<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration Statement Nos. 333-66193
and 333-66193-01
Prospectus Supplement to Prospectus Dated July 15, 1999
BA MASTER CREDIT CARD TRUST
ISSUER
BANK OF AMERICA, NATIONAL ASSOCIATION (USA)
TRANSFEROR AND SERVICER
SERIES 1999-C
$460,000,000 FLOATING-RATE ASSET BACKED CERTIFICATES
THE TRUST WILL ISSUE --
<TABLE>
<CAPTION>
Consider carefully the risk CLASS A CERTIFICATES CLASS B CERTIFICATES
factors beginning on page 10 in -------------------- --------------------
the prospectus. <S> <C> <C>
Principal amount $432,500,000 $27,500,000
A certificate is not a deposit and Certificate rate One-Month LIBOR One-Month LIBOR
neither the certificates nor the plus 0.25% annually plus 0.50% annually
underlying accounts or receivables
are insured or guaranteed by the Interest paid Monthly Monthly
Federal Deposit Insurance
Corporation or any other First interest payment date September 15, 1999 September 15, 1999
governmental agency. Scheduled payment date July 17, 2006 July 17, 2006
Legal final maturity August 15, 2008 August 15, 2008
The certificates will represent
interests in the trust only and will CREDIT ENHANCEMENT --
not represent interests in or
obligations of Bank of America, - The Class B certificates are subordinated to
National Association (USA) or the Class A certificates. Subordination of the
any of its affiliates. Class B certificates provides credit
enhancement for the Class A certificates.
This prospectus supplement may
be used to offer and sell the - The trust is also issuing the collateral
certificates only if accompanied interest in the amount of $40,000,000 that is
by the prospectus. subordinated to the Class A certificates and
the Class B certificates. Subordination of the
collateral interest provides credit enhancement
for both the Class A certificates and the Class
B certificates.
This prospectus supplement and the accompanying
prospectus relate to the offering of the
certificates only.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Underwriters of the Class A Certificates
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
Underwriter of the Class B Certificates
BANC OF AMERICA SECURITIES LLC
July 22, 1999
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates in two separate
documents: (a) this prospectus supplement, which describes the specific terms of
your series of certificates and (b) the accompanying prospectus, which provides
general information, some of which may not apply to your series of certificates.
IF THE TERMS OF YOUR SERIES OF CERTIFICATES VARY BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION
IN THIS PROSPECTUS SUPPLEMENT.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement and the accompanying prospectus are defined under the
caption "Index of Terms for Prospectus Supplement" beginning on page S-54 in
this document and under the caption "Index of Terms for Prospectus" beginning on
page 64 in the accompanying prospectus.
This prospectus supplement and the accompanying prospectus contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended. Such forward-looking statements, together with related
qualifying language and assumptions are found in the material set forth under
the caption "Bank of America Corporation and Bank of America -- Year 2000
Issues" in this prospectus supplement. Forward-looking statements are also found
elsewhere in this prospectus supplement and the prospectus, and may be
identified by, among other things, accompanying language including the words
"expects," "intends," "anticipates," "estimates" or analogous expressions, or by
qualifying language or assumptions. Such statements involve known and unknown
risks, uncertainties and other important factors that could cause the actual
results or performance to differ materially from such forward-looking
statements. Such risks, uncertainties and other factors include, among others,
general economic and business conditions, competition, changes in political,
social and economic conditions, regulatory initiatives and compliance with
government regulations, customer preference and various other matters, many of
which are beyond the Transferor's control. These forward-looking statements
speak only as of the date of this prospectus supplement. The Transferor
expressly disclaims any obligation or undertaking to disseminate any updates or
revisions to such forward-looking statements to reflect any change in the
Transferor's expectations with regard thereto or any change in events,
conditions or circumstances on which any forward-looking statement is based.
---------------------------
S-2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF TERMS...................... S-4
STRUCTURAL SUMMARY.................... S-5
Offered Securities.................. S-5
Interest Payments................ S-5
Principal Payments............... S-6
The Collateral Interest............. S-6
Credit Enhancement.................. S-6
Other Interests in the Trust........ S-6
Other Series of Certificates..... S-6
The Transferor Certificate....... S-6
Information About the Receivables... S-6
Collections by the Servicer......... S-7
Allocations and Payments to you and
your Series...................... S-7
Allocations of Collections of
Finance Charge Receivables..... S-7
Shared Excess Finance Charge
Collections.................... S-9
Allocations of Collections of
Principal Receivables.......... S-10
Revolving Period................. S-11
Controlled Accumulation Period... S-11
Rapid Amortization Period........ S-12
Pay Out Events................... S-12
Shared Excess Principal
Collections.................... S-13
Denominations....................... S-13
Registration, Clearance and
Settlement....................... S-13
Tax Status.......................... S-13
ERISA Considerations................ S-13
Certificate Ratings................. S-13
INTRODUCTION.......................... S-15
BANK OF AMERICA'S CREDIT CARD
ACTIVITIES.......................... S-15
General............................. S-15
Billing, Payments and Fees.......... S-15
Delinquency and Loss Experience..... S-16
Interchange......................... S-18
THE RECEIVABLES....................... S-18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MATURITY ASSUMPTIONS.................. S-23
RECEIVABLE YIELD CONSIDERATIONS....... S-26
BANK OF AMERICA CORPORATION AND BANK
OF AMERICA.......................... S-27
Year 2000 Issues.................... S-27
DESCRIPTION OF THE CERTIFICATES....... S-28
General............................. S-28
Interest Payments................... S-29
Principal Payments.................. S-31
Postponement of Controlled
Accumulation Period.............. S-32
Subordination....................... S-32
Allocation Percentages.............. S-33
Reallocation of Cash Flows.......... S-36
Application of Collections.......... S-37
Shared Excess Finance Charge
Collections...................... S-42
Shared Excess Principal
Collections...................... S-43
Defaulted Receivables; Investor
Charge-Offs...................... S-43
Principal Funding Account........... S-45
Reserve Account..................... S-46
Pay Out Events...................... S-47
Servicing Compensation and Payment
of Expenses...................... S-48
Paired Series....................... S-49
Reports to Certificateholders....... S-49
Amendments.......................... S-49
ERISA CONSIDERATIONS.................. S-50
General............................. S-50
The Authorization................... S-50
UNDERWRITING.......................... S-52
LEGAL MATTERS......................... S-53
INDEX OF TERMS FOR PROSPECTUS
SUPPLEMENT.......................... S-54
ANNEX I: OTHER SERIES ISSUED.......... A-1
</TABLE>
S-3
<PAGE> 4
SUMMARY OF TERMS
<TABLE>
<S> <C>
Trust: BA Master Credit Card Trust -- "Trust"
Transferor: Bank of America, National Association (USA) -- "Bank of America" or
the "Bank"
Servicer: Bank of America
Trustee: U.S. Bank National Association
Pricing Date: July 21, 1999
Closing Date: July 28, 1999
Clearance and Settlement: DTC/Cedelbank/Euroclear
Trust Assets: Receivables originated in MasterCard(R) and VISA(R) accounts,
including recoveries on charged-off receivables
</TABLE>
<TABLE>
<CAPTION>
Amount % of Total Series
<S> <C> <C>
Class A $432,500,000 86.5%
Class B $ 27,500,000 5.5%
Collateral Interest $ 40,000,000 8.0%
Annual Servicing Fee: 2.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------------------------- -----------------------------
<S> <C> <C>
Anticipated Ratings:*
(Moody's/Standard & Poor's/Fitch Aaa/AAA/AAA A1/A/A
IBCA)
Credit Enhancement: subordination of Class B and the subordination of the
collateral interest collateral interest
Interest Rate: one-month one-month
LIBOR + 0.25% p.a. LIBOR + 0.50% p.a.
Interest Accrual Method: actual/360 actual/360
Interest Payment Dates: monthly (15(th)) monthly (15(th))
Interest Rate Index Re-set Date: 2 London business days before 2 London business days before
each interest payment date each interest payment date
First Interest Payment Date: September 15, 1999 September 15, 1999
Scheduled Payment Date: July 17, 2006 July 17, 2006
Commencement of Accumulation June 30, 2005 June 30, 2005
Period (subject to
adjustment):
Series 1999 - C Termination August 15, 2008 August 15, 2008
Date:
</TABLE>
- ---------------
* It is a condition to issuance that one of these ratings be obtained
S-4
<PAGE> 5
STRUCTURAL SUMMARY
- - THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE
CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS.
- - THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
OFFERED SECURITIES
The BA Master Credit Card Trust is offering the certificates as part of this
Series 1999-C. The certificates represent an interest in the assets of the
trust.
The Class B certificates are subordinated to the Class A certificates.
INTEREST PAYMENTS
The Class A certificates will accrue interest for each interest period at an
annual rate equal to LIBOR plus 0.25 %.
The Class B certificates will accrue interest for each interest period at an
annual rate equal to LIBOR plus 0.50 %.
Interest accrued during each interest period will be due on each distribution
date. Any interest due but not paid on a distribution date will be payable on
the next distribution date together with additional interest at the applicable
certificate rate plus 2% per annum.
- - A distribution date is the 15th day of each month, or if that day is not a
business day, the next business day. The first distribution date is September
15, 1999.
- - Each interest period begins on and includes a distribution date and ends on
and excludes the next distribution date. However, the first interest period
will begin on and include July 28, 1999 and end on and include September 14,
1999, the day preceding the first distribution date.
- - LIBOR is the rate for deposits in U.S. dollars for a one-month period which
appears on the Dow Jones Telerate Page 3750 (or similar replacement page) as
of 11:00 a.m., London time, on the related LIBOR determination date. In
addition, see "Description of the Certificates -- Interest Payments" in this
prospectus supplement for a discussion of the determination of LIBOR if that
rate does not appear on Dow Jones Telerate Page 3750 (or similar replacement
page).
- - LIBOR determination dates are:
- July 26, 1999, for the period beginning on and including July 28, 1999 and
ending on and including August 15, 1999;
- August 12, 1999 for the period beginning on and including August 16, 1999
and ending on and including September 14, 1999; and
- the second London business day prior to the first day of each interest
period, for each interest period following the first interest period.
The following time line shows the relevant dates for the first two interest
periods:
(INTEREST PERIOD GRAPH)
Other interest periods will follow sequentially after the second interest period
in the same manner as is shown in the time line.
See "Description of the Certificates -- Interest Payments" in this prospectus
supplement for a discussion of the determination of amounts available to pay
interest and for the definition of business day and London business day.
You may obtain the certificate rates for the current and immediately preceding
interest periods by telephoning U.S. Bank National Association, the trustee, at
its Corporate Trust Office at (800) 934-6802.
S-5
<PAGE> 6
PRINCIPAL PAYMENTS
You are expected to receive payment of principal in full on the scheduled
payment date which is July 17, 2006, or, if that date is not a business day, the
next business day. However, certain circumstances could cause principal to be
paid earlier or later, or in reduced amounts. No principal will be paid to the
Class B certificateholders until the Class A certificateholders are paid in
full. See "Maturity Assumptions" in this prospectus supplement and in the
prospectus and "Description of the Certificates -- Allocation Percentages" in
this prospectus supplement.
The final payment of principal and interest on the certificates will be made no
later than August 15, 2008, or, if that date is not a business day, the next
business day, called the legal final maturity or the Series 1999-C termination
date.
See "Description of the Certificates -- Principal Payments" in this prospectus
supplement for a discussion of the determination of amounts available to pay
principal.
THE COLLATERAL INTEREST
The trust is also issuing an interest in the assets of the trust that is
subordinated to the certificates called the collateral interest. The collateral
interest initial amount is $40,000,000, representing 8.0% of the initial
aggregate principal amount of the certificates and the collateral interest
amount. As a subordinated interest, the collateral interest is a form of credit
enhancement for the certificates. The collateral interest holder will have
voting and certain other rights as if the collateral interest were a
subordinated class of certificates.
THE COLLATERAL INTEREST IS NOT BEING OFFERED THROUGH THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS.
CREDIT ENHANCEMENT
Credit enhancement for your series is for your series's benefit only, and you
are not entitled to the benefits of any credit enhancement available to other
series.
Subordination of the Class B certificates provides credit enhancement for the
Class A certificates. Subordination of the collateral interest provides credit
enhancement for both the Class A certificates and the Class B certificates. The
collateral interest amount and the Class B investor interest must be reduced to
zero before the Class A investor interest will suffer any loss of principal. The
collateral interest amount must be reduced to zero before the Class B investor
interest will suffer any loss of principal. For a description of the events
which may lead to a reduction of the Class A investor interest, the Class B
investor interest and the collateral interest amount, see "Description of the
Certificates -- Reallocation of Cash Flows," "-- Application of Collections" and
"-- Defaulted Receivables; Investor Charge-Offs" in this prospectus supplement.
OTHER INTERESTS IN THE TRUST
OTHER SERIES OF CERTIFICATES
The trust has issued other series of certificates and expects to issue
additional series of certificates. When issued by the trust, the certificates of
each of those series also represent an interest in the assets of the trust. You
can review a summary of each series previously issued and currently outstanding
as well as another series that is expected to be issued by the Trust
substantially at the same time as this Series 1999-C under the caption "Annex I:
Other Series Issued" included at the end of this prospectus supplement. The
trust may issue additional series with terms that may be different from any
other series without prior review or consent by any certificateholders.
THE TRANSFEROR CERTIFICATE
Bank of America initially will own the transferor certificate, which represents
the remaining interest in the assets of the trust not represented by the
certificates, the collateral interest and the other interests issued by the
trust. The transferor interest does not provide credit enhancement for your
series or any other series.
INFORMATION ABOUT THE RECEIVABLES
The trust assets include receivables in certain MasterCard(R) and VISA(R)*
revolving credit card accounts selected from a sub-set of Bank of America's
credit card account portfolio.
- ---------------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Incorporated and Visa U.S.A., Inc., respectively.
S-6
<PAGE> 7
The receivables consist of both principal receivables and finance charge
receivables.
Principal receivables are, generally, amounts charged by cardholders for (a)
goods and services and (b) cash advances.
Finance charge receivables are, generally, (a) the related finance charges and
credit card fees, including annual membership fees collected from cardholders,
and (b) for your series, certain amounts of fees, called interchange, collected
through MasterCard and VISA.
See "Bank of America's Credit Card Activities -- Interchange" in this prospectus
supplement and in the accompanying prospectus.
COLLECTIONS BY THE SERVICER
The servicer will collect payments on the receivables and will periodically
deposit those collections in an account. The servicer will keep track of those
collections that are finance charge receivables and those that are principal
receivables.
ALLOCATIONS AND PAYMENTS TO YOU AND YOUR SERIES
Each month, the servicer will allocate collections and the amount of receivables
that are not collected and are charged-off as uncollectible, called the default
amount, among:
- - your series, based on the size of the investor interest (initially
$500,000,000) in the trust in relation to the overall size of the receivables
in the trust;
- - other outstanding series, based on the size of their respective interests in
the trust in relation to the overall size of the receivables in the trust; and
- - the holder of the transferor certificate, based on the size of the transferor
interest in the trust in relation to the overall size of the receivables in
the trust.
The trust assets allocated to your series will be further allocated to the
following, based on varying percentages:
- - holders of the Class A certificates, based on the Class A investor interest
(initially $432,500,000);
- - holders of the Class B certificates, based on the Class B investor interest
(initially $27,500,000); and
- - the holder of the collateral interest, based on the collateral interest amount
(initially $40,000,000).
See the following chart and "Description of the Certificates -- Allocation
Percentages" in this prospectus supplement.
The following chart illustrates the trust's general allocation structure only
and does not reflect the relative percentages of collections or other amounts
allocated to the transferor interest, to any series, including your series, or
to holders of the Class A certificates, the Class B certificates or the
collateral interest.
(TRUST ASSETS GRAPH)
You are entitled to receive payments of interest and principal based upon
allocations to your series. The investor interest, which is the basis for
allocations to your series, is the sum of (a) the Class A investor interest, (b)
the Class B investor interest and (c) the collateral interest amount. The Class
A investor interest, the Class B investor interest and the collateral interest
amount will initially equal the outstanding principal amount of the Class A
certificates, the Class B certificates and the collateral interest,
respectively. The investor interest will decline as a result of principal
payments and may decline due to the charging-off of receivables or other
reasons. If your investor interest declines, amounts allocated and available for
payment to your series and to you will be reduced. For a description of the
events which may lead to these reductions, see "Description of the
Certificates -- Reallocation of Cash Flows" in this prospectus supplement.
ALLOCATIONS OF COLLECTIONS OF FINANCE CHARGE RECEIVABLES
The following chart demonstrates the manner in which collections of finance
charge receivables are allocated and applied to your series. THE CHART IS A
SIMPLIFIED DEMONSTRATION OF CERTAIN ALLOCATION AND
S-7
<PAGE> 8
PAYMENT PROVISIONS AND IS QUALIFIED BY THE FULL DESCRIPTIONS OF THESE PROVISIONS
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
Step 1: Collections of finance charge receivables for your series are allocated,
based on varying percentages, among the Class A investor interest, the Class
B investor interest and the collateral interest amount.
Step 2: Collections of finance charge receivables allocated to the Class A
investor interest are applied to cover, in the following priority: the
interest payment due to Class A, Class A's portion of the servicing fee due
to the servicer and Class A's portion of the default amount.
Collections of finance charge receivables allocated to the Class B investor
interest are applied to cover, in the following priority: the interest
payment due to Class B and Class B's portion of the servicing fee due to the
servicer.
Collections of finance charge receivables allocated to the collateral
interest amount are applied, under certain circumstances, to cover the
collateral interest's portion of the servicing fee due to the servicer.
Step 3: Collections of finance charge receivables allocated to your series and
not used in Step 2 are combined with shared excess finance charge collections
from other series in shared excess finance charge collections group one, to
the extent necessary and available, and treated as excess spread and applied,
in the following priority, to cover:
- - the interest payment due to Class A, Class A's portion of the servicing fee
due to the servicer and Class A's portion of the default amount, each to the
extent not covered in Step 2;
- - reimbursement of certain reductions of the Class A investor interest;
- - the interest payment due to Class B and Class B's portion of the servicing fee
due to the servicer, each to the extent not covered in Step 2;
- - Class B's portion of the default amount;
- - reimbursement of certain reductions of the Class B investor interest.
Remaining excess spread is then applied, in the following priority, to cover,
among other things:
- - the minimum interest payment due to the collateral interest;
- - the collateral interest's portion of the servicing fee due to the servicer, to
the extent not covered in Step 2;
- - the collateral interest's portion of the default amount;
- - reimbursement of certain reductions of the collateral interest amount;
- - funding, if necessary, of a reserve account maintained to cover certain
interest payment shortfalls, if any; and
- - other amounts owing to the holder of the collateral interest.
Step 4: Collections of finance charge receivables allocated to your series and
not used in Steps 2 and 3 above may be paid first, to other series in shared
excess finance charge collections group one, to the extent necessary, and
then, to series in other shared excess finance charge collections groups, to
the extent necessary, with the balance being paid to the holder of the
collateral interest.
See "Description of the Certificates -- Application of Collections" in this
prospectus supplement.
S-8
<PAGE> 9
(FINANCE CHARGE STEP GRAPH)
SHARED EXCESS FINANCE CHARGE COLLECTIONS
This series is included in a group of series designated as shared excess finance
charge collections group one. Each series identified under the caption "Annex I:
Other Series Issued" included at the end of this prospectus supplement is, and
other series in the future may be, included in shared excess finance charge
collections group one. To the extent that collections of finance charge
receivables allocated to your series are not needed to make payments or deposits
for your series, these collections, called shared excess finance charge
collections, will be applied first, to cover finance charge related payments for
other series within shared excess finance charge collections group one and then,
to series in other shared excess finance charge collections groups, to the
extent needed. Any reallocation for this purpose will not reduce your series's
investor interest. In addition, you may receive the benefits of collections of
excess finance charge collections and certain other amounts allocated to other
series in shared excess finance charge collections group one and series in other
shared excess finance charge collections groups, to the extent those collections
are not needed for those other series and those other groups. See
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<PAGE> 10
"Description of the Certificates -- Shared Excess Finance Charge Collections" in
this prospectus supplement and in the accompanying prospectus.
ALLOCATIONS OF COLLECTIONS OF PRINCIPAL RECEIVABLES
The following chart demonstrates the manner in which collections of principal
receivables are allocated and applied to your series. THE CHART IS A SIMPLIFIED
DEMONSTRATION OF CERTAIN ALLOCATION AND PAYMENT PROVISIONS AND IS QUALIFIED BY
THE FULL DESCRIPTIONS OF THESE PROVISIONS IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS.
Step 1: Collections of principal receivables for your series are allocated,
based on varying percentages, among the Class A investor interest, the Class
B investor interest and the collateral interest amount.
Step 2: Collections of principal receivables allocated to the collateral
interest amount and the Class B investor interest may be reallocated and
treated as collections of finance charge receivables and made available to
pay amounts due to the Class A investor interest that have not been paid by
either Class A's share of collections of finance charge receivables or excess
spread and shared excess finance charge collections. If required Class A
amounts are satisfied, collections of principal receivables allocated to the
collateral interest amount also provide the same type of protection to the
Class B investor interest. Certain collections which are reallocated for
Class A or Class B will not be made part of available investor principal
collections.
Step 3: Collections of principal receivables allocated to your series and not
used in Step 2 above are combined with shared excess principal collections
from other series in the shared excess principal collections group, to the
extent necessary and available, and treated as available investor principal
collections.
Available investor principal collections may be paid, or accumulated and then
paid, to you as payments of principal as discussed below. The amount,
priority and timing of your principal payments, if any, depend on whether
your series is in the revolving period, the controlled accumulation period or
the rapid amortization period, as described below.
The Class A certificates will be paid in full before the Class B certificates
and the collateral interest receive any payments of principal.
The Class B certificates will be paid in full before the collateral interest
receives any payments of principal.
See "Maturity Assumptions" and "Description of the
Certificates -- Application of Collections" in this prospectus supplement.
Step 4: Collections of principal receivables allocated to your series and not
used in Steps 2 and 3 above may be paid to other series, to the extent
necessary, or to the transferor.
S-10
<PAGE> 11
(PRINCIPAL RECEIVABLES STEP GRAPH)
As discussed above in Step 3, available investor principal collections will be
applied as follows:
REVOLVING PERIOD: The certificates will have a period of time, called the
revolving period, when the trust will not pay, or accumulate, principal for
certificateholders or the holder of the collateral interest. In general, during
the revolving period the trust will pay available principal to other series or
the holder of the transferor certificate. See "Description of the
Certificates -- Principal Payments" and "-- Application of Collections" in this
prospectus supplement.
The revolving period starts on the closing date and ends on the earlier to begin
of:
- - the controlled accumulation period; or
- - the rapid amortization period.
CONTROLLED ACCUMULATION PERIOD: During the period called the controlled
accumulation period, each month the servicer will deposit a specified amount in
the principal funding account in order to pay the certificates and the
collateral interest in full on the scheduled payment date.
Each month, the trust will pay principal not required to be deposited in the
principal funding account to other series or the holder of the transferor
certificate. Each month, if the amount actually deposited in the principal
funding account is less than the required deposit, the amount of this deficiency
will be carried forward as a shortfall and included in the next month's required
deposit.
See "Description of the Certificates -- Principal Payments" and "-- Application
of Collections" in this prospectus supplement. For information about the
application of money on deposit in the principal funding account, including any
net investment earnings, see "Description of the Certificates --
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<PAGE> 12
Principal Funding Account" in this prospectus supplement.
On the scheduled payment date, the trust will use the money on deposit in the
principal funding account to pay (a) the Class A investor interest, (b) if the
Class A investor interest is paid in full, the Class B investor interest, and
(c) if the Class B investor interest is paid in full, the collateral interest
amount.
You should be aware that there may not be sufficient amounts available to pay
principal in full for the Class A investor interest, the Class B investor
interest and the collateral interest amount on the scheduled payment date. In
addition, if the money on deposit in the principal funding account is
insufficient to pay these amounts on the scheduled payment date or if a pay out
event occurs, the rapid amortization period will begin and the timing of your
principal payments could change. See "Maturity Assumptions" in this prospectus
supplement and in the accompanying prospectus.
The controlled accumulation period is scheduled to begin on the close of
business on June 30, 2005 but in some cases may be delayed to no later than the
close of business on May 31, 2006. See "Description of the
Certificates -- Postponement of Controlled Accumulation Period" in this
prospectus supplement.
The controlled accumulation period will end when any one of the following
occurs:
- - the investor interest is paid in full;
- - the rapid amortization period begins; or
- - the Series 1999-C termination date.
RAPID AMORTIZATION PERIOD: If a period called the rapid amortization period
begins, the trust will use any available principal collections allocated to your
series to pay (a) the Class A investor interest, (b) if the Class A investor
interest is paid in full, the Class B investor interest and (c) if the Class B
investor interest is paid in full, the collateral interest amount. These
payments will begin on the distribution date in the month immediately following
the commencement of the rapid amortization period.
The rapid amortization period will begin if a pay out event occurs and will end
when any one of the following occurs:
- - the investor interest is paid in full;
- - the Series 1999-C termination date; or
- - the trust termination date.
PAY OUT EVENTS: Certain adverse events called pay out events might lead to the
start of a rapid amortization period and the end of either the revolving period
or the controlled accumulation period.
A pay out event for your series will include the following events:
- - any of the transferors does not make any required payment or deposit;
- - any of the transferors materially violates any other obligation or agreement
relating to the certificates causing you to be adversely affected, if (a) such
transferor does not remedy the violation within 60 days after it has received
written notice and (b) you continue to be materially and adversely affected
for the 60-day period;
- - any of the transferors provides certain representations, warranties or other
information which were materially incorrect at the time they were provided
causing you to be adversely affected, if (a) they continue to be materially
incorrect 60 days after such transferor has received written notice and (b)
you continue to be materially and adversely affected for the 60-day period;
- - the average yield on the receivables is below an average of a minimum level
called the base rate for three consecutive monthly periods;
- - the transferors fail to transfer additional assets to the trust when required;
- - certain defaults by the servicer occur that have a material adverse effect on
you;
- - you are not paid in full on the scheduled payment date;
- - certain events of insolvency or receivership relating to any transferor or
other holder of the transferor certificate occur;
- - any transferor becomes unable to transfer receivables to the trust as required
under the agreement; or
- - the trust becomes an "investment company" under the Investment Company Act of
1940.
For a more detailed discussion of these pay out events, see "Description of the
Certificates -- Pay Out Events" in this prospectus supplement. In
S-12
<PAGE> 13
addition, see "Description of the Certificates -- Pay Out Events" in the
accompanying prospectus for a discussion of the consequences of an insolvency or
receivership of any transferor.
SHARED EXCESS PRINCIPAL COLLECTIONS
This series is included in a group of series designated as the shared excess
principal collections group. Each series identified under the caption "Annex I:
Other Series Issued" included at the end of this prospectus supplement is, and
other series in the future may be, included in the shared excess principal
collections group. To the extent that collections of principal receivables
allocated to your series are not needed to make payments or deposits to the
principal funding account for your series, these collections, called shared
excess principal collections, will be applied to cover principal payments for
other series within the shared excess principal collections group. Any
reallocation for this purpose will not reduce your series's investor interest.
In addition, you may receive the benefits of collections of principal
receivables and certain other amounts allocated to other series in the shared
excess principal collections group, to the extent those collections are not
needed for those other series. See "Description of the Certificates -- Shared
Excess Principal Collections" in this prospectus supplement and in the
accompanying prospectus.
DENOMINATIONS
Beneficial interests in the certificates will be offered in minimum
denominations of $1,000 and integral multiples of that amount.
REGISTRATION, CLEARANCE AND SETTLEMENT
Your certificates will be registered in the name of Cede & Co., as the nominee
of The Depository Trust Company ("DTC"). You will not receive a definitive
certificate representing your interest, except in limited circumstances
described in the accompanying prospectus when certificates in fully registered,
certificated form are issued. See "Description of the Certificates -- Definitive
Certificates" in the accompanying prospectus.
You may elect to hold your certificates through DTC, in the United States, or
Cedelbank, societe anonyme ("CEDELBANK") or the Euroclear System ("EUROCLEAR"),
in Europe. Transfers within DTC, Cedelbank or Euroclear, as the case may be,
will be made in accordance with the usual rules and operating procedures of
those systems. Cross-market transfers between persons holding directly or
indirectly through DTC and counterparties holding directly or indirectly through
Cedelbank or Euroclear will be made in DTC through the relevant depositaries of
Cedelbank or Euroclear. See "Description of the Certificates -- Book-Entry
Registration" in the accompanying prospectus.
We expect that the certificates will be delivered in book-entry form through the
facilities of DTC, Cedelbank and Euroclear on or about July 28, 1999.
TAX STATUS
Special counsel to the transferor is of the opinion that, under existing law,
your certificates will be characterized as debt for federal income tax purposes.
Under the agreement, you and the transferor will agree to treat your
certificates as debt for federal, state and local income tax purposes and
franchise tax purposes. See "Federal Income Tax Consequences" in the
accompanying prospectus for additional information concerning the application of
federal income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this prospectus supplement and in the accompanying prospectus, the Class A
certificates are eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts.
For the reasons discussed under "ERISA Considerations" in this prospectus
supplement and the accompanying prospectus, the Class B certificates are not
eligible for purchase by persons investing assets of employee benefit plans or
individual retirement accounts other than an insurance company investing assets
of its general account.
CERTIFICATE RATINGS
The Class A certificates are required to be rated at issuance in the highest
rating category, excluding subcategory designations, by at least one nationally
recognized rating organization.
S-13
<PAGE> 14
The Class B certificates are required to be rated at issuance in one of the
three highest rating categories, excluding subcategory designations, by at least
one nationally recognized rating organization.
See "Certificate Ratings" in the accompanying prospectus for a discussion of the
primary factors upon which the ratings are based.
S-14
<PAGE> 15
INTRODUCTION
The following provisions of this Prospectus Supplement contain more
detailed information concerning the asset backed certificates offered hereby.
The certificates will be issued by BA Master Credit Card Trust (the "TRUST")
pursuant to the terms of the Agreement. The Trust will issue $432,500,000
aggregate principal amount Class A Floating-Rate Asset Backed Certificates,
Series 1999-C (the "CLASS A CERTIFICATES"), $27,500,000 aggregate principal
amount Class B Floating-Rate Asset Backed Certificates, Series 1999-C (the
"CLASS B CERTIFICATES" and, together with the Class A Certificates, the
"CERTIFICATES") and $40,000,000 aggregate principal amount of Collateral
Interest, Series 1999-C (the "COLLATERAL INTEREST"). The date on which the
Certificates and Collateral Interest are issued, July 28, 1999, is the "CLOSING
DATE."
BANK OF AMERICA'S CREDIT CARD ACTIVITIES
GENERAL
The receivables (the "RECEIVABLES") conveyed to the Trust by Bank of
America pursuant to the pooling and servicing agreement (as amended from time to
time, the "AGREEMENT") between Bank of America, as Transferor and as Servicer,
and U.S. Bank National Association (formerly known as First Bank National
Association), as Trustee, have been or will be generated from transactions made
by holders of selected MasterCard and VISA credit card accounts (the
"ACCOUNTS"), including premium accounts and standard accounts, 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"), as constituted at the time
of such Accounts' selection.
On March 31, 1999, NationsBank of Delaware, N.A., an indirect wholly-owned
subsidiary of the Corporation and an affiliate of the Transferor was merged with
and into Bank of America National Association, at which time Bank of America
National Association changed its name to Bank of America, National Association
(USA). Prior to this merger, the activities of NationsBank of Delaware, N.A.
were primarily related to credit card lending, and as a result of the merger,
Bank of America now owns the credit card accounts formerly owned by NationsBank
of Delaware, N.A. The policies and operations applicable to the accounts
formerly owned by NationsBank of Delaware, N.A. and Bank of America,
respectively, have been consolidated under one management team at Bank of
America. The Additional Accounts designated by the Transferor on July 2, 1999,
the Receivables of which were conveyed to the Trust, consist of accounts
acquired pursuant to the merger with NationsBank of Delaware, N.A. In the
future, more accounts so acquired may also be included in Additional Accounts
with respect to the Trust.
Generally, the Additional Accounts designated on July 2, 1999 have
performed similarly to Accounts in the Trust prior to the July 2, 1999 addition.
These Additional Accounts had an aggregate Receivable balance at the time of
their designation of approximately $3.2 billion and were randomly selected from
accounts with an aggregate receivable balance of approximately $3.9 billion. See
" -- Delinquency and Loss Experience," "Maturity Assumptions" and "Receivable
Yield Considerations" in this Prospectus Supplement for indications of the
recent performance of the receivables arising under the accounts from which such
Additional Accounts were selected.
BILLING, PAYMENTS AND FEES
The Accounts currently have various billing and payment characteristics,
including varying periodic-rate finance charges and fees. 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 greatest of (a) at least 2.2% 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.
S-15
<PAGE> 16
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 for avoiding a finance charge 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 fixed-rate and variable-rate credit card accounts.
Generally the variable rates range from 2.9 percentage points to 14.9 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 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 7.45% to 23.9%.
Bank of America assesses annual membership fees (generally $20) 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 $29) and returned
check charges (generally $25). Bank of America generally assesses a cash advance
fee, typically 3.0% of the cash advance amount, with various minimums 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. 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, Pasadena,
California, Norfolk, Virginia and Spokane, Washington, 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. This may include removing or reaging the past
due status of accounts. Reaging of credit card balances is conducted within the
parameters of normal collection activities in an effort to resolve the
delinquency and reduce the incidence of bankruptcy filings. Accounts which post
three consecutive payments will be reaged. The three payments must equal or
exceed the sum of the minimum payments due over the prior three months.
Cardholders who have made arrangements for scheduled repayments through an
approved third party debtor assistance program (e.g., Consumer Credit Counseling
Services) will be reaged after the first of the scheduled monthly payments is
received. Under any of these reage programs, an account will be "up-aged" to
reflect its original delinquency status if any of the three payments is missed
for any reason or returned for insufficient funds. No account may be reaged more
than once in a twelve-month period. 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 generally within 45 days from the date of verifiable bankruptcy
notification.
S-16
<PAGE> 17
In February 1999, the Federal Financial Institutions Examination Council
published a revised policy statement on the classification of consumer loans.
The revised policy establishes uniform guidelines for charge-off of loans due to
delinquent, bankrupt and deceased borrowers, for charge-off of fraudulent
accounts, and for reaging, extending, deferring or rewriting delinquent
accounts. The guidelines have been implemented by Bank of America, with the
exception of external debt management programs pending further guidance from the
Federal Financial Institutions Examination Council. Bank of America, as
Servicer, does not expect that implementation to have a material effect upon the
payment of principal and interest on the Certificates.
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) the
calendar year ended December 31, 1996 for the Initial Identified Pool and (b)
each of the calendar years ended December 31, 1997 and December 31, 1998 and the
six calendar months ended June 30, 1999 for the Trust Portfolio. The following
tables do not include information with respect to the Receivables arising in the
Additional Accounts designated by the Transferor for inclusion in the Trust as
of July 2, 1999 (as of such date, approximately $3.2 billion). Delinquency
experience for the Trust Portfolio, as of July 2, 1999 (including the
Receivables arising in those Additional Accounts) is included in the table
entitled "Composition by Period of Delinquency Trust Portfolio" on page S-21 in
this Prospectus Supplement. Had the Receivables in those Additional Accounts
been included in the Trust Portfolio for the entire six months ended June 30,
1999, the Transferor believes, based on the performance of the accounts from
which the Additional Accounts were selected, that this inclusion may have had
the effect of increasing the amount reported as "Total Net Charge-Offs as a
percentage of Average Receivables Outstanding," for the six months ended June
30, 1999, in the table entitled "Loss Experience" on page S-18 of this
Prospectus Supplement, by approximately 0.06%, on an annualized basis. 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,
-----------------------------------------------------
JUNE 30, 1999 1998 1997
------------------------- ------------------------- -------------------------
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)......... $6,795,769 $6,755,697 $4,160,515
Receivables Delinquent:
31 - 60 Days........... $ 99,091 1.46% $ 108,081 1.60% $ 73,329 1.76%
61 - 90 Days........... 62,322 0.92 68,380 1.01 44,086 1.06
91 or More Days........ 118,566 1.74 126,676 1.88 79,210 1.90
---------- ---- ---------- ---- ---------- ----
Total............ $ 279,979 4.12% $ 303,137 4.49% $ 196,625 4.72%
========== ==== ========== ==== ========== ====
<CAPTION>
DECEMBER 31,
-------------------------
1996
-------------------------
PERCENTAGE
OF TOTAL
RECEIVABLES RECEIVABLES
----------- -----------
<S> <C> <C>
Receivables
Outstanding(2)......... $4,038,334
Receivables Delinquent:
31 - 60 Days........... $ 65,307 1.62%
61 - 90 Days........... 39,131 0.97
91 or More Days........ 65,931 1.63
---------- ----
Total............ $ 170,369 4.22%
========== ====
</TABLE>
- ---------------
(1) Data for 1999, 1998 and 1997 is for the Trust Portfolio as constituted at
such time. Data for 1996 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.
S-17
<PAGE> 18
LOSS EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------
1999(2) 1998 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(3)........... $6,502,056 $6,048,227 $3,795,496 $4,028,066
Total Gross Charge-Offs(4)................... 227,307 451,909 259,943 236,364
Recoveries................................... 16,255 33,905 9,340 22,252
Total Net Charge-Offs........................ 211,052 418,004 250,603 214,112
Total Net Charge-Offs as a percentage of
Average Receivables Outstanding(5)......... 6.49% 6.91% 6.60% 5.32%
</TABLE>
- ---------------
(1) Data for 1999, 1998 and 1997 is for the Trust Portfolio as constituted at
such time. Data for 1996 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 text above under the heading "Bank of America's Credit Card
Activities -- Delinquency and Loss Experience" contains information relating
to the addition of Receivables in Additional Accounts on July 2, 1999.
(3) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(4) 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.
(5) The percentage reflected for the six months ended June 30, 1999 is an
annualized figure.
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 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 in this Prospectus Supplement, 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" in this Prospectus Supplement and "Bank of America's
Credit Card Activities -- Interchange" in the accompanying 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 May 18, 1996 (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, March 2, 1998, September 2, 1998, May 3, 1999 and July 2,
1999, 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, $2.5 billion, $850 million, $900 million and $3.2
billion, respectively, of amounts charged by cardholders for goods and
S-18
<PAGE> 19
services and cash advances ("PRINCIPAL RECEIVABLES") and the related finance
charges, credit card fees, interchange and annual membership fees ("FINANCE
CHARGE RECEIVABLES"). The Transferor will be required to designate Additional
Accounts, to the extent available (a) to maintain the interest of the Transferor
in the Trust (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, 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 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 accompanying Prospectus.
"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.
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 beginning
of the day on July 2, 1999. 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 beginning of the day on
July 2, 1999, included $9,785,125,288.95 of Principal Receivables and
$179,871,292.57 of Finance Charge Receivables. The Accounts had an average total
Receivable balance of $1,154.60 and an average credit limit of $6,410.82. The
percentage of the aggregate total Receivable balance to the aggregate total
credit limit was 18.01%. The average age of the Accounts was approximately 113
months. As of the beginning of the day on July 2, 1999, 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 beginning
of the day on July 2, 1999, 48.17% of the Accounts were standard accounts and
51.83% were premium accounts, and the aggregate Receivable balances of standard
accounts and premium accounts, as a percentage of the total aggregate
Receivables, were 41.80% and 58.20% respectively.
S-19
<PAGE> 20
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF PERCENTAGE OF TOTAL OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS NUMBER OF ACCOUNTS RECEIVABLES RECEIVABLES
--------------------- --------- ------------------- ----------------- -----------
<S> <C> <C> <C> <C>
Credit Balance........................ 104,031 1.21% $ (13,929,588.24) -0.14%
No Balance............................ 3,922,143 45.44% -- 0.00%
Less than or equal to $1,000.00....... 2,143,855 24.84% 715,007,585.59 7.18%
$ 1,000.01 - $ 3,000.00............... 1,190,005 13.79% 2,227,524,485.04 22.35%
$ 3,000.01 - $ 5,000.00............... 638,340 7.40% 2,511,124,356.39 25.20%
$ 5,000.01 - $ 7,500.00............... 412,002 4.77% 2,506,973,306.38 25.16%
$ 7,500.01 - $10,000.00............... 178,183 2.06% 1,523,797,010.11 15.29%
$10,000.01 or More.................... 42,141 0.49% 494,499,426.25 4.96%
--------- ------ ----------------- ------
Total....................... 8,630,700 100.00% $9,964,996,581.52 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF PERCENTAGE OF TOTAL OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS NUMBER OF ACCOUNTS RECEIVABLES RECEIVABLES
------------------ --------- ------------------- ----------------- -----------
<S> <C> <C> <C> <C>
Less than or equal to $1,000.......... 699,172 8.10% $ 182,254,381.63 1.83%
$ 1,001 - $3,000...................... 1,357,078 15.72% 1,016,115,395.97 10.20%
$ 3,001 - $5,000...................... 1,477,959 17.12% 1,703,521,552.79 17.10%
$ 5,001 - $9,999...................... 3,220,681 37.33% 4,372,743,910.24 43.87%
$10,000 or More....................... 1,875,810 21.73% 2,690,361,340.89 27.00%
--------- ------ ----------------- ------
Total....................... 8,630,700 100.00% $9,964,996,581.52 100.00%
========= ====== ================= ======
</TABLE>
S-20
<PAGE> 21
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF PERCENTAGE OF TOTAL OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS NUMBER OF ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------------------- --------- ------------------- ----------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent........................ 8,354,936 96.80% $9,142,819,256.64 91.75%
1 Day to 30 Days...................... 153,439 1.78% 427,205,534.24 4.29%
31 Days to 60 Days.................... 48,680 0.56% 137,532,610.20 1.38%
61 Days to 90 Days.................... 26,452 0.31% 86,804,379.51 0.87%
91 Days to 120 Days................... 19,642 0.23% 68,558,952.11 0.69%
121 Days and Over..................... 27,551 0.32% 102,075,848.82 1.02%
--------- ------ ----------------- ------
Total....................... 8,630,700 100.00% $9,964,996,581.52 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF PERCENTAGE OF TOTAL OF TOTAL
ACCOUNT AGE ACCOUNTS NUMBER OF ACCOUNTS RECEIVABLES RECEIVABLES
- ----------- --------- ------------------- ----------------- -----------
<S> <C> <C> <C> <C>
0 to 12 Months........................ 215,774 2.50% $ 210,099,001.88 2.11%
Over 12 Months to 24 Months........... 877,828 10.17% 1,005,101,095.48 10.09%
Over 24 Months to 36 Months........... 1,028,578 11.92% 1,132,455,202.21 11.36%
Over 36 Months to 48 Months........... 1,244,023 14.41% 1,287,990,914.67 12.93%
Over 48 Months to 60 Months........... 698,699 8.10% 565,615,741.12 5.68%
Over 60 Months to 72 Months........... 302,379 3.50% 317,032,203.52 3.18%
Over 72 Months to 84 Months........... 237,426 2.75% 231,164,752.39 2.32%
Over 84 Months to 96 Months........... 248,468 2.88% 278,035,955.15 2.79%
Over 96 Months to 108 Months.......... 284,623 3.30% 355,546,597.97 3.57%
Over 108 Months to 120 Months......... 321,926 3.73% 426,401,011.97 4.28%
Over 120 Months....................... 3,170,976 36.74% 4,155,554,105.16 41.69%
--------- ------ ----------------- ------
Total....................... 8,630,700 100.00% $9,964,996,581.52 100.00%
========= ====== ================= ======
</TABLE>
S-21
<PAGE> 22
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF PERCENTAGE OF TOTAL OF TOTAL
STATE ACCOUNTS NUMBER OF ACCOUNTS RECEIVABLES RECEIVABLES
- ----- --------- ------------------- ----------------- -----------
<S> <C> <C> <C> <C>
Alabama.............................. 19,693 0.23% $ 24,993,391.43 0.25%
Alaska............................... 13,123 0.15 19,216,343.04 0.19
Arizona.............................. 246,561 2.86 241,815,317.20 2.43
Arkansas............................. 59,378 0.69 82,289,326.87 0.83
California........................... 3,623,728 41.97 3,616,114,901.17 36.27
Colorado............................. 52,194 0.60 56,527,891.22 0.57
Connecticut.......................... 23,806 0.28 28,842,120.00 0.29
Delaware............................. 4,661 0.05 5,936,769.79 0.06
Florida.............................. 864,419 10.02 1,259,990,916.92 12.64
Georgia.............................. 194,366 2.25 313,851,341.66 3.15
Hawaii............................... 41,267 0.48 38,037,500.48 0.38
Idaho................................ 27,371 0.32 30,982,632.86 0.31
Illinois............................. 132,490 1.54 142,965,382.94 1.43
Indiana.............................. 34,666 0.40 36,917,519.11 0.37
Iowa................................. 31,348 0.36 29,794,399.20 0.30
Kansas............................... 103,352 1.20 109,130,783.64 1.10
Kentucky............................. 17,142 0.20 18,172,873.10 0.18
Louisiana............................ 29,440 0.34 34,989,696.90 0.35
Maine................................ 9,437 0.11 9,690,856.48 0.10
Maryland............................. 118,510 1.37 166,517,415.82 1.67
Massachusetts........................ 60,874 0.71 64,021,542.40 0.64
Michigan............................. 73,282 0.85 87,198,573.69 0.88
Minnesota............................ 35,624 0.41 35,602,847.98 0.36
Mississippi.......................... 11,581 0.13 14,259,857.61 0.14
Missouri............................. 195,737 2.27 237,940,764.45 2.39
Montana.............................. 11,438 0.13 16,071,932.35 0.16
Nebraska............................. 17,859 0.21 17,453,124.98 0.18
Nevada............................... 105,136 1.22 118,289,392.92 1.19
New Hampshire........................ 10,286 0.12 11,874,383.68 0.12
New Jersey........................... 73,152 0.85 87,922,463.18 0.88
New Mexico........................... 87,406 1.01 103,555,848.73 1.04
New York............................. 156,455 1.81 187,846,951.47 1.89
North Carolina....................... 142,324 1.65 203,121,102.18 2.04
North Dakota......................... 4,239 0.05 4,184,473.02 0.04
Ohio................................. 68,308 0.79 78,831,973.56 0.79
Oklahoma............................. 93,162 1.08 119,244,676.09 1.20
Oregon............................... 142,620 1.65 147,601,826.71 1.48
Pennsylvania......................... 86,020 1.00 97,296,758.02 0.98
Rhode Island......................... 7,616 0.09 9,669,546.22 0.10
South Carolina....................... 71,722 0.83 104,031,867.94 1.04
South Dakota......................... 4,952 0.06 4,819,917.29 0.05
Tennessee............................ 93,590 1.08 125,829,733.98 1.26
Texas................................ 515,083 5.97 633,440,780.74 6.36
Utah................................. 25,272 0.29 27,835,270.54 0.28
Vermont.............................. 4,809 0.06 4,770,607.62 0.05
Virginia............................. 157,837 1.83 225,960,958.68 2.27
Washington........................... 641,195 7.43 836,046,143.31 8.39
West Virginia........................ 7,960 0.09 9,191,598.71 0.09
Wisconsin............................ 41,113 0.48 38,018,570.73 0.38
Wyoming.............................. 6,051 0.07 6,940,230.23 0.07
District of Columbia................. 15,003 0.17 23,121,945.07 0.23
Other................................ 16,042 0.19 16,223,537.61 0.16
--------- ------ ----------------- ------
Total...................... 8,630,700 100.00% $9,964,996,581.52 100.00%
========= ====== ================= ======
</TABLE>
S-22
<PAGE> 23
MATURITY ASSUMPTIONS
The Agreement provides that the holders of the Class A Certificates (the
"CLASS A CERTIFICATEHOLDERS") and the holders of the Class B Certificates (the
"CLASS B CERTIFICATEHOLDERS" and, together with the Class A Certificateholders,
the "CERTIFICATEHOLDERS") will not receive payments of principal until July 17,
2006 (the "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 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 a period
called the "CONTROLLED ACCUMULATION PERIOD," 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, and (c) the Adjusted
Investor Interest prior to any deposits on such day, will be deposited in 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 Investor Interest. Amounts in the Principal Funding Account
are expected to be available to pay in full, the Class A Investor Interest and,
after the payment of the Class A Investor Interest in full, the Class B Investor
Interest on the Scheduled Payment Date, and, after the deposit of the Class A
Investor Interest and the Class B Investor Interest in full in the Distribution
Account, the Collateral Interest Amount on the Transfer Date relating to the
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 and the Class B Investor Interest will be paid to the Class B
Certificateholders on the Scheduled Payment Date and the Collateral Interest
Amount will be paid to the holder or holders of the Collateral Interest
(collectively, the "COLLATERAL INTEREST HOLDER") on the Transfer Date relating
to the Scheduled Payment Date, no assurance can be given in this regard. If the
amount required to pay the Class A Investor Interest, the Class B Investor
Interest and the Collateral Interest Amount in full is not available on the
Scheduled Payment Date, a Pay Out Event will occur and the Rapid Amortization
Period will commence.
Rapid Amortization Period. If a Pay Out Event occurs, a period called the
"RAPID AMORTIZATION PERIOD" will commence and any amount on deposit in the
Principal Funding Account will be paid to the Class A Certificateholders, up to
an amount equal to the Class A Investor Interest and, after the Class A Investor
Interest has been paid in full, to the Class B Certificateholders, up to an
amount equal to the Class B Investor Interest, and, after the Class B Investor
Interest has been paid in full, to the Collateral Interest Holder, up to an
amount equal to the Collateral Interest Amount. Payment of amounts on deposit in
the Principal Funding Account as described above will occur on the Distribution
Date in the month immediately 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 earliest of (a) the date on which the Class A
Certificates have been paid in full, (b) August 15, 2008 (the "SERIES 1999-C
TERMINATION DATE"), and (c) the Trust Termination Date. After the Class A
Certificates have been paid in full and if the Series 1999-C Termination Date or
the Trust Termination Date has not occurred, Available Investor Principal
Collections will be paid to the Class B Certificateholders on each Distribution
Date until the earliest of (a) the date on which the Class B Certificates have
been paid in full, (b) the Series 1999-C Termination Date, and (c) the Trust
Termination Date. After the Class B Certificates have been paid in full and if
the Series 1999-C Termination Date or the Trust Termination Date has not
occurred, Available Investor Principal Collections will be paid to the
Collateral Interest Holder on each Transfer Date until the earliest of (a) the
date on which the Collateral Interest has been paid in full, (b) the Series
1999-C Termination Date, and (c) the Trust Termination Date.
Pay Out Events. A Pay Out Event occurs, either automatically or after
specified notice, upon (a) the failure of any of the Transferors 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 any of the Transferors, (c) the
occurrence of certain events of insolvency, receivership or bankruptcy relating
to any 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,
S-23
<PAGE> 24
(f) any Transferor being 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 Investor Interest in full on the Scheduled Payment Date, or
(i) the failure of the Transferors 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" in this
Prospectus Supplement. 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 Minimum 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 an amount equal
to the sum of (a) collections of Finance Charge Receivables, Principal Funding
Investment Proceeds and amounts withdrawn from the Reserve Account, if any, 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 1999-C with respect to the Distribution
Date relating to 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.
Paired Series. The Transferor may, at or after the time at which the
Controlled Accumulation Period commences for Series 1999-C, 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 1999-C 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 1999-C. 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 1999-C 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" in this
Prospectus Supplement. If a pay out event occurs with respect to a Series (which
may be Series 1999-C) 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 1999-C) and for the Paired Series may reset as specified in this
Prospectus Supplement.
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 the calendar year ended December 31,
1996 and (b) for the Trust Portfolio for each of the calendar years ended
December 31, 1997 and December 31, 1998 and the six calendar months ended June
30, 1999, in each case calculated as a percentage of total ending monthly
account balances during the periods shown. The following table does not include
information with respect to the Receivables arising in the Additional Accounts
designated by the Transferor for inclusion in the Trust as of July 2, 1999 (as
of such date, approximately $3.2 billion). Had the Receivables in those
Additional Accounts been included in the Trust Portfolio for the entire six
months ended June 30, 1999, the Transferor believes, based on the performance of
the accounts from which the Additional Accounts were selected, that this
inclusion may have had the effect of lowering the payment rates for the six
months ended June 30, 1999, in the following table, reported as (i) "Lowest
Month" by approximately 0.8%, (ii) "Highest Month" by approximately 2.0%, and
(iii) "Monthly Average" by approximately 1.4%, each on an annualized basis.
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.
S-24
<PAGE> 25
CARDHOLDER MONTHLY PAYMENT RATES(1)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED -------------------------
JUNE 30, 1999(2) 1998 1997 1996
---------------- ----- ----- -----
<S> <C> <C> <C> <C>
Lowest Month........................................ 14.79% 14.14% 13.04% 13.18%
Highest Month....................................... 17.80% 15.82% 15.06% 15.00%
Monthly Average..................................... 15.83% 14.87% 14.07% 14.03%
</TABLE>
- ---------------
(1) Data for 1999, 1998 and 1997 is for the Trust Portfolio as constituted at
such time. Data for 1996 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 text above under the heading "Maturity Assumptions" contains information
relating to the addition of Receivables in Additional Accounts on July 2,
1999.
Currently, with some exceptions, cardholders must make a minimum monthly
payment generally equal to the greater of (a) at least 2.2% 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 and the Collateral Interest
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" in this Prospectus Supplement, 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 Scheduled Payment
Date. See "Maturity Assumptions" and "Risk Factors -- Timing of Principal
Payments" in the accompanying Prospectus.
S-25
<PAGE> 26
RECEIVABLE YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts in the
Initial Identified Pool for the calendar year ended December 31, 1996 and the
gross revenues from finance charges and fees billed to Accounts in the Trust
Portfolio for each of the calendar years ended December 31, 1997 and December
31, 1998 and the six calendar months ended June 30, 1999, are set forth in the
following table. The following table does not include information with respect
to the Receivables arising in the Additional Accounts designated by the
Transferor for inclusion in the Trust as of July 2, 1999 (as of such date,
approximately $3.2 billion). Had the Receivables in those Additional Accounts
been included in the Trust Portfolio for the entire six months ended June 30,
1999, the Transferor believes, based on the performance of the accounts from
which the Additional Accounts were selected, that this inclusion may have had
the effect of lowering the amount reported as "Average Yield," for the six
months ended June 30, 1999, by approximately 0.6%, on an annualized basis.
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 collected from 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 calendar years ended December 31, 1996,
December 31, 1997 and December 31, 1998 and the six calendar months ended June
30, 1999, 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 accompanying Prospectus.
PORTFOLIO YIELD(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------
JUNE 30, 1999(2) 1998 1997 1996
---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(3)........ $6,502,056 $6,048,227 $3,795,496 $4,028,066
Finance Charges and Fee Revenue Billed.... $ 635,184 $1,199,571 $ 744,810 $ 726,444
Interchange............................... $ 65,178 $ 111,005 $ 61,710 $ 73,519
Average Yield(4)(5)....................... 19.54% 19.83% 19.62% 18.03%
</TABLE>
- ---------------
(1) Data for 1999, 1998 and 1997 is for the Trust Portfolio as constituted at
such time. Data for 1996 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 text above under the heading "Receivable Yield Considerations" contains
information relating to the addition of Receivables in Additional Accounts
on July 2, 1999.
(3) Average Receivables Outstanding is the average of the daily ending
receivable balance during the period indicated.
(4) 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.
(5) The percentage reflected for the six months ended June 30, 1999 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 year ended December 31, 1996 may be
different from that set forth above for the Initial Identified Pool. See "Bank
of America's Credit Card Activities" in this Prospectus Supplement and in the
accompanying Prospectus.
S-26
<PAGE> 27
BANK OF AMERICA CORPORATION AND BANK OF AMERICA
Bank of America Corporation (formerly known as BankAmerica Corporation)
(the "CORPORATION") is a multi-bank holding company which was incorporated in
Delaware and formed in connection with the merger on September 30, 1998 of
NationsBank Corporation ("NATIONSBANK") and the former BankAmerica Corporation
("BAC"). At June 30, 1999, the Corporation had total assets of approximately
$614.1 billion, total liabilities of approximately $568.5 billion, and total
shareholders' equity of approximately $45.6 billion. Bank of America is an
indirect wholly-owned subsidiary of the Corporation and was formed as a national
bank organized under the laws of the United States in 1989 and is headquartered
in Phoenix, Arizona. Effective as of the end of the day on March 31, 1999,
NationsBank of Delaware, N.A. merged with and into Bank of America. At March 31,
1999, on a pro forma basis, Bank of America and NationsBank of Delaware, N.A.
had combined total assets of approximately $12.4 billion, total liabilities of
approximately $10.6 billion, and total stockholders' equity of approximately
$1.8 billion (prior to a dividend of $1.0 billion paid in June 1999), as
reported in Bank of America's Consolidated Reports of Condition and Income (the
"CALL REPORT") as of the same date. See "Bank of America Corporation and Bank of
America" in the accompanying Prospectus.
YEAR 2000 ISSUES
General. Because computers frequently use only two digits to recognize
years, on January 1, 2000, many computer systems, as well as equipment that uses
embedded computer chips, may be unable to distinguish between 1900 and 2000. If
not remediated, this problem could create system errors and failures resulting
in the disruption of normal business operations. Since the Year 2000 is a leap
year, there could also be business disruptions as a result of the inability of
many computer systems to recognize February 29, 2000.
In October 1995 and February 1996, respectively, NationsBank and BAC
established project teams to address these issues. Each of these teams remains
in place and continues to work on solving problems related to the Year 2000.
Although each of these Year 2000 teams will proceed according to its respective
work plan, they will capitalize on the best practices of both teams.
Personnel from the Corporation's business segments and project teams are
identifying, analyzing and testing computer systems throughout the Corporation
("SYSTEMS"). Personnel are also taking inventory of equipment that uses embedded
computer chips (i.e., "NON-INFORMATION TECHNOLOGY SYSTEMS" or "INFRASTRUCTURE")
and scheduling remediation or replacement of this Infrastructure, as necessary.
Examples of Infrastructure include ATMs, building security systems, fire alarm
systems, identification and access cards, date stamps and elevators. The
NationsBank team tracks Systems and Infrastructure separately, whereas the BAC
team tracks Systems and Infrastructure collectively ("PROJECTS"). For purposes
of this section, the information provided for Systems and Projects is generally
provided on a combined basis.
State of Readiness. Ultimately, the potential impact of Year 2000 issues
will depend not only on the corrective measures Bank of America undertakes, but
also on the way in which Year 2000 issues are addressed by governmental
agencies, businesses and other entities which provide data to, or receive data
from, Bank of America, or whose financial condition or operational capability is
important to Bank of America as vendors. Accordingly, Bank of America is
communicating with certain of these parties to evaluate any potential impact on
Bank of America.
In particular, Bank of America is contacting its service providers and
software vendors, including TSYS and First Express (collectively, "VENDORS"),
and requesting information on their Year 2000 project plans. Any Vendor which
has not provided appropriate documentation, has not responded timely to Bank of
America's inquiries or does not expect to be compliant until 1999 is placed in
an "at risk" category. Neither TSYS nor First Express has been placed in an "at
risk" category at this time. In accordance with its contingency plans, Bank of
America will be focusing on any such "at risk" mission critical Vendors in order
to mitigate any potential risk.
Costs. Bank of America currently estimates the total cost of the Year 2000
project to be approximately $8.5 million. Of this amount, Bank of America has
incurred cumulative Year 2000 costs of approximately $6.5 million through June
30, 1999. A significant portion of the foregoing cost is not expected to be
incremental to
S-27
<PAGE> 28
Bank of America but instead will constitute a reallocation of existing internal
systems technology resources and, accordingly, will be funded from normal
operations.
Contingency Plans. Bank of America has existing business continuity plans
that address its response to disruptions to business due to natural disasters,
civil unrest, utility outages or other occurrences. Bank of America is
developing business continuity plans specific to Year 2000 issues that are based
on these existing plans. During 1999, the business continuity plans will be
tested and validated with particular attention to event management and
communication processes.
Risks. Although Bank of America's remediation efforts are directed at
reducing its Year 2000 exposure, there can be no assurance that these efforts
will fully mitigate the effect of Year 2000 issues. In the event Bank of America
fails to identify or correct a material Year 2000 problem, there could be
disruptions in normal business operations, which could have a material adverse
effect on Bank of America's results of operations, liquidity or financial
condition. In addition, there can be no assurance that domestic third parties
will adequately address their Year 2000 issues. Further, there may be some such
parties, such as governmental agencies, utilities, telecommunications companies,
financial services vendors and other providers, where alternative arrangements
or resources are not available.
If the Servicer, any subservicer (including TSYS), the Trustee or any of
their respective vendors or third party service providers are not Year 2000
ready, the ability to service the Receivables (in the case of the Servicer, any
subservicer (including TSYS) or any of their respective vendors or third party
service providers) and to make distributions (in the case of the Trustee or any
of its vendors or third party service providers) may be materially and adversely
affected.
Forward-looking statements contained in the foregoing "-- Year 2000 Issues"
section should be read in conjunction with the cautionary statements included in
the introductory paragraphs under "IMPORTANT NOTICE ABOUT INFORMATION PRESENTED
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS" on page S-2.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement as supplemented
by the supplement relating to the Certificates (the "SERIES 1999-C 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 1999-C Supplement. See "Description of the
Certificates" in the accompanying 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 an annual rate equal to
LIBOR plus 0.25% (the "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 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 an annual rate equal to LIBOR plus
0.50% (the "CLASS B CERTIFICATE RATE") on the outstanding principal amount of
the Class B Certificates for the related Interest Period, and payments of
principal on the 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
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<PAGE> 29
Principal Receivables, Excess Spread, funds on deposit in the Principal Funding
Account (in an amount not to exceed the Class A Investor Interest) 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, funds on deposit in the Principal
Funding Account (to the extent such funds exceed the Class A Investor Interest
and in an amount not to exceed the Class B Investor Interest) and the Reserve
Account, 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," which
represents the remaining interest in the assets of the Trust not represented by
the Certificates, the Collateral Interest and the other interests issued by the
Trust. The Transferor Certificate represents 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 accompanying
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 in this
Prospectus Supplement 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 in this Prospectus Supplement 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 Cedelbank 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. Cedelbank and Euroclear will hold
omnibus positions on behalf of the Cedelbank Customers and the Euroclear
Participants, respectively, through customers' securities accounts in
Cedelbank's and Euroclear's names on the books of their respective Depositaries
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 accompanying 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 and
including the Closing Date. Each "INTEREST PERIOD" begins on and includes a
Distribution Date and ends on and excludes the next Distribution Date. However,
the first Interest Period will begin on and include the Closing Date and end on
and include September 14, 1999, the day preceding the first Distribution Date.
Interest will be distributed to Certificateholders on September 15, 1999 and on
the 15th day of each following month (or, if such 15th day is not a business
day, the next succeeding business day) (each, a "DISTRIBUTION DATE"). For
purposes of this Prospectus Supplement and the accompanying Prospectus, a
"BUSINESS DAY" is, 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. 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 and including the Closing Date. Interest due
on the Certificates but not paid on any Distribution
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<PAGE> 30
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 and including 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 1999-C 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 1999-C 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" in this Prospectus Supplement.
"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) an amount equal to the product
of (i) the Class A Account Percentage and (ii) the 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 1999-C Supplement with respect
to such Transfer Date. "CLASS A ACCOUNT PERCENTAGE" means, with respect to any
date of determination, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount on deposit in the Principal Funding Account with
respect to Class A Monthly Principal and the denominator of which is the
aggregate amount on deposit in the Principal Funding Account, in each case as of
the last day of the preceding Monthly Period. "CLASS B AVAILABLE FUNDS" means,
with respect to any Monthly Period, an amount equal to the sum of (a) the Class
B Floating Allocation of collections of Finance Charge Receivables allocated to
the Investor Interest and deposited in the Finance Charge Account for such
Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange), (b) an amount equal to the product of (i) the Class B Account
Percentage and (ii) the 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 B Available
Funds pursuant to the Series 1999-C Supplement with respect to such Transfer
Date. "CLASS B ACCOUNT PERCENTAGE" means, with respect to any date of
determination, the percentage equivalent of a fraction, the numerator of which
is the aggregate amount on deposit in the Principal Funding Account with respect
to Class B Monthly Principal and the denominator of which is the aggregate
amount on deposit in the Principal Funding Account, in each case as of the last
day of the preceding Monthly Period.
The Class A Certificates will accrue interest from and including the
Closing Date through and including August 15, 1999, and from and including
August 16, 1999 through and including September 14, 1999 and with respect to
each Interest Period thereafter, at a rate of 0.25% per annum above LIBOR
prevailing on the related LIBOR Determination Date with respect to each such
period. The Class B Certificates will accrue interest from and including the
Closing Date through and including August 15, 1999, and from and including
August 16, 1999 through and including September 14, 1999 and with respect to
each Interest Period thereafter, at a rate of 0.50% per annum above LIBOR
prevailing on the related LIBOR Determination Date with respect to each such
period.
The Trustee will determine LIBOR on July 26, 1999 for the period from and
including the Closing Date through and including August 15, 1999, on August 12,
1999 for the period from and including August 16, 1999 through and including
September 14, 1999, 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
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<PAGE> 31
DATE"). For purposes of calculating LIBOR, a "LONDON 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 a period of time called 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),
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 relating 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 Adjusted Investor Interest on such
Transfer Date prior to any deposits on such date. Amounts in the Principal
Funding Account will be paid first to the Class A Certificateholders (in an
amount not to exceed the Class A Investor Interest) and then to the Class B
Certificateholders (to the extent such funds exceed the Class A Investor
Interest and in an amount not to exceed the Class B Investor Interest), in each
case, on the Scheduled Payment Date, and lastly to the Collateral Interest
Holder (to the extent such funds exceed the sum of the Class A Investor Interest
and the Class B Investor Interest and in an amount not to exceed the Collateral
Interest Amount) on the Transfer Date preceding the Scheduled Payment Date (in
each case, unless paid earlier due to the commencement of the Rapid Amortization
Period). During the Controlled Accumulation Period, 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, 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 a group of Series designated as the "SHARED EXCESS PRINCIPAL
COLLECTIONS GROUP"
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<PAGE> 32
that are allocated to the Series of the Trust represented by the Certificates
and the Collateral Interest ("SERIES 1999-C").
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 earliest of the date the Class A
Certificates are paid in full, the Series 1999-C Termination Date and the Trust
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 for the related Monthly Period in an amount up to the Class B
Investor Interest until the earliest of the date the Class B Certificates are
paid in full, the Series 1999-C Termination Date and the Trust 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 with respect to the
Rapid Amortization Period, Available Investor Principal Collections until the
earliest of the date the Collateral Interest is paid in full, the Series 1999-C
Termination Date and the Trust 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 June 2005 Distribution Date and on each Determination Date
thereafter, until the Controlled Accumulation Period begins, the Servicer 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
Investor Interest no later than the 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 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 Amount 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 Amount 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,"
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<PAGE> 33
"-- Reallocation of Cash Flows" and "-- Application of Collections -- Excess
Spread; Shared Excess Finance Charge Collections" in this Prospectus Supplement.
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. Each "MONTHLY
PERIOD" will be the period from and including the first day of a calendar month
to and including the last day of such calendar month (other than the initial
Monthly Period, which will commence on and include the Closing Date and end on
and include August 31, 1999).
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 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 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
"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 Adjusted Amount 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.
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<PAGE> 34
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 on such date of determination; provided,
however, that if Series 1999-C 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, upon satisfaction of the Rating Agency
Condition, 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 but only to the extent such balance will be deposited into the Principal
Funding Account or the Distribution Account (for payment to the
Certificateholders or the Collateral Interest Holder) on the Transfer Date
relating to such Monthly Period) 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 1999-C 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, upon satisfaction of the Rating Agency
Condition, by written notice delivered to the Trustee and the Servicer,
designate a different numerator (provided that such numerator is not less than
the Class A Adjusted Investor Interest (less the balance on deposit in the
Principal Account but only to the extent such balance will be deposited into the
Principal Funding Account or the Distribution Account (for payment to the Class
A Certificateholders) on the Transfer Date relating to such Monthly Period) 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 1999-C 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,
upon satisfaction of the Rating Agency Condition, 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 Adjusted 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 but only to the extent such balance will be deposited into the Principal
Funding Account or the Distribution Account (for payment to the Class B
Certificateholders) on the Transfer Date relating to such Monthly Period) 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 Amount as of the close of business on the
last day of the Revolving Period; provided, however, that if Series 1999-C is
paired with a Paired Series and a Pay Out Event occurs with respect to such
Paired Series during
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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 Adjusted
Amount (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 A
Fixed Allocation or the Class B Fixed Allocation to zero but only to the extent
such balance will be deposited into the Principal Funding Account or the
Distribution Account for payment to the Collateral Interest Holder) on the
Transfer Date relating to such Monthly Period) 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 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 Amount 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" in this Prospectus Supplement
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 AMOUNT" for any date means an amount equal to (a)
initially $40,000,000 (the "COLLATERAL INTEREST INITIAL AMOUNT"), 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, minus (e) an amount equal to
the aggregate amount by which the Collateral Interest Amount 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" in this Prospectus Supplement 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 Amount may not be reduced below zero.
"INVESTOR INTEREST" for any date of determination, means an amount equal to
the sum of (a) the Class A Investor Interest, (b) the Class B Investor Interest
and (c) the Collateral Interest Amount.
"CLASS A ADJUSTED INVESTOR INTEREST" for any date of determination, means
an amount equal to the Class A Investor Interest, minus the Principal Funding
Account Balance on such date (up to the Class A Investor Interest).
"CLASS B ADJUSTED INVESTOR INTEREST" for any date of determination, means
an amount equal to the Class B Investor Interest, minus the Principal Funding
Account Balance in excess of the Class A Investor Interest on such date (up to
the Class B Investor Interest).
"COLLATERAL INTEREST ADJUSTED AMOUNT" for any date of determination, means
an amount equal to the Collateral Interest Amount, minus the funds on deposit in
the Principal Funding Account in excess of the sum of the Class A Investor
Interest and the Class B Investor Interest on such date (up to the Collateral
Interest Amount).
"ADJUSTED INVESTOR INTEREST" for any date of determination, means the sum
of (a) the Class A Adjusted Investor Interest, (b) the Class B Adjusted Investor
Interest and (c) the Collateral Interest Adjusted Amount.
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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 1999-C 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
Amount (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 Amount to be a negative number, the Collateral Interest
Amount 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 Amount was not
reduced on such Transfer Date) will be reduced by the amount by which the
Collateral Interest Amount would have been reduced below zero (but not by more
than the excess of the Class A Investor Default Amount, if any, for such Monthly
Period over the amount of such reduction, if any, of the Collateral Interest
Amount 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 Amount 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" in this Prospectus Supplement.
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 1999-C not required to pay the Class A
Required Amount or reimburse Class A Investor Charge-Offs will be used to fund
the Class B Required Amount with respect to such 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 Amount (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 Amount to be a
negative number, the Collateral Interest Amount will be reduced to zero, and the
Class B Investor Interest will be reduced by the amount by which the Collateral
Interest Amount would have been reduced below zero (but not by more than the
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excess of the Class B Investor Default Amount for such Monthly Period over the
amount of such reduction of the Collateral Interest Amount). 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" in this Prospectus Supplement.
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" in this Prospectus Supplement. When such reductions of the
Class A Investor Interest and Class B Investor Interest have been fully
reimbursed, reductions of the Collateral Interest Amount shall be reimbursed
until reimbursed in full in a similar manner.
"REQUIRED AMOUNT" for any Monthly Period means the sum of (a) the Class A
Required Amount and (b) the Class B Required Amount, each for such Monthly
Period.
"REALLOCATED CLASS B PRINCIPAL COLLECTIONS" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor Interest
for such 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 Amount
for such 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 Amount 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 (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 Series 1999-C 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
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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 such Transfer
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 such Transfer
Date, 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 such Transfer Date 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" in
this Prospectus Supplement.
(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 such Transfer
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 such Transfer
Date, 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" in
this Prospectus Supplement.
(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" in
this Prospectus Supplement.
"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 and including the Closing Date
through and including September 14, 1999.
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"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 and including the Closing Date
through and including September 14, 1999.
"COLLATERAL AVAILABLE FUNDS" means, with respect to any Monthly Period, an
amount equal to the sum of (a) 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) and (b) an amount equal to the
product of (i) the Collateral Account Percentage and (ii) the Principal Funding
Investment Proceeds, if any, with respect to the related Transfer Date.
"COLLATERAL ACCOUNT PERCENTAGE" means, with respect to any date of
determination, the percentage equivalent of a fraction, the numerator of which
is the aggregate amount on deposit in the Principal Funding Account with respect
to Collateral Monthly Principal and the denominator of which is the aggregate
amount on deposit in the Principal Funding Account, in each case, as of the last
day of the preceding Monthly Period.
"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
1999-C 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 1999-C, such Excess
Spread and Shared Excess Finance Charge Collections allocated to Series
1999-C 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 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 1999-C, such Excess
Spread and Shared Excess Finance Charge Collections allocated to Series
1999-C shall be applied first to pay amounts due with respect to such
Transfer Date pursuant to clause (b)(i) under "-- Payment of Interest, Fees
and Other Items" above; second to pay amounts due with respect to such
Transfer Date pursuant to clause (b)(ii) under "-- Payment of Interest,
Fees and Other Items" above; 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
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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 Minimum Monthly Interest for
such Transfer Date, plus the amount of any Collateral Minimum Monthly
Interest previously due but not distributed to the Collateral Interest
Holder on a prior Transfer Date, will be distributed to the Collateral
Interest Holder in accordance with the agreement between Bank of America
and the Collateral Interest Holder relating to the transfer of the
Collateral Interest to the Collateral Interest Holder (the "TRANSFER AND
ADMINISTRATION AGREEMENT");
(f) if any Transferor, 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 Amount has been reduced 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" in this Prospectus Supplement 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 shall be paid to the Collateral
Interest Holder on such Transfer Date for application in accordance with
the Transfer and Administration Agreement;
(k) the amount required for Shared Excess Finance Charge Collections,
if any, will constitute a portion of Shared Excess Finance Charge
Collections for the related Distribution Date and will be available for
allocation in the following order of priority: (1) first, to other Series
in Shared Excess Finance Charge Collections Group One and then, (2) to
Series in other Shared Excess Finance Charge Collections Groups; and
(l) the balance, if any, will be paid to the Collateral Interest
Holder on such Transfer Date for application in accordance with the
Transfer and Administration Agreement.
"COLLATERAL MINIMUM MONTHLY INTEREST" with respect to any Distribution Date
will equal the product of (1)(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, times (B) a rate not to exceed 1.05% per annum in excess of LIBOR,
as specified in the Transfer and Administration Agreement (the "COLLATERAL
MINIMUM RATE"), times (C) the Collateral Interest Initial Amount less the
aggregate amount distributed to the Collateral Interest Holder with respect to
Collateral Monthly Principal for all prior Transfer Dates (or, with respect to
the first Transfer Date, the Collateral Initial Amount); provided, however, that
with respect to the first Transfer Date, Collateral Minimum Monthly Interest
will include accrued interest at the Collateral Minimum Rate from and including
the Closing Date through and including September 14, 1999.
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 treated as Shared
Excess Principal Collections and applied as described under
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"Description of the Certificates -- Shared Excess Principal Collections" in
this Prospectus Supplement and in the accompanying 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);
(ii) an amount equal to Class B Monthly Principal will be, after an
amount equal to the Class A Investor Interest has been
deposited in the Principal Funding Account (taking into account
deposits to be made on such Transfer Date), deposited in the
Principal Funding Account (during the Controlled Accumulation
Period) or, after the Class A Investor Interest has been paid
in full (taking into account payments to be made on the related
Distribution Date), distributed (on the related Distribution
Date) to the Class B Certificateholders (during the Rapid
Amortization Period); and
(iii) an amount equal to Collateral Monthly Principal will be, after
an amount equal to the sum of the Class A Investor Interest and
the Class B Investor Interest has been deposited in the
Principal Funding Account, deposited in the Principal Funding
Account (during the Controlled Accumulation Period) or, after
the Class A Investor Interest and the Class B Investor Interest
has been paid in full (taking into account distributions to be
made on the related Distribution Date), distributed (on such
Transfer Date) to the Collateral Interest Holder (during the
Rapid Amortization Period);
(c) 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) above, if any, will be
treated as Shared Excess Principal Collections and applied as described
under "Description of the Certificates -- Shared Excess Principal
Collections" in this Prospectus Supplement and in the accompanying
Prospectus.
"CLASS A MONTHLY PRINCIPAL" with respect to any Transfer Date relating to
the Controlled Accumulation Period or the Rapid Amortization Period 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, the Controlled Deposit
Amount for 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 on which an
amount equal to the Class A Investor Interest has been deposited in the
Principal Funding Account (after taking into account deposits to be made on such
Transfer Date), 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 will be paid in full (after
taking into account payments to be made on the related Distribution Date), will
equal the least 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), (ii) for each Transfer Date with respect to
the Controlled Accumulation Period, the Controlled Deposit Amount for such
Transfer Date (minus the Class A Monthly Principal with respect to such Transfer
Date) and (iii) the Class B Adjusted Investor Interest prior to any deposits on
such Transfer Date.
"COLLATERAL MONTHLY PRINCIPAL" with respect to any Transfer Date relating
to the Controlled Accumulation Period, beginning with the Transfer Date on which
an amount equal to the sum of (i) the Class A Investor Interest and (ii) the
Class B Investor Interest has been deposited in the Principal Funding Account
(after taking into account deposits to be made on such Transfer Date), 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
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Class B Certificates will be paid in full (after taking into account payments to
be made on the related Distribution Date), will equal the least 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 and Class B Monthly
Principal on such Transfer Date), (ii) for each Transfer Date with respect to
the Controlled Accumulation Period, the Controlled Deposit Amount for such
Transfer Date (minus the sum of the Class A Monthly Principal and the Class B
Monthly Principal with respect to such Transfer Date) and (iii) the Collateral
Interest Adjusted Amount prior to any deposits on such Transfer Date.
"CONTROLLED DEPOSIT AMOUNT" means for any Transfer Date, the sum of (a) the
Controlled Accumulation Amount for such Transfer Date and (b) any Accumulation
Shortfall remaining at the close of business on the immediately preceding
Transfer Date.
"CONTROLLED ACCUMULATION AMOUNT" means for any Transfer Date with respect
to the Controlled Accumulation Period, $41,666,667; 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.
"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 deposited into the
Principal Funding Account on 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 deposited into the Principal Funding Account on such subsequent
Transfer Date.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
The Series 1999-C Certificates will be the tenth Series issued by the
Trust, outstanding as of the Closing Date, included in a group of Series
designated "SHARED EXCESS FINANCE CHARGE COLLECTIONS GROUP ONE." Series 1996-A,
Series 1996-B, Series 1997-A, Series 1997-B, Series 1997-C, Series 1998-A,
Series 1998-B, Series 1998-C and Series 1999-A are, and Series 1999-B
(anticipated to be issued substantially concurrently with this Series 1999-C) is
expected to be, 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 or other Shared Excess Finance Charge Collections
Groups 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 or other Shared Excess
Finance Charge Collections Groups.
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 "-- Application of
Collections -- Payment of Interest, Fees and Other Items" and "-- Application of
Collections -- Excess Spread; Shared Excess Finance Charge Collections" in this
Prospectus Supplement. 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, (ii) any similar amounts
remaining with respect to any other Series in Shared Excess Finance Charge
Collections Group One and (iii) any similar amounts remaining with respect to
Series in other Shared Excess Finance Charge Collections Groups, after such
other Groups have completed the sharing of excess collections of finance charge
receivables among the Series within such Group (such amounts described in clause
(iii), if any, the "INTERGROUP EXCESS FINANCE CHARGE COLLECTIONS") that are
available to be applied with respect to Shared Excess Finance Charge Collections
Group One, as described below (the sum of the amounts referred to in clauses (i)
through (iii), the "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
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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") and then, to cover any required
distributions to certificateholders for any Series in other Shared Excess
Finance Charge Collections Groups, if any, entitled thereto which have not been
covered out of the collections of Finance Charge Receivables allocable to such
Series or other Series within the related Shared Excess Finance Charge
Collections Group (such amounts, together with all Finance Charge Shortfalls
with respect to Series in Shared Excess Finance Charge Collections Group One,
the "AGGREGATE FINANCE CHARGE SHORTFALL"). 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. The Servicer will allocate any
Intergroup Excess Finance Charge Collections to cover the Aggregate Finance
Charge Shortfall. If the Aggregate Finance Charge Shortfall exceeds the amount
of Intergroup Excess Finance Charge Collections available for such Monthly
Period, Intergroup Excess Finance Charge Collections will be allocated pro rata
among the Series in the applicable Shared Excess Finance Charge Collections
Groups based on the portion of the Aggregate Finance Charge Shortfall allocable
to each such Series. To the extent that Shared Excess Finance Charge
Collections, as defined with respect to all Series in all Shared Excess Finance
Charge Collections Groups exceed the Aggregate Finance Charge Shortfall, the
balance will be paid to the Collateral Interest Holder. See "Description of
Certificates -- Shared Excess Finance Charge Collections" in the accompanying
Prospectus for a discussion of the limitations on the availability of Shared
Excess Finance Charge Collections.
SHARED EXCESS PRINCIPAL COLLECTIONS
The Series 1999-C Certificates will be the tenth 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, Series 1998-A, Series 1998-B, Series 1998-C and Series
1999-A are, and Series 1999-B (anticipated to be issued substantially
concurrently with this Series 1999-C) is expected to be, 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 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 the Collateral Interest Holder 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 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.
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"
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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.
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" in this
Prospectus Supplement, the Collateral Interest Amount (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 by more than the lesser of the Class A Investor Default Amount and the
Collateral Interest Amount (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 Amount to be a negative number, the Collateral Interest Amount 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 for which the Collateral Interest
Amount is not reduced) will be reduced by the amount by which the Collateral
Interest Amount 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 by 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 and Shared Excess Finance
Charge Collections allocated and available for such purpose as described under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections" in this Prospectus Supplement.
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 as described under "-- Application of Collections -- Excess
Spread; Shared Excess Finance Charge Collections" in this Prospectus Supplement,
the Collateral Amount (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 by
more than the lesser of the Class B Investor Default Amount and the Collateral
Interest Amount (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 Amount to be a negative number, the
Collateral Interest Amount will be reduced to zero and the Class B Investor
Interest will be reduced by the amount by which the Collateral Interest Amount
would have been reduced below zero, but not by 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 Amount (after
giving effect to reductions for any
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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" in this Prospectus Supplement.
On each Transfer Date, if the Collateral Interest 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" in this Prospectus Supplement, the Collateral
Interest Amount will be reduced by the amount of such excess but not by more
than the lesser of the Collateral Default Amount and the Collateral Interest
Amount for such Transfer Date (a "COLLATERAL CHARGE-OFF"). The Collateral
Interest Amount will also be reduced by the amount of Reallocated Principal
Collections and the amount of any portion of the Collateral Interest Amount
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 Amount 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" in this Prospectus Supplement.
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 1999-C Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Certificateholders and the Collateral Interest Holder (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
1999-C from the Principal Account to the Principal Funding Account as described
under "-- Application of Collections" in this Prospectus Supplement.
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 deposited in the Finance Charge Account
and included in Class A Available Funds, Class B Available Funds and Collateral
Available Funds for such Interest Period. If, for any Transfer Date, the
Principal Funding Investment Proceeds are less than the Covered Amount, the
amount of such deficiency (the "RESERVE DRAW AMOUNT") shall be withdrawn, to the
extent required and available, from the Reserve Account and deposited in the
Finance Charge Account and included as Class A Available Funds or Class B
Available Funds or distributed to the Collateral Interest Holder, as provided in
the Series 1999-C Supplement, for such Transfer Date.
"COVERED AMOUNT" means, with respect to any Transfer Date, the sum of (a)
the product of (i) a fraction, the numerator of which is the actual number of
days in such Interest Period and the denominator of which is 360, (ii) the Class
A Certificate Rate in effect with respect to such Interest Period and (iii) the
aggregate amount on deposit in the Principal Funding Account with respect to
Class A Monthly Principal as of the Record Date immediately preceding such
Transfer Date, (b) the product of (i) a fraction, the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360, (ii) the Class B Certificate Rate in effect with respect to such Interest
Period and (iii) the aggregate amount on deposit in the Principal Funding
Account with respect to Class B Monthly Principal as of the Record Date
immediately preceding such Transfer Date, and (c) the product of (i) a fraction,
the numerator of which is the actual number of days in such Interest Period and
the denominator of which is 360, (ii) the Collateral Minimum Rate in effect with
respect to such
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Interest Period and (iii) the aggregate amount on deposit in the Principal
Funding Account with respect to Collateral Monthly Principal as of the Record
Date immediately preceding such Transfer Date.
RESERVE ACCOUNT
Pursuant to the Series 1999-C Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Certificateholders and the Collateral Interest Holder (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,
Class B Certificates and the Collateral Interest 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 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 1999-C. 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 shall distribute such
excess to the Collateral Interest Holder. 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.
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 or before 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 as Class A Available Funds or Class B Available Funds or distributed to
the Collateral Interest Holder, as provided in the Series 1999-C Supplement, 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 Reserve
Draw Amount 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
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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 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 distributed to the Collateral Interest Holder. 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 June 30,
2005 (unless such date is postponed as described under "-- Postponement of
Controlled Accumulation Period" in this Prospectus Supplement), 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 any of the Transferors (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 of such 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 any of the Transferors in
the Agreement, or any information required to be given by such 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 described in this subparagraph (b) shall not be deemed
to occur thereunder if a 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 Transferors 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 Investor Interest is not paid in full on the Scheduled Payment
Date;
(g) certain events of insolvency, receivership or bankruptcy relating
to any Transferor or other holder of the Transferor Certificate;
(h) any 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 interests aggregating not less
than 50% of the Investor Interest, by written notice to the Transferors 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
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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 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 May 31, 2006,
Certificateholders may begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the average life of the
Certificates and the Collateral Interest.
See "Description of the Certificates -- Pay Out Events" in the accompanying
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 $972,222. On each Transfer Date, but only if any of the
Transferors, an affiliate thereof, U.S. Bank National Association or another
successor servicer meeting the requirements described in the Series 1999-C
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 any of the Transferors, 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) 1.25%; provided further, however,
that with respect to the first Transfer Date, the Servicer Interchange may equal
but shall not exceed $607,639. 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) 0.75%, or if any of the Transferors, 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 $315,364. 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
$20,052. 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 $29,167. 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
S-48
<PAGE> 49
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" in this Prospectus Supplement.
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, the Certificateholders or the
Collateral Interest Holder 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 1999-C. 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 1999-C, 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 1999-C 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
Certificateholders 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" in this Prospectus Supplement and "Description of the
Certificates -- Paired Series" in the accompanying Prospectus.
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 accompanying 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 SEC
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 1999-C 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 section 7704 of the Internal Revenue Code of 1986, as amended (the
"CODE") 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 1999-C 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 1999-C Supplement.
S-49
<PAGE> 50
ERISA CONSIDERATIONS
GENERAL
Subject to the considerations described below and in the accompanying
Prospectus, the Class A Certificates may be purchased by, on behalf of, or with
"plan assets" of any employee benefit or other plan that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
section 4975 of the Code (each, a "PLAN"). Any Plan fiduciary that proposes to
cause, or to use "plan assets" of, a Plan to acquire any of the Class A
Certificates should consult with its counsel with respect to the potential
consequences under ERISA and the Code of the Plan's acquisition and ownership of
such Class A Certificates. See "ERISA Considerations" in the accompanying
Prospectus.
The Class B Certificates may not be acquired or held by or with "plan
assets" of any Plan, other than an insurance company investing assets of its
general account. By its acceptance of a Class B Certificate, each Class B
Certificateholder will be deemed to have represented and warranted that either
(i) it is not and will not be a Plan or an entity holding "plan assets" of any
Plan or (ii) it is an insurance company, it acquired and will hold the Class B
Certificates solely with assets of its general account, and such acquisition and
holding satisfies the conditions applicable under sections I and III of U.S.
Department of Labor ("DOL") Prohibited Transaction Class Exemption 95-60.
THE AUTHORIZATION
On March 26, 1999, the DOL authorized Bank of America (the "AUTHORIZATION")
to rely upon the exemptive relief from certain of the prohibited transaction
provisions of ERISA and section 4975 of the Code available under PTCE 96-62
relating to (1) the initial purchase, the holding and the subsequent resale by
Plans of classes of senior certificates representing an undivided interest in a
credit card trust with respect to which Bank of America is the sponsor; and (2)
the servicing, operation and management of such trust, provided that the general
conditions and certain other conditions set forth in the Authorization are
satisfied. The Authorization will apply to the acquisition, holding and resale
of the Class A Certificates by, on behalf of, or with "plan assets" of a Plan,
provided that certain conditions (certain of which are described below) are met.
Among the conditions which must be satisfied for the Authorization to apply
are the following:
(1) The acquisition of the Class A Certificates by a Plan is on terms
(including the price for such Class A Certificates) that are at least as
favorable to the investing Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Class A Certificates acquired by the Plan have received a
rating at the time of such acquisition in one of the two highest generic
rating categories from a Rating Agency; provided, however, notwithstanding
such rating, credit support is provided to the Class A Certificates through
a senior-subordinated structure or other form of third-party credit support
which, at a minimum, represents 5% of the outstanding principal balance of
the Class A Certificates at the time of such acquisition;
(4) The Trustee is not an affiliate of any Underwriter, the
Transferor, the Servicer, any obligor whose receivables constitute more
than 0.5% of the fair market value of the aggregate undivided interest in
the Trust allocated to Series 1999-C, or any of their respective affiliates
(together with the Trustee, the "RESTRICTED GROUP");
(5) The sum of all payments made to and retained by the Underwriters
in connection with the distribution of the Class A Certificates represents
not more than reasonable compensation for underwriting such Class A
Certificates; the consideration received by the Transferor as a consequence
of the assignment of Receivables to the Trust, to the extent allocable to
the Class A Certificates, represents not more than the fair market value of
such Receivables; and the sum of all payments made to and retained by the
Servicer, to the extent allocable to the Class A Certificates, represents
not more than reasonable compensation for the
S-50
<PAGE> 51
Servicer's services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith;
(6) The Plan investing in the Class A Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the SEC under the
Securities Act;
(7) The Trustee is a substantial financial institution or trust
company experienced in trust activities, is familiar with its duties,
responsibilities and liabilities as a fiduciary under ERISA and, as the
legal owner of (or holder of a perfected security interest in) the
Receivables, enforces all the rights created in favor of the Investor
Certificateholders, including Plans;
(8) Prior to the issuance of any new Series, confirmation is received
from the Rating Agencies that such issuance will not result in the
reduction or withdrawal of the then current rating of the Class A
Certificates held by any Plan pursuant to the Authorization;
(9) To protect against fraud, chargebacks or other dilution of the
Receivables, the Agreement and the Rating Agencies require the Transferor
to maintain a Transferor's Interest of not less than 2% of the principal
balance of the receivables contained in the Trust;
(10) Each Receivable is an Eligible Receivable, based on criteria of
the Rating Agencies and as specified in the Agreement, and the Agreement
requires that any change in the terms of the cardholder agreements must be
made applicable to the comparable segment of accounts owned or serviced by
Bank of America which are part of the same program or have the same or
substantially similar characteristics;
(11) The Agreement limits the number of newly originated Accounts to
be designated to the Trust, unless the Rating Agencies otherwise consent in
writing, to the following: (a) with respect to any three-month period, 15%
of the number of existing Accounts designated to the Trust as of the first
day of such period, and (b) with respect to any twelve-month period, 20% of
the number of existing Accounts designated to the Trust as of the first day
of such twelve-month period;
(12) The Agreement requires the Transferor to deliver an opinion of
counsel semi-annually confirming the validity and perfection of the
transfer of Receivables in newly originated Accounts to the Trust if such
an opinion is not delivered with respect to each interim addition; and
(13) The Agreement requires the Transferor and the Trustee to receive
confirmation from each Rating Agency that such Rating Agency will not
reduce or withdraw its then current rating of the Class A Certificates as a
result of (a) a proposed transfer of Receivables in newly originated
Accounts to the Trust, or (b) the transfer of Receivables in all newly
originated Accounts added to the Trust during the preceding three-month
period (beginning at quarterly intervals specified in the Agreement and
ending in the calendar month prior to the date such confirmation is
issued); provided that a Rating Agency confirmation shall not be required
under clause (b) for any three-month period in which any additions of
Receivables in newly originated Accounts occurred only after receipt of
prior Rating Agency confirmation pursuant to clause (a).
The Transferor believes that the Authorization will apply to the
acquisition and holding of the Class A Certificates by Plans and that all
conditions of the Authorization (including those described under "ERISA
Considerations" in the accompanying Prospectus), other than those within the
control of the investors, will be met. It is not anticipated that the Class A
Certificates or the Class B Certificates will qualify as "publicly-offered
securities" (as defined under "ERISA Considerations" in the accompanying
Prospectus).
Any Plan fiduciary considering whether to purchase any Class A Certificates
on behalf of, or with "plan assets" of, a Plan should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and section 4975 of the Code to such investment.
Among other things, before purchasing any Class A Certificates, a Plan fiduciary
should make its own determination as to the availability of the relief provided
in the Authorization and also consider the availability of any other prohibited
transaction exemptions.
S-51
<PAGE> 52
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 Underwriters named below (the "CLASS A UNDERWRITERS"), 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
Underwriters, the "UNDERWRITERS"), the Transferor has agreed to sell to the
Underwriters, and 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 UNDERWRITERS CLASS A CERTIFICATES
- -------------------- --------------------
<S> <C>
Banc of America Securities LLC.............................. $260,500,000
------------
Banc One Capital Markets, Inc............................... $ 43,000,000
------------
Chase Securities Inc........................................ $ 43,000,000
------------
Morgan Stanley & Co. Incorporated........................... $ 43,000,000
------------
Salomon Smith Barney Inc.................................... $ 43,000,000
------------
Total............................................. $432,500,000
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS B UNDERWRITER CLASS B CERTIFICATES
- ------------------- --------------------
<S> <C>
Banc of America Securities LLC.............................. $27,500,000
-----------
Total............................................. $27,500,000
===========
</TABLE>
In the Class A Underwriting Agreement, the Class A Underwriters have
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 Underwriters propose initially to offer the Class A
Certificates to the public at 100% of their face amount 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 Underwriters may allow, and such
dealers may reallow, concessions not in excess of 0.150% 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 Underwriters.
The Class B Underwriter proposes initially to offer the Class B
Certificates to the public at 100% of their face amount 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 0.175% 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.
We will receive proceeds of approximately $431,202,500 from the sale of the
Class A Certificates (representing 99.700% of the principal amount each Class A
Certificate) after paying the underwriting discount of $1,297,500 (representing
0.300% of each Class A Certificate). We will receive proceeds of approximately
$27,403,750 from the sale of the Class B Certificates (representing 99.650% of
each Class B Certificate) after paying the underwriting discount of $96,250
(representing 0.350% of each Class B Certificate). Additional offering expenses
are estimated to be $750,000.
S-52
<PAGE> 53
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.
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 accompanying Prospectus may be used by
Banc of America Securities LLC, an affiliate of the Transferor and Servicer, in
connection with offers and sales related to secondary market transactions in the
Certificates. Banc of America Securities LLC 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 for Bank
of America NT&SA, and by special counsel, Orrick, Herrington & Sutcliffe LLP,
and by special Arizona counsel, Snell & Wilmer L.L.P. Certain legal matters
relating to the federal tax consequences of the issuance of the Certificates
will be passed upon for the Transferor by special counsel, Orrick, Herrington &
Sutcliffe LLP. Certain legal matters relating to the issuance of the
Certificates will be passed upon for the Underwriters by special counsel,
Orrick, Herrington & Sutcliffe LLP.
S-53
<PAGE> 54
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Acceptable Successor Servicer......... S-48
Accounts.............................. S-15
Accumulation Period Length............ S-32
Accumulation Shortfall................ S-42
Additional Interest................... S-30
Adjusted Investor Interest............ S-35
Aggregate Finance Charge Shortfall.... S-43
Aggregate Investor Default Amount..... S-43
Agreement............................. S-15
Authorization......................... S-50
Available Investor Principal
Collections......................... S-31
Available Reserve Account Amount...... S-46
BAC................................... S-27
Bank.................................. S-4
Bank of America....................... S-4
Base Rate............................. S-24
business day.......................... S-29
Call Report........................... S-27
Cedelbank............................. S-13
Certificateholder Servicing Fee....... S-48
Certificateholders.................... S-23
Certificates.......................... S-15
Class A Account Percentage............ S-30
Class A Additional Interest........... S-30
Class A Adjusted Investor Interest.... S-35
Class A Available Funds............... S-30
Class A Certificate Rate.............. S-28
Class A Certificateholders............ S-23
Class A Certificates.................. S-15
Class A Fixed Allocation.............. S-34
Class A Floating Allocation........... S-33
Class A Investor Charge-Off........... S-44
Class A Investor Default Amount....... S-44
Class A Investor Interest............. S-35
Class A Monthly Interest.............. S-38
Class A Monthly Principal............. S-41
Class A Required Amount............... S-36
Class A Servicing Fee................. S-48
Class A Underwriters.................. S-52
Class A Underwriting Agreement........ S-52
Class B Account Percentage............ S-30
Class B Additional Interest........... S-30
Class B Adjusted Investor Interest.... S-35
Class B Available Funds............... S-30
Class B Certificate Rate.............. S-28
Class B Certificateholders............ S-23
Class B Certificates.................. S-15
Class B Fixed Allocation.............. S-34
Class B Floating Allocation........... S-33
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Class B Investor Charge-Off........... S-44
Class B Investor Default Amount....... S-44
Class B Investor Interest............. S-35
Class B Monthly Interest.............. S-39
Class B Monthly Principal............. S-41
Class B Required Amount............... S-36
Class B Servicing Fee................. S-48
Class B Underwriter................... S-52
Class B Underwriting Agreement........ S-52
Closing Date.......................... S-15
Code.................................. S-49
Collateral Account Percentage......... S-39
Collateral Available Funds............ S-39
Collateral Charge-Off................. S-45
Collateral Default Amount............. S-44
Collateral Fixed Allocation........... S-34
Collateral Floating Allocation........ S-33
Collateral Interest................... S-15
Collateral Interest Adjusted Amount... S-35
Collateral Interest Amount............ S-35
Collateral Interest Holder............ S-23
Collateral Interest Initial Amount.... S-35
Collateral Interest Servicing Fee..... S-48
Collateral Minimum Monthly Interest... S-40
Collateral Minimum Rate............... S-40
Collateral Monthly Principal.......... S-41
Controlled Accumulation Amount........ S-42
Controlled Accumulation Period........ S-23
Controlled Deposit Amount............. S-42
Corporation........................... S-27
Covered Amount........................ S-45
Cut-Off Date.......................... S-18
Default Amount........................ S-44
Distribution Date..................... S-29
DOL................................... S-50
DTC................................... S-13
ERISA................................. S-50
Euroclear............................. S-13
Excess Spread......................... S-39
Finance Charge Receivables............ S-19
Finance Charge Shortfalls............. S-43
Fixed Investor Percentage............. S-34
Floating Investor Percentage.......... S-33
Identified Pool....................... S-15
Infrastructure........................ S-27
Initial Identified Pool............... S-17
Interest Period....................... S-29
Intergroup Excess Finance Charge
Collections......................... S-42
</TABLE>
S-54
<PAGE> 55
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Investor Default Amount............... S-43
Investor Interest..................... S-35
Investor Servicing Fee................ S-48
LIBOR................................. S-31
LIBOR Determination Date.............. S-30
London business day................... S-31
Minimum Aggregate Principal
Receivables......................... S-19
Minimum Transferor Interest........... S-19
Monthly Period........................ S-33
NationsBank........................... S-27
Net Servicing Fee Rate................ S-48
non-information technology systems.... S-27
Pay Out Event......................... S-47
Plan.................................. S-50
Portfolio Yield....................... S-24
Principal Funding Account............. S-45
Principal Funding Account Balance..... S-23
Principal Funding Investment
Proceeds............................ S-45
Principal Receivables................. S-19
Principal Shortfalls.................. S-43
Projects.............................. S-27
Rapid Amortization Period............. S-23
Rating Agency Condition............... S-19
Reallocated Class B Principal
Collections......................... S-37
Reallocated Collateral Principal
Collections......................... S-37
Reallocated Principal Collections..... S-37
Receivables........................... S-15
Record Date........................... S-29
Reference Banks....................... S-31
Required Amount....................... S-37
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Required Reserve Account Amount....... S-46
Reserve Account....................... S-46
Reserve Account Funding Date.......... S-46
Reserve Draw Amount................... S-45
Restricted Group...................... S-50
Revolving Period...................... S-31
Scheduled Payment Date................ S-23
Series 1999-C......................... S-32
Series 1999-C Supplement.............. S-28
Series 1999-C Termination Date........ S-23
Servicer Interchange.................. S-48
Shared Excess Finance Charge
Collections......................... S-42
Shared Excess Finance Charge
Collections Group One............... S-42
Shared Excess Principal Collections... S-43
Shared Excess Principal Collections
Group............................... S-31
Systems............................... S-27
Telerate Page 3750.................... S-31
Transfer and Administration
Agreement........................... S-40
Transfer Date......................... S-37
Transferor Certificate................ S-29
Transferor Interest................... S-19
Transferor Percentage................. S-29
Trust................................. S-4,S-15
Trust Portfolio....................... S-18
Underwriters.......................... S-52
Underwriting Agreement................ S-52
Vendors............................... S-27
</TABLE>
S-55
<PAGE> 56
ANNEX I
OTHER SERIES ISSUED
The table below sets forth the principal characteristics of the nine other
Series previously issued by the Trust, Series 1996-A, Series 1996-B, Series
1997-A, Series 1997-B, Series 1997-C, Series 1998-A, Series 1998-B, Series
1998-C and Series 1999-A which are each in Shared Excess Finance Charge
Collections Group One and the Shared Excess Principal Collections Group. In
addition, the table below sets forth certain of the principal characteristics of
Series 1999-B anticipated to be issued substantially concurrently with this
Series 1999-C. It is anticipated that Series 1999-B will also be included 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 (704)
386-3863. 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.
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)........$69,166,667
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
A-1
<PAGE> 57
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
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
A-2
<PAGE> 58
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
A-3
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7. Series 1998-B
Class A Certificates
Initial Investor Interest....................................$648,750,000
Certificate Rate.....................One-Month LIBOR plus 0.12% per annum
Controlled Accumulation Amount (subject to Adjustment)........$54,062,500
Commencement of Accumulation Period........................April 30, 2003
Annual Servicing Fee Percentage...........................2.00% per annum
Initial Collateral Interest...................................$60,000,000
Other Enhancement...................Subordination of Class B Certificates
Series 1998-B Termination Date................June 2006 Distribution Date
Series Issuance Date..........................................May 7, 1998
Class B Certificates
Initial Investor Interest.....................................$41,250,000
Certificate Rate.....................One-Month LIBOR plus 0.28% 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-B Termination Date.....Same as above for Class A Certificates
Series Issuance Date...............Same as above for Class A Certificates
8. Series 1998-C
Class A Certificates
Initial Investor Interest....................................$432,500,000
Certificate Rate.....................One-Month LIBOR plus 0.14% per annum
Controlled Accumulation Amount (subject to Adjustment)........$36,041,667
Commencement of Accumulation Period.......................August 31, 2000
Annual Servicing Fee Percentage..............................2% per annum
Initial Collateral Interest...................................$40,000,000
Other Enhancement...................Subordination of Class B Certificates
Series 1998-C Termination Date.............October 2003 Distribution Date
Series Issuance Date...................................September 25, 1998
Class B Certificates
Initial Investor Interest.....................................$27,500,000
Certificate Rate....................One-Month LIBOR plus 0.365% per annum
Controlled Accumulation Amount................................$27,500,000
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 1998-C Termination Date.....Same as above for Class A Certificates
Series Issuance Date...............Same as above for Class A Certificates
A-4
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9. Series 1999-A
Class A Certificates
Initial Investor Interest....................................$432,500,000
Certificate Rate.....................One-Month LIBOR plus 0.16% per annum
Controlled Accumulation Amount (subject to Adjustment)........$41,666,667
Commencement of Accumulation Period........................April 30, 2003
Annual Servicing Fee Percentage..............................2% per annum
Initial Collateral Interest...................................$40,000,000
Other Enhancement...................Subordination of Class B Certificates
Series 1999-A Termination Date................June 2006 Distribution Date
Series Issuance Date.........................................June 2, 1999
Class B Certificates
Initial Investor Interest.....................................$27,500,000
Certificate Rate.....................One-Month LIBOR plus 0.36% per annum
Controlled Accumulation Amount (subject to Adjustment)........$27,500,000
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 1999-A Termination Date.....Same as above for Class A Certificates
Series Issuance Date...............Same as above for Class A Certificates
10. Series 1999-B
Class A Certificates
Initial Investor Interest....................................$865,000,000
Certificate Rate.....................One-Month LIBOR plus 0.15% per annum
Controlled Accumulation Amount (subject to Adjustment)........$83,333,334
Commencement of Accumulation Period.........................June 30, 2001
Annual Servicing Fee Percentage..............................2% per annum
Initial Collateral Interest...................................$80,000,000
Other Enhancement...................Subordination of Class B Certificates
Series 1999-B Termination Date..............August 2004 Distribution Date
Series Issuance Date (Expected).............................July 28, 1999
Class B Certificates
Initial Investor Interest.....................................$55,000,000
Certificate Rate.....................One-Month LIBOR plus 0.40% per annum
Controlled Accumulation Amount (subject to Adjustment)........$55,000,000
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 1999-B Termination Date.....Same as above for Class A Certificates
Series Issuance Date...............Same as above for Class A Certificates
A-5
<PAGE> 61
PROSPECTUS
BA MASTER CREDIT CARD TRUST
ISSUER
BANK OF AMERICA, NATIONAL ASSOCIATION (USA)
TRANSFEROR AND SERVICER
ASSET BACKED CERTIFICATES
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- ----------------------------------
CONSIDER CAREFULLY THE RISK THE TRUST --
FACTORS BEGINNING ON PAGE 10 IN
THIS PROSPECTUS. - may periodically issue asset backed certificates in one or
more series with one or more classes; and
A certificate is not a deposit
and neither the certificates nor - will own --
the underlying accounts or
receivables are insured or - receivables in a portfolio of consumer revolving credit
guaranteed by the Federal card accounts;
Deposit Insurance Corporation or
any other governmental agency. - payments due on those receivables; and
The certificates will represent - other property described in this prospectus and in the
interests in the trust only and accompanying prospectus supplement.
will not represent interests in
or obligations of Bank of THE CERTIFICATES --
America, National Association
(USA) or any of its affiliates. - will represent interests in the trust and will be paid
only from the trust assets;
This prospectus may be used to
offer and sell any series of - offered with this prospectus will be rated in one of the
certificates only if accompanied four highest rating categories by at least one nationally
by the prospectus supplement for recognized rating organization;
that series.
- may have one or more forms of enhancement; and
- ---------------------------------- - will be issued as part of a designated series which may
include one or more classes of certificates and enhancement.
THE CERTIFICATEHOLDERS --
- will receive interest and principal payments from a
varying percentage of credit card account collections.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
JULY 15, 1999
<PAGE> 62
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents: (a) this prospectus, which provides general information, some of
which may not apply to a particular series of certificates, including your
series, and (b) the accompanying prospectus supplement, which will describe the
specific terms of your series of certificates, including:
- the timing of interest and principal payments;
- financial and other information about the receivables;
- information about enhancement for each class;
- the ratings for each class; and
- the method for selling the certificates.
IF THE TERMS OF A PARTICULAR SERIES OF CERTIFICATES VARY BETWEEN THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN
THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the offer
is not permitted.
We include cross-references in this prospectus and in the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following table of contents and the table of contents
included in the accompanying prospectus supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Terms for Prospectus"
beginning on page 64 in this prospectus.
---------------------------
2
<PAGE> 63
TABLE OF CONTENTS
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PROSPECTUS SUMMARY..................... 5
The Trust and the Trustee............ 5
Trust Assets......................... 5
Information About the Receivables.... 5
Collections by the Servicer.......... 6
Allocation of Trust Assets........... 6
Interest Payments on the
Certificates...................... 6
Principal Payments on the
Certificates...................... 6
Revolving Period.................. 6
Controlled Accumulation Period.... 7
Controlled Amortization Period.... 7
Principal Amortization Period..... 7
Rapid Accumulation Period......... 7
Rapid Amortization Period......... 8
Pay Out Events.................... 8
Shared Excess Finance Charge
Collections....................... 8
Shared Excess Principal
Collections....................... 8
Credit Enhancement................... 8
Optional Repurchase.................. 8
Tax Status........................... 9
ERISA Considerations................. 9
Certificate Ratings.................. 9
RISK FACTORS........................... 10
Limited Ability to Resell Your
Certificates...................... 10
Limited Obligations.................. 10
Potential Priority of Certain
Liens............................. 10
Possible Effects of Insolvency or
Bankruptcy of the Transferor,
Other Holder of Transferor
Certificate or the Servicer....... 10
Transferor's Ability to Change Terms
of the Accounts and Possible
Effect on Certificateholders...... 11
Effects of Consumer Protection Laws
on Certificateholders............. 12
Timing of Principal Payments......... 13
Effect of Subordination on
Subordinated Certificateholders... 13
Risks Relating to Receivables in
Defaulted Accounts................ 13
Basis Risk........................... 14
Effects on Certificateholders of
Issuance of Additional Series by
the Trust......................... 14
THE TRUST.............................. 14
BANK OF AMERICA'S CREDIT CARD
ACTIVITIES........................... 14
General.............................. 14
</TABLE>
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Originations and Underwriting........ 15
Customer Service..................... 16
Interchange.......................... 16
Competition in the Credit Card
Industry.......................... 16
THE RECEIVABLES........................ 17
MATURITY ASSUMPTIONS................... 17
USE OF PROCEEDS........................ 18
BANK OF AMERICA CORPORATION AND BANK OF
AMERICA.............................. 18
DESCRIPTION OF THE CERTIFICATES........ 19
General.............................. 19
Book-Entry Registration.............. 21
Definitive Certificates.............. 24
The Transferor Certificate;
Additional Transferors............ 24
Interest Payments.................... 25
Principal Payments................... 26
Transfer and Assignment of
Receivables....................... 26
New Issuance......................... 26
Representations and Warranties....... 28
Addition of Trust Assets............. 30
Removal of Accounts.................. 31
Collection and Other Servicing
Procedures........................ 32
Discount Option...................... 32
Trust Accounts....................... 33
Funding Period....................... 33
Investor Percentage and Transferor
Percentage........................ 34
Application of Collections........... 35
Groups of Series..................... 36
Shared Excess Finance Charge
Collections....................... 36
Shared Excess Principal
Collections....................... 38
Paired Series........................ 38
Defaulted Receivables; Rebates and
Fraudulent Charges; Investor
Charge-Offs....................... 38
Defeasance........................... 39
Final Payment of Principal;
Termination....................... 39
Pay Out Events....................... 40
Servicing Compensation and Payment of
Expenses.......................... 41
Certain Matters Regarding the
Transferor and the Servicer....... 41
Servicer Default..................... 42
Reports to Certificateholders........ 43
Evidence as to Compliance............ 44
</TABLE>
3
<PAGE> 64
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Amendments........................... 44
List of Certificateholders........... 46
The Trustee.......................... 46
Certificateholders Have Limited
Control of Actions................ 46
CREDIT ENHANCEMENT AND ENHANCEMENT..... 46
General.............................. 46
Subordination........................ 47
Letter of Credit..................... 47
Cash Collateral Guaranty or
Account........................... 48
Collateral Interest.................. 48
Surety Bond or Insurance Policy...... 48
Spread Account....................... 48
Reserve Account...................... 48
Interest Rate Swaps and Related Caps,
Floors and Collars................ 49
CERTIFICATE RATINGS.................... 49
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES.......................... 50
Transfer of Receivables.............. 50
Certain Matters Relating to
Receivership...................... 51
Consumer Protection Laws............. 52
FEDERAL INCOME TAX CONSEQUENCES........ 52
General.............................. 52
</TABLE>
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Treatment of the Certificates as
Debt.............................. 53
Treatment of the Trust............... 53
Taxation of Interest Income of U.S.
Certificate Owners................ 55
Sale or Exchange of Certificates..... 56
Non-U.S. Certificate Owners.......... 56
Information Reporting and Backup
Withholding....................... 57
New Withholding Regulations.......... 57
State and Local Taxation............. 58
ERISA CONSIDERATIONS................... 58
PLAN OF DISTRIBUTION................... 61
LEGAL MATTERS.......................... 62
REPORTS TO CERTIFICATEHOLDERS.......... 62
WHERE YOU CAN FIND MORE INFORMATION.... 62
INDEX OF TERMS FOR PROSPECTUS.......... 64
ANNEX I: GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION PROCEDURES..... A-1
</TABLE>
4
<PAGE> 65
PROSPECTUS SUMMARY
- - THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF THE
CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT.
- - THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
THE TRUST AND THE TRUSTEE
The BA Master Credit Card Trust was formed on July 19, 1996 under an agreement
between Bank of America, National Association (USA) (formerly known as Bank of
America National Association), as transferor and as servicer, and U.S. Bank
National Association (formerly known as First Bank National Association), as
trustee. The trust is a master trust under which one or more series will be
issued through a series supplement to the agreement. Any class or series may not
be offered by this prospectus; for example, they may be offered in a private
placement. The trust may engage only in the following activities:
- - acquiring and holding specified assets;
- - issuing and making payments on the certificates and other interests in the
trust; and
- - engaging in related activities.
TRUST ASSETS
Bank of America has transferred to the trust the receivables in certain
MasterCard(R) and VISA(R)* revolving credit card accounts. All new receivables
generated in the accounts will be transferred automatically to the trust. The
total amount of receivables in the trust will fluctuate daily as new receivables
are generated and payments are received on existing accounts. Additional similar
assets may be transferred to the trust. See "The Receivables" and "Description
of the Certificates -- Addition of Trust Assets" in this prospectus.
The trust assets also include payments due on the receivables and other proceeds
of the receivables and of related credit insurance policies including payments
made, or amounts received, on receivables charged off as uncollectible.
Additional trust assets may include:
- - rights to certain fees Bank of America receives through MasterCard and VISA,
called interchange;
- - monies deposited in certain of the trust's bank accounts and investments of
those monies; and
- - enhancements, including any credit enhancement, guaranteed rate agreement,
maturity liquidity facility, interest rate cap agreement, interest rate swap
agreement, currency swap agreement, or other similar arrangement.
Bank of America may remove, subject to certain limitations and conditions,
receivables that it transferred to the trust. See "Description of the
Certificates -- Removal of Accounts" in this prospectus.
INFORMATION ABOUT THE RECEIVABLES
The receivables arise in accounts selected from Bank of America's credit card
portfolio based on criteria established in the agreement and applied on the date
of their selection.
The receivables consist of both principal receivables and finance charge
receivables.
Principal receivables are, generally, amounts charged by cardholders for (a)
goods and services and (b) cash advances.
Finance charge receivables are the related finance charges and credit card fees.
Interchange fees collected through MasterCard and VISA and annual membership
fees collected from cardholders generally are treated as collections of finance
charge receivables. See "Bank of America's Credit Card
Activities -- Interchange" in this prospectus.
- ---------------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Incorporated and Visa U.S.A., Inc., respectively.
5
<PAGE> 66
COLLECTIONS BY THE SERVICER
Bank of America services the receivables under the agreement. In limited cases,
Bank of America may resign or be removed and either the trustee or a third party
may be appointed as the new servicer. Bank of America, or any new servicer, is
called the servicer. The servicer receives a servicing fee from the trust for
each series. See "Bank of America Corporation and Bank of America" in this
prospectus.
The servicer receives collections on the receivables, deposits those collections
in an account and keeps track of those collections for finance charge
receivables and principal receivables. The servicer then allocates those
collections as summarized below.
ALLOCATION OF TRUST ASSETS
The trust assets will be allocated to the holders of certificates and other
interests of each series. The transferor certificate represents the remaining
interest in the assets of the trust not represented by the certificates and
other interests issued by the trust. If there is more than one class in a
series, there may be a further allocation of trust assets among each class.
The servicer will allocate (a) collections of finance charge receivables and
principal receivables and (b) receivables in accounts charged off as
uncollectible, to each series based on a varying percentage, called the investor
percentage, as described in the accompanying prospectus supplement.
The aggregate amount of principal receivables allocated to a series establishes
that series's investor interest. The transferor interest will be the aggregate
amount of principal receivables in the trust not allocated to each series.
Certificateholders are only entitled to amounts allocated to their series equal
to the interest and principal payments on their certificates. See "Description
of the Certificates -- General" and "-- Investor Percentage and Transferor
Percentage" in this prospectus.
INTEREST PAYMENTS ON THE
CERTIFICATES
Each certificate of a series will represent the right to receive payments of
interest as described in the accompanying prospectus supplement. If a series of
certificates consists of more than one class, each class may differ in, among
other things, priority of payments, payment dates, interest rates, method for
computing interest, and rights to enhancement.
Each class of certificates may have a fixed, floating or any other type of
interest rate. Generally, interest will be paid monthly, quarterly,
semi-annually or on other scheduled dates over the life of the certificates,
each called a distribution date.
If interest is paid less frequently than monthly, collections of finance charge
receivables may be deposited monthly in one or more trust accounts and invested
under guidelines established by the rating agencies until paid to
certificateholders. Interest payments for any series of certificates will be
funded from collections of finance charge receivables allocated to the series,
any applicable enhancement and, if and to the extent specified in the
accompanying prospectus supplement, monies earned while collections were
invested pending payment to certificateholders. See "Description of the
Certificates -- Application of Collections," "-- Shared Excess Finance Charge
Collections" and "Credit Enhancement and Enhancement" in this prospectus.
PRINCIPAL PAYMENTS ON THE
CERTIFICATES
Each certificate of a series will represent the right to receive payments of
principal as described in the accompanying prospectus supplement. If a series of
certificates consists of more than one class, each class may differ in, among
other things, the amounts allocated for principal payments, priority of
payments, payment dates, maturity, and rights to enhancement.
REVOLVING PERIOD
Each class of certificates will begin with a period called a revolving period
during which the trust will not pay, or accumulate, principal for the related
certificateholders. The trust will usually pay available principal to the holder
of the transferor certificate but may pay amounts due to holders of certificates
of other series. The revolving period for a class starts on the date that class
is issued and ends at the start of an amortization period or an accumulation
period.
Following the revolving period, each class of certificates will have one or a
combination of the following periods in which:
6
<PAGE> 67
- - principal is accumulated in specified amounts and paid on a scheduled date
(this occurs during a controlled accumulation period);
- - principal is paid in fixed amounts at scheduled intervals (this occurs during
a controlled amortization period);
- - principal is paid in varying amounts at scheduled intervals (this occurs
during a principal amortization period);
- - principal is accumulated in varying amounts following certain adverse events
and paid on a scheduled date (this occurs during a rapid accumulation period);
- - principal is paid in varying amounts each month following certain adverse
events (this occurs during a rapid amortization period).
CONTROLLED ACCUMULATION PERIOD
If a class of certificates has a controlled accumulation period, the trust is
expected to pay available principal to those certificateholders on a date
specified in the accompanying prospectus supplement called the scheduled payment
date. If the series has more than one class, each class may have a different
priority for payment. For a period of time prior to the scheduled payment date,
the trust is scheduled to deposit available principal in a trust account in
specified amounts plus any specified amounts not previously deposited. If
amounts sufficient to pay the investor interest for a class have not been
accumulated by the scheduled payment date for that class, a pay out event will
occur and the rapid amortization period will begin. The controlled accumulation
period for a class starts on a date specified in the accompanying prospectus
supplement and ends when any one of the following occurs:
- - the investor interest for the class is paid in full;
- - a rapid amortization period or, if it applies, a rapid accumulation period
starts; or
- - the latest date by which principal and interest for the series of certificates
can be paid, called the series termination date.
CONTROLLED AMORTIZATION PERIOD
If a class of certificates has a controlled amortization period, the trust will
pay available principal to those certificateholders on each distribution date
during the controlled amortization period in a fixed amount plus any amounts
previously scheduled but not paid. If the series has more than one class, each
class may have a different priority for payment. The controlled amortization
period for a class starts on the date specified in the accompanying prospectus
supplement and ends when any one of the following occurs:
- - the investor interest for the class is paid in full;
- - a rapid amortization period starts; or
- - the series termination date.
PRINCIPAL AMORTIZATION PERIOD
If a class of certificates has a principal amortization period, the trust will
pay available principal to those certificateholders on each distribution date
during the principal amortization period on which such certificateholders are
scheduled to receive it. If a series has more than one class, each class may
have a different priority and schedule for payment. The principal amortization
period for a class starts on the date specified in the accompanying prospectus
supplement and ends when any one of the following occurs:
- - the investor interest for the class is paid in full;
- - a rapid amortization period starts; or
- - the series termination date.
RAPID ACCUMULATION PERIOD
If a class of certificates has a controlled accumulation period, it may also
have a rapid accumulation period. During a rapid accumulation period, the trust
will periodically deposit available principal in a trust account prior to the
scheduled payment date. The rapid accumulation period for a class starts as
specified in the accompanying prospectus supplement on a day on or after a
designated pay out event has occurred, but in no event later than the scheduled
payment date, and ends when any one of the following occurs:
- - the investor interest for the class is paid in full;
- - a rapid amortization period starts; or
- - the scheduled payment date.
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RAPID AMORTIZATION PERIOD
If a class of certificates is in a rapid amortization period, the trust will pay
available principal to those certificateholders on each distribution date. If
the series has more than one class, each class may have a different priority for
payment. For a class without a rapid accumulation period, the rapid amortization
period starts on the day a pay out event occurs. For a class with a rapid
accumulation period, the rapid amortization period starts as specified in the
accompanying prospectus supplement on a day on or after a related pay out event
occurs, but in no event later than the scheduled payment date for that class.
The rapid amortization period ends when any one of the following occurs:
- - the investor interest for the class is paid in full;
- - the series termination date; or
- - the trust termination date.
PAY OUT EVENTS
A pay out event for any series of certificates will include certain adverse
events described in the accompanying prospectus supplement, including the
following:
- - certain events of insolvency or receivership relating to any of the
transferors or another holder of the transferor certificate;
- - any of the transferors is unable to transfer receivables to the trust as
required under the agreement; or
- - the trust becomes an "investment company" under the Investment Company Act of
1940, as amended.
See "Description of the Certificates -- Pay Out Events" in this prospectus.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any series may be included in a shared excess finance charge collections group.
If specified in the accompanying prospectus supplement, to the extent that
collections of finance charge receivables allocated to any series are not needed
for that series, those collections may be applied to certain shortfalls of
another series in the same shared excess finance charge collections group. To
the extent that collections of finance charge receivables allocated to the
series of any shared excess finance charge collections group are not needed for
such series or group, those collections may be applied to certain shortfalls of
series in other shared excess finance charge collections groups. See
"Description of the Certificates -- Shared Excess Finance Charge Collections"
"-- Application of Collections" and "-- Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs" in this prospectus.
SHARED EXCESS PRINCIPAL COLLECTIONS
If specified in the accompanying prospectus supplement, to the extent that
collections of principal receivables and certain other amounts that are
allocated to the investor interest for any series are not needed for that
series, those collections may be applied to cover principal payments for another
series in the same group. Any reallocation for this purpose will not reduce the
investor interest for the series to which those collections were initially
allocated. See "Description of the Certificates -- Shared Excess Principal
Collections" in this prospectus.
CREDIT ENHANCEMENT
Each class of a series may be entitled to credit enhancement. Credit enhancement
provides additional payment protection to investors in each class of
certificates that has credit enhancement.
Credit enhancement for the certificates of any class may take the form of one or
more of the following:
<TABLE>
<S> <C>
- - subordination - letter of credit
- - collateral interest - surety bond
- - insurance policy - spread account
- - cash collateral - reserve account
guaranty or account
</TABLE>
The type, characteristics and amount of any credit enhancement will be:
- - based on several factors, including the characteristics of the receivables and
accounts at the time a series of certificates is issued; and
- - established based on the requirements of each rating agency rating one or more
classes of the certificates of that series.
See "Credit Enhancement and Enhancement" and "Certificate Ratings" in this
prospectus.
OPTIONAL REPURCHASE
Bank of America has the option to repurchase any series of certificates once the
investor interest for the series is reduced to 5% or less of the initial
investor
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interest. See "Description of the Certificates -- Final Payment of Principal;
Termination" in this prospectus.
TAX STATUS
For information concerning the application of the federal income tax laws,
including whether the certificates will be characterized as debt for federal
income tax purposes, see "Federal Income Tax Consequences" in this prospectus
and "Summary of Terms -- Tax Status" in the accompanying prospectus supplement.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this prospectus and in the accompanying prospectus supplement, the Class A
certificates are eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts.
For reasons discussed under "ERISA Considerations" in this prospectus and the
accompanying prospectus supplement, the Class B certificates are not eligible
for purchase by persons investing assets of employee benefit plans or individual
retirement accounts other than an insurance company investing assets of its
general account.
CERTIFICATE RATINGS
Any certificate offered by this prospectus and the accompanying prospectus
supplement will be rated at issuance in one of the four highest rating
categories, excluding subcategory designations, by at least one nationally
recognized rating organization. Any nationally recognized rating organization
selected by the transferor to rate any series is a rating agency.
A rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning rating agency. Each rating
should be evaluated independently of any other rating. See "Certificate Ratings"
in this prospectus.
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<PAGE> 70
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the certificates.
LIMITED ABILITY TO RESELL
YOUR CERTIFICATES The underwriters may assist in resales of the
certificates but they are not required to do so.
A secondary market for any certificates may not
develop. If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to resell any of
your certificates.
LIMITED OBLIGATIONS The certificates will represent interests in the
trust only and will not represent interests in or
obligations of the transferor or any affiliate of
the transferor. The transferor's obligations with
respect to the certificates and the receivables
are limited to (i) any obligations as transferor
created pursuant to the transferor's
representations and warranties with respect to
the receivables and (ii) any obligations as
servicer under the agreement. The certificates
are not deposits and neither the certificates nor
the underlying accounts or receivables are
insured or guaranteed by the Federal Deposit
Insurance Corporation (the "FDIC") or any other
governmental agency. PROCEEDS OF THE ASSETS
INCLUDED IN THE TRUST (INCLUDING THE RECEIVABLES
AND ANY ENHANCEMENT) WILL BE THE ONLY SOURCE OF
PAYMENTS ON THE CERTIFICATES, AND THERE WILL BE
NO RECOURSE TO THE TRANSFEROR OR ANY OTHER ENTITY
IN THE EVENT THAT SUCH PROCEEDS ARE INSUFFICIENT
OR OTHERWISE UNAVAILABLE TO MAKE PAYMENTS ON THE
CERTIFICATES.
POTENTIAL PRIORITY OF
CERTAIN LIENS The transferor has transferred the receivables to
the trust. However, a court could conclude that
the transferor still owns the receivables and
that the trust holds only a security interest.
The transferor has taken steps to give the
trustee a "first priority perfected security
interest" in the receivables in the event a court
concludes the transferor still owns the
receivables. The holder of a tax or government
lien (or other lien permitted under the law
without the consent of the transferor) on the
transferor's property that attaches before new
receivables come into existence may have priority
over the trust's interest in such new
receivables. Also, if the FDIC is appointed
conservator or receiver of the transferor, the
FDIC's administrative expenses might be paid from
the receivables before the trust receives any
payments on the receivables. See "Certain Legal
Aspects of the Receivables -- Transfer of
Receivables" and "Description of the
Certificates -- Representations and Warranties"
in this prospectus.
POSSIBLE EFFECTS OF
INSOLVENCY OR BANKRUPTCY OF
THE TRANSFEROR, OTHER
HOLDER OF TRANSFEROR
CERTIFICATE OR THE
SERVICER The FDIC has stated that a security interest
granted by a bank should be respected by the FDIC
where --
- the security interest (a) is validly perfected
before the transferor's insolvency and (b) was
not taken in contemplation of the transferor's
insolvency or with the intent to hinder, delay
or defraud the transferor or its creditors.
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<PAGE> 71
FDIC staff positions taken prior to the passage of
the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") do not suggest
that the FDIC would interrupt the timely transfer
to the trust of payments collected on the
receivables. If the FDIC were to assert a
different position, your payments of outstanding
principal and interest could be delayed and
possibly reduced. For example, under the Federal
Deposit Insurance Act (the "FDIA"), the FDIC
could --
- require the trustee to go through an
administrative claims procedure to establish
its right to those payments;
- request a stay of proceedings with respect to the
transferor; or
- repudiate the transferor's pooling and servicing
agreement and limit the trust's resulting claim
to "actual direct compensatory damages."
If a conservator or receiver were appointed for the
transferor, then a pay out event could occur on
all outstanding series. Under the terms of the
agreement, new principal receivables would not be
transferred to the trust and the trustee would
sell the receivables (unless holders of more than
50% of the investor interest of each class of
outstanding certificates, and anyone else
authorized to vote on those matters in a series
supplement, gave the trustee other instructions).
The trust would then terminate earlier than was
planned and you could have a loss if the sale of
the receivables produced insufficient net
proceeds to pay you in full. However, the
conservator or receiver may have the power --
- regardless of the terms of the agreement (a) to
prevent the beginning of a rapid amortization
period (or, if applicable, rapid accumulation
period), (b) to prevent the early sale of the
receivables and termination of the trust or (c)
to require new principal receivables to
continue being transferred to the trust; or
- regardless of the instructions of those
authorized to direct the trustee's actions
under the agreement (a) to require the early
sale of the receivables, (b) to require
termination of the trust and retirement of the
certificates or (c) to prohibit the continued
transfer of principal receivables to the trust.
In addition, if a conservator or receiver is
appointed for the servicer, the conservator or
receiver might have the power to prevent either
the trustee or the certificateholders from
appointing a new servicer under the agreement.
See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to
Receivership" in this prospectus.
TRANSFEROR'S ABILITY TO
CHANGE TERMS OF THE
ACCOUNTS AND POSSIBLE
EFFECT ON
CERTIFICATEHOLDERS The transferor transfers the receivables to the
trust but continues to own the accounts. As owner
of the accounts, the transferor retains the right
to change various account terms (including
finance charges and other fees it charges and the
required monthly minimum payment). A pay out
event could occur if the transferor reduces the
finance charges and other fees it charges and a
corresponding decrease in the collection of
finance charges and fees results. In addition,
changes in the account terms may alter payment
patterns. If payment rates decrease significantly
at a time
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when you are scheduled to receive principal, you
might receive principal more slowly than planned.
The transferor will not reduce the interest rate it
charges on the receivables or other fees if that
action would result in a pay out event unless the
transferor is required by law or determines it is
necessary to maintain its credit card business,
based on its good faith assessment of its
business competition.
The transferor will not change the terms of the
accounts or its servicing practices (including
the reduction of the required minimum monthly
payment and the calculation of the amount or the
timing of finance charges, other fees and
charge-offs) unless the transferor reasonably
believes a pay out event would not occur for any
series and takes the same action on its other
substantially similar accounts, to the extent
permitted by those accounts.
The transferor has no restrictions on its ability
to change the terms of the accounts except as
described above or in the accompanying prospectus
supplement. Changes in relevant law, changes in
the marketplace or prudent business practices
could cause the transferor to change account
terms.
EFFECTS OF CONSUMER
PROTECTION LAWS ON
CERTIFICATEHOLDERS Federal and state consumer protection laws regulate
the creation and enforcement of consumer loans.
Congress and the states could further regulate
the credit card and consumer credit industry in
ways that make it more difficult for the servicer
to collect payments on the receivables or that
reduce the finance charges and other fees that
the transferor can charge on credit card account
balances. For example, if the transferor were
required to reduce its finance charges and other
fees, resulting in a corresponding decrease in
the accounts' effective yield, this could lead to
a pay out event, resulting in the payment of
principal sooner than expected. See "Description
of the Certificates -- Pay Out Events" in this
prospectus.
The transferor makes representations and warranties
relating to the validity and enforceability of
the receivables. Subject to certain conditions
described under "Description of the
Certificates -- Representations and Warranties"
in this prospectus, the transferor must accept
reassignment of each receivable that does not
comply in all material respects with all
requirements of applicable law. However, we do
not anticipate that the trustee will make any
examination of the receivables or the related
records for the purpose of determining the
presence or absence of defects, compliance with
representations and warranties, or for any other
purpose. The only remedy if any representation or
warranty is violated, and the violation continues
beyond the period of time the transferor has to
correct the violation, is that the transferor
must accept reassignment of the receivables
affected by the violation (subject to certain
conditions described under "Description of the
Certificates -- Representations and Warranties"
in this prospectus). See "Certain Legal Aspects
of the Receivables -- Consumer Protection Laws"
in this prospectus.
If a cardholder sought protection under federal or
state bankruptcy or debtor relief laws, a court
could reduce or discharge completely the
cardholder's obligations to repay amounts due on
its Account and, as a
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<PAGE> 73
result, the related receivables would be charged
off as uncollectible. The certificateholders
could suffer a loss if insufficient funds are
available from credit enhancement or other
sources. See "Description of the
Certificates -- Defaulted Receivables; Rebates
and Fraudulent Charges; Investor Charge-Offs" in
this prospectus.
TIMING OF PRINCIPAL
PAYMENTS The receivables may be paid at any time. We cannot
assure the creation of additional receivables in
the accounts or that any particular pattern of
cardholder payments will occur. The commencement
and continuation of a revolving period, a
controlled amortization period, a principal
amortization period or a controlled accumulation
period for a series or class of that series
depend 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 applicable, the rapid accumulation period for
each of those series. If a pay out event occurs,
you could receive payment of principal sooner
than expected. The transferor's ability to
compete in the current industry environment will
affect its ability to generate new receivables
and might also affect payment patterns on the
receivables. In addition, changes in finance
charges can alter the monthly payment rates of
cardholders. A significant decrease in monthly
payment rates could slow the return or
accumulation of principal during an amortization
period or accumulation period. See "Maturity
Assumptions" in this prospectus.
EFFECT OF SUBORDINATION ON
SUBORDINATED
CERTIFICATEHOLDERS Where one or more classes in a series are
subordinated, principal payments on the
subordinated class or classes generally will not
begin until the senior class or classes are
repaid. Additionally, if collections of finance
charge receivables allocated to a series are
insufficient to cover amounts due for that
series's senior certificates, the investor
interest for the subordinated certificates might
be reduced. This would reduce the amount of the
collections of finance charge receivables
available to the subordinated certificates in
future periods and could cause a possible delay
or reduction in principal and interest payments
on the subordinated certificates. If receivables
had to be sold, the net proceeds of that sale
available to pay principal would be paid first to
senior certificateholders and any remaining net
proceeds would be paid to the subordinated
certificateholders.
RISKS RELATING TO
RECEIVABLES IN DEFAULTED
ACCOUNTS Each class of certificates will be allocated a
portion of the receivables charged off as
uncollectible. See "Description of the
Certificates -- Allocation Percentages" and "Bank
of America's Credit Card
Activities -- Delinquency and Loss Experience" in
the accompanying prospectus supplement. If the
amounts of receivables charged off as
uncollectible that are allocated to any
certificates exceed the amounts available to
cover them, which could occur if the limited
amount of credit enhancement is reduced to zero,
those certificateholders may not receive the full
amount of principal and interest due to them. See
"Description of the Certificates -- Reallocation
of Cash Flows,"
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<PAGE> 74
"-- Application of Collections" and "-- Defaulted
Receivables; Investor Charge-Offs" in the
accompanying prospectus supplement.
BASIS RISK Some accounts may have finance charges set at a
variable rate based on a designated index (for
example, the prime rate). A series of
certificates may bear interest either at a fixed
rate or at a floating rate based on a different
index. If the rate charged on the accounts
declines, collections of finance charge
receivables may be reduced without a
corresponding reduction in the amounts payable as
interest on the certificates and other amounts
paid from collections of finance charge
receivables.
EFFECTS ON
CERTIFICATEHOLDERS OF
ISSUANCE OF ADDITIONAL
SERIES BY THE TRUST The trust has issued other series of certificates
and is expected to issue additional series from
time to time. The trust may issue additional
series with terms that are different from your
series without the prior review or consent of any
certificateholders. It is a condition to the
issuance of each new series that each rating
agency that has rated an outstanding series
confirm in writing that the issuance of the new
series will not result in a reduction or
withdrawal of its then current rating of such
outstanding series. However, the terms of a new
series could affect the timing and amounts of
payments on any other outstanding series.
THE TRUST
The BA Master Credit Card Trust (the "TRUST") has been formed in accordance
with the laws of the State of New York pursuant to the pooling and servicing
agreement (as amended from time to time, the "AGREEMENT") between Bank of
America, National Association (USA) (formerly known as Bank of America National
Association) ("BANK OF AMERICA"), as transferor (the "TRANSFEROR") and as
servicer (the "SERVICER"), and U.S. Bank National Association (formerly known as
First Bank National Association), as Trustee (the "TRUSTEE"). The Trust will not
engage in any business activity other than acquiring and holding Receivables,
issuing Series (each, a "SERIES") of asset backed certificates (the
"CERTIFICATES"), Supplemental Certificates and the Transferor Certificate,
making payments thereon and engaging in related activities (including, with
respect to any Series, obtaining any Enhancement, including any Credit
Enhancement, guaranteed rate agreement, maturity liquidity facility, interest
rate cap agreement, interest rate swap agreement, currency swap agreement, or
other similar arrangement ("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.
Furthermore, no such additional capital resources will be available.
BANK OF AMERICA'S CREDIT CARD ACTIVITIES
GENERAL
On December 1, 1994, Bank of America National Trust and Savings Association
("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. The receivables
(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, VISA Gold, and VISA Platinum credit card accounts
and Standard MasterCard, Gold MasterCard, and Platinum MasterCard credit card
accounts. Bank of America is a member of VISA U.S.A., Inc. and of MasterCard
International Incorporated.
The following discussion relates to the accounts in the Identified Pool
from which the Accounts were selected. The Eligible Accounts from which the
Accounts were selected do not necessarily represent the Identified Pool. In
addition, Additional Accounts may consist of Eligible Accounts which are not
currently in
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<PAGE> 75
existence and which may be selected using different criteria from those used in
selecting the Accounts already included in the Trust. See "Description of the
Certificates -- Addition of Trust Assets" in this Prospectus. Consequently,
actual loss and delinquency, revenue and monthly payment rate experience with
respect to the Eligible Accounts may be different from that experienced by the
Trust Portfolio and the Identified Pool described in the accompanying Prospectus
Supplement.
The MasterCard and VISA credit card accounts may be used, and amounts
charged by cardholders for goods and services and cash advances ("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 MasterCard or VISA 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 MasterCard or VISA 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 MasterCard and VISA systems. If either system
materially curtails its activities, or if Bank of America ceases to be a member
of MasterCard or VISA, 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 customers' 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 handles the daily settlements with
MasterCard and VISA. Bank of America has also delegated the payment processing
services relating to some of the Accounts to First Express Remittance ("FIRST
EXPRESS"), a subsidiary of First Tennessee National Association.
ORIGINATIONS AND UNDERWRITING
Credit card accounts are generated by Bank of America principally through:
(1) applications made available to prospective cardholders through a network of
branches operated by Bank of America's affiliated banks; (2) direct-mail
solicitations on a non-prescreened basis; (3) applications mailed to customers
of Bank of America's 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; (5) consumer-initiated requests; and (6) the
acquisition of credit card portfolios from other financial institutions.
When originating accounts, Bank of America is subject to the Corporation's
credit policy guidelines which govern 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. 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.
Bank of America's national direct-mail solicitation process begins with a
prescreening review to identify creditworthy consumers for a credit card
account. As part of the prescreening process, Bank of America provides a set of
credit history criteria to credit reporting agencies, which in turn generate a
list of prospective cardholders with desired attributes. Bank of America further
refines the list by applying its internal underwriting criteria.
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<PAGE> 76
These additional criteria are applied using risk analysis and other statistical
models designed to predict the potential credit risk of prospective cardholders.
In the case of an application which is not pre-approved, the credit risk of
the applicant is 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 is
scored and evaluated based jointly on information reported on the application
and by independent credit reporting agencies.
Before purchasing a portfolio of credit card accounts from another
financial institution, Bank of America reviews the historical performance and
seasoning of the portfolio and the policies and practices of the other financial
institution. Bank of America, however, does not requalify individual accounts
within the acquired portfolio. There can be no assurance, therefore, 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. However,
following the acquisition of a portfolio of credit card accounts, Bank of
America services and maintains such acquired accounts consistent with Bank of
America's policies and practices.
The initial credit line of any account originated by Bank of America is
based on, among other things, each consumer's current credit standing,
historical credit profile, level of indebtedness and income. 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 and decreases 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 MasterCard and VISA associations receive
certain fees from MasterCard and VISA ("INTERCHANGE") as partial compensation
for taking credit risk, absorbing fraud losses and funding receivables for a
limited period prior to initial billing. Under the MasterCard and VISA 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
accompanying Prospectus Supplement (the "PROSPECTUS SUPPLEMENT"), to transfer to
the Trust a percentage of the Interchange attributable to cardholder 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 accompanying Prospectus
Supplement, and, unless otherwise provided in the accompanying 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 fee
(the "SERVICING FEE") paid to the Servicer as servicing compensation.
COMPETITION IN THE CREDIT CARD INDUSTRY
The credit card industry is highly competitive. As new credit card
companies enter the market and all companies try to expand their market share,
effective advertising, target marketing and pricing strategies grow in
importance. Bank of America's ability to compete in this industry environment
will affect its ability to generate
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<PAGE> 77
new Receivables and might also affect payment patterns on the Receivables. If
the rate at which Bank of America generates new Receivables declines
significantly, Bank of America might be unable to designate additional Accounts
to the Trust and a Pay Out Event could occur, resulting in payment of principal
sooner than expected. If the rate at which Bank of America generates new
Receivables decreases significantly at a time when Certificateholders are
scheduled to receive principal, Certificateholders might receive principal more
slowly than planned.
THE RECEIVABLES
The Receivables conveyed to the Trust will arise in the 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"). The Accounts were selected on the
basis of criteria set forth in the Agreement as applied on the date (the
"CUT-OFF DATE") specified in the accompanying Prospectus Supplement and, with
respect to Additional Accounts, as of the date of their designation
(collectively, 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
eligible revolving credit card accounts to be included as 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
and to require the Trustee to reconvey all Receivables in such Accounts (the
"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. The Transferor will make certain representations and
warranties with respect to the Receivables. See "Description of the
Certificates -- Representations and Warranties" in this Prospectus.
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 related charges and credit card fees ("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 holders of each Class of
Certificates (the "CERTIFICATEHOLDERS") of such Series or any specified class
(each, a "CLASS") thereof on each specified distribution date (each, a
"DISTRIBUTION DATE") during either a period called the "CONTROLLED AMORTIZATION
PERIOD" or a period called the "PRINCIPAL AMORTIZATION PERIOD," or are expected
to be accumulated for payment to Certificateholders of such Series or any
specified Class thereof during a period called the "CONTROLLED ACCUMULATION
PERIOD" and, under certain limited circumstances if so specified in the
accompanying Prospectus Supplement, a period called the "RAPID ACCUMULATION
PERIOD" (each, an "ACCUMULATION PERIOD") and distributed on a payment date
specified in the accompanying Prospectus Supplement (a "SCHEDULED PAYMENT
DATE"); provided, however, that, if a period called the "RAPID AMORTIZATION
PERIOD" commences, collections of Principal Receivables will be paid to
Certificateholders in the manner described in this Prospectus and in the
accompanying Prospectus Supplement. The accompanying 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
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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 any were to occur, would
lead to the commencement of a Rapid Amortization Period or, if so specified in
the accompanying 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 accompanying Prospectus Supplement will provide certain historical
data relating to payments by cardholders, total charge-offs and other related
information relating to the Identified Pool or the Trust Portfolio, as
applicable. There can be no assurance that future performance will be consistent
with such historical data.
Cardholders' use of credit and payment patterns may change due to seasonal
variations, the payment habits of individual cardholders, and in response to a
variety of social, technological, legal and economic factors. As a result, the
amount of collections of Receivables may vary from month to month. Relevant
economic factors include the rate of inflation, unemployment levels and relative
interest rates. While the addresses of the cardholders in the portfolio suggest
a wide geographic distribution, the Transferor is unable to determine the extent
to which these factors may affect future credit use or payment patterns. 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 the accompanying 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 a
Controlled Amortization Period, a Principal Amortization Period or a Rapid
Amortization Period (each, 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
accompanying Prospectus Supplement.
BANK OF AMERICA CORPORATION AND BANK OF AMERICA
Bank of America Corporation (the "CORPORATION") is a multi-bank holding
company formed in connection with the merger of NationsBank Corporation, a North
Carolina corporation ("NATIONSBANK") and the former BankAmerica Corporation, a
Delaware corporation ("BAC") pursuant to an Agreement and Plan of Reorganization
dated as of April 10, 1998 (the "MERGER AGREEMENT"). Pursuant to the Merger
Agreement, (i) NationsBank formed a new Delaware subsidiary ("NATIONSBANK (DE)")
and merged (the "REINCORPORATION MERGER") with and into NationsBank (DE), with
NationsBank (DE) as the surviving corporation in the Reincorporation Merger, and
(ii) BAC thereafter merged (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 Merger was consummated on
September 30, 1998, at which time the surviving corporation changed its name to
BankAmerica Corporation. On April 23, 1999, BankAmerica Corporation
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changed its name to Bank of America Corporation. Through its subsidiaries, the
Corporation provides diverse banking and other financial services to
individuals, businesses and corporate, institutional and governmental clients
across the United States and around the world.
Bank of America is an indirect wholly-owned subsidiary of the Corporation.
Bank of America 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.
Effective as of the close of business on March 31, 1999, Bank of America
National Association changed its name to Bank of America, National Association
(USA). Bank of America's activities are primarily related to credit card
lending.
Bank of America NT&SA, a wholly-owned subsidiary of the Corporation, was
formed in 1904. 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.
On March 31, 1999, NationsBank of Delaware, N.A., an indirect wholly-owned
subsidiary of the Corporation and an affiliate of the Transferor was merged with
and into Bank of America National Association, at which time Bank of America
National Association changed its name to Bank of America, National Association
(USA). Prior to this merger, the activities of NationsBank of Delaware, N.A.
were primarily related to credit card lending, and as a result of the merger,
Bank of America now owns the credit card accounts formerly owned by NationsBank
of Delaware, N.A. The Additional Accounts designated by the Transferor on July
2, 1999, the Receivables of which (as of such date, approximately $3.2 billion)
were conveyed to the Trust, consist of accounts acquired pursuant to the merger
with NationsBank of Delaware, N.A. In the future, more accounts so acquired may
also be included in Additional Accounts with respect to the Trust.
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. The "TRANSFEROR CERTIFICATE"
represents the remaining interest in the assets of the Trust not represented by
the Certificates and other interests issued by the Trust. 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 "SERIES SUPPLEMENT"), 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 the applicable Series Supplement.
GENERAL
The Certificates of each Series will represent interests in certain assets
of the Trust, including the right to the applicable "INVESTOR PERCENTAGE," as
described in the accompanying Prospectus Supplement, of all cardholder payments
on the Receivables in the Trust. For each Series of Certificates, the aggregate
amount of Principal Receivables allocated to such Series establishes that
Series' "INVESTOR INTEREST." The Investor Interest on any date generally will be
equal to the initial Investor Interest as of the related date of issuance (the
"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
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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 accompanying Prospectus Supplement.
Each Series of Certificates may 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 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 accompanying 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,
interest rate per annum ("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 accompanying
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 accompanying Prospectus Supplement. Interest will be distributed to
Certificateholders in the amounts, for the periods and on the dates specified in
the accompanying 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 the
accompanying 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" in this Prospectus.
Unless otherwise specified in the accompanying Prospectus Supplement, with
respect to each Series of Certificates, during the period beginning on the
Closing Date and ending with the commencement of an Amortization Period or an
Accumulation Period (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" in this Prospectus. The amount of Principal Receivables in
the Trust, however, will vary each day as new Principal Receivables are created
and others are paid. The "TRANSFEROR INTEREST" is the aggregate amount of
Principal Receivables in the Trust not allocated to each Series. 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 of a Series of
Certificates (a "NEW ISSUANCE"). See "-- New Issuance" in this Prospectus.
Unless otherwise specified in the accompanying Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of The Depository Trust Company ("DTC,"
and together with any successor depository selected by the Transferor, the
"DEPOSITORY") except as set forth below. Unless otherwise specified in the
accompanying 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 & Co. ("CEDE"). Accordingly, Cede is expected to be the holder of record of
each Series of Certificates. No owner of beneficial interests in the
Certificates (a "CERTIFICATE OWNER") acquiring an interest in the Certificates
will be entitled to receive a certificate representing such person's interest in
the Certificates. Unless and until Definitive Certificates are issued for any
Series under the limited circumstances described in this Prospectus, all
references in this Prospectus to actions by Certificateholders shall refer to
actions taken by DTC upon instructions from its Participants (as defined below).
In addition, unless and until Certificates in fully registered, certificated
form ("DEFINITIVE CERTIFICATES") are
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issued for any Series, the Trustee will not consider a Certificate Owner to be a
Certificateholder (as that term is used in the Agreement) and all references in
this Prospectus 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.
Therefore, until such time, a Certificate Owner will only be able to exercise
its rights as a Certificateholder, indirectly through DTC, Cedelbank, societe
anonyme ("CEDELBANK") or the Euroclear System and their participating
organizations. See "-- Book-Entry Registration" and "-- Definitive Certificates"
in this Prospectus.
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 accompanying Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or Cedelbank or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedelbank and
Euroclear will hold omnibus positions on behalf of the Cedelbank Customers and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedelbank's and Euroclear's names on the books of their respective
depositaries (collectively, the "DEPOSITARIES"), which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
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
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). DTC was
created to hold securities for its participating organizations ("PARTICIPANTS")
and facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of Participants,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers (who may include the underwriters of any
Series), banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to others 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").
DTC management is aware that some computer applications and systems used
for processing data were written using two digits rather than four to define the
applicable year, and therefore may not recognize a date using "00" as the Year
2000. This could result in the inability of these systems to properly process
transactions with dates in the Year 2000 and thereafter. DTC has developed and
is implementing a program to address this problem so that its applications and
systems relating to the payment of distributions (including principal and income
payments) to securityholders, book-entry deliveries and settlement of trades
within DTC continue to function properly. This program includes a technical
assessment and a remediation plan, each of which is complete. DTC plans to
implement a testing phase of this program which is expected to be completed
within appropriate time frames.
In addition, DTC is contacting (and will continue to contact) third party
vendors that provide services to DTC to determine the extent of their Year 2000
compliance, and DTC will develop contingency plans as it deems appropriate to
address failures in Year 2000 compliance on the part of third party vendors.
However, there can be no assurance that the systems of third party vendors will
be timely converted and will not adversely affect the proper functioning of
DTC's services.
THE INFORMATION SET FORTH IN THE PRECEDING TWO PARAGRAPHS HAS BEEN PROVIDED
BY DTC FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED TO SERVE AS A
REPRESENTATION, WARRANTY OR CONTRACT
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MODIFICATION OF ANY KIND. THE TRANSFEROR MAKES NO REPRESENTATIONS AS TO THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedelbank Customers and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedelbank
Customers or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedelbank Customers and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedelbank or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedelbank Customer or Euroclear Participant on such business day. Cash received
in Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank Customer or a Euroclear Participant to a DTC Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedelbank or Euroclear cash account only as of the business day
following settlement in DTC.
Certificate Owners 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
holder of the Certificates (a "CERTIFICATEHOLDER") will be Cede, as nominee of
DTC. Certificate Owners will not be recognized by the Trustee as
Certificateholders (as that 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 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
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interests that satisfy such specified percentages. DTC may take conflicting
actions with respect to other interests to the extent that such actions are
taken on behalf of Participants whose holdings include such interests.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its participating organizations
("CEDELBANK CUSTOMERS") and facilitates the clearance and settlement of
securities transactions between Cedelbank Customers through electronic
book-entry changes in accounts of Cedelbank Customers, thereby eliminating the
need for physical movement of certificates. Transactions may be settled in
Cedelbank in any of 34 currencies, including United States dollars. Cedelbank
provides to its Cedelbank Customers, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedelbank interfaces with
domestic markets in several countries. As a registered bank in Luxembourg,
Cedelbank is subject to regulation by the Luxembourg Commission for the
Supervision of the Financial Sector. Cedelbank Customers are recognized
world-wide financial institutions, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the underwriters of any Series of Certificates.
Indirect access to Cedelbank is also available to other institutions, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedelbank Customer, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("EUROCLEAR PARTICIPANTS") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 34
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in more than 25 countries generally similar to
the arrangements for cross-market transfers with DTC described above. The
Euroclear System is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office (the "EUROCLEAR OPERATOR" or "EUROCLEAR"), under
contract with Euroclear Clearance System, Societe Cooperative, a Belgian
cooperative corporation (the "COOPERATIVE"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative Board establishes policy for the Euroclear System.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters of any Series of Certificates. Indirect access to the
Euroclear System is also available to other firms that maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System (collectively, the "TERMS
AND CONDITIONS"). The Terms and Conditions govern transfers of securities and
cash within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedelbank or
Euroclear will be credited to the cash accounts of Cedelbank Customers or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences" in this Prospectus. Cedelbank
or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Agreement on behalf of a
Cedelbank Customer or Euroclear Participant
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only in accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among participants
of DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued at
any time.
In the event that any of DTC, Cedelbank 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" in this
Prospectus.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the accompanying 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 accompanying 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 in this Prospectus 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 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
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"-- Amendments" in this Prospectus); provided, however, that (a) the Transferor
shall have given written notice to each nationally recognized rating
organization selected by the Transferor to rate any Series (each, a "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" and, collectively with Bank of
America, the "TRANSFERORS") under the Agreement (by means of an amendment to the
Agreement that will not require the consent of any Certificateholder; see
"-- Amendments" in this Prospectus) 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" in this Prospectus 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 in this Prospectus.
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" in this Prospectus. See "-- Certain
Matters Regarding the Transferor and the Servicer" in this Prospectus.
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 accompanying Prospectus Supplement. Interest will be
distributed to Certificateholders on the Distribution Dates specified in the
accompanying 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 (each, a
"MONTHLY PERIOD") 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 accompanying 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 accompanying
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.
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PRINCIPAL PAYMENTS
Except in the circumstances specified in the accompanying 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 accompanying 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 accompanying Prospectus Supplement, the Rapid
Accumulation Period, principal will be paid to the Certificateholders in the
amounts and on Distribution Dates specified in the accompanying Prospectus
Supplement. During an Accumulation Period, principal will be accumulated in a
trust account established for the benefit of such Certificateholders (a
"PRINCIPAL FUNDING ACCOUNT") for later distribution to Certificateholders on the
Scheduled Payment Date in the amounts specified in the accompanying 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 accompanying Prospectus Supplement and
allocated to such Series or Class and from certain other sources specified in
the accompanying 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 accompanying 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 accompanying 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 accompanying
Prospectus Supplement.
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" in
this Prospectus.
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
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<PAGE> 87
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 (the
"PRINCIPAL TERMS"). 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 prospectus or other disclosure document
(a "DISCLOSURE DOCUMENT") in offerings pursuant to this Prospectus or in
transactions either registered under the Securities Act of 1933, as amended (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
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 other things: (i) a Series Supplement specifying the
Principal Terms of such Series, (ii) an opinion of counsel to the effect that,
for federal income tax purposes, (a) 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, (b) following
such issuance the Trust will not be deemed to be an association (or publicly
traded partnership) taxable as a corporation and (c) such issuance will not
cause or constitute an event in which gain or loss would be recognized by any
Certificateholder or the Trust (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 in this Prospectus 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 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
a specified minimum level (the "MINIMUM TRANSFEROR INTEREST"). Upon satisfaction
of such conditions, the Trustee will authenticate the new Series.
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REPRESENTATIONS AND WARRANTIES
The Transferor has made in the Agreement, certain representations and
warranties to the Trust to the effect, among other things, that (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 accompanying 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 accompanying 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 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
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of a breach of any of the representations and warranties described in this
paragraph, either the Trustee or the Holders of Certificates evidencing
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 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
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.
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,
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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
accompanying 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
accompanying 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
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, 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 in this
Prospectus 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
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
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receive percentages of collections generated by the pool of assets subject to
such Participation Agreement from time to time and to certain other rights and
remedies specified therein. Participations may have their own credit
enhancement, pay out events, servicing obligations and servicer defaults, all of
which are likely to be enforceable by a separate trustee under the Participation
Agreement and may be different from those specified in this Prospectus. The
rights and remedies of 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
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), the making of representations and
warranties in clause (iii) and receiving applicable notice from the Rating
Agencies as set forth in clause (v)) 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 each of the date such
Additional Accounts are designated for inclusion in the Trust and the date the
existing Receivables are first included in the Trust, 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) each Rating Agency then rating any Series of Certificates
outstanding under the Trust shall have previously, or, in certain limited
circumstances, within a three-month period, given notice to the participating
Transferors 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 Securities and Exchange Commission (the "SEC") 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 accompanying
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
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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
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) 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; (iv) 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; (v) 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; (vi) the Principal Receivables of the
Removed Accounts shall not equal or exceed 5% (or such other percentage
specified in the accompanying 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 sum of (a) the Investor Interest
as of the last day of the Revolving Period or the aggregate principal amount of
the Certificates of such Series (the "FULL INVESTOR INTEREST"), as applicable,
of such Series plus (b) 5% of the aggregate amount of the Receivables in the
Trust at such time; (vii) such other conditions as are specified in the
accompanying Prospectus Supplement; and (viii) the Transferor shall have
delivered to the Trustee an officer's certificate confirming the items set forth
in clauses (i) through (vii) 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 accompanying 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. The term "PORTFOLIO YIELD" will have the meaning
set forth in the accompanying Prospectus Supplement.
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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 accompanying 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, an account established for the purpose of
holding collections of Receivables (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 accompanying 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 accompanying 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 accompanying Prospectus Supplement 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"), 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 deficiency (the "PRE-FUNDING AMOUNT") will be held in a trust account
established with the Trustee for the benefit of Certificateholders of such
Series (the "PRE-FUNDING ACCOUNT") pending the transfer of additional
Receivables to the Trust or pending the reduction of the Investor
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Interests or the Adjusted Investor Interests of other Series issued by the
Trust. The accompanying 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 accompanying Prospectus Supplement. See "-- Addition of Trust
Assets" in this Prospectus. 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. 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 accompanying Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the accompanying Prospectus Supplement. Such payment will reduce
the aggregate principal amount of such Certificates. In addition, if so
specified in the accompanying 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 accompanying 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 accompanying 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 Accounts which were charged-off as
uncollectible by the Servicer ("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
accompanying Prospectus Supplement specifies the method of allocation between
each Class.
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.
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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 accompanying 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 business day immediately prior to each
Distribution Date or other business day specified in the accompanying Prospectus
Supplement (each, a "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
accompanying 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 accompanying 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 accompanying Prospectus Supplement, including for
payment to other Series of Certificates issued by the Trust;
(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 accompanying
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 accompanying 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
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Account or other specified account and will be used as described in the
accompanying 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 accompanying 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 accompanying 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 accompanying 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 (the "SHARED EXCESS PRINCIPAL COLLECTIONS
GROUP") and (b) any number of shared excess finance charge collections groups
(each, a "SHARED EXCESS FINANCE CHARGE COLLECTIONS GROUP"). 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 and Group, 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.
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 accompanying 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
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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 Shared Excess Finance Charge Collections among the Series
included in such Shared Excess Finance Charge Collections Group.
If so specified in the accompanying Prospectus Supplement, and if
shortfalls exist after the sharing described in the immediately preceding
paragraph, the Certificateholders of a Series within a Shared Excess Finance
Charge Collections Group may be entitled to receive all or a portion of the
Intergroup Excess Finance Charge Collections (as defined in the Prospectus
Supplement relating to each applicable Series) with respect to all other Series
within other Shared Excess Finance Charge Collections Groups to cover any
shortfalls with respect to amounts payable from Collections of Finance Charge
Receivables allocable to such Series; provided, however, that the application of
Intergroup Excess Finance Charge Collections among any Series within any Shared
Excess Finance Charge Collections Groups 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 Intergroup 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 Intergroup 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 and any shortfalls with respect to all
outstanding Shared Excess Finance Charge Collections Groups will be paid to the
holder of the Transferor Certificate. The application of Shared Excess Finance
Charge Collections first, among the Series included within a Shared Excess
Finance Charge Collections Group and next, with the Series within other Shared
Excess Finance Charge Collections Groups permits amounts with respect to such
Series that would otherwise be payable to the holder of the Transferor
Certificate to be used first, for the benefit of the Series within the related
Shared Excess Finance Charge Collections Group and next, for the benefit of the
Series within other Shared Excess Finance Charge Collections Groups, in each
case, 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" in this
Prospectus.
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)
any other Shared Excess Finance Charge Collections Groups will be created or, if
created, that any Series will be designated to such Groups, (c) there will be
any Shared Excess Finance Charge Collections with respect to any other Series
within such Shared Excess Finance Charge Collections Group, (d) 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 (e) 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 first, the Series included within
the applicable Shared Excess Finance Charge Collections Group and then, the
Series included in other Shared Excess Finance Charge Collections Groups will
not have adverse regulatory implications for it, there can be no assurance that
this will continue to be true in the future.
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SHARED EXCESS PRINCIPAL COLLECTIONS
If so specified in the accompanying 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 accompanying Prospectus Supplement, the allocation of Shared Excess
Principal Collections may be among Series within the 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 another Series previously or subsequently
issued by the Trust (a "PAIRED SERIES"). As the Investor Interest of the Series
having a Paired Series is reduced, the Investor Interest or Adjusted Investor
Interest (as defined in the accompanying 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 accompanying 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 charged 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 accompanying Prospectus Supplement. If so provided in the accompanying
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 accompanying 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 accompanying Prospectus
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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 or billing error to a
cardholder (including any rebates arising under a 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" in this Prospectus.
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
accompanying 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 a date for
such payment (the "SERIES TERMINATION DATE") with respect to the related Series
of Certificates; 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 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.
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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 accompanying Prospectus Supplement unless one or more of
certain adverse events described in the accompanying Prospectus Supplement
(each, 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 accompanying 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 accompanying 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 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 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
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be immediately deposited in the related Collection Account and allocated as
specified above in "-- Application of Collections" and in "Description of the
Certificates; Application of Collections" in the accompanying 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 final regulations that 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 such final 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, an Additional Transferor or another holder of the Transferor
Certificate, or the appointment of a conservator or receiver for the Transferor,
an Additional Transferor or another holder of the Transferor Certificate, 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 accompanying 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 -- Possible Effects of Insolvency or Bankruptcy of the Transferor, Other
Holder of Transferor Certificate or the Servicer" and "Certain Legal Aspects of
the Receivables -- Certain Matters Relating to Receivership" in this Prospectus.
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 accompanying 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 accompanying 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
accompanying 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.
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
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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 charged 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 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 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
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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 accompanying Prospectus
Supplement.
Unless otherwise stated in the accompanying Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance referred to
in clause (a) above for a period of 10 business days, or referred to under
clause (b) or (c) for a period of 60 business days, 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 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 accompanying Prospectus Supplement, for
each Series of Certificates, on each Distribution Date, or as soon thereafter as
is practicable, as specified in the accompanying 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-
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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 of 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 each accrual period (each, an "INTEREST PERIOD") specified in
the accompanying Prospectus Supplement 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 accompanying 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 accompanying 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,
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 accompanying
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 accompanying 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
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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 interests aggregating not less than 66 2/3 (or such
other percentage specified in the accompanying Prospectus Supplement) of the
Investor Interests for all Series of 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 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.
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 Sections 860H through 860L of the Code, 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" in this Prospectus. 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" in this
Prospectus.
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."
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LIST OF CERTIFICATEHOLDERS
With respect to each Series of Certificates, upon written request of
Certificateholders of record representing interests in the Trust aggregating not
less than 10% (or such other percentage specified in the accompanying 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" in this
Prospectus.
THE TRUSTEE
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 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.
CERTIFICATEHOLDERS HAVE LIMITED CONTROL OF ACTIONS
Certificateholders of any Series or Class within a Series may need the
consent or approval of a specified percentage of the Investor Interest of other
Series or a Class of such other Series to take or direct certain actions,
including to require the appointment of a successor Servicer after a Servicer
Default, to amend the Agreement in some cases, and to direct a repurchase of all
outstanding Series after certain violations of the Transferor's representations
and warranties. The interests of the Certificateholders of any such Series may
not coincide with yours, making it more difficult for any particular
Certificateholder to achieve the desired results from such vote.
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 accompanying Prospectus Supplement, or any
combination of the foregoing. If so specified in that accompanying 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 in that accompanying
Prospectus Supplement. 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 accompanying 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
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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
accompanying Prospectus Supplement includes a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment thereunder
not otherwise described in this Prospectus, (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 accompanying 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 policyholders' surplus,
if applicable, and other appropriate financial information as of the date
specified in such accompanying Prospectus Supplement. If so specified in the
accompanying 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 accompanying
Prospectus Supplement (the "ENHANCEMENT INVESTED AMOUNT").
SUBORDINATION
If so specified in the accompanying Prospectus Supplement, one or more
Classes of any Series will be subordinated as described in the accompanying
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 accompanying Prospectus Supplement. If so specified in the
accompanying Prospectus Supplement, subordination may apply only in the event of
certain types of losses not covered by another Credit Enhancement. The
accompanying 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
accompanying Prospectus Supplement specifies the manner and conditions for
applying such a cross-support feature.
LETTER OF CREDIT
If so specified in the accompanying 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 accompanying 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 accompanying
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
accompanying Prospectus Supplement.
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CASH COLLATERAL GUARANTY OR ACCOUNT
If so specified in the accompanying 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 accompanying Prospectus
Supplement. The accompanying 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 accompanying 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 accompanying Prospectus Supplement which
will be increased (i) to the extent the Transferor elects, subject to certain
conditions specified in the accompanying 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 accompanying
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 accompanying 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 accompanying Prospectus
Supplement. The accompanying 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 accompanying 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 accompanying Prospectus Supplement.
If so specified in the accompanying 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
accompanying Prospectus Supplement.
SPREAD ACCOUNT
If so specified in the accompanying 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 accompanying Prospectus Supplement.
RESERVE ACCOUNT
If so specified in the accompanying 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 accompanying
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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 accompanying 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
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.
CERTIFICATE RATINGS
Any rating of the Certificates by a Rating Agency will indicate:
- its view on the likelihood that Certificateholders will receive required
interest and principal payments; and
- its evaluation of the Receivables and the availability of any Credit
Enhancement for the Certificates.
Among the things a rating will not indicate are:
- the likelihood that interest or principal payments will be paid on a
scheduled date;
- the likelihood that a Pay Out Event will occur;
- the likelihood that a United States withholding tax will be imposed on
non-U.S. Certificateholders;
- the marketability of the Certificates;
- the market price of the Certificates; or
- whether the Certificates are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the
Certificates. A rating may be lowered or withdrawn at any time by a Rating
Agency.
The Transferor will request a rating of the Certificates offered by this
Prospectus and the accompanying Prospectus Supplement from at least one Rating
Agency. Rating agencies other than those requested could assign a rating to the
Certificates and such a rating could be lower than any rating assigned by a
Rating Agency chosen by the Transferor.
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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 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" in this Prospectus.
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 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 have priority
over the interest of the Trust in such Receivable. In addition, through fraud or
negligence of the Transferor, a subsequent transferee of the Receivables may
also have priority over the interests of the Trust. In addition, if the FDIC
were appointed as conservator or receiver of the Transferor, certain
administrative expenses of the conservator or 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 this Prospectus. 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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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 or the propriety of its actions.
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 such Receivables, as
described below. To the extent that the Transferor has granted a security
interest in the 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, or were to require the Trustee to establish
its right to those payments by submitting to and completing the administrative
claims procedure under the FDIA, or were 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 any Transferor or other
holder of the Transferor Certificate or a bankruptcy or insolvency event were to
occur with respect to any 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 on and after any such
appointment or insolvency event. 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 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 any Transferor 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 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. 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
accompanying Prospectus Supplement, collected and held for the benefit of
Certificateholders. This procedure could be delayed, as described above. If a
Pay Out Event occurs, 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
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 accompanying 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 this Prospectus. In addition, in the event of
a Servicer Default relating to the conservatorship, receivership, or insolvency
of the
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Servicer, 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 discussion
of the Trust's rights arising from the breach of these warranties, see
"Description of the Certificates -- Representations and Warranties" in this
Prospectus.
Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdiction's consumer protection laws (including
laws limiting the charges imposed by such credit card issuers) in connection
with their operations in such jurisdictions. A successful challenge by such a
jurisdiction could have an adverse impact on the Transferor's credit card
operations or the yield on the Receivables in the Trust.
If a cardholder sought protection under federal or state bankruptcy or
debtor relief laws, a court could reduce or discharge completely the
cardholder's obligations to repay amounts due on its Account and, as a result,
the related Receivables would be charged off as uncollectible. The
Certificateholders could suffer a loss if insufficient funds are available from
Credit Enhancement or other sources. See "Description of the
Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs" in this Prospectus.
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 in this Prospectus. 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
accompanying 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.
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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.
TREATMENT OF THE CERTIFICATES AS DEBT
The Transferor expresses 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 in this Prospectus has been
the subject of any Treasury regulation, revenue ruling or judicial decision, for
federal income tax purposes the Certificates offered hereby 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
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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 does 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 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.
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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 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" in this Prospectus and the accompanying
Prospectus Supplement. 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 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,"
unless such excess is less 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 particular circumstances. The Transferor
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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"
in this Prospectus. 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 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
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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 it may be
possible to submit other documentary evidence. As defined by Treasury
regulations, the term "broker" includes all persons who stand ready to effect
sales made by others in the ordinary course of a trade or business, as well as
brokers and dealers registered as such under the laws of the United States or a
state. These requirements generally will apply to a U.S. office of a broker, and
the information reporting requirements generally will apply to a foreign office
of a U.S. broker as well as to a foreign office of a foreign broker (i) that is
a controlled foreign corporation within the meaning of section 957(a) of the
Code or (ii) 50 percent or more of whose gross income from all sources for the
three year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the foreign broker has been in
existence) was effectively connected with the conduct of a trade or business
within the United States.
Any amounts withheld under the backup withholding rules from a payment to a
Certificate Owner would be allowed as a refund or a credit against such
Certificate Owner's U.S. federal income tax, provided that the required
information is furnished to the IRS.
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,
2000, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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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 the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and section 4975 of the Code prohibit certain pension, profit
sharing or other employee benefit plans, individual retirement accounts or
annuities and employee annuity plans and Keogh plans (collectively, "PLANS")
from engaging in certain transactions involving "plan assets" with persons that
are "parties in interest" under ERISA or "disqualified persons" under the Code
(collectively, "PARTIES IN INTEREST") with respect to the Plan. A violation of
these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and section 4975 of the Code for such persons, unless a
statutory, regulatory or administrative exemption is available. Plans that are
governmental plans (as defined in section 3(32) of ERISA) and certain church
plans (as defined in section 3(33) of ERISA) are not subject to ERISA
requirements.
A violation of the prohibited transaction rules could occur if any
Certificates or any Class or Series were to be purchased with "plan assets" of
any Plan and the Transferor, the Trustee, any underwriters of such Class or
Series or any of their affiliates were a Party in Interest with respect to such
Plan, unless a statutory, regulatory or administrative exemption is available or
an exception applies under a regulation (the "PLAN ASSET REGULATION") issued by
the Department of Labor (the "DOL"). The Transferor, the Trustee, any
underwriters of a Class or 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 Class or Series or any of
their affiliates and consult their counsel regarding the purchase in light of
the considerations described below. The DOL has issued five class exemptions
that may apply to otherwise prohibited transactions arising from the purchase or
holding of the Certificates: DOL Prohibited Transaction Class Exemptions
("PTCES") 84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers), 90-1 (Class Exemption for
Certain Transactions Involving Insurance Company Pooled Separate Accounts),
91-38 (Class Exemption for Certain Transactions Involving Bank Collective
Investment Funds), 95-60 (Class Exemption for Certain Transactions Involving
Insurance Company General Accounts), and 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-House Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan holds an equity interest as "plan assets" of such
Plan. Because the Certificates will represent beneficial interests in the Trust,
and despite the agreement of the Transferor and the Certificate Owners to treat
each Class 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 and result in non-exempt prohibited transactions,
unless either of the following exceptions applies.
The first exception applies to a "publicly-offered security." A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who were independent of the issuer
and of one another ("INDEPENDENT INVESTORS") and (c) either is (i) part of a
class of securities registered under section 12(b) or 12(g) of the Exchange Act,
or (ii) sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act and the
class of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the SEC)
after the end of the fiscal year of the issuer during which the offering of such
securities to the public occurred. For purposes of the 100 Independent Investor
criterion, except to the extent otherwise disclosed in the accompanying
Prospectus Supplement, each Class of Certificates should be deemed to be a
"class" of securities that would be tested separately from any other securities
that may be issued by the Trust. The accompanying Prospectus
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Supplement will indicate whether it is anticipated that each Class of
Certificates will meet the foregoing criteria for treatment as "publicly-offered
securities."
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.
A third exception may also be available. On March 26, 1999, the DOL
authorized Bank of America (the "AUTHORIZATION") to rely upon the exemptive
relief from certain of the prohibited transaction provisions of ERISA and
section 4975 of the Code available under PTCE 96-62 relating to (1) the initial
purchase, the holding and the subsequent resale by Plans of classes of senior
certificates ("SENIOR CERTIFICATES") representing an undivided interest in a
credit card trust with respect to which Bank of America is the sponsor; and (2)
the servicing, operation and management of such trust, provided that the general
conditions and certain other conditions set forth in the Authorization are
satisfied. The Authorization will apply to the acquisition, holding and resale
of the Senior Certificates by, on behalf of, or with "plan assets" of a Plan,
provided that certain conditions (certain of which are described below) are met.
Among the conditions which must be satisfied for the Authorization to apply
are the following:
(1) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for such Senior Certificates) that are at least as
favorable to the investing Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Plan have received a
rating at the time of such acquisition that is either in (i) one of the two
highest generic rating categories from a Rating Agency or (ii) for Senior
Certificates of one year or less, the highest short-term generic rating
category from a Rating Agency; provided that, notwithstanding such rating,
credit support is provided to the Senior Certificates through a
senior-subordinated structure or other form of third-party credit support
which, at a minimum, represents 5% of the outstanding principal balance of
the Senior Certificates at the time of such acquisition;
(4) The Trustee is not an affiliate of any member of the Restricted
Group (as defined below);
(5) The sum of all payments made to and retained by the underwriters
in connection with the distribution of the Senior Certificates represents
not more than reasonable compensation for underwriting such Senior
Certificates; the consideration received by the Transferor as a consequence
of the assignment of Receivables to the Trust, to the extent allocable to
the Senior Certificates, represents not more than the fair market value of
such Receivables; and the sum of all payments made to and retained by the
Servicer, to the extent allocable to the Senior Certificates, represents
not more than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith;
(6) The Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the SEC under the
Securities Act;
(7) The Trustee is a substantial financial institution or trust
company experienced in trust activities, is familiar with its duties,
responsibilities and liabilities as a fiduciary under ERISA, and, as the
legal owner of (or holder of a perfected security interest in) the
Receivables, enforces all the rights created in favor of the
Certificateholders, including Plans;
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(8) Prior to the issuance of any new Series, confirmation is received
from the Rating Agencies that such issuance will not result in the
reduction or withdrawal of the then current rating of the Senior
Certificates held by any Plan pursuant to the Authorization;
(9) To protect against fraud, chargebacks or other dilution of the
Receivables, the Agreement and the Rating Agencies require the Transferor
to maintain a Transferor's Interest of not less than 2% of the principal
balance of the receivables contained in the Trust;
(10) Each Receivable is an Eligible Receivable, based on criteria of
the Rating Agencies and as specified in the Agreement, and the Agreement
requires that any change in the terms of the cardholder agreements must be
made applicable to the comparable segment of accounts owned or serviced by
Bank of America which are part of the same program or have the same or
substantially similar characteristics;
(11) The Agreement limits the number of newly originated Accounts to
be designated to the Trust, unless the Rating Agencies otherwise consent in
writing, to the following: (a) with respect to any three-month period, 15%
of the number of existing Accounts designated to the Trust as of the first
day of such period, and (b) with respect to any twelve-month period, 20% of
the number of existing Accounts designated to the Trust as of the first day
of such twelve-month period;
(12) The Agreement requires the Transferor to deliver an opinion of
counsel semi-annually confirming the validity and perfection of the
transfer of Receivables in newly originated Accounts to the Trust if such
an opinion is not delivered with respect to each interim addition; and
(13) The Agreement requires the Transferor and the Trustee to receive
confirmation from each Rating Agency that such Rating Agency will not
reduce or withdraw its then current rating of the Senior Certificates as a
result of (a) a proposed transfer of Receivables in newly originated
Accounts to the Trust, or (b) the transfer of Receivables in all newly
originated Accounts added to the Trust during the preceding three-month
period (beginning at quarterly intervals specified in the Agreement and
ending in the calendar month prior to the date such confirmation is
issued); provided that a Rating Agency confirmation shall not be required
under clause (b) for any three-month period in which any additions of
Receivables in newly originated Accounts occurred only after receipt of
prior Rating Agency confirmation pursuant to clause (a).
The Trust also must meet the following requirements:
(a) The corpus of the Trust must consist only of Receivables of the
type which have been included in other investment pools;
(b) Certificates evidencing interests in such other investment pools
have been rated in one of the two highest generic rating categories by at
least one of the Rating Agencies for at least one year prior to the Plan's
acquisition of Certificates; and
(c) Certificates evidencing an interest in such other investment pools
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of Senior Certificates.
Moreover, the Authorization provides relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when a
Plan fiduciary causes a Plan to acquire Senior Certificates if the fiduciary (or
its affiliate) is an obligor on the Receivables held in the Trust; provided that
among other requirements: (a) in the case of an acquisition in connection with
the initial issuance of Senior Certificates, at least 50% of each Class of
Certificates in which Plans have invested is acquired by persons independent of
the Restricted Group and at least 50% of the aggregate interest in the Trust is
acquired by persons independent of the Restricted Group; (b) such fiduciary (or
its affiliate) is an obligor with respect to 0.5% or less of the fair market
value of the obligations contained in the Trust; (c) the Plan's investment in
Senior Certificates does not exceed 25% of all of the Senior Certificates
outstanding after the acquisition; and (d) no more than 25% of the assets of the
Plan are invested in securities representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Authorization does
not apply to Plans sponsored by the Transferor, any underwriter of the Senior
Certificates, the Trustee, the Servicer, any obligor with respect to obligations
included in the Trust constituting more than 0.5% of the fair market value of
the aggregate undivided interest in the Trust allocated to the Senior
Certificates of a
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Series, determined on the date of the initial issuance of such Series, or any
affiliate of any such party (the "RESTRICTED GROUP").
The DOL has designated the Authorization as an "underwriter exemption." As
a result, an insurance company investing solely assets of its general account
may be able to acquire and hold certain subordinated Certificates of a Series;
provided that (i) the Senior Certificates of that Series are eligible for relief
under the Authorization and (ii) such acquisition and holding satisfies the
conditions applicable under sections I and III of PTCE 95-60.
If none 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" of Plans, 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 "plan 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 respect to such Plan assets, and (ii) will be based on
the particular investment needs of such Plan; or (c) unless PTCE 90-1, 91-38 or
95-60 applies, is an employer maintaining or contributing to such Plan.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Certificates on behalf of 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 assets were considered "plan assets," and the
availability of exemptive relief from the prohibited transaction rules under the
Authorization or otherwise.
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 other factors discussed in this Prospectus and in the accompanying
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 offered by this Prospectus, the Transferor will agree to sell or
cause the Trust to sell to each of the underwriters named therein and in the
accompanying 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 accompanying 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
accompanying Prospectus Supplement). Banc of America Securities LLC, 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 accompanying 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.
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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 accompanying Prospectus Supplement may be used by
Banc of America Securities LLC, an affiliate of the Transferor and Servicer, in
connection with offers and sales related to market-making transactions in the
Certificates. Banc of America Securities LLC 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.
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.
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 Bank
of America NT&SA, and by special counsel, Orrick, Herrington & Sutcliffe LLP,
and by Snell & Wilmer, L.L.P., special Arizona counsel. Certain legal matters
relating to the federal tax consequences of the issuance of the Certificates
will be passed upon for the Transferor by special tax counsel, Orrick,
Herrington & Sutcliffe LLP. Certain legal matters relating to the issuance of
the Certificates will be passed upon for the underwriters by Orrick, Herrington
& Sutcliffe LLP.
REPORTS TO CERTIFICATEHOLDERS
The Servicer will prepare monthly and annual reports that will contain
information about the Trust. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until Definitive Certificates are issued, the reports
will be sent to Cede, which is the nominee of DTC and the registered holder of
the Certificates. No financial reports will be sent to you. See "Description of
the Certificates -- Book-Entry Registration," "-- Reports to Certificateholders"
and "-- Evidence as to Compliance" in this Prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Certificates with the
SEC. This Prospectus is part of the registration statement, but the registration
statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov).
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The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in this
Prospectus or the accompanying Prospectus Supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf of the Trust until we terminate our offering of the
Certificates.
As a recipient of this Prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing or
calling us at: (704) 386-3863.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------
<S> <C>
Accounts............................ 17
Accumulation Period................. 17
Additional Accounts................. 30
Additional Transferor............... 25
Aggregate Addition Limit............ 30
Aggregate Investor Default Amount... 38
Agreement........................... 14
Amortization Period................. 18
Assignment.......................... 31
Authorization....................... 59
Automatic Additional Accounts....... 30
BAC................................. 18
Bank of America..................... 14
Bank of America NT&SA............... 14
Bank Portfolio...................... 17
Bill................................ 55
Cash Collateral Account............. 48
Cash Collateral Guaranty............ 48
Cede................................ 20
Cedelbank........................... 21
Cedelbank Customers................. 23
Certificate Owner................... 20
Certificate Rate.................... 20
Certificateholder................... 22
Certificateholders.................. 17
Certificates........................ 14
Class............................... 17
Closing Date........................ 19
Code................................ 55
Collateral Interest................. 48
Collection Account.................. 33
Controlled Accumulation Period...... 17
Controlled Amortization Period...... 17
Cooperative......................... 23
Corporation......................... 18
counterparties...................... 49
Credit Enhancement.................. 46
Credit Enhancement Percentage....... 34
Credit Enhancement Provider......... 43
Cut-Off Date........................ 17
Defaulted Accounts.................. 34
Definitive Certificates............. 20
Depositaries........................ 21
Depository.......................... 20
Designated Additional Accounts...... 30
Determination Date.................. 38
Disclosure Document................. 27
Discount Percentage................. 32
Distribution Account................ 33
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------
<S> <C>
Distribution Date................... 17
DOL................................. 58
DTC................................. 20
Eligible Account.................... 29
Eligible Receivable................. 29
Enhancement......................... 14
Enhancement Invested Amount......... 47
ERISA............................... 58
Euroclear........................... 23
Euroclear Operator.................. 23
Euroclear Participants.............. 23
Exchange Act........................ 21
FASIT............................... 55
FDIA................................ 11
FDIC................................ 10
Finance Charge Account.............. 33
Finance Charge Receivables.......... 17
FIRREA.............................. 11
First Express....................... 15
Fitch............................... 33
Full Investor Interest.............. 32
Funding Period...................... 33
GAAP................................ 45
Group............................... 36
Holders............................. 24
Identified Pool..................... 17
Independent Investors............... 58
Indirect Participants............... 21
Ineligible Receivable............... 28
Insolvency Event.................... 40
Interchange......................... 16
Interest Funding Account............ 25
Interest Period..................... 44
Investor Interest................... 19
Investor Percentage................. 19
IRS................................. 53
L/C Bank............................ 47
LIBOR............................... 49
Merger.............................. 18
Merger Agreement.................... 18
Minimum Transferor Interest......... 27
Monthly Period...................... 25
Moody's............................. 33
NationsBank......................... 18
NationsBank (DE).................... 18
New Issuance........................ 20
New Regulations..................... 57
non-U.S. Certificate Owner.......... 53
OID................................. 53
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
- ---- ------
<S> <C>
OID regulations..................... 53
Paired Series....................... 38
Participants........................ 21
Participation Agreement............. 30
Participations...................... 30
Parties in Interest................. 58
Pay Out Event....................... 40
Paying Agent........................ 43
Permitted Investments............... 33
Plan Asset Regulation............... 58
Plans............................... 58
Portfolio Yield..................... 32
Pre-Funding Account................. 33
Pre-Funding Amount.................. 33
Principal Account................... 33
Principal Amortization Period....... 17
Principal Funding Account........... 26
Principal Receivables............... 15
Principal Terms..................... 27
Prospectus Supplement............... 16
PTCEs............................... 58
Qualified Institution............... 33
Rapid Accumulation Period........... 17
Rapid Amortization Period........... 17
Rating Agency....................... 25
Receivables......................... 14
Record Date......................... 20
Regulations......................... 54
Reincorporation Merger.............. 18
Removed Accounts.................... 17
Reorganization...................... 18
Reserve Account..................... 48
Restricted Group.................... 61
Revolving Period.................... 20
Scheduled Payment Date.............. 17
SEC................................. 31
Securities Act...................... 27
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------
<S> <C>
Senior Certificates................. 20, 59
Series.............................. 14
Series Supplement................... 19
Series Termination Date............. 39
Service Transfer.................... 42
Servicer............................ 14
Servicer Default.................... 43
Servicing Fee....................... 16
Shared Excess Finance Charge
Collections Group................. 36
Shared Excess Principal Collections
Group............................. 36
Special Counsel..................... 52
Spread Account...................... 48
Standard & Poor's................... 33
Subordinated Certificates........... 20
Supplemental Certificate............ 24
Swaps............................... 49
Tax Opinion......................... 27
Terms and Conditions................ 23
Transfer Date....................... 35
Transferor.......................... 14
Transferor Certificate.............. 19
Transferor Interest................. 20
Transferor Percentage............... 20
Transferors......................... 25
Trust............................... 14
Trust Portfolio..................... 17
Trust Termination Date.............. 40
Trustee............................. 14
TSYS................................ 15
U.S. Certificate Owner.............. 53
U.S. Person......................... 53
UCC................................. 50
Unallocated Principal Collections... 36
Underwriting Agreement.............. 61
Withholding Agent................... 56
</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"), Cedelbank or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedelbank and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC (other than
through accounts at Cedelbank or Euroclear) will follow the settlement practices
applicable to U.S. corporate debt obligations. Investor securities custody
accounts will be credited with their holdings against payment in same-day funds
on the settlement date.
Investors electing to hold their Global Securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Global Securities will be credited to
the securities custody accounts on the business day following the settlement
date against payment for value on the settlement date.
SECONDARY MARKET TRADING
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trading of any Global Securities where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants (other than Citibank, N.A. ("CITIBANK") and Morgan Guaranty Trust
Company of New York ("MORGAN") as depositories for Cedelbank and Euroclear
respectively) will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Cedelbank Customers and/or Euroclear Participants.
Secondary market trading between Cedelbank Customers and/or Euroclear
Participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
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Trading between DTC seller and Cedelbank or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
(other than Citibank and Morgan as depositories for Cedelbank and Euroclear,
respectively) to the account of a Cedelbank Customer or a Euroclear Participant,
the purchaser must send instructions to Cedelbank or Euroclear, as the case may
be, before settlement date 12:30. Cedelbank or Euroclear, as the case may be,
will instruct Citibank or Morgan, respectively, to receive the Global Securities
against payment. Payment will then be made by Citibank or Morgan, as the case
may be, to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedelbank Customer's or Euroclear
Participant's account. Credit for the Global Securities will appear the next day
(European time) and cash debit will be back-valued to, and the interest on the
Global Securities will accrue from, the value date (which would be the preceding
day when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedelbank or Euroclear cash
debit will be valued instead as of the actual settlement date.
Cedelbank Customers and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedelbank or Euroclear. Under this approach,
they may take on credit exposure to Cedelbank or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank Customers or Euroclear Participants can elect not to
pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedelbank Customers or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedelbank
Customer's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
Citibank or Morgan for the benefit of Cedelbank Customers or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently from a trade between two DTC Participants.
Trading between Cedelbank or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedelbank Customers and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through Citibank or Morgan, to another DTC Participant. The seller must send
instructions to Cedelbank or Euroclear, as the case may be, before settlement
date 12:30. In these cases, Cedelbank or Euroclear will instruct Citibank or
Morgan, as appropriate, to credit the Global Securities to the DTC Participant's
account against payment. The payment will then be reflected in the account of
the Cedelbank Customer or Euroclear Participant the following business day, and
receipt of the cash proceeds in the Cedelbank Customer's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). If the Cedelbank Customer
or Euroclear Participant has a line of credit with its respective clearing
system and elects to draw on such line of credit in anticipation of receipt of
the sale proceeds in its account, the back-valuation may substantially reduce or
offset any overdraft charges incurred over that one-day period. If settlement is
not completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the Cedelbank Customer's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through
Cedelbank or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless, under currently applicable law, (i) each
clearing system, bank or other financial institution that holds
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customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8 (Certificate
of Foreign Status). If the information shown on Form W-8 changes, a new
Form W-8 must be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the Certificate Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (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.
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.
Further, the IRS has recently proposed new regulations that would revise
some aspects of the current system for withholding on amounts paid to foreign
persons. Under these proposed regulations, interest or OID paid to a nonresident
alien would continue to be exempt from U.S. withholding taxes (including backup
withholding) provided that the holder complies with the new certification
procedures.
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BA MASTER CREDIT CARD TRUST
ISSUER
BANK OF AMERICA, NATIONAL ASSOCIATION (USA)
TRANSFEROR AND SERVICER
SERIES 1999-C
$460,000,000 FLOATING-RATE ASSET BACKED CERTIFICATES
---------------------------
Prospectus Supplement
---------------------------
Underwriters of the Class A Certificates
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
Underwriter of the Class B Certificates
BANC OF AMERICA SECURITIES LLC
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information.
We are not offering the certificates in any state where the offer is not
permitted.
The delivery of this prospectus supplement and the accompanying prospectus
at any time does not imply that the information in this prospectus supplement
and the accompanying prospectus is correct as of any date after the dates on
their covers. We note that if any material change occurs while this prospectus
supplement and the accompanying prospectus are required by law to be delivered,
we will update the relevant information in this prospectus supplement and the
accompanying prospectus to incorporate the material change.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the certificates and with respect to their unsold allotments or
subscriptions. In addition all dealers selling the certificates will deliver a
prospectus supplement and prospectus until October 20, 1999.
This document is printed entirely on recycled paper.
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