constant
(assuming the fee had been billed), thereby shifting payment dollars to principal, thus accelerating the
rate at which outstanding balances on these overlimit accounts are reduced below the credit limit.
FIA assesses fees on its credit card accounts which may include late fees, overlimit fees,
returned check charges, cash advance and check fees and fees for certain purchase transactions. These
fees are a significant part of income generated by the credit card accounts.
Risk Control and Fraud
FIA manages risk at the account level through sophisticated analytical techniques combined with
regular judgmental review. High risk transactions are evaluated at the point of sale, where risk levels
are balanced with profitability and cardholder satisfaction. In addition, cardholders showing signs of
financial stress are periodically reviewed, a process that includes an examination of the cardholder's
credit file, the cardholder's behavior with FIA accounts, and often a phone call to the cardholder for
clarification of the situation. FIA may block use of certain accounts, reduce credit lines on certain
accounts, and increase the annual percentage rates on certain accounts (generally after giving the
cardholder notice and an opportunity to reject the
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rate increase, unless the increase was triggered by
an event set out in the credit agreement as a specific basis for a rate increase).
A balanced approach is also used when stimulating portfolio growth. Risk levels are measured
through statistical models that incorporate payment behavior, employment information, income information
and transaction activity. Credit bureau scores and attributes are obtained and combined with internal
information to allow FIA to increase credit lines and promote account usage while balancing additional
risk.
FIA manages fraud risk through a combination of judgmental reviews and sophisticated technology
to detect and prevent fraud as early as possible. Technologies and strategies utilized include a neural
net-based fraud score, expert systems and fraud specified authorization strategies. Address and other
demographic discrepancies are investigated as part of the credit decision to identify and prevent
identity theft.
Delinquencies and Collection Efforts
An account is contractually delinquent if the minimum payment is not received by the due date
indicated on the monthly billing statement. For collection purposes, however, an account is considered
delinquent if the minimum payment required to be made is not received by FIA generally within 5 days
after the due date reflected in the respective monthly billing statement. Efforts to collect delinquent
credit card receivables currently are made by FIA's Customer Assistance personnel. Collection
activities include statement messages, telephone calls and formal collection letters. FIA employs two
principal computerized systems for collecting past due accounts. The predictive management system
analyzes each cardholder's purchase and repayment habits and selects accounts for initial contact with
the objective of contacting the highest risk accounts first. The accounts selected are queued to FIA's
proprietary Outbound Call Management System. This system sorts accounts by a number of factors,
including time zone, degree of delinquency and dollar amount due, and automatically dials delinquent
accounts in order of priority. Representatives are automatically linked to the cardholder's account
information and voice line when a contact is established.
Charge-Off Policy
FIA charges off open-end delinquent loans by the end of the month in which the account becomes
180 days contractually past due. Delinquent bankrupt accounts are charged off by the end of the second
calendar month following receipt of notification of filing from the applicable court, but not later than
the applicable 180-day timeframe described above. Following receipt of notification of a deceased
cardholder, the related account is charged off by the end of the third calendar month following such
receipt of notification, unless a payment equal to or greater than 1.75% of the outstanding account
balance is received within the past 35 days or the account is less than 30 days contractually past due,
but not later than the applicable 180-day timeframe described above. Fraudulent accounts are charged
off by the end of the calendar month of the 90th day after identifying the account as fraudulent, but
not later than the applicable 180-day timeframe described above. Accounts failing to make a payment
within charge-off policy timeframes are written off. Managers may on an exception basis defer
charge-off of a non-bankrupt account for another month, pending continued payment activity or other special
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circumstances. Senior manager approval is required, and may be required in certain instances
with regard to certain accounts, on all such exceptions to the charge-off policies described above. If
an account has been charged-off, it may be sold to a third party or retained by FIA for recovery.
Renegotiated Loans and Re-Aged Accounts
FIA may modify the terms of its credit card agreements with cardholders who have experienced
financial difficulties by offering them renegotiated loan programs, which include placing them on
nonaccrual status, reducing their interest rate or providing any other concession in terms. When
accounts are classified as nonaccrual, interest is no longer billed to the cardholder. In future
periods, when a payment is received, it is recorded as a reduction of the interest and fee amount that
was billed to the cardholder prior to placing the account on nonaccrual status. Once the original
interest and fee amount or subsequent fees have been paid, payments are recorded as a reduction of
principal. Other restructured loans are loans for which the interest rate was reduced or loans that
have received any other type of concession in terms because of the inability of the cardholder to comply
with the original terms and conditions. Income is accrued at the reduced rate as long as the cardholder
complies with the revised terms and conditions. In addition, accounts may be re-aged to remove existing
delinquency. Generally, the intent of a re-age is to assist cardholders who have recently overcome
temporary financial difficulties, and have demonstrated both the ability and willingness to resume
regular payments, but may be unable to pay the entire past due amount. To qualify for re-aging, the
account must have been open for at least one year and cannot have been re-aged during the preceding 365
days. An account may not be re-aged more than two times in a five-year period. To qualify for
re-aging, the cardholder must also have made three regular minimum monthly payments within the last 90
days. In addition, FIA may re-age the account of a cardholder who is experiencing long-term financial
difficulties and apply modified, concessionary terms and conditions to the account. Such additional
re-ages are limited to one in a five year period and must meet the qualifications for re-ages described
above, except that the cardholder's three consecutive minimum monthly payments may be based on the
modified terms and conditions applied to the account. All re-age strategies are approved by FIA's
senior management and FIA's Loan Review Department. Re-ages may have the effect of delaying
charge-offs. If charge-offs are delayed, certain events related to the performance of the receivables,
such as Pay Out Events, events of default and early redemption events, may be delayed, resulting in the
delay of principal payments to noteholders. See "The Notes—Early Redemption of Notes," "The
Indenture—Early Redemption Events," "—Events of Default," "—Events of Default Remedies" and "Master Trust
II—Pay Out Events."
Receivables Transfer Agreements Generally
FIA originates and owns credit card accounts from which receivables may be transferred to BACCS
pursuant to an agreement between FIA and BACCS. Certain of the receivables transferred to BACCS have
been sold, and may continue to be sold, to Funding by BACCS. These receivables have been, and will be,
sold pursuant to a receivables purchase agreement between BACCS and Funding. As described above under
"Master Trust II—The Receivables" and "—Addition of Master Trust II Assets," Funding has the right (or in
certain circumstances, the obligation) to designate to master trust II, from time to time, additional credit card accounts
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for the related receivables to be included as receivables transferred to master
trust II. Funding will convey to master trust II its interest in all receivables of such additional
credit card accounts, whether such receivables are then existing or thereafter created, pursuant to the
master trust II agreement.
The Receivables Purchase Agreement
Sale of Receivables
FIA is the owner of the accounts which generate the receivables that are purchased by the
transferor under the receivables purchase agreement between BACCS and Funding and then transferred by
Funding to master trust II. In connection with the sale of receivables to Funding, BACCS has:
o filed appropriate UCC financing statements to evidence the sale to Funding and to perfect
Funding's right, title and interest in those receivables; and
o indicated in its computer files that the receivables have been sold to Funding.
Pursuant to the receivables purchase agreement, BACCS:
o sold all of its right, title and interest in the receivables existing in the initial
accounts at the close of business on the initial cut-off date and receivables arising
thereafter in those accounts, in each case including all interchange, insurance proceeds
and recoveries allocable to such receivables, all monies due or to become due, all amounts
received or receivable, all collections and all proceeds, each as it relates to such
receivables; and
o will sell all of its right, title and interest in the receivables existing in the
additional accounts at the close of business on the date of designation for inclusion in
master trust II and receivables arising thereafter in those accounts, in each case
including all interchange, insurance proceeds and recoveries, all monies due or to become
due, all amounts received or receivable, all collections and all proceeds, each as it
relates to such receivables.
Pursuant to the master trust II agreement, those receivables are then transferred immediately
by Funding, subject to certain conditions, to master trust II, and Funding has assigned to master trust
II its rights under the receivables purchase agreement.
Representations and Warranties
In the receivables purchase agreement, BACCS represents and warrants to Funding to the effect
that, among other things:
o it is validly existing in good standing under the applicable laws of the applicable
jurisdiction and has full power and authority to own its properties and conduct its
business;
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o the execution and delivery of the receivables purchase agreement and the performance of the
transactions contemplated by that document will not conflict with or result in any breach
of any of the terms of any material agreement to which BACCS is a party or by which its
properties are bound and will not conflict with or violate any requirements of law
applicable to BACCS; and
o all governmental authorizations, consents, orders, approvals, registrations or declarations
required to be obtained by BACCS in connection with the execution and delivery of, and the
performance of the receivables purchase agreement have been obtained.
Repurchase Obligations
In the receivables purchase agreement, BACCS makes the following representations and
warranties, among others:
o as of October 20, 2006 with respect to the initial accounts, and as of the date of
designation for sale to Funding with respect to additional accounts, the list of accounts
identifies all accounts the receivables of which are to be sold by BACCS to Funding;
o each receivable conveyed to Funding has been conveyed free and clear of any lien or
encumbrance, other than liens for municipal and other local taxes;
o all government authorizations, consents, orders, approvals, registrations or declarations
required to be obtained, effected or given by BACCS in connection with the conveyance of
receivables to Funding have been duly obtained, effected or given and are in full force and
effect;
o on the initial cut-off date, each account is an Eligible Account and, on the date of
designation for inclusion in master trust II, each additional account is an Eligible
Account;
o on the initial cut-off date, each receivable then existing in an initial account is an
Eligible Receivable and, on the applicable additional cut-off date, each receivable then
existing in the related additional account is an Eligible Receivable; and
o as of the date of the creation of any new receivable sold to Funding by BACCS, such
receivable is an Eligible Receivable.
Similar representations and warranties are made by Funding under the master trust II
agreement. The receivables purchase agreement provides that if BACCS breaches any of the
representations and warranties described above and, as a result, Funding is required under the master
trust II agreement to accept a reassignment of the related Ineligible Receivables transferred to master
trust II by Funding or sold to master trust II by FIA prior to the date Funding became the transferor,
then BACCS will accept reassignment of such Ineligible Receivables and pay to Funding an amount equal to
the unpaid balance of such Ineligible Receivables. See "Master Trust II—Representations and Warranties."
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Reassignment of Other Receivables
BACCS also represents and warrants in the receivables purchase agreement that (a) the
receivables purchase agreement and any supplemental conveyances each constitute a legal, valid and
binding obligation of BACCS and (b) the receivables purchase agreement and any supplemental conveyance
constitute a valid sale to Funding of the related receivables, and that the sale is perfected under the
applicable UCC. If a representation described in (a) or (b) of the preceding sentence is not true and
correct in any material respect and as a result of the breach Funding is required under the master trust
II agreement to accept a reassignment of all of the receivables previously sold by BACCS pursuant to the
receivables purchase agreement, BACCS will accept a reassignment of those receivables. See "Master
Trust II—Representations and Warranties." If BACCS is required to accept reassignment under the
preceding paragraph, BACCS will pay to Funding an amount equal to the unpaid balance of the reassigned
receivables.
Amendments
The receivables purchase agreement may be amended by BACCS and Funding without consent of any
investor certificateholders or noteholders. No amendment, however, may be effective unless written
confirmation has been received by Funding from each rating agency that the amendment will not result in
the reduction, qualification or withdrawal of the respective ratings of each rating agency for any
securities issued by master trust II.
Termination
The receivables purchase agreement will terminate upon either (a) the termination of master
trust II pursuant to the master trust II agreement, or (b) an amendment to the master trust II agreement
to replace Funding as transferor under the master trust II agreement. In addition, if BACCS or Funding
becomes a debtor in a bankruptcy case or certain other liquidation, bankruptcy, insolvency or similar
events occur, BACCS will cease to transfer receivables to Funding and promptly give notice of that event
to Funding and the master trust II trustee.
Master Trust II
The following discussion summarizes the material terms of the master trust II agreement—dated
August 4, 1994, among FIA, as servicer, Funding, as transferor, and The Bank of New York, as master
trust II trustee, which has been and may be amended from time to time, and is referred to in this
prospectus as the master trust II agreement—and the series supplements to the master trust II
agreement. The summary does not purport to be complete and is qualified in its entirety by reference to
the provisions of the master trust II agreement and the series supplements.
General
Master trust II has been formed in accordance with the laws of the State of Delaware. Master trust II
is governed by the master trust II agreement. Master trust II will only engage in the following
business activities:
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o acquiring and holding master trust II assets;
o issuing series of certificates and other interests in master trust II;
o receiving collections and making payments on the collateral certificate and other
interests; and
o engaging in related activities (including, for any series, obtaining any enhancement and
entering into an enhancement agreement relating thereto).
As a consequence, master trust II is not expected to have any need for additional capital
resources other than the assets of master trust II.
Master Trust II Trustee
The Bank of New York, a New York banking corporation, is the master trust II trustee under the
master trust II agreement. See "Transaction Parties—The Bank of New York" for a description of The Bank
of New York. The master trust II trustee, FIA, Funding and any of their respective affiliates may hold
certificates in their own names. For purposes of meeting the legal requirements of certain local
jurisdictions, the master trust II trustee will have the power to appoint a co-master trust II trustee
or separate master trust II trustees of all or any part of master trust II. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed upon the master trust II
trustee by the master trust II agreement will be conferred or imposed upon the master trust II trustee
and such separate trustee or co-trustee jointly, or, in any jurisdiction in which the master trust II
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 master trust II trustee.
Under the terms of the master trust II agreement, the servicer agrees to pay to the master
trust II trustee reasonable compensation for performance of its duties under the master trust II
agreement. The master trust II trustee has agreed to perform only those duties specifically set forth
in the master trust II agreement. Many of the duties of the master trust II trustee are described in
"Master Trust II" and throughout this prospectus and the related prospectus supplement. Under the terms
of the master trust II agreement, the master trust II trustee's limited responsibilities include the
following:
o to deliver to certificateholders of record certain notices, reports and other documents
received by the master trust II trustee, as required under the master trust II agreement;
o to authenticate, deliver, cancel and otherwise administer the investor certificates;
o to remove and reassign ineligible receivables and accounts from master trust II;
o to establish and maintain necessary master trust II accounts and to maintain accurate
records of activity in those accounts;
o to serve as the initial transfer agent, paying agent and registrar, and, if it resigns
these duties, to appoint a successor transfer agent, paying agent and registrar;
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o to invest funds in the master trust II accounts at the direction of the servicer;
o to represent the certificateholders in interactions with clearing agencies and other
similar organizations;
o to distribute and transfer funds at the direction of the servicer, as applicable, in
accordance with the terms of the master trust II agreement;
o to file with the appropriate party all documents necessary to protect the rights and
interests of the certificateholders;
o to enforce the rights of the certificateholders against the servicer, if necessary;
o to notify the certificateholders and other parties, to sell the receivables, and to
allocate the proceeds of such sale, in the event of the termination of master trust II;
o to cause a sale of receivables on the legal maturity date of any accelerated tranche of
notes; and
o to perform certain other administrative functions identified in the master trust II
agreement.
In addition to the responsibilities described above, the master trust II trustee has the
discretion to require Funding to cure a potential Pay Out Event and to declare a Pay Out Event. See
"Master Trust II—Pay Out Events."
In the event that Funding becomes insolvent, if any series of investor certificates issued on
or prior to April 25, 2001 is outstanding, the master trust II trustee shall: (1) notify the
certificateholders of the insolvency, (2) dispose of the receivables in a commercially reasonable
manner, and (3) allocate the proceeds of such sale. See "Master Trust II—Pay Out Events."
If a servicer default occurs, in addition to the responsibilities described above, the master
trust II trustee may be required to appoint a successor servicer or to take over servicing
responsibilities under the master trust II agreement. See "Master Trust II—Servicer Default." In
addition, if a servicer default occurs, the master trust II trustee, in its discretion, may proceed to
protect its rights or the rights of the investor certificateholders under the master trust II agreement
by a suit, action or other judicial proceeding.
The master trust II trustee is not liable for any errors of judgment as long as the errors are
made in good faith and the master trust II trustee was not negligent. The master trust II trustee may
resign at any time, and it may be forced to resign if the master trust II trustee fails to meet the
eligibility requirements specified in the master trust II agreement.
The holders of a majority of investor certificates have the right to direct the time, method or
place of conducting any proceeding for any remedy available to the trustee under the master trust II
agreement.
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The master trust II trustee may resign at any time, in which event the transferor will be
obligated to appoint a successor master trust II trustee. The transferor may also remove the master
trust II trustee if the master trust II trustee ceases to be eligible to continue as such under the
master trust II agreement or if the master trust II trustee becomes insolvent. In such circumstances,
the transferor will be obligated to appoint a successor master trust II trustee. Any resignation or
removal of the master trust II trustee and appointment of a successor master trust II trustee does not
become effective until acceptance of the appointment by the successor master trust II trustee.
Any successor trustee will execute and deliver to the transferor, FIA and its predecessor
master trust II trustee an instrument accepting the appointment. Any successor trustee must: (1) be a
corporation organized and doing business under the laws of the United States of America or any state
thereof; (2) be authorized under such laws to exercise corporate trust powers; (3) have a long-term
unsecured debt rating of at least Baa3 by Moody's, BBB- by Standard & Poor's and BBB by Fitch; (4) have,
in the case of an entity that is subject to risk-based capital adequacy requirements, risk-based capital
of at least $50,000,000 or, in the case of an entity that is not subject to risk-based capital adequacy
requirements, have a combined capital and surplus of at least $50,000,000 and subject to supervision or
examination by federal or state authority; (5) be approved by Standard & Poor's to act as the master
trust II trustee; (6) service a portfolio of consumer revolving credit card accounts or other consumer
revolving credit accounts; (7) be legally qualified and have the capacity to service the Master Trust II
Portfolio; (8) be qualified (or licensed) to use the software that the servicer is then currently using
to service the Master Trust II Portfolio or obtains the right to use, or has its own, software which is
adequate to perform its duties under the master trust II agreement; (9) have, in the reasonable judgment
of the master trust II trustee, demonstrated the ability to professionally and competently service a
portfolio of similar accounts in accordance with customary standards of skill and care; and (10) have a
net worth of at least $50,000,000 as of the end of its most recent fiscal quarter.
The master trust II trustee may appoint one or more co-trustees and vest in that co-trustee or
those co-trustees, for the benefit of the certificateholders, such title to the assets in master trust
II or part thereof. No co-trustee appointed in such manner will be subject to the eligibility
requirements discussed in the preceding paragraph.
The servicer has agreed to pay the master trust II trustee's fees and expenses. The payment of
those fees and expenses by the servicer will be made without reimbursement from any master trust II
account. See "The Indenture—Events of Default Remedies."
The Receivables
The Master Trust II Portfolio consists of receivables which arise in credit card accounts
selected from the Bank Portfolio on the basis of criteria set forth in the master trust II agreement as
applied on the Cut-Off Date or, for additional accounts, as of the date of their designation. The
receivables in master trust II may include receivables that are contractually delinquent. Funding will
have the right (subject to certain limitations and conditions set forth therein), and in some
circumstances will be obligated, to designate from time to time additional eligible revolving credit
card accounts to be included as accounts and to transfer to master trust II all
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receivables of such additional accounts, whether such receivables are then existing or thereafter created, or to transfer to
master trust II participations in receivables instead.
Funding, as transferor, will be required to designate additional credit card accounts, to the
extent available:
(a) to maintain the Transferor Interest so that, during any period of 30 consecutive
days, the Transferor Interest averaged over that period equals or exceeds the Minimum
Transferor Interest for the same period; and
(b) to maintain, for so long as master trust II investor certificates of any
series (including the collateral certificate) remain outstanding, an aggregate amount of
principal receivables equal to or greater than the Minimum Aggregate Principal Receivables.
Any additional credit card accounts designated by Funding must meet certain eligibility
requirements on the date of designation.
Funding also has the right (subject to certain limitations and conditions) to require the
master trust II trustee to reconvey all receivables in credit card accounts designated by Funding for
removal, whether such receivables are then existing or thereafter created. Once a credit card account
is removed, receivables existing or arising under that credit card account are not transferred to master
trust II.
Throughout the term of master trust II, the credit card accounts from which the receivables
arise will be the credit card accounts designated by Funding on the Cut-Off Date plus any additional
credit card accounts minus any removed credit card accounts. For each series of certificates issued by
master trust II, Funding will represent and warrant to master trust II that, as of the date of issuance
of the related series and the date receivables are conveyed to master trust II, such receivables meet
certain eligibility requirements. See "—Representations and Warranties" below.
The prospectus supplement relating to each series, class or tranche of notes will provide
certain information about the Master Trust II Portfolio as of the date specified. Such information will
include, but not be limited to, the amount of principal receivables, the amount of finance charge
receivables, the range of principal balances of the credit card accounts and the average thereof, the
range of credit limits of the credit card accounts and the average thereof, the range of ages of the
credit card accounts and the average thereof, the geographic distribution of the credit card accounts,
the types of credit card accounts and delinquency statistics relating to the credit card accounts.
Investor Certificates
Each series of master trust II certificates will represent interests in certain assets of
master trust II, including the right to the applicable investor percentage of all cardholder payments on
the receivables in master trust II. For the collateral certificate, the Investor Interest on any date
will be equal to the sum of the nominal liquidation amounts of all notes secured by the collateral
certificate.
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Funding owns the Transferor Interest which represents the interest in master trust II not
represented by the investor certificates issued and outstanding under master trust II or the rights, if
any, of any credit enhancement providers to receive payments from master trust II. The holder of the
Transferor Interest, subject to certain limitations, will have the right to the Transferor Percentage of
all cardholder payments from the receivables in master trust II. The Transferor Interest may be
transferred in whole or in part subject to certain limitations and conditions set forth in the master
trust II agreement. At the discretion of Funding, the Transferor Interest may be held either in an
uncertificated form or in the form of a certificate representing the Transferor Interest, called a
transferor certificate. See "—Certain Matters Regarding the Servicer and the Transferor" below.
The amount of principal receivables in master trust II will vary each day as new principal
receivables are created and others are paid or charged-off as uncollectible. The amount of the
Transferor Interest will fluctuate each day, therefore, to reflect the changes in the amount of the
principal receivables in master trust II. As a result, the Transferor Interest will generally increase
to reflect reductions in the Investor Interest for such series and will also change to reflect the
variations in the amount of principal receivables in master trust II. The Transferor Interest will
generally decrease as a result of the issuance of a new series of investor certificates by master trust
II or as a result of an increase in the collateral certificate due to the issuance of a new series,
class or tranche of notes or otherwise. See "—New Issuances" below and "The Notes—Issuances of New
Series, Classes and Tranches of Notes" in this prospectus.
Conveyance of Receivables
Pursuant to the master trust II agreement, each of FIA and Funding, during the period it was
the seller or the transferor, as applicable, has assigned to master trust II its interest in all
receivables arising in the initial accounts, as of the Cut-Off Date, and has assigned and will assign
its interest in all of the receivables in the additional accounts, as of the related account addition
date. In addition, FIA or Funding, as applicable, has assigned to master trust II all of its interest
in all receivables thereafter created under such accounts, all interchange, recoveries and insurance
proceeds allocable to master trust II, any participations in receivables added to master trust II and
the proceeds of all of the foregoing.
In connection with each previous transfer of the receivables to master trust II, FIA and
Funding have respectively indicated, and in connection with each subsequent transfer of receivables to
master trust II, Funding will indicate, in its computer files that the receivables have been conveyed to
master trust II. In addition, Funding has provided or will provide to the master trust II trustee
computer files or microfiche lists, containing a true and complete list showing each credit card
account, identified by account number and by total outstanding balance on the date of transfer. FIA, as
servicer, will not deliver to the master trust II trustee any records or agreements relating to the
credit card accounts or the receivables.
Except as stated above, the records and agreements relating to the credit card accounts and the
receivables in master trust II maintained by Funding or the servicer are not and will not be segregated
by Funding or the servicer from other documents and agreements relating to other credit card accounts
and receivables and are not and will not be stamped or marked to reflect the transfer of the receivables
to master trust II. However, the computer records of BACCS are
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marked to evidence the transfer of the receivables to Funding and the computer records of Funding are marked to
evidence the transfer of the receivables to master trust II. BACCS has filed Uniform Commercial Code financing statements
for the transfer of the receivables to Funding, as transferor, and Funding has filed Uniform Commercial Code
financing statements for the transfer of the receivables to master trust II. In the case of the
transfer of the receivables from BACCS to Funding, such financing statements must meet the requirements
of North Carolina state law. In the case of the transfer of the receivables from Funding to master
trust II, such financing statements must meet the requirements of Delaware state law.
Addition of Master Trust II Assets
As described above under "—The Receivables," Funding has the right (or in certain
circumstances, the obligation) to designate to master trust II, from time to time, additional credit
card accounts for the related receivables to be included as receivables transferred to master trust II.
Funding will convey to master trust II its interest in all receivables of such additional credit card
accounts, whether such receivables are then existing or thereafter created.
Each additional account must be an Eligible Account at the time of its designation. However,
additional credit card accounts may not be of the same credit quality as other credit card accounts
transferred to master trust II. Additional credit card accounts may have been originated by FIA using
credit criteria different from those which were applied by FIA to the other credit card accounts
transferred to master trust II. For example, additional credit card accounts may have been acquired by
FIA from an institution which may have had different credit criteria.
In addition to or in lieu of additional credit card accounts, Funding is permitted to add to
master trust II participations representing interests in a pool of assets primarily consisting of
receivables arising under revolving credit card accounts owned by FIA or an affiliate of FIA.
Participations may be evidenced by one or more certificates of ownership issued under a separate pooling
and servicing agreement or similar agreement entered into by Funding which entitles the
certificateholder to receive percentages of collections generated by the pool of assets subject to such
participation agreement from time to time and to certain other rights and remedies specified therein.
Participations may have their own credit enhancement, pay out events, servicing obligations and servicer
defaults, all of which are likely to be enforceable by a separate trustee under the participation
agreement and may be different from those specified in this prospectus. The rights and remedies of
master trust II as the holder of a participation (and therefore the certificateholders) will be subject
to all the terms and provisions of the related participation agreement. The master trust II agreement
may be amended to permit the addition of a participation in master trust II without the consent of the
related certificateholders if:
o Funding delivers to the master trust II trustee a certificate of an authorized officer to
the effect that, in the reasonable belief of Funding, such amendment will not as of the
date of such amendment adversely affect in any material respect the interest of such
certificateholders; and
o such amendment will not result in a withdrawal or reduction of the rating of any
outstanding series under master trust II by any rating agency.
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A conveyance by Funding to master trust II of receivables in additional credit card accounts or
participations is subject to the following conditions, among others:
o Funding shall give the master trust II trustee, each rating agency and the servicer written
notice that such additional accounts or participations will be included, which notice shall
specify the approximate aggregate amount of the receivables or interests therein to be
transferred;
o Funding shall have delivered to the master trust II trustee a written assignment (including
an acceptance by the master trust II trustee on behalf of master trust II for the benefit
of the certificateholders) as provided in the assignment agreement relating to such
additional accounts or participations, and Funding shall have delivered to the master trust
II trustee a computer file or microfiche list, dated as of the Addition Date, containing a
true and complete list of such additional accounts or participations transferred to master
trust II;
o Funding shall represent and warrant that:
— each additional credit card account is, as of the Addition Date, an Eligible Account,
and each receivable in such additional credit card account is, as of the Addition
Date, an Eligible Receivable;
— no selection procedures believed by the transferor to be materially adverse to the
interests of the certificateholders were utilized in selecting the additional credit
card accounts; and
— as of the Addition Date, Funding is not insolvent;
o Funding shall deliver certain opinions of counsel with respect to the transfer of the
receivables in the additional credit card accounts or the participations to master trust
II; and
o where the additional credit card accounts are greater than the Maximum Addition Amount for
the related three-month period, each rating agency then rating any series of certificates
outstanding under master trust II shall have previously consented to the addition of such
additional credit card accounts or participations.
In addition to the periodic reports otherwise required to be filed by the servicer with the SEC
pursuant to the Securities Exchange Act of 1934, as amended, the servicer intends to file, on behalf of
master trust II, a report on Form 8-K with respect to any addition to master trust II of receivables in
additional credit card accounts or participations that would have a material effect on the composition
of the assets of master trust II.
Removal of Accounts
Funding may, but shall not be obligated to, designate from time to time certain credit card
accounts to be removed accounts, all receivables in which shall be subject to removal from master trust
II. Funding, however, may not make more than one such designation in any month.
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Funding will be permitted to designate and require reassignment to it of the receivables from removed accounts only upon
satisfaction of the following conditions, among others:
o the removal of any receivables of any removed accounts shall not, in the reasonable belief
of Funding, cause a Pay Out Event to occur;
o Funding shall have delivered to master trust II for execution a written assignment and an
updated account list, dated as of the Removal Date, containing a true and complete list of
all removed accounts identified by account number and the aggregate amount of the
receivables in such removed accounts;
o Funding shall represent and warrant that it has not used any selection procedures believed
by Funding to be materially adverse to the interests of the holders of any series of
certificates outstanding under master trust II in selecting the related removed accounts;
o each rating agency then rating each series of investor certificates outstanding under
master trust II shall have received notice of such proposed removal of accounts and Funding
shall have received notice from each such rating agency that such proposed removal will not
result in a downgrade or withdrawal of its then-current rating for any such series;
o the aggregate amount of principal receivables of the accounts then existing in master trust
II less the aggregate amount of principal receivables of the removed accounts shall not be
less than the amount specified, if any, for any period specified;
o the principal receivables of the removed accounts shall not equal or exceed 5% of the
aggregate amount of the principal receivables in master trust II at such time; except, that
if any series of master trust II investor certificates or tranche of notes has been paid in
full, the principal receivables in such removed accounts may not equal or exceed the sum of:
— the initial Investor Interest or the aggregate principal amount of the certificates of
such series or tranche, as applicable, of such series; plus
— 5% of the aggregate amount of the principal receivables in master trust II at such
time after giving effect to the removal of accounts in an amount approximately equal
to the initial Investor Interest of such series; and
o Funding shall have delivered to the master trust II trustee an officer's certificate
confirming the items set forth above.
In addition, Funding's designation of any account as a removed account shall be random, unless
Funding's designation of any such account is in response to a third-party action or decision not to act
and not the unilateral action of the transferor.
Funding will be permitted to designate as a removed account without the consent of the master
trust II trustee, certificateholders, noteholders or rating agencies, and without having to
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satisfy the conditions described above, any account that has a zero balance and which Funding will remove from its
computer file.
Collection and Other Servicing Procedures
The servicer will be responsible for servicing and administering the receivables in accordance
with the servicer's policies and procedures for servicing credit card receivables comparable to the
receivables. FIA has been servicing credit card receivables in connection with securitizations since
1986. See "Transaction Parties—FIA and Affiliates" for a discussion of FIA. Servicing activities to be
performed by the servicer include collecting and recording payments, communicating with accountholders,
investigating payment delinquencies, evaluating the increase of credit limits and the issuance of credit
cards, providing billing and tax records to accountholders and maintaining internal records for each
account. Managerial and custodial services performed by the servicer on behalf of master trust II
include providing assistance in any inspections of the documents and records relating to the accounts
and receivables by the master trust II trustee pursuant to the master trust II agreement, maintaining
the agreements, documents and files relating to the accounts and receivables as custodian for master
trust II and providing related data processing and reporting services for investor certificateholders of
any series and on behalf of the master trust II trustee.
If FIA became insolvent, a Pay Out Event and a Servicer Default would occur. If a Pay Out
Event occurs, this could cause an early redemption of the notes, and payments on your notes could be
accelerated, delayed or reduced. See "Master Trust II—Pay Out Events." Furthermore, if a Servicer
Default occurs, FIA could be removed as servicer for master trust II and a successor servicer would be
appointed. See "Master Trust II—Servicer Default" for more information regarding the appointment of a
successor servicer.
Pursuant to the master trust II agreement, FIA, as servicer, has the right to delegate its
duties as servicer to any person who agrees to conduct such duties in accordance with the master trust
II agreement and FIA's lending guidelines. FIA, as servicer, has delegated certain duties relating to
the servicing of credit card accounts owned by FIA to Servicing Corp. However, such delegation will not
relieve FIA of its obligations as servicer under the master trust II agreement. See "Transaction
Parties—FIA and Affiliates" for a description of Servicing Corp.
The servicer will be required to maintain fidelity bond coverage insuring against losses
through wrongdoing of its officers and employees who are involved in the servicing of credit card
receivables covering such actions and in such amounts as the servicer believes to be reasonable from
time to time.
The servicer may not resign from its obligations and duties under the master trust II
agreement, except upon determination that performance of its duties is no longer permissible under
applicable law. No such resignation will become effective until the master trust II trustee or a
successor to the servicer has assumed the servicer's responsibilities and obligations under the master
trust II agreement.
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Master Trust II Accounts
The servicer will establish and maintain, in the name of master trust II, for the benefit of
certificateholders of all series, an account established for the purpose of holding collections of
receivables, called a master trust II collection account, which will be a non-interest bearing
segregated account established and maintained with the servicer or with a Qualified Institution. A
Qualified Institution may also be a depository institution, which may include the master trust II
trustee, which is acceptable to each rating agency.
In addition, for the benefit of the investor certificateholders of certificates issued by
master trust II, the master trust II trustee will establish and maintain in the name of master trust II
two separate accounts, called a finance charge account and a principal account, in segregated master
trust II accounts (which need not be deposit accounts) with a Qualified Institution (other than FIA,
BACCS or the transferor). Funds in the principal account and the finance charge account for master
trust II will be invested, at the direction of the servicer, in Permitted Investments.
Any earnings (net of losses and investment expenses) on funds in the finance charge account or
the principal account allocable to the collateral certificate will be included in collections of finance
charge receivables allocable to the collateral certificate. The servicer will have the revocable power
to withdraw funds from the master trust II collection account and to instruct the master trust II
trustee to make withdrawals and payments from the finance charge account and the principal account for
the purpose of carrying out the servicer's duties.
Investor Percentage
The servicer will allocate between the Investor Interest of each series issued and outstanding
and the Transferor Interest, all amounts collected on finance charge receivables, all amounts collected
on principal receivables and all receivables in Defaulted Accounts, based on a varying percentage called
the investor percentage. The servicer will make each allocation by reference to the applicable investor
percentage of each series and the Transferor Percentage, and, in certain circumstances, the percentage
interest of certain credit enhancement providers, for such series. For a description of how allocations
will be made to the collateral certificate by master trust II, see "Sources of Funds to Pay the
Notes—The Collateral Certificate."
Application of Collections
Except as otherwise provided below, the servicer will deposit into the master trust II
collection account, no later than the second Business Day following the date of processing, any payment
collected by the servicer on the receivables in master trust II. On the same day as any such deposit is
made, the servicer will make the deposits and payments to the accounts and parties as indicated below.
FIA, as servicer, may make such deposits and payments on a monthly or other periodic basis on each
Transfer Date in an amount equal to the net amount of such deposits and payments which would have been
made on a daily basis if:
o (i) the servicer provides to the master trust II trustee and Funding a letter of credit
covering collection risk of the servicer acceptable to the specified rating agency, and
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(ii) Funding shall not have received a notice from such rating agency that such letter of
credit would result in the lowering of such rating agency's then-existing rating of any
series of certificates previously issued by master trust II and then-outstanding; or
o the servicer has and maintains a certificate of deposit or short-term deposit rating of P-1
by Moody's, of A-1 by Standard & Poor's, and of F1 by Fitch.
Whether the servicer is required to make monthly or daily deposits from the master trust II
collection account into the finance charge account or the principal account, for any month:
o the servicer will only be required to deposit collections from the master trust II
collection account into the finance charge account, the principal account or any
series account established by a related series supplement up to the required amount to be
deposited into any such deposit account or, without duplication, distributed on or prior to
the related Distribution Date to certificateholders; and
o if at any time prior to such Distribution Date the amount of collections deposited in the
master trust II collection account exceeds the amount required to be deposited pursuant to
this section, the servicer, subject to certain limitations, will be permitted to withdraw
the excess from the master trust II collection account.
The servicer will withdraw the following amounts from the master trust II collection account
for application as indicated:
(a) An amount equal to the Transferor Percentage of the aggregate amount of such
deposits in respect of principal receivables will be:
— paid to the holder of the Transferor Interest if, and only to the extent that,
the Transferor Interest is greater than the Minimum Transferor Interest; or
— deposited in the principal account and treated as Unallocated Principal
Collections.
(b) An amount equal to the Transferor Percentage of the aggregate amount of such
deposits in respect of finance charge receivables will be:
— deposited in the finance charge account (in an amount equal to the amount of
such deposits times the aggregate prefunded amount, if any, on deposit in the
principal funding subaccount for any tranche of notes divided by the
Transferor Interest) and paid to the issuing entity on the following Transfer
Date (in an amount not to exceed the positive difference, if any, between
(i) the amount of interest payable to noteholders and derivative
counterparties, if any, on such prefunded amount and (ii) the net investment
earnings on such prefunded amounts for such month); or
— otherwise paid to the holder of the Transferor Interest.
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(c) For master trust II certificates other than the collateral certificate, an amount
equal to the applicable investor percentage of the aggregate amount of such deposits relating
to the finance charge receivables will be deposited into the finance charge account and the
aggregate amount of such deposits relating to principal receivables will be deposited into the
principal account, in each case, for application and distribution in accordance with the
related series supplement. However, so long as certain conditions are satisfied, including
that no Pay Out Event has occurred or is continuing, collections of principal receivables
allocable to subordinated classes of investor certificates will be deposited in the principal
account only up to an amount (not less than zero) equal to:
— 1.5 times the total monthly interest to be deposited during the current month
for all classes of investor certificates described in the related
series supplement, plus
— if FIA or The Bank of New York is not the servicer, the monthly servicing fee,
minus
— the preceding month's finance charge collections allocated to the related
investor certificates (unless the transferor or the servicer has knowledge
that the current month's finance charge collections will be materially less
than the finance charge collections for the prior month, in which case, the
lesser amount will be used).
Any collections of principal receivables allocable to subordinated classes of investor
certificates in excess of such amount will be commingled with FIA's other funds until the
following Transfer Date.
(d) For the collateral certificate, deposits in respect of finance charge receivables
and principal receivables will be allocated to the collateral certificate as described in
"Sources of Funds to Pay the Notes—The Collateral Certificate" in this prospectus. However, so
long as certain conditions are satisfied, including that no Pay Out Event relating to the
collateral certificate has occurred or is continuing, and that neither an early redemption
event nor an event of default relating to the notes has occurred or is continuing, collections
of principal receivables allocable to subordinated classes of notes will be deposited in the
principal account only up to an amount (not less than zero) equal to:
— 1.5 times the aggregate amount targeted to be deposited in the interest
funding account during the current month and, following any issuance of notes
during such month, the aggregate amount targeted to be deposited in the
interest funding account for such newly issued notes during the following
month, plus
— if FIA or The Bank of New York is not the servicer, the monthly servicing fee,
minus
— the preceding month's finance charge collections allocated to the collateral
certificate (unless the transferor or the servicer has knowledge that the
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current month's finance charge collections will be materially less than the
finance charge collections for the prior month, in which case, the lesser
amount will be used).
Any collections of principal receivables allocable to subordinated classes of notes in excess
of such amount will be commingled with FIA's other funds until the following Transfer Date.
The amount of collections of principal receivables to be deposited in the principal account for
subordinated classes of investor certificates described in clause (c) above, or subordinated classes of
notes as described in clause (d) above, is subject to amendment with rating agency approval.
Any Unallocated Principal Collections will be held in the principal account and paid to the
holder of the Transferor Interest if, and only to the extent that, the Transferor Interest is greater
than the Minimum Transferor Interest. Unallocated Principal Collections will be held for or distributed
to investor certificateholders of the series of certificates issued by master trust II (including the
collateral certificate) in accordance with related series supplements.
The servicer's compliance with its obligations under the master trust II agreement and each
series supplement will be independently verified as described under "—Evidence as to Compliance" below.
Defaulted Receivables; Rebates and Fraudulent Charges
On each Determination Date, the servicer will calculate the Aggregate Investor Default Amount
for the preceding month, which will be equal to the aggregate amount of the investor percentage of
principal receivables in Defaulted Accounts; that is, credit card accounts which in such month were
written off as uncollectible in accordance with the servicer's policies and procedures for servicing
credit card receivables comparable to the receivables in master trust II. Recoveries on receivables in
Defaulted Accounts (net of expenses) will be included as finance charge collections payable to master
trust II, provided that if any of such recoveries relates to both receivables in Defaulted Accounts and
other receivables, and it cannot be determined with objective certainty whether such recoveries relate
to receivables in Defaulted Accounts or other receivables, the amount of recoveries included as finance
charge collections payable to master trust II will be the servicer's reasonable estimate of the amount
recovered in respect of receivables in Defaulted Accounts.
If the servicer adjusts the amount of any principal receivable because of transactions
occurring in respect of a rebate or refund to a cardholder, then the Transferor Interest will be reduced
by the amount of the adjustment. In addition, the Transferor Interest will be reduced as a result of
transactions in respect of any principal receivable which was discovered as having been created through
a fraudulent or counterfeit charge.
If the servicer makes a deposit into the collection account of a receivable that was received
in the form of a check which is not honored for any reason or if the servicer makes a mistake in the
amount of any deposit of any collection, then the servicer will appropriately adjust
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subsequent deposits into the collection account to reconcile the dishonored check or mistake. Any payment received in the
form of a dishonored check is deemed not to have been paid.
Master Trust II Termination
Master trust II will terminate on the Master Trust II Termination Date. Upon the termination
of master trust II and the surrender of the Transferor Interest, the master trust II trustee shall
convey to the holder of the Transferor Interest all right, title and interest of master trust II in and
to the receivables and other funds of master trust II.
Pay Out Events
A Pay Out Event will cause the early redemption of the notes. A Pay Out Event refers to any of
the following events:
(a) failure on the part of Funding (i) to make any payment or deposit on the date required
under the master trust II agreement or the Series 2001-D supplement (or within the
applicable grace period which shall not exceed 5 days) or (ii) to observe or perform
in any material respect any other covenants or agreements of Funding set forth in the
master trust II agreement or the Series 2001-D supplement, which failure has a
material adverse effect on the certificateholders and which continues unremedied for a
period of 60 days after written notice of such failure, requiring the same to be
remedied, and continues to materially and adversely affect the interests of the
certificateholders for such period;
(b) any representation or warranty made by Funding in the master trust II agreement or the
Series 2001-D supplement, or any information required to be given by Funding to the
master trust II trustee to identify the credit card accounts, proves to have been
incorrect in any material respect when made or delivered and which continues to be
incorrect in any material respect for a period of 60 days after written notice of such
failure, requiring the same to be remedied, and as a result of which the interests of
the certificateholders are materially and adversely affected and continue to be
materially and adversely affected for such period, except that a Pay Out Event
described in this clause (b) will not occur if Funding has accepted reassignment of
the related receivable or all such receivables, if applicable, during such period in
accordance with the provisions of the master trust II agreement;
(c) (i) Funding becomes unable for any reason to transfer receivables to master trust II
in accordance with the master trust II agreement, (ii) BACCS becomes unable for any
reason to transfer receivables to Funding in accordance with the provisions of the
receivables purchase agreement between BACCS and Funding, or (iii) FIA becomes unable
for any reason to transfer receivables to BACCS in accordance with the provisions of
the applicable agreement between FIA and BACCS;
(d) any Servicer Default occurs which would have a material adverse effect on the
certificateholders;
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(e) certain events of insolvency, conservatorship, receivership or bankruptcy relating to
Funding, BACCS, or FIA;
(f) Funding fails to convey receivables arising under additional credit card accounts, or
participations, to master trust II when required by the master trust II agreement; or
(g) master trust II becomes an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (d) above, a Pay Out Event will occur
only if, after any applicable grace period, either the master trust II trustee or the noteholders
evidencing interests aggregating not less than 50% of the Adjusted Outstanding Dollar Principal Amount
of the outstanding notes, by written notice to Funding and the servicer (and to the master trust II
trustee if given by the noteholders) declare that a Pay Out Event has occurred as of the date of such
notice.
In the case of any event described in clause (c), (e), (f) or (g), a Pay Out Event will occur
without any notice or other action on the part of the master trust II trustee or the noteholders
immediately upon the occurrence of such event.
In addition to the consequences of a Pay Out Event discussed above and solely to the extent the
investor certificates of any series issued on or prior to April 25, 2001 are outstanding, if pursuant to
certain provisions of federal law, Funding voluntarily enters liquidation or a receiver is appointed for
Funding, on the day of such event Funding will immediately cease to transfer principal receivables to
master trust II and promptly give notice to the master trust II trustee of such event. Within 15 days,
the master trust II trustee will publish a notice of the liquidation or the appointment stating that the
master trust II trustee intends to sell, dispose of, or otherwise liquidate the receivables in master
trust II. Unless otherwise instructed within a specified period by certificateholders representing
interests aggregating more than 50% of the Investor Interest of each series issued and outstanding, the
master trust II trustee will use its best efforts to sell, dispose of, or otherwise liquidate the
receivables in master trust II through the solicitation of competitive bids and on terms equivalent to
the best purchase offer, as determined by the master trust II trustee. The noteholders will be deemed
to have disapproved of such sale, liquidation or disposition. However, neither Funding, nor any
affiliate or agent of Funding, may purchase the receivables of master trust II in the event of such
sale, liquidation or disposition. The proceeds from the sale, disposition or liquidation of such
receivables will be treated as collections of the receivables and applied as specified above in
"—Application of Collections."
If the only Pay Out Event to occur is either (i) the insolvency or bankruptcy of Funding,
BACCS, or FIA, or (ii) the appointment of a conservator or receiver for FIA, the related conservator,
receiver or bankruptcy court may have the power to prevent the early sale, liquidation or disposition of
the receivables in master trust II and the commencement of a Rapid Amortization Period. In addition, a
conservator, receiver or bankruptcy court may have the power to cause the early sale of the receivables
in master trust II and the early retirement of the certificates. See "Risk Factors" in this prospectus
and any risk factors in the accompanying prospectus supplement.
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On the date on which a Pay Out Event occurs, the Rapid Amortization Period will commence. A
Pay Out Event for the collateral certificate is also an early redemption event for the notes. See "The
Indenture—Early Redemption Events."
Servicing Compensation and Payment of Expenses
The share of the master trust II servicing fee allocable to the collateral certificate for any
Transfer Date, called the Investor Servicing Fee, will equal one-twelfth of the product of (i) 2.0% and
(ii) the Weighted Average Floating Allocation Investor Interest for the collateral certificate for the
month preceding such Transfer Date. On each Transfer Date, if FIA or The Bank of New York is the
servicer, servicer interchange for the related month that is on deposit in the finance charge account
will be withdrawn from the finance charge account and paid to the servicer in payment of a portion of
the Investor Servicing Fee for such month.
The servicer interchange for any month for which FIA or The Bank of New York is the servicer
will be an amount equal to the portion of collections of finance charge receivables allocated to the
Investor Interest for the collateral certificate for such month that is attributable to interchange.
However, servicer interchange for a month will not exceed one-twelfth of the product of (i) the Weighted
Average Floating Allocation Investor Interest for the collateral certificate for such month and
(ii) 0.75%. In the case of any insufficiency of servicer interchange on deposit in the finance charge
account, a portion of the Investor Servicing Fee allocable to the collateral certificate for such month
will not be paid to the extent of such insufficiency and in no event shall master trust II, the master
trust II trustee or the collateral certificateholder be liable for the share of the servicing fee to be
paid out of servicer interchange.
The share of the Investor Servicing Fee allocable to the collateral certificate for any
Transfer Date, called the Net Servicing Fee, is equal to one-twelfth of the product of (i) the Weighted
Average Floating Allocation Investor Interest for the collateral certificate and (ii) 1.25%, or if FIA
or The Bank of New York is not the servicer, 2.0%.
The Investor Servicing Fee allocable to the collateral certificate will be funded from
collections of finance charge receivables allocated to the collateral certificate. The remainder of the
servicing fee for master trust II will be allocable to the Transferor Interest, the Investor Interests
of any other series of investor certificates issued by master trust II and any other interests in master
trust II, if any, for such series. Neither master trust II, the master trust II trustee nor the
certificateholders of any series of investor certificates issued by master trust II (including the
collateral certificate) will have any obligation to pay the portion of the servicing fee allocable to
the Transferor Interest.
In connection with servicing the receivables, the servicer may incur certain expenses. The
Investor Servicing Fee that is paid to the servicer is intended, in part, to compensate the servicer for
these expenses. The servicer will pay from its servicing compensation these expenses which may include,
without limitation, payment of the fees and disbursements of the master trust II trustee, the owner
trustee, the indenture trustee and independent certified public accountants and other fees which are not
expressly stated in the master trust II agreement, the trust agreement or the indenture to be payable by
master trust II or the investor certificateholders other than federal, state and local income and
franchise taxes, if any, of master trust II. See the
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chart entitled "Fees and Expenses Payable from BAseries Available Funds and BAseries Available Principal Amounts."
New Issuances
The master trust II agreement provides that the holder of the Transferor Interest, without
independent verification of its authority, may cause the master trust II trustee to issue one or more
new series of certificates and may define all principal terms of such series. Each series issued may
have different terms and enhancements than any other series. None of the transferor, the servicer, the
master trust II trustee or master trust II is required or intends to provide prior notice to or obtain
the consent of any certificateholder of any other series previously issued by master trust II or any
noteholder of a series previously issued by the issuing entity prior to the issuance of a new series of
master trust II investor certificates. However, as a condition of a new issuance, the holder of the
Transferor Interest will deliver to the master trust II trustee written confirmation that the new
issuance will not result in the reduction or withdrawal by any rating agency of its rating of any
outstanding series.
Under the master trust II agreement, the holder of the Transferor Interest may cause a new
issuance by notifying the master trust II trustee at least three days in advance of the date upon which
the new issuance is to occur. The notice will state the designation of any series to be issued and:
o its initial principal amount (or method for calculating such amount) which amount may not
be greater than the current principal amount of the Transferor Interest;
o its certificate rate (or method of calculating such rate); and
o the provider of any credit enhancement.
The master trust II trustee will authenticate a new series only if it receives the following,
among others:
o a series supplement specifying the principal terms of such series;
o an opinion of counsel to the effect that, unless otherwise stated in the related
series supplement, the certificates of such series will be characterized as indebtedness
for federal income tax purposes;
o a master trust II tax opinion;
o if required by the related series supplement, the form of credit enhancement;
o if credit enhancement is required by the series supplement, an appropriate credit
enhancement agreement executed by Funding and the credit enhancer;
o written confirmation from each rating agency that the new issuance will not result in such
rating agency's reducing or withdrawing its rating on any then outstanding series rated by
it; and
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o an officer's certificate of Funding to the effect that after giving effect to the new
issuance Funding would not be required to add additional accounts pursuant to the master
trust II agreement and the Transferor Interest would be at least equal to the Minimum
Transferor Interest.
Representations and Warranties
Funding has made in the master trust II agreement certain representations and warranties to
master trust II to the effect that, among other things, that as of the Substitution Date:
o as of the issuance date, Funding is duly incorporated and in good standing and that it has
the authority to consummate the transactions contemplated by the master trust II agreement;
and
o as of the date of the designation of the related accounts to master trust II, each account
is an Eligible Account.
Prior to the Substitution Date, FIA made similar representations and warranties relating to
receivables that were transferred by FIA to master trust II. For so long as such receivables are assets
of master trust II, then the representations and warranties made by FIA regarding those receivables will
be in effect and enforceable.
If,
o any of these representations and warranties proves to have been incorrect in any material
respect when made by either FIA with respect to receivables transferred to master trust II
prior to the Substitution Date or by Funding, and continues to be incorrect for 60 days
after notice to Funding by the master trust II trustee or to the transferor and the master
trust II trustee by the certificateholders holding more than 50% of the Investor Interest
of the related series; and
o as a result the interests of the certificateholders are materially and adversely affected,
and continue to be materially and adversely affected during such period;
then the master trust II trustee or certificateholders holding more than 50% of the Investor Interest
may give notice to Funding (and to the master trust II trustee in the latter instance) declaring that a
Pay Out Event has occurred, thereby causing an early redemption event to occur relating to the notes.
Funding has also made representations and warranties to master trust II relating to the
receivables in master trust II to the effect that, among other things:
o as of the date of designation of the related account to the Master Trust II Portfolio, each
of the receivables then existing in such account is an Eligible Receivable; and
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o as of the date of designation of the related account to the Master Trust II Portfolio, each
receivable then existing in such account was transferred to master trust II free and clear
of any lien (except for certain tax, governmental or other nonconsensual liens).
Prior to the Substitution Date, FIA made similar representations and warranties relating to the
receivables as of the date of designation of the related account to the Master Trust II Portfolio. For
so long as receivables transferred by FIA prior to the Substitution Date are assets of master trust II,
then the representations and warranties made by FIA with respect to the receivables will be in effect
and enforceable.
In the event of a breach of any representation and warranty set forth in the preceding
paragraph, within 60 days, or such longer period (not to exceed 120 days) as may be agreed to by the
master trust II trustee, of the earlier to occur of the discovery of such breach by Funding or FIA, as
applicable, or receipt by Funding of written notice of such breach given by the master trust II trustee,
or, for certain breaches relating to prior liens, immediately upon the earlier to occur of such
discovery or notice and as a result of such breach, the receivables in the accounts of master trust II
are charged-off as uncollectible, master trust II's rights in, to or under the receivables or their
proceeds are impaired or the proceeds of such receivables are not available for any reason to master
trust II free and clear of any lien (except for certain tax, governmental and other nonconsensual
liens), then Funding or FIA, with respect to receivables transferred to master trust II prior to the
Substitution Date, will be obligated to accept reassignment of each related principal receivable as an
ineligible receivable. Such reassignment will not be required to be made, however, if, on any day
within the applicable period, or such longer period, the representations and warranties shall then be
true and correct in all material respects.
Funding or FIA, as applicable, will accept reassignment of each applicable ineligible
receivable by directing the servicer to deduct the amount of each such ineligible receivable from the
aggregate amount of principal receivables used to calculate the Transferor Interest. In the event that
the exclusion of an ineligible receivable from the calculation of the Transferor Interest would cause
the Transferor Interest to be a negative number, on the date of reassignment of such ineligible
receivable Funding shall make a deposit in the collection account in immediately available funds in an
amount equal to the amount by which the Transferor Interest would be reduced below zero. Any such
deduction or deposit shall be considered a repayment in full of the ineligible receivable. The
obligation of Funding to accept reassignment of any ineligible receivable transferred to master trust II
after the Substitution Date is the sole remedy respecting any breach of the representations and
warranties made by Funding with respect to receivables transferred to master trust II after the
Substitution Date relating to that receivable available to the certificateholders or the master trust II
trustee on behalf of certificateholders. The obligation of FIA to accept reassignment of any ineligible
receivable transferred to master trust II prior to the Substitution Date is the sole remedy respecting
any breach of the surviving representations and warranties made by FIA with respect to receivables
transferred to master trust II prior to the Substitution Date relating to that receivable available to
the certificateholders or the master trust II trustee on behalf of the certificateholders.
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Funding, as of the date it became transferor, has also represented and warranted to master
trust II to the effect that, among other things, as of the Substitution Date:
o the receivables purchase agreement and the master trust II agreement each constitutes a
legal, valid and binding obligation of Funding; and
o the transfer of receivables by it to master trust II under the master trust II agreement
will constitute either:
— a valid sale to the master trust II trustee of receivables; or
— the grant of a security interest in such receivables, and that sale or security
interest is perfected.
In the event of a breach of any of the representations and warranties described in the
preceding paragraph, either the master trust II trustee or the holders of certificates evidencing
interests in master trust II aggregating more than 50% of the aggregate Investor Interest of all
series outstanding under master trust II may direct FIA (with respect to receivables transferred prior to
the Substitution Date) or Funding (with respect to receivables transferred after the Substitution Date)
to accept reassignment of the Master Trust II Portfolio within 60 days of such notice, or within such
longer period specified in such notice. FIA or Funding, as applicable, will be obligated to accept
reassignment of such receivables in master trust II on a Distribution Date occurring within such
applicable period. Such reassignment will not be required to be made, however, if at any time during
such applicable period, or such longer period, the representations and warranties shall then be true and
correct in all material respects. The deposit amount for such reassignment will be equal to:
o the Investor Interest for each series outstanding under master trust II on the last day of
the month preceding the Distribution Date on which the reassignment is scheduled to be
made; minus
o the amount, if any, previously allocated for payment of principal to such
certificateholders (or other interest holders) on such Distribution Date; plus
o an amount equal to all accrued and unpaid interest less the amount, if any, previously
allocated for payment of such interest on such Distribution Date.
The payment of this reassignment deposit amount and the transfer of all other amounts deposited
for the preceding month in the distribution account will be considered a payment in full of the Investor
Interest for each such series required to be repurchased and will be distributed upon presentation and
surrender of the certificates for each such series. If the master trust II trustee or
certificateholders give a notice as provided above, the obligation of FIA or Funding, as applicable, to
make any such deposit will constitute the sole remedy respecting a breach of the representations and
warranties available to the master trust II trustee or such certificateholders.
It is not required or anticipated that the master trust II trustee will 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 FIA's or Funding's
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representations and warranties, or for any other purpose. Funding, however, will deliver to the master
trust II trustee on or before March 31 of each year (or such other date specified in the accompanying
prospectus supplement), an opinion of counsel with respect to the validity of the security interest of
master trust II in and to the receivables and certain other components of master trust II.
Certain Matters Regarding the Servicer and the Transferor
The master trust II agreement provides that the servicer will indemnify the transferor, master
trust II and the master trust II trustee from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of any acts or omissions or alleged acts or omissions of the servicer
for the activities of master trust II or the master trust II trustee. The servicer, however, will not
indemnify:
o the master trust II trustee or the transferor for liabilities imposed by reason of fraud,
negligence, or willful misconduct by the master trust II trustee or the transferor in the
performance of its duties under the master trust II agreement;
o master trust II, the certificateholders or the certificate owners for liabilities arising
from actions taken by the master trust II trustee at the request of certificateholders;
o master trust II, the certificateholders or the certificate owners for any losses, claims,
damages or liabilities incurred by any of them in their capacities as investors, including
without limitation, losses incurred as a result of defaulted receivables or receivables
which are written off as uncollectible; or
o the transferor, master trust II, the certificateholders or the certificate owners for any
liabilities, costs or expenses of the transferor, master trust II, the certificateholders
or the certificate owners arising under any tax law, including without limitation, any
federal, state, local or foreign income or franchise tax or any other tax imposed on or
measured by income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith) required to be paid by the transferor, master trust II, the
certificateholders or the certificate owners in connection with the master trust II
agreement to any taxing authority.
In addition, the master trust II agreement provides that, subject to certain exceptions,
Funding will indemnify an injured party for any losses, claims, damages or liabilities (other than those
incurred by a certificateholder as an investor in the certificates or those which arise from any action
of a certificateholder) arising out of or based upon the arrangement created by the master trust II
agreement as though the master trust II agreement created a partnership under the Delaware Revised
Uniform Partnership Act in which Funding is a general partner.
None of the transferor, the servicer or any of their respective directors, officers, employees
or agents will be under any liability to master trust II, the master trust II trustee, the investor
certificateholders of any certificates issued by master trust II or any other person for any action
taken, or for refraining from taking any action, in good faith pursuant to the master trust II
agreement. None of the transferor, the servicer or any of their respective directors, officers,
employees or agents will be protected against any liability which would otherwise be imposed by
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reason of willful misfeasance, bad faith or gross negligence of the transferor, the servicer or any such person
in the performance of their duties or by reason of reckless disregard of obligations and duties
thereunder. In addition, the master trust II agreement provides that the servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not incidental to its servicing
responsibilities under the master trust II agreement and which in its opinion may expose it to any
expense or liability.
Funding may transfer its interest in all or a portion of the Transferor Interest, provided that
prior to any such transfer:
o the master trust II trustee receives written notification from each rating agency that such
transfer will not result in a lowering or withdrawal of its then-existing rating of the
certificates of each outstanding series rated by it; and
o the master trust II trustee receives a written opinion of counsel confirming that such
transfer would not adversely affect the treatment of the certificates of each outstanding
series issued by master trust II as debt for federal income tax purposes.
Any person into which, in accordance with the master trust II agreement, the transferor or the
servicer may be merged or consolidated or any person resulting from any merger or consolidation to which
the transferor or the servicer is a party, or any person succeeding to the business of the transferor or
the servicer, upon execution of a supplement to the master trust II agreement and delivery of an opinion
of counsel with respect to the compliance of the transaction with the applicable provisions of the
master trust II agreement, will be the successor to the transferor or the servicer, as the case may be,
under the master trust II agreement.
Servicer Default
In the event of any Servicer Default, either the master trust II trustee or certificateholders
representing interests aggregating more than 50% of the Investor Interests for all series of
certificates of master trust II, by written notice to the servicer (and to the master trust II trustee,
the transferor and certain providers of series enhancement, if given by the certificateholders), may
terminate all of the rights and obligations of the servicer under the master trust II agreement and the
master trust II trustee may appoint a new servicer. Any such termination and appointment is called a
service transfer. The master trust II trustee shall as promptly as possible appoint a successor
servicer. The successor servicer may be the master trust II trustee, a wholly-owned subsidiary of the
master trust II trustee, or an entity which, at the time of its appointment as successor servicer,
(1) services a portfolio of consumer revolving credit card accounts or other consumer revolving credit
accounts, (2) is legally qualified and has the capacity to service the Master Trust II Portfolio, (3) is
qualified (or licensed) to use the software that the servicer is then currently using to service the
Master Trust II Portfolio or obtains the right to use, or has its own, software which is adequate to
perform its duties under the master trust II agreement, (4) has, in the reasonable judgment of the
master trust II trustee, demonstrated the ability to professionally and competently service a portfolio
of similar accounts in accordance with customary standards of skill and care, and (5) has a net worth of
at least $50,000,000 as of the end of its most recent fiscal quarter. The successor servicer shall
accept its appointment by written instrument acceptable to the master trust II trustee. The successor
servicer is entitled to compensation out of
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collections; however, that compensation will not be in
excess of the master trust II servicing fee. See "—Servicing Compensation and Payment of Expenses"
above for a discussion of the master trust II servicing fee.
Because FIA, as servicer, has significant responsibilities for the servicing of the
receivables, the master trust II trustee may have difficulty finding a suitable successor servicer.
Potential successor servicers may not have the capacity to adequately perform the duties required of a
successor servicer or may not be willing to perform such duties for the amount of the servicing fee
currently payable under the master trust II agreement. If no such servicer has been appointed and has
accepted such appointment by the time the servicer ceases to act as servicer, all authority, power and
obligations of the servicer under the master trust II agreement will pass to the master trust II
trustee. The Bank of New York, the master trust II trustee, does not have credit card operations. If
The Bank of New York is automatically appointed as successor servicer it may not have the capacity to
perform the duties required of a successor servicer and current servicing compensation under the master
trust II agreement may not be sufficient to cover its actual costs and expenses of servicing the
accounts. Except when the Servicer Default is caused by certain events of bankruptcy, insolvency,
conservatorship or receivership of the servicer, if the master trust II trustee is unable to obtain any
bids from eligible servicers and the servicer delivers an officer's certificate to the effect that it
cannot in good faith cure the Servicer Default which gave rise to a transfer of servicing, and if the
master trust II trustee is legally unable to act as successor servicer, then the master trust II trustee
shall give the transferor the right of first refusal to purchase the receivables on terms equivalent to
the best purchase offer as determined by the master trust II trustee.
Upon the occurrence of any Servicer Default, the servicer shall not be relieved from using its
best efforts to perform its obligations in a timely manner in accordance with the terms of the master
trust II agreement. The servicer is required to provide the master trust II trustee, any provider of
enhancement and/or any issuer of any third-party credit enhancement, the holder of the Transferor
Interest and the holders of certificates of each series issued and outstanding under master trust II
prompt notice of such failure or delay by it, together with a description of the cause of such failure
or delay and its efforts to perform its obligations.
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 the insolvency of the
servicer exists, the conservator or receiver may have the power to prevent either the master trust II
trustee or the majority of the certificateholders from effecting a service transfer. See "Risk
Factors—Regulatory action could result in losses or delays in payment" in this prospectus.
Evidence as to Compliance
The servicer will deliver to the master trust II trustee and, if required, file with the SEC as
part of an annual report on Form 10-K filed on behalf of master trust II and the issuing entity, the
following documents:
o a report by a firm of independent certified public accountants, based upon established
criteria that meets the standards applicable to accountants' reports intended for
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general distribution, attesting to the fairness of the assertion of the servicer's management that
its internal controls over the functions performed as servicer of master trust II are
effective, in all material respects, in providing reasonable assurance that master trust II
assets are safeguarded against loss from unauthorized use or disposition, on the date of
such report, and that such servicing was conducted in compliance with the sections of the
master trust II agreement during the preceding fiscal year, except for such exceptions or
errors as such firm believes to be immaterial and such other exceptions specified in such
statement;
o with regard to any tranche of notes or any additional notes the offer and sale of which (i)
commences after December 31, 2005 and (ii) is registered with the SEC under the Securities
Act, a report regarding its assessment of compliance during the preceding fiscal year with
all applicable servicing criteria set forth in relevant SEC regulations with respect to
asset-backed securities transactions taken as a whole involving the servicer and Banc of
America Card Servicing Corporation, as applicable, that are backed by the same types of
assets as those backing the notes;
o with respect to each assessment report described immediately above, a report by a
registered public accounting firm that attests to, and reports on, the assessment made by
the asserting party, as set forth in relevant SEC regulations; and
o a servicer compliance certificate, signed by an authorized officer of the servicer, to the
effect that:
(i) a review of the servicer's activities during the reporting period and of its
performance under the master trust II agreement has been made under such
officer's supervision; and
(ii) to the best of such officer's knowledge, based on such review, the servicer
has fulfilled all of its obligations under the master trust II agreement in
all material respects throughout the reporting period or, if there has been a
failure to fulfill any such obligation in any material respect, specifying
each such failure known to such officer and the nature and status thereof.
The servicer's obligation to deliver any servicing assessment report or attestation report and,
if required, to file the same with the SEC, is limited to those reports prepared by the servicer and, in
the case of reports prepared by any other party, those reports actually received by the servicer.
Copies of all statements, certificates and reports furnished to the master trust II trustee may
be obtained by a request in writing delivered to the master trust II trustee.
Except as described above or as described elsewhere in this prospectus or in the related
prospectus supplement, there will not be any independent verification that any duty or obligation to be
performed by any transaction party—including the servicer—has been performed by that party.
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Amendments to the Master Trust II Agreement
By accepting a note, a noteholder will be deemed to acknowledge that the transferor, the
servicer and the master trust II trustee may amend the master trust II agreement and any
series supplement without the consent of any investor certificateholder (including the issuing entity) or
any noteholder, so long as the amendment will not, as evidenced by an opinion of counsel to the master
trust II trustee, materially adversely affect the interest of any investor certificateholder (including
the holder of the collateral certificate).
For purposes of any provision of the master trust II agreement or the Series 2001-D supplement
requiring or permitting actions with the consent of, or at the direction of, certificateholders holding
a specified percentage of the aggregate unpaid principal amount of investor certificates:
o each noteholder will be deemed to be an investor certificateholder;
o each noteholder will be deemed to be the holder of an aggregate unpaid principal amount of
the collateral certificate equal to the Adjusted Outstanding Dollar Principal Amount of
such noteholder's notes;
o each series of notes under the indenture will be deemed to be a separate series of master
trust II certificates and the holder of a note of such series will be deemed to be the
holder of an aggregate unpaid principal amount of such series of master trust II
certificates equal to the Adjusted Outstanding Dollar Principal Amount of such noteholder's
notes of such series;
o each tranche of notes under the indenture will be deemed to be a separate class of master
trust II certificates and the holder of a note of such tranche will be deemed to be the
holder of an aggregate unpaid principal amount of such class of master trust II
certificates equal to the Adjusted Outstanding Dollar Principal Amount of such noteholder's
notes of such tranche; and
o any notes owned by the issuing entity, the transferor, the servicer, any other holder of
the Transferor Interest or any affiliate thereof will be deemed not to be outstanding,
except that, in determining whether the master trust II trustee shall be protected in
relying upon any such consent or direction, only notes which the master trust II trustee
knows to be so owned shall be so disregarded.
No amendment to the master trust II agreement will be effective unless the issuing entity
delivers the opinions of counsel described under "The Indenture—Tax Opinions for Amendments."
The master trust II agreement and any series supplement may be amended by the transferor, the
servicer and the master trust II trustee, without the consent of certificateholders of any series then
outstanding, for any purpose, so long as:
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o the transferor delivers an opinion of counsel acceptable to the master trust II trustee to
the effect that such amendment will not adversely affect in any material respect the
interest of such certificateholders;
o such amendment will not result in a withdrawal or reduction of the rating of any
outstanding series under master trust II; and
o such amendment will not cause a significant change in the permitted activities of master
trust II, as set forth in the master trust II agreement.
The master trust II agreement and any related series supplement may be amended by the
transferor, the servicer and the master trust II trustee, without the consent of the certificateholders
of any series then outstanding, to provide for additional enhancement or substitute enhancement for a
series, to change the definition of Eligible Account, to provide for the addition to master trust II of
a participation, to replace Funding as transferor with an affiliate of Funding as transferor or to
replace BACCS with FIA or another affiliate of Funding as seller of the receivables to the transferor
pursuant to the receivables purchase agreement and to make such other revisions and amendments
incidental to such replacement, so long as:
o the transferor delivers to the master trust II trustee a certificate of an authorized
officer to the effect that, in the reasonable belief of the transferor, such amendment will
not as of the date of such amendment adversely affect in any material respect the interest
of such certificateholders; and
o such amendment will not result in a withdrawal or reduction of the rating of any
outstanding series under master trust II.
The master trust II agreement and the related series supplement may be amended by the
transferor, the servicer and the master trust II trustee (a) with the consent of holders of certificates
evidencing interests aggregating not less than 50% (or such other percentage specified in the related
prospectus supplement) of the Investor Interests for all series of master trust II, for the purpose of
effectuating a significant change in the permitted activities of master trust II which is not materially
adverse to the certificateholders, and (b) in all other cases, with the consent of the holders of
certificates evidencing interests aggregating not less than 66 2/3% (or such other percentage specified
in the accompanying prospectus supplement) of the Investor Interests for all series of master trust II,
for the purpose of adding any provisions to, changing in any manner or eliminating any of the provisions
of the master trust II agreement or the related series supplement or of modifying in any manner the
rights of certificateholders of any outstanding series of master trust II. No such amendment, however,
may:
o reduce in any manner the amount of, or delay the timing of, distributions required to be
made on the related series or any other series;
o change the definition of or the manner of calculating the interest of any certificateholder
of such series or any certificateholder of any other series issued by master trust II; or
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o reduce the aforesaid percentage of interests the holders of which are required to consent
to any such amendment,
in each case without the consent of all certificateholders of the related series and certificateholders
of all other series adversely affected.
In addition, subject to any other applicable conditions described above, the Series 2001-D
supplement may be amended or modified by the transferor without the consent of the servicer, the master
trust II trustee, the collateral certificateholder or any noteholder if the transferor provides the
master trust II trustee with (a) an opinion of counsel to the effect that such amendment or modification
would reduce the risk that master trust II would be treated as taxable as a publicly traded partnership
pursuant to Section 7704 of the Internal Revenue Code of 1986, as amended and (b) a certificate that
such amendment or modification would not materially and adversely affect any certificateholder, except
that no such amendment (i) shall be deemed effective without the master trust II trustee's consent, if
the master trust II trustee's rights, duties and obligations under the Series 2001-D supplement are
thereby modified or (ii) shall cause a significant change in the permitted activities of master trust
II, as set forth in the master trust II agreement. Promptly after the effectiveness of any such
amendment, the transferor shall deliver a copy of such amendment to each of the servicer, the master
trust II trustee and each rating agency described in the Series 2001-D supplement.
Promptly following the execution of any amendment to the master trust II agreement, the master
trust II trustee will furnish written notice of the substance of such amendment to each
certificateholder. Any series supplement and any amendments regarding the addition or removal of
receivables from master trust II will not be considered an amendment requiring certificateholder consent
under the provisions of the master trust II agreement and any series supplement.
Certificateholders Have Limited Control of Actions
Certificateholders of any series or class within a series may need the consent or approval of a
specified percentage of the Investor Interest of other series or a class of such other series to take or
direct certain actions, including to require the appointment of a successor servicer after a Servicer
Default, to amend the master trust II agreement in some cases, and to direct a repurchase of all
outstanding series after certain violations of the transferor's representations and warranties. The
interests of the certificateholders of any such series may not coincide with yours, making it more
difficult for any particular certificateholder to achieve the desired results from such vote.
Consumer Protection Laws
The relationships of the cardholder and credit card issuer and the lender are extensively
regulated by federal and state consumer protection laws. For credit cards issued by FIA, the most
significant laws include the federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting,
Fair Debt Collection Practice, Gramm-Leach-Bliley and Electronic Funds Transfer Acts, and for members of
the military on active duty, the Servicemembers Civil Relief Act. These statutes impose disclosure
requirements when a credit card account is advertised,
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when it is opened, at the end of monthly billing
cycles, and at year end. In addition, these statutes limit customer liability for unauthorized use,
prohibit certain discriminatory practices in extending credit, impose certain limitations on the type of
account- related charges that may be assessed, and regulate the use of cardholder information.
Cardholders are entitled under these laws to have payments and credits applied to the credit card
accounts promptly, to receive prescribed notices and to require billing errors to be resolved promptly.
Master trust II may be liable for certain violations of consumer protection laws that apply to
the receivables, either as assignee from FIA for obligations arising before transfer of the receivables
to master trust II 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. FIA and Funding, as applicable, have represented and
warranted in the master trust II agreement that all of the receivables have been and will be created in
compliance with the requirements of such laws. The servicer also agrees in the master trust II
agreement to indemnify master trust II, among other things, for any liability arising from such
violations caused by the servicer. For a discussion of master trust II's rights arising from the breach
of these warranties, see "Master Trust II—Representations and Warranties" in this prospectus.
Certain jurisdictions may attempt to require out-of-state credit card issuers to comply with
such jurisdiction's consumer protection laws (including laws limiting the charges imposed by such credit
card issuers) in connection with their operations in such jurisdictions. A successful challenge by such
a jurisdiction could have an adverse impact on FIA's credit card operations or the yield on the
receivables in master trust II.
If a cardholder sought protection under federal or state bankruptcy or debtor relief laws, a
court could reduce or discharge completely the cardholder's obligations to repay amounts due on its
account and, as a result, the related receivables would be written off as uncollectible. The
certificateholders could suffer a loss if no funds are available from credit enhancement or other
sources. See "Master Trust II—Defaulted Receivables; Rebates and Fraudulent Charges" in this prospectus.
Federal Income Tax Consequences
General
The following discussion describes the material United States federal income tax consequences
of the purchase, ownership and disposition of the notes. Additional federal income tax considerations
relevant to a particular tranche may be set forth in the accompanying prospectus supplement. The
following discussion has been prepared and reviewed by Orrick, Herrington & Sutcliffe LLP as special tax
counsel to the issuing entity ("Special Tax Counsel"). The discussion is based on the Internal Revenue
Code of 1986, as amended as of the date hereof, and existing final, temporary and proposed Treasury
regulations, revenue rulings and judicial decisions, all of which are subject to prospective and
retroactive changes. The discussion is addressed only to original purchasers of the notes, deals only
with notes held as capital assets within the meaning of Section 1221 of the Internal Revenue Code and,
except as specifically set forth below, does not address tax consequences of holding notes that may be relevant to investors
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in light of their own investment circumstances or their special tax situations,
such as certain financial institutions, tax-exempt organizations, life insurance companies, dealers in
securities, non-U.S. persons, or investors holding the notes as part of a conversion transaction, as
part of a hedge or hedging transaction, or as a position in a straddle for tax purposes. Further, this
discussion does not address alternative minimum tax consequences or any tax consequences to holders of
interests in a noteholder. Special Tax Counsel is of the opinion that the following discussion of
federal income tax consequences is correct in all material respects. Noteholders should be aware that,
under Circular 230 (i.e., the regulations governing practice before the Internal Revenue Service,
located at 31 C.F.R. part 10), this discussion and the opinions contained herein may not be able to be
relied upon to avoid any income tax penalties that may be imposed with respect to the notes. An opinion
of Special Tax Counsel, however, is not binding on the Internal Revenue Service or the courts, and no
ruling on any of the issues discussed below will be sought from the Internal Revenue Service. Moreover,
there are no authorities on similar transactions involving interests issued by an entity with terms
similar to those of the notes described in this prospectus. Accordingly, it is suggested that persons
considering the purchase of notes should consult their own tax advisors with regard to the United States
federal income tax consequences of an investment in the notes and the application of United States
federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdictions, to
their particular situations.
Description of Opinions
As more fully described in this "Federal Income Tax Consequences" section, Special Tax Counsel
is of the opinion to the effect that each of the issuing entity and master trust II will not be subject
to federal income tax, and further that the notes will be characterized as debt for United States
federal income tax purposes. Additionally, Special Tax Counsel is of the opinion to the effect that the
statements set forth in this section to the extent that they constitute matters of law or legal
conclusions, are correct in all material respects.
Special Tax Counsel has not been asked to opine on any other federal income tax matter, and the
balance of this discussion does not purport to set forth any opinion of Special Tax Counsel concerning
any other particular federal income tax matter. For example, the discussion of original issue discount
below is a general discussion of federal income tax consequences relating to an investment in notes that
are treated as having original issue discount, which discussion Special Tax Counsel opines is correct in
all material respects as described above; however, that discussion does not set forth any opinion as to
whether any particular tranche or series of notes will be treated as having original issue discount.
Additionally, those matters as to which Special Tax Counsel renders opinions should be understood to be
subject to the additional considerations in the discussions relating to those opinions set forth below.
Special Tax Counsel has not been asked to, and does not, render any opinion regarding the state
or local income tax consequences of the purchase, ownership and disposition of a beneficial interest in
the notes. See "—State and Local Tax Consequences."
This description of the substance of the opinions rendered by Special Tax Counsel is not
intended as a substitute for an investor's review of the remainder of this discussion of income tax
consequences, or for consultation with its own advisors or tax return preparer.
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Tax Characterization of the Issuing Entity and the Notes
Treatment of the Issuing Entity and Master Trust II as Entities Not Subject to Tax
Special Tax Counsel is of the opinion that, although no transaction closely comparable to that
contemplated herein has been the subject of any Treasury regulation, revenue ruling or judicial
decision, each of the issuing entity and master trust II will not be classified as an association or as
a publicly traded partnership taxable as a corporation for federal income tax purposes. As a result,
Special Tax Counsel is of the opinion that each of the issuing entity and master trust II will not be
subject to federal income tax. However, as discussed above, this opinion is not binding on the Internal
Revenue Service and no assurance can be given that this characterization will prevail.
The precise tax characterization of the issuing entity and master trust II for federal income
tax purposes is not certain. They might be viewed as merely holding assets on behalf of the beneficiary
as collateral for notes issued by the beneficiary. On the other hand, they could be viewed as one or
more separate entities for tax purposes issuing the notes. This distinction, however, should not have a
significant tax effect on noteholders except as stated below under "—Possible Alternative
Characterizations."
Treatment of the Notes as Debt
Special Tax Counsel is of the opinion that, although no transaction closely comparable to that
contemplated herein has been the subject of any Treasury regulation, revenue ruling or judicial
decision, the notes will be characterized as debt for United States federal income tax purposes.
Additionally, the issuing entity will agree by entering into the indenture, and the noteholders will
agree by their purchase and holding of notes, to treat the notes as debt secured by the collateral
certificate and other assets of the issuing entity for United States federal income tax purposes.
Possible Alternative Characterizations
If, contrary to the opinion of Special Tax Counsel, the Internal Revenue Service successfully
asserted that a series or class of notes did not represent debt for United States federal income tax
purposes, those notes might be treated as equity interests in the issuing entity, master trust II or
some other entity for such purposes. If so treated, investors could be treated either as partners in a
partnership or, alternatively, as shareholders in a taxable corporation for such purposes. If an
investor were treated as a partner in a partnership, it would be taxed individually on its respective
share of the partnership's income, gain, loss, deductions and credits attributable to the partnership's
ownership of the collateral certificate and any other assets and liabilities of the partnership without
regard to whether there were actual distributions of that income. As a result, the amount, timing,
character and source of items of income and deductions of an investor could differ if its notes were
held to constitute partnership interests rather than debt. Treatment of a noteholder as a partner could
have adverse tax consequences to certain holders; for example, absent an applicable exemption, income to
foreign persons would be subject to United States tax and United States tax return filing and
withholding requirements, and individual holders might be subject to certain limitations on their
ability to deduct their share of
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partnership expenses. Alternatively, the Internal Revenue Service
could contend that some or all of the notes, or separately some of the other securities that the issuing
entity and master trust II are permitted to issue (and which are permitted to constitute debt or equity
for federal income tax purposes), constitute equity in a partnership that should be classified as a
publicly traded partnership taxable as a corporation for federal income tax purposes. Any such
partnership would be classified as a publicly traded partnership and could be taxable as a corporation
if its equity interests were traded on an "established securities market," or are "readily tradable" on
a "secondary market" or its "substantial equivalent." The beneficiary intends to take measures designed
to reduce the risk that either of the issuing entity or master trust II could be classified as a
publicly traded partnership; although the beneficiary expects that such measures will ultimately be
successful, certain of the actions that may be necessary for avoiding the treatment of such other
securities as "readily tradable" on a "secondary market" or its "substantial equivalent" are not fully
within the control of the beneficiary. As a result, there can be no assurance that the measures the
beneficiary intends to take will in all circumstances be sufficient to prevent the issuing entity and
master trust II from being classified as publicly traded partnerships. If the issuing entity or master
trust II were treated in whole or in part as one or more publicly traded partnerships taxable as a
corporation, corporate tax imposed with respect to that corporation could materially reduce cash
available to make payments on the notes, and foreign investors could be subject to withholding taxes.
Additionally, no distributions from the corporation would be deductible in computing the taxable income
of the corporation, except to the extent that any notes or other securities were treated as debt of the
corporation and distributions to the related noteholders or other security holders were treated as
payments of interest thereon. Further, distributions to noteholders not treated as holding debt would
be dividend income to the extent of the current and accumulated earnings and profits of the corporation
(possibly without the benefit of any dividends received deduction). Prospective investors should
consult their own tax advisors with regard to the consequences of possible alternative characterizations
to them in their particular circumstances; the following discussion assumes that the characterization of
the notes as debt and the issuing entity and master trust II as entities not subject to federal income
tax is correct.
Consequences to Holders of the Offered Notes
Interest and Original Issue Discount
Stated interest on a note will be includible in gross income as it accrues or is received in
accordance with a noteholder's usual method of tax accounting. If a class of notes is issued with
original issue discount, the provisions of Sections 1271 through 1273 and 1275 of the Internal Revenue
Code will apply to those notes. Under those provisions, a holder of such a note (including a cash basis
holder) would be required to include the original issue discount on a note in income for federal income
tax purposes on a constant yield basis, resulting in the inclusion of original issue discount in income
in advance of the receipt of cash attributable to that income. Subject to the discussion below, a note
will be treated as having original issue discount to the extent that its "stated redemption price"
exceeds its "issue price," if such excess equals or exceeds 0.25 percent multiplied by the weighted
average life of the note (determined by taking into account the number of complete years following
issuance until payment is made for each partial principal payment). Under Section 1272(a)(6) of the
Internal Revenue Code, special provisions apply to debt instruments on which payments may be accelerated
due to prepayments
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of other obligations securing those debt instruments. However, no regulations have
been issued interpreting those provisions, and the manner in which those provisions would apply to the
notes is unclear, but the application of Section 1272(a)(6) could affect the rate of accrual of original
issue discount and could have other consequences to holders of the notes. Additionally, the Internal
Revenue Service could take the position based on Treasury regulations that none of the interest payable
on a note is "unconditionally payable" and hence that all of such interest should be included in the
note's stated redemption price at maturity. If sustained, such treatment should not significantly affect
tax liabilities for most holders of the notes, but prospective noteholders should consult their own tax
advisors concerning the impact to them in their particular circumstances. The issuing entity intends to
take the position that interest on the notes constitutes "qualified stated interest" and that the above
consequences do not apply.
Market Discount
A holder of a note who purchases an interest in a note at a discount that exceeds any original
issue discount not previously includible in income may be subject to the "market discount" rules of
Sections 1276 through 1278 of the Internal Revenue Code. These rules provide, in part, that gain on the
sale or other disposition of a note and partial principal payments on a note are treated as ordinary
income to the extent of accrued market discount. The market discount rules also provide for deferral of
interest deductions for debt incurred to purchase or carry a note that has market discount.
Market Premium
A holder of a note who purchases an interest in a note at a premium may elect to amortize the
premium against interest income over the remaining term of the note in accordance with the provisions of
Section 171 of the Internal Revenue Code.
Disposition of the Notes
Subject to exceptions such as in the case of "wash sales," upon the sale, exchange or
retirement of a note, the holder of the note will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the disposition (other than amounts attributable to
accrued interest) and the holder's adjusted tax basis in the note. The holder's adjusted tax basis in
the note generally will equal the cost of the note to such holder, increased by any market or original
issue discount previously included in income by such holder for the note, and decreased by the amount of
any bond premium previously amortized and any payments of principal or original issue discount
previously received by such holder for such note. Except to the extent of any accrued market discount
not previously included in income, any such gain treated as capital gain will be long-term capital gain
if the note has been held for more than one year, and any such loss will be a capital loss, subject to
limitations on deductibility.
Foreign Holders
Under United States federal income tax law now in effect, subject to exceptions applicable to
certain types of interest, payments of interest by the issuing entity to a holder of a note who, as to
the United States, is a nonresident alien individual or a foreign corporation (a "foreign person") will
be considered "portfolio interest" and will not be subject to United States
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federal income tax and withholding tax provided the interest is not effectively connected with the conduct of a trade or
business within the United States by the foreign person and the foreign person (i) is not for United
States federal income tax purposes (a) actually or constructively a "10 percent shareholder" of the
beneficiary, the issuing entity or master trust II, (b) a "controlled foreign corporation" with respect
to which the beneficiary, the issuing entity or master trust II is a "related person" within the meaning
of the Internal Revenue Code, or (c) a bank extending credit pursuant to a loan agreement entered into
in the ordinary course of its trade or business, and (ii) provides the person who is otherwise required
to withhold United States tax with respect to the notes with an appropriate statement (on IRS Form
W-8BEN or a substitute form), signed under penalties of perjury, certifying that the beneficial owner of
the note is a foreign person and providing the foreign person's name, address and certain additional
information. If a note is held through a securities clearing organization or certain other financial
institutions (as is expected to be the case unless Definitive Notes are issued), the organization or
institution may provide the relevant signed statement to the withholding agent; in that case, however,
the signed statement must be accompanied by an IRS Form W-8BEN or substitute form provided by the
foreign person that owns the note. Special rules apply to partnerships, estates and trusts, and in
certain circumstances certifications as to foreign status and other matters may be required to be
provided by partners and beneficiaries thereof. If such interest is not portfolio interest, then it
will be subject to United States federal income and withholding tax at a rate of 30%, unless reduced or
eliminated pursuant to an applicable tax treaty or such interest is effectively connected with the
conduct of a trade or business within the United States and, in either case, the appropriate statement
has been provided.
Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a
note by a foreign person will be exempt from United States federal income tax and withholding tax,
provided that (i) such gain is not effectively connected with the conduct of a trade or business in the
United States by the foreign person, and (ii) in the case of an individual foreign person, such
individual is not present in the United States for 183 days or more in the taxable year.
The U.S. Treasury Department has recently issued final Treasury regulations which revise
various procedural matters relating to withholding taxes. Holders of notes should consult their tax
advisors regarding the procedures whereby they may establish an exemption from withholding.
Backup Withholding and Information Reporting
Payments of principal and interest, as well as payments of proceeds from the sale, retirement
or disposition of a note, may be subject to "backup withholding" tax under Section 3406 of the Internal
Revenue Code if a recipient of such payments fails to furnish to the payor certain identifying
information. Any amounts deducted and withheld would be allowed as a credit against such recipient's
United States federal income tax, provided appropriate proof is provided under rules established by the
Internal Revenue Service. Furthermore, certain penalties may be imposed by the Internal Revenue Service
on a recipient of payments that is required to supply information but that does not do so in the proper
manner. Backup withholding will not apply for payments made to certain exempt recipients, such as
corporations and financial institutions. Information may also be required to be provided to the Internal Revenue Service
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concerning payments, unless an exemption applies. Holders of the notes should
consult their tax advisors regarding their qualification for exemption from backup withholding and
information reporting and the procedure for obtaining such an exemption.
The United States federal income tax discussion set forth above may not be applicable depending
upon a holder's particular tax situation, and does not purport to address the issues described with the
degree of specificity that would be provided by a taxpayer's own tax advisor. Accordingly, it is
suggested that prospective investors should consult their own tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of the notes and the possible effects of
changes in federal tax laws.
State and Local Tax Consequences
The discussion above does not address the taxation of the issuing entity or the tax
consequences of the purchase, ownership or disposition of an interest in the notes under any state or
local tax law. It is suggested that each investor should consult its own tax advisor regarding state
and local tax consequences.
Benefit Plan Investors
Benefit plans are required to comply with restrictions under the Employee Retirement Income
Security Act of 1974, known as ERISA, and/or Section 4975 of the Internal Revenue Code, if they are
subject to either or both sets of restrictions. The ERISA restrictions include rules concerning
prudence and diversification of the investment of assets of a benefit plan—referred to as "plan assets."
A benefit plan fiduciary should consider whether an investment by the benefit plan in notes complies
with these requirements.
In general, a benefit plan for these purposes includes:
o a plan or arrangement which provides deferred compensation or certain health or other
welfare benefits to employees;
o an employee benefit plan that is tax-qualified under the Internal Revenue Code and provides
deferred compensation to employees—such as a pension, profit-sharing, Section 401(k) or
Keogh plan; and
o a collective investment fund or other entity if (a) the fund or entity has one or more
benefit plan investors and (b) certain "look-through" rules apply and treat the assets of
the fund or entity as constituting plan assets of the benefit plan investor.
However, a plan maintained by a governmental employer is not a benefit plan for these
purposes. Most plans maintained by religious organizations and plans maintained by foreign employers
for the benefit of employees employed outside the United States are also not benefit plans for these
purposes. A fund or other entity—including an insurance company general account—considering an
investment in notes should consult its tax advisors concerning whether its assets might be considered
plan assets of benefit plan investors under these rules.
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Prohibited Transactions
ERISA and Section 4975 of the Internal Revenue Code also prohibit transactions of a specified
type between a benefit plan and a party in interest who is related in a specified manner to the benefit
plan. Individual retirement accounts and tax-qualified plans that provide deferred compensation to
employees are also subject to these prohibited transaction rules unless they are maintained by a
governmental employer or (in most cases) a religious organization. Violation of these prohibited
transaction rules may result in significant penalties. There are statutory exemptions from the
prohibited transaction rules, and the U.S. Department of Labor has granted administrative exemptions for
specified transactions.
Potential Prohibited Transactions from Investment in Notes
There are two categories of prohibited transactions that might arise from a benefit plan's
investment in notes. Fiduciaries of benefit plans contemplating an investment in notes should carefully
consider whether the investment would violate these rules.
Prohibited Transactions between the Benefit Plan and a Party in Interest
The first category of prohibited transaction could arise on the grounds that the benefit plan,
by purchasing notes, was engaged in a prohibited transaction with a party in interest. A prohibited
transaction could arise, for example, if the notes were viewed as debt of FIA and FIA is a party in
interest as to the benefit plan. A prohibited transaction could also arise if FIA, the transferor, the
master trust II trustee, the indenture trustee, the servicer or another party with an economic
relationship to the issuing entity or master trust II either:
o is involved in the investment decision for the benefit plan to purchase notes or
o is otherwise a party in interest as to the benefit plan.
If a prohibited transaction might result from the benefit plan's purchase of notes, a statutory
or an administrative exemption from the prohibited transaction rules might be available to permit an
investment in notes. The statutory exemption that is potentially available is set forth in Section
408(b)(17) of ERISA and is available to a "service provider" to a benefit plan that is not a fiduciary
with respect to the benefit plan's assets being used to purchase the notes or an affiliate of such a
fiduciary. The administrative exemptions that are potentially available include the following
prohibited transaction class exemptions:
o 96-23, available to certain "in-house asset managers";
o 95-60, available to insurance company general accounts;
o 91-38, available to bank collective investment funds;
o 90-1, available to insurance company pooled separate accounts; and
o 84-14, available to independent "qualified professional asset managers."
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However, even if the benefit plan is eligible for one of these exemptions, the exemption may
not cover every aspect of the investment by the benefit plan that might be a prohibited transaction.
Prohibited Transactions between the Issuing Entity or Master Trust II and a Party in Interest
The second category of prohibited transactions could arise if:
o a benefit plan acquires notes, and
o under the "look-through" rules of Section 3(42) of ERISA and the U.S. Department of Labor
plan asset regulation, collectively referred to herein as the "plan asset regulation,"
assets of the issuing entity are treated as if they were plan assets of the benefit plan.
In this case, every transaction by the issuing entity would be treated as a transaction by the
benefit plan using its plan assets.
If assets of the issuing entity are treated as plan assets of a benefit plan investor, a
prohibited transaction could result if the issuing entity itself engages in a transaction with a party
in interest as to the benefit plan. For example, if the issuing entity's assets are treated as assets
of the benefit plan and master trust II holds a credit card receivable that is an obligation of a
participant in that same benefit plan, then there would be a prohibited extension of credit between the
benefit plan and a party in interest, the plan participant.
As a result, if assets of the issuing entity are treated as plan assets, there would be a
significant risk of a prohibited transaction. Moreover, the prohibited transaction exemptions referred
to above could not be relied on to exempt all the transactions of the issuing entity or master trust II
from the prohibited transaction rules. In addition, because all the assets of the issuing entity or
master trust II would be treated as plan assets, managers of those assets might be required to comply
with the fiduciary responsibility rules of ERISA.
Under an exemption in the plan asset regulation, assets of the issuing entity would not be
considered plan assets, and so this risk of prohibited transactions should not arise, if a benefit plan
purchases a note that:
o is treated as indebtedness under local law, and
o has no "substantial equity features."
The issuing entity expects that all notes offered by this prospectus will be indebtedness under
local law. Likewise, although there is no authority directly on point, the issuing entity believes that
the notes should not be considered to have substantial equity features. As a result, the plan asset
regulation should not apply to cause assets of the issuing entity to be treated as plan assets.
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Investment by Benefit Plan Investors
For the reasons described in the preceding sections, and subject to the limitations referred to
therein, benefit plans can purchase notes. However, the benefit plan fiduciary must ultimately
determine whether the requirements of the plan asset regulation are satisfied. More generally, the
fiduciary must determine whether the benefit plan's investment in notes will result in one or more
nonexempt prohibited transactions or otherwise violate the provisions of ERISA or the Internal Revenue
Code.
Tax Consequences to Benefit Plans
In general, assuming the notes are debt for federal income tax purposes, interest income on
notes would not be taxable to benefit plans that are tax-exempt under the Internal Revenue Code, unless
the notes were "debt-financed property" because of borrowings by the benefit plan itself. However, if,
contrary to the opinion of Special Tax Counsel, for federal income tax purposes, the notes are equity
interests in a partnership and the partnership or master trust II is viewed as having other outstanding
debt, then all or part of the interest income on the notes would be taxable to the benefit plan as
"debt-financed income." Benefit plans should consult their tax advisors concerning the tax consequences
of purchasing notes.
Plan of Distribution
The issuing entity may offer and sell the notes of a series in one or more of the following
ways:
o directly to one or more purchasers;
o through agents; or
o through underwriters.
Any underwriter or agent that offers the notes may be an affiliate of the issuing entity, and
offers and sales of notes may include secondary market transactions by affiliates of the issuing
entity. These affiliates may act as principal or agent in secondary market transactions. Secondary
market transactions will be made at prices related to prevailing market prices at the time of sale.
The issuing entity will specify in a prospectus supplement the terms of each offering, which
may include:
o the name or names of any underwriters or agents,
o the managing underwriters of any underwriting syndicate,
o the public offering or purchase price,
o the net proceeds to the issuing entity from the sale,
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o any underwriting discounts and other items constituting underwriters' compensation,
o any discounts and commissions allowed or paid to dealers,
o any commissions allowed or paid to agents, and
o the securities exchanges, if any, on which the notes will be listed.
Dealer trading may take place in some of the notes, including notes not listed on any
securities exchange. Direct sales may be made on a national securities exchange or otherwise. If the
issuing entity, directly or through agents, solicits offers to purchase notes, the issuing entity
reserves the sole right to accept and, together with its agents, to reject in whole or in part any
proposed purchase of notes.
The issuing entity may change any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers. If indicated in a prospectus supplement, the
issuing entity will authorize underwriters or agents to solicit offers by certain institutions to
purchase securities from the issuing entity pursuant to delayed delivery contracts providing for payment
and delivery at a future date.
Any underwriter participating in a distribution of securities, including notes offered by the
issuing entity, is, and any agent participating in the distribution of securities, including notes
offered by this prospectus, will be deemed to be, an "underwriter" of those securities under the
Securities Act of 1933 and any discounts or commissions received by it and any profit realized by it on
the sale or resale of the securities may be deemed to be underwriting discounts and commissions.
FIA, the transferor or the issuing entity may agree to indemnify underwriters, agents and their
controlling persons against certain civil liabilities, including liabilities under the Securities Act of
1933 in connection with their participation in the distribution of the issuing entity's notes.
Underwriters and agents participating in the distribution of the issuing entity's notes, and
their controlling persons, may engage in transactions with and perform services for FIA, BACCS, Funding,
the issuing entity or their respective affiliates in the ordinary course of business.
Legal Matters
Certain legal matters relating to the issuance of the notes and the collateral certificate will
be passed upon for FIA, the transferor and master trust II by Orrick, Herrington & Sutcliffe LLP,
Washington, D.C. Certain legal matters relating to the issuance of the notes and the collateral
certificate under the laws of the State of Delaware will be passed upon for FIA, the transferor and
master trust II by Richards, Layton & Finger, P.A., Wilmington, Delaware. Certain legal matters
relating to the federal tax consequences of the issuance of the notes will be passed upon for the
issuing entity by Orrick, Herrington & Sutcliffe LLP. Certain legal matters relating to the issuance of
the notes will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York.
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Where You Can Find More Information
We filed a registration statement relating to the notes with the Securities and Exchange
Commission. This prospectus is part of the registration statement, but the registration statement
includes additional information.
We provide static pool information in response to Item 1105 of Regulation AB through an
Internet Web site. The prospectus supplement accompanying this prospectus will disclose the specific
Internet address where the information is posted. Static pool information on such Internet Web site
that relates to the performance of the receivables for periods commencing prior to January 1, 2006 does
not form a part of this prospectus, the prospectus supplement accompanying this prospectus or the
registration statement relating to the notes.
The servicer will file with the SEC all required annual reports on Form 10-K, periodic reports
on Form 10-D and current reports on Form 8-K.
You may read and copy any reports, statements or other information we file at the SEC's public
reference room at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
(800) SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings
are also available to the public on the SEC Internet Web site (http://www.sec.gov). Our SEC filings may
be located by using the SEC Central Index Key (CIK) for BA Credit Card Trust, 0001128250. For purposes
of any electronic version of this prospectus, the preceding uniform resource locator, or URL, is an
inactive textual reference only. We have taken steps to ensure that this URL was inactive at the time
we created any electronic version of this prospectus.
Reports that are filed with the SEC by the servicer pursuant to the Securities Exchange Act of
1934, as amended, will be made available to investors as soon as reasonably practicable after those
reports are filed with the SEC. These reports may be accessed by any investor, free of charge, through
an Internet Web site at http://ccabs.bankofamerica.com. In the event this Internet Web site is
temporarily unavailable, FIA will provide to investors electronic or paper copies of such reports free
of charge upon request. For purposes of any electronic version of this prospectus, the URL in this
paragraph is an inactive textual reference only. We have taken steps to ensure that the URL in this
paragraph was inactive at the time we created any electronic version of this prospectus.
We "incorporate by reference" information we file with the SEC, which means that we can
disclose important information to you by referring you to those documents. The information incorporated
by reference is considered to be part of this prospectus. Information that we file later with the SEC
will 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 distribution reports on Form 10-D and current reports on
Form 8-K subsequently filed by or on behalf of master trust II or the issuing entity prior to the
termination of the offering of the notes.
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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: Investor Relations; FIA Card Services, National
Association; Wilmington, Delaware 19884-0313; (704) 386-5681.
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Glossary of Defined Terms
"Addition Date" means the date of any assignment of receivables in additional accounts to the
Master Trust II Portfolio.
"Adjusted Outstanding Dollar Principal Amount" means, for any series, class or tranche of
notes, the outstanding dollar principal amount of such series, class or tranche, less any funds on
deposit in the principal funding account or the related subaccount, as applicable, for such series,
class or tranche.
"Aggregate Investor Default Amount" means, for any month, the sum of the Investor Default
Amounts for such month.
"Available Funds" means (a) for all series of notes, the collections of finance charge
receivables (and certain amounts to be treated as finance charge receivables) payable to the issuing
entity, as holder of the collateral certificate, plus the collateral certificate's allocable portion of
investment earnings (net of losses and expenses) on amounts on deposit in the master trust II finance
charge account, minus, if FIA or The Bank of New York is the servicer, any servicer interchange
attributable to the collateral certificate as described in "Master Trust II—Servicing Compensation and
Payment of Expenses" and (b) for any series, class or tranche of notes, the amount of collections in
clause (a) allocated to that series, class or tranche, as applicable, plus any other amounts, or
allocable portion thereof, to be treated as Available Funds for that series, class or tranche as
described in the applicable supplement to this prospectus.
"Available Funds Allocation Amount" means, on any date during any month for any tranche, class
or series of notes (exclusive of (a) any notes within such tranche, class or series which will be paid
in full during such month and (b) any notes which will have a nominal liquidation amount of zero during
such month), an amount equal to the sum of (i) the nominal liquidation amount for such tranche, class or
series, as applicable, as of the last day of the preceding month, plus (ii) the aggregate amount of any
increases in the nominal liquidation amount of such tranche, class or series, as applicable, as a result
of (x) the issuance of a new tranche of notes or the issuance of additional notes in an outstanding
tranche of notes, (y) the accretion of principal on discount notes of such tranche, class or series, as
applicable or (z) the release of prefunded amounts (other than prefunded amounts deposited during such
month) for such tranche, class or series, as applicable, from a principal funding subaccount, in each
case during such month.
"Available Principal Amounts" means, (a) for all series of notes, the collections of principal
receivables allocated and paid to the issuing entity, as holder of the collateral certificate, and
(b) for any series, class or tranche of notes, the amount of collections in clause (a) allocated to that
series, class or tranche, as applicable, plus any other amounts, or allocable portion thereof, to be
treated as Available Principal Amounts for that series, class or tranche as described in the applicable
supplement to this prospectus.
"Bank Portfolio" means the portfolio of MasterCard, Visa and American Express credit card
accounts owned by FIA.
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"Base Rate" for a month is the rate equal to:
— the weighted average interest rates for the outstanding BAseries notes for that month
(based on the outstanding dollar principal amount of the related notes), plus
— 1.25%, or if FIA or The Bank of New York is not the servicer, 2.0%, plus
— only if FIA or The Bank of New York is the servicer, the rate (not to exceed 0.75%) at
which finance charge receivables allocable to interchange are collected for that month.
"BAseries Available Funds" means, for any month, the amounts to be treated as
BAseries Available Funds as described in "Source of Funds to Pay the Notes—Deposit and Application of
Funds for the BAseries—BAseries Available Funds."
"BAseries Available Principal Amounts" means, for any month, the sum of the Available Principal
Amounts allocated to the BAseries, dollar payments for principal under any derivative agreements for
tranches of notes of the BAseries, and any amounts of BAseries Available Funds available to cover
defaults on principal receivables in master trust II allocable to the BAseries or reimburse any deficits
in the nominal liquidation amount of the BAseries notes.
"Business Day" means any day other than a Saturday, a Sunday or a day on which banking
institutions in New York, New York or Newark, Delaware are authorized or obligated by law, executive
order or governmental decree to be closed.
"Class A Unused Subordinated Amount of Class B notes" means for any tranche of outstanding
Class A notes, for any Transfer Date, an amount equal to the Class A required subordinated amount of
Class B notes minus the Class A Usage of Class B Required Subordinated Amount, each as of such Transfer
Date.
"Class A Unused Subordinated Amount of Class C notes" means for any tranche of outstanding
Class A notes, for any Transfer Date, an amount equal to the Class A required subordinated amount of
Class C notes minus the Class A Usage of Class C Required Subordinated Amount, each as of such Transfer
Date.
"Class A Usage of Class B Required Subordinated Amount" means, for any tranche of outstanding
Class A notes, zero on the date of issuance of such tranche, and on any Transfer Date thereafter, the
sum of the Class A Usage of Class B Required Subordinated Amount as of the preceding date of
determination plus the sum of the following amounts:
(1) an amount equal to the product of:
o a fraction, the numerator of which is the Class A Unused Subordinated Amount of Class
B notes for that tranche of Class A notes (as of the last day of the preceding month)
and the denominator of which is the aggregate nominal liquidation amount of all Class
B notes (as of the last day of the preceding month), times
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o the amount of charge-offs for uncovered defaults on principal receivables in master
trust II initially allocated to Class B notes which did not result in a Class A Usage
of Class C Required Subordinated Amount for such tranche of Class A notes on such
Transfer Date; plus
(2) the amount of charge-offs for uncovered defaults on principal receivables in master
trust II initially allocated to that tranche of Class A notes and then reallocated on
such Transfer Date to Class B notes; plus
(3) the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to the interest funding subaccount for that tranche of Class A notes which did not
result in a Class A Usage of Class C Required Subordinated Amount for such tranche of
Class A notes; plus
(4) an amount equal to the aggregate amount of BAseries Available Principal Amounts
reallocated to pay any amount to the servicer for such tranche of Class A notes which
did not result in a Class A Usage of Class C Required Subordinated Amount for such
tranche of Class A notes on such Transfer Date; minus
(5) an amount (which will not exceed the sum of items (1) through (4) above) equal to the
sum of:
o the product of:
— a fraction, the numerator of which is the Class A Usage of Class B Required
Subordinated Amount (prior to giving effect to any reimbursement of a Nominal
Liquidation Amount Deficit for any tranche of Class B notes on such Transfer
Date) for such tranche of Class A notes and the denominator of which is the
aggregate Nominal Liquidation Amount Deficits for all tranches of Class B
notes (prior to giving effect to any reimbursement of a Nominal Liquidation
Amount Deficit for any tranche of Class B notes on such Transfer Date), times
— the aggregate amount of the Nominal Liquidation Amount Deficits of any tranche
of Class B notes which are reimbursed on such Transfer Date, plus
o if the aggregate Class A Usage of Class B Required Subordinated Amount (prior to
giving effect to any reimbursement of Nominal Liquidation Amount Deficits for any
tranche of Class B notes on such Transfer Date) for all Class A notes exceeds the
aggregate Nominal Liquidation Amount Deficits of all tranches of Class B notes (prior
to giving effect to any reimbursement on such Transfer Date), the product of:
— a fraction, the numerator of which is the amount of such excess and the
denominator of which is the aggregate Nominal Liquidation Amount Deficits for
all tranches of Class C notes (prior to giving effect to any
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reimbursement of a Nominal Liquidation Amount Deficit for any tranche of Class C notes on such
Transfer Date), times
— the aggregate amount of the Nominal Liquidation Amount Deficits of any tranche
of Class C notes which are reimbursed on such Transfer Date, times
— a fraction, the numerator of which is the Class A Usage of Class B Required
Subordinated Amount of such tranche of Class A notes and the denominator of
which is the Class A Usage of Class B Required Subordinated Amount for all
Class A notes in the BAseries.
"Class A Usage of Class C Required Subordinated Amount" means, for any tranche of outstanding
Class A notes, zero on the date of issuance of such tranche of Class A notes, and on any Transfer Date
thereafter, the sum of the Class A Usage of Class C Required Subordinated Amount as of the preceding
date of determination plus the sum of the following amounts:
(1) an amount equal to the product of:
o a fraction, the numerator of which is the Class A Unused Subordinated Amount of Class
C notes for that tranche of Class A notes (as of the last day of the preceding month)
and the denominator of which is the aggregate nominal liquidation amount of all Class
C notes (as of the last day of the preceding month), times
o the amount of charge-offs for uncovered defaults on principal receivables in master
trust II initially allocated on such Transfer Date to Class C notes; plus
(2) the amount of charge-offs for uncovered defaults on principal receivables in master
trust II initially allocated to that tranche of Class A notes and then reallocated on
such Transfer Date to Class C notes; plus
(3) an amount equal to the product of:
o a fraction, the numerator of which is the Class A Unused Subordinated Amount of Class
B notes for that tranche of Class A notes (as of the last day of the preceding month)
and the denominator of which is the aggregate nominal liquidation amount of all Class
B notes (as of the last day of the preceding month), times
o the amount of charge-offs for uncovered defaults on principal receivables in master
trust II initially allocated on such Transfer Date to Class B notes; plus
(4) the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to the interest funding subaccount for that tranche of Class A notes; plus
(5) an amount equal to the product of:
o a fraction, the numerator of which is the Class A Unused Subordinated Amount of Class
B notes for such tranche of Class A notes (as of the last day of the
preceding month) and the denominator of which is the aggregate nominal liquidation amount of all Class
B notes (as of the last day of the
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preceding month), times
o the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to the interest funding subaccount for any tranche of Class B notes; plus
(6) the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to pay any amount to the servicer for such tranche of Class A notes; plus
(7) an amount equal to the product of:
o a fraction, the numerator of which is the Class A Unused Subordinated Amount of Class
B notes for that tranche of Class A notes (as of the last day of the preceding month)
and the denominator of which is the aggregate nominal liquidation amount of all Class
B notes (as of the last day of the preceding month), times
o the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to pay any amount to the servicer for any tranche of Class B notes; minus
(8) an amount (which will not exceed the sum of items (1) through (7) above) equal to the
product of:
o a fraction, the numerator of which is the Class A Usage of Class C Required
Subordinated Amount (prior to giving effect to any reimbursement of a Nominal
Liquidation Amount Deficit for any tranche of Class C notes on such Transfer Date) for
that tranche of Class A notes and the denominator of which is the aggregate Nominal
Liquidation Amount Deficits (prior to giving effect to such reimbursement) of all
Class C notes, times
o the aggregate Nominal Liquidation Amount Deficits of all Class C notes which are
reimbursed on such Transfer Date.
"Class B Unused Subordinated Amount of Class C notes" means for any tranche of outstanding
Class B notes, for any Transfer Date, an amount equal to the Class B required subordinated amount of
Class C notes minus the Class B Usage of Class C Required Subordinated Amount, each as of such Transfer
Date.
"Class B Usage of Class C Required Subordinated Amount" means, for any tranche of outstanding
Class B notes, zero on the date of issuance of such tranche, and on any Transfer Date thereafter, the
sum of the Class B Usage of Class C Required Subordinated Amount as of the preceding date of
determination plus the sum of the following amounts:
(1) an amount equal to the product of:
o a fraction, the numerator of which is the Class B Unused Subordinated Amount of Class
C notes for that tranche of Class B notes (as of the last day of the preceding
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month) and the denominator of which is the aggregate nominal liquidation amount of all Class
C notes (as of the last day of the preceding month), times
o the amount of charge-offs for uncovered defaults on principal receivables in master
trust II initially allocated on such Transfer Date to Class C notes; plus
(2) an amount equal to the product of:
o a fraction, the numerator of which is the nominal liquidation amount for that tranche
of Class B notes (as of the last day of the preceding month) and the denominator of
which is the aggregate nominal liquidation amount of all Class B notes (as of the last
day of the preceding month), times
o the sum of (i) the amount of charge-offs for uncovered defaults on principal
receivables in master trust II initially allocated to any tranche of Class A notes
that has a Class A Unused Subordinated Amount of Class B notes that was included in
Class A Usage of Class C Required Subordinated Amount and (ii) the amount of
charge-offs for uncovered defaults on principal receivables in master trust II
initially allocated to any tranche of Class A notes that has a Class A Unused
Subordinated Amount of Class B notes that was included in Class A Usage of Class B
Required Subordinated Amount; plus
(3) the amount of charge-offs for uncovered defaults on principal receivables in master
trust II initially allocated to that tranche of Class B notes, and then reallocated on
such date to the Class C notes; plus
(4) an amount equal to the product of:
o a fraction, the numerator of which is the nominal liquidation amount for that tranche
of Class B notes (as of the last day of the preceding month) and the denominator of
which is the aggregate nominal liquidation amount of all Class B notes (as of the last
day of the preceding month), times
o the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to the interest funding subaccount for any tranche of Class A notes that has a Class A
Unused Subordinated Amount of Class B notes; plus
(5) the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to the interest funding subaccount for that tranche of Class B notes; plus
(6) an amount equal to the product of:
o a fraction, the numerator of which is the nominal liquidation amount for such tranche
of Class B notes (as of the last day of the preceding month) and the denominator of
which is the aggregate nominal liquidation amount of all Class B notes (as of the last
day of the preceding month), times
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o the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to pay any amount to the servicer for any tranche of Class A notes that has a Class A
Unused Subordinated Amount of Class B notes; plus
(7) the amount of BAseries Available Principal Amounts reallocated on such Transfer Date
to pay any amount to the servicer for such tranche of Class B notes; minus
(8) an amount (which will not exceed the sum of items (1) through (7) above) equal to the
product of:
o a fraction, the numerator of which is the Class B Usage of Class C Required
Subordinated Amount (prior to giving effect to any reimbursement of a Nominal
Liquidation Amount Deficit for any tranche of Class C notes on such Transfer Date) for
that tranche of Class B notes and the denominator of which is the aggregate Nominal
Liquidation Amount Deficits (prior to giving effect to such reimbursement) of all
Class C notes, times
o the aggregate Nominal Liquidation Amount Deficits of all Class C notes which are
reimbursed on such Transfer Date.
"Cut-Off Date" means June 22, 1994.
"Daily Available Funds Amount" means, for any day during any month, an amount equal to the
product of (a) the amount of collections of finance charge receivables (together with certain amounts to
be treated as finance charge receivables) processed for any series, class or tranche of notes, minus, if
FIA or The Bank of New York is the servicer, the amount of interchange paid to the servicer for each
month, and (b) the percentage equivalent of a fraction, the numerator of which is the Available Funds
Allocation Amount for the related series, class or tranche of notes for such day and the denominator of
which is the Available Funds Allocation Amount for all series of notes for such day.
"Daily Principal Amount" means, for any day during any month on which collections of principal
receivables are processed for any series, class or tranche of notes, an amount equal to the product of
(a) the aggregate amount of collections of principal receivables allocated to the issuing entity on such
day and (b) the percentage equivalent of a fraction, the numerator of which is the Principal Allocation
Amount for the related series, class or tranche of notes for such day and the denominator of which is
the Principal Allocation Amount for all series of notes for such day.
"Default Amount" means the aggregate amount of principal receivables (other than ineligible
receivables) in a Defaulted Account on the day such account became a Defaulted Account.
"Defaulted Accounts" means certain accounts in the Master Trust II Portfolio, the receivables
of which have been charged off as uncollectible by the servicer.
"Definitive Notes" means notes in definitive, fully registered form.
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"Determination Date" means the fourth Business Day preceding each Transfer Date.
"Distribution Date" means the 15th day of each month (or, if such 15th day is not a Business
Day, the next succeeding Business Day).
"Eligible Account" means any Visa, MasterCard, or American Express credit card account for
which each of the following requirements is satisfied as of the date of its designation for inclusion in
the Master Trust II Portfolio:
o it exists and is maintained by FIA;
o its receivables are payable in United States dollars;
o the related obligor's most recent billing address is located in the United States or its
territories or possessions;
o it is not classified by FIA as cancelled, counterfeit, fraudulent, stolen, or lost; and
o all of its receivables have not been charged-off under FIA's customary and usual procedures
for servicing credit card accounts; provided, however, the definition of Eligible Account
may be changed by amendment to the master trust II agreement without the consent of the
certificateholders if:
o the transferor delivers to the trustee a certificate of an authorized officer to the effect
that, in the reasonable belief of the transferor, such amendment will not as of the date of
such amendment adversely affect in any material respect the interest of such
certificateholders; and
o such amendment will not result in a withdrawal or reduction of the rating of any
outstanding series under master trust II by any rating agency.
"Eligible Receivable" means any receivable for which each of the following requirements is
satisfied as of the applicable time:
o it arises in an Eligible Account;
o it is created, in all material respects, in compliance with all requirements of law
applicable to FIA, and it is created under a credit card agreement that complies in all
material respects with all requirements of law applicable to FIA;
o all consents, licenses, authorizations of, or registrations with, any governmental
authority that are required for its creation or the execution, delivery, or performance of
the related credit card agreement have been duly obtained or made by FIA and are fully
effective;
183
o immediately prior to being transferred to the master trust II trustee, the transferor has
good and marketable title to it free and clear of all liens arising under or through the
transferor (other than certain tax liens for taxes not then due or which FIA, BACCS or the
transferor is contesting);
o it is the legal, valid, and binding payment obligation of the related obligor and is
enforceable against that obligor in accordance with its terms (with certain
bankruptcy-related exceptions); and
o it is an "account" under Article 9 of the UCC.
"Excess Available Funds" means, for the BAseries for any month, the Available Funds allocable
to the BAseries remaining after application to cover targeted deposits to the interest funding account,
payment of the portion of the master trust II servicing fee allocable to the BAseries, and application
to cover any defaults on principal receivables in master trust II allocable to the BAseries or any
deficits in the nominal liquidation amount of the BAseries notes.
"Excess Available Funds Percentage" for a month is determined by subtracting the Base Rate from
the Portfolio Yield for that month.
"Floating Investor Percentage" means, for any date of determination, a percentage based on a
fraction, the numerator of which is the aggregate Available Funds Allocation Amounts for all series of
notes for such date and the denominator of which is the greater of (a) the aggregate amount of principal
receivables in master trust II at the end of the prior month and (b) the sum of the Investor Interests
for all outstanding master trust II series of investor certificates on such date of determination.
However, for any month in which there is a new issuance of notes, an accretion of principal on discount
notes, a release of prefunded amounts from a principal funding subaccount, an addition of accounts, or a
removal of accounts where the receivables in such removed accounts approximately equal the initial
Investor Interest of a series of master trust II investor certificates that has been paid in full, the
denominator described in clause (a) of the previous sentence will be, on and after such date, the
aggregate amount of principal receivables in master trust II as of the beginning of the day on the most
recently occurring event described above (after adjusting for the aggregate amount of principal
receivables, if any, added to or removed from master trust II on such date).
"Investor Default Amount" means, for any receivable, the product of:
o the Floating Investor Percentage on the day the applicable account became a Defaulted
Account; and
o the Default Amount.
"Investor Interest" means, for any date of determination:
o for the collateral certificate, the sum of the nominal liquidation amounts for each
series of notes outstanding as of such date; and
184
o for all other series of master trust II investor certificates, the initial outstanding
principal amount of the investor certificates of that series, less the amount of principal
paid to the related investor certificateholders and the amount of unreimbursed charge-offs
for uncovered defaults and reallocations of principal collections.
"Investor Servicing Fee" has the meaning described in "Master Trust II—Servicing Compensation
and Payment of Expenses" in this prospectus.
"Master Trust II Portfolio" means the credit card accounts selected from the Bank Portfolio and
included in master trust II as of the Cut-Off Date and, for additional accounts, as of the related date
of their designation, based on the eligibility criteria set forth in the master trust II agreement and
which accounts have not been removed from master trust II.
"Master Trust II Termination Date" means, unless the servicer and the holder of the Transferor
Interest instruct otherwise, the earliest of:
o the first Business Day after the Distribution Date on which the outstanding amount of the
interests in master trust II (excluding the Transferor Interest), if any, for each
series outstanding is zero;
o December 31, 2024 or such later date as the servicer and the transferor may determine
(which will not be later than August 31, 2034); or
o if the receivables are sold, disposed of or liquidated following the occurrence of an event
of insolvency or receivership of Funding, immediately following such sale, disposition or
liquidation.
"Maximum Addition Amount" means, for any Addition Date, the number of accounts originated by
FIA and designated as additional accounts without prior rating agency confirmation of its then existing
rating of any series of certificates outstanding which would either:
o for any three consecutive months be equal to the product of (i) 15% and (ii) the number of
accounts designated to master trust II as of the first day of the calendar year during
which such months commence; or
o for any twelve-month period be equal to the product of (i) 20% and (ii) the number of
accounts designated to master trust II as of the first day of such twelve-month period.
However, if the aggregate principal balance in the additional accounts specified above, as the case may
be, exceeds either (y) the product of (i) 15% and (ii) the aggregate amount of principal receivables
determined as of the first day of the third preceding month minus the aggregate amount of principal
receivables as of the date each such additional account was designated to master trust II in all of the
accounts owned by the transferor that have been designated as additional accounts since the first day of
the third preceding month, or (z) the product of (i) 20% and (ii) the aggregate amount of principal
receivables determined as of the first day of the calendar year in which such Addition Date occurs minus
the aggregate amount of principal receivables as of the date each such additional account was designated
to master trust II in all of
185
the accounts owned by FIA that have been designated as additional accounts
since the first day of such calendar year, the Maximum Addition Amount will be an amount equal to the
lesser of the aggregate amount of principal receivables specified in either clause (y) or (z).
"Minimum Aggregate Principal Receivables" for any date means an amount equal to the sum of the
numerators used in the calculation of the Principal Investor Percentages for all outstanding series on
that date. For any series with an Investor Interest as of such date equal to the amount of funds on
deposit in its principal funding account, the numerator used in the calculation of the investor
percentage for such series will, solely for the purpose of this definition, be deemed to equal zero.
"Minimum Transferor Interest" for any period means 4% of the average principal receivables for
such period. The transferor may reduce the Minimum Transferor Interest to not less than 2% of the
average principal receivables for such period upon notification that such reduction will not cause a
reduction or withdrawal of the rating of any outstanding investor certificates issued by master trust II
that are rated by the rating agencies rating those investor certificates and certain other conditions as
set forth in the master trust II agreement.
"Monthly Interest Accrual Date" means, for any outstanding series, class or tranche of notes:
o each interest payment date for such series, class or tranche; and
o for any month in which no interest payment date occurs, the date in that month
corresponding numerically to the next interest payment date for that series, class or
tranche of notes, or in the case of a series, class or tranche of zero-coupon discount
notes, the expected principal payment date for that series, class or tranche; but
— for the month in which a series, class or tranche of notes is issued, the date
of issuance of such series, class or tranche will be the first Monthly
Interest Accrual Date for such series, class or tranche of notes;
— for the month next following the month in which a series, class or tranche of
notes is issued, the first day of such month will be the first Monthly
Interest Accrual Date in such next following month for such series, class or
tranche of notes;
— any date on which proceeds from a sale of receivables following an event of
default and acceleration of any series, class or tranche of notes are
deposited into the interest funding account for such series, class or tranche
of notes will be a Monthly Interest Accrual Date for such series, class or
tranche of notes;
— if there is no such numerically corresponding date in that month, then the
Monthly Interest Accrual Date will be the last Business Day of the month; and
186
— if the numerically corresponding date in such month is not a Business Day for
that class or tranche, then the Monthly Interest Accrual Date will be the next
following Business Day, unless that Business Day would fall in the following
month, in which case the Monthly Interest Accrual Date will be the last
Business Day of the earlier month.
"Monthly Principal Accrual Date" means for any outstanding series, class or tranche of notes:
o for any month in which the expected principal payment date occurs for such series, class or
tranche, such expected principal payment date, or if that day is not a Business Day, the
next following Business Day; and
o for any month in which no expected principal payment date occurs for such series, class or
tranche, the date in that month corresponding numerically to the expected principal payment
date for that series, class or tranche of notes (or for any month following the last
expected principal payment date, the date in such month corresponding numerically to the
preceding expected principal payment date for such series, class or tranche of notes); but
— following a Pay Out Event, the second Business Day following such Pay Out
Event shall be a Monthly Principal Accrual Date;
— any date on which prefunded excess amounts are released from any principal
funding subaccount and deposited into the principal funding subaccount of any
tranche of notes on or after the expected principal payment date for such
tranche of notes will be a Monthly Principal Accrual Date for such tranche of
notes;
— any date on which proceeds from a sale of receivables following an event of
default and acceleration of any series, class or tranche of notes are
deposited into the principal funding account for such series, class or tranche
of notes will be a Monthly Principal Accrual Date for such series, class or
tranche of notes;
— if there is no numerically corresponding date in that month, then the Monthly
Principal Accrual Date will be the last Business Day of the month; and
— if the numerically corresponding date in such month is not a Business Day, the
Monthly Principal Accrual Date will be the next following Business Day, unless
that Business Day would fall in the following month, in which case the Monthly
Principal Accrual Date will be the last Business Day of the earlier month.
"Net Servicing Fee" has the meaning described in "Master Trust II—Servicing Compensation and
Payment of Expenses" in this prospectus.
187
"Nominal Liquidation Amount Deficit" means, for any tranche of notes, the Adjusted Outstanding
Dollar Principal Amount minus the nominal liquidation amount of that tranche.
"Pay Out Events" means, for a series of investor certificates (including the collateral
certificate), the events described in "Master Trust II—Pay Out Events" in this prospectus and any other
events described in the related prospectus supplement.
"Performing" means, for any derivative agreement, that no payment default or repudiation by the
derivative counterparty has occurred and such derivative agreement has not been terminated.
"Permitted Investments" means:
o obligations of, or fully guaranteed by, the United States of America;
o time deposits or certificates of deposit of depository institutions or trust companies, the
certificates of deposit of which have the highest rating from Moody's, Standard & Poor's
and, if rated by Fitch, Fitch;
o commercial paper having, at the time of master trust II's or the issuing entity's
investment, a rating in the highest rating category from Moody's, Standard & Poor's and, if
rated by Fitch, Fitch;
o bankers' acceptances issued by any depository institution or trust company described in the
second clause above;
o money market funds which have the highest rating from, or have otherwise been approved in
writing by, each rating agency;
o certain open end diversified investment companies; and
o any other investment if each rating agency confirms in writing that such investment will
not adversely affect its then-current rating or ratings of the certificates or the notes.
"Portfolio Yield" for a month is the annual rate equivalent of:
o the sum of:
— Available Funds allocated to the BAseries for the related Transfer Date; plus
— the net investment earnings, if any, in the interest funding subaccounts for
notes of the BAseries on that Transfer Date; plus
— any amounts to be treated as BAseries Available Funds remaining in interest
funding subaccounts after a sale of receivables as described in
188
"Sources of Funds to Pay the Notes—Sale of Credit Card Receivables" in this prospectus;
plus
— any shared excess available funds from any other series of notes; plus
— the product of the servicer interchange allocated to the collateral
certificate (as described in "Master Trust II—Servicing Compensation and
Payment of Expenses" in this prospectus) for that month times a fraction, the
numerator of which is the Weighted Average Available Funds Allocation Amount
for the BAseries for that month and the denominator of which is the Weighted
Average Available Funds Allocation Amount for all series of notes for that
month; minus
— the excess, if any, of the shortfalls in the investment earnings on amounts in
any principal funding accounts for notes of the BAseries over the sum of
(i) any withdrawals of amounts from the accumulation reserve subaccount and
(ii) any additional finance charge collections allocable to the BAseries, in
each case, to cover the shortfalls as described under "Sources of Funds to Pay
the Notes—Deposit and Application of Funds for the BAseries—BAseries Available
Funds" in this prospectus; minus
— the sum, for each day during that month, of the product of the Investor
Default Amounts for that day times the percentage equivalent of a fraction,
the numerator of which is the Available Funds Allocation Amount for the
BAseries for that day and the denominator of which is the Available Funds
Allocation Amount for all series of notes for that day; divided by
o the Weighted Average Available Funds Allocation Amount of the BAseries for that month.
"Principal Allocation Amount" means, on any date during any month for any tranche, class or
series of notes (exclusive of (x) any notes within such tranche, class or series which will be paid in
full during such month and (y) any notes which will have a nominal liquidation amount of zero during
such month), an amount equal to the sum of (a) for any notes within such tranche, class or series of
notes in a note accumulation period, the sum of the nominal liquidation amounts for such notes as of the
close of business on the day prior to the commencement of the most recent note accumulation period for
such notes, and (b) for all other notes outstanding within such tranche, class or series of notes,
(i) the sum of the nominal liquidation amounts for such notes, each as of the close of business on the
last day of the immediately preceding month (or, for the first month for any such tranche of notes, the
initial dollar principal amount of such notes), plus (ii) the aggregate amount of any increases in the
nominal liquidation amount of such notes as a result of (x) the issuance of additional notes in an
outstanding series, class or tranche of notes, (y) the accretion of principal on discount notes of such
series, class or tranche, as applicable, or (z) the release of prefunded amounts (other than prefunded
amounts deposited during such month) for such series, class or tranche, as applicable, from a principal
funding subaccount, in each case during such month on or prior to such date.
189
"Principal Investor Percentage" means, for any date of determination, a percentage based on a
fraction, the numerator of which is the aggregate Principal Allocation Amounts for such date and the
denominator of which is the greater of (a) the total principal receivables in master trust II at the end
of the prior month and (b) the sum of the Investor Interests at the end of the prior month for all
outstanding master trust II series of investor certificates on such date of determination. However,
this Principal Investor Percentage will be adjusted for certain Investor Interest increases, as well as
additions and certain removals of accounts, during the related month. In calculating the Principal
Investor Percentage, the Investor Interest is the sum of (i) for each tranche of notes which is not
accumulating or paying principal, the Investor Interest at the end of the prior month and (ii) for each
tranche of notes which is accumulating or paying principal, the Investor Interest prior to any
reductions for accumulations or payments of principal.
"Qualified Institution" means either:
o a depository institution, which may include the indenture trustee or the owner trustee (so
long as it is a paying agent), organized under the laws of the United States of America or
any one of the states thereof or the District of Columbia, the deposits of which are
insured by the FDIC and which at all times has a short-term unsecured debt rating in the
applicable investment category of each rating agency; or
o a depository institution acceptable to each rating agency.
"Rapid Amortization Period" means for Series 2001-D the period beginning on and including the
pay out commencement date and ending on the earlier of the Series 2001-D termination date and the Master
Trust II Termination Date.
"Removal Date" means the date of any removal of receivables in accounts removed from the Master
Trust II Portfolio.
"Required Excess Available Funds" means, for any month, zero; provided, however, that this
amount may be changed if the issuing entity (i) receives the consent of the rating agencies and
(ii) reasonably believes that the change will not have a material adverse effect on the notes.
"Servicer Default" means any of the following events:
(a) failure by the servicer to make any payment, transfer or deposit, or to give
instructions to the master trust II trustee to make certain payments, transfers or deposits, on
the date the servicer is required to do so under the master trust II agreement or any
series supplement (or within the applicable grace period, which will not exceed 10 Business
Days);
(b) failure on the part of the servicer duly to observe or perform in any respect any
other covenants or agreements of the servicer which has a material adverse effect on the
certificateholders of any series issued and outstanding under master trust II and which
continues unremedied for a period of 60 days after written notice and continues to have a
material adverse effect on such certificateholders; or the delegation by the servicer of its
duties under the master trust II agreement, except as specifically permitted thereunder;
190
(c) any representation, warranty or certification made by the servicer in the master
trust II agreement, or in any certificate delivered pursuant to the master trust II agreement,
proves to have been incorrect when made which has a material adverse effect on the
certificateholders of any series issued and outstanding under master trust II, and which
continues to be incorrect in any material respect for a period of 60 days after written notice
and continues to have a material adverse effect on such certificateholders;
(d) the occurrence of certain events of bankruptcy, insolvency, conservatorship or
receivership of the servicer; or
(e) such other event specified in the accompanying prospectus supplement.
Notwithstanding the foregoing, a delay in or failure of performance referred to in clause (a) above for
a period of 10 Business Days, or referred to under clause (b) or (c) for a period of 60 Business Days,
will not constitute a Servicer Default if such delay or failure could not be prevented by the exercise
of reasonable diligence by the servicer and such delay or failure was caused by an act of God or other
similar occurrence.
"Substitution Date" means October 20, 2006.
"Transfer Date" means the Business Day immediately prior to the Distribution Date in each month.
"Transferor Interest" means the interest in master trust II not represented by the investor
certificates issued and outstanding under master trust II or the rights, if any, of any credit
enhancement providers to receive payments from master trust II.
"Transferor Percentage" means a percentage equal to 100% minus the aggregate investor
percentages and, if applicable, the percentage interest of credit enhancement providers, for all
series issued by master trust II that are then outstanding.
"Unallocated Principal Collections" means any amounts collected in respect of principal
receivables that are allocable to, but not paid to, Funding because the Transferor Interest is less than
the Minimum Transferor Interest.
"Weighted Average Available Funds Allocation Amount" means, for any month for any tranche,
class or series of notes, the sum of the Available Funds Allocation Amount for such tranche, class or
series, as applicable, as of the close of business on each day during such month divided by the actual
number of days in such month.
"Weighted Average Floating Allocation Investor Interest" means, for any month, the sum of the
aggregate Available Funds Allocation Amounts for all series of notes as of the close of business on each
day during such month divided by the actual number of days in such month.
"Weighted Average Principal Allocation Amount" means, for any period for any tranche, class or
series of notes, the sum of the Principal Allocation Amount for such series, class or tranche, as
applicable, as of the close of business on each day during such period divided by the actual number of
days in such period.
191
|
|
FIA Card Services, National Association
Sponsor, Servicer and Originator
BA Credit Card Funding, LLC
Transferor and Depositor
BA Credit Card Trust
Issuing Entity
BAseries
$400,000,000
Class A(2007-1) Notes
__________
PROSPECTUS SUPPLEMENT
__________
Underwriters
Banc of America Securities LLC
Barclays Capital
Citigroup
Credit Suisse
__________
You should rely only on the information contained or incorporated by reference in this prospectus
supplement and the prospectus. We have not authorized anyone to provide you with different information.
We are not offering the notes in any state where the offer is not permitted.
We do not claim the accuracy of the information in this prospectus supplement and the prospectus as of
any date other than the dates stated on their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as underwriters of the notes and
with respect to their unsold allotments or subscriptions. In addition, until the date which is 90 days
after the date of this prospectus supplement, all dealers selling the notes will deliver a prospectus
supplement and prospectus. Such delivery obligations may be satisfied by filing the prospectus
supplement and prospectus with the Securities and Exchange Commission.