<PAGE> 1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 18, 1998
$690,000,000
BA MASTER CREDIT CARD TRUST
$648,750,000 CLASS A FLOATING-RATE ASSET BACKED CERTIFICATES, SERIES 1998-B
$41,250,000 CLASS B FLOATING-RATE ASSET BACKED CERTIFICATES, SERIES 1998-B
BANK OF AMERICA NATIONAL ASSOCIATION
TRANSFEROR AND SERVICER
------------------------
Each Class A Floating-Rate Asset Backed Certificate, Series 1998-B
(collectively, the "Class A Certificates") and each Class B Floating-Rate Asset
Backed Certificate, Series 1998-B (collectively, the "Class B Certificates," and
together with the Class A Certificates, the "Certificates") represents an
undivided interest in the assets of, and the right to receive certain payments
from, the BA Master Credit Card Trust (the "Trust"), created pursuant to a
Pooling and Servicing Agreement between Bank of America National Association
("Bank of America"), as transferor and servicer, and U.S. Bank National
Association (formerly known as First Bank National Association), as trustee. The
property of the Trust includes receivables (the "Receivables") generated from
time to time in a portfolio of MasterCard(R) and VISA(R) revolving credit card
accounts (the "Accounts"), all monies due and to become due in payment of the
Receivables, all proceeds of the Receivables and proceeds of any credit
insurance policies relating to the Receivables, any Enhancements, all monies on
deposit in certain bank accounts of the Trust (including any Permitted
Investment in which any such monies are invested) and the right to receive
Interchange allocable to the Certificates, as described herein.
(Continued on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS
NO ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE 20
IN THE PROSPECTUS.
PROCEEDS FROM THE ASSETS IN THE TRUST WILL BE THE ONLY SOURCE OF PAYMENTS
ON THE CERTIFICATES. THE CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF OR
INTEREST IN THE TRANSFEROR, BANKAMERICA CORPORATION, BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, OR ANY OF THEIR AFFILIATES. NEITHER THE
CERTIFICATES NOR THE UNDERLYING RECEIVABLES OR OTHER ASSETS OF THE TRUST ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE
TRANSFEROR, BANKAMERICA CORPORATION, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, OR ANY OF THEIR AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT TRANSFEROR(1)(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Certificate 100.000% .300% 99.700%
- ------------------------------------------------------------------------------------------------------------------------
Per Class B Certificate 100.000% .350% 99.650%
- ------------------------------------------------------------------------------------------------------------------------
Total $690,000,000 $2,090,625 $687,909,375
========================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the Class
B Certificate Rate, as applicable, from May 7, 1998.
(2) Before deduction of expenses estimated to be $750,000.
------------------------
This Prospectus Supplement and the related Prospectus may be used by
BancAmerica Robertson Stephens, an affiliate of the Transferor and Servicer, in
connection with offers and sales related to secondary market transactions in the
Certificates. BancAmerica Robertson Stephens may act as principal or agent in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale or otherwise.
The Certificates are offered by the Underwriter when, as and if issued by
the Trust and accepted by the Underwriter and subject to the Underwriter's right
to reject orders in whole or in part. It is expected that the Certificates will
be delivered in book-entry form on or about May 7, 1998, through the facilities
of The Depository Trust Company, Cedel Bank, societe anonyme, and the Euroclear
System.
------------------------
BANCAMERICA ROBERTSON STEPHENS
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS APRIL 30, 1998
<PAGE> 2
(Continued from previous page)
In addition, the Collateral Interest (as described herein) will be issued
in the initial amount of $60,000,000 and will be subordinated to the
Certificates as described herein. Bank of America initially will own the
remaining undivided interest in the Trust not represented by the Certificates,
the Collateral Interest and the other interests issued by the Trust from time to
time and will service the Receivables. Bank of America has offered and may from
time to time offer other Series of certificates that evidence undivided
interests in certain assets of the Trust, which may have terms significantly
different from the Certificates, and may establish other trusts from time to
time having assets substantially similar to the assets of the Trust.
Certain capitalized terms used herein are defined elsewhere in this
Prospectus Supplement and the accompanying Prospectus. Listings of the pages on
which such terms are defined are found in the "Index of Terms for Prospectus
Supplement" beginning on page S-53 herein and in the "Index of Terms for
Prospectus" on page 76 of the Prospectus.
Interest will accrue on the Class A Certificates from May 7, 1998 (the
"Closing Date") through June 14, 1998 and from June 15, 1998 through July 14,
1998 and with respect to each Interest Period (as defined herein) thereafter, at
the rate of 0.12% per annum above the London interbank offered rate for
one-month United States dollar deposits ("LIBOR"), determined as described
herein, prevailing on the related LIBOR Determination Date (as defined herein)
with respect to such period (the "Class A Certificate Rate"). Interest will
accrue on the Class B Certificates from the Closing Date through June 14, 1998
and from June 15, 1998 through July 14, 1998 and with respect to each Interest
Period thereafter, at the rate of 0.28% per annum above LIBOR prevailing on the
related LIBOR Determination Date with respect to each such period (the "Class B
Certificate Rate"). The initial LIBOR Determination Date is May 5, 1998.
Interest with respect to the Certificates will be distributed on July 15, 1998
and on the 15th day of each month thereafter (or, if such 15th day is not a
business day, the next succeeding business day) (each, a "Distribution Date").
Principal on the Class A Certificates is scheduled to be distributed on the May
2004 Distribution Date (the "Class A Scheduled Payment Date"), but may be paid
earlier or later under certain limited circumstances described herein. Principal
on the Class B Certificates is scheduled to be distributed on the June 2004
Distribution Date (the "Class B Scheduled Payment Date"), but may be paid
earlier or later under certain limited circumstances described herein. See
"Maturity Assumptions." For purposes of this Prospectus Supplement and the
Prospectus, a "business day" shall mean, unless otherwise indicated, any day
other than a Saturday, a Sunday or a day on which banking institutions in St.
Paul, Minnesota or Phoenix, Arizona are authorized or obligated by law or
executive order to be closed.
The Class B Certificates will be subordinated to the Class A Certificates
as described herein. The Collateral Interest will be subordinated to the Class A
Certificates and the Class B Certificates as described herein.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS,
SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
------------------------
The Certificates offered hereby constitute a separate Series of
certificates being issued by the Trust from time to time and offered pursuant to
a Prospectus dated March 18, 1998. This Prospectus Supplement does not contain
complete information about the offering of the Certificates. Additional
information is contained in the Prospectus and purchasers are urged to read both
this Prospectus Supplement and the Prospectus in full. Sales of the Certificates
may not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
S-2
<PAGE> 3
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus Supplement and the accompanying Prospectus.
A listing of the pages on which some of such terms are defined is found in the
"Index of Terms for Prospectus Supplement" herein and the "Index of Terms for
Prospectus" in the Prospectus.
TYPE OF SECURITIES......Class A Floating-Rate Asset Backed Certificates, Series
1998-B (the "Class A Certificates") and Class B
Floating-Rate Asset Backed Certificates, Series
1998-B (the "Class B Certificates," and together with
the Class A Certificates, the "Certificates").
OVERVIEW OF THE
TRANSACTION.............The Trust has been formed for the purpose of holding the
Receivables and to provide for the issuance of the
Certificates and other similar securities. Each
Certificate evidences a specific undivided interest
in the assets of the Trust allocated to the
Certificates and represents the right to receive a
portion of the collections on the Receivables. Such
collections will be used to pay interest and
principal due on such Certificate on the applicable
payment date. The Class A Certificates will also have
the benefits of excess collections of finance
charges, as described herein, and the subordination
of the Class B Certificates and the Collateral
Interest. The Class B Certificates will also have the
benefits of excess collections of finance charges not
needed to cover shortfalls in respect of the Class A
Certificates and the subordination of the Collateral
Interest not used for the benefit of the Class A
Certificates. The Class B Certificates therefore bear
a greater risk of loss of principal and of shortfalls
in payments of interest than the Class A
Certificates. Accordingly, the Class A Certificates
will receive a higher credit rating than the Class B
Certificates. See "-- Class A Certificate Rating" and
"-- Class B Certificate Rating." For a description of
the subordination of the Class B Certificates, see
"-- Subordination of the Class B Certificates and the
Collateral Interest" and "Description of the
Certificates -- Subordination" herein and "Risk
Factors -- Effect of Subordination on Class B
Certificateholders" and "-- Limited Credit
Enhancement" in the Prospectus.
Both the Class A Certificates and the Class B
Certificates are subject to possible repayment
earlier than expected if certain events called Pay
Out Events occur. See "Description of the
Certificates -- Pay Out Events" herein and in the
Prospectus. Both the Class A Certificates and the
Class B Certificates are also subject to potential
delayed repayment if the principal payment rate on
the Receivables decreases. See "Maturity Assumptions"
herein and in the Prospectus and "Risk
Factors -- Timing of Principal Payments Other Than at
Expected Maturity" in the Prospectus. In no event,
however, will principal be paid on the Class B
Certificates prior to the payment in full of the
Class A Certificates.
NON-RECOURSE
OBLIGATIONS.............Proceeds from the assets in the Trust will be the only
source of payments on the Certificates. The
Certificates do not represent an obligation of or
interest in the Transferor, BankAmerica Corporation,
S-3
<PAGE> 4
Bank of America National Trust and Savings
Association ("Bank of America NT&SA") or any of their
affiliates. None of the Certificates, the underlying
Receivables or the other assets of the Trust are
insured or guaranteed by any governmental agency or
instrumentality or by the Transferor, BankAmerica
Corporation, Bank of America NT&SA or any of their
affiliates.
For a discussion of other risk factors applicable to the
Certificates, see "Risk Factors" in the Prospectus.
TRUST...................The BA Master Credit Card Trust (the "Trust") has been
formed pursuant to a pooling and servicing agreement
(as amended from time to time, the "Agreement"),
between Bank of America National Association ("Bank
of America" or the "Bank"), as transferor (in such
capacity, the "Transferor") and as servicer of the
Receivables, and U.S. Bank National Association
(formerly known as First Bank National Association),
as trustee (the "Trustee"), which will be
supplemented by the supplement relating to the
Certificates (the "Series 1998-B Supplement") (the
term "Agreement," unless the context requires
otherwise, refers to the Agreement as supplemented by
the Series 1998-B Supplement). As used in this
Prospectus Supplement, the term "Certificateholders"
refers to holders of the Certificates, the term
"Class A Certificateholders" refers to holders of the
Class A Certificates and the term "Class B
Certificateholders" refers to holders of the Class B
Certificates.
As of the date of this Prospectus Supplement, the Trust
previously has issued six other Series. See "Annex
I: Other Series Issued" for a summary of such other
Series.
TRUST ASSETS............The assets of the Trust include receivables (the
"Receivables") arising under certain MasterCard(R)
and VISA(R)* revolving credit card accounts (the
"Accounts") selected from a sub-set of MasterCard and
VISA accounts identified by the Transferor (such
sub-set, as identified from time to time, the
"Identified Pool") from among all MasterCard and Visa
accounts owned by the Bank (the "Bank Portfolio"),
all monies due or to become due in payment of the
Receivables, all proceeds of the Receivables and
proceeds of credit insurance policies relating to the
Receivables, any Enhancements, all monies on deposit
in certain bank accounts of the Trust (including any
Permitted Investment in which any such monies are
invested, but excluding investment earnings on such
amounts, except as otherwise specified herein), and
the right to receive Interchange allocable to the
Certificates (which right may not be afforded to
other Series issued by the Trust). The
Certificateholders will not be entitled to the
benefits of any Enhancement issued with respect to
any Series other than Series 1998-B, and the holders
of certificates of other Series will not be entitled
to the benefits of any Enhancement issued with
respect to this Series 1998-B. "Series 1998-B" shall
mean the Series of the Trust represented by the
Certificates.
The Transferor has conveyed to the Trustee, for the
benefit of the Trust, all Receivables existing under
certain Accounts that were
- ---------------
* MasterCard(R) and VISA(R) are federally registered servicemarks of
MasterCard International Incorporated and Visa U.S.A., Inc., respectively.
S-4
<PAGE> 5
selected from the Identified Pool, as constituted at
the applicable time, based on criteria provided in
the Agreement as applied on May 18, 1996 (the
"Cut-Off Date") and, with respect to certain
Additional Accounts, as applied on October 27, 1997
and March 2, 1998, and has conveyed and will convey
to the Trustee all Receivables arising under the
Accounts from time to time thereafter until the
termination of the Trust. In addition, pursuant to
the Agreement, the Bank may, at its option, or may be
obligated to (subject to certain limitations and
conditions) designate Additional Accounts for
inclusion in the Trust. Also, the Agreement provides
that in lieu of Additional Accounts or in addition
thereto, the Bank may, subject to certain conditions,
include Participations in the Trust. See "The
Receivables" herein and "Description of the
Certificates -- Addition of Trust Assets" in the
Prospectus.
CERTIFICATE INTEREST AND
PRINCIPAL...............Each of the Certificates offered hereby represents the
right to receive certain payments from the assets of
the Trust. The Trust's assets will be allocated among
the Class A Certificateholders (the "Class A Investor
Interest"), the Class B Certificateholders (the
"Class B Investor Interest"), the Collateral Interest
Holder (the "Collateral Interest," and together with
the Class A Investor Interest and the Class B
Investor Interest, the "Investor Interest"), the
interest of the holders of other undivided interests
in the Trust issued pursuant to the Agreement and
applicable Series Supplements and the Transferor (the
"Transferor Interest"), as described below. The
Collateral Interest in the initial amount of
$60,000,000 (which amount represents 8.0% of the
amount of the initial Investor Interest) constitutes
Credit Enhancement for the Certificates. The provider
of such Credit Enhancement is referred to herein as
the "Collateral Interest Holder." Allocations will be
made to the Collateral Interest, and the Collateral
Interest Holder will have voting and certain other
rights, as if the Collateral Interest were a
subordinated class of certificates. The Transferor
Interest will represent the right to the assets of
the Trust not allocated to the Class A Investor
Interest, the Class B Investor Interest, the
Collateral Interest or the holders of other undivided
interests in the Trust. The principal amount of the
Transferor Interest will fluctuate as the amount of
Receivables in the Trust changes from time to time.
The Class A Certificates will represent the right to
receive, from the assets of the Trust allocated to
the Class A Certificates, funds up to (but not in
excess of) the amounts required to make (a) payments
of interest accruing from May 7, 1998 (the "Closing
Date") through June 14, 1998, from June 15, 1998
through July 14, 1998 and with respect to each
Interest Period thereafter, at the rate of 0.12% per
annum above LIBOR, determined as described herein,
prevailing on the related LIBOR Determination Date
(such rate, the "Class A Certificate Rate"), and (b)
payments of principal on the Class A Scheduled
Payment Date or, under certain limited circumstances,
during the Rapid Amortization Period, to the extent
of the Class A Investor Interest, which may be less
than the unpaid principal balance of the Class A
Certificates in certain circumstances described
herein.
The Class B Certificates will represent the right to
receive, from the assets of the Trust allocated to
the Class B Certificates, funds up to
S-5
<PAGE> 6
(but not in excess of) the amounts required to make
(a) payments of interest accruing from the Closing
Date through June 14, 1998, from June 15, 1998
through July 14, 1998 and with respect to each
Interest Period thereafter, at the rate of 0.28% per
annum above LIBOR, determined as described herein,
prevailing on the related LIBOR Determination Date
(such rate, the "Class B Certificate Rate") and (b)
payments of principal on the Class B Scheduled
Payment Date or, under certain limited circumstances,
during the Rapid Amortization Period, to the extent
of the Class B Investor Interest, which may be less
than the unpaid principal balance of the Class B
Certificates in certain circumstances described
herein. No principal will be paid to the Class B
Certificateholders until the Class A Investor
Interest is paid in full. See "Description of the
Certificates -- Subordination."
The aggregate principal amount of the Class A Investor
Interest and the Class B Investor Interest will,
except as otherwise provided herein, remain fixed at
$648,750,000 and $41,250,000, respectively. The Class
A Investor Interest will decline in certain
circumstances if the Default Amounts allocated to the
Class A Certificates exceed funds allocable thereto
as described herein and the Class B Investor Interest
and the Collateral Interest are zero. The Class B
Investor Interest will decline in certain
circumstances as a result of (a) the reallocation of
collections of Principal Receivables otherwise
allocable to the Class B Investor Interest to fund
certain payments in respect of the Class A
Certificates and (b) the allocation to the Class B
Investor Interest of certain Default Amounts,
including such amounts otherwise allocable to the
Class A Investor Interest when the Collateral
Interest is zero. During the Controlled Accumulation
Period, for the purpose of allocating collections of
Finance Charge Receivables and Default Amounts with
respect to each Monthly Period, an amount equal to
the amount on deposit in the Principal Funding
Account from time to time will be subtracted from the
Class A Investor Interest (as so reduced, the "Class
A Adjusted Investor Interest" and together with the
Class B Investor Interest and the Collateral
Interest, the "Adjusted Investor Interest").
The Class A Certificates, the Class B Certificates and
the Collateral Interest will each include the right
to receive (but only to the extent needed to make
required payments under the Agreement) varying
percentages of collections of Finance Charge
Receivables and Principal Receivables and will be
allocated varying percentages of Default Amounts
during each calendar month, or with respect to
collections relating to the first Distribution Date,
during the period from and including the Closing Date
through June 30, 1998 (in each case, a "Monthly
Period"). Collections of Finance Charge Receivables
and Default Amounts at all times, and collections of
Principal Receivables during the Revolving Period,
will be allocated to the Investor Interest based on
the Floating Investor Percentage and will be further
allocated among the Class A Investor Interest, the
Class B Investor Interest and the Collateral Interest
based on the Class A Floating Allocation, the Class B
Floating Allocation and the Collateral Floating
Allocation, respectively, applicable during the
related Monthly Period. Collections of Principal
Receivables during the Con-
S-6
<PAGE> 7
trolled Accumulation Period and the Rapid
Amortization Period will be allocated to the Investor
Interest based on the Fixed Investor Percentage and
will be further allocated among the Class A Investor
Interest, the Class B Investor Interest and the
Collateral Interest based on the Class A Fixed
Allocation, the Class B Fixed Allocation and the
Collateral Fixed Allocation, respectively. See
"Description of the Certificates -- Allocation
Percentages" and "-- Pay Out Events" herein and
"Description of the Certificates -- Pay Out Events"
in the Prospectus.
The final distribution of principal and interest on the
Certificates will be made no later than the June 2006
Distribution Date in the manner provided in
"Description of the Certificates -- Final Payment of
Principal; Termination" in the Prospectus. Series
1998-B will terminate on the earliest to occur of (a)
the Distribution Date on which the Investor Interest
is paid in full, (b) the June 2006 Distribution Date
or (c) the Trust Termination Date (such earliest date
to occur, the "Series 1998-B Termination Date").
After the Series 1998-B Termination Date, the Trust
will have no further obligation to pay principal or
interest on the Certificates.
RECEIVABLES.............The Receivables arise in Accounts that have been
selected from the Identified Pool, as constituted at
the applicable time, based on criteria provided in
the Agreement as applied on the Cut-Off Date and,
with respect to certain Additional Accounts, as
applied on October 27, 1997 and March 2, 1998. The
Receivables consist of Principal Receivables and
Finance Charge Receivables. In addition, certain
amounts of Interchange attributed to cardholder
charges for goods and services in the Accounts will
be allocated to the Certificates and treated as
Finance Charge Receivables. See "Bank of America's
Credit Card Activities -- Interchange" in the
Prospectus.
The aggregate amount of Receivables in the Accounts as
of the end of the day on March 31, 1998 was
$6,336,532,121 comprised of $6,238,522,883 of
Principal Receivables and $98,009,238 of Finance
Charge Receivables. The amount of Finance Charge
Receivables will not affect the amount of the
Investor Interest represented by the Certificates and
the Collateral Interest or the amount of the
Transferor Interest, all of which are determined on
the basis of the amount of Principal Receivables in
the Trust. The aggregate interest in the Principal
Receivables in the Trust evidenced by the
Certificates and the Collateral Interest will never
exceed the amount of the Investor Interest regardless
of the total amount of Principal Receivables in the
Trust at any time.
DENOMINATIONS...........Beneficial interests in the Certificates will be offered
for purchase in denominations of $1,000 and integral
multiples thereof.
REGISTRATION OF
CERTIFICATES............The Certificates initially will be represented by
Certificates registered in the name of Cede, as the
nominee of DTC. No Certificate Owner will be entitled
to receive a Definitive Certificate, except under the
limited circumstances described herein.
Certificateholders may elect to hold their
Certificates through DTC (in the United States) or
Cedel or Euroclear (in Europe). Transfers will be
made in accordance with the rules and operating
procedures described herein. See "Description of the
Certificates -- Definitive Certificates" in the
Prospectus.
S-7
<PAGE> 8
SERVICING FEE...........The Servicer will receive a monthly fee as servicing
compensation from the Trust on each Transfer Date. On
each Transfer Date, Servicer Interchange with respect
to the related Monthly Period that is on deposit in
the Finance Charge Account will be withdrawn from the
Finance Charge Account and paid to the Servicer in
respect of the Investor Servicing Fee. In addition,
the Class A Servicing Fee, the Class B Servicing Fee
and the Collateral Interest Servicing Fee will be
paid on each Transfer Date as described under
"Description of the Certificates -- Servicing
Compensation and Payment of Expenses." See also
"Description of the Certificates -- Servicing
Compensation and Payment of Expenses" in the
Prospectus.
INTEREST................Interest on the Certificates for each Interest Period
will be distributed on July 15, 1998, and on the 15th
day of each month thereafter, or if such day is not a
business day, on the next succeeding business day
(each, a "Distribution Date"), in an amount equal to
(a) with respect to the Class A Certificates, the
product of (i) the actual number of days in the
related Interest Period divided by 360 and (ii) the
Class A Certificate Rate and (iii) the outstanding
principal balance of the Class A Certificates as of
the preceding Record Date (or in the case of the
first Distribution Date, as of the Closing Date) and
(b) with respect to the Class B Certificates, the
product of (i) the actual number of days in the
related Interest Period divided by 360 and (ii) the
Class B Certificate Rate and (iii) the outstanding
principal balance of the Class B Certificates as of
the preceding Record Date (or in the case of the
first Distribution Date, as of the Closing Date).
Interest for any Distribution Date due but not paid
on such Distribution Date will be payable on the next
succeeding Distribution Date, together with
additional interest on such amount at the applicable
Certificate Rate plus 2% per annum (such amount, as
applicable, "Additional Interest").
The "Interest Period" with respect to any Distribution
Date, will be the period from and including the
previous Distribution Date through the day preceding
such Distribution Date, except that the initial
Interest Period will be the period from and including
the Closing Date through the day preceding the
initial Distribution Date. Interest payments will be
funded from the portion of Finance Charge Receivables
collected during the Monthly Period immediately
preceding the related Distribution Date (or with
respect to the first Distribution Date, from and
including the Closing Date through June 30, 1998) and
certain other available amounts (a) with respect to
the Class A Certificates, allocated to the Class A
Investor Interest and, if necessary, from Excess
Spread, Shared Excess Finance Charge Collections and
Reallocated Principal Collections (to the extent
available), (b) with respect to the Class B
Certificates, allocated to the Class B Investor
Interest and, if necessary, from Excess Spread,
Shared Excess Finance Charge Collections and
Reallocated Collateral Principal Collections (to the
extent available) and (c) with respect to the
Collateral Interest, from Excess Spread and Shared
Excess Finance Charge Collections. See "Description
of the Certificates -- Reallocation of Cash Flows"
and "-- Application of Collections -- Payment of
Interest, Fees and Other Items" herein and "Risk
Factors -- Limited Credit Enhancement" in the
Prospectus.
S-8
<PAGE> 9
REVOLVING PERIOD........The "Revolving Period" with respect to the Certificates
means the period from and including the Closing Date
to, but not including, the earlier of (a) the
commencement of the Controlled Accumulation Period
and (b) the commencement of the Rapid Amortization
Period. The controlled accumulation period with
respect to the Certificates (the "Controlled
Accumulation Period") is scheduled to begin at the
close of business on April 30, 2003. Subject to the
conditions set forth under "Description of the
Certificates -- Postponement of Controlled
Accumulation Period," the day on which the Revolving
Period ends and the Controlled Accumulation Period
begins may be delayed to no later than the close of
business on March 31, 2004. During the Revolving
Period, Available Investor Principal Collections
otherwise allocable to the Investor Interest will,
subject to certain limitations and unless a reduction
in the Required Collateral Interest has occurred, be
treated as Shared Excess Principal Collections and
allocated to the holders of other Series of
certificates within the Shared Excess Principal
Collections Group issued and outstanding or, subject
to certain limitations, paid to the holder of the
Transferor Certificate. See "Description of the
Certificates -- Principal Payments." See "Description
of the Certificates -- Pay Out Events" for a
discussion of the events which might lead to the
termination of the Revolving Period prior to the
commencement of the Controlled Accumulation Period.
CONTROLLED ACCUMULATION
PERIOD..................Unless a Pay Out Event has occurred, the Controlled
Accumulation Period will begin at the close of
business on the last day of the Revolving Period and
will end on the earlier of (i) the commencement of
the Rapid Amortization Period and (ii) the Series
1998-B Termination Date. During the Controlled
Accumulation Period, prior to the payment of the
Class A Investor Interest in full, amounts equal to
the least of (a) the Available Investor Principal
Collections for the related Monthly Period, (b) the
sum of the applicable Controlled Accumulation Amount
for such Monthly Period and the applicable
Accumulation Shortfall, if any (such applicable sum,
the "Controlled Deposit Amount" for such Monthly
Period) and (c) the Class A Adjusted Investor
Interest on such Transfer Date will be deposited
monthly in a trust account established by the
Servicer (the "Principal Funding Account") on each
Transfer Date beginning with the Transfer Date in the
month following the commencement of the Controlled
Accumulation Period until the Principal Funding
Account Balance is equal to the Class A Investor
Interest. On each Transfer Date during the Controlled
Accumulation Period after the Distribution Date on
which the Class A Investor Interest has been paid in
full, an amount equal to the lesser of (a) Available
Investor Principal Collections for the related
Monthly Period and (b) the Class B Investor Interest
on such Transfer Date will be deposited into the
Distribution Account for distribution to the Class B
Certificateholders until the Class B Investor
Interest has been paid in full. If, for any Monthly
Period, the Available Investor Principal Collections
for such Monthly Period exceed the applicable
Controlled Deposit Amount, the amount of such excess
will be first paid to the Collateral Interest Holder
to the extent that the Collateral Interest exceeds
the Required Collateral Interest
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and then will be treated as Shared Excess Principal
Collections and allocated to the holders of other
Series of certificates within the Shared Excess
Principal Collections Group issued and outstanding
or, subject to certain limitations, paid to the
holder of the Transferor Certificate. If for any
Monthly Period the Available Investor Principal
Collections for such Monthly Period are less than the
applicable Controlled Deposit Amount, the amount of
such deficiency will be the applicable "Accumulation
Shortfall" for the succeeding Monthly Period. See
"Description of the Certificates -- Application of
Collections." Also see "Prospectus
Summary -- Controlled Accumulation Period" in the
Prospectus for a general description of the purpose
of this feature and its effect on Certificateholders.
All funds on deposit in the Principal Funding Account
shall be invested at the direction of the Servicer by
the Trustee in Permitted Investments evidencing
obligations of any of the Corporation or any
Affiliate thereof; provided, however, that if no
obligations of the Corporation or any Affiliate
thereof shall qualify as Permitted Investments,
notwithstanding the preceding, the funds on deposit
in the Principal Funding Account shall be invested by
the Trustee in Permitted Investments. Investment
earnings (net of investment losses and expenses) on
funds on deposit in the Principal Funding Account
(the "Principal Funding Investment Proceeds") during
the Controlled Accumulation Period will be applied as
Class A Available Funds. If, on any Transfer Date,
the Principal Funding Investment Proceeds for the
related Interest Period are less than the product of
(a) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the
denominator of which is 360, (b) the Class A
Certificate Rate in effect with respect to the
related Interest Period and (c) the Principal Funding
Account Balance as of the Record Date preceding such
Transfer Date (the "Covered Amount"), the amount of
such deficiency (the "Principal Funding Investment
Shortfall") shall be paid, to the extent available,
from the Reserve Account and, if necessary, from
Excess Spread, Shared Excess Finance Charge
Collections and Reallocated Principal Collections.
Funds on deposit in the Principal Funding Account will
be available to pay the Class A Certificateholders in
respect of the Class A Investor Interest on the Class
A Scheduled Payment Date. If the aggregate principal
amount of deposits made to the Principal Funding
Account is insufficient to pay the Class A Investor
Interest in full on the Class A Scheduled Payment
Date, the Rapid Amortization Period will commence as
described below. Although it is anticipated that
during the Controlled Accumulation Period prior to
the payment of the Class A Investor Interest in full,
funds will be deposited in the Principal Funding
Account in an amount equal to the applicable
Controlled Deposit Amount on each Transfer Date and
that scheduled principal will be available for
distribution to the Class A Certificateholders on the
Class A Scheduled Payment Date, no assurance can be
given in that regard. See "Maturity Assumptions"
herein and in the Prospectus.
On the Class B Scheduled Payment Date, provided that the
Class A Certificates are paid in full on the Class A
Scheduled Payment Date
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and the Rapid Amortization Period has not commenced,
Available Investor Principal Collections will be used
to pay the Class B Certifi-cateholders in respect of
the Class B Investor Interest as described herein. If
the Available Investor Principal Collections are
insufficient to pay the Class B Investor Interest in
full on the Class B Scheduled Payment Date, the Rapid
Amortization Period will commence as described below.
Although it is anticipated that scheduled principal
will be available for distribution to the Class B
Certificateholders on the Class B Scheduled Payment
Date, no assurance can be given in that regard. See
"Maturity Assumptions" herein and in the Prospectus.
If a Pay Out Event occurs during the Controlled
Accumulation Period, the Rapid Amortization Period
will commence and any amounts on deposit in the
Principal Funding Account will be paid to the Class A
Certificateholders on the Distribution Date in the
month following the commencement of the Rapid
Amortization Period.
Other Series offered by the Trust may or may not have
amortization or accumulation periods like the
Controlled Accumulation Period for the Certificates,
and such periods may have different lengths and begin
on different dates than such Controlled Accumulation
Period. Thus, certain Series may be in their
revolving periods while others are in periods during
which collections of Principal Receivables are
distributed to or held for the benefit of
certificateholders of such other Series. In addition,
other Series may allocate Principal Receivables based
upon different investor percentages. See "Description
of the Certificates -- New Issuances" in the
Prospectus for a discussion of the potential terms of
any other Series.
RAPID AMORTIZATION
PERIOD..................During the period beginning on the day on which a Pay
Out Event has occurred and ending on the Series
1998-B Termination Date (such period, the "Rapid
Amortization Period"), Available Investor Principal
Collections will be applied to the payment of
principal on the Certificates and will be distributed
monthly on each Distribution Date to the Class A
Certificateholders and, following payment of the
Class A Investor Interest in full, to the Class B
Certificateholders and, following payment of the
Class B Investor Interest in full, to the Collateral
Interest Holder beginning with the Distribution Date
in the month following the commencement of the Rapid
Amortization Period. See "Description of the
Certificates -- Pay Out Events" for a discussion of
the events which might lead to the commencement of
the Rapid Amortization Period and "Prospectus
Summary -- Rapid Amortization Period" in the
Prospectus for a general discussion of the purpose of
this feature and its effect on Certificateholders.
SUBORDINATION OF THE
CLASS B CERTIFICATES AND
THE COLLATERAL
INTEREST................The Class B Certificates and the Collateral Interest
will be subordinated, as described herein, to the
extent necessary to fund certain payments with
respect to the Class A Certificates as described
herein. In addition, the Collateral Interest will be
subordinated to the extent necessary to fund certain
payments with respect to the Class A Certificates and
the Class B Certificates. If the Collateral
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Interest is reduced to zero, the Class B
Certificateholders will bear directly the credit and
other risks associated with their interest in the
Trust and thus will be more likely to suffer a loss.
To the extent the Class B Investor Interest is
reduced, the percentage of collections of Finance
Charge Receivables allocable to the Class B
Certificateholders in subsequent Monthly Periods will
be reduced. Such reductions of the Class B Investor
Interest will thereafter be reimbursed and the Class
B Investor Interest increased on each Transfer Date
by the amount, if any, of Excess Spread and Shared
Excess Finance Charge Collections for such Transfer
Date available for that purpose. To the extent the
amount of such reduction in the Class B Investor
Interest is not reimbursed, the amount of principal
distributable to the Class B Certificateholders will
be reduced and the amounts available to be
distributed to the Class B Certificateholders with
respect to interest may be reduced. No principal will
be paid to the Class B Certificateholders until the
Class A Investor Interest is paid in full. See
"Description of the Certificates -- Subordination"
herein and "Risk Factors -- Effect of Subordination
on Class B Certificateholders" in the Prospectus.
ADDITIONAL AMOUNTS
AVAILABLE TO
CERTIFICATEHOLDERS......With respect to any Transfer Date, Excess Spread and
Shared Excess Finance Charge Collections allocable to
Series 1998-B will be applied to fund the Class A
Required Amount and the Class B Required Amount, if
any. The "Class A Required Amount" means the amount,
if any, by which the sum of (a) the Class A Monthly
Interest due on the related Distribution Date and any
overdue Class A Monthly Interest and Class A
Additional Interest thereon, (b) the Class A
Servicing Fee for the related Monthly Period and any
overdue Class A Servicing Fee and (c) the Class A
Investor Default Amount, if any, for the related
Monthly Period exceeds the Class A Available Funds
for the related Monthly Period. The "Class B Required
Amount" means the amount, if any, equal to the sum of
(a) the amount, if any, by which the sum of (i) Class
B Monthly Interest due on the related Distribution
Date and any overdue Class B Monthly Interest and
Class B Additional Interest thereon and (ii) the
Class B Servicing Fee for the related Monthly Period
and any overdue Class B Servicing Fee exceeds the
Class B Available Funds for the related Monthly
Period and (b) the Class B Investor Default Amount,
if any, for the related Monthly Period. The "Required
Amount" for any Monthly Period shall mean the sum of
(a) the Class A Required Amount and (b) the Class B
Required Amount, each for such Monthly Period.
"Excess Spread" for any Transfer Date will equal the
sum of (a) the excess of (i) Class A Available Funds
for the related Monthly Period over (ii) the sum of
the amounts referred to in clauses (a), (b) and (c)
in the definition of "Class A Required Amount" above,
(b) the excess of (i) Class B Available Funds for the
related Monthly Period over (ii) the sum of the
amounts referred to in clauses (a) (i) and (a) (ii)
in the definition of "Class B Required Amount" above
and (c) Collateral Available Funds for the related
Monthly Period not used under certain circumstances
to pay the Collateral Interest Servicing Fee, as
described herein.
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If, on any Transfer Date, Excess Spread and Shared
Excess Finance Charge Collections allocable to Series
1998-B are less than the Class A Required Amount,
Reallocated Principal Collections allocable first to
the Collateral Interest and then to the Class B
Investor Interest with respect to the related Monthly
Period will be used to fund the remaining Class A
Required Amount. If Reallocated Principal Collections
with respect to such Monthly Period are insufficient
to fund the remaining Class A Required Amount for the
related Transfer Date, then the Collateral Interest
(after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on
such Transfer Date) will be reduced by the amount of
such deficiency (but not by more than the Class A
Investor Default Amount for such Monthly Period). In
the event that such reduction would cause the
Collateral Interest to be a negative number, the
Collateral Interest will be reduced to zero, and the
Class B Investor Interest (after giving effect to
reductions for any Class B Investor Charge-Offs and
any Reallocated Class B Principal Collections on such
Transfer Date) will be reduced by the amount by which
the Collateral Interest would have been reduced below
zero (but not by more than the excess of the Class A
Investor Default Amount, if any, for such Monthly
Period over the amount of such reduction, if any, of
the Collateral Interest with respect to such Monthly
Period). In the event that such reduction would cause
the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced
to zero and the Class A Investor Interest will be
reduced by the amount by which the Class B Investor
Interest would have been reduced below zero (but not
by more than the excess, if any, of the Class A
Investor Default Amount for such Monthly Period over
such reductions in the Collateral Interest and the
Class B Investor Interest with respect to such
Monthly Period) (such reduction, a "Class A Investor
Charge-Off"). If the Collateral Interest and the
Class B Investor Interest are reduced to zero, the
Class A Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust. See "Description of
the Certificates -- Reallocation of Cash Flows" and
"-- Defaulted Receivables; Investor Charge-Offs."
If, on any Transfer Date, Excess Spread and Shared
Excess Finance Charge Collections allocable to Series
1998-B not required to pay the Class A Required
Amount and to reimburse Class A Investor Charge-Offs
are less than the Class B Required Amount,
Reallocated Principal Collections allocable to the
Collateral Interest for the related Monthly Period
not required to pay the Class A Required Amount will
be used to fund the remaining Class B Required
Amount. If such remaining Reallocated Principal
Collections allocable to the Collateral Interest with
respect to such Monthly Period are insufficient to
fund the remaining Class B Required Amount for the
related Transfer Date, then the Collateral Interest
(after giving effect to reductions for any Collateral
Charge-Offs, Reallocated Principal Collections and
any adjustments made thereto for the benefit of the
Class A Certificateholders) will be reduced by the
amount of such deficiency (but not by more than the
Class B Investor Default Amount for such Monthly
Period). In the event that such reduction would cause
the Collateral Interest to be a negative number, the
Collateral Interest will be
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<PAGE> 14
reduced to zero, and the Class B Investor Interest
will be reduced by the amount by which the Collateral
Interest would have been reduced below zero (but not
by more than the excess, if any, of the Class B
Investor Default Amount for such Monthly Period over
such reduction in the Collateral Interest with
respect to such Monthly Period) (such reduction, a
"Class B Investor Charge-Off"). In the event of a
reduction of the Class A Investor Interest, the Class
B Investor Interest or the Collateral Interest, the
amount of principal and interest available to fund
payments with respect to the Class A Certificates and
the Class B Certificates will be decreased. See
"Description of the Certificates -- Reallocation of
Cash Flows" and "-- Defaulted Receivables; Investor
Charge-Offs."
REQUIRED COLLATERAL
INTEREST................The "Required Collateral Interest" means (a) initially,
$60,000,000 the "Initial Collateral Interest") and
(b) with respect to any Transfer Date thereafter, an
amount equal to 8.0% of the sum of the Class A
Adjusted Investor Interest and the Class B Investor
Interest on such Transfer Date, after taking into
account deposits into the Principal Funding Account
on such Transfer Date and payments to be made on the
related Distribution Date, and the Collateral
Interest on the prior Transfer Date after any
adjustments made on such Transfer Date, but not less
than $22,500,000; provided, however, (1) that if
certain reductions in the Collateral Interest occur
or if a Pay Out Event occurs, the Required Collateral
Interest for such Transfer Date shall equal the
Required Collateral Interest for the Transfer Date
immediately preceding the occurrence of such
reduction or Pay Out Event; (2) in no event shall the
Required Collateral Interest exceed the unpaid
principal amount of the Certificates as of the last
day of the Monthly Period preceding such Transfer
Date after taking into account payments to be made on
the related Distribution Date; and (3) the Required
Collateral Interest may be reduced at any time to a
lesser amount if the Rating Agency Condition is
satisfied. See "Description of the
Certificates -- Required Collateral Interest."
If on any Transfer Date, the Collateral Interest is less
than the Required Collateral Interest, certain Excess
Spread amounts, if available, will be used to
increase the Collateral Interest to the extent of
such shortfall. If on any Transfer Date the
Collateral Interest equals or exceeds the Required
Collateral Interest, any such Excess Spread amounts
will first be deposited into the Reserve Account as
described herein and second, to the extent available,
be applied in accordance with the Loan Agreement
among the Trustee, the Transferor, the Servicer and
the Collateral Interest Holder (the "Loan Agreement")
and will not be available to the Certificateholders.
SHARED EXCESS FINANCE
CHARGE COLLECTIONS......The Series 1998-B Certificates are included in a group
of Series (such group, the "Shared Excess Finance
Charge Collections Group One"). Series 1996-A, Series
1996-B, Series 1997-A, Series 1997-B, Series 1997-C
and Series 1998-A are also included in Shared Excess
Finance Charge Collections Group One. In the future,
the Transferor may, but will not be required to,
designate other Series that are issued by the Trust
to be included in Shared Excess Finance Charge
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<PAGE> 15
Collections Group One. There can be no assurance that
any future Series will be issued by the Trust or
designated by the Transferor to be included in Shared
Excess Finance Charge Collections Group One. Subject
to certain limitations described under "Description
of the Certificates -- Shared Excess Finance Charge
Collections" in the Prospectus, to the extent that
collections with respect to Finance Charge
Receivables allocated to the Investor Interest are
not needed to make payments on the Investor Interest,
such collections will be allocated to cover certain
payments which may be paid from collections with
respect to Finance Charge Receivables and which are
due to or for the benefit of certificateholders of
other Series within Shared Excess Finance Charge
Collections Group One or, under certain
circumstances, paid to the holder of the Transferor
Certificate. In addition, collections of Finance
Charge Receivables otherwise allocable to other
Series within Shared Excess Finance Charge
Collections Group One, to the extent such collections
are not needed to make payments to or deposits for
the benefit of the certificateholders of such other
Series, may be applied to cover shortfalls in amounts
payable from collections of Finance Charge
Receivables due to or for the benefit of the holders
of the Class A Certificates and the Class B
Certificates or the Collateral Interest Holder. See
"Description of the Certificates -- Application of
Collections -- Excess Spread; Shared Excess Finance
Charge Collections" and "-- Shared Excess Finance
Charge Collections" herein and for a general
discussion of the purpose of this feature and its
effect on Certificateholders, see "Description of the
Certificates -- Shared Excess Finance Charge
Collections" in the Prospectus.
SHARED EXCESS PRINCIPAL
COLLECTIONS.............The Series 1998-B Certificates are included in a group
of Series (such group, the "Shared Excess Principal
Collections Group"). Series 1996-A, Series 1996-B,
Series 1997-A, Series 1997-B, Series 1997-C and
Series 1998-A are also included in the Shared Excess
Principal Collections Group. In the future, the
Transferor may, but will not be required to,
designate other Series that are issued by the Trust
to be included in the Shared Excess Principal
Collections Group. There can be no assurance that any
future Series will be issued by the Trust or
designated by the Transferor to be included in the
Shared Excess Principal Collections Group. To the
extent that collections with respect to Principal
Receivables allocated to the Investor Interest are
not needed to make payments on the Investor Interest
or to be deposited in the Principal Funding Account,
such collections will be allocated to cover certain
principal payments due to or for the benefit of
certificateholders of other Series within the Shared
Excess Principal Collections Group or, under certain
circumstances, paid to the holder of the Transferor
Certificate. Any such reallocation or deposit will
not result in a reduction in the Investor Interest
with respect to Series 1998-B. In addition,
collections of Principal Receivables and certain
other amounts otherwise allocable to other Series
within the Shared Excess Principal Collections Group,
to the extent such collections are not needed to make
payments to or deposits for the benefit of the
certificateholders of such other Series, may be
applied to cover principal payments due to or for the
benefit
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<PAGE> 16
of the holders of the Class A Certificates and the
Class B Certificates or the Collateral Interest
Holder. See "Description of the Certificates
-- Shared Excess Principal Collections" herein and
"Prospectus Summary -- Shared Excess Principal
Collections" in the Prospectus for a general
discussion of the purpose of this feature and its
effect on Certificateholders.
PAIRED SERIES...........Series 1998-B may be paired with one or more other
Series (each a "Paired Series"). If a Paired Series
is issued with respect to Series 1998-B, following
the issuance of such Paired Series, as the Adjusted
Investor Interest is reduced, the investor interest
of the Paired Series will increase by an equal
amount. This will have the effect of increasing the
investor interest of the Paired Series by an amount
that otherwise would have increased the Transferor
Interest. If a Pay Out Event occurs with respect to
any such Paired Series prior to the payment in full
of the Certificates, the percentages used to
determine the share of collections of Principal
Receivables allocable to the Certificates may be
reduced, which may delay the final payment of
principal to the Certificateholders. See "Maturity
Assumptions -- Paired Series," "Description of the
Certificates -- Paired Series" and "Description of
the Certificates -- Allocation Percentages."
OPTIONAL REPURCHASE.....The Investor Interest will be subject to optional
repurchase by the Transferor on any Distribution Date
on or after the Distribution Date on which the
Investor Interest is reduced to an amount less than
or equal to $37,500,000 (5% of the initial Investor
Interest), if certain conditions set forth in the
Agreement are met. The repurchase price will be equal
to the sum of the Investor Interest and all accrued
and unpaid interest on the Certificates and the
Collateral Interest through the day preceding the
Distribution Date on which the repurchase occurs. See
"Description of the Certificates -- Final Payment of
Principal; Termination" in the Prospectus.
TRUSTEE.................U.S. Bank National Association (formerly known as First
Bank National Association).
TAX STATUS..............Special counsel to the Transferor will deliver its
opinion on the Closing Date that under existing law
the Certificates will be characterized as debt for
United States federal income tax purposes. Under the
Agreement, the Transferor and the Certificateholders
will agree to treat the Certificates as debt for
United States federal, state and local income tax and
franchise tax purposes. See "Federal Income Tax
Consequences" in the Prospectus for additional
information concerning the application of United
States federal income tax laws.
ERISA CONSIDERATIONS....Under a regulation issued by the Department of Labor,
the Trust's assets would not be deemed "plan assets"
of an employee benefit plan holding the Class A
Certificates if certain conditions are met, including
that the Class A Certificates must be held, upon
completion of the public offering made hereby, by at
least 100 investors who are independent of the
Transferor and of one another. The Underwriters
believe that the Class A Certificates may be held by
at least 100 independent investors at the conclusion
of the offering, although no assurance can be given,
and no monitoring or other measures will be taken to
ensure, that such condition will be met with respect
to the
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<PAGE> 17
Class A Certificates. The Transferor anticipates that
the other conditions of the regulation will be met.
If it is determined that the Class A Certificates
will not satisfy this 100 independent investor
requirement, then the Class A Certificates may not be
acquired by (a) any employee benefit plan that is
subject to ERISA, (b) any plan or other arrangement
(including an individual retirement account or Keogh
plan) that is subject to section 4975 of the Code or
(c) any entity whose underlying assets include "plan
assets" under the regulation by reason of any such
plan's investment in the entity. If the Trust's
assets were deemed to be "plan assets" of an employee
benefit plan investor (e.g., if the 100 independent
investor criterion is not satisfied), violations of
the "prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), could result and generate excise tax and
other liabilities under ERISA and section 4975 of the
Internal Revenue Code of 1986, as amended (the
"Code"), unless a statutory, regulatory or
administrative exemption is available. It is
uncertain whether existing exemptions from the
"prohibited transaction" rules of ERISA would apply
to all transactions involving the Trust's assets if
such assets were treated for ERISA purposes as "plan
assets" of employee benefit plan investors.
Accordingly, fiduciaries or other persons
contemplating purchasing the Certificates on behalf
or with "plan assets" of any employee benefit plan
should consult their counsel before making a
purchase. See "ERISA Considerations" in the
Prospectus.
The Underwriters currently do not expect that the Class
B Certificates will be held by at least 100 such
persons and, therefore, do not expect that such Class
B Certificates will qualify as publicly-offered
securities under the regulation referred to in the
preceding paragraph. Accordingly, the Class B
Certificates may not be acquired by (a) any employee
benefit plan that is subject to ERISA, (b) any plan
or other arrangement (including an individual
retirement account or Keogh plan) that is subject to
section 4975 of the Code or (c) any entity whose
underlying assets include "plan assets" under the
regulation by reason of any such plan's investment in
the entity. By its acceptance of a Class B
Certificate or an interest therein, each Class B
Certificateholder and Certificate Owner will be
deemed to have represented and warranted that it is
not subject to the foregoing limitation.
CLASS A CERTIFICATE
RATING................It is a condition to the issuance of the Class A
Certificates that they be rated in the highest rating
category by at least one Rating Agency. The rating of
the Class A Certificates is based primarily on the
value of the Receivables and the terms of the Class B
Certificates and the Collateral Interest. See "Risk
Factors -- Scope of Certificate Rating" in the
Prospectus.
CLASS B CERTIFICATE
RATING................It is a condition to the issuance of the Class B
Certificates that they be rated in one of the three
highest rating categories by at least one Rating
Agency. The rating of the Class B Certificates is
based primarily on the value of the Receivables and
the terms of the Collateral Interest. See "Risk
Factors -- Scope of Certificate Rating" in the
Prospectus.
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<PAGE> 18
RECENT DEVELOPMENTS
BankAmerica Corporation (the "Corporation") and NationsBank Corporation, a
North Carolina corporation ("NationsBank"), entered into an Agreement and Plan
of Reorganization on April 10, 1998 (the "Merger Agreement"). Pursuant to the
Merger Agreement, (i) NationsBank will form a new Delaware subsidiary
("NationsBank (DE)") and will merge (the "Reincorporation Merger") with and into
NationsBank (DE), with NationsBank (DE) as the surviving corporation in the
Reincorporation Merger, and (ii) the Corporation will thereafter merge (the
"Merger," and together with the Reincorporation Merger, the "Reorganization")
with and into NationsBank (DE), with NationsBank (DE) as the surviving
corporation in the Merger. The Board of Directors of the Corporation and the
Board of Directors of NationsBank approved the Reorganization and the
transactions related thereto at their meetings held April 9, 1998 and April 10,
1998, respectively. Consummation of the Reorganization is subject to various
conditions, including (i) approval of the Merger Agreement and the
Reorganization by the stockholders of each of the parties thereto, and (ii)
receipt of requisite approvals from the Board of Governors of the Federal
Reserve System and other federal and state regulatory authorities as necessary.
BANK OF AMERICA'S CREDIT CARD ACTIVITIES
GENERAL
The Receivables conveyed to the Trust by Bank of America pursuant to the
Agreement have been or will be generated from transactions made by holders of
selected MasterCard and VISA credit card accounts, including premium accounts
and standard accounts, from the Identified Pool, as constituted at the time of
such Accounts' selection.
BILLING, PAYMENTS AND FEES
The Accounts currently have various billing and payment characteristics,
including varying periodic rate finance charges and fees. With the December 1,
1994 transfer of the accounts from Bank of America NT&SA to Bank of America, the
state law governing most of such accounts changed from California to Arizona.
Each cardholder was given the option to (a) continue the cardholder's account
relationship automatically under Arizona law by continuing to charge purchases
and cash advances to the account, or (b) retain California law as the state law
governing the cardmember agreement for the account by ceasing to use the account
for new purchases and cash advances. Accounts that opted to retain California
law are paying down their outstanding balances.
Currently, monthly billing statements are sent by Bank of America to
cardholders with balances at the end of each billing period. With some
exceptions, cardholders must make a minimum monthly payment generally equal to
the greater of (a) 2.5% of the outstanding balance (including purchases, cash
advances, finance charges, and fees posted to the Account) plus any past due
amounts; (b) $10 plus any past due amounts; or (c) the amount of the outstanding
balance in excess of the account credit line. If the cardholder's outstanding
balance is less than $10, the minimum monthly payment equals the amount of the
outstanding balance.
Accounts may have a different annual percentage rate for purchases and cash
advance balances. Bank of America uses variable-rate pricing based on a selected
external rate.
Accounts have a grace period which allows payment of the new balance of
purchases in full every month without incurring a finance charge. There is no
grace period on balances resulting from cash advances. There can be no assurance
that periodic-rate finance charges, fees, and other charges on Accounts will
remain at current levels.
Bank of America offers variable-rate credit card accounts. Generally, the
variable-rates range from 7.49 percentage points to 9.49 percentage points above
the prime rate as published from time to time in The Wall Street Journal. Bank
of America also offers temporary promotional rates and, under certain
circumstances, the periodic finance charges on a limited number of accounts may
be
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less than those generally assessed by Bank of America. Although more than 90% of
the Accounts are currently priced at variable-rates, some Accounts retain
fixed-rates which generally range from 8.1% to 19.8%.
Bank of America assesses annual membership fees (generally $18) on certain
accounts, although under various marketing and relationship incentive programs,
these fees may be waived or rebated. For most credit card accounts, Bank of
America also assesses late and overlimit charges (generally $20) and returned
check charges (generally $20). Bank of America generally assesses a cash advance
fee, typically 2.5% of the cash advance amount, with minimums of $2, $6 and $20
depending on the type of cash advance.
DELINQUENCY AND LOSS EXPERIENCE
An account is contractually delinquent if the minimum payment is not
received by the payment due date. An account is not treated as delinquent if the
minimum monthly payment is received by the next billing date; provided, however,
the period of delinquency on any account is measured from the payment due date.
Collection of delinquent credit card receivables currently is performed by Bank
of America's credit card collections personnel located in operations centers in
Phoenix, Arizona and Pasadena, California, or by Bank of America's agents.
Bank of America's credit card collection programs employ advanced
technology to manage risk and streamline processes. This technology includes
automated calling systems to improve collector efficiency, scoring models to
estimate the relative risk of loss exposure, and behavior analysis to prioritize
cardholder contacts. Collection activities include statement messages, telephone
calls and formal collection letters. Collectors generally initiate telephone
contact with cardholders whose accounts are 5 days or more contractually
delinquent. In the event that the initial telephone call fails to cure the
delinquency, Bank of America continues to contact the cardholder by telephone
and by mail. Bank of America may enter into arrangements with cardholders to
extend or otherwise change payment schedules as approved by one of Bank of
America's collections managers. Delinquency levels are monitored daily by Bank
of America's collections representatives with aggregate delinquency information
reported to senior management on a daily basis.
Accounts are charged off once they have become contractually past due 180
days, unless a payment has been received in an amount sufficient to bring the
account into a different delinquency category or to bring the account current.
At the time of charge-off, an evaluation is made whether to pursue further
remedies. In certain cases, outside collection agencies and law firms are
engaged. The credit evaluation, servicing and charge-off policies, and
collection practices of Bank of America, may change from time to time in
accordance with Bank of America's business judgment and applicable law. Account
balances for bankrupt cardholders are charged off as soon as practically
possible and within 30 days from the date of verifiable bankruptcy notification.
Upon the creation of the Trust, the Transferor conveyed to the Trustee, for
the benefit of the Trust, all Receivables existing under certain Accounts that
were selected from the Identified Pool as constituted on the Cut-Off Date (the
"Initial Identified Pool"). All Additional Accounts, the Receivables of which
have been, or will be, designated for inclusion in the Trust, have been or will
be selected from the Identified Pool, as constituted at the time of such
designation. Pursuant to a consolidation of processing functions by the
Servicer, Accounts relating to the Initial Identified Pool are no longer
identified separately from accounts relating to the entire Bank Portfolio. The
following tables set forth the delinquency and loss experience for (a) each of
the calendar years ended December 31, 1995 and December 31, 1996 for the Initial
Identified Pool and (b) the calendar year ended December 31, 1997 and the three
calendar months ended March 31, 1998, for the Trust Portfolio. The Trust
Portfolio's delinquency and loss experience is comprised of segments which may,
when taken individually, have delinquency and loss characteristics different
from those of the Initial Identified Pool. As of the end of the day on December
31, 1996, the last day on which data is available for the Initial Identified
Pool, the Receivables in the Trust Portfolio represented approximately 99.6% of
the Initial Identified Pool. Because the Trust Portfolio is not identical to the
Initial
S-19
<PAGE> 20
Identified Pool, actual delinquency and loss experience with respect to the
Receivables may be different from that set forth below for the Initial
Identified Pool. There can be no assurance that the delinquency and loss
experience for the Trust Portfolio in the future will be similar to the
historical experience of the Trust Portfolio or the Initial Identified Pool set
forth below.
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
MARCH 31, 1998 1997 1996
------------------------- ------------------------- -------------------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(2)..... $6,336,532 $4,160,515 $4,038,334
Receivables
Delinquent:
30 - 59 Days....... $ 111,689 1.76% $ 73,329 1.76% $ 65,307 1.62%
60 - 89 Days....... 66,320 1.05 44,086 1.06 39,131 0.97
90 or More Days.... 125,643 1.98 79,210 1.90 65,931 1.63
---------- ---- ---------- ---- ---------- ----
Total............ $ 303,652 4.79% $ 196,625 4.73% $ 170,369 4.22%
========== ==== ========== ==== ========== ====
<CAPTION>
DECEMBER 31,
-------------------------
1995
-------------------------
PERCENTAGE
OF TOTAL
RECEIVABLES RECEIVABLES
----------- -----------
<S> <C> <C>
Receivables
Outstanding(2)..... $4,290,345
Receivables
Delinquent:
30 - 59 Days....... $ 65,246 1.52%
60 - 89 Days....... 37,532 0.87
90 or More Days.... 63,644 1.48
---------- ----
Total............ $ 166,422 3.88%
========== ====
</TABLE>
- ---------------
(1) Data for 1998 and 1997 is for the Trust Portfolio as constituted at such
time. Data for 1996 and 1995 is for the Initial Identified Pool. The
Receivables in the Trust Portfolio represented approximately 99.6% of the
Initial Identified Pool on December 31, 1996, the last date on which data is
available for the Initial Identified Pool.
(2) The Receivables Outstanding on the accounts consist of all amounts due from
cardholders as posted to the accounts as of the end of the period shown.
LOSS EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------------------
1998 1997 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(2).......................... $4,796,273 $3,795,496 $4,028,066 $4,170,853
Total Gross Charge-Offs(3).................................. 84,500 259,943 236,364 231,009
Recoveries.................................................. 6,963 9,340 22,252 27,180
Total Net Charge-Offs..................................... 77,537 250,603 214,112 203,829
Total Net Charge-Offs as a percentage of Average Receivables
Outstanding (4)(5)........................................ 6.47% 6.60% 5.32% 4.89%
</TABLE>
- ---------------
(1) Data for 1998 and 1997 is for the Trust Portfolio as constituted at such
time. Data for 1996 and 1995 is for the Initial Identified Pool. The
Receivables in the Trust Portfolio represented approximately 99.6% of the
Initial Identified Pool on December 31, 1996, the last date on which data is
available for the Initial Identified Pool.
(2) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(3) Total Gross Charge-Offs are total principal charge-offs before recoveries
and do not include the amount of any reductions in Average Receivables
Outstanding due to fraud, returned goods, customer disputes or other
miscellaneous credit adjustments.
(4) The percentage reflected for the three months ended March 31, 1998 is an
annualized figure.
(5) On March 2, 1998 the Transferor designated Additional Accounts and conveyed
the Receivables arising therein (in an amount approximately equal to $2.5
billion as of such date) into the Trust Portfolio. In accordance with the
Transferor's customary servicing procedures, such Additional Accounts did
not include any Accounts that were identified as Accounts to be charged-off
as a result of obligor bankruptcies. The Transferor believes that this
designation process may have had the effect of lowering Total Net
Charge-Offs as a percentage of Average Receivables Outstanding for the month
of March and therefore for the three months ended March 31, 1998, by an
amount equal to less than 1.00% on an annualized basis. This beneficial
effect from the March Additional Accounts designation will not be
experienced in future reporting periods.
INTERCHANGE
The Transferor will be required, pursuant to the terms of the Agreement, to
transfer to the Trust a percentage of the Interchange attributed to cardholder
charges for goods and services in the Accounts. Interchange arising under the
Accounts will be allocated to the Certificates on the basis of
S-20
<PAGE> 21
the Floating Investor Percentage of the ratio which the amount of cardholder
charges for goods and services in the Accounts bears to the total amount of
cardholder charges for goods and services in the MasterCard and VISA credit card
accounts owned by Bank of America, as reasonably estimated by the Transferor.
MasterCard and VISA may from time to time change the amount of Interchange
reimbursed to banks issuing their credit cards. Interchange will be treated as
collections of Finance Charge Receivables for the purposes of determining the
amount of Finance Charge Receivables, allocating collections of Finance Charge
Receivables, making required monthly payments, and calculating the Portfolio
Yield. Under the circumstances described herein, Interchange will be used to pay
a portion of the Investor Servicing Fee required to be paid on each Transfer
Date. See "Description of the Certificates -- Servicing Compensation and Payment
of Expenses" herein and "Bank of America's Credit Card
Activities -- Interchange" in the Prospectus.
THE RECEIVABLES
The Receivables conveyed to the Trust arise in Accounts selected from the
Initial Identified Pool on the basis of criteria set forth in the Agreement as
applied on the Cut-Off Date and, with respect to Additional Accounts, from the
Identified Pool, as constituted at the applicable time, on the basis of criteria
set forth in the Agreement as applied on their date of designation for inclusion
in the Trust (the "Trust Portfolio"). Pursuant to the Agreement, the Transferor
has the right, subject to certain limitations and conditions set forth therein,
to designate from time to time Additional Accounts and to transfer to the Trust
all Receivables of such Additional Accounts, whether such Receivables are then
existing or thereafter created. Any Additional Accounts designated pursuant to
the Agreement must be Eligible Accounts as of the date the Transferor designates
such accounts as Additional Accounts. On October 27, 1997 and March 2, 1998, the
Transferor designated Additional Accounts and conveyed the Receivables arising
therein to the Trust, which at the time of each such conveyance included
approximately $486 million and $2.5 billion, respectively, of Principal
Receivables. The Transferor will be required to designate Additional Accounts,
to the extent available (a) to maintain the Transferor Interest so that during
any period of 30 consecutive days, the Transferor Interest averaged over that
period equals or exceeds the Minimum Transferor Interest for the same period and
(b) to maintain, for so long as certificates of any Series (including the
Certificates) remain outstanding, an aggregate amount of Principal Receivables
equal to or greater than the Minimum Aggregate Principal Receivables. "Minimum
Transferor Interest" for any period means 7.0% of the average Principal
Receivables; provided, however, that the Transferor may reduce the Minimum
Transferor Interest to not less than 2% of the average Principal Receivables for
such period upon satisfaction of the Rating Agency Condition and certain other
conditions set forth in the Agreement. "Minimum Aggregate Principal Receivables"
means an amount equal to the sum of the numerators used to calculate the
Investor Percentages with respect to the allocation of collections of Principal
Receivables for each Series then outstanding; provided further, however, that
with respect to any Series in its Rapid Accumulation Period, or such other
period as designated in the related Series Supplement, with an investor interest
as of such date of determination equal to the principal funding account balance
relating to such Series, taking into account any deposit to be made to the
principal funding account relating to such Series on the Transfer Date following
such date of determination, the numerator used in the calculation of the
Investor Percentage with respect to Principal Receivables relating to such
Series shall, solely for the purpose of the definition of Minimum Aggregate
Principal Receivables, be deemed to equal zero; provided further, however, that
the Minimum Aggregate Principal Receivables may be reduced to a lesser amount at
any time if the Rating Agency Condition is satisfied. Further, pursuant to the
Agreement, the Transferor will have the right (subject to certain limitations
and conditions) to designate certain Removed Accounts and to require the Trustee
to reconvey all Receivables in such Removed Accounts to the Transferor, whether
such Receivables are then existing or thereafter created. Throughout the term of
the Trust, the Accounts from which the Receivables arise will be the Accounts
designated by the Transferor on the Cut-Off Date plus any Additional Accounts
minus any Removed Accounts. As of the Cut-Off Date and, with respect to
Receivables in Additional Accounts, as of their date of designation for
inclusion
S-21
<PAGE> 22
in the Trust, and on the date any new Receivables are created, the Transferor
will represent and warrant to the Trust that the Receivables meet the
eligibility requirements specified in the Agreement. See "Description of the
Certificates -- Representations and Warranties" in the Prospectus.
The paragraph immediately below and the tables that follow, each summarize
the Trust Portfolio (other than Accounts that have a zero balance with no
current charging privileges due to such Accounts being classified as lost,
stolen or involved in a product change) by various criteria as of the end of the
day on March 31, 1998. Because the future composition of the Trust Portfolio may
change over time, information contained in the paragraph immediately below and
the tables that follow is not necessarily indicative of the composition of the
Trust Portfolio at any subsequent time.
The Receivables in the Trust Portfolio, as of the end of the day on March
31, 1998, included $6,238,522,883 of Principal Receivables and $98,009,238 of
Finance Charge Receivables. The Accounts had an average total Receivable balance
of $1,139 and an average credit limit of $6,382. The percentage of the aggregate
total Receivable balance to the aggregate total credit limit was 17.85%. The
average age of the Accounts was approximately 129 months. As of the end of the
day on March 31, 1998, cardholders whose Accounts are included in the Trust
Portfolio had billing addresses in all 50 States, the District of Columbia and
certain other United States territories and possessions. Due to a concentration
of Accounts in the state of California, social, technological, legal and
economic factors in that state may have a disproportionate effect on the Trust
Portfolio as a whole. As of the end of the day on March 31, 1998, 46.01% of the
Accounts were standard accounts and 53.99% were premium accounts, and the
aggregate Receivable balances of standard accounts and premium accounts, as a
percentage of the total aggregate Receivables, were 39.66% and 60.34%
respectively.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
--------------------- --------- ---------- ----------------- ------------
<S> <C> <C> <C> <C>
Credit Balance................. 63,038 1.13% $ (7,995,768.14) (0.13)%
No Balance..................... 2,513,789 45.18 -- 0.00
Less than or equal to
$1,000.00.................... 1,385,251 24.90 462,683,726.71 7.30
$1,000.01 -- $3,000.00......... 776,306 13.95 1,456,920,538.30 22.99
$3,000.01 -- $5,000.00......... 434,002 7.80 1,711,053,902.61 27.01
$5,000.01 -- $7,500.00......... 271,822 4.89 1,644,992,923.82 25.96
$7,500.01 -- $10,000.00........ 105,088 1.89 896,158,637.45 14.14
$10,000.01 or More............. 14,590 0.26 172,718,159.98 2.73
--------- ------ ----------------- ------
TOTAL................ 5,563,886 100.00% $6,336,532,120.73 100.00%
========= ====== ================= ======
</TABLE>
S-22
<PAGE> 23
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
------------------ --------- ---------- ----------------- ------------
<S> <C> <C> <C> <C>
Less than or equal to $1,000..... 362,170 6.51% $ 98,391,833.66 1.55%
$1,001 -- $3,000................. 806,996 14.50 621,196,635.96 9.80
$3,001 -- $5,000................. 952,893 17.13 1,155,509,740.70 18.24
$5,001 -- $9,999................. 2,457,679 44.17 3,072,467,843.01 48.49
$10,000 or More.................. 984,148 17.69 1,388,966,067.40 21.92
--------- ------ ----------------- ------
TOTAL.................. 5,563,886 100.00% $6,336,532,120.73 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
------------------------------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent.................... 5,336,496 95.91% $5,661,105,637.98 89.33%
1 Day to 30 Days.................. 136,559 2.45 371,775,242.55 5.87
31 Days to 60 Days................ 36,747 0.66 111,688,650.45 1.76
61 Days to 90 Days................ 19,874 0.36 66,319,772.25 1.05
91 Days to 120 Days............... 14,364 0.26 50,482,568.18 0.80
121 Days and Over................. 19,846 0.36 75,160,249.32 1.19
--------- ------ ----------------- ------
TOTAL................... 5,563,886 100.00% $6,336,532,120.73 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
----------- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
0 to 12 Months.................... 472,921 8.49% $ 626,678,570.03 9.90%
Over 12 Months to 24 Months....... 460,810 8.28 502,224,772.08 7.93
Over 24 Months to 36 Months....... 672,851 12.09 620,432,987.33 9.79
Over 36 Months to 48 Months....... 320,909 5.77 275,219,819.19 4.34
Over 48 Months to 60 Months....... 132,391 2.38 117,839,307.37 1.86
Over 60 Months to 72 Months....... 134,715 2.42 105,431,560.34 1.66
Over 72 Months to 84 Months....... 229,021 4.12 248,059,680.17 3.91
Over 84 Months to 96 Months....... 258,215 4.64 297,832,871.73 4.70
Over 96 Months to 108 Months...... 226,861 4.08 282,861,821.97 4.46
Over 108 Months to 120 Months..... 176,174 3.17 254,217,788.21 4.01
Over 120 Months................... 2,479,018 44.56 3,005,732,942.31 47.44
--------- ------ ----------------- ------
TOTAL................... 5,563,886 100.00% $6,336,532,120.73 100.00%
========= ====== ================= ======
</TABLE>
S-23
<PAGE> 24
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----- --------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Alabama........................... 16,776 0.30% $ 21,791,121.18 0.34%
Alaska............................ 5,571 0.10 7,344,152.80 0.12
Arizona........................... 203,453 3.66 212,069,860.43 3.35
Arkansas.......................... 17,059 0.31 21,725,823.60 0.34
California........................ 3,386,075 60.86 3,719,768,752.93 58.70
Colorado.......................... 46,380 0.83 55,561,668.49 0.88
Connecticut....................... 21,656 0.39 29,515,666.35 0.47
Delaware.......................... 4,258 0.08 5,810,695.27 0.09
Florida........................... 109,647 1.97 134,611,054.24 2.12
Georgia........................... 30,590 0.55 34,679,026.90 0.55
Hawaii............................ 37,968 0.68 40,761,406.51 0.64
Idaho............................. 11,174 0.20 12,708,420.22 0.20
Illinois.......................... 96,401 1.73 113,704,057.18 1.79
Indiana........................... 30,633 0.55 36,035,690.61 0.57
Iowa.............................. 17,809 0.32 18,205,619.77 0.29
Kansas............................ 19,493 0.35 24,850,831.69 0.39
Kentucky.......................... 13,952 0.25 16,604,726.53 0.26
Louisiana......................... 27,354 0.49 36,920,165.63 0.58
Maine............................. 8,512 0.15 9,730,183.67 0.15
Maryland.......................... 27,919 0.50 35,406,398.30 0.56
Massachusetts..................... 58,735 1.06 75,098,702.42 1.19
Michigan.......................... 66,699 1.20 89,825,883.23 1.42
Minnesota......................... 30,966 0.56 34,021,515.51 0.54
Mississippi....................... 10,070 0.18 12,904,233.21 0.20
Missouri.......................... 37,205 0.67 45,557,991.64 0.72
Montana........................... 4,656 0.08 5,504,376.45 0.09
Nebraska.......................... 15,455 0.28 16,522,050.70 0.26
Nevada............................ 86,140 1.55 104,425,104.51 1.65
New Hampshire..................... 9,530 0.17 12,735,181.71 0.20
New Jersey........................ 69,373 1.25 93,299,074.22 1.47
New Mexico........................ 30,354 0.55 31,688,080.70 0.50
New York.......................... 146,176 2.63 200,938,683.46 3.17
North Carolina.................... 33,303 0.60 38,490,933.77 0.61
North Dakota...................... 3,589 0.06 3,654,119.52 0.06
Ohio.............................. 65,153 1.17 80,053,935.46 1.26
Oklahoma.......................... 25,901 0.47 34,043,372.26 0.54
Oregon............................ 95,351 1.71 93,819,323.02 1.48
Pennsylvania...................... 81,315 1.46 102,976,131.82 1.63
Rhode Island...................... 6,799 0.12 9,623,667.57 0.15
South Carolina.................... 11,960 0.21 15,480,023.10 0.24
South Dakota...................... 4,191 0.08 4,524,481.74 0.07
Tennessee......................... 23,735 0.43 27,587,304.80 0.44
Texas............................. 269,971 4.85 309,833,535.53 4.89
Utah.............................. 22,831 0.41 26,616,738.74 0.42
Vermont........................... 4,612 0.08 4,934,113.64 0.08
Virginia.......................... 37,451 0.67 47,539,349.39 0.75
Washington........................ 118,296 2.13 158,420,263.87 2.50
West Virginia..................... 7,393 0.13 9,151,303.06 0.14
Wisconsin......................... 33,462 0.60 36,782,387.93 0.58
Wyoming........................... 5,230 0.09 6,676,859.62 0.11
District of Columbia.............. 4,180 0.08 4,712,784.59 0.07
Other............................. 11,124 0.20 11,285,291.24 0.18
--------- ------ ----------------- ------
TOTAL................... 5,563,886 100.00% $6,336,532,120.73 100.00%
========= ====== ================= ======
</TABLE>
S-24
<PAGE> 25
MATURITY ASSUMPTIONS
The Agreement provides that Class A Certificateholders will not receive
payments of principal until the Class A Scheduled Payment Date, or earlier in
the event of a Pay Out Event which results in the commencement of the Rapid
Amortization Period. The Agreement also provides that Class B Certificateholders
will not receive payments of principal until the Class B Scheduled Payment Date,
or earlier in the event of a Pay Out Event which results in the commencement of
the Rapid Amortization Period (in the latter case, only after the Class A
Investor Interest has been paid in full). The Class B Certificateholders will
not begin to receive payments of principal until the final principal payment on
the Class A Certificates has been made.
Controlled Accumulation Period. On each Transfer Date during the Controlled
Accumulation Period prior to the payment of the Class A Investor Interest in
full, an amount equal to, for each Monthly Period, the least of (a) the
Available Investor Principal Collections, (b) the "Controlled Deposit Amount"
for such Monthly Period, which is equal to the sum of the Controlled
Accumulation Amount for such Monthly Period and the Accumulation Shortfall, if
any, for such Monthly Period and (c) the Class A Adjusted Investor Interest
prior to any deposits on such day, will be deposited in the Principal Funding
Account (the "Principal Funding Account") established by the Trustee until the
principal amount on deposit in the Principal Funding Account (the "Principal
Funding Account Balance") equals the Class A Investor Interest. After the Class
A Investor Interest has been paid in full, or following the first Transfer Date
upon which the Principal Funding Account Balance has increased to the amount of
the Class A Investor Interest, Available Investor Principal Collections, to the
extent required, will be distributed to the Class B Certificateholders on each
related Distribution Date beginning, during the Controlled Accumulation Period,
on the Class B Scheduled Payment Date, until the earlier of the date the Class B
Investor Interest has been paid in full and the Series 1998-B Termination Date.
After the Class A Investor Interest and the Class B Investor Interest have each
been paid in full, Available Investor Principal Collections, to the extent
required, will be distributed to the Collateral Interest Holder on each related
Distribution Date until the earlier of the date the Collateral Interest has been
paid in full and the Series 1998-B Termination Date. Amounts in the Principal
Funding Account are expected to be available to pay the Class A Investor
Interest on the Class A Scheduled Payment Date. After the payment of the Class A
Investor Interest in full, Available Investor Principal Collections are expected
to be available to pay the Class B Investor Interest on the Class B Scheduled
Payment Date. Although it is anticipated that collections of Principal
Receivables will be available on each Transfer Date during the Controlled
Accumulation Period to make a deposit of the applicable Controlled Deposit
Amount and that the Class A Investor Interest will be paid to the Class A
Certificateholders on the Class A Scheduled Payment Date and the Class B
Investor Interest will be paid to the Class B Certificateholders on the Class B
Scheduled Payment Date, respectively, no assurance can be given in this regard.
If the amount required to pay the Class A Investor Interest or the Class B
Investor Interest in full is not available on the Class A Scheduled Payment Date
or the Class B Scheduled Payment Date, respectively, a Pay Out Event will occur
and the Rapid Amortization Period will commence.
Rapid Amortization Period. If a Pay Out Event occurs, the Rapid
Amortization Period will commence and any amount on deposit in the Principal
Funding Account will be paid to the Class A Certificateholders on the
Distribution Date in the month following the commencement of the Rapid
Amortization Period. In addition, to the extent that the Class A Investor
Interest has not been paid in full, the Class A Certificateholders will be
entitled to monthly payments of principal equal to the Available Investor
Principal Collections until the earlier of the date on which the Class A
Certificates have been paid in full and the Series 1998-B Termination Date.
After the Class A Certificates have been paid in full and if the Series 1998-B
Termination Date has not occurred, Available Investor Principal Collections will
be paid to the Class B Certificateholders on each Distribution Date until the
earlier of the date on which the Class B Certificates have been paid in full and
the Series 1998-B Termination Date.
S-25
<PAGE> 26
Pay Out Events. A Pay Out Event occurs, either automatically or after
specified notice, upon (a) the failure of the Transferor to make certain
payments or transfers of funds for the benefit of the Certificateholders within
the time periods stated in the Agreement, (b) material breaches of certain
representations, warranties or covenants of the Transferor, (c) the occurrence
of certain events of insolvency, receivership or bankruptcy relating to the
Transferor or other holder of the Transferor Certificate, (d) the average of the
Portfolio Yields for any three consecutive Monthly Periods being less than the
average of the Base Rates for such period, (e) the Trust becoming an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
(f) the Transferor is unable for any reason to transfer Receivables to the Trust
in accordance with the provisions of the Agreement, (g) the occurrence of a
Servicer Default which would have a material adverse effect on the
Certificateholders, (h) the deposit of insufficient monies in the Distribution
Account to pay the Class A Investor Interest or the Class B Investor Interest in
full on the Class A Scheduled Payment Date or the Class B Scheduled Payment
Date, respectively, or (i) the failure of the Transferor to convey Receivables
arising under Additional Accounts or Participations to the Trust when required
by the Agreement. See "Description of the Certificates -- Pay Out Events." The
term "Base Rate" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is the sum of the
Class A Monthly Interest, the Class B Monthly Interest and the Collateral
Monthly Interest, each for the related Interest Period, and the
Certificateholder Servicing Fee and the Servicer Interchange, each for such
Monthly Period, and the denominator of which is the Investor Interest as of the
close of business on the last day of such Monthly Period. The term "Portfolio
Yield" means, with respect to any Monthly Period, the annualized percentage
equivalent of a fraction, the numerator of which is the sum of (a) collections
of Finance Charge Receivables, Principal Funding Investment Proceeds and amounts
withdrawn from the Reserve Account and in each case deposited into the Finance
Charge Account and allocable to the Certificates and the Collateral Interest for
such Monthly Period, calculated on a cash basis after subtracting the Aggregate
Investor Default Amount for such Monthly Period and (b) upon the satisfaction of
the Rating Agency Condition with respect to their inclusion in Portfolio Yield,
Shared Excess Finance Charge Collections, if any, allocable to Series 1998-B,
and the denominator of which is the Investor Interest as of the close of
business on the last day of such Monthly Period.
Paired Series. The Transferor may, at or after the time at which the
Controlled Accumulation Period commences for Series 1998-B, cause the Trust to
issue another Series (or some portion thereof, to the extent that the full
principal amount of such other Series is not otherwise outstanding at such time)
as a Paired Series with respect to Series 1998-B to be used to finance the
increase in the Transferor Interest caused by the accumulation of principal in
the Principal Funding Account with respect to Series 1998-B. No assurances can
be given as to whether such other Series will be issued and, if issued, the
terms thereof, since the terms of the Certificates may vary from the terms of
such other Series, the pay out events with respect to such other Series may vary
from the Pay Out Events with respect to Series 1998-B and may include pay out
events which are unrelated to the status of the Transferor or the Receivables,
such as pay out events related to the continued availability and rating of
certain providers of Enhancement to such other Series. If a pay out event does
occur with respect to any such Paired Series prior to the payment in full of the
Certificates, the final payment of principal to the Certificateholders may be
delayed. See "Description of the Certificates -- Paired Series." If a Pay Out
Event occurs with respect to a Series (which may be Series 1998-B) having a
Paired Series or with respect to the Paired Series when such Series is in the
Controlled Accumulation Period, the percentage used for allocating collections
of Principal Receivables for the Series (which may be Series 1998-B) and for the
Paired Series may reset as specified herein.
Payment Rates. The following table sets forth the highest and lowest
cardholder monthly payment rates during any month in the period shown and the
average cardholder monthly payment rates for all months during the periods shown
(a) for the Initial Identified Pool for each of the calendar years ended
December 31, 1995 and December 31, 1996 and (b) for the Trust Portfolio for
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<PAGE> 27
the calendar year ended December 31, 1997 and the three calendar months ended
March 31, 1998, in each case calculated as a percentage of total ending monthly
account balances during the periods shown. As of the end of the day on December
31, 1996, the last day on which data is available for the Initial Identified
Pool, the Receivables in the Trust Portfolio represented approximately 99.6% of
the Initial Identified Pool. Payment rates shown in the table are based on
amounts which would be deemed payments of Principal Receivables and Finance
Charge Receivables with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES(1)
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------
MARCH 31, 1998 1997 1996 1995
-------------- ----- ----- -----
<S> <C> <C> <C> <C>
Lowest Month................... 13.42% 13.04% 13.18% 12.83%
Highest Month.................. 15.61% 15.06% 15.00% 15.42%
Monthly Average................ 14.64% 14.07% 14.03% 14.05%
</TABLE>
- ---------------
(1) Data for 1998 and 1997 is for the Trust Portfolio as constituted at such
time. Data for 1996 and 1995 is for the Initial Identified Pool. The
Receivables in the Trust Portfolio represented approximately 99.6% of the
Initial Identified Pool on December 31, 1996, the last date on which data is
available for the Initial Identified Pool.
Currently, with some exceptions, cardholders must make a minimum monthly
payment generally equal to the greater of (a) 2.5% of the outstanding balance
(including purchases, cash advances, finance charges, and fees posted to the
Account) plus any past due amounts; (b) $10 plus any past due amounts; or (c)
the amount of the outstanding balance in excess of the Account credit line. If
the cardholder's outstanding balance is less than $10, the minimum monthly
payment equals the amount of the outstanding balance. Payments are applied
pursuant to the terms of the credit card agreements governing the Accounts.
There can be no assurance that the cardholder monthly payment rates in the
future will be similar to the historical experience set forth above. In
addition, the amount of collections of Receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of
Receivables with respect to the Trust Portfolio will be similar to the
historical experience set forth above or that deposits into the Principal
Funding Account or the Distribution Account, as applicable, will be made in
accordance with the applicable Controlled Accumulation Amount. If a Pay Out
Event occurs, the average life of the Certificates could be significantly
reduced or increased.
Because there may be a slowdown in the payment rate below the payment rates
used to determine the Controlled Accumulation Amounts, or a Pay Out Event may
occur which would initiate the Rapid Amortization Period, there can be no
assurance that the actual number of months elapsed from the date of issuance of
the Class A Certificates and the Class B Certificates to their respective final
Distribution Dates will equal the expected number of months. As described under
"Description of the Certificates -- Postponement of Controlled Accumulation
Period," the Servicer may shorten the Controlled Accumulation Period and, in
such event, there can be no assurance that there will be sufficient time to
accumulate all amounts necessary to pay the Class A Investor Interest and the
Class B Investor Interest on the Class A Scheduled Payment Date and the Class B
Scheduled Payment Date, respectively. See "Maturity Assumptions" and "Risk
Factors -- Timing of Principal Payments Other Than at Expected Maturity" in the
Prospectus.
RECEIVABLE YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts in the
Initial Identified Pool for each of the calendar years ended December 31, 1995
and December 31, 1996 and the gross revenues from finance charges and fees
billed to Accounts in the Trust Portfolio for the calendar year ended December
31, 1997 and the three calendar months ended March 31, 1998, are set forth in
the following table.
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<PAGE> 28
The historical yield figures in the following table are calculated on an
accrual basis. Collections of Receivables included in the Trust will be on a
cash basis and may not reflect the historical yield experience in the table.
During periods of increasing delinquencies or periodic payment deferral
programs, accrual yields may exceed cash amounts accrued and billed to
cardholders. Conversely, cash yields may exceed accrual yields as amounts
collected in a current period may include amounts accrued during prior periods.
However, the Transferor believes that during the three calendar years ended
December 31, 1997 and the three calendar months ended March 31, 1998, the yield
on an accrual basis closely approximated the yield on a cash basis. The yield on
both an accrual and a cash basis will be affected by numerous factors, including
the monthly periodic finance charges on the Receivables, the amount of the
annual membership fees and other fees, changes in the delinquency rate on the
Receivables and the percentage of cardholders who pay their balances in full
each month and do not incur monthly periodic finance charges. See "Risk Factors"
in the Prospectus.
PORTFOLIO YIELD(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ------------------------------------
ENDED
MARCH 31, 1998 1997 1996 1995
-------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(2).. $ 4,796,273 $3,795,496 $4,028,066 $4,170,853
Finance Charges and Fee Revenue
Billed............................ $ 236,138 $ 744,810 $ 726,444 $ 750,350
Interchange......................... $ 17,492 $ 61,710 $ 73,519 $ 76,451
Average Yield(3)(4)................. 19.69% 19.62% 18.03% 17.99%
</TABLE>
- ---------------
(1) Data for 1998 and 1997 is for the Trust Portfolio as constituted at such
time. Data for 1996 and 1995 is for the Initial Identified Pool. The
Receivables in the Trust Portfolio represented approximately 99.6% of the
Initial Identified Pool on December 31, 1996, the last date on which data is
available for the Initial Identified Pool.
(2) Average Receivables Outstanding is the average of the daily ending
receivable balance during the period indicated.
(3) Average Yield is the result of dividing Finance Charges and Fee Revenue
Billed by the Average Receivables Outstanding for the period and does not
include revenue attributable to Interchange or recoveries.
(4) The percentage reflected for the three months ended March 31, 1998 is an
annualized figure.
The revenue for the Trust Portfolio and the Initial Identified Pool of
credit card accounts shown in the above table is comprised of monthly periodic
finance charges, credit card fees and Interchange. These revenues vary for each
account based on the type and volume of activity for each account. Because the
Trust Portfolio is not identical to the Initial Identified Pool, actual yield
with respect to Receivables for the years ended December 31, 1996 and December
31, 1995 may be different from that set forth above for the Initial Identified
Pool. See "Bank of America's Credit Card Activities" herein and "Bank of
America's Credit Card Activities" in the Prospectus.
BANKAMERICA CORPORATION AND BANK OF AMERICA NATIONAL ASSOCIATION
BankAmerica Corporation (the "Corporation") is a multi-bank holding company
which was incorporated in Delaware in 1968. On December 31, 1997, the
Corporation's consolidated assets were approximately $260.2 billion,
consolidated liabilities and certain preferred securities of subsidiary trusts
holding solely junior subordinated debentures of the Corporation were
approximately $240.4 billion, and total stockholders' equity was approximately
$19.8 billion. Bank of America is a wholly-owned subsidiary of the Corporation,
which was formed as a national bank organized under the laws of the United
States in 1989 and is headquartered in Phoenix, Arizona. On December 31, 1997,
Bank of America's total assets were approximately $7.6 billion, total
liabilities were approximately $6.4 billion, and total stockholders' equity was
approximately $1.2 billion, as reported in Bank of America's Consolidated
Reports of Condition and Income (the "Call Report") as of the same date. The
Call Report is required to be prepared in accordance with regulatory accounting
principles, which differ in some respects from generally accepted accounting
principles.
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<PAGE> 29
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement and the Series
1998-B Supplement. Pursuant to the Agreement, the Transferor and the Trustee may
execute further series supplements in order to issue additional Series. The
following summary of the Certificates does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions of the Agreement and the Series 1998-B Supplement. See "Description
of the Certificates" in the Prospectus for additional information concerning the
Certificates and the Agreement.
GENERAL
The Certificates will represent the right to receive certain payments from
the assets of the Trust, including the right to the applicable allocation
percentage of all cardholder payments on the Receivables in the Trust to the
extent necessary to pay principal and interest on the Certificates. Each Class A
Certificate represents the right to receive interest at the applicable Class A
Certificate Rate on the outstanding principal amount of the Class A Certificates
for the related Interest Period and payments of principal on the Class A
Scheduled Payment Date or, to the extent of the Class A Investor Interest, on
each Distribution Date with respect to the Rapid Amortization Period, funded
from collections of Finance Charge Receivables and Principal Receivables,
respectively, allocated to the Class A Investor Interest and certain other
available amounts. Each Class B Certificate represents the right to receive
payments of interest at the applicable Class B Certificate Rate on the principal
amount of the Class B Certificates for the related Interest Period, and payments
of principal on the Class B Scheduled Payment Date or, to the extent of the
Class B Investor Interest, on each Distribution Date with respect to the Rapid
Amortization Period after the Class A Certificates have been paid in full,
funded from collections of Finance Charge Receivables and Principal Receivables,
respectively, allocated to the Class B Investor Interest and certain other
available amounts. Amounts payable to the Class A Certificateholders may be paid
from collections of Finance Charge Receivables and Principal Receivables, from
Excess Spread, funds on deposit in the Principal Funding Account and the Reserve
Account and certain investment earnings thereon, Reallocated Principal
Collections, Shared Excess Principal Collections, Shared Excess Finance Charge
Collections and certain other available amounts. Amounts payable to the Class B
Certificateholders may be paid from collections of Finance Charge Receivables
and Principal Receivables, Excess Spread, Reallocated Collateral Principal
Collections, Shared Excess Finance Charge Collections and Shared Excess
Principal Collections. Payments of interest and principal will be made, to the
extent of funds available therefor, on each Distribution Date on which such
amounts are due to Certificateholders in whose names the Certificates were
registered on the last business day of the calendar month preceding such
Distribution Date (each, a "Record Date").
The Transferor initially will own the Transferor Certificate. The
Transferor Certificate will represent the right to receive certain payments from
the assets of the Trust, including the right to a percentage (the "Transferor
Percentage") of all cardholder payments on the Receivables in the Trust equal to
100% minus the sum of the applicable Investor Percentages for all Series of
certificates then outstanding. The Transferor Certificate may be transferred in
whole or in part subject to certain limitations and conditions set forth in the
Agreement. See "Description of the Certificates -- Certain Matters Regarding the
Transferor and the Servicer" in the Prospectus.
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of Cede, as nominee of DTC.
Unless and until Definitive Certificates are issued, all references herein to
actions by Class A Certificateholders and/or Class B Certificateholders shall
refer to actions taken by DTC upon instructions from DTC Participants and all
references herein to distributions, notices, reports and statements to Class A
Certificateholders and/or Class B Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Class A Certificates and the Class B Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC procedures.
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel Bank or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations that are
S-29
<PAGE> 30
participants in such systems. Cede, as nominee for DTC, will hold the global
Certificates. Cedel Bank and Euroclear will hold omnibus positions on behalf of
the Cedel Bank Participants and the Euroclear Participants, respectively,
through customers' securities accounts in Cedel Bank's and Euroclear's names on
the books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. See "Description of the Certificates -- General," "-- Book-Entry
Registration" and "-- Definitive Certificates" in the Prospectus.
INTEREST PAYMENTS
Interest will accrue on the Class A Certificates at the Class A Certificate
Rate and on the Class B Certificates at the Class B Certificate Rate from the
Closing Date. Interest will be distributed to Certificateholders on July 15,
1998 and on each Distribution Date thereafter. Interest payments on the Class A
Certificates and the Class B Certificates on any Distribution Date will be
calculated on the outstanding principal balance of the Class A Certificates and
the outstanding principal balance of the Class B Certificates, as applicable, as
of the preceding Record Date, except that interest for the first Distribution
Date will accrue at the applicable Certificate Rate on the initial outstanding
principal balance of the Class A Certificates and the initial outstanding
principal balance of the Class B Certificates, as applicable, from the Closing
Date. Interest due on the Certificates but not paid on any Distribution Date
will be payable on the next succeeding Distribution Date together with
additional interest on such amount at the applicable Certificate Rate plus 2.00%
per annum (such amount with respect to the Class A Certificates, the "Class A
Additional Interest," and such amount with respect to the Class B Certificates,
the "Class B Additional Interest" and together, the "Additional Interest").
Additional Interest shall accrue on the same basis as interest on the
Certificates, and shall accrue from the Distribution Date on which such overdue
interest first became due, to but excluding the Distribution Date on which such
Additional Interest is paid. Interest payments on the Class A Certificates on
any Distribution Date will be paid from Class A Available Funds for the related
Monthly Period, and to the extent such Class A Available Funds are insufficient
to pay such interest, from Excess Spread, Shared Excess Finance Charge
Collections allocated to Series 1998-B and Reallocated Principal Collections
(each, to the extent available) for such Monthly Period. Interest payments on
the Class B Certificates on any Distribution Date will be paid from Class B
Available Funds for the related Monthly Period, and to the extent such Class B
Available Funds are insufficient to pay such interest, from Excess Spread,
Shared Excess Finance Charge Collections allocated to Series 1998-B and
Reallocated Collateral Principal Collections (each, to the extent available)
remaining after certain other payments have been made with respect to the Class
A Certificates. See "Application of Collections -- Excess Spread; Shared Excess
Finance Charge Collections."
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation of collections of
Finance Charge Receivables allocated to the Investor Interest and deposited in
the Finance Charge Account with respect to such Monthly Period (excluding the
portion of collections of Finance Charge Receivables attributable to Interchange
that is allocable to Servicer Interchange), (b) Principal Funding Investment
Proceeds, if any, with respect to the related Transfer Date and (c) amounts, if
any, to be withdrawn from the Reserve Account which are required to be included
in Class A Available Funds pursuant to the Series 1998-B Supplement with respect
to such Transfer Date. "Class B Available Funds" means, with respect to any
Monthly Period, an amount equal to the Class B Floating Allocation of
collections of Finance Charge Receivables allocated to the Investor Interest and
deposited in the Finance Charge Account with respect to such Monthly Period
(excluding the portion of collections of Finance Charge Receivables attributable
to Interchange that is allocable to Servicer Interchange).
The Class A Certificates will bear interest from the Closing Date through
June 14, 1998, and from June 15, 1998 through July 14, 1998 and with respect to
each Interest Period thereafter, at a rate of 0.12% per annum above LIBOR
prevailing on the related LIBOR Determination Date with respect to each such
period (the "Class A Certificate Rate"). The Class B Certificates will bear
S-30
<PAGE> 31
interest from the Closing Date through June 14, 1998, and from June 15, 1998
through July 14, 1998 and with respect to each Interest Period thereafter, at a
rate of 0.28% per annum above LIBOR prevailing on the related LIBOR
Determination Date with respect to each such period (the "Class B Certificate
Rate").
The Trustee will determine LIBOR on May 5, 1998 for the period from the
Closing Date through June 14, 1998, on June 11, 1998 for the period from June
15, 1998 through July 14, 1998, and for each Interest Period thereafter, on the
second business day prior to the Distribution Date on which such Interest Period
commences (each, a "LIBOR Determination Date"). For purposes of calculating
LIBOR, a business day is any business day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a one-month period which appears on Telerate Page 3750
as of 11:00 a.m., London time, on such date. If such rate does not appear on
Telerate Page 3750, the rate for that LIBOR Determination Date will be
determined on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks at approximately 11:00 a.m., London time, on
that day to prime banks in the London interbank market for a one-month period.
The Trustee will request the principal London office of each of the Reference
Banks to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that LIBOR Determination Date will be the arithmetic mean
of such quotations. If fewer than two quotations are provided, the rate for that
LIBOR Determination Date will be the arithmetic mean of the rates quoted by
major banks in New York City, selected by the Servicer, at approximately 11:00
a.m., New York City time, on that day for loans in United States dollars to
leading European banks for a one-month period.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the current and immediately preceding Interest Period may be obtained by
telephoning the Trustee at its Corporate Trust Office at (800) 934-6802.
Interest on the Certificates will be calculated on the basis of the actual
number of days in the related Interest Period and a 360-day year.
PRINCIPAL PAYMENTS
On each Transfer Date relating to the Revolving Period (which begins on the
Closing Date and ends at the commencement of the Controlled Accumulation Period
or, if earlier, the Rapid Amortization Period), unless a reduction in the
Required Collateral Interest has occurred, collections of Principal Receivables
allocable to the Investor Interest will, subject to certain limitations,
including the allocation of any Reallocated Principal Collections with respect
to the related Monthly Period to pay the Class A Required Amount and the Class B
Required Amount, be treated as Shared Excess Principal Collections.
On each Transfer Date with respect to the Controlled Accumulation Period,
the Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Investor Principal Collections on deposit in the
Principal Account with respect to such Transfer Date, (b) the applicable
Controlled Deposit Amount and (c) the Class A Adjusted Investor Interest on such
Transfer Date prior to any deposits on such date. Amounts in the Principal
Funding Account will be paid to the Class A Certificateholders on the Class A
Scheduled Payment Date. After the Class A Investor Interest has been paid in
full, on each Transfer Date during the Controlled Accumulation Period, amounts
equal to the lesser of (a) Available Investor Principal Collections with respect
to
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<PAGE> 32
such Transfer Date and (b) the Class B Investor Interest on such Transfer Date
will be deposited in the Distribution Account for distribution to the Class B
Certificateholders until the Class B Investor Interest has been paid in full.
Such amounts in the Distribution Account will be paid to the Class B
Certificateholders on the Class B Scheduled Payment Date. On each Transfer Date,
if a reduction in the Required Collateral Interest has occurred, a portion of
collections of Principal Receivables allocable to the Investor Interest will be
applied in accordance with the Loan Agreement to reduce the Collateral Interest
to the Required Collateral Interest. During the Controlled Accumulation Period
until the final principal payment to the Class B Certificateholders, the portion
of Available Investor Principal Collections not applied to Class A Monthly
Principal, Class B Monthly Principal or Collateral Monthly Principal on a
Transfer Date will generally be treated as Shared Excess Principal Collections.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) collections of Principal
Receivables received during such Monthly Period and certain other amounts
allocable to the Investor Interest, as more fully described herein and in the
Series 1998-B Supplement, minus (ii) the amount of Reallocated Principal
Collections with respect to such Monthly Period used to fund the Required
Amount, plus (b) any Shared Excess Principal Collections with respect to other
Series in the Shared Excess Principal Collections Group that are allocated to
Series 1998-B.
On each Distribution Date with respect to the Rapid Amortization Period,
the Class A Certificateholders will be entitled to receive Available Investor
Principal Collections for the related Monthly Period in an amount up to the
Class A Investor Interest until the earlier of the date the Class A Certificates
are paid in full or the Series 1998-B Termination Date. After payment in full of
the Class A Investor Interest, the Class B Certificateholders will be entitled
to receive on each Distribution Date with respect to the Rapid Amortization
Period, Available Investor Principal Collections until the earlier of the date
the Class B Certificates are paid in full or the Series 1998-B Termination Date.
After payment in full of the Class B Investor Interest, the Collateral Interest
Holder will be entitled to receive on each Transfer Date (other than the
Transfer Date prior to the Series 1998-B Termination Date) and on the Series
1998-B Termination Date, Available Investor Principal Collections until the
earlier of the date the Collateral Interest is paid in full and the Series
1998-B Termination Date. See "-- Pay Out Events" below for a discussion of
events which might lead to the commencement of the Rapid Amortization Period.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
The commencement of the Controlled Accumulation Period may be postponed,
and the length of the Revolving Period extended, subject to certain conditions
including those set forth below. Such postponement and extension, respectively,
will take place only if the Accumulation Period Length (determined as described
below) is less than twelve months. On the Determination Date immediately
preceding the April 2003 Distribution Date and on each Determination Date
thereafter, until the Controlled Accumulation Period begins, the Servicer, on
behalf of the Transferor will determine the "Accumulation Period Length," which
is the number of whole months expected to be required to fully fund the
Principal Funding Account up to the initial outstanding principal amount of the
Class A Certificates no later than the Class A Scheduled Payment Date, based on
(a) the expected monthly collections of Principal Receivables expected to be
distributable to the Certificateholders of all Series (excluding certain other
Series), assuming a principal payment rate no greater than the lowest monthly
principal payment rate on the Receivables for the preceding twelve months and
(b) the amount of principal expected to be distributable to Certificateholders
of all Series (excluding certain other Series) which are not expected to be in
their revolving periods during the Controlled Accumulation Period. If the
Accumulation Period Length is less than twelve months, the commencement of the
Controlled Accumulation Period will be postponed such that the number of months
included in the Controlled Accumulation Period will be equal to or exceed the
Accumulation Period Length. The effect of the foregoing calculation is to permit
the reduction of the length of the Controlled Accumulation Period based on the
investor interest of certain other Series which are
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<PAGE> 33
scheduled to be in their revolving periods during the Controlled Accumulation
Period and on increases in the principal payment rate occurring after the
Closing Date. The length of the Controlled Accumulation Period will not be
determined to be less than one month.
SUBORDINATION
The Class B Certificates and the Collateral Interest will be subordinated
to the extent necessary to fund certain payments with respect to the Class A
Certificates. In addition, the Collateral Interest will be subordinated to the
extent necessary to fund certain payments with respect to the Class B
Certificates. Certain principal payments otherwise allocable to the Class B
Certificateholders may be reallocated to cover amounts in respect of the Class A
Certificates and the Class B Investor Interest may be reduced if the Collateral
Interest is equal to zero. Similarly, certain principal payments allocable to
the Collateral Interest may be reallocated to cover amounts in respect of the
Class A Certificates and the Class B Certificates and the Collateral Interest
may be reduced. To the extent the Class B Investor Interest is reduced, the
percentage of collections of Finance Charge Receivables allocated to the Class B
Certificates in subsequent Monthly Periods will be reduced. Moreover, to the
extent the amount of such reduction in the Class B Investor Interest is not
reimbursed, the amount of principal distributable to the Class B
Certificateholders, and the amounts available to be distributed with respect to
interest on the Class B Certificates, will be reduced. No principal will be paid
to the Class B Certificateholders until the Class A Investor Interest is paid in
full. See "-- Allocation Percentages," "-- Reallocation of Cash Flows" and
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections."
ALLOCATION PERCENTAGES
Pursuant to the Agreement, with respect to each Monthly Period the Servicer
will allocate among the Investor Interest, the investor interest for all other
Series issued and outstanding and the Transferor Interest, all amounts collected
on Finance Charge Receivables, all amounts collected on Principal Receivables
and all Default Amounts with respect to such Monthly Period.
Collections of Finance Charge Receivables and Default Amounts at any time
and collections of Principal Receivables during the Revolving Period will be
allocated to the Investor Interest based on the Floating Investor Percentage.
The "Floating Investor Percentage" means, with respect to any Monthly Period,
the percentage equivalent of a fraction, the numerator of which is the Adjusted
Investor Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, the initial
Investor Interest) and the denominator of which is the greater of (x) the
aggregate amount of Principal Receivables as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first calendar
month in the first Monthly Period, the aggregate amount of Principal Receivables
as of the close of business on the day immediately preceding the Closing Date,
and with respect to the second calendar month in the first Monthly Period, the
aggregate amount of Principal Receivables as of the close of business on the
last day of the first calendar month in such first Monthly Period) and (y) the
sum of the numerators used to calculate the Investor Percentages for allocations
with respect to Finance Charge Receivables, Default Amounts or Principal
Receivables, as applicable, for all outstanding Series on such date of
determination; provided, however, that with respect to any Monthly Period in
which an Addition Date occurs or in which a Removal Date occurs on which, if any
Series has been paid in full, Principal Receivables in an aggregate amount
approximately equal to the initial investor interest of such Series are removed
from the Trust, the amount in clause (x) above shall be (i) the aggregate amount
of Principal Receivables in the Trust as of the close of business on the last
day of the prior Monthly Period for the period from and including the first day
of such Monthly Period to but excluding the related Addition Date or Removal
Date and (ii) the aggregate amount of Principal Receivables in the Trust as of
the beginning of the day on the related Addition Date or Removal Date after
adjusting for the aggregate amount of Principal Receivables added to or removed
from the Trust on the related Addition Date or Removal Date, as the case may be,
for the period from and
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including the related Addition Date or Removal Date to and including the last
day of such Monthly Period. The amounts so allocated will be further allocated
between the Class A Certificateholders, Class B Certificateholders and the
Collateral Interest Holder based on the Class A Floating Allocation, the Class B
Floating Allocation and the Collateral Floating Allocation, respectively. The
"Class A Floating Allocation" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is equal to the Class A Adjusted Investor Interest as of
the close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, as of the Closing Date) and the denominator
of which is equal to the Adjusted Investor Interest as of the close of business
on such day. The "Class B Floating Allocation" means, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is equal to the Class B Investor
Interest as of the close of business on the last day of the preceding Monthly
Period (or with respect to the first Monthly Period, as of the Closing Date) and
the denominator of which is equal to the Adjusted Investor Interest as of the
close of business on such day. The "Collateral Floating Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is equal to the
Collateral Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, as of the Closing
Date) and the denominator of which is equal to the Adjusted Investor Interest as
of the close of business on such day.
Collections of Principal Receivables during the Controlled Accumulation
Period and Rapid Amortization Period will be allocated to the Investor Interest
based on the Fixed Investor Percentage. The "Fixed Investor Percentage" means,
with respect to any Monthly Period, the percentage equivalent of a fraction, the
numerator of which is the Investor Interest as of the close of business on the
last day of the Revolving Period and the denominator of which is the greater of
(x) the aggregate amount of Principal Receivables as of the close of business on
the last day of the prior Monthly Period and (y) the sum of the numerators used
to calculate the Investor Percentages for allocations with respect to Principal
Receivables for all outstanding Series for such Monthly Period; provided,
however, that if Series 1998-B is paired with a Paired Series and a Pay Out
Event occurs with respect to such Paired Series during the Controlled
Accumulation Period, the Transferor may, by written notice delivered to the
Trustee and the Servicer, designate a different numerator (provided that such
numerator is not less than the Adjusted Investor Interest (less the balance on
deposit in the Principal Account) as of the last day of the revolving period for
such Paired Series); provided, however, that with respect to any Monthly Period
in which an Addition Date occurs or in which a Removal Date occurs on which, if
any Series has been paid in full, Principal Receivables in an aggregate amount
approximately equal to the initial investor interest of such Series are removed
from the Trust, the amount in clause (x) above shall be (i) the aggregate amount
of Principal Receivables in the Trust as of the close of business on the last
day of the prior Monthly Period for the period from and including the first day
of such Monthly Period to but excluding the related Addition Date or Removal
Date and (ii) the aggregate amount of Principal Receivables in the Trust at the
beginning of the day on the related Addition Date or Removal Date after
adjusting for the aggregate amount of Principal Receivables added to or removed
from the Trust on the related Addition Date or Removal Date, as the case may be,
for the period from and including the related Addition Date or Removal Date to
and including the last day of such Monthly Period. The amounts so allocated will
be further allocated between the Class A Certificateholders, the Class B
Certificateholders and the Collateral Interest Holder based on the Class A Fixed
Allocation, the Class B Fixed Allocation and the Collateral Fixed Allocation,
respectively. The "Class A Fixed Allocation" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class A Investor Interest as
of the close of business on the last day of the Revolving Period; provided,
however, that if Series 1998-B is paired with a Paired Series and a Pay Out
Event occurs with respect to such Paired Series during the Controlled
Accumulation Period, the Transferor may, by written notice delivered to the
Trustee and the Servicer, designate a different numerator (provided that such
numerator is not
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less than the Class A Adjusted Investor Interest (less the balance on deposit in
the Principal Account) as of the last day of the revolving period for such
Paired Series) and the denominator of which is equal to the numerator used to
determine the Fixed Investor Percentage with respect to such Monthly Period. The
"Class B Fixed Allocation" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is equal to the Class B Investor Interest as of the close
of business on the last day of the Revolving Period; provided, however, that if
Series 1998-B is paired with a Paired Series and a Pay Out Event occurs with
respect to such Paired Series during the Controlled Accumulation Period, the
Transferor may, by written notice delivered to the Trustee and the Servicer,
designate a different numerator (provided that such numerator is not less than
the Class B Investor Interest (less, if the Class A Fixed Allocation is zero,
the balance on deposit in the Principal Account to the extent not subtracted in
reducing the Class A Fixed Allocation to zero) as of the last day of the
revolving period for such Paired Series) and the denominator of which is equal
to the numerator used to determine the Fixed Investor Percentage with respect to
such Monthly Period. The "Collateral Fixed Allocation" means, with respect to
any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Collateral
Interest as of the close of business on the last day of the Revolving Period;
provided, however, that if Series 1998-B is paired with a Paired Series and a
Pay Out Event occurs with respect to such Paired Series during the Controlled
Accumulation Period, the Transferor may, by written notice delivered to the
Trustee and the Servicer, designate a different numerator (provided that such
numerator is not less than the Collateral Interest (less, if the Class B Fixed
Allocation is zero, the balance on deposit in the Principal Account, to the
extent not subtracted in reducing the Class B Fixed Allocation to zero) as of
the last day of the revolving period for such Paired Series) and the denominator
of which is equal to the numerator used to determine the Fixed Investor
Percentage with respect to such Monthly Period.
"Class A Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class A Certificates, minus (b) the
aggregate amount of principal payments made to Class A Certificateholders prior
to such date, minus (c) the excess, if any, of the aggregate amount of Class A
Investor Charge-Offs for all Transfer Dates preceding such date over the
aggregate amount of any reimbursements of Class A Investor Charge-Offs for all
Transfer Dates preceding such date; provided, however, that the Class A Investor
Interest may not be reduced below zero.
"Class A Adjusted Investor Interest," for any date of determination, means
an amount equal to the then current Class A Investor Interest, minus the
Principal Funding Account Balance on such date.
"Class B Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class B Certificates, minus (b) the
aggregate amount of principal payments made to Class B Certificateholders prior
to such date, minus (c) the aggregate amount of Class B Investor Charge-Offs for
all prior Transfer Dates, minus (d) the aggregate amount of Reallocated Class B
Principal Collections for all prior Transfer Dates for which the Collateral
Interest has not been reduced, minus (e) an amount equal to the aggregate amount
by which the Class B Investor Interest has been reduced to fund the Class A
Investor Default Amount on all prior Transfer Dates as described under
"-- Defaulted Receivables; Investor Charge-Offs," and plus (f) the aggregate
amount of Excess Spread and Shared Excess Finance Charge Collections allocated
and available on all prior Transfer Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c), (d) and (e); provided, however,
that the Class B Investor Interest may not be reduced below zero.
"Collateral Interest" for any date means an amount equal to (a) the Initial
Collateral Interest, minus (b) the aggregate amount of principal payments made
to the Collateral Interest Holder prior to such date, minus (c) the aggregate
amount of Collateral Charge-Offs for all prior Transfer Dates, minus (d) the
aggregate amount of Reallocated Principal Collections for all prior Transfer
Dates,
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minus (e) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced to fund the Class A Investor Default Amount and the
Class B Investor Default Amount on all prior Transfer Dates as described under
"-- Defaulted Receivables; Investor Charge-Offs," plus (f) the aggregate amount
of Excess Spread and Shared Excess Finance Charge Collections allocated and
available on all prior Transfer Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c), (d) and (e); provided, however,
that the Collateral Interest may not be reduced below zero.
REALLOCATION OF CASH FLOWS
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class A Required Amount"), which will be equal to the amount, if any, by
which the sum of (a) Class A Monthly Interest due on the related Distribution
Date and overdue Class A Monthly Interest and Class A Additional Interest
thereon, if any, (b) the Class A Servicing Fee for the related Monthly Period
and overdue Class A Servicing Fee, if any, and (c) the Class A Investor Default
Amount, if any, for the related Monthly Period exceeds the Class A Available
Funds for the related Monthly Period. If the Class A Required Amount is greater
than zero, Excess Spread and Shared Excess Finance Charge Collections allocated
to Series 1998-B and available for such purpose will be used to fund the Class A
Required Amount with respect to such Transfer Date. If such Excess Spread and
Shared Excess Finance Charge Collections are insufficient to fund the Class A
Required Amount, first, Reallocated Collateral Principal Collections and, then,
Reallocated Class B Principal Collections will be used to fund the remaining
Class A Required Amount. If Reallocated Principal Collections with respect to
the related Monthly Period, together with such Excess Spread and Shared Excess
Finance Charge Collections, are insufficient to fund the remaining Class A
Required Amount for such related Monthly Period, then the Collateral Interest
(after giving effect to reductions for any Collateral Charge-Offs and
Reallocated Principal Collections on such Transfer Date) will be reduced by the
amount of such excess (but not by more than the Class A Investor Default Amount
for such Monthly Period). In the event that such reduction would cause the
Collateral Interest to be a negative number, the Collateral Interest will be
reduced to zero, and the Class B Investor Interest (after giving effect to
reductions for any Class B Investor Charge-Offs and any Reallocated Class B
Principal Collections for which the Collateral Interest was not reduced on such
Transfer Date) will be reduced by the amount by which the Collateral Interest
would have been reduced below zero (but not by more than the excess of the Class
A Investor Default Amount, if any, for such Monthly Period over the amount of
such reduction, if any, of the Collateral Interest with respect to such Monthly
Period). In the event that such reduction would cause the Class B Investor
Interest to be a negative number, the Class B Investor Interest will be reduced
to zero and the Class A Investor Interest will be reduced by the amount by which
the Class B Investor Interest would have been reduced below zero (but not by
more than the excess, if any, of the Class A Investor Default Amount for such
Monthly Period over the amount of the reductions, if any, of the Collateral
Interest and the Class B Investor Interest with respect to such Monthly Period).
Any such reduction in the Class A Investor Interest will have the effect of
slowing or reducing the return of principal and interest to the Class A
Certificateholders. In such case, the Class A Certificateholders will bear
directly the credit and other risks associated with their interests in the
Trust. See "-- Defaulted Receivables; Investor Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"), which will be equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B Monthly Interest due on the
related Distribution Date and overdue Class B Monthly Interest and Class B
Additional Interest thereon, if any, and (ii) the Class B Servicing Fee for the
related Monthly Period and overdue Class B Servicing Fee, if any, exceeds the
Class B Available Funds for the related Monthly Period and (b) the Class B
Investor Default Amount, if any, for the related Monthly Period. If the Class B
Required Amount is greater than zero, Excess Spread and Shared Excess Finance
Charge Collections allocated to Series 1998-B not required to pay the Class A
Required Amount or reimburse Class A Investor Charge-Offs will be used to fund
the
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<PAGE> 37
Class B Required Amount with respect to such Transfer Date. If such Excess
Spread and Shared Excess Finance Charge Collections are insufficient to fund the
Class B Required Amount, Reallocated Collateral Principal Collections not
required to fund the Class A Required Amount for the related Monthly Period will
be used to fund the remaining Class B Required Amount. If such Reallocated
Collateral Principal Collections with respect to the related Monthly Period,
together with such Excess Spread and Shared Excess Finance Charge Collections
are insufficient to fund the remaining Class B Required Amount, then the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after any adjustments made thereto for the benefit of the Class A
Certificateholders) will be reduced by the amount of such deficiency (but not by
more than the Class B Investor Default Amount for such Monthly Period). In the
event that such a reduction would cause the Collateral Interest to be a negative
number, the Collateral Interest will be reduced to zero, and the Class B
Investor Interest will be reduced by the amount by which the Collateral Interest
would have been reduced below zero (but not by more than the excess of the Class
B Investor Default Amount for such Monthly Period over the amount of such
reduction of the Collateral Interest). Any such reduction in the Class B
Investor Interest will have the effect of slowing or reducing the return of
principal and interest to the Class B Certificateholders. In such case, the
Class B Certificateholders will bear directly the credit and other risks
associated with their interests in the Trust. See "-- Defaulted Receivables;
Investor Charge-Offs."
Reductions of the Class A Investor Interest or Class B Investor Interest
described above shall be reimbursed by, and the Class A Investor Interest or
Class B Investor Interest increased to the extent of, Excess Spread and Shared
Excess Finance Charge Collections available for such purposes on each Transfer
Date. See "-- Application of Collections -- Excess Spread; Shared Excess Finance
Charge Collections." When such reductions of the Class A Investor Interest and
Class B Investor Interest have been fully reimbursed, reductions of the
Collateral Interest shall be reimbursed until reimbursed in full in a similar
manner.
"Reallocated Class B Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor Interest
for the related Monthly Period in an amount not to exceed the amount applied to
fund the Class A Required Amount, if any; provided, however, that such amount
will not exceed the Class B Investor Interest after giving effect to any Class B
Investor Charge-Offs for the related Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Collateral Interest for
the related Monthly Period in an amount not to exceed the amount applied to fund
the Class A Required Amount and the Class B Required Amount, if any; provided,
however, that such amount will not exceed the Collateral Interest after giving
effect to any Collateral Charge-Offs for the related Transfer Date.
"Reallocated Principal Collections" for any Monthly Period means the sum of
(a) the Reallocated Class B Principal Collections for such Monthly Period, if
any, and (b) the Reallocated Collateral Principal Collections for such Monthly
Period, if any.
APPLICATION OF COLLECTIONS
Allocations. Except as otherwise provided below, the Servicer will deposit
into the Collection Account, no later than the second business day following the
date of processing, any payment collected by the Servicer on the Receivables. On
the same day as any such deposit is made, the Servicer will make the deposits
and payments to the accounts and parties as indicated below; provided, however,
that for as long as Bank of America remains the Servicer under the Agreement and
(a) (i) the Servicer provides to the Trustee a letter of credit or other credit
enhancement covering the risk of collection of the Servicer and (ii) the
Transferor shall have received a notice from each Rating Agency that reliance on
such letter of credit or other credit enhancement would not result in the
lowering of such Rating Agency's then-existing rating of any Series then
outstanding or
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(b) the Servicer has and maintains a certificate of deposit or short-term
deposit rating of P-1 by Moody's and of A-1 by Standard & Poor's and deposit
insurance provided by the FDIC, then the Servicer may make such deposits and
payments on the business day immediately prior to the Distribution Date (the
"Transfer Date") in an amount equal to the net amount of such deposits and
payments which would have been made had the conditions of this proviso not
applied. Currently, Bank of America remains the Servicer and maintains a
certificate of deposit or short-term deposit rating of P-1 by Moody's and of
A-1+ by Standard & Poor's and deposit insurance provided by the FDIC.
With respect to the Certificates and any Monthly Period, and
notwithstanding anything in the Agreement to the contrary, whether the Servicer
is required to make monthly or daily deposits from the Collection Account into
the Finance Charge Account or the Principal Account (i) the Servicer will only
be required to deposit Collections from the Collection Account into the Finance
Charge Account or the Principal Account up to the required amount to be
deposited into any such deposit account or, without duplication, distributed on
or prior to the related Distribution Date to Certificateholders or to the
Collateral Interest Holder and (ii) if at any time prior to such Distribution
Date the amount of Collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the Servicer will
be permitted to withdraw the excess from the Collection Account.
Payment of Interest, Fees and Other Items. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds in the
Finance Charge Account in the following priority:
(a) On each Transfer Date, an amount equal to the Class A Available
Funds will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class A Monthly
Interest and Class A Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class A
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class A Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class A Servicing Fee,
will be paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount, if
any, for the related Monthly Period will be treated as a portion of
Available Investor Principal Collections and deposited into the
Principal Account on such Transfer Date; and
(iv) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"-- Excess Spread; Shared Excess Finance Charge Collections."
(b) On each Transfer Date, an amount equal to the Class B Available
Funds will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class B Monthly
Interest and Class B Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class B
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing Fee,
will be paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"-- Excess Spread; Shared Excess Finance Charge Collections."
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<PAGE> 39
(c) On each Transfer Date, an amount equal to the Collateral Available
Funds will be distributed in the following priority:
(i) if Bank of America, an affiliate thereof or an Acceptable
Successor Servicer is not the Servicer, an amount equal to the
Collateral Interest Servicing Fee for the related Monthly Period, plus
the amount of any overdue Collateral Interest Servicing Fee, will be
paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"-- Excess Spread; Shared Excess Finance Charge Collections."
"Class A Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class A Certificate Rate for the related Interest Period,
(ii) the actual number of days in such Interest Period divided by 360 and (iii)
the outstanding principal balance of the Class A Certificates as of the related
Record Date; provided, however, with respect to the first Distribution Date,
Class A Monthly Interest will be equal to the interest accrued on the initial
outstanding principal balance of the Class A Certificates at the applicable
Class A Certificate Rate for the period from the Closing Date through July 14,
1998.
"Class B Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class B Certificate Rate for the related Interest Period,
(ii) the actual number of days in such Interest Period divided by 360 and (iii)
the outstanding principal balance of the Class B Certificates as of the related
Record Date; provided, however, with respect to the first Distribution Date,
Class B Monthly Interest will be equal to the interest accrued on the initial
outstanding principal balance of the Class B Certificates at the applicable
Class B Certificate Rate for the period from the Closing Date through July 14,
1998.
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Allocation of collections of Finance
Charge Receivables allocated to the Investor Interest and deposited in the
Finance Charge Account with respect to such Monthly Period (excluding the
portion of collections of Finance Charge Receivables attributable to Interchange
that is allocable to Servicer Interchange).
"Excess Spread" means, with respect to any Transfer Date, an amount equal
to the sum of the amounts described in clause (a) (iv), clause (b) (iii) and
clause (c) (ii) above.
Excess Spread; Shared Excess Finance Charge Collections. On each Transfer
Date, the Trustee, acting pursuant to the Servicer's instructions, will apply
Excess Spread and Shared Excess Finance Charge Collections allocated to Series
1998-B with respect to the related Monthly Period, to make the following
distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class A Required
Amount; provided, however, that in the event the Class A Required Amount
for such Transfer Date exceeds the amount of Excess Spread and Shared
Excess Finance Charge Collections allocated to Series 1998-B, such Excess
Spread and Shared Excess Finance Charge Collections allocated to Series
1998-B shall be applied first to pay amounts due with respect to such
Transfer Date pursuant to clause (a)(i) above under "-- Payment of
Interest, Fees and Other Items;" second to pay amounts due with respect to
such Transfer Date pursuant to clause (a) (ii) above under "-- Payment of
Interest, Fees and Other Items;" and third to pay amounts due with respect
to such Transfer Date pursuant to clause (a) (iii) under "-- Payment of
Interest, Fees and Other Items" above;
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed (after giving effect
to the allocation on such Transfer Date of certain other amounts applied
for that purpose) will be deposited into the Principal Account and
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treated as a portion of Available Investor Principal Collections for such
Transfer Date as described under "-- Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class B Required
Amount; provided, however, that in the event the Class B Required Amount
for such Transfer Date exceeds the amount of Excess Spread and Shared
Excess Finance Charge Collections allocated to Series 1998-B, such Excess
Spread and Shared Excess Finance Charge Collections allocated to Series
1998-B shall be applied first to pay amounts due with respect to such
Transfer Date pursuant to clause (b)(i) above under "-- Payment of
Interest, Fees and Other Items;" second to pay amounts due with respect to
such Transfer Date pursuant to clause (b) (ii) above under "-- Payment of
Interest, Fees and Other Items" and third, the amount remaining, up to the
Class B Investor Default Amount, will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "-- Payments of
Principal" below;
(d) an amount equal to the aggregate amount by which the Class B
Investor Interest has been reduced below the initial Class B Investor
Interest for reasons other than the payment of principal to the Class B
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be deposited
into the Principal Account and treated as a portion of Available Investor
Principal Collections for such Transfer Date as described under
"-- Payments of Principal" below;
(e) an amount equal to the Collateral Monthly Interest for the related
Distribution Date, plus the amount of any Collateral Monthly Interest
previously due but not distributed to the Collateral Interest Holder on a
prior Distribution Date, will be deposited into the Distribution Account on
such Transfer Date and distributed to the Collateral Interest Holder on the
related Distribution Date in accordance with the Loan Agreement;
(f) if Bank of America, an affiliate thereof or an Acceptable
Successor Servicer is the Servicer, an amount equal to the Collateral
Interest Servicing Fee for the related Monthly Period, plus the amount of
any overdue Collateral Interest Servicing Fee, will be paid to the
Servicer;
(g) an amount equal to the aggregate Collateral Default Amount, if
any, for such Transfer Date will be deposited into the Principal Account
and treated as a portion of Available Investor Principal Collections for
such Transfer Date as described under "-- Payments of Principal" below;
(h) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced below the Required Collateral Interest for
reasons other than the payment of principal to the Collateral Interest
Holder (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "-- Payments of
Principal" below;
(i) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "-- Reserve Account," an amount up to the excess, if any,
of the Required Reserve Account Amount over the Available Reserve Account
Amount will be deposited into the Reserve Account;
(j) an amount equal to the aggregate of any other amounts then due to
the Collateral Interest Holder out of collections of Excess Spread and
Shared Excess Finance Charge Collections allocated to Series 1998-B
pursuant to the Loan Agreement shall be deposited into the Distribution
Account on such Transfer Date and distributed to the Collateral Interest
Holder on the related Distribution Date for application in accordance with
the Loan Agreement; and
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(k) the balance, if any, will constitute a portion of Shared Excess
Finance Charge Collections for such Distribution Date and will be available
for allocation to other Series in Shared Excess Finance Charge Collections
Group One or to the holder of the Transferor Certificate as described in
"Description of the Certificates -- Shared Excess Finance Charge
Collections" in the Prospectus.
"Collateral Monthly Interest" with respect to any Distribution Date will
equal the product of (a) an amount equal to LIBOR plus 1.0% per annum, or such
lesser amount as may be designated in the Loan Agreement (the "Collateral
Rate"), (b) the actual number of days in the related Interest Period divided by
360 and (c) the Collateral Interest as of the related Record Date or, with
respect to the first Distribution Date, the Initial Collateral Interest.
Payments of Principal. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will distribute Available Investor Principal
Collections (see "-- Principal Payments" above) on deposit in the Principal
Account in the following priority:
(a) on each Transfer Date with respect to the Revolving Period, all
such Available Investor Principal Collections will be distributed or
deposited in the following priority:
(i) an amount equal to the Collateral Monthly Principal will be
deposited into the Distribution Account on such Transfer Date and
distributed on the related Distribution Date to the Collateral Interest
Holder in accordance with the Loan Agreement; and
(ii) the balance will be treated as Shared Excess Principal
Collections and applied as described under "Description of the
Certificates -- Shared Excess Principal Collections" herein and in the
Prospectus;
(b) on each Transfer Date with respect to the Controlled Accumulation
Period or the Rapid Amortization Period, all such Available Investor
Principal Collections will be distributed or deposited in the following
priority:
(i) an amount equal to Class A Monthly Principal will be deposited
in the Principal Funding Account (during the Controlled Accumulation
Period) or deposited into the Distribution Account for distribution to
the Class A Certificateholders (during the Rapid Amortization Period);
and
(ii) for each Transfer Date after the Class A Investor Interest has
been paid in full (after taking into account payments to be made on the
related Distribution Date), an amount equal to the Class B Monthly
Principal for such Transfer Date will be deposited into the Distribution
Account for distribution to the Class B Certificateholders;
(c) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period in which a reduction in the
Required Collateral Interest has occurred, Available Investor Principal
Collections not applied to Class A Monthly Principal or Class B Monthly
Principal will be applied on the related Distribution Date to reduce the
Collateral Interest to the Required Collateral Interest; and
(d) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period, the balance of Available Investor
Principal Collections not applied pursuant to (b) and (c) above, if any,
will be treated as Shared Excess Principal Collections and applied as
described under "Description of the Certificates -- Shared Excess Principal
Collections" herein and in the Prospectus.
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period or the Rapid Amortization Period, prior to
the payment in full of the Class A Investor Interest, will equal the least of
(i) the Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date, (ii) for each Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, and on or prior to the Class A Scheduled Payment
Date, the applicable Controlled Deposit Amount for
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such Transfer Date and (iii) the Class A Adjusted Investor Interest prior to any
deposits on such Transfer Date.
"Class B Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period, beginning with the Transfer Date following
the Monthly Period in which the Class A Investor Interest has been paid in full,
or with respect to any Transfer Date relating to the Rapid Amortization Period,
beginning with the Transfer Date immediately preceding the Distribution Date on
which the Class A Certificates have been paid in full (after taking into account
payments to be made on the related Distribution Date), will equal the lesser of
(i) the Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date (minus the portion of such Available
Investor Principal Collections applied to Class A Monthly Principal on such
Transfer Date) and (ii) the Class B Investor Interest for such Transfer Date.
"Collateral Monthly Principal" means (a) with respect to any Transfer Date
relating to the Revolving Period following any reduction of the Required
Collateral Interest pursuant to clause (3) of the proviso in the definition
thereof, an amount equal to the lesser of (i) the excess, if any, of the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after giving effect to any adjustments thereto for the benefit of the Class A
Certificateholders and the Class B Certificateholders on such Transfer Date)
over the Required Collateral Interest on such Transfer Date, and (ii) the
Available Investor Principal Collections on such Transfer Date or (b) with
respect to any Transfer Date relating to the Controlled Accumulation Period or
Rapid Amortization Period, an amount equal to the lesser of (i) the excess, if
any, of the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and Reallocated Principal Collections on such Transfer
Date and after giving effect to any adjustments thereto for the benefit of the
Class A Certificateholders and the Class B Certificateholders on such Transfer
Date) over the Required Collateral Interest on such Transfer Date, and (ii) the
excess, if any, of (A) the Available Investor Principal Collections on such
Transfer Date over (B) the sum of the Class A Monthly Principal and the Class B
Monthly Principal for such Transfer Date.
"Controlled Accumulation Amount" means (a) for any Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, $54,062,500; provided, however, that if the
commencement of the Controlled Accumulation Period is delayed as described above
under "-- Postponement of Controlled Accumulation Period," the Controlled
Accumulation Amount may be higher than the amount stated above for each Transfer
Date with respect to the Controlled Accumulation Period and will be determined
by the Servicer in accordance with the Agreement based on the principal payment
rates for the Accounts and on the investor interests of other Series (other than
certain excluded Series) which are scheduled to be in their revolving periods
and then scheduled to create Shared Excess Principal Collections during the
Controlled Accumulation Period and (b) for any Transfer Date with respect to the
Controlled Accumulation Period after the payment in full of the Class A Investor
Interest, an amount equal to the Class B Investor Interest on such Transfer
Date.
"Accumulation Shortfall" means (a) on the first Transfer Date with respect
to the Controlled Accumulation Period, the excess, if any, of the Controlled
Accumulation Amount for such Transfer Date over the amount distributed from the
Principal Account as Class A Monthly Principal for such Transfer Date and (b) on
each subsequent Transfer Date with respect to the Controlled Accumulation
Period, the excess, if any, of the applicable Controlled Accumulation Amount for
such subsequent Transfer Date plus any Accumulation Shortfall for the prior
Transfer Date over the amount distributed from the Principal Account as Class A
Monthly Principal for such subsequent Transfer Date.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
The Series 1998-B Certificates will be the seventh Series issued by the
Trust, outstanding as of the Closing Date, included in Shared Excess Finance
Charge Collections Group One. Series 1996-A,
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Series 1996-B, Series 1997-A, Series 1997-B, Series 1997-C and Series 1998-A are
also included in Shared Excess Finance Charge Collections Group One. In the
future, the Transferor may, but will not be required to, designate other Series
that are issued by the Trust to be included in Shared Excess Finance Charge
Collections Group One although there can be no assurance that any other Series
will be issued by the Trust or, if issued, will be designated by the Transferor
to be included in Shared Excess Finance Charge Collections Group One.
Collections of Finance Charge Receivables for any Monthly Period allocated
to the Investor Interest will first be used to cover, with respect to any
Monthly Period, all amounts described under "Description of the
Certificates -- Application of Collections -- Payment of Interest, Fees and
Other Items" and "-- Application of Collections -- Excess Spread; Shared Excess
Finance Charge Collections." The Servicer will then determine (i) the amount of
collections of Finance Charge Receivables for any Monthly Period allocated to
the Investor Interest remaining after covering such required payments to the
Certificateholders and the Collateral Interest Holder and (ii) any similar
amounts remaining with respect to any other Series in Shared Excess Finance
Charge Collections Group One ("Shared Excess Finance Charge Collections"). The
Servicer will allocate any Shared Excess Finance Charge Collections to cover any
required distributions to certificateholders for any Series in Shared Excess
Finance Charge Collections Group One entitled thereto which have not been
covered out of the collections of Finance Charge Receivables allocable to such
Series ("Finance Charge Shortfalls"). If Finance Charge Shortfalls exceed Shared
Excess Finance Charge Collections for any Monthly Period, Shared Excess Finance
Charge Collections will be allocated pro rata among the applicable Series in
Shared Excess Finance Charge Collections Group One based on the relative amounts
of Finance Charge Shortfalls. To the extent that Shared Excess Finance Charge
Collections exceed Finance Charge Shortfalls, the balance will be paid to the
holder of the Transferor Certificate. See "Description of Certificates -- Shared
Excess Finance Charge Collections" in the Prospectus for a discussion of the
limitations on the availability of Shared Excess Finance Charge Collections.
SHARED EXCESS PRINCIPAL COLLECTIONS
The Series 1998-B Certificates will be the seventh Series issued by the
Trust, outstanding as of the Closing Date, included in the Shared Excess
Principal Collections Group. Series 1996-A, Series 1996-B, Series 1997-A, Series
1997-B, Series 1997-C and Series 1998-A are also included in the Shared Excess
Principal Collections Group. In the future, the Transferor may, but will not be
required to, designate other Series that are issued by the Trust to be included
in the Shared Excess Principal Collections Group although there can be no
assurance that any other Series will be issued by the Trust or, if issued, will
be designated by the Transferor to be included in the Shared Excess Principal
Collections Group.
Collections of Principal Receivables for any Monthly Period allocated to
the Investor Interest will first be used to cover, with respect to any Monthly
Period during the Controlled Accumulation Period, deposits of the applicable
Controlled Deposit Amount to the Principal Funding Account or the Distribution
Account, and during the Rapid Amortization Period, payments to the
Certificateholders and then under certain circumstances payments to the
Collateral Interest Holder. The Servicer will determine the amount of
collections of Principal Receivables for any Monthly Period allocated to the
Investor Interest remaining after covering required payments to the
Certificateholders and any similar amount remaining for any other Series in the
Shared Excess Principal Collections Group ("Shared Excess Principal
Collections"). The Servicer will allocate the Shared Excess Principal
Collections to cover any scheduled or permitted principal distributions to
certificateholders and deposits to principal funding accounts, if any, for any
Series entitled thereto which have not been covered out of the collections of
Principal Receivables allocable to such Series and certain other amounts for
such Series ("Principal Shortfalls"). Shared Excess Principal Collections will
not be used to cover investor charge-offs for any Series. If Principal
Shortfalls exceed Shared Excess Principal Collections for any Monthly Period,
Shared Excess Principal Collections will be
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allocated pro rata among the applicable Series in the Shared Excess Principal
Collections Group based on the relative amounts of Principal Shortfalls. To the
extent that Shared Excess Principal Collections exceed Principal Shortfalls, the
balance will, subject to certain limitations, be paid to the holder of the
Transferor Certificate.
REQUIRED COLLATERAL INTEREST
The "Required Collateral Interest" with respect to any Transfer Date means
(i) initially $60,000,000 and (ii) thereafter on each Transfer Date an amount
equal to 8.0% of the sum of the Class A Adjusted Investor Interest and the Class
B Investor Interest on such Transfer Date, after taking into account deposits
into the Principal Funding Account on such Transfer Date and payments to be made
on the related Distribution Date, and the Collateral Interest on the prior
Transfer Date after any adjustments made on such Transfer Date, but not less
than $22,500,000; provided, however, that (1) if certain reductions in the
Collateral Interest are made or if a Pay Out Event occurs, the Required
Collateral Interest for such Transfer Date shall equal the Required Collateral
Interest for the Transfer Date immediately preceding the occurrence of such
reduction or Pay Out Event, (2) in no event shall the Required Collateral
Interest exceed the unpaid principal amount of the Certificates as of the last
day of the Monthly Period preceding such Transfer Date after taking into account
payments to be made on the related Distribution Date and (3) the Required
Collateral Interest may be reduced to a lesser amount at any time if the Rating
Agency Condition is satisfied.
"Rating Agency Condition" means the notification in writing by each Rating
Agency to the Transferor, the Servicer and the Trustee that a proposed action
will not result in such Rating Agency reducing or withdrawing its then existing
rating of the investor certificates of any outstanding Series or class with
respect to which it is a Rating Agency.
With respect to any Transfer Date, if the Collateral Interest is less than
the Required Collateral Interest, certain Excess Spread and Shared Excess
Finance Charge Collections allocated to Series 1998-B, if available, will be
allocated to increase the Collateral Interest to the extent of such shortfall.
Any of such Excess Spread and Shared Excess Finance Charge Collections allocated
to Series 1998-B not required to be so allocated or deposited into the Reserve
Account with respect to any Transfer Date will be applied in accordance with the
Loan Agreement. See "-- Application of Collections -- Excess Spread; Shared
Excess Finance Charge Collections."
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On or before each Transfer Date, the Servicer will calculate the Aggregate
Investor Default Amount for the preceding Monthly Period. The term "Aggregate
Investor Default Amount" means, for any Monthly Period, the sum of the Investor
Default Amounts for such Monthly Period. The term "Investor Default Amount"
means, for any Defaulted Account, the product of (a) the Floating Investor
Percentage on the day such Account became a Defaulted Account and (b) the
aggregate amount of Principal Receivables (other than Ineligible Receivables) in
such Account on the day such Account became a Defaulted Account (the "Default
Amount"). A portion of the Aggregate Investor Default Amount will be allocated
to the Class A Certificateholders (the "Class A Investor Default Amount") on
each Transfer Date in an amount equal to the product of the Class A Floating
Allocation applicable during the related Monthly Period and the Aggregate
Investor Default Amount for such Monthly Period. A portion of the Aggregate
Investor Default Amount will be allocated to the Class B Certificateholders (the
"Class B Investor Default Amount") on each Transfer Date in an amount equal to
the product of the Class B Floating Allocation applicable during the related
Monthly Period and the Aggregate Investor Default Amount for such Monthly
Period. A portion of the Aggregate Investor Default Amount will be allocated to
the Collateral Interest Holder (the "Collateral Default Amount") on each
Transfer Date in an amount equal to the product of the Collateral Floating
Allocation applicable during the related Monthly Period and the Aggregate
Investor Default Amount for such Monthly Period.
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On each Transfer Date, if the Class A Investor Default Amount for such
Transfer Date exceeds the amount of Class A Available Funds, Excess Spread,
Shared Excess Finance Charge Collections and Reallocated Principal Collections
available to fund such amount with respect to the Monthly Period immediately
preceding such Transfer Date as described under "-- Application of
Collections -- Excess Spread; Shared Excess Finance Charge Collections," the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and any Reallocated Principal Collections on such Transfer Date)
will be reduced by the amount of such excess, but not more than the lesser of
the Class A Investor Default Amount and the Collateral Interest (after giving
effect to reductions for any Collateral Charge-Offs and any Reallocated
Principal Collections on such Transfer Date) for such Transfer Date. In the
event that such reduction would cause the Collateral Interest to be a negative
number, the Collateral Interest will be reduced to zero, and the Class B
Investor Interest (after giving effect to reductions for any Class B Investor
Charge-Offs and any Reallocated Class B Principal Collections on such Transfer
Date) will be reduced by the amount by which the Collateral Interest would have
been reduced below zero. In the event that such reduction would cause the Class
B Investor Interest to be a negative number, the Class B Investor Interest will
be reduced to zero, and the Class A Investor Interest will be reduced by the
amount by which the Class B Investor Interest would have been reduced below
zero, but not more than the Class A Investor Default Amount for such Transfer
Date (a "Class A Investor Charge-Off"), which will have the effect of slowing or
reducing the return of principal and interest to the Class A Certificateholders.
If the Class A Investor Interest has been reduced by the amount of any Class A
Investor Charge-Offs, it will be reimbursed on any Transfer Date (but not by an
amount in excess of the aggregate Class A Investor Charge-Offs) by the amount of
Excess Spread allocated and available for such purpose as described under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections."
On each Transfer Date, if the Class B Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread, Shared Excess Finance Charge
Collections and Reallocated Collateral Principal Collections which are allocated
and available to fund such amount with respect to the Monthly Period preceding
such Transfer Date, the Collateral Interest (after giving effect to reductions
for any Collateral Charge-Offs and any Reallocated Principal Collections on such
Transfer Date and after giving effect to any adjustments with respect thereto as
described in the preceding paragraph) will be reduced by the amount of such
excess but not more than the lesser of the Class B Investor Default Amount and
the Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and any Reallocated Principal Collections on such Transfer Date and
after giving effect to any adjustments with respect thereto as described in the
preceding paragraph) for such Transfer Date. In the event that such reduction
would cause the Collateral Interest to be a negative number, the Collateral
Interest will be reduced to zero and the Class B Investor Interest will be
reduced by the amount by which the Collateral Interest would have been reduced
below zero, but not more than the Class B Investor Default Amount for such
Transfer Date (a "Class B Investor Charge-Off"). The Class B Investor Interest
will also be reduced by the amount of Reallocated Class B Principal Collections
in excess of the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and any Reallocated Collateral Principal Collections on
such Transfer Date) and the amount of any portion of the Class B Investor
Interest allocated to the Class A Certificates to avoid a reduction in the Class
A Investor Interest. The Class B Investor Interest will thereafter be reimbursed
(but not in excess of the unpaid principal balance of the Class B Certificates)
on any Transfer Date by the amount of Excess Spread and Shared Excess Finance
Charge Collections allocated and available for that purpose as described under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections."
On each Transfer Date, if the Collateral Default Amount for such Transfer
Date exceeds the amount of Excess Spread and Shared Excess Finance Charge
Collections which is allocated and available to fund such amount as described
under "-- Application of Collections -- Excess Spread; Shared Excess Finance
Charge Collections," the Collateral Interest will be reduced by the amount of
such excess but not more than the lesser of the Collateral Default Amount and
the Collateral Interest
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for such Transfer Date (a "Collateral Charge-Off"). The Collateral Interest will
also be reduced by the amount of Reallocated Principal Collections and the
amount of any portion of the Collateral Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest or to the
Class B Certificates to avoid a reduction in the Class B Investor Interest. The
Collateral Interest will thereafter be reimbursed on any Transfer Date by the
amount of Excess Spread and Shared Excess Finance Charge Collections allocated
and available for that purpose as described under "-- Application of
Collections -- Excess Spread; Shared Excess Finance Charge Collections."
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 1998-B Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Certificateholders (the "Principal Funding Account"). During the
Controlled Accumulation Period, the Trustee at the direction of the Servicer
will transfer collections in respect of Principal Receivables (other than
Reallocated Principal Collections) and Shared Excess Principal Collections from
other Series, if any, allocated to Series 1998-B from the Principal Account to
the Principal Funding Account as described under "-- Application of
Collections." Such collections will be retained in the Principal Funding Account
and ultimately used to pay principal of the Class A Certificates on the Class A
Scheduled Payment Date or the Distribution Date in the month following the
commencement of the Rapid Amortization Period, whichever occurs earlier.
Funds on deposit in the Principal Funding Account shall be invested at the
direction of the Servicer by the Trustee in Permitted Investments evidencing
obligations of any of the Corporation or any Affiliate thereof; provided,
however, that if no obligations of the Corporation or any Affiliate thereof
shall qualify as Permitted Investments, notwithstanding the preceding, the funds
on deposit in the Principal Funding Account shall be invested by the Trustee in
Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") will be applied on each Transfer Date as Class A
Available Funds. If, on any Transfer Date, the Principal Funding Investment
Proceeds for the related Interest Period are less than the Covered Amount, the
amount of such Principal Funding Investment Shortfall shall be paid, to the
extent available, from the Reserve Account and, if necessary, from Excess
Spread, Shared Excess Finance Charge Collections and Reallocated Principal
Collections.
RESERVE ACCOUNT
Pursuant to the Series 1998-B Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Certificateholders (the "Reserve Account"). The Reserve Account
is established to assist with the subsequent distribution of interest on the
Certificates during the Controlled Accumulation Period. On each Transfer Date
from and after the Reserve Account Funding Date, but prior to the termination of
the Reserve Account, the Trustee, acting pursuant to the Servicer's
instructions, will apply Excess Spread and Shared Excess Finance Charge
Collections allocated to the Certificates (to the extent described above under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections") to increase the amount on deposit in the Reserve Account (to the
extent such amount is less than the Required Reserve Account Amount). The
"Reserve Account Funding Date" will be the Transfer Date with respect to the
Monthly Period which commences no later than three months prior to the
commencement of the Controlled Accumulation Period, or such earlier date as may
be required by the Agreement. The "Required Reserve Account Amount" for any
Transfer Date on or after the Reserve Account Funding Date will be equal to (a)
0.5% of the outstanding principal balance of the Class A Certificates or (b) any
other amount designated by the Transferor; provided, however, that if such
designation is of a lesser amount, the Transferor shall have provided the
Servicer, the Collateral Interest Holder and the Trustee with evidence that the
Rating Agency
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Condition has been satisfied and the Transferor shall have delivered to the
Trustee a certificate of an authorized officer to the effect that, based on the
facts known to such officer at such time, in the reasonable belief of the
Transferor, such designation will not cause a Pay Out Event or an event that,
after the giving of notice or the lapse of time, would cause a Pay Out Event to
occur with respect to Series 1998-B. On each Transfer Date, after giving effect
to any deposit to be made to, and any withdrawal to be made from, the Reserve
Account on such Transfer Date, the Trustee will withdraw from the Reserve
Account an amount equal to the excess, if any, of the amount on deposit in the
Reserve Account over the Required Reserve Account Amount and deposit such excess
into the Distribution Account to be paid to the Collateral Interest Holder on
the related Distribution Date, for application in accordance with the terms of
the Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
funds on deposit in the Reserve Account shall be invested at the direction of
the Servicer by the Trustee in Permitted Investments evidencing obligations of
any of the Corporation or any Affiliate thereof; provided, however, that if no
obligations of the Corporation or any Affiliate thereof shall qualify as
Permitted Investments, notwithstanding the preceding, the funds on deposit in
the Reserve Account shall be invested by the Trustee in Permitted Investments.
The interest and other investment income (net of investment expenses and losses)
earned on such investments will be retained in the Reserve Account (to the
extent the amount on deposit is less than the Required Reserve Account Amount)
or deposited in the Finance Charge Account and treated as Class A Available
Funds.
On or before each Transfer Date with respect to the Controlled Accumulation
Period and on the first Transfer Date with respect to the Rapid Amortization
Period, a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Finance Charge Account and included in
collections of Finance Charge Receivables to be applied to the payment of the
Class A Monthly Interest for such Transfer Date in an amount equal to the lesser
of (a) the Available Reserve Account Amount with respect to such Transfer Date
and (b) the Principal Funding Investment Shortfall with respect to such Transfer
Date; provided, however, that the amount of such withdrawal shall be reduced to
the extent that funds otherwise would be available to be deposited in the
Reserve Account on such Transfer Date. On each Transfer Date, the amount
available to be withdrawn from the Reserve Account (the "Available Reserve
Account Amount") will be equal to the lesser of the amount on deposit in the
Reserve Account (before giving effect to any deposit to be made to the Reserve
Account on such Transfer Date) and the Required Reserve Account Amount for such
Transfer Date.
The Reserve Account will be terminated upon the earlier to occur of (a) the
termination of the Trust pursuant to the Agreement and (b) if the Controlled
Accumulation Period has not commenced, the first Transfer Date with respect to
the Rapid Amortization Period or, if the Controlled Accumulation Period has
commenced, the earlier to occur of (i) the first Transfer Date with respect to
the Rapid Amortization Period and (ii) the Transfer Date immediately preceding
the Class A Scheduled Payment Date. Upon the termination of the Reserve Account,
all amounts on deposit therein (after giving effect to any withdrawal from the
Reserve Account on such date as described above) will be deposited into the
Distribution Account to be paid to the Collateral Interest Holder on the related
Distribution Date, for application in accordance with the terms of the Loan
Agreement. Any amounts withdrawn from the Reserve Account and distributed to the
Collateral Interest Holder as described above will not be available for
distribution to the Certificateholders.
PAY OUT EVENTS
As described above, the Revolving Period will continue through April 30,
2003 (unless such date is postponed as described under "-- Postponement of
Controlled Accumulation Period"), unless a Pay Out Event occurs prior to such
date. A "Pay Out Event" refers to any of the following events:
(a) failure on the part of the Transferor (i) to make any payment or
deposit on the date required under the Agreement (or within the applicable
grace period which shall not exceed five days) or (ii) to observe or
perform in any material respect any other covenants or agreements
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of the Transferor set forth in the Agreement, which failure has a material
adverse effect on the Certificateholders (which determination shall be made
without reference to the amount of the Collateral Interest) and which
continues unremedied for a period of 60 days after written notice and
continues to materially and adversely affect the interests of the
Certificateholders (which determination shall be made without regard to the
amount of the Collateral Interest) for such period;
(b) any representation or warranty made by the Transferor in the
Agreement, or any information required to be given by the Transferor to the
Trustee to identify the Accounts proves to have been incorrect in any
material respect when made or when delivered and which continues to be
incorrect in any material respect for a period of 60 days after written
notice and as a result of which the interests of the Certificateholders are
materially and adversely affected (which determination shall be made
without reference to the amount of the Collateral Interest) and continue to
be materially and adversely affected for such period; provided, however,
that a Pay Out Event pursuant to this subparagraph (b) shall not be deemed
to occur thereunder if the Transferor has accepted reassignment of the
related Receivable or all such Receivables, if applicable, during such
period in accordance with the provisions of the Agreement;
(c) the average of the Portfolio Yields for any three consecutive
Monthly Periods is less than the average of the Base Rates for such period;
(d) a failure by the Transferor to convey Receivables arising under
Additional Accounts, or Participations, to the Trust when required by the
Agreement;
(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders;
(f) the Class A Investor Interest is not paid in full on the Class A
Scheduled Payment Date or the Class B Investor Interest is not paid in full
on the Class B Scheduled Payment Date;
(g) certain events of insolvency, receivership or bankruptcy relating
to the Transferor or other holder of the Transferor Certificate;
(h) the Transferor becomes unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the
Agreement; or
(i) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (e) above, a Pay
Out Event will be deemed to have occurred with respect to the Certificates only
if, after any applicable grace period, either the Trustee or Certificateholders
and the Collateral Interest Holder evidencing undivided interests aggregating
not less than 50% of the Investor Interest, by written notice to the Transferor
and the Servicer (and to the Trustee if given by the Certificateholders) declare
that a Pay Out Event has occurred with respect to the Certificates as of the
date of such notice. In the case of any event described in clause (g), (h) or
(i), a Pay Out Event with respect to all Series then outstanding, and in the
case of any event described in clause (c), (d) or (f), a Pay Out Event with
respect to only the Certificates, will be deemed to have occurred without any
notice or other action on the part of the Trustee or the Certificateholders, the
Collateral Interest Holder or all certificateholders, as appropriate,
immediately upon the occurrence of such event. On the date on which a Pay Out
Event is deemed to have occurred, the Rapid Amortization Period will commence.
In such event, distributions of principal to the Certificateholders will begin
on the first Distribution Date following the month in which such Pay Out Event
occurred. If, because of the occurrence of a Pay Out Event, the Rapid
Amortization Period begins on or prior to March 31, 2004 Certificateholders may
begin receiving distributions of principal earlier than they otherwise would
have, which may shorten the average life of the Certificates.
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See "Description of the Certificates -- Pay Out Events" in the Prospectus
for an additional discussion of the consequences of an insolvency,
conservatorship or receivership of the Transferor.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Investor Interest with
respect to any Transfer Date (the "Investor Servicing Fee") shall be equal to
one-twelfth of the product of (a) 2.0% and (b) the Adjusted Investor Interest as
of the last day of the Monthly Period preceding such Transfer Date; provided,
however, with respect to the first Transfer Date, the Investor Servicing Fee
shall be equal to $1,145,833. On each Transfer Date, but only if Bank of
America, an affiliate thereof, U.S. Bank National Association (formerly known as
First Bank National Association) or another successor servicer meeting the
requirements described in the Series 1998-B Supplement (an "Acceptable Successor
Servicer") is the Servicer, Servicer Interchange with respect to the related
Monthly Period that is on deposit in the Finance Charge Account shall be
withdrawn from the Finance Charge Account and paid to the Servicer in payment of
a portion of the Investor Servicing Fee with respect to such Monthly Period. The
"Servicer Interchange" for any Monthly Period for which Bank of America, an
affiliate thereof or an Acceptable Successor Servicer is the Servicer will be an
amount equal to the portion of collections of Finance Charge Receivables
allocated to the Investor Interest with respect to such Monthly Period that is
attributable to Interchange; provided, however, that Servicer Interchange for a
Monthly Period shall not exceed one-twelfth of the product of (i) the Adjusted
Investor Interest, as of the last day of such Monthly Period and (ii) 1.0%;
provided further, however, that with respect to the first Transfer Date, the
Servicer Interchange may equal but shall not exceed $572,917. In the case of any
insufficiency of Servicer Interchange on deposit in the Finance Charge Account,
a portion of the Investor Servicing Fee with respect to such Monthly Period will
not be paid to the extent of such insufficiency and in no event shall the Trust,
the Trustee, the Certificateholders or the Collateral Interest Holder be liable
for the share of the Servicing Fee to be paid out of Servicer Interchange.
The share of the Investor Servicing Fee allocable to the Class A
Certificateholders with respect to any Transfer Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Allocation, (b) 1.0%, or if Bank of America, an affiliate thereof or an
Acceptable Successor Servicer is not the Servicer, 2.0% (the "Net Servicing Fee
Rate") and (c) the Adjusted Investor Interest as of the last day of the Monthly
Period preceding such Transfer Date; provided, however, that with respect to the
first Transfer Date, the Class A Servicing Fee shall be equal to $495,573. The
share of the Investor Servicing Fee allocable to the Class B Certificateholders
with respect to any Transfer Date (the "Class B Servicing Fee") shall be equal
to one-twelfth of the product of (a) the Class B Floating Allocation, (b) the
Net Servicing Fee Rate and (c) the Adjusted Investor Interest as of the last day
of the Monthly Period preceding such Transfer Date; provided, however, that with
respect to the first Transfer Date, the Class B Servicing Fee shall be equal to
$31,510. The share of the Investor Servicing Fee allocable to the Collateral
Interest Holder with respect to any Transfer Date (the "Collateral Interest
Servicing Fee," together with the Class A Servicing Fee and the Class B
Servicing Fee, the "Certificateholder Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Collateral Floating Allocation, (b) the
Net Servicing Fee Rate and (c) the Adjusted Investor Interest as of the last day
of the Monthly Period preceding such Transfer Date; provided, however, that with
respect to the first Transfer Date, the Collateral Interest Servicing Fee shall
be equal to $45,833. The remainder of the Servicing Fee shall be paid by the
holder of the Transferor Certificate or by other Series (as provided in the
related Series Supplements) or, to the extent of any insufficiency of Servicer
Interchange as described above, not be paid. The Class A Servicing Fee and the
Class B Servicing Fee shall be payable to the Servicer solely to the extent
amounts are available for distribution in respect thereof as described under
"-- Application of Collections -- Payment of Interest, Fees and Other Items."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and independent
certified public accountants and other fees which are not expressly
S-49
<PAGE> 50
stated in the Agreement to be payable by the Trust or the Certificateholders
other than any tax imposed on or measured by income, including United States
federal, state and local income and franchise taxes, if any, of the Trust or the
Certificateholders.
PAIRED SERIES
The Transferor may cause the Trust to issue another Series as a Paired
Series with respect to Series 1998-B. Although no assurance can be given as to
whether such other Series will be issued and, if issued, the specific terms
thereof, the outstanding principal amount of such Series may vary from time to
time whether or not a Pay Out Event occurs with respect to Series 1998-B, and
the interest rate with respect to certificates of such other Series will be
established on the date of issuance of such Series and may be reset
periodically. Further, the pay out events with respect to such other Series may
vary from the Pay Out Events with respect to the Series 1998-B and may include
pay out events which are unrelated to the status of the Transferor, the Servicer
or the Receivables, such as events related to the continued availability and
rating of certain providers of Enhancement to such other Series. If a Pay Out
Event does occur with respect to any such Paired Series prior to the payment in
full of the Certificates, the final payment of principal to the Holders may be
delayed. In particular, the numerator of the Fixed Allocation Percentage may be
changed upon the occurrence of a pay out event with respect to a Paired Series
resulting in a possible reduction of the percentage of collections of Principal
Receivables allocated to the Certificateholders and a possible delay in payments
to such Certificateholders. See "-- Allocation Percentages" and "-- Paired
Series."
REPORTS TO CERTIFICATEHOLDERS
On each Transfer Date, the Trustee will forward to each Certificateholder
of record, a statement prepared by the Servicer setting forth the items
described in "Description of the Certificates -- Reports to Certificateholders"
in the Prospectus. In addition, such statement will include certain information
regarding the Principal Funding Account and the Collateral Interest, if any, for
such Transfer Date. The Servicer intends to file with the Commission periodic
reports with respect to the Certificates following completion of the reporting
period required by Rule 15d-1.
AMENDMENTS
In addition to being subject to amendment pursuant to any other provisions
relating to amendments in the Agreement, the Series 1998-B Supplement may be
amended by the Transferor without the consent of the Servicer, the Trustee or
any Certificateholder if the Transferor provides the Trustee with (a) an opinion
of counsel to the effect that such amendment or modification would reduce the
risk that the Trust would be treated as taxable as a publicly traded partnership
pursuant to Code section 7704 and (b) a certificate that such amendment or
modification would not materially and adversely affect any Certificateholder;
provided, however, that no such amendment shall be deemed effective without the
Trustee's consent, if the Trustee's rights, duties and obligations under the
Series 1998-B Supplement are thereby modified. Promptly after the effectiveness
of any such amendment, the Transferor shall deliver a copy of such amendment to
each of the Servicer, the Trustee and each Rating Agency described in the Series
1998-B Supplement.
UNDERWRITING
Subject to the terms and conditions set forth in the Class A Underwriting
Agreement (the "Class A Underwriting Agreement") between the Transferor and the
Class A Underwriter named below (the "Class A Underwriter"), and the terms and
conditions set forth in the Class B Underwriting Agreement (the "Class B
Underwriting Agreement," and together with the Class A Underwriting Agreement,
the "Underwriting Agreement") between the Transferor and the Class B Underwriter
named below (the "Class B Underwriter," and together with the Class A
Underwriter, the "Underwriters"), the Transferor has agreed to direct the Trust
to sell to the Underwriters, and
S-50
<PAGE> 51
each of the Underwriters has severally agreed to purchase, the principal amount
of the Certificates set forth opposite its name:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS A UNDERWRITER CLASS A CERTIFICATES
------------------- --------------------
<S> <C>
BancAmerica Robertson Stephens......................... $648,750,000
------------
Total................................................ $648,750,000
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS B UNDERWRITER CLASS B CERTIFICATES
------------------- --------------------
<S> <C>
BancAmerica Robertson Stephens......................... $ 41,250,000
------------
Total................................................ $ 41,250,000
============
</TABLE>
In the Class A Underwriting Agreement, the Class A Underwriter has agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Class A Certificates offered hereby if any of the Class A Certificates are
purchased. In the Class B Underwriting Agreement, the Class B Underwriter has
agreed, subject to the terms and conditions set forth therein, to purchase all
of the Class B Certificates offered hereby if any of the Class B Certificates
are purchased. The Underwriters have agreed to reimburse the Transferor for
certain expenses of the issuance and distribution of the Certificates.
The Class A Underwriter proposes initially to offer the Class A
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of 0.180% of the
principal amount of the Class A Certificates. The Class A Underwriter may allow,
and such dealers may reallow, concessions not in excess of 0.120% of the
principal amount of the Class A Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class A Underwriter.
The Class B Underwriter proposes initially to offer the Class B
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of 0.210% of the
principal amount of the Class B Certificates. The Class B Underwriter may allow,
and such dealers may reallow, concessions not in excess of 0.140% of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class B Underwriter.
Each Underwriter will represent and agree that:
(a) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Certificates in, from or otherwise involving the United Kingdom;
(b) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of the
Certificates to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
or is a person to whom such document may otherwise lawfully be issued or passed
on;
(c) if it is an authorized person under Chapter III of Part 1 of the
Financial Services Act 1986, it has only promoted and will only promote (as that
term is defined in Regulation 1.02(2) of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991) to any person in the United Kingdom the
scheme described in this Prospectus Supplement and the Prospectus if that person
is a kind described either in Section 76(2) of the Financial Services Act 1986
or in Regulation 1.04 of the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991; and
(d) it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995.
S-51
<PAGE> 52
The Transferor will indemnify the Underwriters against liabilities relating
to the adequacy of disclosure to investors, including liabilities under the
Securities Act, or contribute to payments the Underwriters may be required to
make in respect thereof.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Certificates in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the Certificates so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of the
Certificates in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the Underwriters
to reclaim a selling concession from a syndicate member when the Certificates
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of the
Certificates to be higher than they would otherwise be in the absence of such
transactions. Neither the Transferor nor any of the Underwriters represent that
the Underwriters will engage in any such transactions or that such transactions,
once commenced, will not be discontinued without notice at any time.
This Prospectus Supplement and the related Prospectus may be used by
BancAmerica Robertson Stephens, an affiliate of the Transferor and Servicer, in
connection with offers and sales related to secondary market transactions in the
Certificates. BancAmerica Robertson Stephens may act as principal or agent in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale or otherwise.
The Underwriters or agents and their associates may be customers of
(including borrowers from), engage in transactions with, and/or perform services
for, the Transferor, the Servicer, or the Corporation, their respective
affiliates and the Trustee, in the ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Transferor by Andrea B. Goldenberg, Senior Counsel at the
Corporation, and by Orrick, Herrington & Sutcliffe LLP, San Francisco,
California, special counsel to the Transferor. Certain legal matters relating to
the federal tax consequences of the issuance of the Certificates will be passed
upon for the Transferor by Orrick, Herrington & Sutcliffe LLP, San Francisco,
California, special tax counsel to the Transferor. Certain legal matters
relating to the issuance of the Certificates will be passed upon for the
Underwriters by Mayer, Brown & Platt, Chicago, Illinois.
S-52
<PAGE> 53
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Acceptable Successor Servicer............................... S-49
Accounts.................................................... S-1, S-4
Accumulation Period Length.................................. S-32
Accumulation Shortfall...................................... S-10, S-42
Additional Interest......................................... S-8, S-30
Adjusted Investor Interest.................................. S-6
Aggregate Investor Default Amount........................... S-44
Agreement................................................... S-4
Available Investor Principal Collections.................... S-32
Available Reserve Account Amount............................ S-47
Bank........................................................ S-4
Bank of America............................................. S-1, S-4
Bank of America NT&SA....................................... S-4
Bank Portfolio.............................................. S-4
Base Rate................................................... S-26
Call Report................................................. S-28
Certificateholder Servicing Fee............................. S-49
Certificateholders.......................................... S-4
Certificates................................................ S-1, S-3
Class A Additional Interest................................. S-30
Class A Adjusted Investor Interest.......................... S-6, S-35
Class A Available Funds..................................... S-30
Class A Certificate Rate.................................... S-2, S-5, S-30
Class A Certificateholders.................................. S-4
Class A Certificates........................................ S-1, S-3
Class A Fixed Allocation.................................... S-34
Class A Floating Allocation................................. S-34
Class A Investor Charge-Off................................. S-13, S-45
Class A Investor Default Amount............................. S-44
Class A Investor Interest................................... S-5, S-35
Class A Monthly Interest.................................... S-39
Class A Monthly Principal................................... S-41
Class A Required Amount..................................... S-12, S-36
Class A Scheduled Payment Date.............................. S-2
Class A Servicing Fee....................................... S-49
Class A Underwriter......................................... S-50
Class A Underwriting Agreement.............................. S-50
Class B Additional Interest................................. S-30
Class B Available Funds..................................... S-30
Class B Certificate Rate.................................... S-2, S-6, S-31
Class B Certificateholders.................................. S-4
Class B Certificates........................................ S-1, S-3
Class B Fixed Allocation.................................... S-35
Class B Floating Allocation................................. S-34
Class B Investor Charge-Off................................. S-14, S-45
Class B Investor Default Amount............................. S-44
Class B Investor Interest................................... S-5, S-35
Class B Monthly Interest.................................... S-39
Class B Monthly Principal................................... S-42
Class B Required Amount..................................... S-12, S-36
</TABLE>
S-53
<PAGE> 54
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Class B Scheduled Payment Date.............................. S-2
Class B Servicing Fee....................................... S-49
Class B Underwriter......................................... S-50
Class B Underwriting Agreement.............................. S-50
Closing Date................................................ S-2, S-5
Code........................................................ S-17
Collateral Available Funds.................................. S-39
Collateral Charge-Off....................................... S-46
Collateral Default Amount................................... S-44
Collateral Fixed Allocation................................. S-35
Collateral Floating Allocation.............................. S-34
Collateral Interest......................................... S-5, S-35
Collateral Interest Holder.................................. S-5
Collateral Interest Servicing Fee........................... S-49
Collateral Monthly Interest................................. S-41
Collateral Monthly Principal................................ S-42
Collateral Rate............................................. S-41
Controlled Accumulation Amount.............................. S-42
Controlled Accumulation Period.............................. S-9
Controlled Deposit Amount................................... S-9, S-25
Corporation................................................. S-18, S-28
Covered Amount.............................................. S-10
Cut-Off Date................................................ S-5
Default Amount.............................................. S-44
Distribution Date........................................... S-2, S-8
ERISA....................................................... S-17
Excess Spread............................................... S-12, S-39
Finance Charge Shortfalls................................... S-43
Fixed Investor Percentage................................... S-34
Floating Investor Percentage................................ S-33
Identified Pool............................................. S-4
Initial Collateral Interest................................. S-14
Initial Identified Pool..................................... S-19
Interest Period............................................. S-8
Investor Default Amount..................................... S-44
Investor Interest........................................... S-5
Investor Servicing Fee...................................... S-49
LIBOR....................................................... S-2, S-31
LIBOR Determination Date.................................... S-31
Loan Agreement.............................................. S-14
Merger...................................................... S-18
Merger Agreement............................................ S-18
Minimum Aggregate Principal Receivables..................... S-21
Minimum Transferor Interest................................. S-21
Monthly Period.............................................. S-6
NationsBank................................................. S-18
NationsBank (DE)............................................ S-18
Net Servicing Fee Rate...................................... S-49
Paired Series............................................... S-16
Pay Out Event............................................... S-47
Portfolio Yield............................................. S-26
Principal Funding Account................................... S-9, S-25, S-46
</TABLE>
S-54
<PAGE> 55
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Principal Funding Account Balance........................... S-25
Principal Funding Investment Proceeds....................... S-10, S-46
Principal Funding Investment Shortfall...................... S-10
Principal Shortfalls........................................ S-43
Rapid Amortization Period................................... S-11
Rating Agency Condition..................................... S-44
Reallocated Class B Principal Collections................... S-37
Reallocated Collateral Principal Collections................ S-37
Reallocated Principal Collections........................... S-37
Receivables................................................. S-1, S-4
Record Date................................................. S-29
Reference Banks............................................. S-31
Reincorporation Merger...................................... S-18
Reorganization.............................................. S-18
Required Amount............................................. S-12
Required Collateral Interest................................ S-14, S-44
Required Reserve Account Amount............................. S-46
Reserve Account............................................. S-46
Reserve Account Funding Date................................ S-46
Revolving Period............................................ S-9
Series 1998-B............................................... S-4
Series 1998-B Supplement.................................... S-4
Series 1998-B Termination Date.............................. S-7
Servicer Interchange........................................ S-49
Shared Excess Finance Charge Collections Group One.......... S-14
Shared Excess Finance Charge Collections.................... S-43
Shared Excess Principal Collections......................... S-43
Shared Excess Principal Collections Group................... S-15
Telerate Page 3750.......................................... S-31
Transfer Date............................................... S-38
Transferor.................................................. S-4
Transferor Interest......................................... S-5
Transferor Percentage....................................... S-29
Trust....................................................... S-1, S-4
Trust Portfolio............................................. S-21
Trustee..................................................... S-4
Underwriters................................................ S-50
Underwriting Agreement...................................... S-50
</TABLE>
S-55
<PAGE> 56
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<PAGE> 57
ANNEX I
OTHER SERIES ISSUED
The table below sets forth the principal characteristics of the six other
Series previously issued by the Trust, Series 1996-A, Series 1996-B, Series
1997-A, Series 1997-B, Series 1997-C and Series 1998-A which are each in Shared
Excess Finance Charge Collections Group One and the Shared Excess Principal
Collections Group. For more specific information with respect to any Series, any
prospective investor should contact Bank of America at (602) 597-3273. Bank of
America will provide, without charge, to any prospective purchaser of the
Certificates, a copy of the Disclosure Documents for any previously
publicly-issued Series.
<TABLE>
<S> <C>
1. Series 1996-A
Class A Certificates
Initial Investor Interest........................................$427,500,000
Certificate Rate.........................One-Month LIBOR plus 0.13% per annum
Controlled Accumulation Amount (subject to adjustment)............$35,625,000
Commencement of Accumulation Period.............................June 30, 2000
Annual Servicing Fee Percentage...............................2.00% per annum
Initial Collateral Interest.......................................$40,000,000
Other Enhancement.......................Subordination of Class B Certificates
Series 1996-A Termination Date..................August 2003 Distribution Date
Series Issuance Date............................................July 19, 1996
Class B Certificates
Initial Investor Interest.........................................$32,500,000
Certificate Rate.........................One-Month LIBOR plus 0.29% per annum
Controlled Accumulation Amount....................................$32,500,000
Commencement of Accumulation Period....Same as above for Class A Certificates
Annual Servicing Fee Percentage........same as above for Class A Certificates
Initial Collateral Interest............Same as above for Class A Certificates
Series 1996-A Termination Date.........Same as above for Class A Certificates
Series Issuance Date...................Same as above for Class A Certificates
2. Series 1996-B
Class A Certificates
Initial Investor Interest........................................$830,000,000
Certificate Rate......................Three-Month LIBOR plus 0.125% per annum
Controlled Accumulation Amount (subject to adjustment)............$69,166,167
Commencement of Accumulation Period........................September 30, 2002
Annual Servicing Fee Percentage...............................2.00% per annum
Initial Collateral Interest.......................................$77,661,000
Other Enhancement.......................Subordination of Class B Certificates
Series 1996-B Termination Date................November 2005 Distribution Date
Series Issuance Date.........................................October 11, 1996
Class B Certificates
Initial Investor Interest.........................................$63,100,000
Certificate Rate.......................Three-Month LIBOR plus 0.28% per annum
Controlled Accumulation Amount....................................$63,100,000
Commencement of Accumulation Period....Same as above for Class A Certificates
Annual Servicing Fee Percentage........Same as above for Class A Certificates
Initial Collateral Interest............Same as above for Class A Certificates
Series 1996-B Termination Date.........Same as above for Class A Certificates
Series Issuance Date...................Same as above for Class A Certificates
</TABLE>
A-1
<PAGE> 58
<TABLE>
<S> <C>
3. Series 1997-A
Class A Certificates
Initial Investor Interest...............................................$648,750,000
Certificate Rate................................One-Month LIBOR plus 0.11% per annum
Controlled Accumulation Amount (subject to adjustment)...................$54,062,500
Commencement of Accumulation Period.....................................May 31, 2001
Annual Servicing Fee Percentage......................................2.00% per annum
Initial Collateral Interest..............................................$60,000,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1997-A Termination Date...........................July 2004 Distribution Date
Series Issuance Date...................................................June 17, 1997
Class B Certificates
Initial Investor Interest................................................$41,250,000
Certificate Rate................................One-Month LIBOR plus 0.29% per annum
Controlled Accumulation Amount...........................................$41,250,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1997-A Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
4. Series 1997-B
Class A Certificates
Initial Investor Interest...............................................$648,750,000
Certificate Rate............................Three-Month LIBOR minus 0.125% per annum
Controlled Accumulation Amount (subject to adjustment)...................$54,062,500
Commencement of Accumulation Period..................................August 31, 2001
Annual Servicing Fee Percentage......................................2.00% per annum
Initial Collateral Interest..............................................$60,000,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1997-B Termination Date........................October 2004 Distribution Date
Series Issuance Date..............................................September 25, 1997
Class B Certificates
Initial Investor Interest................................................$41,250,000
Certificate Rate..............................Three-Month LIBOR plus 0.26% per annum
Controlled Accumulation Amount...........................................$41,250,000
Commencement of Accumulation Period........................Same as above for Class A
Certificates
Annual Servicing Fee Percentage............................Same as above for Class A
Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1997-B Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
A-2
<PAGE> 59
<TABLE>
<S> <C>
5. Series 1997-C
Class A Certificates
Initial Investor Interest...............................................$562,250,000
Certificate Rate................................One-Month LIBOR plus 0.12% per annum
Controlled Accumulation Amount (subject to adjustment)...................$46,854,167
Commencement of Accumulation Period................................November 30, 1999
Annual Servicing Fee Percentage......................................2.00% per annum
Initial Collateral Interest..............................................$52,000,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1997-C Termination Date........................January 2003 Distribution Date
Series Issuance Date................................................December 9, 1997
Class B Certificates
Initial Investor Interest................................................$35,750,000
Certificate Rate................................One-Month LIBOR plus 0.33% per annum
Controlled Accumulation Amount...........................................$35,750,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1997-C Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
6. Series 1998-A
Class A Certificates
Initial Investor Interest...............................................$648,750,000
Certificate Rate................................One-Month LIBOR plus 0.11% per annum
Controlled Accumulation Amount (subject to adjustment)...................$54,062,500
Commencement of Accumulation Period................................February 28, 2002
Annual Servicing Fee Percentage......................................2.00% per annum
Initial Collateral Interest..............................................$60,000,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1998-A Termination Date..........................April 2005 Distribution Date
Series Issuance Date..................................................March 26, 1998
Class B Certificates
Initial Investor Interest................................................$41,250,000
Certificate Rate................................One-Month LIBOR plus 0.27% per annum
Controlled Accumulation Amount...........................................$41,250,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1998-A Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
A-3
<PAGE> 60
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<PAGE> 61
PROSPECTUS
BA MASTER CREDIT CARD TRUST
ASSET BACKED CERTIFICATES
BANK OF AMERICA NATIONAL ASSOCIATION
TRANSFEROR AND SERVICER
------------------------
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and
which are set forth in a supplement to this Prospectus (a "Prospectus
Supplement"). The Certificates of each Series will represent an undivided
interest in the assets of the BA Master Credit Card Trust (the "Trust"). The
Trust has been formed pursuant to a pooling and servicing agreement between Bank
of America National Association ("Bank of America"), as transferor and servicer,
and U.S. Bank National Association (formerly known as First Bank National
Association), as trustee. The property of the Trust will include receivables
(the "Receivables") generated from time to time in a portfolio of consumer
revolving credit card accounts (the "Accounts"), all monies due and to become
due in payment of the Receivables, all proceeds of the Receivables and proceeds
of credit insurance policies relating to the Receivables, any Enhancements and
all monies on deposit in certain bank accounts of the Trust (including any
Permitted Investments in which any such monies are invested), as more fully
described herein and, with respect to any Series, in the related Prospectus
Supplement. Certain capitalized terms used herein are defined elsewhere in this
Prospectus. A listing of the pages on which such terms are defined is found in
the "Index of Terms for Prospectus" beginning on page 76. Bank of America
initially will own the remaining undivided interest in the Trust not represented
by the Certificates issued by the Trust and the other interests issued by the
Trust from time to time and will service the related Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed-rate Certificates, floating-rate
Certificates or other type of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest in
the Trust and the interest of the Certificateholders of each Class or Series
will include the right to receive a varying percentage of each month's
collections with respect to the Receivables of the Trust at the times, in the
manner and to the extent described herein and, with respect to any Series
offered hereby, in the related Prospectus Supplement. Interest and principal
payments with respect to each Series offered hereby will be made as specified in
the related Prospectus Supplement. One or more Classes of a Series offered
hereby may be entitled to the benefits of Credit Enhancement, such as a
collateral interest, cash collateral account or guaranty, a letter of credit, a
surety bond, an insurance policy or other form of enhancement as specified in
the Prospectus Supplement relating to such Series. In addition, any Series
offered hereby may include one or more Classes which are subordinated in right
and priority to payment of principal of, and/or interest on, one or more other
Classes of such Series or another Series, in each case to the extent described
in the related Prospectus Supplement. Each Series of Certificates or Class
thereof offered hereby will be rated in one of the four highest rating
categories by at least one nationally recognized rating organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered are described in the related Prospectus Supplement, the terms
of such Series are not subject to prior review by, or consent of, the
Certificateholders of any previously issued Series.
Any Series of Certificates may be sold to or through underwriters, including
BancAmerica Robertson Stephens, an affiliate of the Transferor and Servicer,
acting as principals for their own account or as agents. See "Plan of
Distribution." This Prospectus and any related Prospectus Supplement may be used
by BancAmerica Robertson Stephens in connection with offers and sales related to
secondary market transactions in any Series of Certificates. BancAmerica
Robertson Stephens may act as principal or agent in such transactions. Such
sales will be made at prices related to prevailing market prices at the time of
the sale.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" ON PAGE 20.
PROCEEDS FROM THE ASSETS IN THE TRUST WILL BE THE ONLY SOURCE OF PAYMENTS
ON THE CERTIFICATES. THE CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF OR
INTEREST IN THE TRANSFEROR, BANKAMERICA CORPORATION, BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, OR ANY OF THEIR AFFILIATES. NEITHER THE
CERTIFICATES NOR THE UNDERLYING RECEIVABLES OR OTHER ASSETS OF THE TRUST ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE
TRANSFEROR, BANKAMERICA CORPORATION, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, OR ANY OF THEIR AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
Certificates may be sold by Bank of America or the Trust directly to
purchasers, through agents designated from time to time, through underwriting
syndicates led by one or more managing underwriters or through one or more
underwriters acting alone. If underwriters or agents are involved in the
offering of the Certificates of any Series offered hereby, the name of the
managing underwriter or underwriters or agents is set forth in the related
Prospectus Supplement. If an underwriter, agent or dealer is involved in the
offering of the Certificates of any Series offered hereby, the underwriter's
discount, agent's commission or dealer's purchase price is set forth in, or may
be calculated from, the related Prospectus Supplement, and the net proceeds to
Bank of America from such offering will be the public offering price of such
Certificates less such discount in the case of an underwriter, the purchase
price of such Certificates less such commission in the case of an agent or the
purchase price of such Certificates in the case of a dealer, and less, in each
case, the other expenses of Bank of America associated with the issuance and
distribution of such Certificates. See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SERIES OF
CERTIFICATES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
------------------------
THE DATE OF THIS PROSPECTUS IS MARCH 18, 1998.
<PAGE> 62
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby, among other things, sets forth with respect to such Series: (a) the
initial aggregate principal amount of each Class of such Series; (b) the
certificate interest rate (or method for determining it) of each Class of such
Series; (c) certain information concerning the Receivables allocated to such
Series; (d) the expected date or dates on which the principal amount of the
Certificates will be paid to holders of each Class of Certificates (the
"Certificateholders"); (e) the extent to which any Class within a Series is
subordinated to any other Class of such Series or any other Series; (f) the
identity of each Class of floating-rate Certificates and fixed-rate Certificates
included in such Series, if any, or such other type of Class of Certificates;
(g) the Distribution Dates for the respective Classes; (h) relevant financial
information with respect to the Receivables; (i) the Series Termination Date
with respect to such Series; (j) additional information with respect to any
Enhancement relating to such Series; and (k) the plan of distribution of such
Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning the Trust and prepared by the
Servicer, will be sent on behalf of the Trust to Cede & Co. ("Cede"), as nominee
of The Depository Trust Company ("DTC") and registered holder of the related
Certificates, pursuant to the Agreement. See "Description of the Certificates --
Book-Entry Registration," "-- Reports to Certificateholders" and "-- Evidence as
to Compliance." Such reports will not constitute financial statements prepared
in accordance with generally accepted accounting principles. The Transferor does
not intend to send any of its financial reports to Certificateholders or to the
owners of beneficial interests in the Certificates ("Certificate Owners"). The
Servicer will file with the Securities and Exchange Commission (the
"Commission") such periodic reports with respect to the Trust as are required
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations of the Commission thereunder (the "Rules"). The
Prospectus Supplement relating to a Series to be offered thereby and hereby will
set forth whether or not the Servicer intends to file with the Commission
periodic reports with respect to any Series following completion of the
reporting period required by Rule 15d-1.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein by
reference as described below under "Incorporation of Certain Documents by
Reference," which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a public
access site on the Internet through the World Wide Web at which site reports,
information statements and other information, including all electronic filings,
may be reviewed. The Internet address of the Commission's World Wide Web site is
http://www.sec.gov.
2
<PAGE> 63
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained 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 in this Prospectus 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 1825 East Buckeye Road, Phoenix, Arizona 85034, Attention:
Chief Financial Officer. Telephone requests for such copies should be directed
to Bank of America National Association at (602) 597-3273.
3
<PAGE> 64
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT................. 2
REPORTS TO CERTIFICATEHOLDERS......... 2
AVAILABLE INFORMATION................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE........................... 3
PROSPECTUS SUMMARY.................... 5
RISK FACTORS.......................... 20
THE TRUST............................. 27
BANK OF AMERICA'S CREDIT CARD
ACTIVITIES.......................... 28
General............................. 28
Originations and Underwriting....... 28
Customer Service.................... 29
Interchange......................... 29
THE RECEIVABLES....................... 30
MATURITY ASSUMPTIONS.................. 30
USE OF PROCEEDS....................... 31
BANKAMERICA CORPORATION AND BANK OF
AMERICA NATIONAL ASSOCIATION........ 31
DESCRIPTION OF THE CERTIFICATES....... 32
General............................. 32
Book-Entry Registration............. 33
Definitive Certificates............. 36
The Transferor Certificate;
Additional Transferors........... 37
Interest Payments................... 38
Principal Payments.................. 38
Transfer and Assignment of
Receivables...................... 39
New Issuance........................ 39
Representations and Warranties...... 40
Addition of Trust Assets............ 42
Removal of Accounts................. 44
Collection and Other Servicing
Procedures....................... 45
Discount Option..................... 45
Trust Accounts...................... 46
Funding Period...................... 46
Investor Percentage and Transferor
Percentage....................... 47
Application of Collections.......... 48
Groups of Series.................... 49
Shared Excess Finance Charge
Collections...................... 50
Shared Excess Principal
Collections...................... 50
Paired Series....................... 51
Defaulted Receivables; Rebates and
Fraudulent Charges; Investor
Charge-Offs...................... 51
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Defeasance.......................... 52
Final Payment of Principal;
Termination...................... 52
Pay Out Events...................... 53
Servicing Compensation and Payment
of Expenses...................... 54
Certain Matters Regarding the
Transferor and the Servicer...... 55
Servicer Default.................... 56
Reports to Certificateholders....... 57
Evidence as to Compliance........... 57
Amendments.......................... 58
List of Certificateholders.......... 59
The Trustee......................... 59
CREDIT ENHANCEMENT AND ENHANCEMENT.... 60
General............................. 60
Subordination....................... 61
Letter of Credit.................... 61
Cash Collateral Guaranty or
Account.......................... 61
Collateral Interest................. 61
Surety Bond or Insurance Policy..... 62
Spread Account...................... 62
Reserve Account..................... 62
Interest Rate Swaps and Related
Caps, Floors and Collars......... 62
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES......................... 63
Transfer of Receivables............. 63
Certain Matters Relating to
Receivership..................... 64
Consumer Protection Laws............ 65
FEDERAL INCOME TAX CONSEQUENCES..... 66
General.......................... 66
Treatment of the Certificates as
Debt........................... 67
Treatment of the Trust........... 67
Taxation of Interest Income of
U.S. Certificate Owners........ 69
Sale or Exchange of
Certificates................... 70
Non-U.S. Certificate Owners...... 70
Information Reporting and Backup
Withholding.................... 71
New Withholding Regulations...... 72
State and Local Taxation......... 72
ERISA CONSIDERATIONS.................. 72
PLAN OF DISTRIBUTION.................. 74
LEGAL MATTERS......................... 75
INDEX OF TERMS FOR PROSPECTUS......... 76
</TABLE>
4
<PAGE> 65
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus and in the accompanying Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms for Prospectus." Unless the context requires
otherwise, capitalized terms used in this Prospectus and in the accompanying
Prospectus Supplement refer only to the particular Series being offered by such
Prospectus Supplement.
TYPE OF SECURITIES......Asset Backed Certificates (the "Certificates")
evidencing an undivided interest in the assets of the
BA Master Credit Card Trust (the "Trust") may be
issued from time to time in one or more series (each,
a "Series") which will consist of one or more classes
of Certificates (each, a "Class").
TRUST...................The Trust has been formed pursuant to a pooling and
servicing agreement (as amended from time to time,
the "Agreement") between Bank of America National
Association ("Bank of America"), as transferor (in
such capacity, the "Transferor") and servicer, and
U.S. Bank National Association (formerly known as
First Bank National Association), as trustee (the
"Trustee"). The Trust is a master trust under which
one or more Series may be issued pursuant to a series
supplement to the Agreement (each such series
supplement, a "Series Supplement;" the term
"Agreement," as it relates to any Series, refers to
the Agreement as supplemented by the Series
Supplement entered into with respect to such Series).
Any Series issued by the Trust may be offered
pursuant to this Prospectus, or may be offered in a
transaction exempt from the registration requirements
of the Securities Act of 1933, as amended (the
"Securities Act"). Each Prospectus Supplement
identifies the Trust and all Series previously issued
by the Trust.
TRUST ASSETS............The assets of the Trust include receivables (the
"Receivables") arising under certain MasterCard(R)
and VISA(R)* revolving credit card accounts (the
"Accounts") selected from a sub-set of MasterCard and
VISA accounts identified by the Transferor (such
sub-set as identified from time to time, the
"Identified Pool") from among all MasterCard and Visa
accounts owned by the Transferor (the "Bank
Portfolio") and all monies due or to become due in
payment of the Receivables, all proceeds of the
Receivables and proceeds of credit insurance policies
relating to the Receivables, and all monies on
deposit in certain bank accounts of the Trust
(including any Permitted Investments in which any
such monies are invested, but excluding investment
earnings on such amounts unless otherwise specified
in the related Prospectus Supplement), and any
Enhancement with respect to any particular Series or
Class, as described in the related Prospectus
Supplement. In addition, with respect to any Series,
the assets of the Trust may include the right to
receive Interchange, if any, allocable to such
Series, as described in the related Prospectus
Supplement. See "The Receivables" and "Description of
the Certificates -- Addition of Trust Assets."
"Interchange" consists of certain
- ---------------
*MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Incorporated and VISA U.S.A. Inc., respectively.
5
<PAGE> 66
fees received by Bank of America from VISA and
MasterCard as partial compensation for taking credit
risk, absorbing fraud losses and funding receivables
for a limited period prior to initial billing. The
term "Enhancement" means, with respect to any Series
or Class thereof, any Credit Enhancement, guaranteed
rate agreement, maturity liquidity facility, interest
rate cap agreement, interest rate swap agreement or
other similar arrangement for the benefit of the
Certificateholders of such Series or Class. The term
"Credit Enhancement" means, with respect to any
Series or Class thereof, any letter of credit, cash
collateral guaranty or account, collateral interest,
surety bond, insurance policy, spread account,
reserve account or other similar arrangement for the
benefit of the Certificateholders of such Series or
Class. Credit Enhancement may also take the form of
subordination of one or more Classes of a Series to
any other Class or Classes of a Series or a
cross-support feature which requires collections on
Receivables of one Series to be paid as principal
and/or interest with respect to another Series.
At the time of formation of the Trust the Transferor
conveyed to the Trustee, and at certain other times
subsequent thereto, the Transferor will convey to the
Trustee, all Receivables existing under certain
Accounts selected from the Identified Pool, as
constituted at the applicable time, based on criteria
provided in the Agreement and all Receivables arising
under such Accounts from time to time thereafter
until termination of the Trust. In addition, the
Agreement provides, that the Transferor may from time
to time (subject to certain limitations and
conditions), and in some circumstances will be
obligated to, designate additional eligible revolving
credit card accounts from the Identified Pool, as
constituted at such time, to be included as Accounts
(the "Additional Accounts"), the Receivables of which
will be included in the Trust. The Agreement provides
that in lieu of Additional Accounts or in addition
thereto, the Transferor may include in the Trust,
participations representing undivided interests in a
pool of assets primarily consisting of receivables
arising under consumer revolving credit card accounts
owned by the Transferor and collections thereon
("Participations"). The addition of Participations to
the Trust may be subject to certain restrictions
relating to the Securities Act. See "The Receivables"
and "Description of the Certificates -- Addition of
Trust Assets."
NON-RECOURSE
OBLIGATIONS.............Proceeds from the assets in the Trust will be the only
source of payments on the Certificates of each
Series. The Certificates do not represent an
obligation of or interest in the Transferor,
BankAmerica Corporation, Bank of America NT&SA or any
of their affiliates. None of the Certificates, the
underlying Receivables or the other assets of the
Trust are insured or guaranteed by any governmental
agency or instrumentality or by the Transferor,
BankAmerica Corporation, Bank of America NT&SA or any
of their affiliates.
CERTIFICATE INTEREST AND
PRINCIPAL...............Each Series of Certificates will represent an undivided
interest in the assets of the Trust. Each Certificate
of a Series will represent the right to receive
payments of (i) interest at the specified rate or
rates per annum (each, a "Certificate Rate"), which
may be a fixed, a
6
<PAGE> 67
floating or other type of rate and (ii) principal
during the Controlled Amortization Period, the
Principal Amortization Period, or, under certain
limited circumstances, the Rapid Amortization Period
(each, an "Amortization Period"), or on Scheduled
Payment Dates, in which case such Series will have a
Controlled Accumulation Period and, under certain
limited circumstances if so specified in the related
Prospectus Supplement, a Rapid Accumulation Period
(each, an "Accumulation Period"), as well as, under
certain limited circumstances, a Rapid Amortization
Period, all as specified in the related Prospectus
Supplement.
Each Series of Certificates will consist of one or more
Classes, one or more of which may be Senior
Certificates ("Senior Certificates") and one or more
of which may be Subordinated Certificates
("Subordinated Certificates"). Each Class of a Series
may evidence the right to receive a specified portion
of each distribution of principal or interest or
both. The Certificates of a Class may also differ
from Certificates of other Classes of the same Series
in, among other things, the amounts allocated to
principal payments, priority of payments, payment
dates, maturity, interest rates, interest rate
computation, and availability and form of
Enhancement.
The assets of the Trust will be allocated among the
Certificateholders of each Series of the Trust and
the holder of the Transferor Certificate of the Trust
and, if any Credit Enhancement constitutes an
undivided interest in the Trust as specified in the
related Prospectus Supplement, the related Credit
Enhancement Provider. See "Credit Enhancement and
Enhancement" herein, and "Description of the
Certificates -- Allocation Percentages" in the
Prospectus Supplement. The aggregate principal amount
of the interest of the Certificateholders of a Series
in the Trust is referred to herein as the "Investor
Interest" and is based on the aggregate amount of the
Principal Receivables in the Trust allocated to such
Series. If specified in the related Prospectus
Supplement, the term "Investor Interest" with respect
to the related Series includes the Collateral
Interest with respect to such Series. The aggregate
principal amount of the interest of the holder of the
Transferor Certificate in the Trust is referred to
herein as the "Transferor Interest," and is based on
the aggregate amount of Principal Receivables in the
Trust not allocated to the Certificateholders or any
Credit Enhancement Provider with respect to the
Trust. See "Description of the
Certificates -- General."
The Certificateholders of each Series will have the
right to receive (but only to the extent needed to
make required payments under the Agreement and the
related Series Supplement and subject to any
reallocation of such amounts if the related Series
Supplement so provides) varying percentages of the
collections of Finance Charge Receivables and
Principal Receivables for each month and will be
allocated a varying percentage of the amount of
Receivables in Accounts which were written off as
uncollectible by the Servicer ("Defaulted Accounts")
for such month (each such percentage, an "Investor
Percentage"). The related Prospectus Supplement
specifies the Investor Percentages with respect to
the allocation of collections of Principal
Receivables, Finance Charge Receivables and
Receivables in Defaulted Accounts during the
Revolving Period, any
7
<PAGE> 68
Amortization Period and any Accumulation Period, as
applicable. If the Certificates of a Series offered
hereby include more than one Class of Certificates,
the assets of the Trust allocable to the Certificates
of such Series may be further allocated among each
Class in such Series as described in the related
Prospectus Supplement. See "Description of the
Certificates -- Investor Percentage and Transferor
Percentage."
RECEIVABLES.............The Receivables held in the Trust will arise in Accounts
that have been selected from the Identified Pool, as
constituted at the applicable time, based on criteria
provided in the Agreement and described in the
related Prospectus Supplement as applied initially on
the date (the "Cut-Off Date") specified in the
related Prospectus Supplement and, with respect to
certain Additional Accounts, if any, on the
subsequent dates specified in the related Prospectus
Supplement.
The Receivables will consist of amounts charged by
cardholders for goods and services and cash advances
(the "Principal Receivables"), plus the related
periodic finance charges and amounts charged to the
Accounts in respect of membership or annual fees,
late fees, overlimit fees, returned check charges,
cash advance fees and certain other credit card fees,
amounts with respect to recoveries on the Accounts
and certain other amounts as described herein (the
"Finance Charge Receivables"); provided, however,
that if the Transferor exercises the Discount Option
with respect to the Trust, an amount equal to the
product of the Discount Percentage and the amount of
Receivables arising in the related Accounts on and
after the date such option is exercised that
otherwise would be Principal Receivables will be
treated as Finance Charge Receivables. See
"Description of the Certificates -- Discount Option."
In addition, if so specified in the related
Prospectus Supplement, certain amounts of Interchange
attributed to cardholder charges for goods and
services in the Accounts may be allocated to the
Certificates of a Series or any Class thereof and
treated as collections of Finance Charge Receivables
for purposes of such Series or Class thereof or may
be applied in some other manner as described in the
related Prospectus Supplement. See "Bank of America's
Credit Card Activities -- Interchange."
During the term of the Trust, all new Receivables
arising in the Accounts relating to the Trust will be
transferred automatically to the Trust by the
Transferor. The total amount of Receivables in the
Trust will fluctuate from day to day, because the
amount of new Receivables arising in the Accounts and
the amount of payments collected on existing
Receivables usually differ each day. It is not
required or anticipated that the Trustee will make
any initial or periodic general examination of the
Receivables or any records relating to the
Receivables for the presence or absence of defects,
compliance with the Transferor's representations and
warranties or for any other purpose.
Pursuant to the Agreement, the Transferor will have the
right (subject to certain limitations and
conditions), and in some circumstances, such as the
maintenance of the Transferor Interest at a specified
minimum level (the "Minimum Transferor Interest"),
will be obligated, to designate additional eligible
revolving credit card accounts
8
<PAGE> 69
to be included as Additional Accounts and to convey
to the Trust all of the Receivables in the Additional
Accounts, whether such Receivables are then existing
or thereafter created or to designate Participations
to be included in the Trust in lieu thereof or in
addition thereto. See "Description of the
Certificates -- Addition of Trust Assets."
Pursuant to the Agreement, the Transferor will have the
right (subject to certain limitations and conditions)
to designate certain Accounts and to accept the
reconveyance of all the Receivables in such Accounts
(the "Removed Accounts"), whether such Receivables
are then existing or thereafter created. See
"Description of the Certificates -- Removal of
Accounts."
NEW ISSUANCES...........The Agreement authorizes the Trustee to issue three
types of certificates: (i) one or more Series of
Certificates that will be transferable and have the
characteristics described below, (ii) a certificate
that, along with any Supplemental Certificates
outstanding, evidences the Transferor Interest (the
"Transferor Certificate"), which is not offered
hereby and which initially will be held by the
Transferor and which will be transferable only as
provided in the Agreement and (iii) one or more
Supplemental Certificates (relating to the Transferor
Interest) which are not offered hereby and will be
transferable only as provided in the Agreement. Any
such Series of Certificates identified in clause (i)
above, or one or more Classes of such Series of
Certificates identified in clause (i) above may be
offered to the public or other investors under a
prospectus or other disclosure document (a
"Disclosure Document") in offerings pursuant to this
Prospectus or in transactions either registered under
the Securities Act, or exempt from registration
thereunder, directly or through one or more other
underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise.
See "Description of the Certificates -- New
Issuance."
A new issuance of a Series of Certificates identified in
clause (i) of the previous paragraph (a "New
Issuance") may occur only upon delivery to the
Trustee of the following: (i) a Series Supplement
specifying the principal terms of such Series (the
"Principal Terms"), (ii) an opinion of counsel to the
effect that, for federal income tax purposes, (1)
such issuance will not adversely affect the tax
characterization as debt of Certificates of any
outstanding Series or Class that were characterized
as debt at the time of their issuance, (2) such
issuance will not cause the Trust to be deemed to be
an association (or publicly traded partnership)
taxable as a corporation and (3) such issuance will
not cause or constitute an event in which gain or
loss would be recognized by any holder of
Certificates of any outstanding Series or Class that
were characterized as debt at the time of their
issuance (an opinion of counsel with respect to any
matter to the effect referred to in clause (ii) with
respect to any action is referred to herein as a "Tax
Opinion"), (iii) if required by the related Series
Supplement, the form of Credit Enhancement, (iv) if
Credit Enhancement is required by the Series
Supplement, an appropriate Credit Enhancement
agreement with respect thereto, (v) written
confirmation from each Rating Agency that the New
9
<PAGE> 70
Issuance will not result in such Rating Agency
reducing or withdrawing its rating on any then
outstanding Series rated by it and (vi) an officer's
certificate of the Transferor to the effect that
after giving effect to the New Issuance the
Transferor would not be required to add the
Receivables of any Additional Accounts pursuant to
the Agreement and the Transferor Interest would be at
least equal to the Minimum Transferor Interest. See
"Description of the Certificates -- New Issuance."
DENOMINATIONS...........Beneficial interests in the Certificates will be offered
for purchase in denominations of $1,000 and integral
multiples thereof or such other denominations
specified in the Prospectus Supplement.
REGISTRATION OF
CERTIFICATES............Except as specified in the related Prospectus
Supplement, the Certificates of each Series initially
will be represented by Certificates registered in the
name of Cede, as the nominee of DTC. No Certificate
Owner will be entitled to receive a definitive
certificate representing such person's interest,
except in the event that Certificates in fully
registered, certificated form ("Definitive
Certificates") are issued under the limited
circumstances described herein. See "Description of
the Certificates -- Definitive Certificates."
CLEARANCE AND
SETTLEMENT..............Except as specified in the related Prospectus
Supplement, Certificate Owners of each Series offered
hereby may elect to hold their Certificates through
any of DTC (in the United States) or Cedel or
Euroclear (in Europe). Transfers within DTC, Cedel or
Euroclear, as the case may be, will be made in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through
Cedel or Euroclear, on the other, will be effected in
DTC through the relevant Depositaries of Cedel or
Euroclear. See "Description of the
Certificates -- Book-Entry Registration."
SERVICER................Bank of America National Association is the Servicer.
The principal executive offices of Bank of America
are located at 1825 East Buckeye Road, Phoenix,
Arizona 85034, telephone number (602) 597-3738. The
Servicer will receive a fee as servicing compensation
from the Trust in respect of each Series in the
amounts and at the times specified in the related
Prospectus Supplement (the "Servicing Fee"). The
Servicing Fee may be payable from Finance Charge
Receivables, or other amounts as specified in the
related Prospectus Supplement. In certain limited
circumstances, Bank of America may resign or be
removed, in which event the Trustee or a third-party
servicer may be appointed as successor servicer (Bank
of America, or any such successor servicer, is
referred to herein as the "Servicer"). Bank of
America is a wholly-owned subsidiary of BankAmerica
Corporation (the "Corporation"). See "BankAmerica
Corporation and Bank of America National
Association."
TRANSFEROR..............Bank of America is the Transferor. Subject to certain
conditions described herein under "Description of the
Certificates -- The Transferor Certificate;
Additional Transferors," Bank of America may
designate one or more affiliates to transfer all
right, title and interest
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<PAGE> 71
in Receivables or Participations to the Trust from
time to time. Any such additional transferors will
generally have the same rights and obligations as
those of the Transferor described herein.
COLLECTIONS.............Except in circumstances specified in the related
Prospectus Supplement, the Servicer will deposit all
collections of Receivables in an account required to
be established for such purpose by the Agreement (the
"Collection Account"). All amounts deposited in the
Collection Account with respect to the Trust will be
allocated by the Servicer between amounts collected
on Principal Receivables and amounts collected on
Finance Charge Receivables. If so specified in the
related Prospectus Supplement, Principal Receivables
and/or Finance Charge Receivables may be otherwise
characterized. See "Description of the
Certificates -- Discount Option." All such amounts
will then be allocated in accordance with the
respective interests of the Certificateholders of
each Series of Certificates or Class thereof and the
holder of the Transferor Certificate and, in certain
circumstances, certain Credit Enhancement Providers.
See "Description of the Certificates -- Investor
Percentage and Transferor Percentage."
INTEREST PAYMENTS.......Interest on each Series of Certificates or Class thereof
for each accrual period (each, an "Interest Period")
specified in the related Prospectus Supplement will
be distributed in the amounts and on the dates (which
may be monthly, quarterly, semiannually or otherwise
as specified in the related Prospectus Supplement)
(each, a "Distribution Date") specified in the
related Prospectus Supplement. Interest payments will
be funded from collections of Finance Charge
Receivables allocated to the Investor Interest during
the preceding calendar month or other period
immediately preceding the related Distribution Date
(each, a "Monthly Period") as described in the
related Prospectus Supplement, and may be funded from
certain investment earnings on funds in certain
accounts of the Trust and from any applicable
Enhancement, if necessary, or certain other amounts
as specified in the related Prospectus Supplement. If
the Distribution Dates for payment of interest for a
Series or Class occur less frequently than monthly,
such collections or other amounts allocable to such
Series or Class may be deposited in one or more trust
accounts pending distribution to the
Certificateholders of such Series or Class, all as
described in the related Prospectus Supplement. See
"Risk Factors -- Limited Credit Enhancement,"
"Description of the Certificates -- Application of
Collections," "-- Shared Excess Finance Charge
Collections" and "Credit Enhancement and
Enhancement."
REVOLVING PERIOD........Unless otherwise specified in the related Prospectus
Supplement, with respect to each Series and any Class
thereof, no principal will be payable to
Certificateholders until the Principal Commencement
Date or the Scheduled Payment Date with respect to
such Series or Class, as described below. For the
period beginning on the date of issuance of the
related Series (the "Closing Date") and ending with
the commencement of an Amortization Period or an
Accumulation Period (the "Revolving Period"),
collections of Principal Receivables otherwise
allocable to the Investor Interest will, subject to
certain limita-
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<PAGE> 72
tions, be paid from the Trust to the holder of the
Transferor Certificate or, under certain
circumstances and if so specified in the related
Prospectus Supplement, will be treated as Shared
Excess Principal Collections and paid to the holders
of other Series of Certificates issued by the Trust,
as described herein and in the related Prospectus
Supplement. See "Description of the
Certificates -- Pay Out Events" for a discussion of
the events which might lead to early termination of
the Revolving Period.
PRINCIPAL PAYMENTS......The principal of the Certificates of each Series offered
hereby will be scheduled to be paid either in
installments commencing on a date specified in the
related Prospectus Supplement (the "Principal
Commencement Date"), in which case such Series will
have either a Controlled Amortization Period or a
Principal Amortization Period, as described below, or
on an expected date specified in, or determined in
the manner specified in, the related Prospectus
Supplement (the "Scheduled Payment Date"), in which
case such Series will have an Accumulation Period, as
described below. If a Series has more than one Class
of Certificates, a different method of paying
principal, Principal Commencement Date or Scheduled
Payment Date may be assigned to each Class. The
payment of principal with respect to the Certificates
of a Series or Class may commence earlier than the
applicable Principal Commencement Date or Scheduled
Payment Date, and the final principal payment with
respect to the Certificates of a Series or Class may
be made earlier or later than the applicable expected
payment date, Scheduled Payment Date or other
expected date, if a Pay Out Event occurs and the
Rapid Amortization Period commences with respect to
such Series or Class or under certain other
circumstances described herein. See "Description of
the Certificates -- Principal Payments."
CONTROLLED AMORTIZATION
PERIOD..................If the Prospectus Supplement relating to a Series so
specifies, unless a Rapid Amortization Period with
respect to such Series commences, the Certificates of
such Series or any Class thereof will have an
amortization period (the "Controlled Amortization
Period") during which collections of Principal
Receivables allocable to the Investor Interest of
such Series (and certain other amounts if so
specified in the related Prospectus Supplement) will
be used on each Distribution Date to make principal
distributions in scheduled amounts to the
Certificateholders of such Series or any Class of
such Series then scheduled to receive such
distributions. The Controlled Amortization Period is
intended to permit the applicable Certificateholders
to receive payment of the principal balance of their
Certificates in fixed installments over a specified
period. The amount to be distributed on any
Distribution Date during the Controlled Amortization
Period will be limited to an amount (the "Controlled
Distribution Amount") equal to an amount specified in
the related Prospectus Supplement (the "Controlled
Amortization Amount") plus any existing deficit
controlled amortization amount arising from prior
Distribution Dates. If a Series has more than one
Class of Certificates, each Class may have a separate
Controlled Amortization Amount. In addition, the
related Prospectus Supplement may describe certain
priorities among such Classes with respect to such
distributions. The Con-
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<PAGE> 73
trolled Amortization Period will commence at the
close of business on a date specified in the related
Prospectus Supplement and continue until the earliest
of (a) the commencement of the Rapid Amortization
Period, (b) payment in full of the Investor Interest
of the Certificates of such Series or Class and, if
so specified in the related Prospectus Supplement, of
the Collateral Interest or Enhancement Invested
Amount, if any, with respect to such Series, and (c)
the Series Termination Date with respect to such
Series.
PRINCIPAL AMORTIZATION
PERIOD..................If the Prospectus Supplement relating to a Series so
specifies, unless a Rapid Amortization Period with
respect to such Series commences, the Certificates of
such Series or any Class thereof will have an
amortization period (the "Principal Amortization
Period") during which collections of Principal
Receivables allocable to the Investor Interest of
such Series (and certain other amounts if so
specified in the related Prospectus Supplement) will
be used on each Distribution Date to make principal
distributions to the Certificateholders of such
Series or any Class of such Series then scheduled to
receive such distributions. Such payments will not be
limited by any Controlled Amortization Amount as they
are during a Controlled Amortization Period. If a
Series has more than one Class of Certificates, the
related Prospectus Supplement may describe certain
priorities among such Classes with respect to such
distributions. The Principal Amortization Period will
commence at the close of business on a date specified
in the related Prospectus Supplement and continue
until the earlier of (a) the commencement of the
Rapid Amortization Period, (b) payment in full of the
Investor Interest of the Certificates of such Series
or Class and, if so specified in the related
Prospectus Supplement, of the Collateral Interest or
Enhancement Invested Amount, if any, with respect to
such Series, and (c) the Series Termination Date with
respect to such Series. The Principal Amortization
Period is intended to result in the fastest possible
distribution of principal to Certificateholders in a
Series or Class.
CONTROLLED ACCUMULATION
PERIOD..................If the Prospectus Supplement relating to a Series so
specifies, unless a Rapid Amortization Period or, if
so specified in the related Prospectus Supplement, a
Rapid Accumulation Period with respect to such Series
commences, the Certificates of such Series or any
Class thereof will have an accumulation period (the
"Controlled Accumulation Period") during which
collections of Principal Receivables allocable to the
Investor Interest of such Series (and certain other
amounts if so specified in the related Prospectus
Supplement) will be deposited on the business day
immediately prior to each Distribution Date or other
business day specified in the related Prospectus
Supplement (each a "Transfer Date") in a trust
account established for the benefit of the
Certificateholders of such Series or Class (a
"Principal Funding Account") and used to make
distributions of principal to the Certificateholders
of such Series or Class on the Scheduled Payment Date
relating to such Series or Class. This is to allow
Certificateholders to receive a single payment with
respect to their principal balance rather than to
receive installment payments as with a Controlled
Amortization Period, a Principal Amortization Pe-
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<PAGE> 74
riod or a Rapid Amortization Period. The amount to be
deposited in the Principal Funding Account on any
Transfer Date will be limited to an amount (the
"Controlled Deposit Amount") equal to an amount
specified in the related Prospectus Supplement (the
"Controlled Accumulation Amount") plus any deficit
Controlled Accumulation Amount arising from prior
Distribution Dates. If a Series has more than one
Class of Certificates, each Class may have a separate
Principal Funding Account and Controlled Accumulation
Amount. In addition, the related Prospectus
Supplement may describe certain priorities among such
Classes with respect to deposits of principal into
such Principal Funding Accounts. The Controlled
Accumulation Period will commence at the close of
business on a date specified in or determined in the
manner specified in the related Prospectus Supplement
and continue until the earliest of (a) the
commencement of the Rapid Amortization Period or, if
so specified in the related Prospectus Supplement,
the Rapid Accumulation Period, (b) payment in full of
the Investor Interest of the Certificates of such
Series or Class and, if so specified in the related
Prospectus Supplement, of the Collateral Interest or
Enhancement Invested Amount, if any, with respect to
such Series and (c) the Series Termination Date with
respect to such Series.
Funds on deposit in any Principal Funding Account may be
invested in Permitted Investments or subject to a
guaranteed rate or investment contract or other
arrangement intended to assure a minimum return on
the investment of such funds. Investment earnings on
such funds may be applied to pay interest on the
related Series of Certificates. In order to enhance
the likelihood of payment in full of principal at the
end of an Accumulation Period with respect to a
Series of Certificates, such Series may be subject to
a principal guaranty or other similar arrangement.
RAPID ACCUMULATION
PERIOD..................If so specified and under the conditions set forth in
the Prospectus Supplement relating to a Series having
a Controlled Accumulation Period, during the period
from the day on which a Pay Out Event has occurred
until the earliest of (a) the commencement of the
Rapid Amortization Period, (b) the payment in full of
the Investor Interest of the Certificates of such
Series and, if so specified in the related Prospectus
Supplement, of the Collateral Interest or Enhancement
Invested Amount, if any, with respect to such Series
and (c) the related Series Termination Date (the
"Rapid Accumulation Period"), collections of
Principal Receivables allocable to the Investor
Interest of such Series (and certain other amounts if
so specified in the related Prospectus Supplement)
will be deposited on each Transfer Date in the
Principal Funding Account and used to make
distributions of principal to the Certificateholders
of such Series or Class on the Scheduled Payment
Date. The amount to be deposited in the Principal
Funding Account during the Rapid Accumulation Period
will not be limited to the Controlled Deposit Amount
as such amount is limited during a Controlled
Accumulation Period. The Rapid Accumulation Period is
intended to result in the fastest possible
accumulation of funds available to make principal
distributions to Certificateholders of a Series or
Class on the Scheduled Payment Date following a Pay
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<PAGE> 75
Out Event with respect to such Series in order to
better assure the repayment of principal to such
Certificateholders.
The term "Pay Out Event" with respect to a Series of
Certificates issued by the Trust means any of the
events identified as such in the related Prospectus
Supplement and any of the following: (a) certain
events of insolvency or bankruptcy relating to the
Transferor, an Additional Transferor or any other
holder of the Transferor Certificate, (b) the
Transferor or an Additional Transferor is unable for
any reason to transfer Receivables to the Trust in
accordance with the provisions of the Agreement or
(c) the Trust becomes an "investment company" within
the meaning of the Investment Company Act of 1940, as
amended. See "Description of the Certificates -- Pay
Out Events" for a discussion of the events which
might lead to commencement of a Rapid Accumulation
Period.
During the Rapid Accumulation Period, funds on deposit
in any Principal Funding Account may be invested in
Permitted Investments or subject to a guaranteed rate
or investment contract or other arrangement intended
to assure a minimum return on the investment of such
funds. Investment earnings on such funds may be
applied to pay interest on the related Series of
Certificates or make other payments as specified in
the related Prospectus Supplement. In order to
enhance the likelihood of payment in full of
principal at the end of the Rapid Accumulation Period
with respect to a Series of Certificates, such Series
may be subject to a principal guaranty or other
similar arrangement.
RAPID AMORTIZATION
PERIOD..................During the period from the day on which a Pay Out Event
has occurred with respect to a Series or, if so
specified in the Prospectus Supplement relating to a
Series with a Controlled Accumulation Period, from
such time specified in the related Prospectus
Supplement after a Pay Out Event has occurred and the
Rapid Accumulation Period has commenced, to the
earlier of (a) the date on which the Investor
Interest of the Certificates of such Series and the
Enhancement Invested Amount or the Collateral
Interest, if any, with respect to such Series have
been paid in full and (b) the related Series
Termination Date (the "Rapid Amortization Period"),
collections of Principal Receivables allocable to the
Investor Interest of such Series (and certain other
amounts if so specified in the related Prospectus
Supplement) will be distributed as principal payments
to the Certificateholders of such Series and, in
certain circumstances, to the Credit Enhancement
Provider, monthly on each Distribution Date with
respect to such Series in the manner and order of
priority set forth in the related Prospectus
Supplement. During the Rapid Amortization Period with
respect to a Series, distributions of principal will
not be subject to any Controlled Deposit Amount or
Controlled Distribution Amount. In addition, upon the
commencement of the Rapid Amortization Period with
respect to a Series, any funds on deposit in a
Principal Funding Account with respect to such Series
or any Class thereof will be paid to the
Certificateholders of such Series or Class on the
first Distribution Date in the Rapid Amortization
Period. The Rapid Amortization Period is intended to
result in the fastest possible
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<PAGE> 76
distribution of principal to Certificateholders of a
Series following a Pay Out Event with respect to such
Series in order to better assure the repayment of
principal to such Certificateholders. See
"Description of the Certificates -- Pay Out Events"
for a discussion of the events which might lead to
commencement of a Rapid Amortization Period.
SHARED EXCESS FINANCE
CHARGE COLLECTIONS......Any Series offered hereby may be, but will not be
required to be, designated by the Transferor to be
included in a group of Series (a "Shared Excess
Finance Charge Collections Group"). If so specified
in the related Prospectus Supplement, the
Certificateholders of a Series within a Shared Excess
Finance Charge Collections Group or any Class thereof
may be entitled to receive all or a portion of Excess
Finance Charge Collections with respect to another
Series within such Shared Excess Finance Charge
Collections Group or Class thereof to cover any
shortfalls with respect to amounts payable from
collections of Finance Charge Receivables allocable
to such Series or Class. By so sharing such excess
collections with respect to Finance Charge
Receivables allocated to investors, the Transferor
may avoid the occurrence of a Pay Out Event with
respect to a Series within a Shared Excess Finance
Charge Collections Group resulting from a shortfall
which is limited to that Series and is merely
temporary. See "Description of the
Certificates -- Application of Collections,"
"-- Shared Excess Finance Charge Collections" and
"-- Defaulted Receivables; Rebates and Fraudulent
Charges; Investor Charge-Offs."
SHARED EXCESS PRINCIPAL
COLLECTIONS.............Any Series offered hereby may be, but will not be
required to be, designated by the Transferor to be
included in a group of Series (the "Shared Excess
Principal Collections Group"). If so specified in the
related Prospectus Supplement, to the extent that
collections of Principal Receivables that are
allocated to the Investor Interest of any Series are
not needed to make payments or deposits with respect
to such Series, such collections ("Shared Excess
Principal Collections") will be applied to cover
principal payments due to or for the benefit of
Certificateholders of another Series. By so applying
Shared Excess Principal Collections, the Transferor
may make more efficient use of collections with
respect to Principal Receivables allocated to
investors to repay investors' principal when due or
for its own purposes when no return of investors'
principal is due. Any such reallocation will not
result in a reduction in the Investor Interest of the
Series to which such collections were initially
allocated.
FUNDING PERIOD..........The Prospectus Supplement relating to a Series of
Certificates may specify that for a period beginning
on the Closing Date and ending on a specified date
before the commencement of an Amortization Period or
Accumulation Period with respect to such Series (the
"Funding Period"), which period is expected to be
less than one year, the aggregate amount of Principal
Receivables in the Trust allocable to such Series may
be less than the aggregate principal amount of the
Certificates of such Series and that the amount of
such deficiency (the "Pre-Funding Amount") will be
held in a trust account estab-
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<PAGE> 77
lished with the Trustee for the benefit of
Certificateholders of such Series (the "Pre-Funding
Account") pending the transfer of additional
Principal Receivables to the Trust or pending the
reduction of the Investor Interests or Adjusted
Investor Interest of other Series issued by the
Trust. The Pre-Funding Amount may be up to 100% of
the principal amount of the Certificates of a Series.
The related Prospectus Supplement will specify the
initial Investor Interest on the Closing Date with
respect to such Series, the aggregate principal
amount of the Certificates of such Series (the "Full
Investor Interest") and the date by which the
Investor Interest is expected to equal the Full
Investor Interest. The Investor Interest will
increase as Principal Receivables are delivered to
the Trust or as the Investor Interests or Adjusted
Investor Interests of other Series of the Trust are
reduced. The Investor Interest may also decrease due
to Investor Charge-Offs or the occurrence of a Pay
Out Event and the commencement of the Rapid
Amortization Period, as specified in the related
Prospectus Supplement.
During the Funding Period, funds on deposit in the
Pre-Funding Account for a Series of Certificates will
be withdrawn and paid to the holder of the Transferor
Certificate to the extent of any increases in the
Investor Interest. In the event that the Investor
Interest does not for any reason equal the Full
Investor Interest by the end of the Funding Period,
any amount remaining in the Pre-Funding Account will
be payable to the Certificateholders of such Series
in a manner and at such time as set forth in the
related Prospectus Supplement. Such payment will
reduce the aggregate principal amount of such
Certificates. In addition, a prepayment premium or
penalty or similar amount may be payable to the
Certificateholders of such Series, if specified in
the related Prospectus Supplement.
If so specified in the related Prospectus Supplement,
monies in the Pre-Funding Account with respect to any
Series will be invested by the Trustee in Permitted
Investments or will be subject to a guaranteed rate
or investment agreement or other similar arrangement,
and investment earnings and any applicable payment
under any such investment arrangement will be applied
to pay interest on the Certificates of such Series.
PAIRED SERIES...........If so specified in the related Prospectus Supplement, a
Series of Certificates may be paired with another
Series previously or subsequently issued by the Trust
(a "Paired Series"). As the Adjusted Investor
Interest of the Series having a Paired Series is
reduced, the Investor Interest of the Paired Series
will increase by an equal amount. The effect of a
Paired Series is to provide for the continuous
investment in the Receivables by Certificateholders,
thereby reducing the potential increase in the
Transferor Interest as a Series' interest in the
Trust is reduced through the amortization or
accumulation of principal. If a Pay Out Event occurs
with respect to the Series having a Paired Series or
with respect to the Paired Series when such Series is
in the Controlled Amortization Period or Controlled
Accumulation Period, the percentage used for
allocating collections of Principal Receivables for
the Series and for the Paired Series may be reset as
specified in the related Prospectus Supplement.
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<PAGE> 78
CREDIT ENHANCEMENT......Credit Enhancement with respect to a Series or any Class
thereof may be provided in the form or forms of
subordination, a letter of credit, a cash collateral
guaranty or account, a collateral interest, a surety
bond, an insurance policy, a spread account, a
reserve account or other form of support as specified
in the related Prospectus Supplement. Credit
Enhancement may also be provided to a Class or
Classes of different Series by a cross-support
feature which requires that distributions of
principal and/or interest be made with respect to
Certificates of one or more Classes of a particular
Series before distributions are made to one or more
Classes of another Series.
The type, characteristics and amount of the Credit
Enhancement will be determined based on several
factors, including the characteristics of the
Receivables and Accounts included in the Trust
Portfolio as of the Closing Date with respect to any
Series, and will be established on the basis of
requirements of each Rating Agency rating the
Certificates of such Series. If so specified in the
related Prospectus Supplement, any such Credit
Enhancement will apply only in the event of certain
types of losses and the protection against losses
provided by such Credit Enhancement will be limited.
The terms of the Credit Enhancement with respect to a
Series, and the conditions under which the Credit
Enhancement may be increased, reduced or replaced,
are described in the related Prospectus Supplement.
See "Risk Factors -- Scope of Certificate Rating" and
"Credit Enhancement and Enhancement."
OPTIONAL REPURCHASE.....With respect to each Series of Certificates, the
Investor Interest will be subject to optional
repurchase by the Transferor on any Distribution Date
after the Investor Interest and the Enhancement
Invested Amount, if any, with respect to such Series,
is reduced to an amount less than or equal to 5% of
the initial Investor Interest, if any, or such other
amount specified in the related Prospectus
Supplement, if certain conditions set forth in the
Agreement are met. The repurchase price will be equal
to the Investor Interest (less the amount, if any, on
deposit in any Principal Funding Account with respect
to such Series), plus accrued and unpaid interest on
the Certificates and interest or other amounts
payable on the Enhancement Invested Amount or the
Collateral Interest, if any, through the day
preceding the Distribution Date on which the
repurchase occurs or such other amount specified in
the Prospectus Supplement. See "Description of the
Certificates -- Final Payment of Principal;
Termination."
TAX STATUS..............Except to the extent otherwise specified in the related
Prospectus Supplement, Special Counsel to the
Transferor will deliver its opinion that under
existing law the Certificates of each Series will be
characterized as debt for federal income tax
purposes. Except to the extent otherwise specified in
the related Prospectus Supplement, the Certificate
Owners will agree to treat the Certificates as debt
for federal income tax purposes. See "Federal Income
Tax Consequences" for additional information
concerning the application of federal income tax
laws.
ERISA CONSIDERATIONS....Under regulations issued by the Department of Labor, the
Trust's assets would not be deemed "plan assets" of
any employee benefit plan holding interests in the
Certificates of a Series if certain condi-
18
<PAGE> 79
tions are met. If the Trust's assets were deemed to
be "plan assets" of an employee benefit plan, there
is uncertainty as to whether existing exemptions from
the "prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), and section 4975 of the Code would apply
to all transactions involving the Trust's assets. No
assurance can be made with respect to any offering of
the Certificates of any Series that the conditions
which would allow the Trust assets not to be deemed
"plan assets" will be met, although the intention of
the underwriters (but not their assurance) as to
whether the Certificates of a particular Series will
be "publicly-offered securities," and therefore
eligible for an ERISA exemption, is set forth in the
related Prospectus Supplement. Accordingly, employee
benefit plan investors contemplating purchasing
interests in Certificates should consult their
counsel before making a purchase. See "ERISA
Considerations."
CERTIFICATE RATING......It will be a condition to the issuance of the
certificates of each Series or Class thereof offered
pursuant to this Prospectus and the related
Prospectus Supplement that they be rated in one of
the four highest rating categories by at least one
nationally recognized rating organization (the rating
agency or agencies selected by the Transferor to rate
any Series, the "Rating Agency"). The rating or
ratings applicable to the Certificates of each Series
or Class thereof offered hereby will be set forth in
the related Prospectus Supplement.
A rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the assigning Rating
Agency. Each rating should be evaluated independently
of any other rating. See "Risk Factors -- Scope of
Certificate Rating."
LISTING.................If so specified in the Prospectus Supplement relating to
a Series, application will be made to list the
Certificates of such Series, or all or a portion of
any Class thereof, on the Luxembourg Stock Exchange
or any other specified exchange.
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<PAGE> 80
RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market in
such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will develop
with respect to the Certificates of any Series offered hereby, or if it does
develop, that it will provide Certificateholders with liquidity of investment or
that it will continue for the life of such Certificates.
Limited Obligations. The Certificates will not represent an interest in or
obligation of the Transferor, BankAmerica Corporation (the "Corporation"), Bank
of America NT&SA, or any of their affiliates. The only obligations of the
foregoing entities with respect to the Certificates or the Receivables will be
(i) the obligations (if any) of the Transferor, if applicable, pursuant to
certain limited representations and warranties made with respect to the
Receivables and (ii) the Servicer's servicing obligations under the Agreement.
Neither the Certificates nor the underlying Receivables will be guaranteed or
insured by any governmental agency or instrumentality, or by the Transferor, the
Corporation, Bank of America NT&SA, or any of their affiliates. PROCEEDS OF THE
ASSETS INCLUDED IN THE TRUST (INCLUDING THE RECEIVABLES AND ANY FORM OF
ENHANCEMENT) WILL BE THE SOLE SOURCE OF PAYMENTS ON THE CERTIFICATES, AND THERE
WILL BE NO RECOURSE TO THE TRANSFEROR, THE CORPORATION, BANK OF AMERICA NT&SA OR
ANY OTHER ENTITY IN THE EVENT THAT SUCH PROCEEDS ARE INSUFFICIENT OR OTHERWISE
UNAVAILABLE TO MAKE PAYMENTS PROVIDED FOR UNDER THE CERTIFICATES.
Potential Priority of Certain Liens. While the Transferor will transfer
interests in Receivables to the Trust, a court could treat any such transaction
as an assignment of collateral as security for the benefit of holders of
Certificates issued by the Trust. The Transferor will represent and warrant in
the Agreement that the transfer of the Receivables to the Trust is either a
valid transfer and assignment of the related Receivables to the Trust or a grant
to the Trust of a security interest in such Receivables. With respect to the
Trust, the Transferor will take certain actions as are required to perfect the
Trust's security interest in the related Receivables and, with respect to the
Trust, will warrant that if the transfer to the Trust is deemed to be a grant to
the Trust of a security interest in the related Receivables, the Trustee will
have a first priority perfected security interest therein (except for certain
tax and other governmental liens), and, with certain exceptions and for certain
limited periods of time provided for in the Uniform Commercial Code, in the
proceeds thereof (subject, in each case, to certain potential tax or other
governmental liens referred to under "Description of the
Certificates -- Representations and Warranties"). Nevertheless, if the transfer
of Receivables to the Trust is deemed to create a security interest therein, a
tax or government lien or other nonconsensual lien on property of any Transferor
arising before Receivables come into existence may have priority over the
Trust's interest in such Receivables, and if the FDIC were appointed receiver or
conservator of the Transferor, the FDIC's administrative expenses may also have
priority over the Trust's interest in such Receivables. The existence of such
liens or rights of the receiver of the Transferor could delay or reduce the
amount payable on the Receivables and result in possible delay or reductions in
the amount of payments on the Certificates. See "Certain Legal Aspects of the
Receivables -- Transfer of Receivables."
In addition, while the Transferor is the Servicer, cash collections held by
the Transferor may, subject to certain conditions, be commingled and used for
the benefit of the Transferor prior to the date on which such collections are
required to be deposited in the Finance Charge Account and Principal Account as
described under "Description of Certificates -- Application of Collections." In
the event of the conservatorship or receivership of the Transferor or, in
certain circumstances, the lapse of certain time periods, the Trust may not have
a perfected interest in such collections and, in such event, the Trust may
suffer a loss of all or part of such collections which may result in a loss to
Certificateholders.
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Insolvency or Bankruptcy of Transferor or Other Holder of Transferor
Certificate. Positions taken by the Federal Deposit Insurance Corporation
("FDIC") staff prior to the passage of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended ("FIRREA") do not suggest that
the FDIC, as receiver for the Transferor, would interfere with the timely
transfer to the Trust of payments collected on the related Receivables. To the
extent that the Transferor will grant a security interest in Receivables to the
Trust and that security interest is validly perfected before the Transferor's
insolvency and will not be taken in contemplation of insolvency of the
Transferor, or with the intent to hinder, delay or defraud the Transferor or the
creditors of the Transferor, based upon opinions issued by the general counsel
of the FDIC and policy statements of the FDIC, such security interest should not
be subject to avoidance, and payments to the Trust with respect to the
Receivables should not be subject to recovery, by the FDIC. However, such
opinions and policy statements are not binding on the FDIC and if the FDIC were
to assert a contrary position, such as by requiring the Trustee to establish its
right to those payments by submitting to and completing the administrative
claims procedure under the Federal Deposit Insurance Act, as amended ("FDIA"),
or were the conservator or receiver to request a stay of proceedings with
respect to the Transferor as provided under the FDIA, delays in payments on the
related Series of Certificates and possible reductions in the amount of those
payments could occur. In addition, the FDIC, if appointed as the conservator or
receiver for the Transferor has the power under the FDIA to repudiate contracts,
including secured contracts of the Transferor. The FDIA provides that a claim
for damages arising from the repudiation of a contract is limited to "Actual
Direct Compensatory Damages." In the event the FDIC were to be appointed as
conservator or receiver of the Transferor and were to repudiate the Agreement,
then the amount payable out of available collections to the Certificateholders
could be lower than the outstanding principal and accrued interest on the
Certificates.
If a conservator or receiver were appointed for the Transferor or other
holder of the Transferor Certificate or a bankruptcy or insolvency event were to
occur with respect to the Transferor or other holder of the Transferor
Certificate, then a Pay Out Event will occur with respect to all Series then
outstanding and, pursuant to the Agreement, new Principal Receivables would not
be transferred to the Trust unless otherwise required by the FDIC as receiver or
conservator. In addition, the Trustee would sell the Receivables (unless
otherwise instructed by holders of more than 50% of the Investor Interest of
each Series of Certificates, or with respect to any Series with more than one
Class, of each Class, and the Transferor and each holder of an interest in the
Transferor Certificate not subject to the appointment of a conservator or
receiver or the occurrence of an insolvency event, and any other person
designated by the Transferor in an officer's certificate delivered to the
Trustee prior to the Insolvency Event or specified in the related Series
Supplement, which may include any provider of Enhancement), thereby causing
early termination of the Trust and a loss to Certificateholders of a Series if
the net proceeds of such sale allocable to such Series were insufficient to pay
the Certificateholders of such Series in full. If a Pay Out Event occurs
involving either the bankruptcy or insolvency of the Transferor or other holder
of the Transferor Certificate or the appointment of a conservator or receiver
for the Transferor, the conservator, receiver or bankruptcy trustee (including
another holder of the Transferor Certificate as debtor-in-possession) for the
Transferor or other holder of the Transferor Certificate may have the power to
prevent the early sale, liquidation or disposition of the Receivables and the
commencement of the Rapid Amortization Period or, if applicable with respect to
a Series as specified in the related Prospectus Supplement, the Rapid
Accumulation Period, and may be able to require that new Principal Receivables
be transferred to the Trust. Such action could cause delays or shortfalls in the
amounts ultimately repaid to Certificateholders. A conservator, receiver or
bankruptcy trustee (including another holder of the Transferor Certificate as
debtor-in-possession) for the Transferor or other holder of the Transferor
Certificate may also have the power to cause the early sale of the Receivables
and the early retirement of the Certificates of each Series or to prohibit the
continued transfer of Principal Receivables to the Trust. In addition, in the
event of a Servicer Default relating to the conservatorship, receivership, or
insolvency of the Servicer, if no Servicer Default other than such
conservatorship, receivership, or insolvency exists, the conservator or receiver
for the Servicer may have the
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power to prevent either the Trustee or the Certificateholders from appointing a
successor Servicer under the Agreement. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Receivership."
Transferor's Ability to Change Terms of the Receivables. Pursuant to the
Agreement, the Transferor does not transfer to the Trust the Accounts, but only
the Receivables arising in the Accounts. As owner of the Accounts, the
Transferor retains the right to determine the monthly periodic finance charges
and other fees which will be applicable from time to time to the Accounts, to
alter the minimum monthly payment required on the Accounts and to change various
other terms with respect to the Accounts, including changing the annual
percentage rate from a fixed-rate to a variable-rate. A decrease in the monthly
periodic finance charge and a reduction in credit card or other fees would
decrease the effective yield on the Accounts with respect to the Trust and could
result in the occurrence of a Pay Out Event with respect to each Series relating
to the Trust and the commencement of the Rapid Amortization Period or, if so
specified in the related Prospectus Supplement, the Rapid Accumulation Period
with respect to each such Series. Under the Agreement, the Transferor will agree
that, except as otherwise required by law or as is deemed by the Transferor to
be necessary in order to maintain its credit card business, based upon a good
faith assessment by it, in its sole discretion, of the nature of the competition
in that business, the Transferor will not reduce the annual percentage rate of
the monthly periodic finance charges assessed on the related Receivables or
other fees on the related Accounts if, as a result of such reduction, the
Portfolio Yield for any Series as of such date would be less than the Base Rate
for such Series. The terms "Portfolio Yield" and "Base Rate" for each Series
will have the meanings set forth in the Prospectus Supplement relating to each
such Series. In addition, the Agreement provides that the Transferor may change
the terms of the contracts relating to the related Accounts or its policies and
procedures with respect to the servicing thereof (including without limitation
the reduction of the required minimum monthly payment and the calculation of the
amount or the timing of finance charges, credit card fees, and charge offs), if
such change (i) would not, in the reasonable belief of the Transferor, cause a
Pay Out Event for any related Series to occur, and (ii) is made applicable to
the comparable segment of revolving credit card accounts owned and serviced by
the Transferor which have characteristics the same as or substantially similar
to the related Accounts which are subject to such change. In servicing the
Accounts, the Servicer will be required to exercise the same care and apply the
same policies that it exercises in handling similar matters for its own
comparable accounts. Except as specified above or in any Prospectus Supplement,
there will be no restrictions on the Transferor's ability to change the terms of
the Accounts. There can be no assurance that changes in applicable law, changes
in the marketplace or prudent business practice might not result in a
determination by the Transferor to take actions which would change some or all
of the above-mentioned Account terms or other Account terms. Currently, the
Transferor has no basis to determine what effect various changes in the terms of
the Receivables may have had in the past and has no basis to determine what
change in the terms of the Receivables may be made in the future or what effect
those changes may have.
Effects of Consumer Protection Laws. Federal and state consumer protection
laws impose requirements on the making and enforcement of consumer loans.
Congress and the states may enact new laws and amendments to existing laws to
regulate further the credit card and consumer credit industry or to reduce
finance charges or other fees or charges applicable to credit card accounts.
Such laws, as well as any new laws or rulings which may be adopted, may
adversely affect the Servicer's ability to collect on the Receivables or
maintain previous levels of monthly periodic finance charges and other credit
card fees. One effect of any legislation which regulates the amount of interest
and other charges that may be assessed on credit card account balances would be
to reduce the Portfolio Yield on the Accounts. If such legislation were to
result in a significant reduction in the Portfolio Yield, a Pay Out Event could
occur, in which case the Rapid Amortization Period or, if so specified in the
related Prospectus Supplement, the Rapid Accumulation Period would commence.
Certificateholders of an affected Series might then receive principal payments
earlier than expected. If the resulting reduction in the Portfolio Yield were
significant enough, there
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<PAGE> 83
could be reductions in payments to Certificateholders of the affected Series.
See "Description of the Certificates -- Pay Out Events."
Pursuant to the Agreement, the Transferor has made a covenant to accept
reassignment, subject to certain conditions described under "Description of the
Certificates -- Representations and Warranties," of each Receivable that does
not comply in all material respects with all requirements of applicable law. The
Transferor has made certain other representations and warranties relating to the
validity and enforceability of the Receivables. However, it is not anticipated
that the Trustee will make any examination of the related Receivables or the
records relating thereto for the purpose of establishing the presence or absence
of defects, compliance with such representations and warranties, or for any
other purpose. The sole remedy if any such representation or warranty is
breached and such breach continues beyond the applicable cure period is that the
Transferor will be obligated to accept reassignment, subject to certain
conditions described under "Description of the Certificates -- Representations
and Warranties," of the Receivables affected thereby. Such Receivables will be
reassigned to the Transferor without any cost, direct or indirect, incurred by
Certificateholders. See "Description of the Certificates -- Representations and
Warranties" and "Certain Legal Aspects of the Receivables -- Consumer Protection
Laws."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are no
funds available from any Credit Enhancement or other sources to cover any
resulting shortfalls in amounts payable to Certificateholders. See "Description
of the Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."
Effects of Competition in the Credit Card Industry. The credit card
industry is highly competitive. As new credit card issuers enter the market and
all issuers seek to expand their share of the market, there is increased use of
advertising, target marketing and pricing competition. The Trust will be
dependent upon the Transferor's continued ability to generate new Receivables.
If the rate at which new Receivables are generated declines significantly and
the Transferor or an Additional Transferor is unable to designate Additional
Accounts with respect to the Trust, a Pay Out Event could occur with respect to
each Series relating to the Trust, in which case the Rapid Amortization Period
or, if so specified in the related Prospectus Supplement, the Rapid Accumulation
Period with respect to each such Series would commence. Certificateholders might
then receive principal payments earlier than expected.
Timing of Principal Payments Other Than at Expected Maturity. The
Receivables may be paid at any time and there is no assurance that there will be
additional Receivables created in the Accounts or that any particular pattern of
cardholder repayments will occur. The commencement and continuation of a
Controlled Amortization Period, a Principal Amortization Period or a Controlled
Accumulation Period for a Series or Class thereof with respect to the Trust will
be dependent upon the continued generation of new Receivables to be conveyed to
the Trust. A significant decline in the amount of Receivables generated could
result in the occurrence of a Pay Out Event for one or more Series and the
commencement of the Rapid Amortization Period or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period for each such Series.
Certificateholders might then receive principal payments earlier than expected.
Certificateholders should be aware that the Transferor's ability to continue to
compete in the current industry environment will affect the Transferor's ability
to generate new Receivables to be conveyed to the Trust and may also affect
payment patterns. In addition, changes in periodic finance charges can alter the
monthly payment rates of cardholders. A significant decrease in such monthly
payment rate could slow the payment or accumulation of principal for the benefit
of Certificateholders during an Amortization Period or Accumulation Period. No
assurance can be given that payments of principal will be made as expected
during the Controlled Amortization Period or the Principal Amortization Period,
or with respect to an Accumulation Period, on the Scheduled Payment Date, as
applicable. See "Maturity Assumptions."
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Prepayment Risks Connected with a Pre-Funding Account. With respect to any
Series having a Pre-Funding Account, in the event that there is an insufficient
amount of Principal Receivables in the Trust at the end of the applicable
Funding Period, the Certificateholders of such Series will be repaid principal
from amounts on deposit in the Pre-Funding Account (to the extent of such
insufficiency) following the end of such Funding Period, as described more fully
in the Prospectus Supplement. Such repayment of principal would be prior to the
scheduled date of such repayment. As a result of such repayment,
Certificateholders would receive a principal payment earlier than they expected.
In addition, Certificateholders would not receive the benefit of the applicable
Certificate Rate for the period of time originally expected on the amount of
such early repayment. There can be no assurance that a Certificateholder would
be able to reinvest such early repayment amount at a similar rate of return. If
a Certificateholder is not able to reinvest such early repayment amount at the
same rate of return or better, the Certificateholder's anticipated yield would
be adversely affected. However, a Series with a Pre-Funding Account feature may
also require the payment of a prepayment premium in such a circumstance, which
would mitigate the adverse effect to the Certificateholder's anticipated yield.
See "Description of the Certificates -- Funding Period."
Effect of Subordination on Class B Certificateholders. With respect to
Certificates of a Series having a Class or Classes of Subordinated Certificates,
except in circumstances specified in the related Prospectus Supplement, payments
of principal in respect of the Subordinated Certificates of a Series will not
commence until after the final principal payment with respect to the Senior
Certificates of such Series. In addition, if so specified in the related
Prospectus Supplement, if collections of Finance Charge Receivables allocable to
the Certificates of a Series are insufficient to cover required amounts due with
respect to the Senior Certificates of such Series, the Investor Interest with
respect to the Subordinated Certificates will be reduced, resulting in a
reduction of the portion of collections of Finance Charge Receivables allocable
to the Subordinated Certificates in future periods and a possible delay or
reduction in principal and interest payments on the Subordinated Certificates.
Moreover, if so specified in the related Prospectus Supplement, in the event of
a sale of Receivables in the Trust due to the bankruptcy or insolvency with
respect to the Transferor or any other holder of the Transferor Certificate or
the appointment of a conservator or receiver for the Transferor or any other
holder of the Transferor Certificate, or due to the inability of the Trustee to
act as or find a successor Servicer after a Servicer Default, the portion of the
net proceeds of such sale allocable to pay principal to the Certificates of a
Series will be used first to pay amounts due to the Senior Certificateholders
and any remainder will be used to pay amounts due to the Subordinated
Certificateholders.
Effect of Geographic Concentration. Unless otherwise specified in the
related Prospectus Supplement, the cardholders whose accounts are included in
the Trust Portfolio have addresses in all 50 states, the District of Columbia
and certain U.S. territories and possessions. However, if a single state or
region in the United States contains a high concentration of Receivables within
the Trust, events in that state or region may have a magnified effect on the
Trust due to such concentration. The Prospectus Supplement relating to a Series
to be offered thereby and hereby will set forth a then-current detailed
geographic breakdown of the number of Accounts and the amount of Receivables in
each state. See "The Receivables -- Geographic Distribution of Account Trust
Portfolio" in the related Prospectus Supplement. The Transferor, however, is
unable to determine and has no basis to predict, with respect to any state or
region, whether any such events have occurred or may occur, or to what extent
such events may effect the Receivables or the payment of the Certificates.
Scope of Certificate Rating. Any rating assigned to the Certificates of a
Series or a Class by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such Series or Class
will receive the payments of interest and principal required to be made under
the Agreement (including amounts payable from any Pre-Funding Account) and will
be based primarily on the value of the Receivables in the Trust and the
availability of any Enhancement with respect to such Series or Class. However,
any such rating will not, unless otherwise specified in the related Prospectus
Supplement with respect to any Class or Series offered hereby, address the
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likelihood that the principal of, or interest on, any Certificates of such Class
or Series will be paid on a scheduled date. In addition, any such rating will
not address the possibility of the occurrence of a Pay Out Event with respect to
such Class or Series or the possibility of the imposition of United States
withholding tax with respect to non-U.S. Certificateholders. The rating will not
be a recommendation to purchase, hold or sell Certificates of such Series or
Class, and such rating will not comment as to the marketability of such
Certificates, any market price or suitability for a particular investor. There
is no assurance that any rating will remain for any given period of time or that
any rating will not be reduced or withdrawn entirely by a Rating Agency if in
such Rating Agency's judgment circumstances so warrant. Such a reduction or
withdrawal may affect the price or marketability of the Certificates. However,
the Transferor has no basis to determine what specific effects such a reduction
or withdrawal might have on any particular Certificateholder or Certificate
Owner.
The Transferor will request a rating of the Certificates offered hereby of
each Series by at least one Rating Agency. There can be no assurance as to
whether any rating agency not requested to rate the Certificates will
nonetheless issue a rating with respect to any Series of Certificates or Class
thereof, and, if so, what such rating would be. A rating assigned to any Series
of Certificates or Class thereof by a rating agency that has not been requested
by the Transferor to do so may be lower than the rating assigned by a Rating
Agency pursuant to the Transferor's request.
Limited Credit Enhancement. Although Credit Enhancement may be provided
with respect to a Series of Certificates or any Class thereof, the amount
available will be limited and will be subject to certain reductions. If the
amount available under any Credit Enhancement is reduced to zero or the Credit
Enhancement is otherwise not available to cover a loss, Certificateholders of
the Series or Class thereof covered by such Credit Enhancement will bear
directly the credit and other risks associated with their undivided interest in
the Trust and will be more likely to suffer a loss. See "Credit Enhancement."
Basis Risk. If so specified in the related Prospectus Supplement, a portion
of the Accounts in the Trust will have finance charges set at a variable-rate
above a designated reference rate or other designated index. A Series of
Certificates issued by the Trust may bear interest at a fixed-rate or at a
floating-rate based on an index other than such reference rate or other
designated index. If there is a decline in such reference rate or other
designated index, the amount of collections of Finance Charge Receivables on
such Accounts may be reduced, whereas the amounts payable as Monthly Interest on
such Series of Certificates and other amounts required to be funded out of
collections of Finance Charge Receivables with respect to such Series may not be
similarly reduced. Such an event could result in the occurrence of a Pay Out
Event, in which case the Rapid Amortization Period or, if so specified in the
related Prospectus Supplement, the Rapid Accumulation Period would commence.
Certificateholders of an affected Series might then receive principal payments
earlier than expected. Conversely, to the extent that Accounts in the Trust bear
interest at a fixed-rate and there is an increase in such reference rate or
other designated index, amounts payable as Monthly Interest on such Series of
Certificates and other amounts required to be funded out of collections of
Finance Charge Receivables with respect to such Series may be increased, whereas
the amount of collections of Finance Charge Receivables on such Accounts may not
be similarly increased.
Risks of Swaps. The Trustee on behalf of the Trust may enter into interest
rate swaps and related caps, floors and collars or other forms of derivatives to
minimize the risk to Certificateholders from adverse changes in interest rates.
However, such transactions will not eliminate fluctuations in the value of the
Receivables or prevent such losses if the value of the Receivables decline.
The Trust's ability to hedge all or a portion of its portfolio of
Receivables through transactions in Swaps depends on the degree to which
interest rate movements in the market generally correlate with interest rate
movements in the Receivables.
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The Trust's ability to engage in transactions involving Swaps will depend
on the degree to which the Trust can identify acceptable counterparties. There
can be no assurance that acceptable counterparties will be available for a
specific Swap at any specific time.
The costs to the Trust of hedging transactions vary among the hedging
techniques and also depend on such factors as market conditions and the length
of the contract. Furthermore, the Trust's ability to engage in hedging
transactions may be limited by tax considerations.
Swaps are not traded on markets regulated by the Commission or the
Commodity Futures Trading Commission, but are arranged through financial
institutions acting as principals or agents. In an over-the-counter environment,
many of the protections afforded to exchange participants are not available. For
example, there are no daily fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of time. Because
the performance of over-the-counter Swaps is not guaranteed by any settlement
agency, there is a risk of counterparty default.
The Trust may consider taking advantage of investment opportunities in
Swaps that are not presently contemplated for use by the Trust or that are not
currently available but that may be developed, to the extent such opportunities
are both consistent with the Trust's objectives and legally permissible
investments for the Trust. Such opportunities, if they arise, may involve risks
that differ from or exceed those involved in the activities described above and
will be more fully described in the applicable Prospectus Supplement.
Master Trust Considerations. The Trust, as a master trust, is expected to
issue Series from time to time. While the Principal Terms of any Series will be
specified in a Series Supplement, the provisions of a Series Supplement and,
therefore, the terms of any additional Series, will not be subject to the prior
review by or consent of, holders of the Certificates of any previously issued
Series. Such Principal Terms may include methods for determining applicable
investor percentages and allocating collections, provisions creating different
or additional security or other Credit Enhancement, provisions subordinating
such Series to another Series or other Series (if the Series Supplement relating
to such Series so permits) to such Series, and any other amendment or supplement
to the Agreement which is made applicable only to such Series. It is a condition
precedent to the issuance of any additional Series by the Trust that each Rating
Agency that has rated any outstanding Series issued by the Trust deliver written
confirmation to the Trustee that a New Issuance will not result in such Rating
Agency reducing or withdrawing its rating on any outstanding Series. There can
be no assurance, however, that the Principal Terms of any other Series,
including any Series issued from time to time hereafter, might not have an
impact on the timing and amount of payments received by a Certificateholder of
any other Series. See "Description of the Certificates -- New Issuance."
Effect of Addition of Trust Assets on Credit Quality. The Transferor
expects, and in some cases will be obligated, to designate Additional Accounts,
the Receivables in which will be conveyed to the Trust. Such Additional Accounts
may include accounts having characteristics (including the possibility of
certain rebate features) which are different from, or accounts originated using
criteria different from those which were applied to, the Accounts designated on
the Cut-Off Date related to the Trust or to previously-designated Additional
Accounts, because such accounts were originated at a different date or were
acquired from another institution. Consequently, there can be no assurance that
Additional Accounts designated in the future will be of the same credit quality
as previously-designated Accounts. In addition, the Agreement provides that the
Transferor may add Participations to the Trust. The designation of Additional
Accounts and Participations will be subject to the satisfaction of certain
conditions described herein under "Description of the Certificates -- Addition
of Trust Assets;" however, there is no mechanism to assure consistent credit
quality from time to time. The credit quality of the Certificates are related to
the credit quality of the underlying Accounts. In addition, if a decline in the
credit quality of the Trust Portfolio were significant enough, it could result
in reductions in payment to Certificateholders in an affected Series.
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Certificateholders Have Limited Control of Action Under Agreement. The
Certificateholders generally have limited control over the administration of the
Trust or the applicable Series. Subject to certain exceptions, the
Certificateholders of each Series may take certain actions, or direct certain
actions to be taken, under the Agreement or the related Series Supplement.
However, the Agreement or related Series Supplement may provide that under
certain circumstances the consent or approval of a specified percentage of the
aggregate Investor Interest of other Series or of the Investor Interest of a
specified Class of such other Series will be required to direct certain actions,
including requiring the appointment of a successor Servicer following a Servicer
Default, amending the Agreement in certain circumstances and directing a
repurchase of all outstanding Series upon the breach of certain representations
and warranties by the Transferor. See "Description of the Certificates -- Pay
Out Events," "-- Servicer Default" and "-- Amendments." Certificateholders of
such other Series may have interests which do not coincide in any way with the
interests of Certificateholders of the subject Series. In such instances, it may
be difficult for the Certificateholders of such Series to achieve the results
from the vote that they desire.
Risks Presented by Social, Technological, Legal and Economic
Factors. Changes in use of credit and payment patterns by customers may result
from a variety of social, technological, legal and economic factors. Social
factors include the public's perceptions of the use of credit cards.
Technological factors include new methods of payment such as debit cards. Legal
factors include any changes in the current legal structure affecting the
relative positions of credit card issuers and obligors under credit card
accounts. Economic factors include the rate of inflation, unemployment levels
and relative interest rates. Cardholders whose accounts are included in the
Trust Portfolio may have addresses in all 50 states, the District of Columbia
and certain U.S. territories and possessions. See "-- Effect of Geographic
Concentration." The Transferor, however, is unable to determine and has no basis
to predict whether, or to what extent, social, technological, legal or economic
factors in any state will affect future use of credit or repayment patterns.
Effects of Book-Entry Registration. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series initially will be
represented by one or more Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Unless and until Definitive Certificates are issued
for a Series, Certificate Owners relating to such Series will not be recognized
by the Trustee as Certificateholders, as that term will be used in the
Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Certificateholders indirectly through DTC, Cedel or
Euroclear and their participating organizations. See "Description of the
Certificates -- Book-Entry Registration" and "-- Definitive Certificates."
THE TRUST
The Trust has been formed in accordance with the laws of the State of New
York pursuant to the Agreement. The Trust will not engage in any business
activity other than acquiring and holding Receivables, issuing Series of
Certificates, Supplemental Certificates and the Transferor Certificate, making
payments thereon and engaging in related activities (including, with respect to
any Series, obtaining any Enhancement and entering into an Enhancement agreement
relating thereto). As a consequence, the Trust is not expected to have any need
for additional capital resources other than the assets of the Trust and there is
no reasonable potential for such need to develop. Furthermore, no such
additional capital resources will be available.
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BANK OF AMERICA'S CREDIT CARD ACTIVITIES
GENERAL
On December 1, 1994, Bank of America NT&SA transferred its credit card
accounts and certain related assets to Bank of America National Association
("Bank of America"). A selected portion of these transferred accounts initially
constituted the Accounts within the Trust. The Receivables which Bank of America
has conveyed and will convey to the Trust pursuant to the Agreement have been
generated from transactions made by cardholders of VISA Classic and VISA Gold
credit card accounts and Standard MasterCard and Gold MasterCard credit card
accounts. The Accounts designated as of the Cut-Off Date were generated under
the VISA or MasterCard programs and were originated by Bank of America NT&SA.
Bank of America is a member of VISA U.S.A. Inc. and of MasterCard International
Incorporated.
The VISA and MasterCard credit card accounts may be used, and Principal
Receivables may be created, in four types of transactions: credit card
purchases, cash advances, overdraft protection, and in certain cases,
consolidation of outstanding balances of other credit card accounts.
Each cardholder is subject to an agreement with Bank of America governing
the terms and conditions of the related VISA or MasterCard credit card account.
Pursuant to each such agreement, Bank of America reserves the right, subject to
such notice to the cardholder as may be required by law, to add to or change the
terms of its VISA or MasterCard credit card accounts at any time, including,
without limitation, increasing or decreasing the periodic finance charges, or
other charges, or the minimum monthly payment requirements.
The credit evaluation, collection, and charge-off policies and servicing
practices of Bank of America, as well as the terms and conditions governing
cardholder agreements in effect as of the date hereof, are under continuous
review by Bank of America and may change at any time in accordance with Bank of
America's business judgment, applicable law and guidelines established by
regulatory authorities.
Transactions creating the Receivables through the use of the credit cards
are processed through the VISA and MasterCard systems. If either system
materially curtails its activities, or if Bank of America ceases to be a member
of VISA or MasterCard, for any reason, a Pay Out Event could occur, and delays
in payments on the Receivables and possible reductions in the amounts thereof
could occur.
The Accounts within the Trust are currently serviced by Bank of America.
However, Bank of America has delegated the data processing services relating to
all of the Accounts to Total System Services, Inc ("TSYS") in Columbus, Georgia.
TSYS is a credit, debit and private-label card processing company. Under this
delegation, TSYS provides a variety of data processing services to Bank of
America, including processing credit slips (drafts), cash advances and
accountholder purchases for merchants. Additionally, TSYS stores customer's data
files, updates master files daily, and provides master file tapes monthly, makes
billing statement calculations, creates statement files, handles the daily
posting of transactions to the accounts and handle the daily settlements with
MasterCard and VISA.
ORIGINATIONS AND UNDERWRITING
The Accounts designated as of the Cut-Off Date were principally generated
by Bank of America NT&SA through: (1) applications made available to prospective
cardholders through a network of branches operated by Bank of America NT&SA and
its affiliated banks; (2) direct-mail solicitations on a non-prescreened basis;
(3) applications mailed to customers of Bank of America NT&SA and its
affiliates; (4) pre-approved direct-mail solicitations of individuals who were
prescreened at credit bureaus on the basis of criteria furnished by Bank of
America NT&SA; and (5) consumer-initiated requests.
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When the Accounts designated as of the Cut-Off Date were originated, Bank
of America NT&SA was subject to the Corporation's credit policy guidelines which
have governed lending activities at all Corporation subsidiaries. The
Corporation's credit policy has addressed guiding principles, basic rules,
policies, and special requirements to which all Corporation subsidiaries have
been held accountable. Before purchasing the Bank of America NT&SA portfolio,
Bank of America reviewed the historical performance and seasoning of the
portfolio and the policies and practices of Bank of America NT&SA. Bank of
America's ongoing compliance with the Corporation's credit policy and governing
laws and regulations is frequently reviewed by internal compliance specialists,
the Corporation's auditors and external auditors, and regulatory agency
personnel. There can be no assurance, however, that Accounts so acquired have
been originated in a manner consistent with Bank of America's policies or that
the underwriting and qualification of such Accounts conformed with prudent
underwriting and qualification standards.
Bank of America NT&SA's national direct-mail solicitation process employed
in the origination of certain of the Accounts designated as of the Cut-Off Date
began with a prescreening review to identify creditworthy consumers for a credit
card account. As part of the prescreening process, Bank of America NT&SA
provided a set of credit history criteria to credit reporting agencies, which in
turn generated a list of prospective cardholders with desired attributes. Bank
of America NT&SA further refined the list by applying its internal underwriting
criteria. These additional criteria were applied using risk analysis models
designed to predict the potential credit risk of prospective cardholders. The
credit line was based on, among other things, each consumer's credit profile,
level of existing and potential indebtedness relative to assumed income and
estimated income, and demographic data.
In the case of an application which was not pre-approved, the credit risk
of the applicant was evaluated with a credit scoring system, intended to provide
a general indication, based on the information available, of the applicant's
willingness and ability to repay his or her obligations. Each application was
scored and evaluated based jointly on information reported on the application
and by independent credit reporting agencies.
Cardholder requests for credit line increases are evaluated by Bank of
America based on current credit bureau reports, updated application data, and
prior account performance. In addition, Bank of America periodically increases
credit lines for cardholders meeting specific criteria.
Each Account is subject to an agreement governing the terms and conditions
of the Accounts. In that agreement, Bank of America reserves the right to change
or terminate any terms, conditions, services or features of an Account
(including, without limitation, increasing or decreasing monthly periodic
finance charges, other fees or minimum payments).
CUSTOMER SERVICE
Customer Service representatives are available seven days a week.
Technologies, such as voice-response units for incoming calls, together with
multiple tracking and reporting systems, are employed as part of Bank of
America's effort to ensure that service standards are achieved and maintained.
INTERCHANGE
Creditors participating in the VISA and MasterCard associations receive
Interchange as partial compensation for taking credit risk, absorbing fraud
losses and funding receivables for a limited period prior to initial billing.
Under the VISA and MasterCard systems, a portion of this Interchange in
connection with cardholder charges for goods and services is passed from banks
which clear the transactions for merchants to credit card issuing banks.
Interchange fees are set annually by MasterCard and VISA and are based on the
number of credit card transactions and the amount charged per transaction. The
Transferor may be required, as described in the related Prospectus Supplement,
to transfer to the Trust a percentage of the Interchange attributable to
cardholder
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charges for goods and services in the related Accounts. If so required to be
transferred, Interchange arising under the Accounts will be allocated to the
related Certificates of any Series in the manner provided in the related
Prospectus Supplement, and, unless otherwise provided in the related Prospectus
Supplement, will be treated as collections of Finance Charge Receivables and
will be used to pay required monthly payments including interest on the related
Series of Certificates, and, in some cases, to pay all or a portion of the
Servicing Fee to the Servicer.
THE RECEIVABLES
The Receivables conveyed to the Trust will arise in Accounts selected from
the Identified Pool on the basis of criteria set forth in the Agreement as
applied on the Cut-Off Date and, with respect to Additional Accounts, as of the
related date of their designation (the "Trust Portfolio"). The Transferor will
have the right (subject to certain limitations and conditions set forth
therein), and in some circumstances will be obligated, to designate from time to
time Additional Accounts and to transfer to the Trust all Receivables of such
Additional Accounts, whether such Receivables are then existing or thereafter
created, or to transfer to the Trust, Participations in lieu of such Receivables
or in addition thereto. Any Additional Accounts designated pursuant to the
Agreement must be Eligible Accounts as of the date the Transferor designates
such accounts as Additional Accounts. Furthermore, pursuant to the Agreement,
the Transferor has the right (subject to certain limitations and conditions) to
designate certain Accounts as Removed Accounts and to require the Trustee to
reconvey all Receivables in such Removed Accounts to the Transferor, whether
such Receivables are then existing or thereafter created. Throughout the term of
the Trust, the related Accounts from which the Receivables arise will be the
Accounts designated by the Transferor on the relevant Cut-Off Date plus any
Additional Accounts minus any Removed Accounts. With respect to each Series of
Certificates, the Transferor will represent and warrant to the Trust that, as of
the Closing Date and the date Receivables are conveyed to the Trust, such
Receivables meet certain eligibility requirements. See "Description of the
Certificates -- Representations and Warranties."
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the Trust Portfolio as of the date specified.
Such information will include, but not be limited to, the amount of Principal
Receivables, the amount of Finance Charge Receivables, the range of principal
balances of the Accounts and the average thereof, the range of credit limits of
the Accounts and the average thereof, the range of ages of the Accounts and the
average thereof, the geographic distribution of the Accounts, the types of
Accounts and delinquency statistics relating to the Accounts.
MATURITY ASSUMPTIONS
For each Series, following the Revolving Period, collections of Principal
Receivables are expected to be distributed to the Certificateholders of such
Series or any specified Class thereof on each specified Distribution Date during
the Controlled Amortization Period or the Principal Amortization Period, or are
expected to be accumulated for payment to Certificateholders of such Series or
any specified Class thereof during an Accumulation Period and distributed on a
Scheduled Payment Date; provided, however, that, if the Rapid Amortization
Period commences, collections of Principal Receivables will be paid to
Certificateholders in the manner described herein and in the related Prospectus
Supplement. The related Prospectus Supplement specifies when the Controlled
Amortization Period, the Principal Amortization Period or an Accumulation
Period, as applicable, will commence, the principal payments expected or
available to be received or accumulated during such Controlled Amortization
Period, Principal Amortization Period or Accumulation Period, or on the
Scheduled Payment Date, as applicable, the manner and priority of principal
accumulations and payments among the Classes of a Series of Certificates, the
payment rate assumptions on which such expected principal accumulations and
payments are based and the Pay Out Events which, if
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any were to occur, would lead to the commencement of a Rapid Amortization Period
or, if so specified in the related Prospectus Supplement, a Rapid Accumulation
Period.
No assurance can be given, however, that the Principal Receivables
allocated to be paid to Certificateholders or the holders of any specified Class
thereof will be available for distribution or accumulation for payment to
Certificateholders on each Distribution Date during the Controlled Amortization
Period, the Principal Amortization Period or an Accumulation Period, or on the
Scheduled Payment Date, as applicable. In addition, the Transferor can give no
assurance that the payment rate assumptions for any Series will prove to be
correct. The related Prospectus Supplement will provide certain historical data
relating to payments by cardholders, total charge-offs and other related
information relating to the Identified Pool and the Trust Portfolio, as
applicable. There can be no assurance that future performance will be consistent
with such historical data.
The amount of collections of Receivables may vary from month to month due
to seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of Principal
Receivables with respect to the Trust Portfolio, and thus the rate at which the
related Certificateholders could expect to receive or accumulate payments of
principal on their Certificates during an Amortization Period or Accumulation
Period, or on any Scheduled Payment Date, as applicable, will be similar to any
historical experience set forth in a related Prospectus Supplement. If a Pay Out
Event occurs and the Rapid Amortization Period commences, the average life and
maturity of such Series of Certificates could be significantly reduced.
Because, for any Series of Certificates, there may be a slowdown in the
payment rate below the payment rate used to determine the amount of collections
of Principal Receivables scheduled or available to be distributed or accumulated
for later payment to Certificateholders or any specified Class thereof during an
Amortization Period or an Accumulation Period or on any Scheduled Payment Date,
as applicable, or a Pay Out Event may occur which could initiate the Rapid
Amortization Period, there can be no assurance that the actual number of months
elapsed from the date of issuance of such Series of Certificates to the final
Distribution Date with respect to the Certificates will equal the expected
number of months.
USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates offered
hereby will be paid to the Transferor. The Transferor will use such proceeds for
its general corporate purposes or for such other purpose specified in the
Prospectus Supplement.
BANKAMERICA CORPORATION AND BANK OF AMERICA NATIONAL ASSOCIATION
BankAmerica Corporation (the "Corporation") is a multi-bank holding company
which was incorporated in Delaware in 1968. Bank of America National Association
("Bank of America"), a wholly-owned subsidiary of the Corporation, was formed in
1989 and is headquartered in Phoenix, Arizona. Bank of America is a national
bank organized under the laws of the United States and regulated primarily by
the Office of the Comptroller of the Currency. Bank of America National Trust
and Savings Association ("Bank of America NT&SA"), a wholly-owned subsidiary of
the Corporation, was formed in 1904. In addition to Bank of America and Bank of
America NT&SA, the Corporation holds investments in other subsidiaries which
provide a variety of financial services, including commercial and consumer
lending, investment banking, securities trading, and investment advisory
services.
On December 1, 1994, Bank of America NT&SA transferred its credit card
accounts and certain related assets to Bank of America. A selected portion of
these transferred accounts initially constituted the Accounts within the Trust.
Bank of America's activities are primarily related to credit card lending.
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The Prospectus Supplement for each Series of Certificates contains
additional information, including financial information, relating to the
Corporation and Bank of America.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the Trust other than the interests represented by any other Series
of Certificates issued by the Trust (which may include Series offered pursuant
to this Prospectus) and the Transferor Certificate. Each Series will be issued
pursuant to the Agreement entered into by Bank of America and the Trustee and a
Series Supplement to the Agreement, a copy of the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summaries describe certain provisions common to each Series of
Certificates. The summaries do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the Agreement and Series Supplement.
GENERAL
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable Investor
Percentage of all cardholder payments on the Receivables in the Trust. For each
Series of Certificates, the Investor Interest on any date generally will be
equal to the initial Investor Interest as of the related Closing Date for such
Series (increased by the principal balance of any Certificates of such Series
issued after the Closing Date for such Series) minus the amount of principal
paid to the related Certificateholders prior to such date and minus the amount
of unreimbursed Investor Charge-Offs with respect to such Certificates prior to
such date, except that the Investor Interest of any pre-funded Series may
increase upon the transfer of additional Principal Receivables to the Trust or
the reduction of the Investor Interest or the Adjusted Investor Interest of
another Series. If so specified in the Prospectus Supplement relating to any
Series of Certificates, under certain circumstances the Investor Interest may be
further adjusted by the amount of principal allocated to Certificateholders, the
funds on deposit in any specified account, and any other amount specified in the
related Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be Subordinated
Certificates. Each Class of a Series will evidence the right to receive a
specified portion of each distribution of principal or interest or both. The
Investor Interest with respect to a Series with more than one Class will be
allocated among the Classes as described in the related Prospectus Supplement.
The Certificates of a Class may differ from Certificates of other Classes of the
same Series in, among other things, the amounts allocated to principal payments,
maturity date, Certificate Rate and the availability of Enhancement.
For each Series of Certificates, payments or deposits of interest and
principal will be made on Distribution Dates specified in the related Prospectus
Supplement to Certificateholders in whose names the Certificates were registered
on the record dates (each, a "Record Date") or otherwise as specified in the
related Prospectus Supplement. Interest will be distributed to
Certificateholders in the amounts, for the periods and on the dates specified in
the related Prospectus Supplement.
For each Series of Certificates, the Transferor initially will own the
Transferor Certificate. The Transferor Certificate will represent the undivided
interest in the Trust not represented by the Certificates issued and outstanding
under the Trust or the rights, if any, of any Credit Enhancement Providers to
receive payments from the Trust. The holder of the Transferor Certificate will
have the right to a percentage (the "Transferor Percentage") of all cardholder
payments from the Receivables in the Trust. If provided in the Agreement and
Prospectus Supplement, the Transferor Certificate may be transferred in whole or
in part subject to certain limitations and conditions set forth therein. See
"-- Certain Matters Regarding the Transferor and the Servicer."
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Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the amount
of the Investor Interest in the Trust will remain constant except under certain
limited circumstances. See "-- Defaulted Receivables; Rebates and Fraudulent
Charges; Investor Charge-Offs." The amount of Principal Receivables in the
Trust, however, will vary each day as new Principal Receivables are created and
others are paid. The amount of the Transferor Interest will fluctuate each day,
therefore, to reflect the changes in the amount of the Principal Receivables in
the Trust. When a Series is amortizing, the Investor Interest of such Series
will decline as customer payments of Principal Receivables are collected and
distributed to or accumulated for distribution to the Certificateholders. As a
result, the Transferor Interest will generally increase to reflect reductions in
the Investor Interest for such Series and will also change to reflect the
variations in the amount of Principal Receivables in the Trust. The Transferor
Interest in the Trust may also be reduced as the result of a New Issuance. See
"-- New Issuance."
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository") except as set forth
below. Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, beneficial interests in the Certificates
will be available for purchase in minimum denominations of $1,000 and integral
multiples thereof in book-entry form only. The Transferor has been informed by
DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be the
holder of record of each Series of Certificates. No Certificate Owner acquiring
an interest in the Certificates will be entitled to receive a certificate
representing such person's interest in the Certificates. Unless and until
Definitive Certificates are issued for any Series under the limited
circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants (as defined below), and all references herein to distributions,
notices, reports and statements to Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Certificates, as the case may be, for distribution to Certificate
Owners in accordance with DTC procedures. See "-- Book-Entry Registration" and
"-- Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or Cedel or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
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 ("Participants") and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers
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and dealers (who may include the underwriters of any Series), banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (the "Indirect
Participants").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal of
and interest on the Certificates from the Trustee through the Participants who
in turn will receive them from DTC. Under a book-entry format, Certificate
Owners may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will
forward such payments to Participants which thereafter 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 only be permitted to exercise the rights
of Certificateholders indirectly through the Participants who in turn will
exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal and interest on the
Certificates. 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. Accordingly, although Certificate Owners
will not possess Certificates, Certificate Owners will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Certificates to persons or
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entities that do not participate in the DTC system, or otherwise take actions in
respect of such Certificates, may be limited due to the lack of a physical
certificate for such Certificates.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one or
more Participants to whose account with DTC the Certificates are credited.
Additionally, DTC has advised the Transferor that it will take such actions with
respect to specified percentages of the Investor Interest 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 Participants whose holdings include such undivided interests.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of 34 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulation by the Luxembourg Monetary Institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any Series
of Certificates. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 34
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in more than 25 countries generally similar to
the arrangements for cross-market transfers with DTC described above. The
Euroclear System is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euroclear Clearance System, Societe Cooperative, a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative Board establishes policy for the Euroclear System.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters of any Series of Certificates. Indirect access to the
Euroclear System is also available to other firms that maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System (collectively, the "Terms
and Conditions"). The Terms and Conditions govern
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transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Federal Income Tax Consequences." Cedel or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a
Certificateholder under the Agreement on behalf of a Cedel Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Transferor would seek an alternative depository (if available) or
cause the issuance of Definitive Certificates to Certificate Owners or their
nominees in the manner described under "-- Definitive Certificates."
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee for
such Series in writing that DTC is no longer willing or able to discharge
properly its responsibilities as Depository with respect to such Series of
Certificates, and the Trustee or the Transferor is unable to locate a qualified
successor, (ii) the Transferor, at its option, advises the Trustee in writing
that it elects to terminate the book-entry system through DTC or (iii) after the
occurrence of a Servicer Default, Certificate Owners representing not less than
50% (or such other percentage specified in the related Prospectus Supplement) of
the Investor Interest advise the Trustee and DTC through Participants in writing
that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
re-registration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments and any
principal payments on each Distribution Date will be made to Holders in whose
names the Definitive Certificates were registered at the close of business on
the related Record Date. Distributions will be made by check mailed to the
address of such Holder as it appears on the register maintained by the Trustee,
except that distributions made with respect to Certificates registered in the
name of the nominee of a clearing agency will be made in immediately available
funds. The final payment on any Certificate (whether Definitive Certificates or
the Certificates registered in the name of Cede representing the Certificates),
however, will be made only upon presentation and surrender of such Certificate
at the office or agency specified in the
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notice of final distribution to Certificateholders. The Trustee will provide
such notice to registered Certificateholders not later than the fifth day of the
month of such final distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer or
exchange, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. The Transfer Agent and Registrar shall not be required to register
the transfer or exchange of Definitive Certificates for a period of fifteen days
preceding the due date for any payment with respect to such Definitive
Certificates.
THE TRANSFEROR CERTIFICATE; ADDITIONAL TRANSFERORS
The Agreement provides that the Transferor may instruct the Trustee to
issue one or more additional certificates (each, a "Supplemental Certificate")
which, together with the Transferor Certificate, will represent the Transferor
Interest. Each Supplemental Certificate will be issued to a person designated by
the Transferor upon the execution and delivery of a supplement to the Agreement
(which supplement will be subject to the amendment section of the Agreement to
the extent that it amends any of the terms of the Agreement; see
"-- Amendments"); provided, however, that (a) the Transferor shall have given
written notice to each Rating Agency of the issuance of such Supplemental
Certificate, (b) the Transferor Interest (excluding the interest represented by
any Supplemental Certificate) shall not be less than 2% of the total amount of
Principal Receivables as of the date of, and after giving effect to, such
issuance and (c) if any Series of Certificates are outstanding that were
characterized as debt at the time of their issuance, the Transferor shall have
delivered to the Trustee and each Rating Agency an opinion of counsel, dated the
date of such transfer, to the effect that such transfer does not adversely
affect the conclusions reached in any of the Tax Opinions delivered in
connection with the issuance of any applicable Series of Certificates. Any
transfer of a Supplemental Certificate is subject to the condition set forth in
clause (b) above.
Bank of America may designate affiliates of Bank of America to be included
as a Transferor (each, an "Additional Transferor") under the Agreement (by means
of an amendment to the Agreement that will not require the consent of any
Certificateholder; see "-- Amendments") and, in connection with such
designation, the Transferor shall surrender the Transferor Certificate to the
Trustee in exchange for a newly issued Transferor Certificate modified to
reflect such Additional Transferor's interest in the Transferor Interest;
provided, however, that (i) the conditions set forth in the preceding paragraph
with respect to the issuance of a Supplemental Certificate shall have been
satisfied with respect to such designation and exchange and (ii) any applicable
condition described in "-- Addition of Trust Assets" shall have been satisfied
with respect to the transfer of Receivables or Participations by any Additional
Transferor to the Trust. Following the inclusion of an Additional Transferor,
the Additional Transferor will be treated in the same manner as a Transferor and
each Additional Transferor generally will have the same obligations and rights
as a Transferor described herein.
The Transferor Certificate (or any interest therein) may be transferred to
a Person which is a member of the "affiliated group" of which the Corporation is
the "common parent" (as such terms are defined in Section 1504(a) of the Code);
provided, however, that (i) if any Series of Certificates are outstanding that
were characterized as debt at the time of their issuance, the Transferors shall
have delivered to the Trustee and each Rating Agency a Tax Opinion, dated the
date of such transfer, with respect thereto, and (ii) any such transferee shall
be deemed to be a "Transferor" for certain purposes including for purposes of
the discussion under "-- Pay Out Events."
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INTEREST PAYMENTS
For each Series of Certificates and Class thereof, interest will accrue
from the relevant Closing Date on the applicable Investor Interest at the
applicable Certificate Rate, which may be a fixed, floating or other type of
rate as specified in the related Prospectus Supplement. Interest will be
distributed to Certificateholders on the Distribution Dates specified in the
related Prospectus Supplement. Interest payments on any Distribution Date will
be funded from collections of Finance Charge Receivables allocated to the
Investor Interest during the preceding Monthly Period or Periods and may be
funded from certain investment earnings on funds held in accounts of the Trust
and from any applicable Credit Enhancement, if necessary, or certain other
amounts as specified in the related Prospectus Supplement. If the Distribution
Dates for payment of interest for a Series or Class occur less frequently than
monthly, such collections or other amounts (or the portion thereof allocable to
such Class) may be deposited in one or more trust accounts (each, an "Interest
Funding Account") pending distribution to the Certificateholders of such Series
or Class, as described in the related Prospectus Supplement. If a Series has
more than one Class of Certificates, each such Class may have a separate
Interest Funding Account. The Prospectus Supplement relating to each Series of
Certificates and each Class thereof describes the amounts and sources of
interest payments to be made, the Certificate Rate, and, for a Series or Class
thereof bearing interest at a floating Certificate Rate, the dates and the
manner for determining subsequent Certificate Rates, and the formula, index or
other method by which such Certificate Rates are determined.
PRINCIPAL PAYMENTS
Except in the circumstances specified in the related Prospectus Supplement,
during the Revolving Period for each Series of Certificates (which begins on the
Closing Date relating to such Series and ends on the day before an Amortization
Period or Accumulation Period begins), no principal payments will be made to the
Certificateholders of such Series. During the Controlled Amortization Period or
Principal Amortization Period, as applicable, which will be scheduled to begin
on the date specified in, or determined in the manner specified in, the related
Prospectus Supplement, and during the Rapid Amortization Period, which will
begin upon the occurrence of a Pay Out Event or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period, principal will be paid to
the Certificateholders in the amounts and on Distribution Dates specified in the
related Prospectus Supplement. During an Accumulation Period, principal will be
accumulated in a Principal Funding Account for later distribution to
Certificateholders on the Scheduled Payment Date in the amounts specified in the
related Prospectus Supplement. Principal payments for any Series or Class
thereof will be funded from collections of Principal Receivables received during
the related Monthly Period or Periods as specified in the related Prospectus
Supplement and allocated to such Series or Class and from certain other sources
specified in the related Prospectus Supplement. In the case of a Series with
more than one Class of Certificates, the Certificateholders of one or more
Classes may receive payments of principal at different times. The related
Prospectus Supplement describes the manner, timing and priority of payments of
principal to Certificateholders of each Class.
Funds on deposit in any Principal Funding Account applicable to a Series
may be subject to a guaranteed rate agreement or guaranteed investment contract
or other arrangement specified in the related Prospectus Supplement intended to
assure a minimum rate of return on the investment of such funds. In order to
enhance the likelihood of the payment in full of the principal amount of a
Series of Certificates or Class thereof at the end of an Accumulation Period,
such Series of Certificates or Class thereof may be subject to a principal
guaranty or other similar arrangement specified in the related Prospectus
Supplement.
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TRANSFER AND ASSIGNMENT OF RECEIVABLES
With respect to the Trust, the Transferor assigned, at the time of
formation of the Trust, all of its right, title and interest in and to the
Receivables in the related Accounts and all Receivables thereafter created in
such Accounts.
In connection with each transfer of Receivables to the Trust, the
Transferor will indicate in its computer files that the related Receivables have
been conveyed to the Trust. In addition, the Transferor will provide to the
Trustee, with respect to the Trust, computer files or microfiche lists,
containing a true and complete list showing each related Account, identified by
account number and by total outstanding balance on the date such accounts were
designated for inclusion in the Trust. The Transferor will not deliver to the
Trustee any other records or agreements relating to the Accounts or the
Receivables, except in connection with additions or removals of Accounts. Except
as stated above, the records and agreements relating to the Accounts and the
Receivables maintained by the Transferor or the Servicer are not and will not be
segregated by the Transferor or the Servicer from other documents and agreements
relating to other credit card accounts and receivables and are not and will not
be stamped or marked to reflect the transfer of the Receivables to the Trust,
but the computer records of the Transferor are and will be required to be marked
to evidence such transfer. The Transferor will file, with respect to the Trust,
Uniform Commercial Code financing statements with respect to the Receivables
meeting the requirements of applicable state law. See "Risk Factors -- Potential
Priority of Certain Liens" and "Certain Legal Aspects of the Receivables."
NEW ISSUANCE
The Agreement provides for the Trustee to issue three types of
certificates: (i) one or more Series of Certificates which are transferable and
have the characteristics described below, (ii) the Transferor Certificate, a
certificate which, together with the Supplemental Certificates outstanding, if
any, evidences the Transferor Interest, which Transferor Certificate initially
will be held by the Transferor and will be transferable only as provided in the
Agreement and (iii) one or more Supplemental Certificates, which if issued,
would relate to the Transferor Interest in that they would be entitled to a
portion of amounts allocable to the Transferor Interest and would be
transferable as provided in the Agreement. Pursuant to the Agreement, the holder
of the Transferor Certificate may define, with respect to any newly issued
Series of Certificates, all Principal Terms of such new Series. Upon the
issuance of an additional Series of Certificates, none of the Transferor, the
Servicer, the Trustee or the Trust will be required or will intend to obtain the
consent of any Certificateholder of any other Series previously issued by the
Trust. However, as a condition of a New Issuance, the holder of the Transferor
Certificate will deliver to the Trustee written confirmation that the New
Issuance will not result in the reduction or withdrawal by any Rating Agency of
its rating of any outstanding Series. The Transferor may offer any Series under
a Disclosure Document in offerings pursuant to this Prospectus or in
transactions either registered under the Securities Act or exempt from
registration thereunder directly, through one or more other underwriters or
placement agents, in fixed-price offerings or in negotiated transactions or
otherwise.
The holder of the Transferor Certificate may permit a New Issuance and
define Principal Terms such that each Series issued under the Trust has a period
during which amortization or accumulation of the principal amount thereof is
intended to occur which may have a different length and begin on a different
date than such period for any other Series. Further, one or more Series may be
in their amortization or accumulation periods while other Series are not.
Moreover, each Series may have the benefit of a Credit Enhancement which is
available only to such Series. Under the Agreement, the Trustee shall hold any
such form of Credit Enhancement only on behalf of the Series with respect to
which it relates. Likewise, with respect to each such form of Credit
Enhancement, the holder of the Transferor Certificate may deliver a different
form of Credit Enhancement agreement. The holder of the Transferor Certificate
may specify different certificate rates and monthly servicing fees with respect
to each Series (or a particular Class within such Series). The holder of the
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Transferor Certificate will also have the option under the Agreement to vary
between Series the terms upon which a Series (or a particular Class within such
Series) may be repurchased by the Transferor or remarketed to other investors.
Additionally, certain Series may be subordinated to other Series, or Classes
within a Series may have different priorities. There will be no limit to the
number of New Issuances that may be performed under the Agreement.
A New Issuance may only occur upon the satisfaction of certain conditions
provided in the Agreement. Under the Agreement, the holder of the Transferor
Certificate may permit a New Issuance by notifying the Trustee at least 3 days
in advance of the date upon which the New Issuance is to occur. Under the
Agreement, the notice will state the designation of any Series to be issued on
the date of the New Issuance and, with respect to each such Series: (i) its
initial principal amount (or method for calculating such amount) which amount
may not be greater than the current principal amount of the Transferor
Certificate, (ii) its certificate rate (or method of calculating such rate) and
(iii) the provider of Credit Enhancement, if any, which is expected to provide
support with respect to it. The Agreement provides that on the date of the New
Issuance the Trustee will authenticate any such Series only upon delivery to it
of the following, among others, (i) a Series Supplement specifying the Principal
Terms of such Series, (ii) a Tax Opinion, (iii) if required by the related
Series Supplement, the form of Credit Enhancement, (iv) if Credit Enhancement is
required by the Series Supplement, an appropriate Credit Enhancement agreement
with respect thereto executed by the Transferor and the issuer of the Credit
Enhancement, (v) written confirmation from each Rating Agency that the New
Issuance will not result in such Rating Agency's reducing or withdrawing its
rating on any then outstanding Series rated by it and (vi) an officer's
certificate of the Transferor to the effect that after giving effect to the New
Issuance the Transferor would not be required to add Additional Accounts
pursuant to the Agreement and the Transferor Interest would be at least equal to
the Minimum Transferor Interest. Upon satisfaction of such conditions, the
Trustee will authenticate the new Series.
REPRESENTATIONS AND WARRANTIES
The Transferor has made in the Agreement, certain representations and
warranties to the Trust to the effect that, among other things, (a) as of the
Closing Date, the Transferor was duly organized and in good standing and that it
has the authority to consummate the transactions contemplated by the Agreement
and (b) as of the Cut-Off Date (or as of the date of the designation of
Additional Accounts), each Account was an Eligible Account. If so provided in
the related Prospectus Supplement, if (i) any of these representations and
warranties proves to have been incorrect in any material respect when made, and
continues to be incorrect for 60 days after notice to the Transferor by the
Trustee or to the Transferor and the Trustee by the Certificateholders holding
not less than 50% of the Investor Interest of the related Series, and (ii) as a
result the interests of the Certificateholders are materially and adversely
affected, and continue to be materially and adversely affected during such
period, then the Trustee or Certificateholders holding not less than 50% of the
Investor Interest may give notice to the Transferor (and to the Trustee in the
latter instance) declaring that a Pay Out Event has occurred, thereby commencing
the Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period.
The Transferor has made in the Agreement, representations and warranties to
the Trust relating to the Receivables in the Trust to the effect, among other
things, that (a) as of the Closing Date of the initial Series of Certificates
issued by the Trust, each of the Receivables then existing is an Eligible
Receivable and (b) as of the date of creation of any new Receivable, such
Receivable is an Eligible Receivable, and the representation and warranty set
forth in clause (b) in the immediately following paragraph is true and correct
with respect to such Receivable. In the event (i) of a breach of any
representation and warranty set forth in this paragraph within 60 days, or such
longer period as may be agreed to by the Trustee, of the earlier to occur of the
discovery of such breach by the Transferor or Servicer or receipt by the
Transferor of written notice of such breach given by the Trustee, or, with
respect to certain breaches relating to prior liens, immediately upon the
earlier to
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occur of such discovery or notice and (ii) that as a result of such breach, the
Receivables in the related Accounts are charged off as uncollectible, the
Trust's rights in, to or under the Receivables or its proceeds are impaired or
the proceeds of such Receivables are not available for any reason to the Trust
free and clear of any lien (except for certain tax, governmental and other
nonconsensual liens), the Transferor shall accept reassignment of each Principal
Receivable as to which such breach relates (an "Ineligible Receivable") on the
terms and conditions set forth below; provided, however, that no such
reassignment shall be required to be made with respect to such Ineligible
Receivable if, on any day within the applicable period (or such longer period as
may be agreed to by the Trustee), the representations and warranties with
respect to such Ineligible Receivable shall then be true and correct in all
material respects. The Transferor shall accept reassignment of each such
Ineligible Receivable by directing the Servicer to deduct the amount of each
such Ineligible Receivable from the aggregate amount of Principal Receivables
used to calculate the Transferor Interest. In the event that the exclusion of an
Ineligible Receivable from the calculation of the Transferor Interest would
cause the Transferor Interest to be a negative number, on the date of
reassignment of such Ineligible Receivable the Transferor shall make a deposit
in the Principal Account in immediately available funds in an amount equal to
the amount by which the Transferor Interest would be reduced below zero. Any
such deduction or deposit shall be considered a repayment in full of the
Ineligible Receivable. The obligation of the Transferor to accept reassignment
of any Ineligible Receivable is the sole remedy respecting any breach of the
representations and warranties set forth in this paragraph with respect to such
Receivable available to the Certificateholders or the Trustee on behalf of
Certificateholders. Certificateholders will not incur any costs, direct or
indirect, relating to any such reassignment to the Transferor.
The Transferor has made in the Agreement, representations and warranties to
the Trust to the effect, among other things, that as of the Closing Date of the
initial Series of Certificates issued by the Trust (a) the Agreement constitutes
a legal, valid and binding obligation of the Transferor and (b) the transfer of
Receivables by it to the Trust under the Agreement constitutes either a valid
transfer and assignment to the Trust of all right, title and interest of the
Transferor in and to the Receivables, whether then existing or thereafter
created and the proceeds thereof (including amounts in any of the accounts
established for the benefit of Certificateholders) or the grant of a first
priority perfected security interest in such Receivables (except for certain
tax, governmental and other nonconsensual liens) and the proceeds thereof
(including amounts in any of the accounts established for the benefit of
Certificateholders), which is effective as to each such Receivable upon the
creation thereof. In the event of a breach of any of the representations and
warranties described in this paragraph, either the Trustee or the Holders of
Certificates evidencing undivided interests in the Trust aggregating more than
50% of the aggregate Investor Interest of all Series outstanding under the Trust
may direct the Transferor to accept reassignment of the Trust Portfolio within
60 days of such notice, or within such longer period specified in such notice.
The Transferor will be obligated to accept reassignment of such Receivables on a
Distribution Date occurring within such applicable period. Such reassignment
will not be required to be made, however, if at any time during such applicable
period, or such longer period, the representations and warranties shall then be
true and correct in all material respects. The deposit amount for such
reassignment will be equal to the Investor Interest and Enhancement Invested
Amount or the Collateral Interest, if any, for each Series outstanding under the
Trust on the last day of the Monthly Period preceding the Distribution Date on
which the reassignment is scheduled to be made less the amount, if any,
previously allocated for payment of principal to such Certificateholders or such
holders of the Enhancement Invested Amount or the Collateral Interest, if any,
on such Distribution Date, plus an amount equal to all accrued and unpaid
interest less the amount, if any, previously allocated for payment of such
interest on such Distribution Date. The payment of the reassignment deposit
amount and the transfer of all other amounts deposited for the preceding month
in the Distribution Account will be considered a payment in full of the Investor
Interest and the Enhancement Invested Amount or the Collateral Interest, if any,
for each such Series required to be repurchased and will be distributed upon
presentation and surrender of the Certificates for each such Series. If the
Trustee or
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Certificateholders give a notice as provided above, the obligation of the
Transferor to make any such deposit will constitute the sole remedy respecting a
breach of the representations and warranties available to the Trustee or such
Certificateholders. Certificateholders will not incur any costs, direct or
indirect, related to the reassignment of the Trust Portfolio to the Transferor.
An "Eligible Account" will be defined to mean, as of the relevant Cut-Off
Date (or, with respect to Additional Accounts, as of their date of designation
for inclusion in the Trust), each Account owned by the applicable Transferor (a)
which was in existence and maintained with such Transferor, (b) which is payable
in United States dollars, (c) the customer of which has provided, as his most
recent billing address, an address located in the United States or its
territories or possessions, (d) which has not been classified by such Transferor
as cancelled, counterfeit, bankrupt, fraudulent, stolen or lost and (e) which
has not been charged off by such Transferor in its customary and usual manner
for charging off such Account as of the Cut-Off Date and, with respect to
Additional Accounts, as of their date of designation for inclusion in the Trust.
Under the Agreement, the definition of Eligible Account may be changed by
amendment to the Agreement without the consent of the related Certificateholders
if (i) each of the related Transferors delivers to the Trustee a certificate of
an authorized officer to the effect that, in the reasonable belief of such
Transferors, such amendment will not as of the date of such amendment adversely
affect in any material respect the interest of such Certificateholders, and (ii)
such amendment will not result in a withdrawal or reduction of the rating of any
outstanding Series under the Trust.
An "Eligible Receivable" will be defined to mean each Receivable (a) which
has arisen under an Eligible Account, (b) which was created in compliance, in
all material respects, with all requirements of law applicable to the Transferor
that transferred such Receivable to the Trust, and pursuant to a credit card
agreement which complies in all material respects with all requirements of law
applicable to such Transferor, (c) with respect to which all consents, licenses
or authorizations of, or registrations with, any governmental authority required
to be obtained or given by such Transferor in connection with the creation of
such Receivable or the execution, delivery, creation and performance by such
Transferor of the related credit card agreement have been duly obtained or given
and are in full force and effect as of the date of the creation of such
Receivable, (d) as to which, at the time of its creation, such Transferor or the
Trust had good and marketable title free and clear of all liens and security
interests arising under or through such Transferor (other than certain tax liens
for taxes not then due or which such Transferor is contesting), (e) which is the
legal, valid and binding payment obligation of the obligor thereon, legally
enforceable against such obligor in accordance with its terms (with certain
bankruptcy-related exceptions) and (f) which constitutes an "account" or a
"general intangible" under Article 9 of the applicable Uniform Commercial Code.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, it will not be required or anticipated that the Trustee
will make any initial or periodic general examination of the Receivables or any
records relating to the Receivables for the purpose of establishing the presence
or absence of defects, compliance with the Transferor's representations and
warranties or for any other purpose. However, the Servicer will, with respect to
the Trust, deliver to the Trustee on or before March 31 of each year (or such
other date specified in the related Prospectus Supplement) an opinion of counsel
with respect to the validity of the security interest of the Trust in and to the
Receivables and certain other components of the Trust.
ADDITION OF TRUST ASSETS
As described above under "The Receivables," the Transferor will have the
right to designate for the Trust, from time to time, additional Accounts to be
included as Accounts with respect to the Trust ("Designated Additional
Accounts"). In addition, the Transferor will be required to include Designated
Additional Accounts under the circumstances and in the amounts specified in the
related Prospectus Supplement. The Transferor will convey to the Trust its
interest in all Receivables of such Designated Additional Accounts, whether such
Receivables are then existing or thereafter created. This feature permits the
Transferor to increase the amount of Principal Receivables in the Trust over the
amount that would otherwise be included, thereby permitting the issuance of
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additional Series or avoiding the occurrence of certain Pay Out Events with
respect to existing Series. Certificateholders will not incur any costs, direct
or indirect, as a result of the exercise of this feature.
The Transferor may from time to time, at its sole discretion, designate
that all Eligible Accounts arising in the Identified Pool (or a specified
portion thereof) during a specified period be included as Accounts ("Automatic
Additional Accounts"), subject to the limitations specified in this paragraph.
Unless each Rating Agency otherwise consents, no Automatic Additional Accounts
may be designated for addition to the Trust if the number of Automatic
Additional Accounts plus the number of Designated Additional Accounts added
voluntarily as specified above, without prior Rating Agency approval, shall (i)
with respect to any three consecutive Monthly Periods, exceed 15% of the number
of Accounts at the end of the ninth Monthly Period preceding the commencement of
such three Monthly Periods (or, the Cut-Off Date, whichever is later) or (ii)
with respect to any twelve Monthly Periods, exceed 20% of the number of Accounts
as of the first day of such twelve Monthly Periods (or, the related Cut-Off
Date, whichever is later) (the "Aggregate Addition Limit"). If the Transferor or
any Additional Transferor includes Automatic Additional Accounts in the Trust,
in each calendar quarter on or before March 31, June 30, September 30 and
December 31 of each calendar year beginning after the initial inclusion of
Automatic Additional Accounts, or more frequently if required by any Rating
Agency, the Transferor shall deliver to the Trustee and each Rating Agency an
opinion of outside counsel with respect to the Automatic Additional Accounts
included as Accounts during the preceding three-month period confirming the
validity and perfection of each transfer of such Automatic Additional Accounts.
If such opinion of counsel with respect to any Automatic Additional Accounts is
not so received, the ability of the Transferor and any Additional Transferor to
designate Automatic Additional Accounts will be suspended until such time as
each Rating Agency otherwise consents in writing or such Accounts are removed
from the Trust. The Transferors may only include as Automatic Additional
Accounts revolving credit card accounts either (i) originated by the Transferor,
any Additional Transferor or any affiliate of the Transferor or any Additional
Transferor and (ii) of a type previously included as Accounts. Additions of
Participations must also comply with such conditions. Automatic Additional
Accounts and Designated Additional Accounts relating to any Addition are
collectively referred to herein as "Additional Accounts."
The applicable Transferor will represent that each Additional Account is an
Eligible Account at the time of its designation. However, Additional Accounts
may not be of the same credit quality as the initial Accounts. Additional
Accounts may have been originated by the Transferor using credit criteria
different from those which were applied by the Transferor to the initial
Accounts or may have been acquired by the Transferor from an institution which
may have had different credit criteria.
If so specified in the Prospectus Supplement relating to a Series, in
addition to or in lieu of Additional Accounts, the Transferor under the
Agreement is permitted to add to the Trust, participations representing
undivided interests in a pool of assets primarily consisting of receivables
arising under consumer revolving credit card accounts owned by the Transferor
and collections thereon ("Participations"). Participations may be evidenced by
one or more certificates of ownership issued under a separate pooling and
servicing agreement or similar agreement (a "Participation Agreement") entered
into by the Transferor which entitles the certificateholder to receive
percentages of collections generated by the pool of assets subject to such
Participation Agreement from time to time and to certain other rights and
remedies specified therein. Participations may have their own credit
enhancement, pay out events, servicing obligations and servicer defaults, all of
which are likely to be enforceable by a separate trustee under the Participation
Agreement and may be different from those specified herein. The rights and
remedies of the Trust as the holder of a Participation (and therefore the
Certificateholders) will be subject to all the terms and provisions of the
related Participation Agreement. To the extent that such Participations
encompass previously issued credit-card or other asset-backed securities, such
securities (i) either will have been previously registered under the Securities
Act or will have been held for the "holding period" prescribed by Rule 144(k)
under the Securities Act and (ii) will have been acquired in a bona fide
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secondary market transaction, rather than from the issuer thereof or one of such
issuer's affiliates, or such securities will have otherwise been acquired in
compliance with the Securities Act. The Agreement may be amended to permit the
addition of a Participation in the Trust without the consent of the related
Certificateholders if (i) the Transferor delivers to the Trustee a certificate
of an authorized officer to the effect that, in the reasonable belief of the
Transferor, such amendment will not as of the date of such amendment adversely
affect in any material respect the interest of such Certificateholders, and (ii)
such amendment will not result in a withdrawal or reduction of the rating of any
outstanding Series under the Trust.
A conveyance by the Transferor to the Trust of Receivables in Additional
Accounts or Participations is subject to the following conditions, among others
(provided, that the following conditions (other than the delivery of a written
assignment as described in clause (ii) and the making of representations and
warranties in clause (iii)) shall not apply to the transfer to the Trust of
Receivables in Automatic Additional Accounts): (i) the Transferor shall give the
Trustee, each Rating Agency and the Servicer written notice that such Additional
Accounts or Participations will be included, which notice shall specify the
approximate aggregate amount of the Receivables or interests therein to be
transferred; (ii) the Transferor shall have delivered to the Trustee a written
assignment (including an acceptance by the Trustee on behalf of the Trust for
the benefit of the Certificateholders) as provided in the Agreement relating to
such Additional Accounts or Participations (the "Assignment") and, the
Transferor shall have delivered to the Trustee a computer file or microfiche
list on the date of such Assignment, containing a true and complete list of such
Additional Accounts (other than Automatic Additional Accounts) or
Participations; (iii) the Transferor shall make certain representations and
warranties that (x) each Additional Account is, as of its date of designation
for inclusion in the Trust, an Eligible Account, and each Receivable in such
Additional Account is, as of its date of designation for inclusion in the Trust,
an Eligible Receivable, (y) no selection procedures believed by the Transferor
to be materially adverse to the interests of the related Certificateholders were
utilized in selecting the Additional Accounts from the available Eligible
Accounts from the Identified Pool, and (z) as of the Addition Date, the
Transferor or the applicable Additional Transferor, as the case may be, is not
insolvent; (iv) the Transferor shall deliver certain opinions of counsel with
respect to the transfer of the Receivables in the Additional Accounts or the
Participations to the Trust and (v) under certain circumstances with respect to
Additional Accounts, and in all cases with respect to Participations, the
Transferor shall have received notice from each Rating Agency then rating any
Series of Certificates outstanding under the Trust that the addition of such
Additional Accounts or Participations will not result in the reduction or
withdrawal of its then existing rating of any Series of Certificates outstanding
under the Trust.
In addition to the periodic reports otherwise required to be filed by the
Servicer with the Commission pursuant to the Exchange Act, the Servicer intends
to file, on behalf of the Trust, a Report on Form 8-K with respect to any
addition to the Trust of Receivables in Additional Accounts or Participations
that would have a material effect on the composition of the assets of the Trust.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding sentence, the
Transferor may, but shall not be obligated to, designate from time to time
(which may be restricted to certain periods if so specified in the related
Prospectus Supplement) certain Accounts to be Removed Accounts, all Receivables
in which shall be subject to deletion and removal from the Trust. This feature
is intended to permit the Transferor to obtain unencumbered ownership of
Receivables not needed to support any Series of Certificates. Certificateholders
will not incur any cost, direct or indirect, as a result of the exercise of this
feature. The Transferor will be permitted to designate and require reassignment
to it of the Receivables from Removed Accounts only upon satisfaction of the
following conditions: (i) the removal of any Receivables of any Removed Accounts
shall not, in the reasonable belief of the Transferor, cause a Pay Out Event to
occur; (ii) the Transferor shall have
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delivered to the Trustee for execution a written assignment and a computer file
or microfiche list containing a true and complete list of all Removed Accounts
identified by account number and the aggregate amount of the Receivables in such
Removed Accounts; (iii) none of (a) the Receivables are more than 15% delinquent
by estimated principal amount and the weighted average delinquency of such
Receivables does not exceed 60 days, (b) the Receivables are more than 7%
delinquent by estimated principal balance and the weighted average delinquency
of such Receivables does not exceed 90 days or (c) the Receivables are more than
the specified percentage delinquent by estimated principal amount and the
weighted average delinquency of such Receivables does not exceed the number of
days specified in the related Prospectus Supplement; (iv) the Transferor shall
represent and warrant that no selection procedures believed by the Transferor to
be materially adverse to the interests of the holders of any Series of
Certificates outstanding under the Trust were utilized in selecting the Removed
Accounts to be removed from the Trust; (v) each Rating Agency then rating each
Series of Certificates outstanding under the Trust shall have received notice of
such proposed removal of Accounts and the Transferor shall have received notice
from each such Rating Agency that such proposed removal will not result in a
downgrade of its then-current rating for any such Series; (vi) the aggregate
amount of Principal Receivables of the Accounts then existing less the aggregate
amount of Principal Receivables of the Removed Accounts shall not be less than
the amount, if any, specified for any period specified; (vii) the Principal
Receivables of the Removed Accounts shall not equal or exceed 5% (or such other
percentage specified in the related Prospectus Supplement) of the aggregate
amount of the Principal Receivables in the Trust at such time; provided,
however, that if any Series has been paid in full, the Principal Receivables in
such Removed Accounts may equal or approximately equal the Investor Interest as
of the last day of the Revolving Period or Full Investor Interest, as
applicable, of such Series; (viii) such other conditions as are specified in the
related Prospectus Supplement; and (ix) the Transferor shall have delivered to
the Trustee an officer's certificate confirming the items set forth in clauses
(i) through (viii) above. Notwithstanding the above, the Transferor will be
permitted to designate as a Removed Account, without the consent of the Trustee,
Certificateholders or Rating Agencies, any Account that has a zero balance and
which the Transferor will remove from its computer file.
COLLECTION AND OTHER SERVICING PROCEDURES
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the Servicer's
policies and procedures for servicing credit card receivables comparable to the
Receivables. The Servicer will be required to maintain, or cause to be
maintained, fidelity bond coverage insuring against losses through wrongdoing of
its officers and employees who are involved in the servicing of credit card
receivables covering such actions and in such amounts as the Servicer believes
to be commercially reasonable from time to time.
DISCOUNT OPTION
The Transferor may at any time designate a specified fixed or variable
percentage (the "Discount Percentage") of the amount of Receivables arising in
certain Additional Accounts, if any, designated on or prior to the related
Addition Date with respect to the Trust on and after the date such option is
exercised that otherwise would have been treated as Principal Receivables to be
treated as Finance Charge Receivables. Such designation will become effective
upon satisfaction of the requirements set forth in the Agreement, including
written confirmation by each Rating Agency of its then current rating on each
outstanding Series of the Trust. On the date of processing of any collections,
the product of the Discount Percentage and collections of Receivables that arise
in the Accounts on such day on or after the date such option is exercised that
otherwise would be Principal Receivables will be deemed collections of Finance
Charge Receivables and will be applied accordingly, unless otherwise provided in
the related Prospectus Supplement. Such feature is intended to permit the
Transferor to increase the Portfolio Yield and thereby decrease the risk of the
occurrence of a Pay Out Event.
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TRUST ACCOUNTS
The Trustee will establish and maintain in the name of the Trust two
separate accounts in a segregated trust account (which need not be a deposit
account), a "Finance Charge Account" and a "Principal Account," for the benefit
of the Certificateholders of all related Series, including any Series offered
pursuant to this Prospectus. The Agreement provides that the Trustee shall have
the power to establish series accounts in Series Supplements, including an
Interest Funding Account, a Principal Funding Account, a Pre-Funding Account or
such other account specified in the related Series Supplement, each of which
series accounts shall be held for the benefit of the Certificateholders of the
related Series and for the purposes set forth in the related Prospectus
Supplement. The Trustee will also establish a "Distribution Account" (a
non-interest bearing segregated demand deposit account established with a
Qualified Institution other than the Transferor). The Servicer will establish
and maintain, in the name of the Trustee, on behalf of the Trust, for the
benefit of Certificateholders of all Series issued thereby including any Series
offered pursuant to this Prospectus, a Collection Account, which will be a
non-interest bearing segregated account established and maintained with the
Servicer or with a "Qualified Institution," defined as a depository institution
or trust company, which may include the Trustee, organized under the laws of the
United States or any one of the states thereof (including the District of
Columbia), which at all times has a short-term unsecured debt rating of P-1 by
Moody's Investors Service, Inc. ("Moody's"), A-1+ by Standard & Poor's Ratings
Services ("Standard & Poor's") and F-1 by Fitch IBCA, Inc. ("Fitch") (if then
rated by Fitch) or, if such depository institution shall have corporate trust
powers and shall maintain the Trust account as a fully segregated trust account
with the trust department, a long-term unsecured debt obligation rating of Baa3
by Moody's or a depository institution, which may include the Trustee, which is
acceptable to the Rating Agencies. Funds in the Principal Account and the
Finance Charge Account for the Trust will be invested, at the direction of the
Servicer, in (i) obligations of or fully guaranteed by the United States of
America, (ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies, the certificates of deposit or
short-term deposits of which have the highest rating from Fitch (if rated by
Fitch), Moody's and Standard & Poor's, (iii) commercial paper, bank notes or any
other debt obligation having, at the time of the Trust's investment, a rating in
the highest rating category from Fitch (if rated by Fitch), Moody's and Standard
& Poor's, (iv) bankers' acceptances issued by any depository institution or
trust company described in clause (ii) above and certain repurchase agreements
transacted with either (a) an entity subject to the United States federal
bankruptcy code or (b) a financial institution insured by the FDIC or any
broker-dealer with "retail customers" that is under the jurisdiction of the
Securities Investors Protection Corporation and (v) any other investment if the
Rating Agency confirms in writing that such investment will not adversely affect
its then current rating or ratings, if any, of the Certificates then
outstanding, provided, that such investment will not cause the Trust to be
treated as an investment company within the meaning of the Investment Company
Act of 1940, as amended (such investments, "Permitted Investments"). Any
earnings (net of losses and investment expenses) on funds in the Finance Charge
Account or the Principal Account will be paid to the Transferor or used for
another purpose if specified in the related Prospectus Supplement. Funds in any
other series account established by a Series Supplement may be invested in
Permitted Investments or otherwise as provided in the related Prospectus
Supplement. The Servicer will have the revocable power to withdraw funds from
the Collection Account and to instruct the Trustee to make withdrawals and
payments from the Finance Charge Account and the Principal Account for the
purpose of carrying out the Servicer's duties under the Agreement. The Trustee
will initially be the paying agent and will have the revocable power to withdraw
funds from the Distribution Account for the purpose of making distributions to
the Certificateholders.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, the Pre-Funding Amount will be held in a
Pre-Funding Account pending the transfer
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of additional Receivables to the Trust or pending the reduction of the Investor
Interests or the Adjusted Investor Interests of other Series issued by the
Trust. The related Prospectus Supplement will specify the initial Investor
Interest with respect to such Series, the Full Investor Interest and the date by
which the Investor Interest is expected to equal the Full Investor Interest. The
Investor Interest will increase as Receivables are delivered to the Trust or as
the Investor Interests or the Adjusted Investor Interests of other Series of the
Trust are reduced. The Investor Interest may also decrease due to Investor
Charge-Offs or the occurrence of a Pay Out Event with respect to such Series as
provided in the related Prospectus Supplement. See "-- Addition of Trust
Assets." This feature is intended to permit the Transferor to issue a new Series
of Certificates at an opportune time, if the Investor Interests or Adjusted
Investor Interests of existing Series are expected to be reduced or additional
Receivables are expected to be included in the Trust at a subsequent time.
Certificateholders will not incur any costs, direct or indirect, as a result of
the exercise of this feature. If the Investor Interest does not equal the Full
Investor Interest by the end of the Funding Period, Certificateholders of the
affected Series will receive principal repayments prior to the expected date of
receipt. See "Risk Factors -- Prepayment Risks Connected with a Pre-Funding
Account." Any designation of Additional Accounts (or Participations) during the
Funding Period will be subject to the same conditions and protections applicable
at any other time.
During the Funding Period, funds on deposit in the Pre-Funding Account for
a Series of Certificates will be withdrawn and paid to the Transferor to the
extent of any increases in the Investor Interest. In the event that the Investor
Interest does not for any reason equal the Full Investor Interest by the end of
the Funding Period, any amount remaining in the Pre-Funding Account and any
additional amounts specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the related Prospectus Supplement. Such payment will reduce the
aggregate principal amount of such Certificates. In addition, if so specified in
the related Prospectus Supplement, a prepayment premium or penalty or similar
amount may be payable to the Certificateholders of such Series.
Monies in the Pre-Funding Account will be invested by the Trustee in
Permitted Investments and, if so specified in the related Prospectus Supplement,
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Pre-Funding Account during the
related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Finance Charge
Account for distribution in respect of interest on the Certificates of the
related Series in the manner specified in the related Prospectus Supplement.
INVESTOR PERCENTAGE AND TRANSFEROR PERCENTAGE
For the Trust, the Servicer will allocate between the Investor Interest of
each Series issued and outstanding by the Trust (and among each outstanding
Class of each Series) and the Transferor Interest, and, in certain
circumstances, the interest of certain Credit Enhancement Providers, all amounts
collected on Finance Charge Receivables, all amounts collected on Principal
Receivables and all Receivables in Defaulted Accounts. The Servicer will make
each allocation by reference to the applicable Investor Percentage of each
Series and the Transferor Percentage, and, in certain circumstances, the
percentage interest of certain Credit Enhancement Providers (the "Credit
Enhancement Percentage") with respect to such Series. The Prospectus Supplement
relating to a Series specifies the Investor Percentage and, if applicable, the
Credit Enhancement Percentage (or the method of calculating such percentages)
with respect to the allocations of collections of Principal Receivables, Finance
Charge Receivables and Receivables in Defaulted Accounts during the Revolving
Period, any Amortization Period and any Accumulation Period, as applicable. In
addition, for each Series of Certificates having more than one Class, the
related Prospectus Supplement specifies the method of allocation between each
Class.
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The Transferor Percentage will, in all cases, be equal to 100% minus the
aggregate Investor Percentages and, if applicable, the Credit Enhancement
Percentages, for all Series then outstanding.
APPLICATION OF COLLECTIONS
Except as otherwise provided below, the Servicer will deposit into the
Collection Account for the Trust no later than the second business day (or such
other day specified in the related Prospectus Supplement) following the date of
processing, any payment collected by the Servicer on the Receivables. On the
same day as any such deposit is made, the Servicer will make the deposits and
payments to the accounts and parties as indicated below; provided, however, that
for as long as Bank of America remains the Servicer under the Agreement, and
(a)(i) the Servicer provides to the Trustee a letter of credit (or other credit
support) covering risk collection of the Servicer and (ii) the Transferor shall
have received a notice from each Rating Agency that such letter of credit would
not result in the lowering of such Rating Agency's then-existing rating of the
related Series (and if the Trust has issued more than one series, any Series of
certificates previously-issued and then-outstanding thereunder), or (b) the
Servicer has and maintains a certificate of deposit or short-term deposit rating
of P-1 by Moody's and of A-1 by Standard & Poor's and deposit insurance provided
by the FDIC, then the Servicer may make such deposits and payments on a monthly
or other periodic basis on the Transfer Date in an amount equal to the net
amount of such deposits and payments which would have been made had the
conditions of this proviso not applied.
Notwithstanding anything in the Agreement to the contrary, whether the
Servicer is required to make monthly or daily deposits from the Collection
Account into the Finance Charge Account, the Principal Account or any applicable
series account, with respect to any Monthly Period, (i) the Servicer will only
be required to deposit collections from the Collection Account into the Finance
Charge Account, the Principal Account or any series account established by a
related Series Supplement up to the required amount to be deposited into any
such deposit account or, without duplication, distributed on or prior to the
related Distribution Date to Certificateholders or to the provider of
Enhancement and (ii) if at any time prior to such Distribution Date the amount
of collections deposited in the Collection Account exceeds the amount required
to be deposited pursuant to clause (i) above, the Servicer will be permitted to
withdraw the excess from the Collection Account.
The Servicer will withdraw the following amounts, in the priority
indicated, from the Collection Account for application as indicated unless the
related Prospectus Supplement specifies otherwise:
(a) an amount equal to the Transferor Percentage of the aggregate
amount of such deposits in respect of Principal Receivables and Finance
Charge Receivables, respectively, will be paid or held for payment to the
holder of the Transferor Certificate, or, if applicable, the holder of any
Supplemental Certificate;
(b) an amount equal to the applicable Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge Receivables
will be deposited into the Finance Charge Account for allocation and
distribution as described in the related Prospectus Supplement;
(c) during the Revolving Period, an amount equal to the applicable
Investor Percentage of the aggregate amount of such deposits in respect of
Principal Receivables will be paid or held for payment to the holder of the
Transferor Certificate, provided that if after giving effect to the
inclusion in the Trust of all Receivables on or prior to such date of
processing and the application of payments referred to in paragraph (a)
above the Transferor Interest is reduced to zero, the excess will be
deposited in the Principal Account or other specified account and will be
used as described in the related Prospectus Supplement, including for
payment to other Series of Certificates issued by the Trust;
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(d) during the Controlled Amortization Period, Controlled Accumulation
Period or Rapid Accumulation Period, as applicable, an amount equal to the
applicable Investor Percentage of such deposits in respect of Principal
Receivables up to the amount, if any, as specified in the related
Prospectus Supplement will be deposited in the Principal Account or
Principal Funding Account, as applicable, for allocation and distribution
to Certificateholders as described in the related Prospectus Supplement,
provided that if collections of Principal Receivables exceed the principal
payments which may be allocated or distributed to Certificateholders, the
amount of such excess will be paid to the holder of the Transferor
Certificate until the Transferor Interest is reduced to zero, and
thereafter will be deposited in the Principal Account or other specified
account and will be used as described in the related Prospectus Supplement,
including for payment to other Series of Certificates issued by the Trust;
and
(e) during the Principal Amortization Period, if applicable, and the
Rapid Amortization Period, an amount equal to the applicable Investor
Percentage of such deposits in respect of Principal Receivables will be
deposited into the Principal Account for application and distribution as
provided in the related Prospectus Supplement.
In the case of a Series of Certificates having more than one Class, the
amounts in the Collection Account will be allocated and applied to each Class in
the manner and order of priority described in the related Prospectus Supplement.
Any amounts collected in respect of Principal Receivables and not paid to
the Transferor because the Transferor Interest is zero as described above (with
respect to each Series, "Unallocated Principal Collections"), together with any
adjustment payments as described above under "-- Representations and Warranties"
and below under "-- Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs," will be paid to and held in the Principal Account and
paid to the Transferor if and to the extent that the Transferor Interest is
equal to or greater than zero. If an Amortization Period or Accumulation Period
has commenced, Unallocated Principal Collections will be held for distribution
to the Certificateholders on the related Distribution Date or accumulated for
distribution on the Scheduled Payment Date, as applicable, and distributed to
the Certificateholders of each Class or held for and distributed to the
Certificateholders of other Series of Certificates issued by the Trust in the
manner and order of priority specified in the related Prospectus Supplement.
GROUPS OF SERIES
The Agreement provides that the Transferor may create certain groups of
Series (each a "Group"). These Groups will consist of (a) a single Shared Excess
Principal Collections Group and (b) any number of Shared Excess Finance Charge
Collections Groups. The Certificates of a Series may be designated by the
Transferor to be included in the Shared Excess Principal Collections Group
and/or one of the Shared Excess Finance Charge Collections Groups. That
designation, if any, will be made by the Transferor, at its sole discretion,
prior to the issuance of each Series and if any Series is designated by the
Transferor to be included in any Group or Groups, such designation will be
provided for in the Prospectus Supplement relating to any Series of Certificates
so designated.
To the extent that a Series of Certificates is included in the Shared
Excess Principal Collections Group, Shared Excess Principal Collections with
respect to such Group will be available to such Series, as described below under
"-- Shared Excess Principal Collections" and under "Description of the
Certificates -- Shared Excess Principal Collections" in the Prospectus
Supplement relating to such Series of Certificates. To the extent that a Series
of Certificates is included in a Shared Excess Finance Charge Collections Group,
Shared Excess Finance Charge Collections with respect to such Group will be
available to such Series, as described below under "-- Shared Excess Finance
Charge Collections" and under "Description of the Certificates -- Shared Excess
Finance Charge Collections" in the Prospectus Supplement relating to such Series
of Certificates.
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SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series offered hereby may be included in a Shared Excess Finance Charge
Collections Group. The Prospectus Supplement relating to a Series specifies
whether such Series is included in a Shared Excess Finance Charge Collections
Group and identifies any previously issued Series included in such Shared Excess
Finance Charge Collections Group. If so specified in the related Prospectus
Supplement, the Certificateholders of a Series within a Shared Excess Finance
Charge Collections Group or any Class thereof may be entitled to receive all or
a portion of the Shared Excess Finance Charge Collections (as defined in the
Prospectus Supplement relating to each applicable Series) with respect to all
other Series within such Shared Excess Finance Charge Collections Group to cover
any shortfalls with respect to amounts payable from collections of Finance
Charge Receivables allocable to such Series or Class; provided, however, that
the application of Shared Excess Finance Charge Collections among any Series
within any Shared Excess Finance Charge Collections Group will cease if the
Transferor shall deliver to the Trustee a certificate of an authorized
representative to the effect that, in the reasonable belief of the Transferor,
the continued application of Shared Excess Finance Charge Collections with
respect to any applicable Shared Excess Finance Charge Collections Group would
have adverse regulatory implications with respect to the Transferor. Following
the delivery by the Transferor of any such certificate to the Trustee with
respect to any Shared Excess Finance Charge Collections Group, there will not be
any further sharing of Excess Finance Charge Collections among the Series
included in such Shared Excess Finance Charge Collections Group. In all cases,
any Shared Excess Finance Charge Collections with respect to any Shared Excess
Finance Charge Collections Group remaining after covering any shortfalls with
respect to all outstanding Series within such Shared Excess Finance Charge
Collections Group will be paid to the holder of the Transferor Certificate. The
application of Shared Excess Finance Charge Collections among the Series
included in a Shared Excess Finance Charge Collections Group permits amounts
with respect to such Series that would otherwise be payable to the holder of the
Transferor Certificate to be used for the benefit of the Series within the
related Shared Excess Finance Charge Collections Group that would otherwise
experience shortfalls, if any, in amounts payable from collections of Finance
Charge Receivables allocable to, or from Enhancement relating to, such Series.
See "-- Application of Collections" and "-- Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs."
While any Series offered hereby may be designated by the Transferor to be
included within a Shared Excess Finance Charge Collections Group, there can be
no assurance that (a) any other Series will be designated by the Transferor to
be included within the same Shared Excess Finance Charge Collections Group, (b)
there will be any Shared Excess Finance Charge Collections with respect to any
other Series within such Shared Excess Finance Charge Collections Group, (c) any
agreement relating to any Enhancement will not be amended in such a manner as to
increase payments to the providers of such Enhancement and thereby decrease the
amount of Shared Excess Finance Charge Collections available from such Series or
(d) the Transferor will not, at any time, deliver a certificate as to adverse
regulatory implications as described above. While the Transferor believes that,
based upon applicable rules and regulations as currently in effect, the
application of Shared Excess Finance Charge Collections among the Series
included within the applicable Shared Excess Finance Charge Collections Group
will not have adverse regulatory implications for it, there can be no assurance
that this will continue to be true in the future.
SHARED EXCESS PRINCIPAL COLLECTIONS
If so specified in the related Prospectus Supplement, to the extent that
collections of Principal Receivables and certain other amounts that are
allocated to the Investor Interest of any Series are not needed to make payments
or deposits with respect to such Series, such collections will constitute Shared
Excess Principal Collections and will be applied to cover principal payments due
to or for the benefit of Certificateholders of other Series. If so specified in
the related Prospectus Supplement, the allocation of Shared Excess Principal
Collections may be among Series within the
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Shared Excess Principal Collections Group. Any such reallocation will not result
in a reduction in the Investor Interest of the Series to which such collections
were initially allocated. This feature permits amounts that would otherwise be
payable to the holder of the Transferor Certificate to be used for the benefit
of Series of Certificates that would otherwise experience a shortfall or delay
in the payment of principal thereon.
While any Series offered hereby may be designated by the Transferor to be
included within the Shared Excess Principal Collections Group, there can be no
assurance that (a) any other Series will be designated by the Transferor to be
included within the Shared Excess Principal Collections Group or (b) there will
be any Shared Excess Principal Collections with respect to any other Series
within the Shared Excess Principal Collections Group.
PAIRED SERIES
If so provided in the Prospectus Supplement relating to a Series, each such
Series is subject to being paired with a Paired Series issued by the Trust. As
the Investor Interest of the Series having a Paired Series is reduced, the
Investor Interest or Adjusted Investor Interest (as defined in the related
Prospectus Supplement), as the case may be, in the Trust of the Paired Series
will increase by an equal amount. If a Pay Out Event occurs with respect to the
Series having a Paired Series or with respect to the Paired Series when the
Series is in a Controlled Amortization Period or a Controlled Accumulation
Period, the percentage used for allocating collections of Principal Receivables
for such Series and for the Paired Series will be reset as provided in the
related Prospectus Supplement. The effects of this feature will be discussed in
the Prospectus Supplement relating to a Paired Series.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
For each Series of Certificates, on or before the second business day
preceding each Transfer Date (the "Determination Date"), the Servicer will
calculate the Aggregate Investor Default Amount for the preceding Monthly
Period, which will be equal to the aggregate amount of the Investor Percentage
of Principal Receivables (other than Ineligible Receivables) in Defaulted
Accounts; that is, Accounts which in such Monthly Period were written off as
uncollectible in accordance with the Servicer's policies and procedures for
servicing credit card receivables comparable to the Receivables. In the case of
a Series of Certificates having more than one Class, the Aggregate Investor
Default Amount will be allocated among the Classes in the manner described in
the related Prospectus Supplement. If so provided in the related Prospectus
Supplement, an amount equal to the Aggregate Investor Default Amount for any
Monthly Period may be paid from other amounts, including collections in the
Finance Charge Account or from Credit Enhancement, and applied to pay principal
to Certificateholders or the holder of the Transferor Certificate, as
appropriate. In the case of a Series of Certificates having one or more Classes
of Subordinated Certificates, the related Prospectus Supplement may provide that
all or a portion of amounts otherwise allocable to such Subordinated
Certificates may be paid to the holders of Senior Certificates to make up any
Aggregate Investor Default Amount allocable to such holders of Senior
Certificates.
With respect to each Series of Certificates, the Investor Interest with
respect to such Series will be reduced by the amount of Investor Charge-Offs for
any Monthly Period. Investor Charge-Offs will be reimbursed on any Distribution
Date to the extent amounts on deposit in the Finance Charge Account and
otherwise available therefor exceed such interest, fees and any Aggregate
Investor Default Amount payable on such date. Such reimbursement of Investor
Charge-Offs will result in an increase in the Investor Interest with respect to
such Series. In the case of a Series of Certificates having more than one Class,
the related Prospectus Supplement describes the manner and priority of
allocating Investor Charge-Offs and reimbursements thereof among the Investor
Interests of the several Classes.
If the Servicer adjusts the amount of any Principal Receivable (a) because
of transactions occurring in respect of a rebate or refund to a cardholder
(including any rebates arising under a
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rebate program), (b) because such Principal Receivable was created in respect of
merchandise which was refused or returned by a cardholder or services
successfully disputed by a cardholder or (c) because such Principal Receivable
was transferred to a credit card account outside of the Trust, then the amount
of the Transferor Interest in the Trust will be reduced, on a net basis, by the
amount of the adjustment. In addition, the Transferor Interest in the Trust will
be reduced, on a net basis, as a result of transactions in respect of any
Principal Receivable which was discovered as having been created through a
fraudulent or counterfeit charge. In the event any such reduction would cause
the Transferor Interest to be a negative number, the Transferor shall make a
deposit into the Principal Account in immediately available funds in an amount
equal to the deficiency.
DEFEASANCE
If so specified in the Prospectus Supplement relating to a Series, the
Transferor may terminate its substantive obligations in respect of such Series
or the Trust by depositing with the Trustee, from amounts representing, or
acquired with, collections of Receivables, money or Permitted Investments
sufficient to make all remaining scheduled interest and principal payments on
such Series or all outstanding Series of Certificates of the Trust, as the case
may be, on the dates scheduled for such payments and to pay all amounts owing to
any Credit Enhancement Provider with respect to such Series or all outstanding
Series, as the case may be, if such action would not result in a Pay Out Event
for any Series. Prior to its first exercise of its right to substitute money or
Permitted Investments for Receivables, the Transferor will deliver to the
Trustee (i) an opinion of counsel to the effect that such deposit and
termination of obligations will not result in the Trust being required to
register as an "investment company" within the meaning of the Investment Company
Act of 1940, as amended and (ii) an Opinion of Counsel with respect to such
deposit and termination to the effect that it will not cause the Trust or any
portion thereof to be treated as an association or publicly traded partnership
taxable as a corporation. Upon any such deposit, holders of Certificates of the
affected Series could recognize taxable gain for federal income tax purposes to
the extent that the value of the related Certificate exceeds its tax basis
therein, but would in no event be allowed to deduct a taxable loss for such
purposes. See "Federal Income Tax Consequences -- Sale or Exchange of
Certificates."
FINAL PAYMENT OF PRINCIPAL; TERMINATION
With respect to each Series, the Certificates will be subject to optional
repurchase by the Transferor on any Distribution Date after the total Investor
Interest of such Series and the Enhancement Invested Amount, if any, with
respect to such Series, is reduced to an amount less than or equal to 5% of the
initial Investor Interest, if any (or such other amount specified in the related
Prospectus Supplement), if certain conditions set forth in the Agreement are
met. The repurchase price will be equal to the total Investor Interest of such
Series (less the amount, if any, on deposit in any Principal Funding Account
with respect to such Series), plus the Enhancement Invested Amount, if any, with
respect to such Series, plus accrued and unpaid interest on the Certificates and
interest or other amounts payable on the Enhancement Invested Amount or the
Collateral Interest, if any, through the day preceding the Distribution Date on
which the repurchase occurs.
The Certificates of each Series will be retired on the day following the
Distribution Date on which the final payment of principal is scheduled to be
made to the Certificateholders, whether as a result of optional reassignment to
the Transferor or otherwise. Each Prospectus Supplement specifies the final date
on which principal and interest with respect to the related Series of
Certificates will be scheduled to be distributed (the "Series Termination
Date"); provided, however, that the Certificates may be subject to prior
termination as provided above. If the Investor Interest is greater than zero on
the Series Termination Date, the Trustee or Servicer may be required to sell or
cause to be sold certain Receivables in the manner provided in the Agreement and
Series Supplement and to pay the net proceeds of such sale and any collections
on the Receivables, in an amount at least
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equal to the sum of the Investor Interest and the Enhancement Invested Amount,
if any, with respect to such Series plus accrued interest due thereon.
Unless the Servicer and the holder of the Transferor Certificate instruct
the Trustee otherwise, the Trust will terminate on the earlier of (a) the day
after the Distribution Date on which the aggregate Investor Interest and
Enhancement Invested Amount or Collateral Interest, if any, with respect to each
Series outstanding is zero, (b) June 30, 2026 or (c) if the Receivables are
sold, disposed of or liquidated following the occurrence of an Insolvency Event,
immediately following such sale, disposition or liquidation (such date, the
"Trust Termination Date"). Upon the termination of the Trust and the surrender
of the Transferor Certificate, the Trustee shall convey to the holder of the
Transferor Certificate all right, title and interest of the Trust in and to the
Receivables and other funds of the Trust.
PAY OUT EVENTS
As described above, the Revolving Period will continue through the date
specified in the related Prospectus Supplement unless a Pay Out Event occurs
prior to such date. A Pay Out Event occurs with respect to all Series issued by
the Trust upon the occurrence of any of the following events:
(a) certain events of insolvency, receivership or bankruptcy relating
to the Transferor, an Additional Transferor or another holder of the
Transferor Certificate (each, an "Insolvency Event" with respect to the
related Transferor);
(b) the Transferor or any Additional Transferor is unable for any
reason to transfer Receivables to the Trust in accordance with the
provisions of the Agreement; or
(c) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In addition, a Pay Out Event may occur with respect to any Series upon the
occurrence of any other event specified in the related Prospectus Supplement. On
the date on which a Pay Out Event is deemed to have occurred, the Rapid
Amortization Period or, if so specified in the related Prospectus Supplement,
the Rapid Accumulation Period will commence. If, because of the occurrence of a
Pay Out Event, the Rapid Amortization Period begins earlier than the scheduled
commencement of an Amortization Period or prior to a Scheduled Payment Date,
Certificateholders will begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the average life of the
Certificates.
In addition to the consequences of a Pay Out Event discussed above, if a
conservator or receiver were appointed for the Transferor, an Additional
Transferor or another holder of the Transferor Certificate or a bankruptcy or
Insolvency Event were to occur with respect to the Transferor, an Additional
Transferor or another holder of the Transferor Certificate, on the day any such
event occurs the Transferor and any Additional Transferor will immediately cease
to transfer Principal Receivables and discount option receivables to the Trust
and promptly give notice to the Trustee of such event and the Agreement and the
Trust shall terminate, subject to the liquidation, winding-up and dissolution
procedures described in the Agreement. Within 15 days, the Trustee will publish
a notice of the termination of the Trust and the liquidation or the appointment
stating that the Trustee intends to sell, dispose of, or otherwise liquidate the
Receivables in a commercially reasonable manner. Unless otherwise instructed
within a specified period by Certificateholders representing undivided interests
aggregating more than 50% of the Investor Interest of each Series (or, with
respect to any Series with more than one Class, of each Class) and the
Transferor, each Additional Transferor (other than the Transferor that is the
subject of such Insolvency Event) and each holder of an interest in the
Transferor Interest (including any holder of a Supplemental Certificate) not
subject to the appointment or Insolvency Event, and any other person designated
by the Transferor or an Additional Transferor in an officer's certificate
delivered to the Trustee prior to the Insolvency Event or specified in the
related Series Supplement, which may include any provider
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of Enhancement, to the effect that such Persons disapprove of the liquidation of
the Receivables and wish to reconstitute the Trust pursuant to the terms of the
Agreement (as amended in connection with such reconstitution), the Trustee will
promptly sell, dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms. If the
Trustee is instructed not to liquidate the Receivables as described in the
preceding sentence, the Trustee will retain the Receivables and apply
collections thereon in accordance with the Agreement. The proceeds from the
sale, disposition or liquidation of the Receivables and any Participation will
be immediately deposited in the related Collection Account and allocated as
specified above in "-- Application of Collections" and in the related Prospectus
Supplement. The foregoing provisions have been included in the Agreement for
reasons related to the possible treatment of the Trust as a partnership for
federal income tax purposes. The IRS has issued proposed regulations that, if
adopted as final regulations, would make the foregoing provisions unnecessary.
The amendment provisions of the Agreement, therefore, allow the Trustee and the
Servicer to amend the Agreement, without the consent of any of the
Certificateholders, to eliminate such provisions upon (i) the adoption of final
regulations whose applicable provisions are substantially the same as the
corresponding provisions of the proposed regulations and (ii) the receipt of an
opinion that the deletion of such provisions will not adversely affect the
ability of the Trust to be characterized as a partnership for federal income tax
purposes. The rights of Certificateholders to vote on whether to continue or
dissolve the Trust (or any Series thereof) upon the insolvency of the Transferor
could therefore be eliminated without Certificateholders having any right to
prevent such elimination.
If the only Pay Out Event to occur is either the insolvency of the
Transferor or an Additional Transferor or the appointment of a conservator or
receiver for the Transferor or an Additional Transferor, the conservator or
receiver may have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of a Rapid Amortization
Period or, if applicable with respect to a Series as specified in the related
Prospectus Supplement, a Rapid Accumulation Period. In addition, a conservator
or receiver may have the power to cause the early sale of the Receivables and
the early retirement of the Certificates. See "Risk Factors -- Insolvency or
Bankruptcy of Transferor or Other Holder of Transferor Certificate" and "Certain
Legal Aspects of the Receivables -- Certain Matters Relating to Receivership."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
For each Series of Certificates, the Servicer's compensation for its
servicing activities and reimbursement for its expenses will take the form of
the payment to it of the Servicing Fee payable at the times and in the amounts
specified in the related Prospectus Supplement. The portion of the Servicing Fee
allocated to the Certificates of each Series will be funded from collections of
Finance Charge Receivables allocated to the related Investor Interest and will
be paid each month, or on such other specified periodic basis, from amounts so
allocated and on deposit in the Finance Charge Account (which, if so specified
in the related Prospectus Supplement, may include all or a portion of the
Interchange arising from the Accounts) or, in certain limited circumstances,
from amounts available from Enhancement and other sources, if any. The remainder
of the servicing fee for the Trust will be allocable to the Transferor Interest,
the Investor Interests of any other Series issued by the Trust and the interest
represented by the Enhancement Invested Amount or the Collateral Interest, if
any, with respect to such Series, as described in the related Prospectus
Supplement. Neither the Trust nor the related Certificateholders will have any
obligation to pay the portion of the servicing fee allocable to the Transferor
Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and independent
certified public accountants and other fees which are not expressly stated in
the Agreement to be payable by the Trust or the related Certificateholders other
than federal, state and local income and franchise taxes, if any, of the Trust.
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CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
With respect to each Series of Certificates, the Servicer may not resign
from its obligations and duties under the Agreement, except upon determination
that performance of its duties is no longer permissible under applicable law. No
such resignation will become effective until the Trustee or a successor to the
Servicer has assumed the Servicer's responsibilities and obligations under the
Agreement.
The Agreement provides that the Servicer will indemnify the Trust and
Trustee from and against any reasonable loss, liability, expense, damage or
injury suffered or sustained by reason of any acts or omissions or alleged acts
or omissions of the Servicer with respect to the activities of the Trust or
Trustee; provided, however, that the Servicer shall not indemnify (a) the
Trustee for liabilities imposed by reason of fraud, negligence, or willful
misconduct by the Trustee in the performance of its duties under the Agreement,
(b) the Trust, the Certificateholders or the Certificate Owners for liabilities
arising from actions taken by the Trustee at the request of Certificateholders,
(c) the Trust, the Certificateholders or the Certificate Owners for any losses,
claims, damages or liabilities incurred by any of them in their capacities as
investors, including without limitation, losses incurred as a result of
defaulted Accounts or Receivables which are written off as uncollectible, or (d)
the Trust, the Certificateholders or the Certificate Owners for any liabilities,
costs or expenses of the Trust, the Certificateholders or the Certificate Owners
arising under any tax law, including without limitation, any federal, state or
local income or franchise tax or any other tax imposed on or measured by income
(or any interest or penalties with respect thereto or arising from a failure to
comply therewith) required to be paid by the Trust, the Certificateholders or
the Certificate Owners in connection with the Agreement to any taxing authority.
In addition, the Agreement provides that, subject to certain exceptions,
the Transferor will agree to be liable to an injured party for any losses,
claims, damages or liabilities (other than those incurred by a Certificateholder
as an investor in the Certificates) arising out of or based upon each of the
arrangements created by the Agreement and the actions of the Servicer as though
the Agreement created a partnership under the New York Uniform Partnership Act
in which the Transferor is a general partner.
The Agreement provides that neither the Transferor nor the Servicer nor any
of their respective directors, officers, employees or agents will be under any
other liability to the Trust, Trustee, Certificateholders or any other person
for any action taken, or for refraining from taking any action, in good faith
pursuant to the Agreement. Neither the Transferor, the Servicer, nor any of
their respective directors, officers, employees or agents will be protected
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence of the Transferor, the Servicer or
any such person in the performance of its duties or by reason of reckless
disregard of obligations and duties thereunder. In addition, the Agreement
provides that the Servicer is not under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability.
The Agreement provides that the Transferor may transfer its interest in all
or a portion of the Transferor Certificate, provided that prior to any such
transfer (a) the Trustee receives written notification from each Rating Agency
that such transfer will not result in a lowering of its then-existing rating of
the Certificates of each outstanding Series rated by it and (b) the Trustee
receives a written opinion of counsel confirming that such transfer would not
adversely affect the treatment of the Certificates of each outstanding Series as
debt for federal income tax purposes.
Any person into which, in accordance with the Agreement, the Transferor or
the Servicer may be merged or consolidated or any person resulting from any
merger or consolidation to which the Transferor or the Servicer is a party, or
any person succeeding to the business of the Transferor or the Servicer, upon
execution of a supplement to the Agreement and delivery of an opinion of counsel
with respect to the compliance of the transaction with the applicable provisions
of the
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Agreement, will be the successor to the Transferor or the Servicer, as the case
may be, under the Agreement.
SERVICER DEFAULT
In the event of any Servicer Default, either the Trustee or
Certificateholders representing undivided interests aggregating more than 50% of
the Investor Interests for all Series of Certificates of the Trust, by written
notice to the Servicer (and to the Trustee if given by the Certificateholders),
may terminate all of the rights and obligations of the Servicer as servicer
under the Agreement and in and to the Receivables and the proceeds thereof and
the Trustee may appoint a new Servicer (a "Service Transfer"). The rights and
interest of the Transferor under the Agreement and in the Transferor Interest
will not be affected by such termination. The Trustee shall as promptly as
possible appoint a successor Servicer. If no such successor Servicer has been
appointed and has accepted such appointment by the time the Servicer ceases to
act as Servicer, all authority, power and obligations of the Servicer under the
Agreement shall pass to and be vested in the Trustee. If the Trustee is unable
to obtain any bids from eligible servicers and the Servicer delivers an
officer's certificate to the effect that it cannot in good faith cure the
Servicer Default which gave rise to a transfer of servicing, and if the Trustee
is legally unable to act as successor Servicer, then the Trustee shall give the
Transferor the right of first refusal to acquire the Receivables on terms
equivalent to the best offer as determined by the Trustee.
"Servicer Default" under the Agreement refers to any of the following
events:
(a) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Trustee to make certain payments, transfers
or deposits, on the date the Servicer is required to do so under the
Agreement or any Series Supplement (or within the applicable grace period,
which shall not exceed 10 business days);
(b) failure on the part of the Servicer duly to observe or perform in
any respect any other covenants or agreements of the Servicer which has a
material adverse effect on the Certificateholders of any Series issued and
outstanding under the Trust and which continues unremedied for a period of
60 days after written notice and continues to have a material adverse
effect on such Certificateholders; or the delegation by the Servicer of its
duties under the Agreement, except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer
in the Agreement, or in any certificate delivered pursuant to the
Agreement, proves to have been incorrect when made which has a material
adverse effect on the Certificateholders of any Series issued and
outstanding under the Trust, and which continues to be incorrect in any
material respect for a period of 60 days after written notice and continues
to have a material adverse effect on such Certificateholders;
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer; or
(e) such other event specified in the related Prospectus Supplement.
Unless otherwise stated in the related Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance referred to
in clause (a) above for a period of 10 business days, or referred to under
clause (b) or (c) for a period of 60 business days, shall not constitute a
Servicer Default if such delay or failure could not be prevented by the exercise
of reasonable diligence by the Servicer and such delay or failure was caused by
an act of God or other similar occurrence. Upon the occurrence of any such
event, the Servicer shall not be relieved from using its best efforts to perform
its obligations in a timely manner in accordance with the terms of the
Agreement, and the Servicer shall provide the Trustee, any provider of
Enhancement and/or any issuer of any third-party Credit Enhancement (a "Credit
Enhancement Provider"), the Transferor and the holders of Certificates of each
Series issued and outstanding under the Trust prompt notice
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of such failure or delay by it, together with a description of the cause of such
failure or delay and its efforts to perform its obligations.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer and no Servicer Default other than such
conservatorship or receivership or the insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or the
majority of the Certificateholders from effecting a Service Transfer.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, on each Distribution Date, or as soon thereafter as is
practicable, as specified in the related Prospectus Supplement, the agent making
payments to the Certificateholders (the "Paying Agent") will forward to each
Certificateholder of record a statement prepared by the Servicer setting forth,
among other things: (a) the amount of the distribution on such Distribution Date
allocable to principal on the Certificates, (b) the amount of such distribution
allocable to interest on the Certificates, (c) the amount of collections of
Principal Receivables processed during the preceding month or months since the
last Distribution Date and allocated in respect of the Certificates, (d) the
aggregate amount of Principal Receivables in the Trust as of the end of the last
day of the preceding Monthly Period or Periods since the last Distribution Date,
(e) the aggregate outstanding balance of Accounts which are 30 or more days
delinquent by class of delinquency as of the end of the last day of the
preceding Monthly Period or Periods since the last Distribution Date, (f) the
Aggregate Investor Default Amount for the preceding Monthly Period or Periods
since the last Distribution Date, (g) the amount of Investor Charge-Offs for the
preceding Monthly Period or Periods since the last Distribution Date and the
amount of reimbursements of previous Investor Charge-Offs for the preceding
Monthly Period or Periods since the last Distribution Date, (h) the amount of
the Servicing Fee allocated to the Certificates for the preceding Monthly Period
or Periods since the last Distribution Date, (i) the amount available under any
Enhancement (including any Credit Enhancement) as of the close of business on
such Distribution Date, (j) the aggregate amount of collections on Finance
Charge Receivables processed during the preceding Monthly Period or Periods
since the last Distribution Date, (k) the Portfolio Yield for the preceding
Monthly Period or Periods since the last Distribution Date, and (l) certain
information relating to the floating or variable Certificate Rates, if
applicable, for the Interest Period relating to such Distribution Date. In the
case of a Series of Certificates having more than one Class, the statements
forwarded to Certificateholders will provide information as to each Class of
Certificates, as appropriate.
On or before January 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Paying Agent will furnish to
each person who at any time during the preceding calendar year was a
Certificateholder of record, a statement prepared by the Servicer containing the
information required to be contained in the regular monthly report to
Certificateholders, as set forth in clauses (a), (b) and (c) above aggregated
for such calendar year or the applicable portion thereof during which such
person was a Certificateholder, together with such other customary information
(consistent with the treatment of the Certificates as debt) as the Trustee or
the Servicer deems necessary or desirable to enable the Certificateholders to
prepare their United States tax returns.
EVIDENCE AS TO COMPLIANCE
The Agreement provides that on or before March 31 of each calendar year or
such other date as specified in the related Prospectus Supplement, the Servicer
will cause a firm of independent certified public accountants to furnish a
report to the effect that such accounting firm has made a study and evaluation
of the Servicer's internal accounting controls relative to the servicing of the
Accounts and that, on the basis of such examination, such firm is of the opinion
that, assuming the accuracy of reports by the Servicer's third party agents, the
system of internal accounting controls in effect on the date of such statement
relating to servicing procedures performed by the Servicer,
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taken as a whole, was sufficient for the prevention and detection of errors and
irregularities in amounts that would be material to the financial statements of
the Servicer and that such servicing was conducted in compliance with the
sections of the Agreement during the period covered by such report (which shall
be the period from January 1 (or for the initial period, the relevant Closing
Date) of the preceding calendar year to and including December 31 of such
calendar year), except for such exceptions or errors as such firm shall believe
to be immaterial and such other exceptions as shall be set forth in such
statement.
The Agreement provides for delivery to the Trustee on or before March 31 of
each calendar year or such other date as specified in the related Prospectus
Supplement, of an annual statement signed by an officer of the Servicer to the
effect that the Servicer has fully performed its obligations under the Agreement
throughout the preceding year, or, if there has been a default in the
performance of any such obligation, specifying the nature and status of the
default.
AMENDMENTS
The Agreement and any Series Supplement (unless, with respect to a Series
Supplement, otherwise specified in the related Prospectus Supplement) may be
amended by the Transferor, the Servicer and the Trustee, without the consent of
Certificateholders of any Series then outstanding, for any purpose; provided,
however, that (i) the Transferor delivers an officer's certificate to the
Trustee to the effect that such amendment will not adversely affect in any
material respect the interest of such Certificateholders, and (ii) such
amendment will not result in a withdrawal or reduction of the rating of any
outstanding Series under the Trust. The Agreement and any related Series
Supplement may be amended by the Transferor (and, if applicable, any Additional
Transferor being designated), the Servicer and the Trustee, without the consent
of the Certificateholders of any Series then outstanding, to provide for
additional Enhancement or substitute Enhancement with respect to a Series, to
change the definition of Eligible Account, to provide for the designation of an
Additional Transferor, or to provide for the addition to the Trust of a
Participation, provided, that (i) the Transferor (and, if applicable, any
Additional Transferor being designated) delivers to the Trustee a certificate of
an authorized officer to the effect that, in the reasonable belief of the
Transferor (and such Additional Transferor as applicable), such amendment will
not as of the date of such amendment adversely affect in any material respect
the interest of such Certificateholders, and (ii) such amendment will not result
in a withdrawal or reduction of the rating of any outstanding Series under the
Trust.
The Agreement and the related Series Supplement may be amended by the
Transferor, the Servicer and the Trustee with the consent of the holders of
Certificates evidencing undivided interests aggregating not less than 66 2/3%
(or such other percentage specified in the related Prospectus Supplement) of the
Investor Interests for all Series of the Trust, for the purpose of adding any
provisions to, changing in any manner or eliminating any of the provisions of
the Agreement or the related Series Supplement or of modifying in any manner the
rights of Certificateholders of any outstanding Series of the Trust. No such
amendment, however, may (a) reduce in any manner the amount of, or delay the
timing of, distributions required to be made on the related Series or any
Series, (b) change the definition of or the manner of calculating the interest
of any Certificateholder of such Series or any Certificateholder of any other
Series issued by the Trust or (c) reduce the aforesaid percentage of undivided
interests the holders of which are required to consent to any such amendment, in
each case without the consent of all Certificateholders of the related Series
and Certificateholders of all Series adversely affected. Promptly following the
execution of any amendment to the Agreement, the Trustee will furnish written
notice of the substance of such amendment to each Certificateholder. Any Series
Supplement and any amendments regarding the addition or removal of Receivables
or Participations from the Trust will not be considered an amendment requiring
Certificateholder consent under the provisions of the Agreement and any Series
Supplement.
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Additionally, the Agreement and any Series Supplement may be amended by the
Servicer and the Trustee at the direction of the Transferor without the consent
of any of the Certificateholders (i) to add, modify or eliminate such provisions
as may be necessary or advisable in order to enable all or a portion of the
Trust to qualify as, and to permit an election to be made to cause all or a
portion of the Trust to be treated as, a "financial asset securitization
investment trust" as described in the provisions of the "Seven Year Balanced
Budget Act of 1995," H.R. 2491, 104th Cong., 1st Sess. (1995), or to enable all
or a portion of the Trust to qualify and an election to be made for similar
treatment under such comparable subsequent federal income tax provisions as may
ultimately be enacted into law, and (ii) in connection with any such election,
to modify or eliminate existing provisions of the Agreement and any Series
Supplement relating to the intended federal income tax treatment of the
Certificates and the Trust in the absence of the election. See "Federal Income
Tax Consequences -- Treatment of the Trust -- Newly Enacted Legislation." It is
a condition to any such amendment that each Rating Agency will have notified the
Transferor, the Servicer and the Trustee in writing that the amendment will not
result in a reduction or withdrawal of the rating of any outstanding Series or
Class to which it is a Rating Agency. The amendments which the Transferor may
make in connection with any election described above without the consent of
Certificateholders may include, without limitation, the elimination of any sale
of Receivables and termination of the Trust upon the occurrence of an event of
receivership or insolvency with respect to the Transferor, an Additional
Transferor or other holder of the Transferor Certificate. See "Certain Legal
Aspects of the Receivables -- Certain Matters Relating to Receivership."
Additionally, the Agreement and any Series Supplement may be amended by the
Servicer and the Trustee at the direction of the Transferor without the consent
of any of the Certificateholders (i) to add, modify or eliminate such provisions
as may be necessary or advisable in order to enable (a) the transfer to the
Trust of all or any portion of the Receivables to be derecognized under
generally accepted accounting principals ("GAAP") by the Transferor or (b) the
Trust to avoid becoming a member of any Transferor's consolidated group under
GAAP, and (ii) in connection with any such addition, modification or
elimination, without limiting the generality of the foregoing clause (i), to
cause the Receivables to be transferred by a Transferor first to a bankruptcy
remote Affiliate and from such Affiliate to the Trust; provided, however, that
it is a condition to any such amendment that (i) the Transferor delivers an
officer's certificate to the Trustee to the effect that such amendment meets the
requirements set forth in this paragraph and (ii) such amendment will not result
in a withdrawal or reduction of the rating of any outstanding Series under the
Trust. In addition, the Agreement may be amended as described above under
"-- Pay Out Events."
LIST OF CERTIFICATEHOLDERS
With respect to each Series of Certificates, upon written request of
Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% (or such other percentage specified in the related
Prospectus Supplement) of the Investor Interest, the Trustee after having been
adequately indemnified by such Certificateholders for its costs and expenses,
and having given the Servicer notice that such request has been made, will
afford such Certificateholders access during business hours to the current list
of Certificateholders of the Trust for purposes of communicating with other
Certificateholders with respect to their rights under the Agreement. See
"-- Book-Entry Registration" and "-- Definitive Certificates" above.
THE TRUSTEE
The Prospectus Supplement for each Series will specify the Trustee under
the Agreement. The Transferor, the Servicer and their respective affiliates may
from time to time enter into normal banking and trustee relationships with the
Trustee and its affiliates. The Trustee, the Transferor, the Servicer and any of
their respective affiliates may hold Certificates in their own names. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee shall have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of
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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, in which event the Transferor will be
obligated to appoint a successor Trustee. The Transferor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Transferor will be obligated to appoint a successor Trustee. Any resignation or
removal of the Trustee and appointment of a successor Trustee does not become
effective until acceptance of the appointment by the successor Trustee.
CREDIT ENHANCEMENT AND ENHANCEMENT
GENERAL
For any Series, Credit Enhancement may be provided with respect to one or
more Classes thereof. Credit Enhancement may be in the form of the subordination
of one or more Classes of the Certificates of such Series, a letter of credit,
the establishment of a cash collateral guaranty or account, a collateral
interest, a surety bond, an insurance policy, a spread account, a reserve
account, the use of cross support features or another method of Credit
Enhancement described in the related Prospectus Supplement, or any combination
of the foregoing. If so specified in the related Prospectus Supplement, any form
of Credit Enhancement may be structured so as to be drawn upon by more than one
Class to the extent described therein. The initial form of Credit Enhancement,
with respect to any Series of Certificates, will be determined by the Transferor
prior to the issuance of such Certificates, based principally on the alternative
costs of the various forms of Credit Enhancement prevailing at that time.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Credit Enhancement will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur which exceed the amount
covered by the Credit Enhancement or which are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of deficiencies.
If Credit Enhancement is provided with respect to a Series, the related
Prospectus Supplement includes a description of (a) the amount payable under
such Credit Enhancement, (b) any conditions to payment thereunder not otherwise
described herein, (c) the conditions (if any) under which the amount payable
under such Credit Enhancement may be reduced and under which such Credit
Enhancement may be terminated or replaced, (d) any material provision of any
agreement relating to such Credit Enhancement and (e) the allocation (if any) of
Trust assets to the related Credit Enhancement Provider. Additionally, the
related Prospectus Supplement may set forth certain information with respect to
any Credit Enhancement Provider, including (i) a brief description of its
principal business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (iii) if applicable, the identity of regulatory agencies which
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, its stockholders' or policy holders' surplus, if applicable, and
other appropriate financial information as of the date specified in the
Prospectus Supplement. If so specified in the related Prospectus Supplement,
Credit Enhancement with respect to a Series may be available to pay principal of
the Certificates of such Series following the occurrence of certain Pay Out
Events with respect to such Series. In such event, the Credit Enhancement
Provider will have an interest in certain cash flows in respect of the
Receivables to the extent described in such Prospectus Supplement (the
"Enhancement Invested Amount").
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SUBORDINATION
If so specified in the related Prospectus Supplement, one or more Classes
of any Series will be subordinated as described in the related Prospectus
Supplement to the extent necessary to fund payments with respect to the Senior
Certificates. The rights of the holders of any such Subordinated Certificates to
receive distributions of principal and/or interest on any Distribution Date for
such Series will be subordinate in right and priority to the rights of the
holders of Senior Certificates, but only to the extent set forth in the related
Prospectus Supplement. If so specified in the related Prospectus Supplement,
subordination may apply only in the event of certain types of losses not covered
by another Credit Enhancement. The related Prospectus Supplement sets forth any
applicable information concerning the amount of subordination of a Class or
Classes of Subordinated Certificates in a Series, the circumstances in which
such subordination will be applicable, the manner, if any, in which the amount
of subordination will decrease over time, and the conditions under which amounts
available from payments that would otherwise be made to holders of such
Subordinated Certificates will be distributed to holders of Senior Certificates.
If collections of Receivables otherwise distributable to holders of a
Subordinated Class of a Series will be used as support for a Class of another
Series, the related Prospectus Supplement specifies the manner and conditions
for applying such a cross-support feature.
LETTER OF CREDIT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain losses
in addition to or in lieu of other Credit Enhancement. The issuer of the letter
of credit (the "L/C Bank") will be obligated to honor demands with respect to
such letter of credit, to the extent of the amount available thereunder, to
provide funds under the circumstances and subject to such conditions as are
specified in the related Prospectus Supplement.
The maximum liability of an L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the related Prospectus
Supplement of the Initial Investor Interest of a Series or a Class of such
Series. The maximum amount available at any time to be paid under a letter of
credit will be determined in the manner specified therein and in the related
Prospectus Supplement.
CASH COLLATERAL GUARANTY OR ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain permitted
investments in an account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash Collateral Guaranty or by a Cash Collateral Account
alone. The amount available pursuant to the Cash Collateral Guaranty or the Cash
Collateral Account will be the lesser of amounts on deposit in the Cash
Collateral Account and an amount specified in the related Prospectus Supplement.
The related Prospectus Supplement sets forth the circumstances under which
payments are made to beneficiaries of the Cash Collateral Account or the Cash
Collateral Guaranty, as applicable.
COLLATERAL INTEREST
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided initially by an undivided
interest in the Trust (the "Collateral Interest") in an amount initially equal
to a percentage of the Certificates of such Series as specified in the
Prospectus Supplement. Such Series may also have the benefit of a Cash
Collateral Guaranty or Cash Collateral Account with an initial amount on deposit
therein, if any, as specified in the Prospectus Supplement which will be
increased (i) to the extent the Transferor elects, subject to
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certain conditions specified in the related Prospectus Supplement, by the
application of collections of Principal Receivables allocable to the Collateral
Interest to decrease the Collateral Interest, (ii) to the extent collections of
Principal Receivables allocable to the Collateral Interest are required to be
deposited into the Cash Collateral Account as specified in the related
Prospectus Supplement and (iii) to the extent excess collections of Finance
Charge Receivables are required to be deposited into the Cash Collateral Account
as specified in the related Prospectus Supplement. The total amount of the
Credit Enhancement available pursuant to the Collateral Interest and, if
applicable, the Cash Collateral Guaranty or Cash Collateral Account will be the
lesser of the sum of the Collateral Interest and the amount on deposit in the
Cash Collateral Account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement sets forth the circumstances under
which payments which otherwise would be made to holders of the Collateral
Interest will be distributed to holders of Certificates and, if applicable, the
circumstances under which payment will be made under the Cash Collateral
Guaranty or from the Cash Collateral Account.
SURETY BOND OR INSURANCE POLICY
If so specified in the related Prospectus Supplement, insurance with
respect to a Series or one or more Classes thereof will be provided by one or
more insurance companies. Such insurance will guarantee, with respect to one or
more Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond will be
purchased for the benefit of the holders of any Series or Class of such Series
to assure distributions of interest or principal with respect to such Series or
Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
SPREAD ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by the periodic deposit of
certain available excess cash flow from Trust assets into an account (the
"Spread Account") intended to assist with subsequent distribution of interest
and principal on the Certificates of such Class or Series in the manner
specified in the related Prospectus Supplement.
RESERVE ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof or any Enhancement related thereto will be
provided by the establishment of a reserve account (the "Reserve Account"). The
Reserve Account may be funded, to the extent provided in the related Prospectus
Supplement, by an initial cash deposit, the retention of certain periodic
distributions of principal or interest or both otherwise payable to one or more
Classes of Certificates, including the Subordinated Certificates, or the
provision of a letter of credit, guarantee, insurance policy or other form of
credit or any combination thereof. The Reserve Account will be established to
assist with the subsequent distribution of principal or interest on the
Certificates of such Series or Class thereof or such other amount owing on any
Enhancement thereto in the manner provided in the related Prospectus Supplement.
INTEREST RATE SWAPS AND RELATED CAPS, FLOORS AND COLLARS
The Trustee on behalf of the Trust may enter into interest rate swaps and
related caps, floors and collars or other forms of derivatives to minimize the
risk to Certificateholders from adverse changes in interest rates (collectively,
"Swaps").
An interest rate Swap is an agreement between two parties
("counterparties") to exchange a stream of interest payments on an agreed
hypothetical or "notional" principal amount. No principal amount is exchanged
between the counterparties to an interest rate swap. In the typical Swap, one
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party agrees to pay a fixed-rate on a notional principal amount, while the
counterparty pays a floating-rate based on one or more reference interest rates
such as the London Interbank Offered Rate ("LIBOR"), a specified bank's prime
rate, or U.S. Treasury Bill rates. Interest rate Swaps also permit
counterparties to exchange a floating-rate obligation based upon one reference
interest rate (such as LIBOR) for a floating-rate obligation based upon another
referenced interest rate (such as U.S. Treasury Bill rates).
The Swap market has grown substantially in recent years with a significant
number of banks and financial service firms acting both as principals and as
agents utilizing standardized Swap documentation. Caps, floors and collars are
more recent innovations, and they may be less liquid than other Swaps. There can
be no assurance that the Trust will be able to enter into or offset Swaps at any
specific time or at prices or on other terms that are advantageous. In addition,
although the terms of a Swap may provide for termination under certain
circumstances, there can be no assurance that the Trust will be able to
terminate or offset a Swap on favorable terms.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Transferor will represent and warrant in the Agreement that the
transfer of Receivables by it to the Trust is either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor in
and to the related Receivables, except for the interest of the Transferor as
holder of the Transferor Certificate, or the grant to the Trust of a security
interest in such Receivables. The Transferor also will represent and warrant in
the Agreement that in the event the transfer of Receivables by the Transferor to
the Trust is deemed to create a security interest under the Uniform Commercial
Code (the "UCC"), there will exist a valid, subsisting and enforceable first
priority perfected security interest in such Receivables created thereafter in
favor of the Trust on and after their creation, except for certain tax and other
governmental liens. For a discussion of the Trust's rights arising from a breach
of these warranties, see "Description of the Certificates -- Representations and
Warranties."
The Transferor will represent as to Receivables to be conveyed, that the
Receivables are "accounts" or "general intangibles" for purposes of the UCC.
Both the sale of accounts and the transfer of accounts as security for an
obligation are treated under Article 9 of the UCC as creating a security
interest therein and are subject to its provisions, and the filing of
appropriate financing statements is required to perfect the security interest of
the Trust. Financing statements covering the Receivables have been and will be
filed with the appropriate governmental authority to protect the interests of
the Trust in the Receivables. If a transfer of general intangibles is deemed to
be a sale, then the UCC is not applicable and perfection of the Trust's interest
in the Receivables and protection of the Receivables from subsequent creditors
or transferees of the Transferor will be determined pursuant to general
principles of common law. Under such common law principles, the Trust's interest
in the Receivables should be superior to the interests of such subsequent
creditors or transferees except to the extent any such creditor or transferee
acts in good faith without knowledge or reason to know of the Trust's interest
in the Receivables and either obtains payment of the Receivables, obtains
judgment against the obligors under the Receivables, enters into a new contract
by novation with the obligors or possesses a writing customarily accepted as a
symbol or evidence of the Receivables. Actions required to be taken by the
Transferor and Trustee pursuant to the Agreement should provide such subsequent
creditor or transferee with knowledge or reason to know of the Trust's interest
in the Receivables.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after a Closing Date
could have an interest in such Receivables with priority over the Trust's
interest. Under the Agreement, however, the Transferor has made a representation
and warranty that it transferred the Receivables to the Trust free and
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clear of the lien of any third party. In addition, the Transferor has made a
covenant that it will not sell, pledge, assign, transfer or grant any lien on
any Receivable (or any interest therein) other than to the Trust. A tax or
government lien or other nonconsensual lien on property of the Transferor
arising prior to the time a Receivable comes into existence may also have
priority over the interest of the Trust in such Receivable. In addition, if the
FDIC were appointed as conservator or receiver of the Transferor, certain
administrative expenses of the receiver may also have priority over the interest
of the Trust in such Receivable. If a conservatorship or receivership proceeding
were to be commenced involving the Transferor and the conservator or receiver of
the Transferor were to take the position that the transfer of the Receivables
from the Transferor to the Trust should be characterized as the grant of a
security interest in such Receivables, then delays in distributions on the
Certificates and reductions in such distributions could result. In addition,
while the Transferor is the Servicer, cash collections held by the Transferor
may, subject to certain conditions, be commingled and used for the benefit of
the Transferor prior to the date on which such collections are required to be
deposited in the Finance Charge Account and Principal Account as described under
"Description of Certificates -- Application of Collections." In the event of the
conservatorship or receivership of the Transferor or, in certain circumstances,
the lapse of certain time periods, the Trust may not have a perfected interest
in such collections and, in such event, the Trust may suffer a loss of all or
part of such collections which may result in a loss to Certificateholders.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Transferor is chartered as a national banking association and is
subject to regulation and supervision by the Office of the Comptroller of the
Currency, which is authorized to appoint the FDIC as conservator or receiver of
the Transferor upon the occurrence of certain events relating to the
Transferor's financial condition.
The FDIA, as amended by FIRREA, sets forth certain powers that the FDIC in
its capacity as conservator or receiver for the Transferor could exercise.
Positions taken by the FDIC prior to the passage of FIRREA do not suggest that
the FDIC, if appointed as conservator or receiver for the Transferor, would
interfere with the timely transfer to the Trust of payments collected on the
Receivables or interfere with the timely liquidation of related Receivables, as
described below. To the extent that the Transferor has granted a security
interest in related Receivables to the Trust, and that interest was validly
perfected before the Transferor's insolvency and was not taken in contemplation
of the insolvency of the Transferor, or with the intent to hinder, delay or
defraud the Transferor or the creditors of the Transferor, based upon opinions
issued by the general counsel of the FDIC and policy statements of the FDIC,
such security interest should not be subject to avoidance by the FDIC. However,
such opinions and policy statements are not binding on the FDIC and if the FDIC
were to assert a contrary position, such as by requiring the Trustee to
establish its right to those payments by submitting to and completing the
administrative claims procedure under the FDIA, or were the conservator or
receiver to request a stay of proceedings with respect to the Transferor as
provided under the FDIA, delays in payments on the Certificates and possible
reductions in the amount of those payments could occur. In addition, the FDIC,
if appointed, as conservator or receiver for the Transferor, has the power under
the FDIA to repudiate contracts, including secured contracts of the Transferor.
The FDIA provides that a claim for damages arising from the repudiation of a
contract is limited to "actual direct compensatory damages." In the event the
FDIC were to be appointed as conservator or receiver of the Transferor and were
to repudiate the Agreement, then the amount payable out of available collections
to the Certificateholders could be lower than the outstanding principal and
accrued interest on the Certificates.
If a conservator or receiver were appointed for the Transferor or other
holder of the Transferor Certificate or a bankruptcy or insolvency event were to
occur with respect to the Transferor or other holder of the Transferor
Certificate, then the Transferor will promptly give notice thereof to the
Trustee and a Pay Out Event will occur with respect to all Series then
outstanding under the Trust. Pursuant to the Agreement, newly created Principal
Receivables will not be transferred to the Trust
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on and after any such appointment or insolvency event, unless otherwise required
by the FDIC as receiver or conservator. In addition, the Trustee will proceed to
sell, dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms, unless otherwise
instructed within a specified period by holders of Certificates representing
undivided interests aggregating not less than 50% of the Investor Interest of
each Series (or if any Series has more than one Class, of each Class) and the
Transferor and each holder of an interest in the Transferor Interest not subject
to the appointment or insolvency event, and any other person designated by the
Transferor in an officer's certificate delivered to the Trustee prior to the
appointment or insolvency event or specified in the related Series Supplement,
which may include any provider of Enhancement, or unless otherwise required by
the FDIC as receiver or conservator. Under the Agreement, the proceeds from the
sale of the Receivables would be treated as collections of the Receivables and
the Investor Percentage of such proceeds would be distributed to the
Certificateholders or, if so specified in the related Prospectus Supplement,
collected and held for the benefit of Certificateholders. This procedure could
be delayed, as described above. If the only Pay Out Event to occur is either the
appointment of a conservator or receiver for, or the insolvency of, the
Transferor or other holder of the Transferor Certificate, or a bankruptcy or
insolvency event with respect to the Transferor or other holder of the
Transferor Certificate, the conservator, receiver or bankruptcy trustee
(including another holder of the Transferor Certificate as debtor-in-possession)
for the Transferor or other holder of the Transferor Certificate may have the
power to prevent the early sale, liquidation or disposition of the Receivables
and the commencement of a Rapid Amortization Period or, if applicable with
respect to a Series as specified in the related Prospectus Supplement, a Rapid
Accumulation Period, and may be able to require that new Principal Receivables
be transferred to the Trust. In addition, a conservator, receiver or bankruptcy
trustee (including another holder of the Transferor Certificate as
debtor-in-possession) for the Transferor or other holder of the Transferor
Certificate may have the power to cause the early sale of the Receivables and
the early retirement of the Certificates or to prohibit the continued transfer
of Principal Receivables to the Trust. See "Description of the
Certificates -- Pay Out Events." In addition, in the event of a Servicer Default
relating to the conservatorship, receivership, or insolvency of the Servicer, if
no Servicer Default other than such conservatorship, receivership, or insolvency
exists, the conservator or receiver for the Servicer may have the power to
prevent either the Trustee or the Certificateholders from appointing a successor
Servicer under the Agreement.
CONSUMER PROTECTION LAWS
The relationships of the cardholder and credit card issuer and the lender
are extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by the Transferor, the most significant laws
include the federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting, Fair Debt Collection Practice and Electronic Funds Transfer Acts.
These statutes impose disclosure requirements when a credit card account is
advertised, when it is opened, at the end of monthly billing cycles, and at year
end. In addition, these statutes limit customer liability for unauthorized use,
prohibit certain discriminatory practices in extending credit, and impose
certain limitations on the type of account-related charges that may be assessed.
Cardholders are entitled under these laws to have payments and credits applied
to the credit card accounts promptly, to receive prescribed notices and to
require billing errors to be resolved promptly. The Trust may be liable for
certain violations of consumer protection laws that apply to the related
Receivables, either as assignee from the Transferor with respect to obligations
arising before transfer of the Receivables to the Trust or as a party directly
responsible for obligations arising after the transfer. In addition, a
cardholder may be entitled to assert such violations by way of set-off against
his obligation to pay the amount of Receivables owing. The Transferor will
warrant in the Agreement that all related Receivables have been and will be
created in compliance with the requirements of such laws. The Servicer will also
agree in the Agreement to indemnify the Trust, among other things, for any
liability arising from such violations caused by the Servicer. For a
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discussion of the Trust's rights arising from the breach of these warranties,
see "Description of the Certificates -- Representations and Warranties."
Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdiction's consumer protection laws (including
laws limiting the charges imposed by such credit card issuers) in connection
with their operations in such jurisdictions. A successful challenge by such a
jurisdiction could have an adverse impact on the Transferor's credit card
operations or the yield on the Receivables in the Trust.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders if such laws result in any
related Receivables being written off as uncollectible when the amount available
under any Credit Enhancement is equal to zero. See "Description of the
Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs."
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of material federal income tax
consequences relating to the purchase, ownership and disposition of a
Certificate, which is based on the opinion of Orrick, Herrington & Sutcliffe
LLP, counsel to the Transferor ("Special Counsel"). This discussion represents
the opinion of Orrick, Herrington & Sutcliffe LLP, counsel to the Transferor,
subject to the qualifications set forth herein. Orrick, Herrington & Sutcliffe
LLP has prepared and reviewed the statements in this Prospectus under the
heading "Federal Income Tax Consequences," and is of the opinion that such
statements are correct in all material respects. Additional federal income tax
considerations relevant to a particular Series may be set forth in the related
Prospectus Supplement. This discussion is based on current law, which is subject
to changes that could prospectively or retroactively modify or adversely affect
the tax consequences summarized below. The discussion does not address all of
the tax consequences relevant to a particular Certificate Owner in light of that
Certificate Owner's circumstances, and some Certificate Owners may be subject to
special tax rules and limitations not discussed below. Each prospective
Certificate Owner is urged to consult its own tax adviser in determining the
federal, state, local and foreign income and any other tax consequences of the
purchase, ownership and disposition of a Certificate.
For purposes of this discussion, "U.S. Person" means a citizen or resident
of the United States, a corporation or partnership organized in or under the
laws of the United States, any state thereof, or any political subdivision of
either (including the District of Columbia), or an estate or trust the income of
which is includible in gross income for U.S. federal income tax purposes
regardless of its source. The term "U.S. Certificate Owner" means any U.S.
Person and any other person to the extent that income attributable to its
interest in a Certificate is effectively connected with that person's conduct of
a U.S. trade or business. The term "non-U.S. Certificate Owner" means any person
other than a U.S. Certificate Owner.
The discussion assumes that a Certificate is issued in registered form, has
all payments denominated in U.S. dollars and has a term that exceeds one year.
Moreover, the discussion assumes that the interest formula for the Certificate
meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID regulations") relating to original issue discount ("OID"),
and that any OID on the Certificate (i.e., any excess of the principal amount of
the Certificate over its issue price) does not exceed a de minimis amount (i.e.,
0.25 percent of its principal amount multiplied by the number of full years
until its maturity date), all within the meaning of the OID regulations.
Moreover, the discussion assumes that the Certificates are of a type, as set
forth below, which counsel is of the opinion will be debt for federal income tax
purposes. The applicable Prospectus Supplement will set forth a discussion of
any additional material tax consequences with respect to Certificates not
conforming to the foregoing assumptions.
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TREATMENT OF THE CERTIFICATES AS DEBT
The Transferor will express in the Agreement the intent that for federal,
state and local income and franchise tax purposes, the Certificates will be debt
secured by the Receivables. The Transferor, by entering into the Agreement, and
each investor, by the acceptance of a beneficial interest in a Certificate, will
agree to treat the Certificates as debt for federal, state and local income and
franchise tax purposes. However, the Agreement is generally ambiguous in
characterizing the transfer of Receivables, and because different criteria are
used in determining the non-tax accounting treatment of the transaction, the
Transferor will treat the Agreement for certain non-tax accounting purposes as
causing a transfer of an ownership interest in the Receivables and not as
creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form and non-tax
characterization of a transaction, while relevant factors, are not conclusive
evidence of its economic substance. In appropriate circumstances, the courts
have allowed taxpayers as well as the Internal Revenue Service (the "IRS") to
treat a transaction in accordance with its economic substance as determined
under federal income tax law, even though the participants in the transaction
have characterized it differently for non-tax purposes.
The determination of whether the economic substance of a transfer of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the transferor has relinquished (and the transferee has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the transferee has the
opportunity to gain if the property increases in value, and has the risk of loss
if the property decreases in value. Based on its analysis of such factors,
Special Counsel is of the opinion that, under current law, although no
transaction closely comparable to that contemplated herein has been the subject
of any Treasury regulation, revenue ruling or judicial decision, for federal
income tax purposes the Certificates will not constitute an ownership interest
in the Receivables but will properly be characterized as debt.
TREATMENT OF THE TRUST
General. The Agreement permits the issuance of Certificates and certain
other interests (including any Collateral Interest) in the Trust, each of which
may be treated for federal income tax purposes either as debt or as equity
interests in the Trust. If all of the Certificates and other interests (other
than the Transferor Certificate) in the Trust were characterized as debt, the
Trust might be characterized as a security arrangement for debt collateralized
by the Receivables and issued directly by the Transferor (or other holder of the
Transferor Certificate). Under such a view, the Trust would be disregarded for
federal income tax purposes. Alternatively, if some of the Transferor
Certificate, the Certificates and other interests in the Trust were
characterized as equity therein, the Trust might be characterized as a separate
entity owning the Receivables, issuing its own debt, and jointly owned by the
Transferor (or other holder of the Transferor Certificate) and any other holders
of equity interests in the Trust. However, Special Counsel is of the opinion
that, under current law, any such entity constituted by the Trust will not be an
association or publicly traded partnership taxable as a corporation.
Possible Treatment of the Trust as a Partnership or a Publicly Traded
Partnership. Although, as described above, Special Counsel is of the opinion
that the Certificates will properly be treated as debt for federal income tax
purposes and that the Trust will not be treated as an association or publicly
traded partnership taxable as a corporation, such opinion will not bind the IRS
and thus no assurance can be given that such treatment will prevail. If the IRS
were to contend successfully that some or all of the Transferor Certificate, the
Certificates or any other interest in the Trust, including any Collateral
Interest, were equity in the Trust for federal income tax purposes, all or a
portion of the Trust could be classified as a publicly traded partnership
taxable as a corporation for such
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purposes. Because Special Counsel is of the opinion that the Certificates will
be characterized as debt for federal income tax purposes and because any holder
of an interest in a Collateral Interest will agree to treat that interest as
debt for such purposes, no attempt will be made to comply with any tax reporting
requirements that would apply as a result of such alternative characterizations.
If the Trust were treated in whole or in part as a partnership in which
some or all of the holders of interests in the publicly offered Certificates
were partners, that partnership would be classified as a publicly traded
partnership, and so could be taxable as a corporation. Further, regulations
published by the Treasury Department on December 4, 1995 (the "Regulations")
could cause the Trust to constitute a publicly traded partnership even if all
holders of interests in the publicly offered Certificates are treated as holding
debt. The Regulations generally apply to taxable years beginning after December
31, 1995. If the Trust were classified as a publicly traded partnership, whether
by reason of the treatment of publicly offered Certificates as equity or by
reason of the Regulations, it would avoid taxation as a corporation if its
income was not derived in the conduct of a "financial business"; however,
whether the income of the Trust would be so classified is unclear and Special
Counsel is unable to opine as to whether the Trust would be so classified.
Under the Code and the Regulations, a partnership will be classified as a
publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Transferor intends to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
offered Certificates. Although the Transferor expects such measures will
ultimately be successful, certain of the actions that may be necessary for
avoiding the treatment of such interests as "readily tradable" on a "secondary
market" or its "substantial equivalent" are not fully within the control of the
Transferor. As a result, there can be no assurance that the measures the
Transferor intends to take will in all circumstances be sufficient to prevent
the Trust from being classified as a publicly traded partnership under the
Regulations.
If the Trust were treated as a partnership and nevertheless were not
treated as a publicly traded partnership, that partnership would not be subject
to federal income tax. Rather, each item of income, gain, loss and deduction of
the partnership generated through the ownership of the related Receivables would
be taken into account directly in computing taxable income of the Transferor (or
the holder of the Transferor Certificate) and any Certificate Owners treated as
partners in accordance with their respective partnership interests therein. The
amounts and timing of income reportable by any Certificate Owners treated as
partners would likely differ from that reportable by such Certificate Owners had
they been treated as owning debt. In addition, if the Trust were treated in
whole or in part as a partnership other than a publicly traded partnership,
income derived from the partnership by any Certificate Owner that is a pension
fund or other tax-exempt entity may be treated as unrelated business taxable
income. Partnership characterization also may have adverse state and local
income or franchise tax consequences for a Certificate Owner. If the Trust were
treated in whole or in part as a partnership and the number of holders of
interests in the publicly offered Certificates and other interests in the Trust
treated as partners equaled or exceeded 100, the Transferor may cause the Trust
to elect to be an "electing large partnership." The consequence of such election
to investors could include the determination of certain tax items at the
partnership level and the disallowance of otherwise allowable deductions. No
representation is made as to whether such election will be made.
If the arrangement created by the Agreement were treated in whole or in
part as a publicly traded partnership taxable as a corporation, that entity
would be subject to federal income tax at corporate tax rates on its taxable
income generated by ownership of the related Receivables. That tax could result
in reduced distributions to Certificate Owners. No distributions from the Trust
would be deductible in computing the taxable income of the corporation, except
to the extent that any Certificates were treated as debt of the corporation and
distributions to the related Certificate Owners were treated as payments of
interest thereon. In addition, distributions to Certificate
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Owners not treated as holding debt would be dividend income to the extent of the
current and accumulated earnings and profits of the corporation (and Certificate
Owners may not be entitled to any dividends received deduction in respect of
such income).
Newly Enacted Legislation. The "Small Business Jobs Protection Act of
1996," H.R. 3448 (the "Bill"), contains provisions creating a new type of entity
for federal income tax purposes called a "financial asset securitization
investment trust" or "FASIT." Starting in September of 1997, the FASIT
provisions of the Bill generally enable certain arrangements similar to the
Trust to elect to be treated as a FASIT. Under the FASIT provisions of the Bill,
a FASIT generally would avoid federal income taxation and could issue securities
substantially similar to the Certificates, and those securities would be treated
as debt for federal income tax purposes. Upon satisfying certain conditions set
forth in the Agreement, the Transferor will be permitted to amend the Agreement
and any Series Supplement in order to enable all or a portion of the Trust to
qualify as a FASIT and to permit a FASIT election to be made with respect
thereto, and to make such modifications to the Agreement and any Supplement as
may be permitted by reason of the making of such an election. See "Description
of the Certificates -- Amendments." However, if such an election is made, it may
cause a holder to recognize gain (but not loss) with respect to its Certificate,
even though Special Counsel is of the opinion that a Certificate will be treated
as debt for federal income tax purposes without regard to the election and the
Certificate would be treated as debt following the election. Additionally, any
such election and any related amendments to the Agreement and any Series
Supplement may have other tax and non-tax consequences to Certificateholders.
Accordingly, prospective Certificateholders should consult their tax advisors
with regard to the effects of any such election and any permitted related
amendments on them in their particular circumstances.
TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
General. Assuming, in accordance with Special Counsel's opinion, that the
Certificates are debt obligations for federal income tax purposes, stated
interest on a beneficial interest in a Certificate will be includible in gross
income in accordance with a U.S. Certificate Owner's method of accounting.
Original Issue Discount. If the Certificates are issued with original issue
discount ("OID"), the provisions of sections 1271 through 1273 and 1275 of the
Internal Revenue Code of 1986 (the "Code") will apply to the Certificates. Under
those provisions, a U.S. Certificate Owner (including a cash basis holder)
generally would be required to accrue the OID on its interest in a Certificate
in income for federal income tax purposes on a constant yield basis, resulting
in the inclusion of OID in income somewhat in advance of the receipt of cash
attributable to that income. In general, a Certificate will be treated as having
OID to the extent that its "stated redemption price" exceeds its "issue price,"
if such excess is more than 0.25 percent multiplied by the weighted average life
of the Certificate (determined by taking into account only the number of
complete years following issuance until payment is made for any partial
principal payments). Under section 1272(a)(6) of the Code, special provisions
apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. However, no
regulations have been issued interpreting those provisions, and the manner in
which those provisions would apply to the Certificates is unclear. Additionally,
the IRS could take the position based on Treasury Regulations that none of the
interest payable on a Certificate is "unconditionally payable" and hence that
all of such interest should be included in the Certificate's stated redemption
price at maturity. Accordingly, Special Counsel is unable to opine as to whether
interest payable on a Certificate constitutes "qualified stated interest" exempt
from such inclusion. If sustained, such treatment should not significantly
affect tax liabilities for most Certificate Owners, but prospective U.S.
Certificate Owners should consult their own tax advisors concerning the impact
to them in their
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particular circumstances. The Transferor intends to take the position that
interest on the Certificates constitutes "qualified stated interest" and that
the above consequences do not apply.
Market Discount. A U.S. Certificate Owner who purchases an interest in a
Certificate at a discount that exceeds any unamortized OID may be subject to the
"market discount" rules of sections 1276 through 1278 of the Code. These rules
provide, in part, that gain on the sale or other disposition of a Certificate
and partial principal payments on a Certificate are treated as ordinary income
to the extent of accrued market discount. The market discount rules also provide
for deferral of interest deductions with respect to debt incurred to purchase or
carry a Certificate that has market discount.
Market Premium. A U.S. Certificate Owner who purchases an interest in a
Certificate at a premium may elect to offset the premium against interest income
over the remaining term of the Certificate in accordance with the provisions of
section 171 of the Code.
SALE OR EXCHANGE OF CERTIFICATES
Upon a disposition of an interest in a Certificate, a U.S. Certificate
Owner generally will recognize gain or loss equal to the difference between the
amount realized on the disposition and the U.S. Certificate Owner's adjusted
basis in its interest in the Certificate. A taxable exchange of a Certificate
also could occur as a result of the Transferor's substitution of money or
investments for Receivables; see "Description of the
Certificates -- Defeasance." The adjusted basis in the interest in the
Certificate will equal its cost, increased by any OID or market discount
included in income with respect to the interest in the Certificate prior to its
disposition and reduced by any principal payments previously received with
respect to the interest in the Certificate and any amortized premium. Subject to
the market discount rules, gain or loss will generally be capital gain or loss
if the interest in the Certificate was held as a capital asset. Capital losses
generally may be used by a corporate taxpayer only to offset capital gains and
by an individual taxpayer only to the extent of capital gains plus $3,000 of
other income.
NON-U.S. CERTIFICATE OWNERS
In general, a non-U.S. Certificate Owner will not be subject to U.S.
federal income tax on interest (including OID) on a beneficial interest in a
Certificate unless (i) the non-U.S. Certificate Owner actually or constructively
owns 10 percent or more of the total combined voting power of all classes of
stock of the Transferor entitled to vote (or of a profits or capital interest of
the Trust characterized as a partnership), (ii) the non-U.S. Certificate Owner
is a controlled foreign corporation that is related to the Transferor (or the
Trust treated as a partnership) through stock ownership, (iii) the non-U.S.
Certificate Owner is a bank described in Code Section 881(c)(3)(A), (iv) such
interest is contingent interest described in Code Section 871(h)(4), or (v) the
non-U.S. Certificate Owner bears certain relationships to any holder of either
the Transferor Certificate other than the Transferor or any other interest in
the Trust not properly characterized as debt. To qualify for the exemption from
taxation, the last U.S. Person in the chain of payment prior to payment to a
non-U.S. Certificate Owner (the "Withholding Agent") must have received (in the
year in which a payment of interest or principal occurs or in either of the two
preceding years) a statement that (i) is signed by the non-U.S. Certificate
Owner under penalties of perjury, (ii) certifies that the non-U.S. Certificate
Owner is not a U.S. Person and (iii) provides the name and address of the
non-U.S. Certificate Owner. The statement may be made on a Form W-8 or
substantially similar substitute form, and the non-U.S. Certificate Owner must
inform the Withholding Agent of any change in the information on the statement
within 30 days of the change. If a Certificate is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the Withholding Agent. However,
in that case, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the non-U.S. Certificate Owner to the organization
or institution holding the Certificate on behalf of the non-U.S. Certificate
Owner. The U.S. Treasury Department is considering implementation of
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further certification requirements aimed at determining whether the issuer of a
debt obligation is related to holders thereof.
Generally, any gain or income realized by a non-U.S. Certificate Owner upon
retirement or disposition of an interest in a Certificate will not be subject to
U.S. federal income tax, provided that (i) in the case of a Certificate Owner
that is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such retirement or
disposition occurs and (ii) in the case of gain representing accrued interest,
the conditions described in the preceding paragraph for exemption from
withholding are satisfied. Certain exceptions may be applicable, and an
individual non-U.S. Certificate Owner should consult a tax adviser.
If the Certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. Certificate Owner to be treated as
engaged in a trade or business in the United States. In that event, the non-U.S.
Certificate Owner would be required to file a federal income tax return and, in
general, would be subject to U.S. federal income tax (including the branch
profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or distributions
made to a foreign partner. That withholding may be at a rate as high as 39.6
percent. If some or all of the Certificates were treated as stock in a
corporation, any related dividend distributions to a non-U.S. Certificate Owner
generally would be subject to withholding of tax at the rate of 30 percent,
unless that rate were reduced by an applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31 percent may
apply to payments made in respect of a Certificate to a registered owner who is
not an "exempt recipient" and who fails to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the manner required. Generally, individuals are not exempt recipients whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a U.S. Certificate Owner must be reported to the IRS, unless the U.S.
Certificate Owner is an exempt recipient or otherwise establishes an exemption.
Compliance with the identification procedures (described in the preceding
section) would establish an exemption from backup withholding for a non-U.S.
Certificate Owner who is not an exempt recipient.
In addition, upon the sale of a Certificate to (or through) a "broker," the
broker must withhold 31 percent of the entire purchase price, unless either (i)
the broker determines that the seller is a corporation or other exempt recipient
or (ii) the seller provides certain identifying information in the required
manner, and in the case of a non-U.S. Certificate Owner certifies that the
seller is a non-U.S. Certificate Owner (and certain other conditions are met).
Such a sale must also be reported by the broker to the IRS, unless either (i)
the broker determines that the seller is an exempt recipient or (ii) the seller
certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status normally would be made
on Form W-8 under penalties of perjury, although in certain cases under proposed
Treasury regulations it may be possible to submit other documentary evidence. As
defined by Treasury regulations, the term "broker" includes all persons who
stand ready to effect sales made by others in the ordinary course of a trade or
business, as well as brokers and dealers registered as such under the laws of
the United States or a state. These requirements generally will apply to a U.S.
office of a broker, and the information reporting requirements generally will
apply to a foreign office of a U.S. broker as well as to a foreign office of a
foreign broker (i) that is a controlled foreign corporation within the meaning
of section 957(a) of the Code or (ii) 50 percent or more of whose gross income
from all sources for the three year period ending with the close of its taxable
year preceding the payment (or for such part of the period that the foreign
broker has been in existence) was effectively connected with the conduct of a
trade or business within the United States.
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Any amounts withheld under the backup withholding rules from a payment to a
Certificate Owner would be allowed as a refund or a credit against such
Certificate Owner's U.S. federal income tax, provided that the required
information is furnished to the IRS.
NEW WITHHOLDING REGULATIONS
The Treasury Department has issued new regulations (the "New Regulations")
which make certain modifications to the withholding, backup withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
STATE AND LOCAL TAXATION
The discussion above does not address the taxation of the Trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
Certificates under any state or local tax law. Each investor should consult its
own tax adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
Section 406 of ERISA and section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities and employee annuity plans and Keogh plans (collectively, "Plans")
from engaging in certain transactions involving "plan assets" with persons that
are "parties in interest" under ERISA or "disqualified persons" under the Code
with respect to the Plan. A violation of these "prohibited transaction" rules
may generate excise tax and other liabilities under ERISA and section 4975 of
the Code for such persons, unless a statutory, regulatory or administrative
exemption is available. Plans that are governmental plans (as defined in section
3(32) of ERISA) and certain church plans (as defined in section 3(33) of ERISA)
are not subject to ERISA requirements.
Subject to the considerations described below and except to the extent
otherwise specified in the related Prospectus Supplement, the Transferor
anticipates that each Class of Certificates will be eligible for purchase by
Plan investors.
A violation of the prohibited transaction rules could occur if any Series
of Certificates were to be purchased with assets of any Plan and the Transferor,
the Trustee, any underwriters of such Series or any of their affiliates were a
"party in interest" or a "disqualified person" (collectively, a "Party in
Interest") with respect to such Plan, unless a statutory, regulatory or
administrative exemption is available or an exception applies under a regulation
(the "Plan Asset Regulation") issued by the Department of Labor (the "DoL"). The
Transferor, the Trustee, any underwriters of a Series and their affiliates are
likely to be Parties in Interest with respect to many Plans. Before purchasing
Certificates, a Plan fiduciary or other Plan investor should consider whether a
prohibited transaction might arise by reason of the relationship between the
Plan and the Transferor, the Trustee, any underwriters of such Series or any of
their affiliates and consult their counsel regarding the purchase in light of
the considerations described below. The DoL has issued five class exemptions
that may apply to otherwise prohibited transactions arising from the purchase or
holding of the Certificates: DoL Prohibited Transaction Exemptions 84-14 (Class
Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers), 90-1 (Class Exemption for Certain Transactions
Involving Insurance Company Pooled Separate Accounts), 91-38 (Class Exemption
for Certain Transactions Involving Bank Collective Investment Funds), 95-60
(Class Exemption for Certain Transactions Involving Insurance Company General
Accounts), and 96-23 (Class Exemption for Plan Asset Transactions Determined by
In-House Asset Managers).
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Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan holds an equity interest as "plan assets" of such
Plan. Because the Certificates will represent beneficial interests in the Trust,
and despite the agreement of the Transferor and the Certificate Owners to treat
each Series of Certificates as debt instruments, the Certificates are likely to
be considered equity interests in the Trust for purposes of the Plan Asset
Regulation, with the result that the assets of the Trust are likely to be
treated as "plan assets" of the investing Plans for purposes of ERISA and
section 4975 of the Code, unless either of the following exceptions applies.
The first exception applies to a "publicly-offered security." A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who were independent of the issuer
and of one another ("Independent Investors") and (c) either is (i) part of a
class of securities registered under section 12(b) or 12(g) of the Exchange Act,
or (ii) sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act and the
class of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the
Commission) after the end of the fiscal year of the issuer during which the
offering of such securities to the public occurred. For purposes of the 100
Independent Investor criterion, except to the extent otherwise disclosed in the
related Prospectus Supplement, each Class of Certificates should be deemed to be
a "class" of securities that would be tested separately from any other
securities that may be issued by the Trust. The related Prospectus Supplement
will indicate whether it is anticipated that each Class of Certificates will
meet the foregoing criteria for treatment as "publicly-offered securities." No
restrictions will be imposed on the transfer of the Certificates. Except to the
extent otherwise disclosed in the related Prospectus Supplement, the Transferor
expects that the most senior Class of Certificates will be held by at least 100
Independent Investors at the conclusion of the initial public offering although
no assurance can be given, and no monitoring or other measures will be taken to
ensure, that such condition is met. Unless otherwise disclosed in the related
Prospectus Supplement, the most senior Class of Certificates will be sold as
part of an offering pursuant to an effective registration statement under the
Act and then will be timely registered under the Exchange Act.
The second exception applies if equity participation in the entity by
"benefit plan investors" (i.e., Plans and other employee benefit plans not
subject to ERISA, such as governmental or foreign plans, as well as entities
holding assets deemed to be "plan assets") is not "significant." Benefit plan
investors' equity participation in the Trust is not significant on any date on
which any Series of Certificates is issued and outstanding if, immediately after
the most recent acquisition of any equity interest in the Trust, less than 25%
of the value of each class of equity interests in the Trust (excluding interests
held by the Transferor, the Trustee or their affiliates) is held by benefit plan
investors. No assurance can be given by the Transferor as to whether the value
of each class of equity interests in the Trust held by benefit plan investors
will be "significant" upon completion of the offering of any Series of
Certificates or thereafter, and no monitoring or other measures will be taken
with respect to the satisfaction of the conditions to this exception.
If neither of the foregoing exceptions under the Plan Asset Regulation were
satisfied with respect to the Trust and the Trust were considered to hold "plan
assets," transactions involving the Trust and Parties in Interest with respect
to a Plan that is a Certificate Owner might be prohibited under section 406 of
ERISA and/or section 4975 of the Code and result in excise tax and other
liabilities under ERISA and section 4975 of the Code unless an exemption were
available. The five DoL class exemptions mentioned above may not provide relief
for all transactions involving the assets of the Trust even if they would
otherwise apply to the purchase of a Certificate by a Plan.
The Certificates of any Series may not be purchased with the assets of a
Plan if the Transferor, the Servicer, the Trustee or any of their affiliates (a)
has investment or administrative discretion with respect to such Plan assets;
(b) has authority or responsibility to give, or regularly gives, investment
advice with respect to such Plan assets, for a fee and pursuant to an agreement
or understanding that such advice (i) will serve as a primary basis for
investment decisions with
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respect to such Plan assets, and (ii) will be based on the particular investment
needs of such Plan; or (c) is an employer maintaining or contributing to such
Plan.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Certificates on behalf or with "plan assets" of any Plan should
consult their own counsel regarding whether the Trust assets represented by the
Certificates would be considered "plan assets," the consequences that would
apply if the Trust's assets were considered "plan assets," and the possibility
of exemptive relief from the prohibited transaction rules. In addition, based on
the reasoning of the United States Supreme Court's decision in John Hancock Mut.
Life. Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86 (1993), under certain
circumstances assets in the general account of an insurance company may be
deemed to be plan assets for certain purposes, and under such a reasoning a
purchase of Certificates with assets of an insurance company's general account
may subject the insurance company to the prohibited transaction and other
fiduciary responsibility rules of ERISA with respect to such assets. Insurance
company general account investors should also consider the effect of the
enactment of Section 401(c) of ERISA and any regulations issued under Section
401(c). Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion of
the Plan's assets in the Certificates. Accordingly, among other factors, Plan
fiduciaries and other Plan investors should consider whether the investment (i)
satisfies the diversification requirement of ERISA or other applicable law, (ii)
is in accordance with the Plan's governing instruments, and (iii) is prudent in
light of the "Risk Factors" and other factors discussed herein and in the
related Prospectus Supplement.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(an "Underwriting Agreement") to be entered into with respect to each Series of
Certificates, the Transferor will agree to sell or cause the Trust to sell to
each of the underwriters named therein and in the related Prospectus Supplement,
and each of such underwriters will severally agree to purchase from the
Transferor or Trust, as applicable, the principal amount of Certificates set
forth therein and in the related Prospectus Supplement (subject to proportional
adjustment on the terms and conditions set forth in the related Underwriting
Agreement in the event of an increase or decrease in the aggregate amount of
Certificates offered hereby and by the related Prospectus Supplement).
BancAmerica Robertson Stephens, an affiliate of the Transferor, the Servicer and
the Corporation, may participate as an underwriter in the offering of the
Certificates.
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any of
such Certificates are purchased. In the event of a default by any underwriter,
each Underwriting Agreement will provide that, in certain circumstances,
purchase commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Prospectus Supplement will set forth the price at which each Series of
Certificates or Class being offered thereby initially will be offered to the
public and any concessions that may be offered to certain dealers participating
in the offering of such Certificates. After the initial public offering, the
public offering price and such concessions may be changed.
This Prospectus and the related Prospectus Supplement may be used by
BancAmerica Robertson Stephens, an affiliate of the Transferor and Servicer, in
connection with offers and sales related to market-making transactions in the
Certificates. BancAmerica Robertson Stephens may act as principal or agent in
such transactions. Such prices will be made at prices related to prevailing
market prices at the time of sale or otherwise.
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Each Underwriting Agreement will provide that the Transferor will indemnify
the related underwriters against liabilities relating to the adequacy of
disclosure to investors, including liabilities under the Securities Act of 1933,
as amended.
The place and time of delivery for any Series of Certificates in respect of
which this Prospectus is delivered will be set forth in the accompanying
Prospectus Supplement.
Any underwriters, agents or dealers participating in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions, under the Securities Act. Certain agents
and underwriters may be entitled under agreements entered into with Bank of
America to indemnification by Bank of America against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, Bank of America or its affiliates in the ordinary
course of business.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Transferor by Andrea B. Goldenberg, Senior Counsel for the
Corporation, and by Orrick, Herrington & Sutcliffe LLP, San Francisco,
California, special counsel to the Transferor. Certain legal matters relating to
the federal tax consequences of the issuance of the Certificates will be passed
upon for the Transferor by Orrick, Herrington & Sutcliffe LLP, San Francisco,
California, special tax counsel to the Transferor. Certain legal matters
relating to the issuance of the Certificates will be passed upon for the
underwriters by such counsel as specified in the related Prospectus Supplement.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Accounts.................................................... 1, 5
Accumulation Period......................................... 7
Additional Accounts......................................... 6, 43
Additional Transferor....................................... 37
Aggregate Addition Limit.................................... 43
Agreement................................................... 5
Amortization Period......................................... 7
Assignment.................................................. 44
Automatic Additional Accounts............................... 43
Bank of America............................................. 1, 5, 28, 31
Bank of America NT&SA....................................... 31
Bank Portfolio.............................................. 5
Base Rate................................................... 22
Bill........................................................ 69
Cash Collateral Account..................................... 61
Cash Collateral Guaranty.................................... 61
Cede........................................................ 2
Cedel....................................................... 35
Cedel Participants.......................................... 35
Certificate Owners.......................................... 2
Certificate Rate............................................ 6
Certificateholder........................................... 34
Certificateholders.......................................... 2
Certificates................................................ 1, 5
Class....................................................... 1, 5
Closing Date................................................ 11
Code........................................................ 69
Collateral Interest......................................... 61
Collection Account.......................................... 11
Commission.................................................. 2
Controlled Accumulation Amount.............................. 14
Controlled Accumulation Period.............................. 13
Controlled Amortization Amount.............................. 12
Controlled Amortization Period.............................. 12
Controlled Deposit Amount................................... 14
Controlled Distribution Amount.............................. 12
Cooperative................................................. 35
Corporation................................................. 10, 2 0, 31
Credit Enhancement.......................................... 6
Credit Enhancement Percentage............................... 47
Credit Enhancement Provider................................. 56
Cut-Off Date................................................ 8
Defaulted Accounts.......................................... 7
Definitive Certificates..................................... 10
Depositaries................................................ 33
Depository.................................................. 33
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Designated Additional Accounts.............................. 42
Determination Date.......................................... 51
Disclosure Document......................................... 9
Discount Percentage......................................... 45
Distribution Account........................................ 46
Distribution Date........................................... 11
DoL......................................................... 72
DTC......................................................... 2
Eligible Account............................................ 42
Eligible Receivable......................................... 42
Enhancement................................................. 6
Enhancement Invested Amount................................. 60
ERISA....................................................... 19
Euroclear................................................... 35
Euroclear Operator.......................................... 35
Euroclear Participants...................................... 35
Exchange Act................................................ 2
FASIT....................................................... 69
FDIA........................................................ 21
FDIC........................................................ 21
Finance Charge Account...................................... 46
Finance Charge Receivables.................................. 8
FIRREA...................................................... 21
Fitch....................................................... 46
Full Investor Interest...................................... 17
Funding Period.............................................. 16
GAAP........................................................ 59
Group....................................................... 49
Holders..................................................... 36
Identified Pool............................................. 5
Independent Investors....................................... 73
Indirect Participants....................................... 34
Ineligible Receivable....................................... 41
Insolvency Event............................................ 53
Interchange................................................. 5
Interest Funding Account.................................... 38
Interest Period............................................. 11
Investor Interest........................................... 7
Investor Percentage......................................... 7
IRS......................................................... 67
L/C Bank.................................................... 61
LIBOR....................................................... 63
Minimum Transferor Interest................................. 8
Monthly Period.............................................. 11
Moody's..................................................... 46
New Issuance................................................ 9
New Regulations............................................. 72
Non-U.S. Certificate Owner.................................. 66
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
OID......................................................... 66, 69
OID regulations............................................. 66
Paired Series............................................... 17
Participants................................................ 33
Participation Agreement..................................... 43
Participations.............................................. 6, 43
Party in Interest........................................... 72
Pay Out Event............................................... 15
Paying Agent................................................ 57
Permitted Investments....................................... 46
Plan Asset Regulation....................................... 72
Plans....................................................... 72
Portfolio Yield............................................. 22
Pre-Funding Account......................................... 17
Pre-Funding Amount.......................................... 16
Principal Account........................................... 46
Principal Amortization Period............................... 13
Principal Commencement Date................................. 12
Principal Funding Account................................... 13
Principal Receivables....................................... 8
Principal Terms............................................. 9
Prospectus Supplement....................................... 1
Qualified Institution....................................... 46
Rapid Accumulation Period................................... 14
Rapid Amortization Period................................... 15
Rating Agency............................................... 19
Receivables................................................. 1, 5
Record Date................................................. 32
Regulations................................................. 68
Removed Accounts............................................ 9
Reserve Account............................................. 62
Revolving Period............................................ 11
Rules....................................................... 2
Scheduled Payment Date...................................... 12
Securities Act.............................................. 5
Senior Certificates......................................... 7
Series...................................................... 1, 5
Series Supplement........................................... 5
Series Termination Date..................................... 52
Service Transfer............................................ 56
Servicer.................................................... 10
Servicer Default............................................ 56
Servicing Fee............................................... 10
Shared Excess Finance Charge Collections Group.............. 16
Shared Excess Principal Collections......................... 16
Shared Excess Principal Collections Group................... 16
Special Counsel............................................. 66
Spread Account.............................................. 62
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Standard & Poor's........................................... 46
Subordinated Certificates................................... 7
Supplemental Certificate.................................... 37
Swaps....................................................... 62
Tax Opinion................................................. 9
Terms and Conditions........................................ 35
Transfer Date............................................... 13
Transferor.................................................. 5
Transferor Certificate...................................... 9
Transferor Interest......................................... 7
Transferor Percentage....................................... 32
Trust....................................................... 1, 5
Trust Portfolio............................................. 30
Trust Termination Date...................................... 53
Trustee..................................................... 5
TSYS........................................................ 28
U.S. Certificate Owner...................................... 66
U.S. Person................................................. 66
UCC......................................................... 63
Unallocated Principal Collections........................... 49
Underwriting Agreement...................................... 74
Withholding Agent........................................... 70
</TABLE>
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered BA Master
Credit Card Trust Asset Backed Certificates (the "Global Securities") to be
issued in Series from time to time (each, a "Series") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
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Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. The payment will then be reflected in the
account of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
Cedel Participant's or
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Euroclear Participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use Cedel or Euroclear and that
purchase Global Securities from DTC Participants for delivery to Cedel
Participants or Euroclear Participants should note that these trades would
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
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The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
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================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRANSFEROR OR ANY OF THE AGENTS OR UNDERWRITERS.
NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES
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. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE TRANSFEROR OR THE RECEIVABLES OR THE
ACCOUNTS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Terms................................ S-3
Recent Developments............................. S-18
Bank of America's Credit Card Activities........ S-18
The Receivables................................. S-21
Maturity Assumptions............................ S-25
Receivable Yield Considerations................. S-27
BankAmerica Corporation and Bank of America
National Association.......................... S-28
Description of the Certificates................. S-29
Underwriting.................................... S-50
Legal Matters................................... S-52
Index of Terms for Prospectus Supplement........ S-53
Annex I: Other Series Issued.................... A-1
PROSPECTUS
Prospectus Supplement........................... 2
Reports to Certificateholders................... 2
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 3
Prospectus Summary.............................. 5
Risk Factors.................................... 20
The Trust....................................... 27
Bank of America's Credit Card Activities........ 28
The Receivables................................. 30
Maturity Assumptions............................ 30
Use of Proceeds................................. 31
BankAmerica Corporation and Bank of America
National Association.......................... 31
Description of the Certificates................. 32
Credit Enhancement and Enhancement.............. 60
Certain Legal Aspects of the Receivables........ 63
Federal Income Tax Consequences................. 66
ERISA Considerations............................ 72
Plan of Distribution............................ 74
Legal Matters................................... 75
Index of Terms for Prospectus................... 76
Annex I: Global Clearance, Settlement and Tax
Documentation Procedures................ A-1
</TABLE>
------------------------
UNTIL JULY 29, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
BA MASTER CREDIT CARD TRUST
$648,750,000 CLASS A
FLOATING-RATE ASSET BACKED
CERTIFICATES, SERIES 1998-B
$41,250,000 CLASS B
FLOATING-RATE ASSET BACKED
CERTIFICATES, SERIES 1998-B
BANK OF AMERICA NATIONAL ASSOCIATION
TRANSFEROR AND SERVICER
------------------------------------------------
PROSPECTUS SUPPLEMENT
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BANCAMERICA
ROBERTSON STEPHENS
(LOGO) This document is printed entirely on recycled paper.
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