AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 1997
REGISTRATION NO. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NATIONSCREDIT GRANTOR TRUST 1997-1
(Issuer with respect to the Certificates)
NATIONSCREDIT SECURITIZATION CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-2655744
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
225 E. JOHN CARPENTER FREEWAY
IRVING, TEXAS 75062-2731
(972) 506-5026
(Address, including zip code and telephone number, including area
code, of registrant's principal executive offices)
JOHN STOCKTON, ESQ.
NATIONSCREDIT MANAGEMENT CORPORATION
ONE CANTERBURY GREEN
STAMFORD, CONNECTICUIT 06901
(203) 352-4134
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
REED D. AUERBACH
STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC:
As soon as practicable on or after the effective date of this
Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. 9
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. :
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, please check
the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. 9
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Aggregate Amount of
To Be Registered Registered(1) Per Unit(2) Offering Price(2) Registration Fee
<S> <C> <C> <C> <C>
Nations Credit Grantor Trust Marine
Receivable-Backed Certificates...... $1,000,000 100.00% $1,000,000 $303.03
</TABLE>
(1) This Registration Statement also relates to market-making transactions that
will be made by NationsBanc Capital Markets, Inc., an affiliate of the
Registrant.
(2) Estimated solely for purposes of calculating the registration
fee.
-------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1993 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT CONTAINS (I) A PROSPECTUS RELATING TO A
PUBLIC OFFERING BY NATIONSCREDIT GRANTOR TRUST 1997-1 (THE "TRUST") OF
$______________ AGGREGATE PRINCIPAL AMOUNT OF ____% MARINE RECEIVABLE-BACKED
CERTIFICATES (THE "CERTIFICATES"); AND (II) CERTAIN PAGES OF A SECOND PROSPECTUS
TO BE USED IN CONNECTION WITH OFFERS AND SALES RELATING TO MARKET-MAKING
TRANSACTIONS IN THE CERTIFICATES BY AN AFFILIATE OF THE REGISTRANT. THE
PROSPECTUS RELATING TO THE CERTIFICATES FOLLOWS IMMEDIATELY AFTER THIS
EXPLANATORY NOTE. FOLLOWING SUCH PROSPECTUS ARE ALTERNATE PAGES OF THE
MARKET-MAKING PROSPECTUS RELATING TO THE CERTIFICATES. ALL OTHER PAGES OF THE
PUBLIC OFFERING PROSPECTUS FOR THE CERTIFICATES ARE ALSO TO BE USED FOR THE
MARKET-MAKING PROSPECTUS.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED ___________ __, 1997
NATIONSCREDIT GRANTOR TRUST 1997-1
$--------------
____% MARINE RECEIVABLE-BACKED CERTIFICATES
NATIONSCREDIT SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA
SERVICER
Each ____% Marine Receivable-Backed Certificate (the "Certificates") offered
hereby will represent a fractional undivided interest in the NationsCredit
Grantor Trust 1997-1 (the "Trust"). The Trust will be formed pursuant to a
Pooling and Servicing Agreement (the "Agreement") to be entered into among
NationsCredit Securitization Corporation, as Depositor (the "Depositor"),
NationsCredit Commercial Corporation of America, as Servicer (the "Servicer"),
and Bankers Trust Company, as Trustee and as Collateral Agent (in such
capacities, the "Trustee" and the "Collateral Agent", respectively). The
property of the Trust will include a pool of marine retail installment sale
contracts secured by new and used boats, boat motors and any accompanying boat
trailers (the "Receivables"), all payments received or due thereunder after
__________, 1997 (the "Cutoff Date"), security interests in the boats and marine
equipment financed thereby, an irrevocable surety bond (the "Surety Bond"),
guaranteeing the timely payment of interest and principal on the Certificates,
issued by Capital Markets Assurance Corporation (the "Surety Bond Issuer") and
certain other property. The Servicer will be responsible for servicing and
maintaining custody of the Receivables. The aggregate principal balance of the
Receivables (the "Pool Balance") as of the Cutoff Date was $______________ (the
"Initial Pool Balance").
Principal and interest to the extent of the Pass-Through Rate of ____% per annum
on the Certificates will be distributed to holders of the Certificates
("Certificateholders") as of the day prior to each Distribution Date (each a
"Record Date") on the 15th day of each month (or the next following business
day), beginning ______ 15, 1997 (each a "Distribution Date"). The final
scheduled Distribution Date on the Certificates will be on ___________ 15, ____
(the "Final Scheduled Distribution Date").
FOR INFORMATION CONCERNING THE RISKS OF AN INVESTMENT IN THE CERTIFICATES,
SEE "RISK FACTORS" COMMENCING ON PAGE 10.
---------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT
REPRESENT AN INTEREST IN OR OBLIGATION OF
NATIONSCREDIT SECURITIZATION CORPORATION, NATIONSCREDIT
COMMERCIAL CORPORATION OF AMERICA OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
PRICE TO Underwriting Proceeds to
PUBLIC(1) Discount Trust(1)(2)
<S> <C> <C> <C>
Per Certificate _______% _______% _______%
Total.................... $______________ $__________ $______________
(1) Plus interest calculated at the Pass-Through Rate from __________, 1997.
(2) Before deducting expenses payable by the Depositor estimated at $__________.
</TABLE>
---------------
The Certificates are offered subject to receipt and acceptance by the
Underwriters, to prior sale, and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Certificates will be made in book-entry form
through the facilities of The Depository Trust Company, on or about ___________,
1997.
NATIONSBANC CAPITAL MARKETS, INC. [ ]
---
___________, 1997
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Depositor has filed a Registration Statement under the Securities
Act of 1933, as amended (the "Securities Act") with the Securities and Exchange
Commission (the "Commission") with respect to the Certificates offered pursuant
to this Prospectus. For further information reference is made to the
Registration Statement and amendments thereof and exhibits thereto, which are
available for inspection without charge at the office of the Commission at 450
Fifth Street N.W., Washington, D.C. 20549; Natwest Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048; and Midwest Regional Office,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the
Registration Statement and amendments thereof and exhibits thereto can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates and electronically through the
Commission's Electronic Gathering and Retrieval System at the Commission's Web
Site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of
NationsCredit Grantor Trust 1997-1, pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained herein or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person to whom a copy
of this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by reference,
except the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to NationsCredit Commercial Corporation of America, 225 E.
John Carpenter Freeway, Irving, Texas 75062-2731, Attn: Lawrence Angelilli.
Telephone requests for such copies should be directed to NationsCredit
Commercial Corporation of America at (972) 506-5026.
REPORTS TO CERTIFICATEHOLDERS BY THE TRUSTEE
Bankers Trust Company, as Trustee for the Certificateholders under the
Pooling and Servicing Agreement, including the Standard Terms and Conditions of
the Agreement (the "Agreement"), dated as of __________, 1997, among the
Depositor, the Servicer, the Trustee and the Collateral Agent, will provide to
The Depository Trust Company ("DTC") for distribution to beneficial owners of
the Certificates (each a "Certificate Owner") monthly and annual reports
concerning the Receivables. See "The Certificates - Statements to
Certificateholders".
<PAGE>
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus. Reference is
made to the Index for the location herein of the definitions of certain
capitalized terms used herein.
Issuer:........................... NationsCredit Grantor Trust 1997-1 (the
"Trust") will be formed by the
Depositor. The assets of the Trust shall
consist of a pool of marine retail
installment sale contracts acquired
after __________, 199_ by NationsCredit
Commercial Corporation of America, a
wholly-owned subsidiary of NationsCredit
Corporation (the "Receivables"), all
payments received or due thereunder
after __________, 1997 (the "Cutoff
Date"), security interests in new and
used boats, boat motors and any
accompanying boat trailers financed
thereby (collectively, "Boats"), certain
bank accounts and the proceeds thereof,
the Surety Bond described below, and
certain other property. See "The Trust,"
"NationsCredit Commercial's Portfolio of
Marine Contracts" and "Certain Legal
Aspects of the Receivables - Lack of
Security Interests in Boats".
The Depositor shall cause the Trust to
purchase the Receivables either directly
or indirectly from NationsCredit
Commercial (as defined below) on or
prior to the date of issuance of the
Certificates (the "Closing Date").
Depositor:........................ NationsCredit Securitization Corporation
(the "Depositor"), a wholly- owned
subsidiary of NationsCredit Commercial
Corporation of America ("NationsCredit
Commercial"), which in turn is an
indirect wholly- owned subsidiary of
NationsCredit Corporation
("NationsCredit"). See "The Depositor".
Servicer:......................... NationsCredit Commercial (sometimes
referred to herein as the "Servicer"),
an indirect wholly-owned subsidiary of
NationsCredit. See "The Servicer".
Securities Offered:............... Each ____% Marine Receivable-Backed
Certificate (a "Certificate") represents
a fractional undivided interest in the
Trust. The Certificates will be issued
pursuant to the Agreement in book-entry
form and shall be available in
denominations of $1,000 and integral
multiples thereof.
The Certificates will be represented
initially by global certificates
registered in the name of Cede & Co., as
nominee of DTC. See "The Certificates -
General," "Book-Entry Registration"
and "Definitive Certificates".
Pass-Through Rate:................ ____% per annum, payable monthly at
one-twelfth of the annual rate.
Interest:......................... On each Distribution Date, the Trustee
shall provide for a pro rata
distribution to the Certificateholders
of record at the close of business on
the day prior to such Distribution Date
of the preceding calendar month (the
"Record Date") of interest in an
aggregate amount equal to one-twelfth of
the product of the Pass-Through Rate and
the Certificate Balance as of the close
of business on the prior Distribution
Date (or in case of the first Distribu-
tion Date, the Certificate Balance as of
the Closing Date). See "The Certificates
- Distributions on Certificates".
Principal:........................ On each Distribution Date, the Trustee
shall provide for a pro rata
distribution to the Certificateholders
of record as of the related Record Date
of all principal payments, including all
prepayments whether in full or in part,
received by the Servicer during the
preceding calendar month. See "The
Certificates - Distributions on
Certificates".
Certificate Balance:.............. The "Certificate Balance" shall equal,
initially, $___________ and thereafter
shall equal the initial Certificate
Balance reduced by all principal
distributions on the Certificates.
Distribution Date:................ The 15th day of each month (or if such
15th day is not a business day, the next
following business day) commencing
________, 1997.
Servicing Fee:.................... On each Distribution Date, the Servicer
shall receive a monthly fee equal to the
product of one-twelfth of [_________]
(the "Servicing Fee Rate") and the Pool
Balance as of the last day of the prior
Collection Period (or in the case of the
first Distribution Date, the Initial
Pool Balance), plus certain late fees,
prepayment charges and other
administrative fees or similar charges.
See "The Certificates - Distributions on
Certificates".
Surety Bond:...................... The Servicer has obtained, for the
benefit of the Trust, the Surety Bond,
draws on which will unconditionally
guarantee timely payments of interest
and principal on the Certificates and
the Servicing Fee to the extent
described herein. See "The Certificates
- The Surety Bond and Reserve Account".
Reserve Account:.................. The
Depositor will establish and maintain
with the Collateral Agent an account
(the "Reserve Account"). The Reserve
Account will not be part of the Trust,
but will be pledged to the Trustee for
the benefit of the Certificateholders
and the Surety Bond Issuer. On the
Closing Date an initial deposit will be
made into the Reserve Account and
thereafter on each Distribution Date,
the Reserve Account will be augmented
from payments in respect of Receivables
allocable to interest on deposit in the
Certificate Account with respect to the
preceding Collection Period after
distributions thereof in respect of the
Monthly Interest Payment, the Servicing
Fee (to the extent described herein),
the principal balance of any Defaulted
Receivables, Preference Amounts and any
amounts owing to the Surety Bond Issuer
under the Insurance and Reimbursement
Agreement, dated as of __________, 1997,
among the Surety Bond Issuer, the
Depositor and the Servicer (the
"Insurance Agreement") and the
Agreement, and not paid, until the
amount on deposit in the Reserve Account
is equal to a specified amount to be
determined by the Surety Bond Issuer and
the Rating Agencies (the "Specified
Reserve Account Requirement"). Amounts,
if any, on deposit in the Reserve
Account on any Distribution Date (after
giving effect to all distributions to be
made on such Distribution Date) in
excess of the Specified Reserve Account
Requirement will be released to the
Depositor. The Specified Reserve Account
Requirement and amounts on deposit or to
be deposited into the Reserve Account
may be reduced, including to zero, or
distributed in a different manner than
described herein with the consent of the
Surety Bond Issuer, as long as such
reduction or change does not cause a
downgrading or withdrawal of the
then-current rating of the Certificates
by a Rating Agency, but without prior
Certificateholders. Prospective
purchasers of the Certificates should
not rely on any amounts being deposited
into or available from the Reserve
Account in making a decision as to
whether to purchase the Certificates.
See "The Certificates - The Surety Bond
and Reserve Account" and "-
Distributions on Certificates".
Optional Purchase:................ The Servicer may purchase all the
Receivables in the Trust as of any
Record Date on which the Pool Balance
shall decline to 5% or less of the
Initial Pool Balance, at a purchase
price equal to the aggregate Purchase
Amount of the Receivables as of the
beginning of the Collection Period
related to such Record Date less the
amount of all collections on the
Receivables received by the Servicer
during such Collection Period; provided
however that the Servicer may not make
any such purchase on any date on which
there are outstanding draws under the
Surety Bond, which have not been
reimbursed to the Surety Bond Issuer.
See "The Certificates - Termination."
Surety Bond Issuer:...............
Capital Markets Assurance Corporation
("CapMAC" or the "Surety Bond Issuer"),
a monoline insurance company
incorporated under the laws of the State
of New York. See "The Surety Bond
Issuer".
Trustee:.......................... Bankers Trust Company, a New York
banking corporation (the "Trustee").
Lack of Perfection of Certain Security
Interests in Boats:.... Pursuant to the
Agreement, a representation and warranty
that each Receivable created a first
priority perfected security interest in
the Boat financed thereby in favor of
NationsCredit Commercial will be made by
the Servicer. In connection with the
sale of the Receivables, the security
interests of NationsCredit Commercial in
the Boats financed by the Receivables
will be assigned to the Trust. Due to
the administrative burden and expense,
the certificates of title, in the case
of Boats financed in states where
security interests in boats are subject
to certificate of title statutes, will
not be endorsed to the Trust and the
UCC-1 financing statements, in the case
of Boats financed in states where
security interests in boats are
perfected by filing a UCC-1 financing
statement, will not be amended to
reflect the assignment to the Trust. In
the absence of such procedures, the
Trust may not have a perfected security
interest in the Boats financed in
certificate of title or UCC states, but
the failure to make such endorsements,
filings or recordations will not affect
the validity of the original security
interest as against the Obligor in UCC
states. With respect to Boats licensed
in certificate of title states, the
validity of the security interest
against the original Obligor is less
clear. In the event that any
required payments under the Surety Bond
are not made and Certificateholders have
to rely on enforcement of their rights
under Receivables in default, this and
other factors, including various Federal
and state laws, depreciation in the
value of boats and a limited resale
market for boats, could limit the amount
which the Trust could realize to less
than the amount due on such Receivables.
See "Risk Factors - Lack of Perfection
of Interests in the Receivables" and
"Certain Legal Aspects of the
Receivables".
Tax Status:....................... The Trust will be treated as a grantor
trust for Federal income tax purposes,
and will not be subject to Federal
income tax. Certificateholders will
report their pro rata shares of all
income of the Trust, and, subject to
certain limitations in the case of an
individual Certificateholder, may deduct
their pro rata shares of reasonable
servicing and other fees of the Trust.
Because tax consequences may vary based
on the status or tax attributes of the
Certificate Owner, prospective investors
should consult their own tax advisors to
determine the Federal, state, local and
other tax consequences of the purchase,
ownership and disposition of
Certificates. See "Certain Federal
Income Tax Consequences".
ERISA Considerations:............. The Certificates may be purchased by
employee benefit plans that are subject
to the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), upon satisfaction of certain
conditions described herein. Any benefit
plan fiduciary considering the purchase
of the Certificates should, among other
things, consult with counsel in
determining whether all required
conditions have been satisfied. See
"ERISA Considerations".
Rating:........................... As a condition of issuance, the
Certificates shall be rated "Aaa" by
Moody's Investors Service, Inc.
("Moody's") and "AAA" by Standard &
Poor's Ratings Services, a Division of
The McGraw-Hill Companies ("S&P") (each
a "Rating Agency" and together, the
"Rating Agencies"). The ratings are
based primarily on the credit rating of
the Surety Bond Issuer and the value of
the underlying Receivables. Any rating
assigned to the Certificates by a Rating
Agency will reflect such Rating Agency's
assessment of the likelihood that
Certificateholders will receive the
payments of interest and principal
required to be made under the Agreement.
The ratings take into consideration the
characteristics of the Receivables and
the structural, legal and tax aspects
associated with the Certificates. The
ratings on the Certificates do not
represent any assessment of the
likelihood or rate of principal
prepayments. The ratings are not a
recommendation to purchase, hold or sell
Certificates, inasmuch as such rating
does not comment as to market price or
suitability for a particular investor.
There is no assurance that the ratings
will remain for any given period of time
or that the ratings will not be lowered
or withdrawn entirely by the Rating
Agencies if in their judgment
circumstances in the future so warrant.
See "Risk Factors - Limitation on Credit
Rating".
<PAGE>
RISK FACTORS
Prospective purchasers of the Certificates should consider carefully
the following discussion of certain risks associated with an investment in the
Certificates, as well as the other information set forth in this Prospectus.
LIMITED LIQUIDITY. There is currently no market for the Certificates.
NationsBanc Capital Markets, Inc. and [ ] (each, an "Underwriter") expect, but
are not obligated, to make a market in the Certificates. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide holders of the Certificates with liquidity of
investment or that it will continue for the life of the Certificates.
LACK OF PERFECTION OF INTERESTS IN THE RECEIVABLES. The sale of the
Receivables to the Trust is subject to the perfection requirements of the
Uniform Commercial Code (the "UCC") in effect in the States of [Texas and ____].
Pursuant to the Agreement, the Servicer will represent and warrant that the
Trust has been assigned a valid, first priority perfected security or ownership
interest in each Receivable conveyed to the Trust on the Closing Date. Moreover,
such representations and warranties relate solely to the Receivables themselves
and do not include the Boats that secure such Receivables. Certain liens,
including a lien arising prior in time to the recording and endorsement of a
preferred mortgage on a vessel, landlords', warehousemens' and materialmens'
liens and certain tax liens, may, as a matter of law, have priority over
perfected, first priority liens. In addition, if another person purchased any of
the Receivables for new value without knowledge of the Trust's security interest
and acquired possession of the Receivables in the ordinary course of such
person's business, the purchaser's interest would be superior to the interest of
the Trust. To facilitate servicing and to minimize administrative burden and
expense, the Servicer will maintain possession of all of the Receivables. If
NationsCredit Commercial sells and delivers any of the Receivables to another
party, there is a risk that the purchaser could acquire an interest in the
Receivables having priority over the Trust's interest. NationsCredit Commercial
will covenant that it will not sell, pledge, transfer, deliver or otherwise
dispose of any Receivable, except as provided under the Agreement. As provided
in the Agreement, any breach of this covenant by NationsCredit Commercial that
materially and adversely affects the Trust's interest in the Receivables and
remains uncured will result in an obligation of NationsCredit Commercial to
repurchase the affected Receivables. Pursuant to the Agreement, NationsCredit
Commercial or the Servicer will be obligated to purchase any Receivable if there
is a breach of a representation and warranty made by it that materially
adversely affects the Trust's interest in such Receivable, unless such breach is
cured as provided in the Agreement by the second Record Date following the
discovery of such breach.
LACK OF SECURITY INTERESTS IN BOATS. When originated, each Receivable
includes a security interest in the Boat financed thereby, such interest is
perfected under state law. The Servicer will make certain representations and
warranties to the Trust with respect to the perfection and priority of the
security interests of NationsCredit Commercial in the Boats, which
representations and warranties will be subject to any statutory liens arising
after the Closing Date. Due to the administrative burden and expense (estimated
by NationsCredit Commercial to be $_______, excluding associated labor costs) of
(i) endorsing the certificate of title of each Boat to reflect the Trust's
interest therein and delivering each such certificate of title to the Trustee
for filing (and the payment of related filing fees), in the case of Boats
licensed in states where security interests in boats are subject to certificate
of title statutes; and (ii) filing amendments to UCC-1 financing statements
relating to each Boat (and the payment of related filing fees) to reflect the
Trust's interest therein, in the case of Boats licensed in states where security
interests in boats are perfected by filing a UCC-1 financing statement; none of
such certificates of title will be endorsed, delivered and filed, or UCC-1
financing statements amended. In the absence of such procedures the Trust may
not have a perfected security interest in the Boats licensed in certificate of
title or UCC states, but the failure to make such endorsements, filings or
recordations will not affect the validity of the original security interest as
against the retail purchaser (the "Obligor") under a Receivable in UCC states.
With respect to Boats documented under certificate of title states, the validity
of the security interest against the Obligor is less clear. Approximately _____%
of the Initial Pool Balance (approximately $___________) relates to Receivables
which are billed to Obligors in certificate of title states and approximately
_____% of the Initial Pool Balance (approximately $__________) relates to
Receivables which are billed to Obligors in UCC states. Boats are not
necessarily registered in the states where Obligors are billed. Additionally,
because NationsCredit Commercial will not make the necessary endorsements,
filings or recordations, there is a substantial risk that the Trust will not
have a security interest in Boats registered in California, which represents
_____% of the Initial Pool Balance (based on the billing address of the
Obligors), and if the absence of such security interest is asserted by an
Obligor (or its representative), the Trust will not be entitled to any
liquidation proceeds with respect to the related Boat. As a result, the
Certificateholders may be subject to delays in payments and may incur losses
with respect to the Receivables if any required payments under the Surety Bond
are not made. Boats registered in California may not relate to the geographic
concentration of Receivables in California because the concentration of such
Receivables is based solely on the billing address of the related Obligor.
Moreover, statutory liens for repairs or unpaid taxes may have priority over
security interests in Boats perfected under state law.
RISK OF DEFENSES AND RISK RELATED TO REPOSSESSION AND LIQUIDATION.
Various Federal and state laws impose requirements and restrictions applicable
to the origination and servicing of the Receivables. Violations of certain of
those laws may give rise to claims and defenses by an Obligor against the
Servicer or the Trust. In addition, an Obligor may be entitled to assert against
the Servicer or the Trust claims and defenses which the Obligor has against the
seller of the Boat (the "Dealer"). The Servicer pursuant to the Agreement, will
represent and warrant as of the Closing Date that no such claims or defenses
have been asserted or threatened with respect to the Receivables and that all
requirements of applicable laws with respect to the Receivables have been
satisfied. State laws and court decisions also impose requirements and
restrictions relating to repossession sales of boats and on obtaining deficiency
judgments following such sales. Even if a Boat securing a Receivable is
successfully repossessed and sold, the full amount due on the Receivable may not
be realized because of depreciation of or damage to the Boat or because the
resale value of the Boat may vary significantly due to the limited markets for
used boats, seasonal factors and other economic and social factors. In sum, the
Trust may not realize the full amount due on a Receivable because of the failure
to endorse the certificate of title or to amend a UCC-1 financing statement, as
the case may be, or the application of requirements and restrictions on
repossession sales and deficiency judgments, or because of depreciation, damage
or loss of a Boat, the application of Federal and state bankruptcy and
insolvency laws, or other factors. As a result, the Certificateholders may be
subject to delays in payments and losses if any required payments under the
Surety Bond are not made. See "Certain Legal Aspects of the Receivables".
CONCENTRATION RISK. Based on the Initial Pool Balance, _____% and
_____% of the Receivables are billed to Obligors with billing addresses in
California and Texas, respectively. An economic downturn in California and/or
Texas may have an adverse effect on the ability of Obligors in such states to
meet their payment obligations under the Receivables. Because of the
concentration of Receivables originated in these states, losses on the related
Receivables may be higher than would be the case if there were more geographic
diversification among the Receivables.
PREPAYMENT CONSIDERATIONS. Full or partial prepayments on the
Receivables will have the effect of reducing the weighted average life of the
Certificates, while delinquencies under the Receivables by the Obligors and
extensions of Receivables by the Servicer will have the effect of increasing the
weighted average life (but not the final maturity) of the Certificates. The
Receivables may be prepaid at any time without penalty. Prepayments may result
from, among other things, the sale, refinancing, insured loss or other
disposition of a Boat, the Receivables becoming Defaulted Receivables, the
purchase of Receivables due to material breaches of NationsCredit Commercial's
or the Servicer's representations and warranties or the exercise by the Servicer
of its option to purchase all the Receivables as of any Record Date on which the
Pool Balance shall decline to 5% or less of the Initial Pool Balance. The actual
maturity of the Certificates could occur earlier than the Final Scheduled
Distribution Date since the rate of payments on the Certificates will depend on
the rate of payments on the Receivables. No prediction can be made as to the
actual rate of prepayments in respect of the Receivables. Prepayments are
affected by numerous social, economic and other factors, including, for example,
the seasonal nature of the marine retail financing business. Certificateholders
will bear all reinvestment risk resulting from prepayment of the Receivables.
See "The Receivables Pool - Maturity and Prepayment Assumptions".
<PAGE>
COMMINGLING RISK. While NationsCredit Commercial or an entity (a) into
which NationsCredit Commercial is merged or consolidated, (b) which succeeds to
the properties and assets of the Servicer substantially as a whole or (c) more
than 50% of the voting stock of which is owned by NationsBank Corporation, which
has executed an agreement of assumption to perform the obligations of the
Servicer under the Insurance Agreement and the Agreement, is the Servicer, the
Servicer may commingle collections held by it and may use such funds for its own
purposes prior to the business day preceding each Distribution Date provided
that all of the following conditions are satisfied: (i) there exists no Event of
Default (as described below), (ii) if the Servicer does not have a short term
debt rating or deposit rating, as applicable, of at least A-1 from S&P and P-1
from Moody's, a guaranty, letter of credit, surety bond or other similar
instrument is issued covering collections held by NationsCredit Commercial or
such successor servicer, which is acceptable to the Rating Agencies and the
Surety Bond Issuer and issued by an entity which has a short term debt or
deposit rating, of at least A-1 from S&P and P-1 from Moody's, and (iii) the
Servicer, the Trustee, the Depositor or the Surety Bond Issuer shall not have
received notice from S&P or Moody's that failure to separate such funds will
result in a reduction or withdrawal of the then current rating on the
Certificates by either S&P or Moody's. If all the conditions contained in the
preceding sentence are not met, the Servicer will deposit all payments on
Receivables (from whatever source) and all proceeds of Receivables collected
during each Collection Period into the Certificate Account not later than the
second business day after receipt. In the event that the Servicer commingles
collections, the Certificateholders will be subject to the risk of loss of such
collections, including as a result of the bankruptcy or insolvency of the
Servicer. It is anticipated that on the Closing Date NationsBank Corporation
will furnish a guaranty that will permit NationsCredit Commercial to commingle
funds.
LIMITATION ON CREDIT RATING. As a condition of issuance, the
Certificates shall be rated "Aaa" by Moody's and "AAA" by S&P. The ratings are
based primarily on the credit rating of the Surety Bond Issuer and the value of
the underlying Receivables. Any rating assigned to the Certificates by a Rating
Agency will reflect such Rating Agency's assessment of the likelihood that
Certificateholders will receive the timely payments of interest and principal
required to be made under the Agreement. The ratings take into consideration the
Surety Bond, the characteristics of the Receivables and the structural, legal
and tax aspects associated with the Certificates. The ratings on the
Certificates do not represent any assessment of the likelihood or rate of
principal prepayments. The ratings are not a recommendation to buy, sell or hold
securities and there is no assurance that the ratings will remain for any given
period of time or that the ratings will not be lowered or withdrawn entirely by
the Rating Agencies if in their judgment circumstances in the future so warrant.
THE TRUST
The Depositor will establish the Trust prior to the Closing Date and
cause the Trust to indirectly purchase the Receivables from NationsCredit
Commercial with the proceeds of the sale of the Certificates. The Servicer will
initially service the Receivables pursuant to the Agreement, and will be
compensated for acting as the Servicer. See "The Certificates - Servicing
Compensation". To facilitate servicing and to minimize any administrative burden
and expense, the Servicer will be appointed custodian for all the Receivables by
the Trustee, but will not stamp the Receivables to reflect the sale and
assignment of the Receivables to the Trust, nor amend the UCC-1 financing
statements relating to the Boats nor amend the certificates of title of the
Boats. NationsCredit Commercial will, however, indicate in its computer records
that the Receivables have been sold and assigned to the Trust. See "Risk Factors
C Lack of Security Interests in Boats," "Lack of Perfection of Interests in
Receivables" and "Certain Legal Aspects of the Receivables". The Servicer has
obtained, for the benefit of the Trust, the Surety Bond, draws on which will
guarantee timely payments of interest and principal to the Certificateholders
and under certain circumstances the Servicing Fee. See "The Certificates - The
Surety Bond and Reserve Account" and Distributions on Certificates."
Each Certificate represents a fractional undivided interest in the
Trust. The assets of the Trust include the Receivables, and all payments
received thereunder, in the case of simple interest Receivables and all payments
due thereunder, in the case of precomputed Receivables, after the Cutoff Date.
The Receivables were originated by the Dealers and purchased by NationsCredit
Commercial pursuant to agreements with the Dealers ("Dealer Agreements") are
serviced by the Servicer, and evidence indirect financings made available to the
Obligors. During the term of the Agreement, the Servicer may not substitute any
other marine retail installment sale contract for any Receivable sold to the
Trust. The assets of the Trust also include (i) such amounts as from time to
time may be held in one or more trust accounts (collectively, the "Certificate
Account") which will be established and maintained by the Servicer pursuant to
the Agreement, as described below; (ii) the interest of NationsCredit Commercial
in the security interests in the Boats; (iii) the Surety Bond; (iv) the interest
of the Servicer in any proceeds from recourse to Dealers on Receivables; (v) the
interest of the Servicer in any proceeds from claims on physical damage, credit
life or disability insurance policies covering the Boats or the Obligors, as the
case may be; (vi) any property that shall have secured a Receivable and that
shall have been acquired by the Trustee and (vii) the proceeds of all of the
foregoing.
NATIONSCREDIT COMMERCIAL'S PORTFOLIO OF MARINE CONTRACTS
GENERAL
The following describes certain general origination, servicing and
collection policies and procedures applied by NationsCredit Commercial with
respect to marine retail installment sale contracts ("marine contracts"). Only
marine contracts that were purchased by NationsCredit Commercial from Dealers
subsequent to [ ] (the "Marine Contract Portfolio") will be included in the
portfolio of marine contracts sold to the Trust.
NationsCredit Commercial purchases marine contracts directly or
indirectly from [ ] retail boat dealers or finance subsidiaries of manufacturers
who regularly initiate and sell contracts to NationsCredit Commercial pursuant
to the terms of approved dealer agreements. NationsCredit Commercial services
such contracts. No marine contract is purchased from a dealer until the credit
application from the obligor is submitted to NationsCredit Commercial and is
reviewed, evaluated, and approved by one of NationsCredit Commercial's credit
analysts in accordance with NationsCredit Commercial's underwriting policies and
procedures. NationsCredit Commercial's evaluation of credit applicants is
intended to assess the applicant's willingness and ability to repay the amounts
due on the contract and the adequacy of the boat (which usually includes the
boat, motor and trailer) or, in a small minority of cases, the boat motor or
trailer by itself, as collateral (references to boats herein include the boat
motor and trailer with respect to each boat, and the separately financed boat
motors or trailers, unless the context otherwise indicates).
The credit application, which requests the liabilities, income, and
credit and employment history of the applicant, is reviewed for completeness and
compliance with NationsCredit Commercial's credit guidelines for marine
contracts purchased from Dealers. In response to recessionary forces that
adversely impacted marine collateral values in 1990, 1991, and 1992,
NationsCredit Commercial (as its predecessor company) instituted tighter
underwriting criteria in 1992 which included an increase in the down payment
requirements on both new and used boats. Also, in 1992 NationsCredit Commercial
completed a process of reducing the number of its offices and the number of its
employees with credit authority as a means to improve consistency and control
over credit approvals. In December of 1993, NationsCredit Commercial instituted
an upfront scoring system which has resulted in more consistent underwriting
standards and has provided more management control over decisions effecting
credit approvals. NationsCredit Commercial's current guidelines, which are based
on credit scoring criteria, are intended to provide a basis for credit
decisions, but are not meant to supersede the credit judgment of the credit
analysts in both approval and denial decisioning. Consequently, certain marine
contracts may not comply with all NationsCredit Commercial guidelines, but will
be within prescribed limits for which exceptions to the guidelines are
permitted. In all cases, NationsCredit Commercial will review a current credit
report issued by an independent credit reporting agency, and will generally
confirm income and employment data, on each applicant.
Each marine contract arises from a credit sale of a new or used boat.
Approximately [__%] (by number) of all marine contracts purchased by
NationsCredit Commercial under approved Dealer Agreements relate to the credit
sale of a new boat. In most cases, NationsCredit Commercial will not purchase a
marine contract relating to a new boat if the amount financed under the marine
contract exceeds the sum of (a) 110% of the manufacturer's invoice price of the
boat to the dealer, plus (b) the cost to the customer of any dealer-installed
options, extended warranty plans and credit life and disability insurance, less
a 10% downpayment by the obligor.
NationsCredit Commercial will not purchase a marine contract secured
by a used boat if the amount financed under the marine contract exceeds 100% of
the "NADA (National Automobile Dealers Association) Wholesale Price" less a down
payment by the obligor of at least 10%. It is the policy of NationsCredit
Commercial not to purchase a used boat marine contract if the amount financed
under the marine contract exceeds the total sales price of the boat to the
obligor. While NationsCredit Commercial reviews the sales price of each used
boat financed, resale prices for used boats vary significantly based upon
individual circumstances, and there can be no assurance that a ready secondary
market will exist for any used boat.
Each dealer from which NationsCredit Commercial purchases marine
contracts has been selected by NationsCredit Commercial based on such dealer's
financial and operating history. Such dealers have made representations and
warranties to NationsCredit Commercial with respect to the marine contracts and
the security interests in the boats relating thereto. These representations and
warranties do not relate to the creditworthiness of the obligors or the
collectibility of the contracts. NationsCredit Commercial has a right of
recourse against such dealers who breach such representations and warranties to
require them to repurchase such marine contracts. In determining whether to
exercise such right, NationsCredit Commercial considers the prior performance of
the Dealer and other business and commercial considerations. NationsCredit
Commercial is obligated to enforce such rights with respect to Dealer Agreements
relating to the Receivables only to the extent of such customary practices.
Once NationsCredit Commercial has purchased a marine contract from a
dealer it may, on a case-by-case basis, permit an extension with respect to the
due date of the marine contract. NationsCredit Commercial's policy sets certain
guidelines on such extensions which include the following: (a) generally a
marine contract may not be extended during the first six months of its term; (b)
each extension of a marine contract shall be for a period not to exceed one
month; (c) a marine contract may not be extended more than three times in any
twelve-month period; and (d) a marine contract may not be extended for more than
fourteen one-month periods during its life. Pursuant to the Agreement, the
Servicer will not be permitted to extend, rewrite or otherwise modify the
payment terms of a Receivable; provided, however, that the Servicer may, with
certain limitations set forth in the Agreement, extend a Receivable for credit
related reasons that would be acceptable to the Servicer with respect to
comparable marine contracts that it services for itself and others and in
accordance with its customary standards, policies and procedures if the
cumulative extensions with respect to any Receivable shall not cause the term of
such Receivable to extend beyond _______________.
Extensions represent the deferral of a monthly payment until the month
after the final maturity date of the marine contract. The fee payable by the
obligor which will effect such a deferral varies by state in accordance with
each state's applicable laws. Such fees, if any, will be included as part of the
Trust's assets; provided however that the Trustee will agree to hold any such
amounts for the benefit of the Servicer and any payments received with respect
thereto will not be passed through to Certificateholders, but will instead be
promptly remitted to the Servicer upon receipt.
NationsCredit Commercial will also permit one deferral known as a
"delinquency cure" over the life of a marine contract. A delinquency cure will
permit the obligor to postpone the due date of past-due monthly installments of
principal and interest when three consecutive regularly scheduled payments are
received on a timely basis, and will extend the final maturity date of the
marine contract by the number of months equal to the number of payments
deferred, unless the extended final maturity date goes beyond _______________.
NationsCredit Commercial does not receive a fee from the obligor for a
delinquency cure.
Collection activities with respect to delinquent contracts are
performed in a centralized environment by collection personnel and under current
practices, collection personnel generally initiate contact, by mail, with
obligors whose marine contracts have become more than five days delinquent. In
the event that such mail contact fails to resolve the delinquency, NationsCredit
Commercial generally begins to contact the obligor periodically by telephone
after the marine contract becomes ten days delinquent. After a marine contract
has been delinquent for 60 days, a process to repossess the collateral is
commenced. After repossession, the obligor generally has an additional 15 days
(subject to variance under state law) to satisfy the obligor's obligations under
the marine contract before the boat is resold.
Losses may occur in connection with delinquent contracts and can arise
in several ways, such as the inability of NationsCredit Commercial to locate the
boat to be repossessed or costs incurred by NationsCredit Commercial in
effecting repossession. NationsCredit Commercial uses the following rules for
recognizing losses on delinquent marine contracts: within the first 91 days that
a marine contract becomes past due, the fair market value of the boat is
reviewed and established for management purposes, to determine the appropriate
carrying value, defined as the NADA Wholesale Price less an appropriate sales
commission, or the manager's assessment of the collateral value, whichever is
less. At the time of repossession, the boat is again evaluated for its
collateral value, and the status of the account is updated to reflect this
valuation. In the event that the valuation of the boat at the time of
repossession is less than the total balance outstanding on the marine contract,
then a charge-off of that difference is incurred at that time. If a repossessed
boat that secures a marine contract with a balance of $10,000 or less is not
resold within 90 days of repossession or within 180 days, in the case of a
marine contract with a balance of greater than $10,000, the entire carrying
value of the boat will be charged-off, and the marine contract will be written
off in its entirety. If a repossessed boat is resold within 90 or 180 days, as
the case may be, of repossession for less than the carrying value of the boat,
then a charge-off of such difference is incurred at that time. When the boat is
eventually resold, the proceeds from the sale, less the expenses associated with
collection, repossession, and sale, where permitted by law, will represent a
recovery on the final disposition of the marine contract. Upon repossession of
the boat, any deficiency remaining will be pursued to the extent deemed
practical and to the extent permitted by law. The charge-off policies and the
servicing and collection practices of NationsCredit Commercial may change over
time in accordance with NationsCredit Commercial's business judgment.
The marine contract requires the obligor to maintain insurance
covering physical damage to the boat. Such insurance typically names
NationsCredit Commercial as loss payee and insures the boat against loss or
damage due to fire, theft and other physical damage and marine risks. Since
obligors may choose their own insurers to provide the required coverage, the
specific terms and conditions of their policies may vary. In the event an
obligor does not maintain adequate insurance coverage and the outstanding
balance and months remaining to maturity on the marine contract are greater than
$10,000 and 6 months, respectively, NationsCredit Commercial will purchase a
collateral protection insurance policy on behalf of the obligor. The obligor is
billed monthly by NationsCredit Commercial for such policy. Amounts payable by
the obligor in any such circumstance will be remitted to the Servicer by the
Trustee. NationsCredit Commercial's practices regarding the purchase of
collateral protection insurance on behalf of obligors may change over time in
accordance with changes in applicable law or its business judgment.
In accordance with NationsCredit Commercial's normal practices and
procedures, payments by or on behalf of obligors are allocated first to late
payment fees and extension fees, second to interest accrued on the marine
contracts, third to principal due on the marine contracts, fourth to insurance
premiums and certain other amounts due on physical damage insurance policies,
fifth to administrative charges, if any, and sixth to the remaining principal
balance. Late payment and extension fees, if any, and other administrative fees
will be recorded to the credit of the Servicer.
The marine contracts generally provide for equal monthly payments
which amortize the full amount of the marine contracts in accordance with a
pre-determined amortization schedule. The first payment can be deferred beyond
forty-five days under certain specialized programs. Generally, the marine
contracts have an original term of up to 15 years. The marine contracts can be
prepaid at any time without prepayment penalty. All the marine contracts are
either simple interest or precomputed contracts. As payments are received under
a simple interest contract, the finance charges accrued to date are paid first
and the remaining amount of the payment is applied to reduce the unpaid amount
financed. Accordingly, if an obligor pays the fixed monthly payment on a simple
interest contract in advance of the due date, the portion of the payment
allocable to finance charges for the period since the preceding payment will be
less than it would be if the payment were made on the due date, and the portion
of the payment allocable to reduce the amount financed will be correspondingly
greater. Conversely, if the obligor pays the fixed monthly payment on a simple
interest contract after its due date, the portion of the payment allocable to
finance charges for the period since the last payment will be greater than it
would be if the payment were made on the due date, and the portion of the
payment allocable to reduce the amount financed will be correspondingly smaller.
Adjustments are made in the amount of the final scheduled payment with respect
to each simple interest contract to reflect the larger or smaller allocations of
payments to the amount financed under the contract as a result of early or late
payments. On a precomputed contract the allocation of principal and interest is
consistently applied to the obligor's balance in accordance with a
pre-determined schedule regardless of when the payment is received. A late fee
may be charged on a precomputed contract for each payment received following a
grace period after the due date. Any such late fee will be remitted to the
Servicer by the Trustee. Precomputed contracts that are not paid in full by
their final scheduled payment date typically will accrue finance charges
thereafter until payment in full, but not necessarily at the contract annual
percentage rate ("APR").
DELINQUENCY, REPOSSESSION AND LOSS EXPERIENCE
The tables set forth below indicate the delinquency, repossession and
loss experience for each of the last three calendar years and for each of the
three months ended March 31, 1997 and March 31, 1996, for NationsCredit
Commercial's Marine Contract Portfolio and the Receivables. The delinquency
experience and credit loss/repossession experience percentages may be affected
by the size and relative lack of seasoning of the marine contracts originated in
1995 and 1996. Accordingly, the information should not be considered as a basis
for assessing the likelihood, amount or severity of delinquency or losses on the
Receivables in the future and no assurances can be given that the delinquency,
repossession and loss experience presented in the tables below will be
indicative of such experience of the Receivables.
<TABLE>
<CAPTION>
DELINQUENCY, REPOSSESSION AND LOSS EXPERIENCE FOR THE MARINE CONTRACT PORTFOLIO
Delinquency Experience
(Dollars in Thousands)
As of March 31 As of December 31
-----------------------------------------------------------------------------
1997 1996 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number Number Number Number Number
of of of of of
Contracts Amount Contracts Amount Contracts Amount Contracts Amount Contracts Amount
Portfolio.......
Period of
Delinquency
30-59 Days......
60-89 Days......
90 Days or More..
Total Delinquencies
Total Delinquencies
as a Percent
of the Portfolio
</TABLE>
<TABLE>
<CAPTION>
CREDIT LOSS/REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
QUARTER ENDED Year Ended
MARCH 31 December 31
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
Average Portfolio Balance During the Period.............................
Average Number of Marine Contracts Outstanding
During the Period.....................................................
Number of Repossessions Made as a Percent of
Average Number of Marine Contracts Outstanding........................
Collateral Write-Down Amount(1).........................................
(Gain)/Loss Upon Liquidation(2).........................................
Net Losses..............................................................
Net Losses as a Percent of Average Amount Outstanding...................
</TABLE>
- ----------
(1) Includes (i) write downs of marine contracts to fair market value of the
collateral at the time of repossession and charged-off marine contract balances
related to repossessed collateral not sold within 90 days of repossession, which
was NationsCredit Commercial's charge-off policy prior to ________ __, 1996 and
(ii) write downs of marine contracts to fair market value of the collateral at
time of repossession and charged-off marine contract balances relating to
repossessed collateral with balances of $10,000 or less and not sold within 90
days of repossession or within 180 days of repossession, in the case of
Receivables with balances of greater than $10,000, which has been NationsCredit
Commercial's charge-off policy since ________ __, 1996.
(2) Consists of the aggregation of additional losses or gains recognized when
repossessed collateral is sold.
DELINQUENCY/LOSS EXPERIENCE FOR THE RECEIVABLES
<TABLE>
<CAPTION>
Delinquency Experience
(Dollars in Thousands)
As of March 31 As of December 31
----------------------------------------------------------------------------
1997 1996 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number Number Number Number Number
of of of of of
Contracts Amount Contracts Amount Contracts Amount Contracts Amount Contracts Amount
Portfolio........
Period of
Delinquency
30-59 Days.......
60-89 Days.....
90 Days or More....
Total Delinquencies
Total Delinquencies
as a Percent
of the Portfolio
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CREDIT LOSS/REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
QUARTER ENDED Year Ended
MARCH 31 December 31
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
Average Portfolio Balance During the Period.............................
Average Number of Marine Contracts Outstanding
During the Period.....................................................
Number of Repossessions Made as a Percent of
Average Number of Marine Contracts Outstanding........................
Collateral Write-Down Amount(1).........................................
(Gain)/Loss Upon Liquidation(2).........................................
Net Losses..............................................................
Net Losses as a Percent of Average Amount Outstanding...................
</TABLE>
- ----------
(1) Includes (i) write downs of marine contracts to fair market value of the
collateral at the time of repossession and charged-off marine contract balances
related to repossessed collateral not sold within 90 days of repossession, which
was NationsCredit Commercial's charge-off policy prior to ________ __, 1996 and
(ii) write downs of marine contracts to fair market value of the collateral at
time of repossession and charged-off marine contract balances relating to
repossessed collateral with balances of $10,000 or less and not sold within 90
days of repossession or within 180 days of repossession, in the case of
Receivables with balances of greater than $10,000, which has been NationsCredit
Commercial's charge-off policy since ________ __, 1996.
(2) Consists of the aggregation of additional losses or gains recognized when
repossessed collateral is sold.
<PAGE>
THE RECEIVABLES POOL
The Receivables include marine contracts from NationsCredit
Commercial's Marine Contract Portfolio meeting the following criteria as of the
Cutoff Date: (i) each Receivable provides for level monthly payments (provided
that the payment in the first or last month in the life of the Receivable may be
minimally different from the level payment) that fully amortize the principal
amount of such Receivable (as long as each scheduled payment is made when due)
by maturity and pay interest at the APR if in the case of simple interest
Receivables, each payment is made on its scheduled due date; (ii) each
Receivable provides for, in the event that such contract is prepaid, a
prepayment that fully pays the Principal Balance and includes accrued but unpaid
interest through the date of prepayment in an amount at least equal to the APR;
(iii) each Receivable has a fixed APR of not less than ____% and not greater
than _____%; (iv) each Receivable has an original maturity of not more than
[180] months; (v) each Receivable has a remaining maturity of at least [2 months
and not more than 180 months]; (v) each Receivable has a remaining principal
balance of not greater than [ ]; (vi) each Receivable is denominated in U.S.
dollars in the United States; (vii) with respect to each Receivable, the related
Obligor has obtained physical damage insurance covering the Boat and such
Obligor is required under the terms of the Receivable to maintain such
insurance; (viii) each Receivable constitutes "chattel paper" under the UCC; and
(ix) no Boat related to any Receivables shall be required to be documented under
the Ship Mortgage Act of 1920, as amended (the "Ship Mortgage Act").
Approximately _____% of the number of the Receivables, constituting
approximately _____% of the Initial Pool Balance, represents the financing of
new Boats; the remainder of the Receivables represent the financing of used
Boats. Approximately _____% of the number of Receivables, constituting _____% of
the Initial Pool Balance, are simple interest contracts. Approximately _____% of
the number of Receivables, constituting _____% of the Initial Pool Balance are
precomputed contracts. Approximately __% of the number of Receivables
constituting approximately __% of the Initial Pool Balance are related to Boats
which have been repossessed by the Servicer. Approximately ______% of the number
of Receivables constituting _______% of the Initial Pool Balance are 30 to 59
days overdue. Approximately ____% of the number of Receivables constituting
____% of the Initial Pool Balance are 60 to 89 days overdue. Approximately ___%
of the number of Receivables constituting ____% of the Initial Pool Balance are
90 or more days overdue.
<PAGE>
COMPOSITION OF THE RECEIVABLES
<TABLE>
<CAPTION>
Aggregate Average
Weighted Principal Number of Principal Weighted Average Weighed Average
Average APR Balance Receivables Balance Original Term Remaining Term
<S> <C> <C> <C> <C> <C>
_____% $______________ ______ $_________ ___ mos. ___ mos.
</TABLE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES
<TABLE>
<CAPTION>
Percent of
Total Aggregate Percent of
Number of Number of Principal Balance Initial Pool
State(1) Receivables Receivables(2) as of Cutoff Date Balance(2)
<S> <C> <C> <C> <C>
Other..............................
Total......................... ______ 100.00% ___________ 100.00%
======
</TABLE>
- ----------
(1) Based on the current billing addresses of the Obligors on the Receivables.
(2) The sum of the individual percentages may not add to 100% because of
rounding.
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF THE RECEIVABLES BY CONTRACT RATE
Aggregate
Percent of Principal
Total Balance Percent of
Number of Number of as of Cutoff Initial Pool
Contract Rate Receivables Receivables(1) Date Balance(1)
<S> <C> <C> <C> <C>
Total ______ 100.00% $____________ 100.00%
======
</TABLE>
- ----------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
<PAGE>
DISTRIBUTION BY ORIGINAL TERM
<TABLE>
<CAPTION>
Aggregate
Percent of Principal
Total Balance Percent of
Number of Number of as of Cutoff Initial Pool
Original Term (months) Receivables Receivables(1) Date Balance(1)
<S> <C> <C> <C>
Total............................ 100.00% $ 100.00%
</TABLE>
- ----------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
<PAGE>
DISTRIBUTION BY REMAINING TERM
<TABLE>
<CAPTION>
Aggregate
Percent of Principal
Total Balance Percent of
Number of Number of as of Cutoff Initial Pool
Remaining Term (months) Receivables Receivables(1) Date Balance(1)
<S> <C> <C> <C> <C>
Total.............................. 100.00% $ 100.00%
======
</TABLE>
- ----------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE ORIGINAL RECEIVABLE PRINCIPAL BALANCES
Aggregate
Principal
Percent of Total Balance Percent of
Number of Number as of Cutoff Initial Pool
Range Receivables of Receivables(1) Date Balance(1)
<S> <C> <C> <C> <C>
Total................. 100.00% $ 100.00%
======
</TABLE>
- ----------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE REMAINING RECEIVABLE PRINCIPAL BALANCES
Aggregate
Principal
Percent of Total Balance Percent of
Number of Number As of Cutoff Initial Pool
Range Receivables of Receivables(1) Date Balance(1)
<S> <C> <C> <C>
Total................ 100.00% $ 100.00%
======
</TABLE>
- ----------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
DISTRIBUTION BY AGE OF RECEIVABLES
<TABLE>
<CAPTION>
Aggregate
Principal
Percent of Total Balance Percent of
Number of Number of As of Cutoff Initial Pool
Months Since Origination Receivables Receivables(1) Date Balance(1)
<S> <C> <C> <C>
Total................... 100.00% $ 100.00%
======
</TABLE>
- ----------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
<PAGE>
DISTRIBUTION BY QUARTER OF ORIGINATION
<TABLE>
<CAPTION>
Percent of
Total Aggregate Percent of
Number of Number of Principal Balance Initial Pool
Origination Quarter (quarter/year) Receivables Receivables(1) as of Cutoff Date Balance(1)
- ----------------------------------
<S> <C> <C> <C>
Total......................... 100.00% $ 100.00%
=====
</TABLE>
- ----------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
<TABLE>
<CAPTION>
AGGREGATE NEW AND USED REMAINING RECEIVABLE PRINCIPAL BALANCES
Percent of
Total Aggregate Percent of
Number of Number of Principal Balance Initial Pool
New vs. Used Receivables Receivables(1) As of Cutoff Date Balance(1)
- ------------
<S> <C> <C> <C> <C>
New..................
Used.................
Total............. 100.00% $ 100.00%
======
- ----------
</TABLE>
(1) The sum of the individual percentages may not add to 100% because of
rounding.
<PAGE>
MATURITY AND PREPAYMENT ASSUMPTIONS
Full and partial prepayments on the Receivables will have the effect
of reducing the weighted average life of the Certificates, while delinquencies
by Obligors under the Receivables, as well as extensions and deferrals on the
Receivables, will have the effect of increasing the weighted average life of the
Certificates. The Receivables may be prepaid at any time without penalty and the
mandatory prepayment of a Receivable may result from, among other things, the
sale, insured loss or other disposition of the Boat financed by the Receivable
or the Receivable becoming a Defaulted Receivable. While no assurance can be
given as to the rate of prepayments or as to whether there will be a significant
amount of prepayments, NationsCredit Commercial has experienced substantial
levels of prepayments on its portfolios of marine contracts in the past. Based
on the historical performance of NationsCredit Commercial's portfolio of marine
contracts, the average effective term of such contracts is approximately
one-third of their scheduled contractual term. NationsCredit Commercial's
historical prepayment experience on its portfolio of marine contracts has also
reflected seasonal variations due to the seasonal nature of the retail marine
finance business, with higher levels of prepayments in the beginning of the
boating season during the spring and early summer. Although NationsCredit
Commercial expects significant levels of prepayments to continue, no assurance
can be given as to the level or timing of prepayments because prepayments are
affected by numerous social, economic and other factors and because historical
prepayment experience is not necessarily indicative of future prepayments.
Certificateholders will bear all reinvestment risk resulting from prepayments on
the Receivables.
CERTIFICATE FACTORS AND TRADING INFORMATION
The "Certificate Factor" is a seven-digit decimal figure, which the
Servicer will compute each month, equal to the Certificate Balance on such date
of determination, divided by the initial Certificate Balance. The Certificate
Factor will be 1.0000000 as of the Cutoff Date; thereafter, the Certificate
Factor will decline to reflect reductions in the Certificate Balance. The amount
of a Certificateholder's pro rata share of the Certificate Balance for a given
month can be determined by multiplying the original denomination of such
holder's Certificate by the Certificate Factor for that month. The Certificate
Factor will be made available on or about the [eighth] business day of each
month.
Pursuant to the Agreement, Certificateholders will receive monthly
reports concerning the payments received on the applicable Receivables, the
Certificate Balance, the Certificate Factor, and various other items of
information. Certificateholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by law. See "The Certificates - Statements to Certificateholders".
USE OF PROCEEDS
The net proceeds to be received by the Trust from the sale of the
Certificates will be applied to the purchase of the Receivables.
THE DEPOSITOR
The Depositor, NationsCredit Securitization Corporation, is a
wholly-owned subsidiary of NationsCredit Commercial Corporation of America,
which, in turn, is indirectly wholly-owned by NationsCredit Corporation
("NationsCredit"). The Depositor was incorporated in Delaware in 1995. The
Depositor is organized for the limited purpose of purchasing, among other
things, retail marine installment sale contracts and transferring such contracts
to third parties and any activities incidental to and necessary or convenient
for the accomplishment of such purposes. The principal executive offices of the
Depositor are located at 225 E. John Carpenter Freeway, Irving, TX 75062-2731
and its telephone number is (972) 506-5026.
The Depositor will take steps in structuring the transaction
contemplated hereby that are intended to ensure that the voluntary or
involuntary application for relief by NationsCredit Commercial under the United
States Bankruptcy Code or similar applicable state law ("Insolvency Laws") will
not result in consolidation of the assets and liabilities of the Depositor with
those of NationsCredit Commercial. These steps include or will include the
creation of the Depositor as a separate, limited-purpose subsidiary pursuant to
a certificate of incorporation or an amendment thereto containing certain
limitations, including restricting the nature of the Depositor's business,
requiring the Depositor to maintain records and books of account separate from
those of NationsCredit Commercial, to refrain from commingling its assets with
those of NationsCredit Commercial and to refrain from holding itself out as
having agreed to pay, or being liable for, the debts of NationsCredit
Commercial. In addition, the Depositor's certificate of incorporation will
contain a restriction on the Depositor's ability to commence a voluntary case or
proceeding under any Insolvency Law without the prior unanimous affirmative vote
of all of its directors, including at least one outside director. The Depositor
intends to follow these and other procedures related to maintaining its separate
corporate identity. However, there can be no assurance that a court would not
conclude that the assets and liabilities of the Depositor should be consolidated
with those of NationsCredit Commercial. If a court were to reach such a
conclusion, or a filing were made under any Insolvency Law by or against the
Depositor, or if an attempt were made to litigate any of the foregoing issues,
delays in distributions on the Certificates (and possible reductions in the
amount of such distributions) could occur.
THE SERVICER
The Servicer, NationsCredit Commercial Corporation of America
("NationsCredit Commercial") was incorporated in 1992 under the laws of the
State of North Carolina. NationsCredit Commercial engages in the financing of
dealer inventory of consumer goods which include such products as boats, boat
motors and trailers, musical instruments, consumer electronics and appliances,
residential heating and air conditioning equipment, lawn and garden equipment,
manufactured housing units, and recreational vehicles. In support of its
inventory financing of boat dealers, NationsCredit Commercial purchases marine
installment sale contracts. NationsCredit Commercial is an indirect wholly-owned
subsidiary of NationsCredit, which in turn is a wholly-owned subsidiary of
NationsBank Corporation.
On February 1, 1993, NationsBank Corporation, through its subsidiary
NationsBanc Financial Services Corporation, acquired certain of the assets and
assumed certain of the liabilities of Chrysler First Inc., a subsidiary of
Chrysler Financial Corporation. NationsCredit Commercial represents operations
which were formerly subsidiaries of Chrysler First Inc. None of the Receivables
were originated prior to the acquisition of the assets and liabilities of
Chrysler First Inc.
The principal office of the Servicer is located at 3350 Cumberland
Circle, N.W., Suite 1000 Atlanta, GA 30339
THE SURETY BOND ISSUER
CapMAC is a New York-domiciled monoline stock insurance company which
engages only in the business of financial guarantee and surety insurance. CapMAC
is licensed in 50 states in addition to the District of Columbia, the
Commonwealth of Puerto Rico and the territory of Guam. CapMAC insures structured
asset-backed, corporate, municipal and other financial obligations in the U.S.
and international capital markets. CapMAC also provides financial guarantee
reinsurance for structured asset-backed, corporate, municipal and other
financial obligations written by other major insurance companies.
CapMAC claims-paying ability is rated "Aaa" by Moody's, "AAA" by S&P,
"AAA" by Duff & Phelps Credit Rating Co. ("Duff & Phelps") and "AAA" by Nippon
Investors Service Inc. Such ratings reflect only the views of the respective
rating agencies, are not recommendations to buy, sell or hold securities and are
subject to revision or withdrawal at any time by such rating agencies.
CapMAC is a wholly-owned subsidiary of CapMAC Holdings Inc.
("Holdings"). Neither Holdings nor any of its stockholders is obligated to pay
any claims under any surety bond issued by CapMAC or any debts of CapMAC or to
make additional capital contributions.
CapMAC is regulated by the Superintendent of Insurance of the State of
New York. In addition, CapMAC is subject to regulation by the insurance laws and
regulations of the other jurisdictions in which it is licensed. Such insurance
laws regulate, among other things, the amount of net exposure per risk that
CapMAC may retain, capital transfers, dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and acquisitions.
CapMAC is subject to periodic regulatory examinations by the same regulatory
authorities.
CAPMAC'S OBLIGATIONS UNDER THE SURETY BOND MAY BE REINSURED. SUCH
REINSURANCE DOES NOT RELIEVE CAPMAC OF ANY OF ITS OBLIGATIONS UNDER THE SURETY
BOND.
THE SURETY BOND IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
AS OF DECEMBER 31, 1996 AND 1995, CAPMAC HAD QUALIFIED STATUTORY
CAPITAL (WHICH CONSISTS OF POLICYHOLDERS' SURPLUS AND CONTINGENCY RESERVE) OF
APPROXIMATELY $____ MILLION AND $240 MILLION, RESPECTIVELY, AND HAD NOT INCURRED
ANY DEBT OBLIGATIONS. ARTICLE 69 OF THE NEW YORK STATE INSURANCE LAW REQUIRES
CAPMAC TO ESTABLISH AND MAINTAIN THE CONTINGENCY RESERVE, WHICH IS AVAILABLE TO
COVER CLAIMS UNDER SURETY BONDS ISSUED BY CAPMAC.
The financial statements of CapMAC prepared in accordance with
generally accepted accounting principles as of December 31, 1996 and 1995, and
for each of the years in the three-year period ended December 31, 1996, are made
part of this Prospectus. Copies of CapMAC's financial statements prepared in
accordance with statutory accounting standards, which differ from generally
accepted accounting principles, and filed with the Insurance Department of the
State of New York are available upon request from CapMAC. CapMAC is located at
885 Third Avenue, New York, New York 10022, and its telephone number is (212)
755-1155.
THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to the
Agreement. Copies of the Agreement (without exhibits) may be obtained by
Certificateholders upon request in writing to the Trustee at Bankers Trust
Company, 4 Albany Street, New York, New York 10006; Attn: Corporate Trust and
Agency Group Structured Transactions. The following summary does not purport to
be complete and is subject to and qualified in its entirety by reference to the
Agreement.
GENERAL
The Certificates will be available for purchase in book-entry form in
minimum denominations representing $1,000 of initial principal balance of the
Receivables and in integral multiples thereof, and will represent an undivided
fractional interest in the Trust equal to the percentage obtained by dividing
the denomination of the Certificate by such initial principal balance.
In general, it is intended that Certificateholders receive, on each
Distribution Date, the aggregate payments of principal, consisting of the
aggregate collected principal payments, full and partial prepayments on the
Receivables (other than Receivables for which the Servicer or NationsCredit
Commercial has made a payment of the Purchase Amount in a Collection Period
prior to the related Collection Period) received by the Servicer during the
preceding calendar month (the "Collection Period"), the principal balance of
Defaulted Receivables which became Defaulted Receivables during the related
Collection Period and interest at one-twelfth the Pass-Through Rate on the
Certificate Balance as of the close of business on the prior Distribution Date.
A prepayment of a Receivable may be made by or on behalf of the respective
Obligor by application of certain insurance proceeds, as a result of a
repurchase by NationsCredit Commercial or a purchase by the Servicer, as a
result of payments made in respect of Defaulted Receivables under the Reserve
Account, the Surety Bond, or, if payments are not made as required under the
Surety Bond, upon the repossession of the Boat, or other enforcement measure
taken with respect to a Defaulted Receivable. See "The Certificates - Sale and
Assignment of Receivables", The Surety Bond and Reserve Account", and Servicing
Procedures".
The Certificates will initially be represented by one or more
certificates registered in the name of the nominee of The Depository Trust
Company ("DTC", and together with any successor depository selected by the
Depositor, the "Depository") except as set forth below. The Depositor has been
informed by DTC that DTC's nominee will be Cede & Co. ("Cede"). Accordingly,
Cede is expected to be the holder of record of the Certificates. Unless and
until Definitive Certificates are issued under the limited circumstances
described herein, no Certificate Owner will be entitled to receive a certificate
representing such person's interest in the Certificates. All references herein
to action by Certificateholders shall refer to actions taken by DTC upon
instructions from its participating organizations (the "Participants") and all
references herein to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of the Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC procedures.
See Book-Entry Registration" and Definitive Certificates".
BOOK-ENTRY REGISTRATION
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("Direct Participants") and to facilitate the clearance and
settlement of securities transactions between Direct Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. Direct Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly (the "Indirect Participants").
Certificate Owners that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions of
principal and interest from the Trustee through Direct Participants and Indirect
Participants. Under a book-entry format Certificateholders may experience some
delay in their receipt of principal and interest distributions with respect to
the Certificates since distributions with respect to the Certificateholders will
be forwarded by Bankers Trust Company as paying agent, or its successor in such
capacity (the "Paying Agent") to Cede, the nominee of DTC will then forward such
distributions to its Direct Participants who in turn will forward them to
Indirect Participants or Certificate Owners. It is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificate Owners will not
be recognized by the Trustee as Certificateholders, as such term is used in the
Agreement and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its Direct Participants and
Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Direct Participants and is required to receive and transmit distributions
of principal of, and interest on, the Certificates. Direct Participants and
Indirect Participants with which Certificate Owners have accounts with respect
to the Certificates similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Certificate
Owners.
Because DTC can only act on behalf of Direct Participants, who in turn
act on behalf of Indirect Participants and certain banks, trust companies and
other persons approved by it the ability of a Certificate Owner to pledge
Certificates to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of such Certificates, may be limited due to
the absence of physical certificates for such Certificates.
DTC has advised the Depositor that it will take any action permitted
to be taken by a Certificateholder under the Agreement only at the direction of
one or more Direct Participants to whose accounts with DTC the Certificates are
credited. Additionally, DTC has advised the Depositor that it will take such
actions with respect to specified percentages of the Certificate Balance only at
the direction of and on behalf of Participants whose holdings include undivided
interests that satisfy such specified percentages. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Direct Participants whose holdings include such
undivided interests.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form
(the "Definitive Certificates"), to Certificate Owners or their nominees rather
than to DTC or its nominee, only if (i) the Depositor advises the Trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to the Certificates, and the Trustee
or the Depositor is unable to locate a qualified successor, (ii) the Depositor,
at its option, elects to terminate the book-entry system through DTC, or (iii)
after the occurrence of an Event of Default, Certificate Owners representing in
the aggregate not less than 50% of the Certificate Balance advise the Trustee
and DTC through Direct Participants in writing that the continuation of a
book-entry system through any Depository is no longer in the best interest of
the Certificate Owners.
Upon the occurrence of any events described in the immediately
preceding paragraph, the Trustee shall notify all Certificate Owners through DTC
of the occurrence of any such event and of the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificates
representing the Certificates and instructions for re-registration, the Trustee
will issue the Certificates as Definitive Certificates, and thereafter the
Trustee will recognize the registered holders of such Definitive Certificates as
Certificateholders under the Agreement (the "Holders").
If Definitive Certificates are issued, distributions of principal of,
and interest on, the Definitive Certificates will be made by the Trustee
directly to Holders in accordance with the procedures set forth herein and in
the Agreement. Distributions of principal and interest on each Distribution Date
will be made to Holders in whose names the Definitive Certificates were
registered at the close of business on the preceding Record Date. Such
distributions will be made by check mailed to the address of such Holder as it
appears on the register maintained by the Trustee. The final payment on any
Definitive Certificate, however, will be made only upon presentation and
surrender of such Definitive Certificate at the office or agency specified in
the notice of final distribution mailed to Holders.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee in New York, New York. No service charge will be imposed
for any registration of transfer or exchange, but the Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith. Bankers Trust Company will initially be
designated as the registrar for the Certificates.
Certificates held by the Depositor or the Servicer shall not be
counted in any vote or action requiring the consent of Certificateholders under
the Agreement.
SALE AND ASSIGNMENT OF RECEIVABLES
On the date of issuance of the Certificates (the "Closing Date"), the
Depositor will cause the Trust to purchase the Receivables indirectly from
NationsCredit Commercial. Each Receivable purchased by the Trust will be
identified in a schedule appearing as an exhibit to the Agreement. The Trustee
will, concurrently with such purchase, execute, authenticate and deliver the
Certificates.
In the Agreement the following representations and warranties made by
NationsCredit Commercial will be assigned to the Trustee: (i) each Receivable
has been originated in the United States by a Dealer, for the retail sale of a
Boat in the ordinary course of such Dealer's business, has been fully and
properly executed by the parties thereto, has been purchased by NationsCredit
Commercial from such Dealer under an existing Dealer Agreement with
NationsCredit Commercial; (ii) each Receivable creates or shall create a valid,
subsisting and enforceable first priority perfected security interest in favor
of NationsCredit Commercial in the related Boat (other than in the case of boat
motors subject to certificate of title statutes that provide for perfection by
filing a UCC-1 financing statement); (iii) upon the creation of each receivable
and immediately prior to its sale by NationsCredit Commercial, NationsCredit
Commercial was the legal and beneficial owner of each Receivable; (iv) each
Receivable was originated in the United States by a Dealer in the ordinary
course of such Dealer's business and such Receivable was purchased by
NationsCredit Commercial from such Dealer under an existing Dealer Agreement
with NationsCredit Commercial; (v) there is no right of rescission, offset,
defense or counterclaim to the Servicer obligation of the Obligor under any
Receivable which right of rescission, offset, defense or counterclaim has been
overtly asserted; (vi) each Receivable is the legal, valid and binding
obligation of the related Obligor thereunder and is enforceable in accordance
with its terms, subject to bankruptcy, insolvency, and other similar laws
relating to the enforcement of creditors' rights generally and to the general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) as they relate to bankruptcy, insolvency or
similar proceedings involving the Obligor as debtor, and all parties to such
Receivable had full legal capacity to execute such Receivable and all other
documents related thereto; (vii) there is only one original of each Receivable;
and (viii) the performance of the Obligor's obligations under each Receivable is
secured by a valid, perfected, subsisting and enforceable first priority
security interest in the related Boat (other than boat motors subject to
certificate of title statutes that provide for the security interest in such
boat motors to be perfected by the filing of UCC-1 financing statements) in
favor of NationsCredit Commercial, and all filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give a perfected
ownership interest in such Receivables shall have been made. Pursuant to the
Agreement, the Servicer shall represent and warrant to the Trustee, among other
things, that (i) the Receivables satisfy the selection criteria specified above
in "The Receivables Pool"; (ii) no Receivable shall be due from the United
States of America or any State or local government or from any agency,
department or instrumentality of the United States of America, any State or
local government; (iii) no Receivable shall have been satisfied, subordinated or
rescinded, nor shall any Boat have been released from the security interests
granted by the related Receivable in whole or in part, (iv) no provision of a
Receivable shall have been waived; (v) no liens or claims shall have been filed
for work, labor or materials relating to a Boat that shall be liens prior to, or
equal or coordinate with, the security interest in the Boat granted by the
Receivable; (vi) each Receivable is free and clear of all security interests,
liens, charges and encumbrances, other than security interests, liens, and
encumbrances held by or assigned to the Trust; and (vii) each Receivable
complies in all material respects with all applicable state and federal laws
(and regulations thereunder) including, without limitation, to the extent
applicable, consumer protection, usury, equal credit opportunity, fair credit
billing, fair credit reporting, fair credit debt collection practices, truth-in
lending or other similar laws, and the Federal Trade Commission Act; and (viiii)
all filings (including, without limitation, UCC filings necessary in any
jurisdiction to give the Trustee, in the case of the Agreement, a first priority
perfected ownership interest in the Receivables shall have been made. As of the
second (or, at NationsCredit Commercial's or the Servicer's option, as
applicable, the first) Record Date following the discovery by or notice to
NationsCredit Commercial's or the Servicer of a breach of any representation or
warranty made by NationsCredit Commercial's or the Servicer, respectively, that
materially and adversely affects the interests of the Certificateholders in a
Receivable, NationsCredit Commercial or the Servicer as applicable, unless it
cures the breach, will purchase the Receivable from the Trustee, at a price
equal to the unpaid principal balance owed by the Obligor plus accrued interest
calculated at a rate equal to the sum of the Pass-Through Rate plus the
Servicing Fee Rate (the "Purchase Amount"). The repurchase and the purchase
obligation are a general and unsecured obligation of NationsCredit Commercial
and the Servicer, respectively, and will constitute the sole remedy available to
the Certificateholders or the Trustee for any such uncured breach. Any failure
on the part of NationsCredit or the Servicer to pay the Purchase Amount of any
Receivable when required will not be covered by collections from Receivables or
payments under the Surety Bond.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trustee, on behalf of the Trust, will appoint the
Servicer as custodian of all the Receivables. NationsCredit Commercial's
accounting records and computer systems will reflect the ultimate sale and
assignment of the Receivables to the Trustee. UCC-1 financing statements
reflecting the sale and assignment of the Receivables to the Trustee will be
filed. Because the Receivables will remain in the Servicer's possession and will
not be stamped or otherwise marked to reflect the assignment to the Trustee, if
a subsequent purchaser were able to take physical possession of the Receivables
in the ordinary course of its business without knowledge of the assignment, the
Trustee's interest in the Receivables could be defeated. See "Risk Factors C
Lack of Perfection of Interests in Receivables." Due to the administrative
burden and expense: the certificates of title, in the case of Boats financed in
states where security interests in boats are subject to certificate of title
statutes, will not be endorsed; and the UCC-1 financing statements, in the case
of Boats financed in states where security interests in boats are perfected by
filing a UCC-1 financing statement, will not be amended. In the absence of such
procedures, the Trust may not have a perfected security interest in the Boats
financed in certificate of title or UCC states, but the failure to make such
endorsements, filings or recordations will not affect the validity of the
original security interest as against the Obligor in UCC states. With respect to
Boats documented under certificate of title states, the validity of the security
interest against the original Obligor is less clear. See "Risk Factors - Lack of
Security Interests in Boats."
ACCOUNTS
The Servicer will establish and maintain with the Trustee one or more
accounts, in the name of the Trustee on behalf of the Certificateholders, into
which all payments made on or with respect to the Receivables will be deposited,
and from which all distributions with respect to the Receivables and the
Certificates will be made (collectively, the "Certificate Account"). The
Certificate Account shall be maintained with the Trustee so long as (i) the
Trustee's deposits have a rating acceptable to each Rating Agency or (ii) the
Certificate Account is maintained as a fully segregated trust account. If at any
time the conditions in clauses (i) or (ii) above are not satisfied, the Servicer
shall, with the Trustee's assistance as necessary, cause the Certificate Account
to be moved to a bank which can satisfy such conditions.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due
with respect to the Receivables and, in a manner consistent with the Agreement,
will perform such collection procedures as it follows with respect to marine
contracts that it services for itself and others. See "Certain Legal Aspects of
the Receivables." Consistent with the Agreement, the Servicer may, in its
discretion, arrange with the Obligor on a Receivable to extend, rewrite or
otherwise modify the payment terms of a Receivable; provided, however, that the
Servicer may, with certain limitations set forth in the Agreement, extend a
Receivable for credit related reasons that would be acceptable to the Servicer
with respect to comparable marine contracts that it services for itself and
others and in accordance with its customary standards, policies and procedures
if the cumulative extensions with respect to any Receivable shall not cause the
term of such Receivable to extend beyond _______________. See "NationsCredit
Commercial's Portfolio of Marine Contracts." Such arrangements may result in the
Servicer purchasing the Receivable for its Purchase Amount. If required payments
under the Surety Bond are not made, the Servicer would follow such normal
collection practices and procedures as it deems necessary or advisable to
realize upon any Receivable with respect to which the Servicer determines that
eventual payment in full is unlikely. The Servicer may sell the Boat securing
the Receivable at a public or private sale, or take any other action permitted
by applicable law.
The Servicer will covenant in the Agreement that: (i) the Servicer
will not release a Boat from the security interest granted by the related
Receivable in whole or in part, except upon payment in full by the related
Obligor; (ii) the Servicer will not impair the rights of the Certificateholders
in any Receivables; (iii) the Servicer will not increase or decrease the amount
of any scheduled payment on a Receivable or the principal amount of a Receivable
(except with respect to a prepayment of a scheduled payment that does not result
in a deferral of any other scheduled payment); (iv) the Servicer will not change
the APR of any Receivable; (v) the Servicer will not sell, pledge, transfer,
deliver or otherwise dispose of any Receivable, except as provided in the
Agreement; (vi) the Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same shall become due and shall follow such collection procedures as it
follows with respect to all comparable marine contracts that it services for
itself and others; and (vii) the Servicer will not extend, rewrite or otherwise
modify the payment terms of a Receivable; provided, however, that the Servicer
may, with certain limitations set forth in the Agreement, extend a Receivable
for credit related reasons that would be acceptable to the Servicer with respect
to comparable marine contracts that it services for itself and others and in
accordance with its customary standards, policies and procedures if the
cumulative extensions with respect to any Receivable shall not cause the term of
such Receivable to extend beyond _______________.
In the event of a breach by the Servicer of any covenant described
above that materially and adversely affects the interests of the
Certificateholders and the Surety Bond Issuer in a Receivable, the Servicer,
unless such breach has been cured by the second Record Date (or, at the
Servicer's election, the first Record Date) following the date on which the
Servicer becomes aware of, or receives written notice of such breach or earlier
in certain circumstances, will be required to purchase the Receivable from the
Trustee on the business day prior to the Distribution Date related to such
Record Date or earlier under certain circumstances. The purchase price will be
the Purchase Amount as of the last day of the Collection Period preceding the
date of such purchase. The purchase obligation is a general unsecured obligation
of the Servicer and will constitute the sole remedy available to the
Certificateholders, the Trust or the Trustee against the Servicer for any such
uncured breach, except with respect to certain indemnities of the Servicer under
the Agreement related thereto. Any failure of the Servicer to pay the Purchase
Amount of any Receivable when required will not be covered by collections from
Receivables or payments under the Surety Bond.
COLLECTIONS ON RECEIVABLES
While NationsCredit Commercial or an entity (a) into which
NationsCredit Commercial is merged or consolidated, (b) which succeeds to the
properties and assets of the Servicer substantially as a whole or (c) more than
50% of the voting stock of which is, directly or indirectly, owned by
NationsBank Corporation, which has executed an agreement of assumption to
perform the obligations of the Servicer under the Insurance Agreement and the
Agreement, is the Servicer, the Servicer may commingle collections held by it
and may use such funds for its own purposes prior to the business day preceding
each Distribution Date provided that all of the following conditions are
satisfied: (i) there exists no Event of Default (as described below); (ii) if
the Servicer does not have a short-term rating or deposit rating of at least A-1
from S&P and P-1 from Moody's, a guaranty, letter of credit, surety bond or
other similar instrument is issued covering collections held by NationsCredit
Commercial or such successor, which is acceptable to the Rating Agencies and the
Surety Bond Issuer and is issued by an entity which has a short-term debt or
deposit rating, as applicable, of at least A-1 from S&P and P-1 from Moody's;
and (iii) the Servicer, the Trustee, the Depositor and the Surety Bond Issuer
shall not have received notice from S&P or Moody's that failure to separate such
funds will result in a reduction or withdrawal of the then current rating on the
Certificates by either S&P or Moody's. If all the conditions contained in the
preceding sentence are not met, the Servicer will deposit all payments on
Receivables (from whatever source) and all proceeds of Receivables collected
during each Collection Period into the Certificate Account not later than the
second business day after receipt. NationsCredit Commercial and the Servicer
will deposit the aggregate Purchase Amount of Receivables repurchased by
NationsCredit Commercial or purchased by the Servicer into the Certificate
Account on or before the business day preceding the applicable Distribution
Date. Pending deposit into the Certificate Account, collections may be invested
by the Servicer at its own risk and for its own benefit, and will not be
segregated from funds of the Servicer. See "Risk Factors - Commingling Risk."
In accordance with NationsCredit Commercial's normal practices and
procedures, payments made by or on behalf of an Obligor on a Receivable during a
Collection Period shall be applied first to late payment fees and extension
fees, second to interest accrued on the Receivable, third to principal due on
the Receivable, fourth to insurance premiums and certain other amounts due on
physical damage insurance policies placed by the Servicer, fifth to
administrative charges, if any, and sixth to the remaining principal balance.
Late payment and extension fees, if any, and other administrative fees and
add-on amounts for items such as physical damage insurance placed by the
Servicer will be included as part of the Trust's assets; provided however that
the Trustee will agree to hold any such amounts for the benefit of the Servicer
and any payments received with respect thereto will not be passed through to
Certificateholders, but will instead be promptly remitted to the Servicer upon
receipt.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee with
respect to each Distribution Date, equal to the product of one-twelfth the
Servicing Fee Rate multiplied by the Pool Balance as of the last day of the
prior Collection Period (or, in the case of the first Distribution Date, the
Initial Pool Balance). The Trustee, as provided above, will remit to the
Servicer any late fees, prepayment charges and other administrative fees or
similar charges allowed by applicable law with respect to the Receivables.
Payments by or on behalf of Obligors will be allocated to payments of principal,
interest and late fees in accordance with the Servicer's normal practices and
procedures.
The Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of marine retail installment sale contracts
as an agent for their beneficial owner, including collecting and posting all
payments, responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment statements to Obligors, reporting tax information
to Obligors, paying costs of disposition of defaults, and monitoring the
collateral. The Servicing Fee also will compensate the Servicer for
administering the Receivables, including accounting for collections and
furnishing monthly and annual statements to the Trustee with respect to
distributions, and providing information to the appropriate party relating to
Federal income taxes. The Servicing Fee also will reimburse the Servicer for
certain taxes, accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering the Receivables. The Trust
will not be responsible for fees and expenses of any subservicer.
DISTRIBUTIONS ON CERTIFICATES
On or before the eighth business day of each month, the Servicer will
inform the Trustee of the amount of aggregate collections on the Receivables
(other than Receivables purchased by the Servicer or repurchased by
NationsCredit Commercial) including all refunds received by the Servicer with
respect to any refunded portion of any extended warranty protection plan costs,
or of physical damage, credit life or disability insurance premiums included in
the principal amount of the Receivables; the aggregate Purchase Amount of
Receivables required to be repurchased by NationsCredit Commercial or required
to be purchased by the Servicer; the aggregate amounts to be drawn on the
Reserve Account; the aggregate payments to be made under the Surety Bond; and
the Servicing Fee; all with respect to the preceding Collection Period.
On the Distribution Date, the Trustee will distribute from the
Certificate Account pro rata to the Certificateholders of record as of
the preceding Record Date, the Servicer, the Surety Bond Issuer, the
Collateral Agent and the Depositor the following amounts in the
following order of priority:
(i) to the Certificateholders, an amount equal to one-twelfth of
the product of (x) the Pass-Through Rate and (y) the Certificate
Balance as of the close of business on the prior Distribution Date
(the "Monthly Interest Payment"), and any carry-over Monthly Interest
Payment from prior Distribution Dates;
(ii) if NationsCredit Commercial or an affiliate thereof is not
the Servicer, to the Servicer, an amount equal to one-twelfth of the
product of (x) the Servicing Fee Rate and (y) the Pool Balance as of
the last day of the prior Collection Period (or, in the case of the
first Distribution Date, the Initial Pool Balance) ("Monthly Servicing
Fee") and any carry-over Monthly Servicing Fee from prior Distribution
Dates;
(iii) to the Certificateholders, (a) that portion of all
collections received by the Servicer during the related Collection
Period on Receivables allocable to principal (which shall not include
the principal portion of proceeds from any recoveries or liquidations
in respect of Defaulted Receivables), (b) Purchase Amounts allocable
to principal and paid by the Depositor or the Servicer, (c) the
principal balance of Defaulted Receivables; and (d) any Preference
Amount paid by the Trust during the related Collection Period
(collectively, the "Monthly Principal Payment") and any carry-over
Monthly Principal Payment from prior Distribution Dates;
(iv) If NationsCredit Commercial or an affiliate thereof is the
Servicer, to the Servicer, the Monthly Servicing Fee and any
carry-over Monthly Servicing Fee from prior Distribution Dates;
(v) to the Surety Bond Issuer, any amounts owing to the Surety
Bond Issuer under the Insurance Agreement and the Agreement and not
paid (any payments to the Surety Bond Issuer made pursuant to this
clause (iv) shall be applied as follows: first, to the extent of any
premiums due and unpaid; second, to the extent of any other amounts
owing and not paid to the Surety Bond Issuer (except for unreimbursed
draws on the Surety Bond); third, to the extent of any unreimbursed
draws on the Surety Bond with respect to interest; and fourth, to the
extent of any unreimbursed draws on the Surety Bond in respect of
principal);
(vi) to the Collateral Agent, an amount up to the Specified
Reserve Account Requirement for deposit into the Reserve Account; and
(vii) to the Depositor, any remaining amounts.
"Defaulted Receivable" means the principal balance owed by an Obligor
on each Receivable with respect to which (x) the Servicer has determined during
the related Collection Period that eventual payment in full is unlikely or (y)
during the related Collection Period has become (1) 180 consecutive days
delinquent, in the case of any Receivable with a balance of $10,000 or less as
of the first day of delinquency, or (2) 270 consecutive days delinquent, in the
case of any Receivable with a balance of greater than $10,000 as of the first
day of delinquency, (in each case a "Defaulted Receivable").
"Preference Amount" means losses incurred by the Trust which result
from a loss to the Trust arising from a successful claim by an Obligor or an
Obligor's representative for previously collected monies.
[The Monthly Principal Payment will not exceed the unpaid principal
balance of the Certificates.]
The Surety Bond Issuer will unconditionally and irrevocably guarantee
payment of the distributions described in clauses (i) through (iii). See "--The
Surety Bond and Reserve Account."
The Monthly Interest Payment is calculated on the Certificate Balance,
which shall decline by the amount of principal distributions made on the
Certificates. To the extent that payments on the Receivables and amounts on
deposit in the Reserve Account are not sufficient to cover the entire principal
amount of Defaulted Receivables and payments under the Surety Bond are not made,
Certificateholders will incur a loss and interest will not be paid on the amount
of such loss.
As an administrative convenience, the Servicer will be permitted to
make the deposit of (a) collections and the aggregate Purchase Amount for or
with respect to the Collection Period and (b) the Purchase Amount for any
optional purchase of the Receivables (as described herein) net of distributions
to be made to the Servicer with respect to the Collection Period. The Servicer,
however, will account for the amount of any such purchase to the Trustee and to
the Certificateholders as if all deposits, distributions and transfers were made
individually.
Any amounts released to the Depositor pursuant to clause (vi) above
shall not be property of the Trust thereafter, and the Depositor shall have no
obligation to return such amounts to the Trust in the event insufficient funds
are available on any subsequent Distribution Date to distribute to
Certificateholders the Monthly Interest Payment, any carry-over Monthly Interest
Payment, the Monthly Principal Payment or any carry-over Monthly Principal
Payment.
The following chart sets forth an example of the application of the
foregoing provisions to a monthly distribution:
[ ]......... The Servicer receives monthly payments,
prepayments and other proceeds in respect of the
Receivables.
[ ].......... Record Date. Distributions on the Distribution
Date are made to Certificateholders of record at
the close of business on this date.
[ ]........... Determination Date. The Servicer notifies the
Trustee of the amounts to be distributed on the
Distribution Date.
[ ]............ Distribution Date. The Trustee distributes to
Certificateholders amounts payable in respect of
the Certificates, and transfers the balance as
described in clauses (i), (ii), (iii), and (vii)
above.
THE SURETY BOND AND RESERVE ACCOUNT
On or before the Closing Date, the Depositor will cause the Surety
Bond to be issued by the Surety Bond Issuer pursuant to the provisions of the
Agreement and the Insurance and Reimbursement Agreement (the "Insurance
Agreement") among the Depositor, the Servicer and the Surety Bond Issuer. The
Surety Bond will unconditionally and irrevocably guarantee the timely payment of
(i) the Monthly Interest Payment, (ii) if NationsCredit Commercial or an
affiliate thereof is not the Servicer, the Monthly Servicing Fee and (iii) the
Monthly Principal Payment.
The Trustee will demand payment under the Surety Bond (or the Surety
Bond Issuer will otherwise make available) with respect to any Distribution Date
to the extent there are not sufficient amounts available from collections on
Receivables or on deposit in the Reserve Account, to make distributions in
respect of (i) the Monthly Interest Payment, (ii) if NationsCredit Commercial or
an affiliate thereof is not the Servicer, the Monthly Servicing Fee and (iii)
the Monthly Principal Payment.
In addition, the Surety Bond will unconditionally guarantee the payment
of the outstanding Certificate Balance on the Final Scheduled Distribution Date
(after giving effect to all other amounts distributed and allocable to principal
on such Distribution Date).
In the event the Reserve Account is exhausted or otherwise unavailable,
in the absence of payments under the Surety Bond, Certificateholders will
directly bear the credit and other risks associated with their undivided
interest in the Trust.
In the event the Surety Bond Issuer's claims paying ratings have been
reduced by any of the Rating Agencies, the Depositor may, but it is not
obligated to, upon payment of all amounts required to be paid to the Surety Bond
Issuer pursuant to the Insurance Agreement and the Agreement either (i) replace
the Surety Bond with a financial guaranty insurance policy issued by another
surety bond issuer, provided that the ratings on the claims paying ability of
such replacement surety bond issuer are higher than those of the surety bond
issuer sought to be replaced (after giving effect to such reduction) or (ii)
eliminate or provide another form of credit enhancement; provided that in the
case of clause (ii), the Rating Agencies consent thereto and confirmation that
the ratings of the Certificates will be increased from their then current levels
(after giving effect to such reduction) as a result of such action shall have
been obtained.
Payment of claims under the Surety Bond will be made by the Surety Bond
Issuer following Receipt by the Surety Bond Issuer of the appropriate notice for
payment on the later to occur of (a) 11:00 a.m., New York City time, on the
second Business Day following Receipt of such notice for payment, and (b) 11:00
a.m., New York City time, on the Business Day immediately preceding the relevant
Distribution Date.
The terms "Receipt" and "Received," with respect to the Surety Bond,
means actual delivery to the Surety Bond Issuer, prior to 2:00 p.m., New York
City time, on a Business Day; delivery either on a day that is not a Business
Day or after 2:00 p.m., New York City time, shall be deemed to be Receipt on the
next succeeding Business Day.
If a payment by the Surety Bond Issuer is voided pursuant to a final
and non-appealable order (a "Preference Event") under any applicable bankruptcy,
insolvency, receivership or similar law in an Insolvency Proceeding, and, as a
result of such a Preference Event, the Trustee is required to return such voided
payment, or any portion of such voided payment, made in respect of the
Certificates (an "Avoided Payment"), the Surety Bond Issuer will pay an amount
equal to such Avoided Payment, upon receipt by the Surety Bond Issuer from the
Trustee of (x) a certified copy of a final order of a court exercising
jurisdiction in such Insolvency Proceeding to the effect that the Trustee is
required to return any such payment or portion thereof during the term of the
Surety Bond because such payment was voided under applicable law, with respect
to which order the appeal period has expired without an appeal having been filed
(the "Final Order"), (y) an assignment, in form reasonably satisfactory to the
Surety Bond Issuer, irrevocably assigning to the Surety Bond Issuer all rights
and claims of the Trustee relating to or arising under such Avoided Payment and
(z) a notice for payment appropriately completed and executed by the Trustee.
Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order and not
to the Trustee directly.
Notwithstanding the foregoing, in no event shall the Surety Bond Issuer
be obligated to make any payment in respect of any Avoided Payment, which
payment represents a payment of the principal amount of the Certificates, prior
to the time the Surety Bond Issuer would have been required to make a payment in
respect of such principal in the absence of such Preference Event.
The Surety Bond Issuer shall make payments due in respect of Avoided
Payments prior to 1:00 p.m., New York City time, on the second Business Day
following the Surety Bond Issuer's Receipt of the documents required under
clauses (x) through (z) of the second preceding paragraph.
Under the Surety Bond, "Business Day" means any day other than (i) a
Saturday or Sunday or (ii) a day on which banking institutions in the City of
New York, New York and the States of [ ] are authorized or obligated by law or
executive order to be closed.
"Insolvency Proceeding" means the commencement, after the Closing Date,
of any bankruptcy, insolvency, readjustment of debt, reorganization, marshaling
of assets and liabilities or similar proceedings by or against any person, or
the commencement, after the Closing Date, of any proceedings by or against any
Person for the winding up or liquidation of its affairs, or the consent after
the date hereof to the appointment of a trustee, conservator, receiver or
liquidator in any bankruptcy, insolvency, readjustment of debt, reorganization,
marshaling of assets and liabilities or similar proceedings of or relating to
any Person.
The terms of the Surety Bond cannot be modified, altered or affected by
any other agreement or instrument, or by the merger, consolidation or
dissolution of the Trust, the Depositor or the Servicer. The Surety Bond by its
terms may not be canceled or revoked prior to the time it is terminated in
accordance with its express terms. The Surety Bond is governed by the laws of
the State of New York.
THE SURETY BOND IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK STATE INSURANCE LAW.
The Depositor will establish and maintain with the Collateral Agent an
account (the "Reserve Account"). The Reserve Account will not be part of the
Trust, but will be pledged to the Trustee for the benefit of the
Certificateholders and the Surety Bond Issuer. On the Closing Date an initial
deposit will be made into the Reserve Account and thereafter will be augmented
on each Distribution Date from payments on Receivables allocable to interest on
deposit in the Certificate Account with respect to the preceding Collection
Period after distributions on such Distribution Date in respect of the Monthly
Interest Payment and any carry-over Monthly Interest Payment, the Monthly
Servicing Fee and any carry-over Monthly Servicing Fee (if NationsCredit
Commercial or an affiliate thereof is not the Servicer), the Monthly Principal
Payment and any carry-over Monthly Principal Payment and any amounts owing to
the Surety Bond Issuer under the Insurance Agreement and the Agreement and not
paid, until the amount on deposit in the Reserve Account is equal to a specified
amount to be determined by the Surety Bond Issuer and the Rating Agencies (the
"Specified Reserve Account Requirement"). Amounts, if any, on deposit in the
Reserve Account on any Distribution Date (after giving effect to all
distributions to be made on such Distribution Date) in excess of the Specified
Reserve Account Requirement will be released to the Depositor. The Specified
Reserve Account Requirement and amounts on deposit or to be deposited into the
Reserve Account may be reduced, including to zero, or distributed in a different
manner than described herein with the consent of the Surety Bond Issuer as long
as such reduction or change does not cause a downgrade or withdrawal of the
then-current rating of the Certificates by either Moody's or S&P, but without
prior notice to or the consent of the Certificateholders. Prospective purchasers
of the Certificates should not rely on any amounts being deposited into or being
available from the Reserve Account in making a decision on whether to purchase
the Certificates.
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with each
distribution to each Certificateholder of record, a statement to
Certificateholders furnished pursuant to the Agreement, setting forth for the
Collection Period relating to such Distribution Date the following information
(stated in the case of items (i), (ii) and (iii), on the basis of $1,000 initial
principal amount) as of such Distribution Date:
(i) the amount of the Certificateholder's distribution which
constitutes the Monthly Principal Payment (including any carry-over
Monthly Principal Payment);
(ii) the amount of the Certificateholder's distribution which
constitutes the Monthly Interest Payment (including any carry-over
Monthly Interest Payment);
(iii) the Certificateholder's pro rata portion of the Monthly
Servicing Fee (including any carry-over Monthly Servicing Fee);
(iv) the Certificate Balance and the Certificate Factor as of the
close of business on such Distribution Date; and
(v) the Pool Balance as of the last day of the Collection Period.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of the Agreement, the Trustee
shall mail to each Person who at any time during such calendar year shall have
been a Certificateholder of record a statement containing the annual total for
the amounts described in (i) through (iii) above for the purposes of such
Certificateholder's preparation of Federal income tax returns. See "Certain
Federal Income Tax Consequences."
EVIDENCE AS TO COMPLIANCE
The Agreement will provide that a firm of independent public
accountants will furnish to the Trustee and the Surety Bond Issuer on or before
March 31 of each year, beginning March 31, 1998, a statement as to compliance by
the Servicer during the preceding twelve months ended December 31 of the
preceding year with certain standards relating to the servicing of the
Receivables.
The Agreement will also provide for delivery to the Trustee, on or
before March 31 of each year, commencing March 31, 1998 of a certificate signed
by an officer of the Servicer stating that the Servicer has fulfilled its
obligations under such Agreement throughout the preceding twelve months ended
December 31 or, if there has been a default in the fulfillment of any such
obligation, describing each such default. The Servicer has agreed to give the
Trustee notice of certain Events of Default under the Agreements.
Copies of such statements and certificates may be obtained by
Certificateholders by a request in writing addressed to the Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
The Agreement will provide that NationsCredit Commercial may not resign
from its obligations and duties as Servicer thereunder, except upon
determination that the performance of such duties by NationsCredit Commercial is
no longer permissible under applicable law. No such resignation will become
effective until the Trustee or a successor servicer has assumed NationsCredit
Commercials's servicing obligations and duties under the Agreement. The Servicer
may delegate all or any part of its servicing obligations under the Agreement to
another person provided that no such delegation shall relieve the Servicer of
any of its obligations or liabilities under the Agreement. NationsCredit
Commercial employs NationsCredit Financial Services Corporation to collect on
charged-off marine contracts.
The Agreement will further provide that neither the Servicer nor any
of its directors, officers, employees and agents shall be under any liability to
the Trust or the Certificateholders for taking any action or for refraining from
taking any action pursuant to the Agreement, or for errors in judgment;
provided, however, that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of its duties or
by reason of reckless disregard of obligations and duties thereunder. In
addition, the Agreement will provide that the Servicer is under no obligation to
appear in, prosecute or defend any legal action that is not incidental to its
servicing responsibilities under such Agreement and that, in its opinion, may
involve it in any expense or liability. The Servicer may, however, undertake any
reasonable action that it may deem necessary or desirable in respect of the
Agreement and the rights and duties of the parties thereto and the interests of
the Certificateholders thereunder.
Under the circumstances specified in the Agreement, any entity into
which the Servicer may be merged or consolidated, or any entity resulting from
any merger or consolidation to which the Servicer is a party, or any entity
succeeding to the business of the Servicer, or, with respect to its obligations
as Servicer, any corporation 50% or more of the voting stock of which is owned,
directly or indirectly, by NationsBank Corporation, which corporation or other
entity in each of the foregoing cases assumes the obligations of the Servicer,
will be the successor of the Servicer under the Agreement.
EVENTS OF DEFAULT
"Events of Default" under the Agreement will consist of: (i) any
failure by the Servicer to deliver to the Trustee for distribution to the
Certificateholders any proceeds or payment required to be delivered under the
terms of the Certificates and the Agreement, which failure continues unremedied
for three business days after written notice from the Trustee is received by the
Servicer or after discovery by an officer of the Servicer; (ii) any failure by
the Servicer, NationsCredit Commercial or the Depositor, as the case may be,
duly to observe or to perform in any material respect any other covenant or
agreement set forth in the Certificates or the Agreement which failure
materially and adversely affects the rights of Certificateholders and which
continues unremedied for 60 days after the giving of written notice of such
failure (1) to the Servicer or the Depositor, as the case may be, by the Trustee
or (2) to the Servicer or the Depositor, as the case may be, and to the Trustee
by the respective Certificateholders evidencing not less than 25% of the Pool
Balance and the Surety Bond Issuer; (iii) certain events of bankruptcy,
insolvency, readjustment of debt, marshaling of assets and liabilities, or
similar proceedings with respect to the Servicer or the Depositor and certain
actions by the Servicer or the Depositor indicating its insolvency,
reorganization pursuant to bankruptcy proceedings, or inability to pay its
obligations and (iv) any representation or warranty by the Servicer in the
Agreement shall prove to have been incorrect in any material respect when made
which continues to be incorrect in any material respect for a period of 60 days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by either the Certificateholders evidencing not less
than 25% of the Certificate Balance or the Surety Bond Issuer and as a result of
which the interests hereunder of Certificateholders are materially and adversely
affected. The Surety Bond Issuer may give the Trustee notice of any Event of
Default under the Agreement.
RIGHTS UPON EVENT OF DEFAULT; SERVICER TRANSFER
As long as an Event of Default under the Agreement remains unremedied,
the Trustee or holders of Certificates of the Trust evidencing not less than 25%
of the Certificate Balance as of the most recent Record Date may terminate all
the rights and obligations of the Servicer under the Agreement (a "Servicer
Transfer") in each case with the consent of the Surety Bond Issuer, whereupon a
successor servicer appointed by the Trustee and consented to by the Surety Bond
Issuer in writing or the Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer under the Agreement and will be entitled
to similar compensation arrangements. In the event that the Trustee is unwilling
or unable so to act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor with a net worth of at least
$50,000,000 and whose regular business includes the servicing of marine retail
installment sale contracts. The Trustee may make such arrangements for
compensation to be paid on each Distribution Date, which shall be negotiated on
an arms-length basis, but in no event may be greater than the product of
one-twelfth of [ ] and the Certificate Balance as of such Distribution Date.
In addition, the Agreement will also provide that the Surety Bond
Issuer, together with holders of Certificates evidencing not less than 51% of
the Certificate Balance, with notice in writing to the Servicer, may effect a
Servicer Transfer upon the occurrence of any of the following events: (a) the
Depositor or Servicer, as the case may be, shall fail to pay when due any amount
payable by it or for the benefit of the Surety Bond Issuer; (b) an Event of
Default occurs under the Agreement; (c) the Surety Bond Issuer determines that
the performance of the Servicer under the Agreement is not, in the opinion of
the Surety Bond Issuer, in conformity with the Servicing Standards; (d) if, with
respect to any Distribution Date, the average of the Net Credit Loss Ratio for
the three preceding calendar months exceeds [ ] %; (e) the Servicer shall enter
into any merger, consolidation or other corporate transaction pursuant to which
the debt of the surviving entity (or if such debt is not rated, the debt of its
ultimate parent) is rated below investment grade by either Rating Agency; (f)
NationsBank Corporation ceases to maintain a majority ownership interest in
NationsCredit Corporation and the debt of the new holder of the majority
ownership interest in NationsCredit Corporation is rated below investment grade
by either Rating Agency; (g) NationsCredit Corporation shall enter into any
merger, consolidation or other corporate transaction pursuant to which the debt
of the surviving entity (or if such debt is not rated, the debt of its ultimate
parent) is rated below investment grade by either Rating Agency; or (h)
NationsCredit Corporation ceases to maintain a direct or indirect majority
ownership interest in the Servicer and the debt of the new holder of the
majority ownership interest in the Servicer is rated below investment grade by
either Rating Agency.
"Net Credit Loss Ratio" means, for any Collection Period, an amount
expressed as an annualized percentage equal to (i) the aggregate gross losses
with respect to the Receivables recognized in such Collection Period, as
determined in accordance with the Servicer's normal practices, less any
recoveries received during such Collection Period, divided by (ii) the average
of the Pool Balances as of the last day of the prior Collection Period and as of
the last day of such Collection Period.
"Servicing Standards" means, at any time, the quality of the Servicer's
(or in the event that a subservicer performs servicing operations on behalf of
the Servicer, such subservicer's) performance with respect to (i) compliance
with the terms and conditions of the Agreement, and (ii) adequacy, measured in
accordance with industry standards and current and historical standards of the
Servicer (or such subservicer) in respect of all receivables serviced by the
Servicer (or such subservicer), regardless of whether such receivables are owned
by the Servicer (or such subservicer), of the Servicer's (or such subservicer's)
servicing of the Receivables. The Surety Bond Issuer may audit the Servicer's
books, records and procedures to determine the Servicer's compliance with the
Agreement.
WAIVER OF PAST DEFAULTS
The Certificateholders evidencing not less than 51% of the Certificate
Balance as of the most recent Record Date, with the consent of the Surety Bond
Issuer, may waive any default by the Servicer in the performance of its
obligations under the Agreement and its consequences, except a default in making
any required deposits to or payments to the respective Certificate Account in
accordance with the Agreement. No such waiver shall impair such
Certificateholders' rights or the Surety Bond Issuer's rights with respect to
subsequent defaults.
AMENDMENT
The Agreement may be amended by the Depositor, the Servicer and the
Trustee, without the consent of the Certificateholders or the Surety Bond
Issuer, to cure any ambiguity, correct or supplement any provision therein, or
to add any other provisions with respect to matters or questions arising under
the Agreement which are not inconsistent with the provisions of the Agreement;
provided that such action will not, in the opinion of counsel satisfactory to
the Trustee, materially and adversely affect the interest of any
Certificateholder or the Surety Bond Issuer. The Agreement may also be amended
by the Depositor, the Servicer and the Trustee with the consent of the Surety
Bond Issuer and holders of Certificates evidencing not less than 51% of the
Certificate Balance as of the most recent Record Date for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Agreement or of modifying in any manner the rights of the
Certificateholders or the Surety Bond Issuer; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Receivables or distributions
that are required to be made on any Certificate or (ii) reduce the aforesaid
percentage required to consent to any such amendment, in each case without the
consent of the holders of all Certificates then outstanding.
LIST OF CERTIFICATEHOLDERS
Upon written request of the Servicer or the Surety Bond Issuer, the
Trustee will provide to the Servicer or the Surety Bond Issuer within 15 days
after receipt of such request, a list of the names and addresses of all
Certificateholders of record of the Trust as of the most recent Record Date.
Upon written request by three or more Certificateholders or by Holders of
Certificates evidencing not less than 25% of the Certificate Balance as of the
most recent Record Date, and upon compliance by such Certificateholders with
certain other provisions of the Agreement, the Trustee will afford such
Certificateholders access during business hours to the current list of
Certificateholders for purposes of communicating with other Certificateholders
with respect to their rights under the Agreement.
The Agreement will not provide for the holding of any annual or other
meetings of Certificateholders.
TERMINATION
The respective obligations of the Servicer, the Depositor, the Trustee
and the Trust created pursuant to the Agreement will terminate upon (i) the
maturity or other liquidation of the last Receivable and the disposition of any
amounts received upon liquidation of any remaining Receivables or (ii) the
payment to the Certificateholders of all amounts required to be paid to them
pursuant to the Agreement and the payment to the Surety Bond Issuer of all
amounts required to be paid to it pursuant to the Agreement and the Insurance
Agreement and disposition of all property held by the Trust. In order to avoid
excessive administrative expense, the Servicer or its successor may purchase all
the Receivables in the Trust as of any Record Date on which the Pool Balance
shall decline to 5% or less of the Initial Pool Balance, at a purchase price
equal to the aggregate Purchase Amount of the Receivables, as of the beginning
of the Collection Period related to such Record Date plus the appraised value of
any other property held by the Trust; less the amount of all collections on the
Receivables received by the Servicer during such Collection Period, provided
however that the Servicer may not make any such purchase on any date on which
there are outstanding amounts under the Insurance Agreement and the Agreement,
which have not been paid to the Surety Bond Issuer. Exercise of such right will
effect early retirement of the Certificates. The Trustee will give written
notice of termination to each Certificateholder of record of the Trust. The
final distribution to any Certificateholder will be made only upon surrender and
cancellation of such Holder's Certificate at any office or agency of the Trustee
specified in the notice of termination. Any funds remaining in the Trust, after
the Trustee has taken certain measures to locate a Certificateholder and such
measures have failed, will be distributed to the United Way of Metropolitan
Dallas.
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency
of the Agreement, the Certificates (other than the authentication of the
Certificates), or any Receivables or related documents, and is not accountable
for the use or application by the Depositor or the Servicer of any funds paid to
the Depositor or the Servicer in respect of the Certificates or the Receivables,
or the investment of any monies by the Servicer before such monies are deposited
into a Certificate Account. The Trustee has not independently verified the
Receivables. If no Event of Default has occurred, the Trustee is required to
perform only those duties specifically required of it under the Agreement.
Generally, those duties are limited to the receipt of the various certificates,
reports or other instruments required to be furnished to the Trustee under the
Agreement, in which case it is only required to examine them to determine
whether they conform to the requirements of the Agreement. The Trustee shall not
be charged with knowledge of a failure by the Servicer to perform its duties
under the Agreement which failure constitutes an Event of Default unless the
Trustee obtains actual knowledge of such failure as specified in the Agreement.
The Trustee is under no obligation to exercise any of the rights or
powers vested in it by the Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Certificateholder will have any
right under the Agreement to institute any proceeding with respect to the
Agreement, unless such holder previously has given to the Trustee written notice
of default and unless the Certificateholders evidencing not less than 25% of the
Certificate Balance as of the most recent Record Date have made written request
upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity and the Trustee
for 30 days has neglected or refused to institute any such proceedings.
THE TRUSTEE
Bankers Trust Company is the Trustee under the Agreement. The Trustee,
in its individual capacity or otherwise, may hold Certificates in its own name
or as pledgee. For the purpose of meeting the legal requirements of certain
jurisdictions, the Servicer and the Trustee acting jointly (or in some
instances, the Trustee acting alone) shall have the power to appoint co-trustees
or separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Agreement shall be conferred or imposed upon the Trustee
and such separate trustee or co-trustee jointly, or, in any jurisdiction in
which the Trustee shall be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the
Trustee.
The Trustee may resign at any time. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreements, becomes legally unable to act, or becomes insolvent. In any such
circumstances, the Servicer will be obligated to appoint a successor trustee.
Any such successor must be an eligible Servicer or an affiliate of an eligible
Servicer, which eligible Servicer is willing to act as Servicer upon a Servicer
Transfer, and such successor or affiliate must have a net worth of at least
$50,000,000 and its regular business must include the servicing of marine retail
installment sale contracts. Any resignation or removal of the Trustee and
appointment of a successor trustee does not become effective until acceptance of
the appointment by the successor trustee and with the prior written consent of
the Surety Bond Issuer.
The Agreement will provide that the Servicer will pay the Trustee's
fees. The Agreement will further provide that the Trustee will be entitled to
indemnification by the Depositor and the Servicer for, and will be held harmless
against, any loss, liability, fee, disbursement or expense incurred by the
Trustee not resulting from the Trustee's own willful misfeasance, bad faith or
negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Agreement). The Agreement will further provide that
the Depositor and the Servicer will indemnify the Trustee for certain taxes that
may be asserted in connection with the transaction.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
LACK OF PERFECTION OF INTERESTS IN THE RECEIVABLES
The Receivables are "chattel paper" as defined in the UCC in effect in
the States of Texas and ____. Pursuant to the UCC, for most purposes, a sale of
chattel paper is treated in a manner similar to a transaction creating a
security interest in chattel paper. The Servicer will cause the filing of an
appropriate UCC-1 financing statement to be made with the appropriate
governmental authorities in the States of Texas and _____and other appropriate
jurisdictions to give notice of the Trust's purchase of the Receivables.
Pursuant to the Agreement, the Servicer will have custody of the
Receivables following the sale of the Receivables to the Trust. The original
Receivables will not be physically marked to indicate that such Receivables have
been sold to the Trust. If, through inadvertence or otherwise, another party
purchased (including the taking of a security interest in) the Receivables for
new value in the ordinary course of its business, without actual knowledge of
the Trust's interest and took possession of the Receivables, the purchaser may
acquire an interest in the Receivables superior to the interest of the Trust.
The Servicer will, however, indicate in its computer records that the
Receivables have been sold and assigned to the Trust.
Under the Agreement, the Servicer will be obligated from time to time
to take such actions as are necessary to protect and perfect the Trust's
interest in the Receivables and their proceeds.
LACK OF SECURITY INTERESTS IN BOATS
The Receivables were originated by Dealers. NationsCredit Commercial
acquired the Receivables directly or indirectly from Dealers or finance
subsidiaries of manufactures and indirectly sold the Receivables to the Trust.
NationsCredit Commercial is the assignee and secured party under the
Receivables. NationsCredit Commercial takes actions as it deems prudent under
the laws of the state in which the Boat is located to perfect NationsCredit
Commercial's security interest in the Boat. In connection with the sale of the
Receivables to the Trust, NationsCredit Commercial's rights as secured party
have been assigned to the Trust. Because NationsCredit Commercial continues to
service the Receivables, the Obligors on the Receivables are not notified of the
purchase of the Receivables by the Trust and no action is taken to record the
transfer of the security interests from NationsCredit Commercial to the Trust.
Generally, security interests in boats may be perfected in one of three
ways: in "title" states, a security interest is perfected by notation of the
secured party's lien on the certificate of title issued by an applicable state
motor vehicle department or other appropriate state agency; in other states, a
security interest may be perfected by filing a UCC-1 financing statement,
however, a purchase money lien in consumer goods is perfected without any filing
requirement and if a boat is required to be documented under Federal law, a
preferred mortgage may be obtained under the Ship Mortgage Act by filing the
mortgage with the Coast Guard, which is the exclusive method for perfectly
securing interests in documented boats. The Servicer will represent and warrant
in the Agreement that none of the Boats are required to be documented under the
Ship Mortgage Act.
NationsCredit Commercial takes such measures as it deems prudent to
perfect its security interest in each Boat under the laws of the state in which
the Boat is registered. Typically, a Dealer will make proper and prompt
application to any applicable state motor vehicle department or other
appropriate state agency to have a notation of the lien made on the certificate
of title of each Boat at the time of sale if the Boat is subject to a title
statute. When a UCC-1 financing statement is filed, the Dealer is required to
obtain the necessary signature on the UCC-1 financing statement to allow filing
by NationsCredit Commercial. Where under state law a filing or other action is
required to perfect a security interest and if NationsCredit Commercial, because
of clerical error or otherwise, has failed to take such action with respect to a
Boat, NationsCredit Commercial will not have a perfected security interest in
the Boat under such law and its security interest may be subordinate to the
interest of, among others, subsequent purchasers of the Boat, holders of
perfected security interests and the bankruptcy trustee of the Obligor.
NationsCredit Commercial's state law security interest may also be subordinate
to such third parties in the event of fraud or forgery by the Obligor or
administrative error by state recording officials. In addition, under certain
certificate of title statutes NationsCredit Commercial must perfect its security
interest in boat motors otherwise subject to certificate of title statutes under
the UCC. NationsCredit Commercial as a general matter does not separately
perfect its interest in such boat motors under the UCC and therefore
NationsCredit Commercial does not generally have a perfected security interest
in motors used on Boats where the perfection of a security interest in the Boats
themselves are otherwise determined under certificate of title statutes.
Approximately _____% of the Initial Pool Balance (approximately $___________)
relates to Receivables which are billed to Obligors in certificate of title
states and approximately _____% of the Initial Pool Balance (approximately
$__________) relates to Receivables which are billed to Obligors in UCC states.
Boats are not necessarily registered in the states where Obligors are billed.
Security interests perfected under state law may have to be refiled if
the Obligor moves to a state other than the state in which a security interest
is originally perfected and in addition if the security interest is perfected
under the UCC, a new filing must be made under the UCC in order to continue the
perfected security interest.
If the security interest in the Boat is perfected under a title statute
and an Obligor moves to a state other than the state in which the Boat is
registered, under the laws of most title states the perfection of the security
interest in the Boat would continue for a brief period of time after such
relocation. A majority of states issuing certificates of title on boats require
surrender of a certificate of title to re-register a boat. In those states that
also provide for possession of the certificate of title by the secured party,
NationsCredit Commercial must surrender possession of the certificate of title
for the Boat to be re-registered. Some states do not give the secured party
possession of the certificate of title, but indicate the secured party on the
certificate of title and provide notice to such secured party of surrender of
the certificate of title by another person. If either NationsCredit Commercial
is in possession of a certificate of title that must be surrendered to
re-register the Boat or NationsCredit Commercial receives notice of any
surrender of the certificate of title by another person, NationsCredit
Commercial would then have the opportunity to continue the perfection of the
security interest in the Boat in the state of registration. If the Obligor moves
to a state which does not require surrender of a certificate of title for
reregistration of a Boat, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of marine contracts, NationsCredit
Commercial generally takes steps to effect such perfection upon receipt of
notice of surrender or information from the Obligor as to relocation in those
states that require any action to be taken. Similarly, when an Obligor sells a
Boat, under the laws of many states, the purchaser cannot re-register the Boat
unless NationsCredit Commercial surrenders possession of the certificate of
title and accordingly NationsCredit Commercial will have an opportunity to
require satisfaction of the related Receivable before release of the lien.
If NationsCredit Commercial has perfected NationsCredit Commercial's
security interest by the filing of a UCC-1 financing statement, or the Obligor
moves from a title state to a non-title state, NationsCredit Commercial files a
UCC-1 financing statement in the new state of the Obligor as soon as possible
after receiving notice of the Obligor's change of residence. UCC-1 financing
statements expire after five years. When the term of a loan exceeds five years,
the filing must be continued in order to maintain NationsCredit Commercial's
perfected security interest. NationsCredit Commercial takes steps to effect such
continuation. In the event that an Obligor moves to a state other than the state
in which the UCC-1 financing statement is filed or in certain states to a
different county in such state, under the laws of most states the perfection of
the security interest in the Boat would continue for four months after such
relocation, unless the perfection in the original jurisdiction would have
expired earlier. A new financing statement must be filed in the state of
relocation or, if such state is a title state, a notation on the certificate of
title must be made in order to continue NationsCredit Commercial's security
interest. NationsCredit Commercial generally takes steps to effect such
re-perfection upon notification of an address change. Generally, in both title
states and in non-title states, NationsCredit Commercial will not re-perfect a
state law security interest which has expired or where the Obligor has moved if
the Receivable has a small balance, a short remaining term and the Obligor has a
good payment record.
Under the laws of many states, liens for storage and repairs performed
on a boat and certain tax liens take priority even over a perfected state law
security interest. The Servicer will represent and warrant in the Agreement with
respect to the Receivables sold to the Trust that, as of the Closing Date, to
the best of the Servicer's knowledge, no such liens or claims are pending or
threatened with respect to a Boat which may be or become prior to or equal with
the lien of the related Receivable. In the event of a material adverse breach of
such warranty, the only recourse of the Trust would be to require the Servicer
to repurchase the Receivable secured by such Boat.
Due to the administrative burden and expense (estimated by
NationsCredit Commercial to be $_______, excluding associated labor costs) of
(i) endorsing the certificate of title of each Boat to reflect the Trust's
interest therein and delivering each such certificate of title to the Trustee
for filing (and the payment of related filing fees), in the case of Boats
licensed in states where security interests in boats are subject to certificate
of title statutes; and (ii) filing amendments to UCC-1 financing statements
relating to each Boat (and the payment of related filing fees) to reflect the
Trust's interest therein, in the case of Boats licensed in states where security
interests in boats are perfected by filing a UCC-1 financing statement, none of
such certificates of title will be endorsed, delivered and filed, or UCC-1
financing statements amended. In the absence of such procedures, the Trust may
not have a perfected security interest in the Boats licensed in certificate of
title or UCC states, but the failure to make such endorsements, filings or
recordations will not affect the validity of the original security interest as
against the Obligor under a Receivable in UCC states.
NationsCredit Commercial's security interests in the Boats will be
assigned to the Trust. However, because of the administrative burden and
expense, the certificates of title relating to the Boats will not be endorsed to
reflect the Trust's interest therein, nor will any certificates of title in
NationsCredit Commercial's possession be delivered to the Trust. Accordingly,
NationsCredit Commercial will continue to be named as the secured party on the
certificates of title relating to the Boats registered in "title" states. In
most such states, such an assignment would be an effective conveyance of such a
security interest and the new secured party would succeed to NationsCredit
Commercial's rights as the secured party. In the absence of fraud or forgery by
the Obligor or administrative error by Federal, state or local recording
officials, the notation of the lien of NationsCredit Commercial's on the
certificate of title will be sufficient to protect the Trust against the rights
of subsequent purchasers of a Boat or subsequent lenders who take a security
interest in the Boat. There exists a risk, however, in not identifying the Trust
as the new secured party on the certificate of title, that the Trust may in some
states be subordinate to claims of creditors or the receiver of NationsCredit
Commercial in the event of the insolvency of NationsCredit Commercial and that,
through fraud or negligence, the security interest of such Trust could be
released by NationsCredit Commercial as security holder of record.
The Servicer will represent and warrant in the Agreement with respect
to the Trust that there shall exist a valid, subsisting and enforceable first
priority perfected security interest in each Boat in favor of the Trust, as of
the Closing Date, and that such security interest will be assigned to the Trust.
In the event of a material adverse breach of such warranty, the only recourse of
the Trust against the Servicer would be to require the Servicer to repurchase
the Receivable secured by the Boat involved. See "The Certificates - Sale and
Assignment of Receivables".
ENFORCEMENT OF SECURITY INTEREST IN BOATS
In the event that required payments under the Surety Bond are not made,
the Servicer on behalf of such Trust may take action to enforce the security
interest in Boats securing Defaulted Receivables by repossession and resale of
the Boats. Under the UCC and consumer protection laws applicable in most states,
a creditor can, without prior notice to the debtor, repossess a boat securing a
defaulted contract by the obligor's voluntary surrender, by "self-help"
repossession that does not involve a breach of the peace and by judicial
process. However, some jurisdictions require that the obligor be notified of the
default and be given a time period within which the obligor may cure the default
prior to repossession. Generally, this right to cure may be exercised a limited
number of times in any one-year period.
The UCC and other state laws place restrictions on repossession sales,
including requirements that the secured party provide the obligor with
reasonable notice of the date, time and place of any public sale and/or the date
after which any private sale of the collateral may be held and that any such
sale be conducted in a commercially reasonable manner.
The obligor has the right to redeem the collateral prior to actual sale
by paying the secured party the delinquent payments of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus in some jurisdictions, reasonable
attorneys' fees, or in some states, by payment of the unpaid balance.
In the event of such a repossession and resale of a Boat, the Servicer,
on behalf of the Trust, would be entitled to be paid the full amount of the
Obligor's indebtedness out of the sale proceeds before such proceeds could be
applied to the payment of the claims of the holders of junior security interests
in the Boats, unsecured creditors, or thereafter, to the debtor.
Under the UCC and laws applicable in most states, a creditor is
entitled to obtain a deficiency judgment from an obligor for any deficiency on
repossession and resale of the boat securing the unpaid balance of such
obligor's contract. However, some states may impose prohibitions or limitations
on deficiency judgments. If a deficiency judgment were granted, the judgment
would be a personal judgment against the obligor for the shortfall, and a
defaulting obligor may have very little capital or sources of income available
following repossession. Therefore, in many cases it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
Certain statutory provisions, including Federal and state bankruptcy
and insolvency laws, may also limit the ability of the Servicer to repossess and
resell collateral or obtain a deficiency judgment. Certain other factors,
including the value of a repossessed Boat, may limit the amount realized on the
sale of the collateral to less than the amount due on a Receivable.
CONSUMER PROTECTION LAWS
Numerous Federal and state consumer protection laws and related
regulations impose requirements upon creditors and servicers involved in
consumer financing applicable to the origination and servicing of the
Receivables. These laws and regulations include the Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Federal Trade Commission Credit Practices Rule, state unfair and
deceptive trade practice laws, state adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code and state motor vehicle retail
installment sales acts, retail installment sales acts, and other similar laws.
Also, state laws may impose finance charge ceilings and other restrictions on
consumer credit transactions and require contract disclosures in addition to
those required under Federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect the ability of an assignee such as the
Trustee to enforce consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course-Rule" of the Federal Trade
Commission (the "FTC Rule"), has the effect of subjecting any assignee of the
seller in a consumer credit transaction to all claims and defenses which the
obligor in the credit sale transaction could assert against the seller of the
goods. Liability under the FTC Rule is limited to the amounts paid by the
obligor under the contract, and the holder of the contract may also be unable to
collect any balance remaining due thereunder from the obligor. The FTC Rule is
generally duplicated by the Uniform Consumer Credit Code, other state statutes
or the common law in certain states. Most of the Receivables will be subject to
the requirements of the FTC Rule. Accordingly, NationsCredit Commercial, as
assignee of the Dealers, and the Trust, as direct or indirect assignee of
NationsCredit Commercial and as holder of the Receivables, will be subject to
any claims or defenses that the Obligor who purchased the related financed Boat
may assert against the Dealer who sold the financed Boat.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections of the 14th Amendment to the Constitution of the United States.
Courts have generally either upheld the notice provisions of the UCC and related
laws as reasonable or have found that the creditor's repossession and resale do
not involve sufficient state action to afford constitutional protection to
consumers.
Representations and warranties from NationsCredit Commercial have been
assigned to the Trust that each Receivable complies with all requirements of law
in all material respects. Accordingly, if an Obligor has a claim against the
Trustee for violation of any law and such claim materially and adversely affects
the Trustee's interest in a Receivable, such violation would constitute a breach
of warranty under the related Agreement and would create an obligation of
NationsCredit Commercial to repurchase the Receivable unless the breach were
cured. In the event of such a material adverse breach of warranty, the only
recourse of a Trust against NationsCredit Commercial would be to require
NationsCredit Commercial to repurchase each Receivable involved. See "The
Certificates - Sale and Assignment of Receivables".
OTHER MATTERS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the Federal bankruptcy law, a court may prevent a
creditor from repossessing a boat or recreational vehicle and, as a part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the boat or recreational vehicle at the time of bankruptcy (as
determined by the court), leaving the party providing financing as a general
unsecured creditor for the remainder of the indebtedness. A bankruptcy court may
also reduce the monthly payments due under an installment sale contract or
change the rate of interest and time of repayment of the indebtedness.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material Federal income tax
consequences of the purchase, ownership, and disposition of Certificates. This
summary is based upon laws, regulations, rulings, and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all Federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. In addition, this summary is generally
limited to investors who will hold the Certificates as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). Prospective
investors should note that no rulings have been or will be sought from the
Internal Revenue Service (the "IRS") with respect to any of the Federal income
tax consequences discussed below, and no assurance can be given that the IRS
will not take contrary positions. However, Special Federal Tax Counsel (as
defined below) is of the opinion that the statements in this Prospectus under
the headings "Prospectus Summary - Tax Status" and "Certain Federal Income Tax
Consequences," accurately describe the material federal income tax consequences
generally applicable to investors.
BECAUSE TAX CONSEQUENCES MAY VARY BASED ON THE STATUS OR TAX ATTRIBUTES
OF THE CERTIFICATE OWNER, INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS TO
DETERMINE THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP, AND DISPOSITION OF THE CERTIFICATES RESULTING FROM
INDIVIDUAL CHARACTERISTICS OR CIRCUMSTANCES.
TAX STATUS OF THE TRUST; SCOPE OF TAX OPINION
In the opinion of Stroock & Stroock & Lavan LLP, special federal tax
counsel to the Depositor ("Special Federal Tax Counsel"), the Trust will not be
classified as an association taxable as a corporation for Federal income tax
purposes, but will be classified as a grantor trust, and each Certificate Owner
will be subject to Federal income taxation as if it owned directly its interest
in each asset owned by the Trust and paid directly its share of reasonable
expenses paid by the Trust.
TREATMENT OF CERTIFICATE OWNERS' INTEREST IN TRUST ASSETS
Each Certificate Owner could be considered to own either (i) an
undivided interest in a single debt obligation held by the Trust and having a
principal amount equal to the total stated principal amount of the Receivables
and an interest rate equal to the Pass-Through Rate, or (ii) an interest in each
of the Receivables and in the other assets of the Trust. The Agreement will
express the intent of the Depositor to cause the Trust to purchase the
Receivables (other than the Retained Yield (as defined below)) and the
Depositor, the Certificateholders, and each Certificate Owner, by accepting a
beneficial interest in a Certificate, will agree to treat the Certificates as
ownership interests in the Receivables.
Treatment as Debt Obligation. If a Certificate Owner were considered to
own an undivided interest in a single debt obligation, rather than reporting its
share of the interest accrued on each Receivable it would, in general, be
required to include in income interest accrued or received on the principal
amount of its Certificates at the Pass- Through Rate in accordance with its
usual method of accounting.
The Certificates would be subject to the original issue discount
("OID") rules, generally in the manner discussed below. However, in determining
whether such OID is de minimis, the weighted average life of the Certificates
would be determined using a reasonable assumption regarding anticipated
prepayments (a "Prepayment Assumption"). OID includible in income for any
accrual period (generally, the period between payment dates) would generally be
calculated using a Prepayment Assumption and an anticipated yield established as
of the date of initial sale of the Certificates, and would increase or decrease
to reflect prepayments at a faster or slower rate than anticipated. The
Certificates would also be subject to the market discount provisions of the
Code, to the extent that a Certificate Owner purchased such Certificates at a
discount from the initial issue price (as adjusted to reflect prior accruals of
original issue discount).
Income on Receivables. The remainder of the discussion herein assumes
and Special Federal Tax Counsel is of the opinion that a Certificate Owner will
be treated as owning an interest in each Receivable (and the proceeds thereof).
For Federal income tax purposes, the Depositor will be treated as
having retained a fixed portion of the interest due on each Receivable equal to
the difference between (x) the APR of the Receivable and (y) the sum of the
Pass- Through Rate and the Servicing Fee (the "Retained Yield"). The Retained
Yield will be treated as "stripped coupons" within the meaning of section 1286
of the Code, and the Receivables will be treated as "stripped bonds".
Accordingly, each Certificate Owner will be treated as owning its pro rata
percentage interest of the principal payable on each Receivable (the "Receivable
Principal") and its pro rata percentage interest of the interest payable on each
Receivable minus the Retained Yield (the "Receivable Interest", and as to each
Receivable, the respective Receivable Principal and Receivable Interest referred
to herein as a "Stripped Receivable"). Accordingly, each Certificate Owner will
be treated as owning its pro rata percentage interest in the principal of, and
interest payable on, each Stripped Receivable (minus the Retained Yield).
Each Certificate Owner will be required to report on its Federal income
tax return its share of the gross income of the Trust, including interest and
certain other charges accrued on the Stripped Receivables, original issue
discount, investment earnings on amounts held pending distribution, and any gain
upon collection or disposition of the Stripped Receivables. Such income (other
than original issue discount) would be includible in income in accordance with a
Certificate Owner's usual method of accounting. Accordingly, interest would be
includible in a Certificate Owner's gross income at the time it accrues on the
Stripped Receivables, or, in the case of Certificate Owners who are cash basis
taxpayers, when received by the Servicer on behalf of Certificate Owners.
Because (i) interest accrues on the Stripped Receivables over differing monthly
periods and is paid in arrears and (ii) interest collected on a Stripped
Receivable is generally paid to Certificate Owners in the following month, the
amount of interest accruing to or received by the Servicer on behalf of a
Certificate Owner during any month will not equal the interest distributed in
that month. Any amounts received by a Certificate Owner from the Surety Bond or
the Reserve Account will be treated, for Federal income tax purposes, as having
the same characteristics as the payments they replace.
A Certificate Owner will be entitled to deduct, consistent with its
method of accounting, its pro rata share of reasonable servicing fees and other
fees paid or incurred by the Trust as provided in Section 162 or 212 of the
Code. If a Certificate Owner is an individual, estate or trust, the deduction
for such holder's share of such fees will be allowed only to the extent that all
of such holder's miscellaneous itemized deductions, including such holder's
share of such fees, exceed 2% of such holder's adjusted gross income. In
addition, in the case of Certificate Owners who are individuals, certain
otherwise allowable itemized deductions will be reduced, but not by more than
80%, by an amount equal to 3% of such holder's adjusted gross income in excess
of a statutorily defined threshold. The Servicer will not report to Certificate
Owners the amount of income or deductions attributable to interest earned on
collections (which is includible in gross income, but deduction of which is
subject to the foregoing limitations) and, accordingly, such a holder will not
have sufficient information from the report itself to accurately reflect the
holder's net taxable income.
For administrative convenience, the Servicer intends to report
information with respect to the Certificates on an aggregate basis (as though
all of the Stripped Receivables were a single obligation), rather than on an
asset-by-asset basis. The amount and, in some instances, character, of the
income reported to a Certificate Owner may differ under this method for a
particular period from that which would be reported if income were reported on a
precise asset-by- asset basis. Accordingly, the IRS could require that a
Certificate Owner calculate its income either (i) on an asset-by- asset basis,
accounting separately for each Receivable or (ii) aggregating all Stripped
Receivables under the aggregation rule described below. See Original Issue
Discount.
The remainder of the disclosure generally describes the Code provisions
governing reporting of income on the Stripped Receivables on a separate basis.
DISCOUNT AND PREMIUM
In determining whether a Certificate Owner has purchased a Receivable
with OID or market discount, a portion of the purchase price of a Certificate
should be allocated to the Certificate Owner's undivided interest in accrued but
unpaid interest and to amounts collected at the time of purchase but not
distributed. As a result, the portion of the purchase price allocable to a
Certificate Owner's undivided interest in the Stripped Receivables (the
"Purchase Price") will be decreased and the potential OID on the Receivables
could be increased.
Original Issue Discount. Because the Stripped Receivables represent
stripped bonds, Stripped Receivables will be subject to the OID rules of the
Code. Under Treasury Regulations issued under Section 1286 of the Code (the
"Section 1286 Regulations"), it appears that the portion of the interest on each
Stripped Receivable payable to the Certificate Owners may be treated as
"qualified stated interest". As a result, the amount of OID on a Stripped
Receivable (or Stripped Receivables) will equal the amount by which the Purchase
Price is less than the portion of the remaining principal balance of the
Stripped Receivable (or Stripped Receivables) allocable to the interest
acquired.
The Underwriters will calculate OID, if any, on all of the Stripped
Receivables on an aggregate basis and without the use of a prepayment
assumption. Regulations issued under the OID provisions of the Code (the "OID
Regulations"), suggest that all payments on each Stripped Receivable allocable
to the Certificates may be aggregated in determining whether each Stripped
Receivable will be treated as having OID. In addition, it is not clear whether
use of a prepayment assumption is required in computing OID. If the Servicer
were to require that OID be computed on a Stripped Receivable-by-Stripped
Receivable basis, or that a prepayment assumption be used, the character and
timing of a Certificate Owner's income could be adversely affected. Because
under the stripped bond rules, each sale of a Certificate results in a
recalculation of OID, a Certificate Owner will not be subject to the market
discount provisions of the Code with respect to Stripped Receivables.
The tax treatment of a Stripped Receivable (or the Stripped Receivables
in the aggregate) will depend upon whether the amount of OID on the Stripped
Receivable or Stripped Receivables in the aggregate is less than a statutorily
defined de minimis amount. In general, under the Section 1286 Regulations the
amount of OID on a Stripped Receivable (or Receivables in the aggregate) will be
de minimis if it is less than 1/4 of one percent for each full year of weighted
average maturity remaining after the purchase date until the maturity of the
Stripped Receivable (or Receivables in the aggregate) (although it is not clear
whether expected prepayments are taken into account). If the amount of OID is de
minimis under this rule, a Stripped Receivable (or Receivables in the aggregate)
would not be treated as having OID. The actual amount of discount on a Stripped
Receivable would be includible in income as principal payments are received on
the Stripped Receivable, in the proportion that each principal payment bears to
the total principal amount of the Stripped Receivable.
If the OID on a Stripped Receivable (or Receivables in the aggregate)
is not treated as being de minimis, in addition to the amounts described above,
a Certificate Owner will be required to include in income any OID as it accrues
on a daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield to maturity on the Stripped Receivable (or
Receivables in the aggregate). Accrued OID would increase a Certificate Owner's
tax basis in the Certificate (and the applicable Stripped Receivables).
Distributions of principal and other items attributable to accrued OID (other
than payments of interest on the Stripped Receivables at the sum of the
Pass-Through Rate and the Servicing Fee) would reduce a Certificate Owner's tax
basis. Application of the OID rules, particularly if a prepayment assumption is
required and the Stripped Receivables are not aggregated, would be complex and
could significantly affect the timing of inclusion of income on a Certificate.
The Underwriters intend to account for OID, if any, reportable by
Certificateholders by reference to the price paid for a Certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID on the interest in the Stripped
Receivables represented by the Certificates.
Premium. In the event that a Stripped Receivable is treated as
purchased at a premium (i.e., its Purchase Price exceeds the portion of the
remaining principal balance of such Receivable allocable to the Certificate
Owner), such premium will be amortizable by the Certificate Owner as an offset
to interest income (with a corresponding reduction in the Certificate Owner's
basis) under a constant yield method over the term of the Stripped Receivable if
an election under Section 171 of the Code is made with respect to the interests
in the Stripped Receivables represented by the Certificates or was previously in
effect. Any such election will also apply to all debt instruments held by the
Certificate Owner during the year in which the election is made and all debt
instruments acquired thereafter.
RULE OF 78'S RECEIVABLES
The annual statement regularly furnished to Certificateholders for
Federal income tax purposes will include information based on the actuarial
method of accounting for interest and principal on certain of the Stripped
Receivables, and for a portion of the amount of the fees paid to the Servicer
and others. Certificate Owners should generally be permitted to account for
interest on such Stripped Receivables using the actuarial method. However, these
Stripped Receivables provide that, upon a prepayment in full, the amount payable
by the Obligor will be determined under the Rule of 78's (the "Rule of 78's
Receivables"). Prospective investors should consult their tax advisors as to
whether they may be required or permitted to use the Rule of 78's method to
account for interest on the Rule of 78's Receivables. A Certificateholder will
be furnished information for Federal income tax purposes enabling him to report
interest on the Stripped Receivables under the Rule of 78's method of accounting
only upon written request to the Trustee, and payment of the actual costs of
producing the same.
If a Rule of 78's Receivable is prepaid, any amount received by the
Trust upon prepayment in excess of the account balance using the actuarial
method would constitute income to a Certificate Owner who had reported income
with respect to such Rule of 78's Receivable on the actuarial method, and an
amount equal to such excess will be paid to the Servicer and will be deductible
only to the extent described above.
SALE OF A CERTIFICATE
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Certificate Owner's
adjusted basis in the Stripped Receivables and any other assets held by the
Trust. A Certificate Owner's adjusted basis will equal the Certificate Owner's
cost for the Certificate, increased by any discount previously included in
income, and decreased by any deduction previously allowed for accrued premium
and by the amount of principal payments previously received on the Stripped
Receivables. Any gain or loss not attributable to accrued interest will be
capital gain or loss if the Certificate was held as a capital asset.
FOREIGN CERTIFICATE OWNERS
Interest attributable to Stripped Receivables which is payable to a
foreign Certificate Owner will generally not be subject to the 30% withholding
tax generally imposed with respect to such payments, provided that such
Certificate Owner is not engaged in a trade or business in the United States and
that such Certificate Owner fulfills certain certification requirements. Under
such certification requirements, the Certificate Owner must certify, under
penalties of perjury, that it is not a "United States person" and that it is the
beneficial owner of the Certificates, and must provide its name and address. For
this purpose, "United States person" means a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust treated as a U.S. person under Code Section 7701.
BACKUP WITHHOLDING
In general, if the Certificate Owner fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code, payments made on the Certificates and proceeds from the sale of
Certificates will be subject to a "backup" withholding tax of 31%.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on employee benefit plans
and certain other retirement plans and arrangements, including individual
retirement accounts and annuities, Keogh plans and collective investment funds
and separate accounts in which such plans, accounts or arrangements are invested
that are subject to ERISA and the Code (all of which are hereinafter referred to
as a "Plan") and on persons who are fiduciaries with respect to such Plans.
Moreover, based on the reasoning of the United States Supreme Court in John
Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993), an
insurance company's general account may be deemed to include assets of the Plans
investing in the general account (e.g., through the purchase of an annuity
contract), and the insurance company might be treated as a fiduciary with
respect to such plans by virtue of such investment. In accordance with ERISA's
general fiduciary standards, before investing in a Certificate, a Plan fiduciary
should determine whether such an investment is permitted under the governing
Plan instruments and is appropriate for the Plan in view of its overall
investment policy and the composition and diversification of its portfolio.
Other provisions of ERISA and the Code prohibit certain transactions involving
the assets of a Plan and persons who have certain specified relationships to the
Plan ("parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code). Thus, a Plan fiduciary considering an
investment in Certificates should also consider whether such an investment might
constitute or give rise to a prohibited transaction under ERISA or the Code.
An investment in Certificates by a Plan might result in the assets of
the Trust being deemed to constitute Plan assets, which in turn might mean that
certain aspects of such investment, including the operation of the Trust, might
be prohibited transactions under ERISA and the Code. There may also be an
improper delegation of the responsibility to manage Plan assets if Plans that
purchase the Certificates are deemed to own an interest in the underlying assets
of the Trust. Neither ERISA nor the Code defines the term "plan assets". Under
Section 2510.3-101 of the United States Department of Labor ("DOL") regulations
(the "Regulation"), a Plan's assets may include an interest in the underlying
assets of an entity (such as a trust) for certain purposes, including the
prohibited transaction provisions of ERISA and the Code, if the Plan acquires an
"equity interest" in such entity.
EXEMPTION FOR CERTIFICATES
The DOL has issued an individual exemption, Prohibited Transaction
Exemption 93-31, to NationsBank Corporation and its affiliates (the
"Exemption"). Pursuant to the Exemption a Plan may purchase, hold and transfer
the Certificates. The Exemption generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA and the excise taxes
imposed on such prohibited transactions pursuant to Section 4975(a) and (b) of
the Code and Section 502(i) of ERISA certain transactions relating to the
initial purchase, holding and subsequent resale by Plans of certificates in
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements set forth in the
Exemption. The receivables covered by the Exemption include fixed rate simple
interest retail marine installment sale contracts and retail marine installment
loans such as the Receivables. The Exemption will apply to the acquisition,
holding and resale of the Certificates by a Plan, provided that specified
conditions (certain of which are described below) are met. The Depositors
believe that the Exemption will apply to the acquisition and holding of the
Certificates by a Plan and that all conditions of the Exemption other than those
within the control of the investors have been or will be met.
The Exemption sets forth six general conditions that must be satisfied
for a transaction involving the acquisition of the Certificates by a Plan to be
eligible for the exemptive relief thereunder:
(1) the acquisition of the Certificates by a Plan is on terms
(including the price for the Certificates) that are at least as
favorable to the Plan as they would be in an arms'-length transaction
with an unrelated party;
(2) the rights and interests evidenced by the Certificates acquired
by a Plan are not subordinated to the rights and interests evidenced by
other certificates of the Trust;
(3) the Certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest
generic rating categories of S&P, Moody's, Duff & Phelps or Fitch
Investors Service, L.P.;
(4) the Trustee is not an affiliate of any other member of the
"Restricted Group," which consists of the Underwriter, the Depositor,
the Servicer, the Trustee, the Surety Bond Issuer and any Obligor with
respect to the Receivables included in the Trust constituting more than
5% of the aggregate unamortized principal balance of the assets of the
Trust as of the date of initial issuance of the Certificates, and any
affiliate of such parties;
(5) the sum of all payments made to and retained by the Underwriter
in connection with the distribution or placement of the Certificates
represents not more than reasonable compensation for underwriting or
placing the Certificates. The sum of all payments made to and retained
by the Depositor pursuant to the sale of the Receivables to the Trust
represents not more than the fair market value of such Receivables. The
sum of all payments made to and retained by the Servicer represents not
more than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith; and
(6) the Plan investing in the Certificates must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act.
In addition the Trust must satisfy the following requirements:
(a) the corpus of the Trust must consist solely of assets of the
type which have been included in other investment pools.
(b) certificates in such other investment pools must have been
rated in one of the three highest generic rating categories of S&P,
Moody's, Duff & Phelps or Fitch Investors Service, L.P. for at least
one year prior to the Plan's acquisition of the Certificates, and
(c) certificates evidencing interests in such other investments
pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of the Certificates.
If the general conditions of the Exemption are satisfied, the
Exemption may provide relief from the restrictions imposed by Sections 406(a)
and 407(a) of ERISA as well as the excise taxes imposed by Sections 4975(a) and
(b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code, in
connection with the direct or indirect sale, exchange, transfer or holding of
the Certificates by a Plan. However, no exemption is provided from the
restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the
acquisition or holding of a Certificate on behalf of an "Excluded Plan" by any
person who has discretionary authority or renders investment advice with respect
to the assets of such Excluded Plan. For purposes of the Certificates, an
Excluded Plan is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide relief from the restrictions imposed by Sections 406(b)(1)
and (b)(2) and 407(a) of ERISA and the taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with
the direct or indirect sale, exchange, transfer or holding of the Certificates
in the initial issuance of the Certificates between the Depositor or Underwriter
and a Plan other than an Excluded Plan when the person who has discretionary
authority or renders investment advice with respect to the investment of Plan
assets in the Certificates is (a) an Obligor with respect to 5% or less of the
fair market value of the Receivables or (b) an affiliate of such person.
The Exemption also applies to transactions in connection with the
servicing, management and operation of the Trust, provided that, in addition to
the general requirements described above, (a) such transactions are carried out
in accordance with the terms of a binding pooling and servicing agreement and
(b) the pooling and servicing agreement is provided to, or described in all
material respects in the prospectus provided to, investing Plans before their
purchase of the Certificates issued by the Trust. The Agreement is a pooling and
servicing agreement as defined in the Exemption. All transactions relating to
the servicing, management and operations of the Trust will be carried out in
accordance with the Agreement. See "The Certificates."
The Exemption also may provide relief from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA and the taxes imposed by Sections
4975(c)(1)(A) through (D) of the Code if such restrictions are deemed to
otherwise apply merely because a person is deemed to be a party in interest or a
disqualified person with respect to an investing Plan by virtue of providing
services to a Plan (or by virtue of having certain specified relationships to
such a person) solely as a result of such Plan's ownership of the Certificates.
Any Plan fiduciary considering whether to purchase a Certificate on
behalf of a Plan should consult with experienced legal counsel regarding the
applicability of the Exemption and other applicable issues and whether the
Certificates are an appropriate investment for a Plan under ERISA and the Code.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") dated ___________, 1997, between the
Depositor and the Underwriters, the Depositor has agreed to sell to the
Underwriters, and the Underwriters have agreed to purchase, the principal amount
of the Certificates set forth on the cover page of this Prospectus.
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the Certificates
offered hereby if any Certificates are purchased. The Depositor has been advised
by the Underwriters that the Underwriters propose initially to offer the
Certificates to the public at the public offering price set forth on the cover
page of this Prospectus, and to certain dealers at such price less a concession
not in excess of ___% of the principal amount of the Certificates. The
Underwriters may allow and such dealers may reallow a concession not in excess
of ___% of such principal amount. After the initial public offering, the public
offering price and such concessions may be changed.
The Underwriting Agreement provides that the Depositor will indemnify
the Underwriters against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the Underwriters may be
required to make in respect thereof.
NationsBanc Capital Markets, Inc. ("NCMI"), one of the Underwriters, is
an affiliate of the Depositor. Under Schedule E to the By-Laws ("Schedule E") of
the National Association of Securities Dealers, Inc. (the "NASD"), when an NASD
member, such as NCMI, participates in the distribution of an affiliated
company's securities, the offering must be conducted in accordance with the
applicable provisions of Schedule E. The Depositor is considered to be an
"affiliate" (as such term is defined in Schedule E) of NCMI. The offer and sale
of any Certificates by NCMI will comply with the requirements of Schedule E
regarding the underwriting of securities of affiliates. Pursuant to such
compliance, it is contemplated that only securities rated "investment grade" by
a rating service acceptable to the NASD will be offered hereby. In addition,
such offers and sales will comply with any restrictions as may be imposed on
NCMI by the Federal Reserve Board. Under Schedule E, no NASD member
participating in offers and sales of the Certificates may execute a transaction
in the Certificates in a discretionary account without the specific prior
written approval of the member's customer.
While NCMI is an affiliate of the Depositor, NCMI is a registered
broker/dealer. Any obligations of NCMI are the sole responsibility of NCMI and
do not create any obligation or guarantee on the part of any affiliate of NCMI.
EXPERTS
The financial statements of Capital Markets Assurance Corporation as of
December 31, 1996 and 1995 and for each of the years in the three-year period
ended December 31, 1996 have been audited by [ ], independent auditors, as
indicated in their report with respect thereto and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
The report of [ ] referred to above refers to the Company's adoption at
December 31, 1993 of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon
for the Depositor and the Underwriters by Stroock & Stroock & Lavan LLP, Special
Counsel of the Depositor and the Underwriters. Certain legal matters relating to
the Federal tax consequences of the issuance and ownership of the Certificates
will be passed upon by Stroock & Stroock & Lavan LLP.
<PAGE>
INDEX
PAGE
accredited investor.......................................... 53
APR.......................................................... 14
Agreement.................................................... 2,3
Avoided Payment.............................................. 36
Boats........................................................ 4
CapMAC....................................................... 6
Cede......................................................... 28
Certificate(s)............................................... 2,4
Certificate Account.......................................... 11,31
Certificate Balance.......................................... 5
Certificate Factor........................................... 25
Certificateholders........................................... 2
Certificate Owner............................................ 3
Closing Date................................................. 4,30
Code......................................................... 48
Collateral Agent............................................. 2
Collection Period............................................ 28
Commission................................................... 3
Cutoff Date.................................................. 4
Dealer....................................................... 9
Dealer Agreements............................................ 11
Defaulted Receivable......................................... 34
Definitive Certificates...................................... 29
delinquency cure............................................. 12
Depository................................................... 28
Determination Date...........................................
Direct Participants.......................................... 28
Distribution Date............................................ 2
DOL.......................................................... 52
DTC.......................................................... 5,28
Duff & Phelps................................................ 26
ERISA........................................................ 7,52
Events of Default............................................ 39
Exchange Act................................................. 3
Excluded Plan................................................ 54
Exemption.................................................... 52
Final Order.................................................. 36
Final Scheduled Distribution Date............................ 2
FTC Rule..................................................... 47
Holders...................................................... 29
Holdings..................................................... 26
Indirect Participants........................................ 28
Initial Pool Balance......................................... 2
Insolvency Laws.............................................. 25
Insolvency Proceeding........................................ 36
Insurance Agreement.......................................... 5,35
IRS.......................................................... 48
marine contracts............................................. 11
Marine Contract Portfolio.................................... 11
Monthly Interest Payment..................................... 34
Monthly Principal Payment.................................... 34
Monthly Servicing Fee........................................ 34
Moody's...................................................... 7
NASD......................................................... 55
NCMI......................................................... 55
NationsCredit................................................ 4,25
NationsCredit Commercial..................................... 4,26
Net Credit Loss Ratio........................................ 40
Obligor...................................................... 8
OID.......................................................... 48
OID Regulations.............................................. 50
Participants................................................. 28
Pass-Through Rate............................................ 4
Paying Agent................................................. 28
Plan......................................................... 52
Pool Balance................................................. 2
Preference Amount............................................ 34
Preference Event............................................. 36
Prepayment Assumption........................................ 48
Purchase Amount.............................................. 31
Purchase Price............................................... 50
Rating Agencies.............................................. 7
Receipt...................................................... 36
Received..................................................... 36
Receivable Interest.......................................... 49
Receivable Principal......................................... 49
Receivables.................................................. 2,4
Record Date.................................................. 4
Regulation................................................... 52
Reserve Account.............................................. 5,37
Restricted Group............................................. 52
Retained Yield............................................... 49
Rule of 78's Receivables..................................... 51
Rules........................................................ 29
S&P.......................................................... 7
Schedule E................................................... 55
Securities Act............................................... 3
Section 1286 Regulations..................................... 50
Servicer Transfer............................................ 39
Servicer..................................................... 2,4
Servicing Fee Rate........................................... 5
Servicing Standards.......................................... 40
Ship Mortgage Act............................................ 16
Special Federal Tax Counsel.................................. 48
Specified Reserve Account Requirement........................ 5,37
Stripped Receivable.......................................... 49
Surety Bond.................................................. 2
Surety Bond Issuer........................................... 2,6
Trust........................................................ 2,4
Trustee...................................................... 2,6
UCC.......................................................... 8
Underwriter(s)............................................... 8
Underwriting Agreement....................................... 54
United States person......................................... 52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
FINANCIAL STATEMENTS:
Fiscal Years 1996 and 1995
Independent Auditor's Report...................................................
Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995.....
Consolidated Statements of Income for each of the years in the three-year
period ended December 31, 1996................................................
Consolidated Statements of Stockholders' Equity for each of the years in the
three-year period ended December 31, 1996.....................................
Consolidated Statements of Cash Flows for each of the years in the three-year
period ended December 31, 1996................................................
Notes to Financial Statements.................................................
<PAGE>
- ----------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. NEITHER THE
DELIVERY OF THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE DEPOSITOR OR THE RECEIVABLES SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------
TABLE OF CONTENTS
PAGE
Available Information.....................................
Incorporation of Certain Documents by
Reference.................................................
Reports to Certificateholders by the
Trustee...................................................
Prospectus Summary........................................
Risk Factors..............................................
The Trust.................................................
NationsCredit Commercial's Portfolio of
Marine Contracts .........................................
The Receivables Pool......................................
Certificate Factors and Trading Information
Use of Proceeds...........................................
The Depositor.............................................
The Servicer..............................................
The Surety Bond Issuer....................................
The Certificates..........................................
Certain Legal Aspects of the Receivables
Certain Federal Income Tax Consequences
ERISA Considerations......................................
Underwriting..............................................
Experts...................................................
Legal Matters.............................................
Index.....................................................
Index to Financial Statements..........................F-1
UNTIL _________, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
NATIONSCREDIT
GRANTOR TRUST 1997-1
$--------------
____% MARINE RECEIVABLE-
BACKED CERTIFICATES
NATIONSCREDIT
SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT COMMERCIAL
CORPORATION OF AMERICA
SERVICER
------------
PROSPECTUS
------------
NATIONSBANC CAPITAL MARKETS, INC.
[ ]
Dated ___________, 1997
<PAGE>
[ALTERNATE PAGE]
NATIONSCREDIT GRANTOR TRUST 1997-1
$--------------
____% MARINE RECEIVABLE-BACKED CERTIFICATES
NATIONSCREDIT SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA
SERVICER
Each ____% Marine Receivable-Backed Certificate (the "Certificates") offered
hereby will represent a fractional undivided interest in the NationsCredit
Grantor Trust 1997-1 (the "Trust"). The Trust will be formed pursuant to a
Pooling and Servicing Agreement (the "Agreement") to be entered into among
NationsCredit Securitization Corporation, as Depositor (the "Depositor"),
NationsCredit Commercial Corporation of America, as Servicer (the "Servicer"),
and Bankers Trust Company, as Trustee and as Collateral Agent (in such
capacities, the "Trustee" and the "Collateral Agent", respectively). The
property of the Trust will include a pool of marine retail installment sale
contracts secured by new and used boats, boat motors and any accompanying boat
trailers (the "Receivables"), all payments received or due thereunder after
__________, 1997 (the "Cutoff Date"), security interests in the boats and marine
equipment financed thereby, an irrevocable surety bond (the "Surety Bond"),
guaranteeing the timely payment of interest and principal on the Certificates,
issued by Capital Markets Assurance Corporation (the "Surety Bond Issuer") and
certain other property. The Servicer will be responsible for servicing and
maintaining custody of the Receivables. The aggregate principal balance of the
Receivables (the "Pool Balance") as of the Cutoff Date was $______________ (the
"Initial Pool Balance").
Principal and interest to the extent of the Pass-Through Rate of ____% per annum
on the Certificates will be distributed to holders of the Certificates
("Certificateholders") as of the Record Date on the 15th day of each month (or
the next following business day), beginning ______ 15, 1997 (each a
"Distribution Date"). The final scheduled Distribution Date on the Certificates
will be on ___________ 15, ____ (the "Final Scheduled Distribution Date").
FOR INFORMATION CONCERNING THE RISKS OF AN
INVESTMENT IN THE CERTIFICATES, SEE "RISK
FACTORS" COMMENCING ON PAGE 10.
---------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
AN INTEREST IN OR OBLIGATION OF NATIONSCREDIT SECURITIZATION
CORPORATION, NATIONSCREDIT COMMERCIAL CORPORATION OF
AMERICA OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS TO BE USED BY NATIONSBANC CAPITAL MARKETS, INC.
("NCMI") AN AFFILIATE OF THE SELLER IN CONNECTION WITH OFFERS AND SALES
RELATED TO MARKET-MAKING TRANSACTIONS IN THE CERTIFICATES IN
WHICH NCMI ACTS AS PRINCIPAL. NCMI MAY ALSO ACT AS AGENT IN SUCH
TRANSACTIONS. SALES WILL BE MADE AT PRICES RELATED TO THE
PREVAILING PRICES AT THE TIME OF SALE.
---------------
__________ __, 1997
<PAGE>
UNDERWRITING
This Prospectus is to be used by the Underwriter, an affiliate of the
Seller, in connection with offers and sales related to market-making
transactions in the Certificates in which the Underwriter acts as principal. The
Underwriter may also act as agent in such transactions. Sales will be made at
prices related to the prevailing prices at the time of sale. Any obligations of
the Underwriter are the sole obligations of the Underwriter and do not create
any obligations on the part of any affiliate of the Underwriter.
EXPERTS
The financial statements of Capital Markets Assurance Corporation as
of December 31, 1996 and 1995 and for each of the years in the three-year period
ended December 31, 1996 have been audited by [ ], independent auditors, as
indicated in their report with respect thereto and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
The report of [ ] referred to above refers to the Company's adoption
at December 31, 1993 of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon
for the Depositor and the Underwriters by Stroock & Stroock & Lavan LLP, Special
Counsel of the Depositor and the Underwriters. Certain legal matters relating to
the Federal tax consequences of the issuance and ownership of the Certificates
will be passed upon by Stroock & Stroock & Lavan LLP.
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. NEITHER THE
DELIVERY OF THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE DEPOSITOR OR THE RECEIVABLES SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------
TABLE OF CONTENTS
PAGE
Available Information.....................................
Incorporation of Certain Documents by
Reference...............................................
Reports to Certificateholders by the
Trustee.................................................
Prospectus Summary........................................
Risk Factors..............................................
The Trust.................................................
NationsCredit Commercial's Portfolio of
Marine Contracts .......................................
The Receivables Pool......................................
Certificate Factors and Trading Information
Use of Proceeds...........................................
The Depositor.............................................
The Servicer..............................................
The Surety Bond Issuer....................................
The Certificates..........................................
Certain Legal Aspects of the Receivables
Certain Federal Income Tax Consequences
ERISA Considerations......................................
Underwriting..............................................
Experts...................................................
Legal Matters.............................................
Index.....................................................
Index to Financial Statements..........................F-1
UNTIL _________, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[ALTERNATE PAGE]
NATIONSCREDIT
GRANTOR TRUST 1997-1
$--------------
____% MARINE RECEIVABLE-
BACKED CERTIFICATES
NATIONSCREDIT
SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT COMMERCIAL
CORPORATION OF AMERICA
SERVICER
------------
PROSPECTUS
------------
NATIONSBANC CAPITAL MARKETS, INC.
Dated ___________, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering of the Certificates, other than underwriting
discounts and commissions:
SEC Registration Fee..................................................$
Printing and Engraving................................................
Legal Fees and Expenses...............................................
Blue Sky Fees.........................................................
Accounting Fees and Expenses..........................................
Trustee Fees and Expenses.............................................
Rating Agency Fees....................................................
Miscellaneous.........................................................
Total........................................................
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware provides as
follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance--
(a) A Corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, event though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was a serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
Article 11 of the Certificate of Incorporation of the Registrant provides as
follows:
No director shall have any personal liability to the Corporation or its
stockholders for any monetary damages for breach of fiduciary duty as a
director, except that this Article 11 shall not eliminate or limit the liability
of each director:
(i) for any breach of such director's duty of loyalty to the
corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law,
or
(iv) for any transaction from which such director derived an
improper personal benefit.
If the Delaware Corporate law is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
furthest extent of the Delaware Corporate Law, as so amended. Any repeal or
modification of this provision shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
Article VI of the Registrant's Bylaws provides that:
The Registrant will indemnify any person who was a director, officer,
employee or agent of the Registrant to the fullest extent and in the manner set
forth in and as provided by the General Corporation Law of Delaware.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
Number Description
1.1 -- Form of Underwriting Agreement.*
3.1 -- Amended and Restated Certificate of Incorporation of the Seller. *
3.2 -- Amended and Restated By-Laws of the Seller. *
4.1 -- Form of Pooling and Servicing Agreement among the Seller, the Servicer
and the Trustee. *
4.2 -- Form of Standard Terms and Conditions of Agreement between the Seller
and the Servicer. *
4.3 -- Form of Surety Bond. *
4.4 -- Form of Dealer Agreement. *
5.1 -- Opinion of Stroock & Stroock & Lavan LLP with respect to legality. *
8.1 -- Opinion of Stroock & Stroock & Lavan LLP with respect to tax matters
(included as part of Exhibit 5.1). *
23.1 -- Consent of Stroock & Stroock & Lavan LLP (included as part of Exhibit
5.1). *
23.2 -- Consent of [ ]. *
24.1 -- Power of Attorney.
- -------------------
* To be filed.
(b) Financial Statement Schedules:
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering;
(4) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, such
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue;
(5) to provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit
prompt delivery to each purchaser;
(6) that for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(7) that for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing of Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irving and State of Texas, on the 25th day of
February 1997.
NATIONSCREDIT SECURITIZATION CORPORATION
(Registrant)
By: /S/ JOSEPH A. CUTRONA
Name: Joseph A. Cutrona
Title: Chief Executive Officer, President and
Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints each of John E. Mack and Joseph A. Cutrona his true and lawful
attorney-in-fact with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and to cause the same to be filed, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
granting to said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing whatsoever requisite or
desirable to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all acts and things that said attorneys-in-fact and agents, or either
of them, or their substitutes or substitute, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/JOSEPH A. CUTRONA Chief Executive Officer, President February 25, 1997
Joseph A. Cutrona and Director (principal executive
officer)
/S/ JOHN E. MACK Treasurer and Director (principal February 25, 1997
John E. Mack financial officer)
/S/ JAMES H. LUTHER Director February 25, 1997
James H. Luther
/S/ KARIN HIRTLER-GARVEY Senior Vice President and Chief February 25, 1997
Karin Hirtler-Garvey Accounting Officer (principal
accounting officer)
</TABLE>
