<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 5, 1996)
NationsBank Credit Card Master Trust
$756,000,000 Class A Floating Rate Asset Backed Certificates, Series 1996-1
$58,500,000 Class B Floating Rate Asset Backed Certificates, Series 1996-1
NationsBank of Delaware, N.A.
Transferor and Servicer
Each Class A Floating Rate Asset Backed Certificate (collectively, the
"Class A Certificates") and each Class B Floating Rate Asset Backed Certificate
(collectively, the "Class B Certificates" and, together with the Class A
Certificates, the "Certificates") will represent an undivided interest in the
NationsBank Credit Card Master Trust (the "Trust") created pursuant to a Pooling
and Servicing Agreement between NationsBank of Delaware, N.A. ("NationsBank")
and The Bank of New York, as trustee (the "Trustee"). In addition, a Collateral
Indebtedness Interest (as defined herein) having an initial principal amount of
$85,500,000 will be issued as part of Series 1996-1, and will be subordinated to
the Certificates as described herein. The Collateral Indebtedness Interest is
not offered hereby. The property of the Trust will include receivables (the
"Receivables") generated from time to time in a portfolio of revolving credit
card accounts (the "Accounts"), all monies due in payment of the Receivables,
and certain other property, as described herein. NationsBank will own the
remaining undivided interest in the Trust not represented by the Certificates,
by the Collateral Indebtedness Interest, by other investor certificates issued
by the Trust and by the interests of Enhancement Providers (as defined in the
Prospectus), if any, and will service the Receivables. NationsBank has offered
and sold and from time to time may offer and sell other Series that evidence
undivided interests in certain assets of the Trust, which may have terms
significantly different from the Certificates.
(continued on next page)
There currently is no secondary market for the Certificates, and there is
no assurance that one will develop. Potential investors should consider, among
other things, the information set forth in "Risk Factors" beginning on page 13
in the Prospectus.
Non-U.S. Persons considering purchasing the Certificates should consider
the information discussed in Annex II to this Prospectus Supplement entitled
"Additional Information for Non-U.S. Persons."
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF NATIONSBANK OF DELAWARE,
N.A. OR ANY AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND
NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR
RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[CAPTION]
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Price to Underwriting Proceeds to
Public (1) Discount Transferor (1)(2)
<S> <C> <C> <C>
Per Class A Certificate................... 100.00% 0.35% 99.65%
Per Class B Certificate................... 100.00% 0.40% 99.60%
Total..................................... $814,500,000 $2,880,000 $811,620,000
</TABLE>
(1) Plus accrued interest, if any, from June 11, 1996.
(2) Before deduction of expenses estimated to be $700,000.
This Prospectus Supplement and the related Prospectus may be used by
NationsBanc Capital Markets, Inc., an affiliate of the Transferor and Servicer,
in connection with offers and sales related to market-making transactions in the
Certificates. NationsBanc Capital Markets, Inc. 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. Certain information in this
Prospectus Supplement and the Prospectus will be updated from time to time as
described in "Incorporation of Certain Documents by Reference" in the
Prospectus.
The Certificates are offered by the Underwriters when, as and if issued by
the Trust and accepted by the Underwriters and subject to the Underwriters'
right to reject orders in whole or in part. It is expected that the Certificates
will be delivered in book-entry form on or about June 11, 1996, through the
facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the
Euroclear System.
Underwriters of the Class A Certificates
NationsBanc Capital Markets, Inc.
Chase Securities Inc.
Lehman Brothers
Morgan Stanley
& Co.
Incorporated
UBS
Securities LLC
Underwriter of the Class B Certificates
NationsBanc Capital Markets, Inc.
June 5, 1996
<PAGE>
Interest will accrue on the Class A Certificates from June 11, 1996 (the
"Closing Date") through the day preceding the September 1996 Interest Payment
Date, and with respect to each Interest Period thereafter, at the rate of 0.15%
per annum above the London interbank offered quotations for three-month United
States dollar deposits ("LIBOR") prevailing on the related LIBOR Determination
Date (as defined herein) determined as described herein (the "Class A
Certificate Rate"). Interest will accrue on the Class B Certificates from the
Closing Date through the day preceding the September 1996 Interest Payment Date,
and with respect to each Interest Period thereafter, at the rate of 0.28% per
annum above LIBOR prevailing on the related LIBOR Determination Date determined
as described herein (the "Class B Certificate Rate"). Interest with respect to
the Certificates will be distributed quarterly on the 15th day of each
September, December, March and June or, if such 15th day is not a Business Day
(as defined herein), the next succeeding Business Day (each, an "Interest
Payment Date"), commencing with the September 1996 Interest Payment Date,
provided that following the payment in full of the Class A Certificates or upon
the occurrence of an Early Amortization Event (as defined herein) interest will
be payable on the 15th day of each month or, if such day is not a Business Day,
the next succeeding Business Day (each, a "Distribution Date"). Principal on the
Class A Certificates is scheduled to be paid on the June 2003 Distribution Date,
but may be paid earlier or later under certain circumstances described herein.
Principal on the Class B Certificates is scheduled to be paid on the July 2003
Distribution Date, but may be paid earlier or later under certain circumstances
described herein. See "Maturity Assumptions."
The Class B Certificates will be subordinated to the Class A Certificates to
the extent necessary to fund payments on the Class A Certificates as described
herein. The Collateral Indebtedness Interest will be subordinated to the Class A
Certificates and the Class B Certificates as described herein. The Certificates
will also be entitled to the benefits of funds, if any, on deposit in a cash
collateral account (the "Cash Collateral Account"), as described herein. See
"Description of the Certificates -- Cash Collateral Account."
Application will be made to list the Certificates on the Luxembourg Stock
Exchange.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF SECURITIES IN THE
UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES ACT 1986 AND
THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1995 WITH RESPECT TO ANYTHING DONE
BY ANY PERSON IN RELATION TO SECURITIES IN, FROM OR OTHERWISE INVOLVING THE
UNITED KINGDOM MUST BE COMPLIED WITH.
The Certificates offered hereby constitute a separate Series of Certificates
being offered by the Transferor from time to time pursuant to its Prospectus
dated June 5, 1996. This Prospectus Supplement does not contain complete
information about the offering of the Certificates. Additional information is
contained in the Prospectus, and purchasers are urged to read both this
Prospectus Supplement and the Prospectus in full. Sales of the Certificates may
not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
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<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus Supplement and the accompanying Prospectus.
A listing of the pages on which some of such terms are defined is found in the
"Index of Terms for Prospectus Supplement" and the "Index of Terms for
Prospectus."
<TABLE>
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Type of Securities.................. $756,000,000 Class A Floating Rate Asset Backed Certificates, Series 1996-1 and
$58,500,000 Class B Floating Rate Asset Backed Certificates, Series 1996-1.
Trust............................... The NationsBank Credit Card Master Trust (the "Trust") was formed pursuant to a Pooling
and Servicing Agreement, dated as of December 1, 1993 (the "Agreement"), between
NationsBank of Delaware, N.A., as transferor (in such capacity, the "Transferor") and
as servicer (in such capacity, the "Servicer"), and The Bank of New York, as trustee
(the "Trustee"). The Trust was created as a master trust under which one or more
Series may be issued pursuant to a series supplement to the Agreement (each, a
"Series Supplement"). The Certificates are part of Series 1996-1 of the Trust
("Series 1996-1"). The Certificates will be issued pursuant to the Agreement, as
supplemented by the Series Supplement relating to the Certificates (the "Series
1996-1 Supplement") (the term "Agreement," unless the context requires otherwise,
refers to the Agreement as supplemented by the Series 1996-1 Supplement). An interest
referred to as the "Collateral Indebtedness Interest" and deemed to be a class of
investor certificates will also be issued as part of Series 1996-1. As used in this
Prospectus Supplement, the term "Certificateholders" refers to holders of the
Certificates, the term "Class A Certificateholders" refers to holders of the Class A
Certificates, the term "Class B Certificateholders" refers to holders of the Class B
Certificates and the term "Collateral Indebtedness Holder" refers to the holder of
the Collateral Indebtedness Interest.
The Trust previously has issued three other Series. See "Annex I: Other Series Issued"
for a summary of such other Series issued. Additional Series are expected to be
issued from time to time by the Trust.
Trust Assets........................ The property of the Trust includes receivables (the "Receivables") arising under
certain MasterCard(R) and VISA(R)* revolving credit card accounts (the "Accounts") selected
by the Transferor from a portfolio of MasterCard and VISA accounts owned by the
Transferor, all monies due or to become due in payment of the Receivables (including
recoveries on charged-off Receivables), all proceeds of the Receivables and proceeds
of credit insurance policies relating to the Receivables, the right to receive
Interchange allocable to the Certificates and all monies on deposit in certain bank
accounts of the Trust (other than certain investment earnings on such amounts), the
benefit of funds, if any, on deposit in the Cash Collateral Account and any
enhancement with respect to any particular Series or Class as described herein and in
the Prospectus. No other Series will be entitled to the benefit of any such funds on
deposit in the Cash Collateral Account.
</TABLE>
* MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
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The Transferor has conveyed to the Trustee all Receivables existing under certain
Accounts selected by the Transferor from the Designated Portfolio based on criteria
provided in the Agreement as applied on October 29, 1993, May 31, 1995 and August 31,
1995, respectively (each, a "Selection Date"), and will convey all Receivables
arising under such Accounts from and after December 1, 1993, May 31, 1995 and August
31, 1995, respectively (each, a "Cut Off Date"), until the termination of the Trust
(except to the extent any such Account becomes a Removed Account). In addition,
pursuant to the Agreement, the Transferor may (subject to certain limitations and
conditions) designate Additional Accounts for inclusion in the Trust. Such Additional
Accounts may not be presently included in the Designated Portfolio. See "The
Receivables" herein and "Description of the Certificates -- Addition of Accounts" in
the Prospectus.
Interest and Principal.............. Each of the Certificates offered hereby represents an undivided interest in the Trust.
Each Class A Certificate represents the right to receive payments of (i) interest at
the rate of 0.15% per annum above LIBOR determined as set forth under "Description of
the Certificates -- Interest Payments" (the "Class A Certificate Rate"), accruing
from the Closing Date through the day preceding the September 1996 Interest Payment
Date and with respect to each Interest Period thereafter and (ii) principal on the
June 2003 Distribution Date (the "Class A Expected Final Distribution Date") or,
under certain limited circumstances, monthly during the Early Amortization Period,
funded from a percentage of the payments received with respect to the Receivables and
certain other funds (including, under the circumstances specified herein, funds, if
any, on deposit in the Reserve Account, the Cash Collateral Account and the Principal
Funding Account), as described herein.
Each Class B Certificate represents the right to receive payments of (i) interest at
the rate of 0.28% per annum above LIBOR (the "Class B Certificate Rate"), accruing
from the Closing Date through the day preceding the September 1996 Interest Payment
Date and with respect to each Interest Period thereafter and (ii) principal on the
July 2003 Distribution Date (the "Class B Expected Final Distribution Date") or,
under certain limited circumstances, monthly during the Early Amortization Period,
funded from a percentage of the payments received with respect to the Receivables and
certain other funds (including, under the circumstances specified herein, funds, if
any, on deposit in the Reserve Account, the Cash Collateral Account and the Principal
Funding Account), as described herein.
The aggregate undivided interest in the Principal Receivables represented by the Class
A Certificates (the "Class A Invested Amount") initially will equal $756,000,000 (the
"Class A Initial Invested Amount") and will decline as principal with respect to the
Class A Certificates is deposited in the Principal Funding Account (or, without
duplication, paid to the Class A Certificateholders) or as Class A Investor
Charge-Offs occur.
The aggregate undivided interest in the Principal Receivables represented by the Class
B Certificates (the "Class B Invested Amount") initially will equal $58,500,000 (the
"Class B Initial Invested Amount") and will decline as principal with respect to the
Class B Certificates is deposited in the Principal Funding Account (or, without
duplication, paid to the Class B Certificateholders), as collections of Principal
Receivables allocable to the Class B Certificates are reallocated for the benefit of
the Class A
</TABLE>
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Certificates, as the Class B Invested Amount is reduced in respect of the Class A
Investor Default Amount or as Class B Investor Charge-Offs occur.
The final distribution of principal and interest on the Certificates will be made no
later than the February 2006 Distribution Date (the "Stated Series Termination
Date"). After the Stated Series Termination Date, the Trust will have no further
obligation to pay principal or interest on the Certificates.
The Certificates will include the right to receive varying percentages of the
collections of Finance Charge Receivables and Principal Receivables for each calendar
month (each, a "Due Period"). See "Description of the Certificates -- Allocation
Percentages" herein.
Receivables......................... The aggregate amount of Receivables in the Accounts as of April 30, 1996 was
$4,031,968,782, comprised of $3,973,275,981 of Principal Receivables and $58,692,801
of Finance Charge Receivables. The Finance Charge Receivables will not affect the
Invested Amount or the Transferor Amount, which is determined on the basis of the
amount of Principal Receivables in the Trust. The aggregate undivided interest in the
Principal Receivables in the Trust evidenced by the Certificates and the Collateral
Indebtedness Interest will never exceed the Invested Amount regardless of the total
amount of Principal Receivables in the Trust at any time.
Servicing Fee....................... The Servicer will receive a monthly fee as servicing compensation from the Trust. The
portion of monthly servicing fee allocable to Series 1996-1 is equal to one-twelfth
of the product of 2.00% per annum and the Invested Amount of Series 1996-1 (the
"Monthly Investor Servicing Fee"). A portion of the Monthly Investor Servicing Fee
equal to up to one-twelfth of the product of 0.75% per annum and the Invested Amount
of Series 1996-1 will be payable solely from Interchange. See "Description of the
Certificates -- Servicing Compensation and Payment of Expenses" herein and in the
Prospectus.
Interest Payments................... Interest on the Certificates will be distributed quarterly on the 15th day of each
September, December, March and June, or, if such day is not a Business Day, on the
next succeeding Business Day (each, an "Interest Payment Date"), commencing with the
September 1996 Interest Payment Date, provided that following payment in full of the
Class A Certificates or upon the occurrence of an Early Amortization Event, each
Distribution Date will be an Interest Payment Date. A "Distribution Date" is the 15th
day of each month, or, if such day is not a Business Day, the next succeeding
Business Day, commencing with July 15, 1996. The amount of interest with respect to
the Class A Certificates and the Class B Certificates to be deposited in the Interest
Funding Account on any Distribution Date will be an amount equal to the product of
(i)(a) the actual number of days in the related Interest Period divided by 360, times
(b) the Class A Certificate Rate or the Class B Certificate Rate, as applicable, and
(ii) the outstanding principal amount of the Class A Certificates or the outstanding
principal amount of the Class B Certificates, as applicable, as of the preceding
Record Date (or, in the case of the July 1996 Distribution Date, as of the Closing
Date). The "Interest Period" with respect to any Distribution Date will be the period
from and including the previous Distribution Date through the day preceding such
Distribution Date, except that the initial Interest Period will be the period
</TABLE>
S-5
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<TABLE>
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from and including the Closing Date through the day preceding the initial
Distribution Date.
Interest on the Class A Certificates or the Class B Certificates for any Interest
Payment Date due but not paid on such Interest Payment Date will be payable on the
next succeeding Interest Payment Date, together with additional interest on such
amount at the Class A Certificate Rate or the Class B Certificate Rate, as
applicable, plus 2% per annum.
Revolving Period and Accumulation
Period............................ Unless an Early Amortization Event has occurred, the Revolving Period with respect to
the Certificates (the "Revolving Period") is scheduled to end and the Accumulation
Period with respect to the Certificates (the "Accumulation Period") is scheduled to
commence at the close of business on the last day of the May 2002 Due Period. Subject
to the conditions set forth under "Description of the Certificates -- Postponement of
Accumulation Period" herein, the day on which the Revolving Period ends and the
Accumulation Period begins may be delayed to no later than the close of business on
the last day of the April 2003 Due Period. Unless an Early Amortization Event has
occurred, (i) the Class A Accumulation Period (the "Class A Accumulation Period")
will commence at the close of business on the last day of the Revolving Period and
end on the earliest of (a) the commencement of the Early Amortization Period, (b) the
payment in full of the Class A Invested Amount or (c) the Stated Series Termination
Date, and (ii) the Class B Accumulation Period (the "Class B Accumulation Period")
will commence on the Distribution Date on which the Class A Invested Amount is paid
in full or, if the Class A Invested Amount is paid in full on the Class A Expected
Final Distribution Date and the Early Amortization Period has not commenced, the
Distribution Date following the Class A Expected Final Distribution Date (the "Class
B Principal Commencement Date") and end on the earliest of (a) the commencement of
the Early Amortization Period, (b) the payment in full of the Class B Invested Amount
or (c) the Stated Series Termination Date.
No principal will be payable to Class A Certificateholders until the Class A Expected
Final Distribution Date or, upon the occurrence of an Early Amortization Event as
described herein, the first Distribution Date with respect to the Early Amortization
Period. No principal will be payable to the Class B Certificateholders until the
Class A Invested Amount is paid in full. For the period beginning on the Closing Date
and ending with the commencement of the Accumulation Period or the Early Amortization
Period, collections of Principal Receivables otherwise allocable to the
Certificateholders and the Collateral Indebtedness Holder (other than collections of
Principal Receivables allocated to the Class B Certificateholders and the Collateral
Indebtedness Holder ("Reallocated Principal Collections") that are used to pay any
deficiency in the Class A Required Amount or the Class B Required Amount) will,
subject to certain limitations, be treated as Shared Principal Collections and
applied to cover principal payments due to or for the benefit of certificateholders
of other Series, if so specified in the Series Supplements for such other Series, or
paid to the Transferor as holder of the Exchangeable Transferor Certificate or in
certain circumstances, be paid to the Collateral Indebtedness Holder. See
"Description of the Certificates -- Early Amortization Events" herein and in the
Prospectus for a discussion of the events which might lead to the termination of the
Revolving Period prior to the commencement of the Accumulation Period.
</TABLE>
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Subordination of the Class B
Certificates and the Collateral
Indebtedness Interest............. The Class B Certificates and the Collateral Indebtedness Interest will be subordinated
as described herein to the extent necessary to fund payments with respect to the
Class A Certificates as described herein. In addition, the Collateral Indebtedness
Interest will be subordinated as described herein to the extent necessary to fund
certain payments with respect to the Class B Certificates. If the amount on deposit
in the Cash Collateral Account is reduced to zero and the Collateral Indebtedness
Amount is reduced to zero, the Class B Certificateholders will bear directly the
credit and other risks associated with their undivided interest in the Trust (and if
the Class B Invested Amount were reduced to zero, the Class A Certificateholders
would bear directly the credit and other risks associated with their undivided
interest in the Trust). To the extent the Class B Invested Amount is reduced, the
percentage of collections of Finance Charge Receivables allocable to the Class B
Certificateholders with respect to subsequent Due Periods will be reduced. Moreover,
to the extent the amount of such reduction in the Class B Invested Amount is not
reimbursed, the amount of principal distributable to the Class B Certificateholders
will be reduced. See "Description of the Certificates -- Allocation Percentages" and
" -- Subordination of the Class B Certificates and the Collateral Indebtedness
Interest" herein.
Amounts Available as Enhancement.... On each Distribution Date, the amount of Enhancement available to the
Certificateholders will equal the lesser of (i) the sum of the Collateral
Indebtedness Amount and the amount, if any, on deposit in the Cash Collateral Account
(the "Available Cash Collateral Amount") (collectively, the "Available Enhancement
Amount") and (ii) the Required Enhancement Amount. The "Required Enhancement Amount"
means, with respect to any Distribution Date, subject to certain limitations more
fully described herein, the product of the Invested Amount (after taking into account
any reductions thereof on such Distribution Date) and 9.5%, but not less than
$27,000,000; provided, however, that if an Early Amortization Event occurs, then the
Required Enhancement Amount will generally equal the Required Enhancement Amount on
the Distribution Date immediately preceding the occurrence of such Early Amortization
Event. With respect to any Distribution Date, if the Available Enhancement Amount is
less than the Required Enhancement Amount, certain Excess Spread and Excess Finance
Charge Collections allocable to Series 1996-1 will be used to increase the Available
Enhancement Amount to the extent of such shortfall. If on any Distribution Date, the
Available Enhancement Amount exceeds the Required Enhancement Amount, such excess may
be applied in accordance with the Loan Agreement and will not thereafter be available
to the Certificateholders.
Cash Collateral Account............. A cash collateral account (the "Cash Collateral Account") will be held in the name of
the Trustee for the benefit of the Certificateholders and the Collateral Indebtedness
Holder. The Cash Collateral Account will have a beginning balance of zero, which may
be increased to the extent collections of Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-1 are required to be deposited therein. At the
Transferor's election, subject to the provisions of the Loan Agreement, any funding
of the Cash Collateral Account may result in a reduction of the Collateral
Indebtedness Amount, provided that, after giving effect to
</TABLE>
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such reduction on any Distribution Date, the Available Enhancement Amount equals or
exceeds the Required Enhancement Amount. See "Description of the Certificates -- Cash
Collateral Account" herein. Withdrawals may be made from the Cash Collateral Account
to fund the amounts described under "Description of the Certificates -- Cash
Collateral Account" herein.
Excess Finance Charge Collections... Subject to certain limitations, Excess Finance Charge Collections, if any, with respect
to any Series may be applied to cover any shortfalls with respect to amounts payable
from collections of Finance Charge Receivables allocable to any other Series, pro
rata based upon the amount of the shortfall, if any, with respect to each Series. See
"Description of the Certificates -- Shared Excess Finance Charge Collections" in the
Prospectus.
Shared Principal Collections........ Collections of Principal Receivables and certain other amounts otherwise allocable to
other Series, to the extent such collections are not needed to make payments to or
deposits for the benefit of the certificateholders of such other Series, will be
applied to cover principal payments due to or for the benefit of the holders of the
Certificates (as well as principal payments due to or for the benefit of other
Series). Such amounts are referred to herein as "Excess Principal Collections". There
can be no assurance that there will be any Excess Principal Collections allocable to
Series 1996-1. See "Description of the Certificates -- Shared Principal Collections"
in the Prospectus.
Optional Repurchase................. The Invested Amount will be subject to optional repurchase by the Transferor on any
Distribution Date after the Invested Amount is reduced to an amount less than or
equal to 5% of the Initial Invested Amount, if certain conditions set forth in the
Agreement are met. The repurchase price will be equal to the Invested Amount plus
accrued and unpaid interest on the Certificates and the Collateral Indebtedness
Interest. See "Description of the Certificates -- Final Payment of Principal;
Termination" in the Prospectus.
Tax Status.......................... Skadden, Arps, Slate, Meagher & Flom, special tax counsel to the Transferor, is of the
opinion that under existing law the Certificates will be characterized as
indebtedness for Federal income tax purposes. Under the Agreement, the Transferor
will agree, and the Certificate Owners will be deemed to agree, to treat the
Certificates as debt for Federal income tax purposes. See "Certain Federal Income Tax
Consequences" in the Prospectus for additional information concerning the application
of Federal income tax laws.
ERISA Considerations................ Under a regulation issued by the Department of Labor, the Trust's assets would not be
deemed "plan assets" of an employee benefit plan holding the Certificates if certain
conditions are met, including that the Certificates must be held, upon completion of
the public offering made hereby, by at least 100 investors who are independent of the
Transferor and of one another. The Underwriters expect that the Class A Certificates
will be held by at least 100 independent investors at the conclusion of the offering,
although no assurance can be given, and no monitoring or other measures will be
taken, to ensure that such condition will be met. The Transferor anticipates that the
other conditions of the regulation will be met with respect to the Class A
Certificates. The Underwriter of the Class B Certificates does not expect that the
Class B Certificates will be held by
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100 or more independent investors. If the Trust's assets were deemed to be "plan
assets" of an employee benefit plan investor, it is uncertain whether existing
exemptions from the "prohibited transaction" rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), would apply to all transactions involving
the Trust's assets. Accordingly, employee benefit plan fiduciaries contemplating
purchasing the Certificates should consult their counsel before making a purchase.
Class B Certificates may not be acquired by benefit plan investors. Each Certificate
Owner of a Class B Certificate, by its acceptance thereof, will be deemed to have
represented that it is not a benefit plan investor. See "ERISA Considerations" in the
Prospectus.
Certificate Rating.................. It is a condition to the issuance of the Class A Certificates that they be rated in the
highest rating category by at least one nationally recognized statistical rating
organization selected by the Transferor (each, a "Rating Agency"). The rating of the
Class A Certificates is based primarily on the value of the Receivables, as
determined by the applicable Rating Agency and the terms of the Class B Certificates
and the Collateral Indebtedness Interest. See "Description of the
Certificates -- Subordination of the Class B Certificates and the Collateral
Indebtedness Interest" herein and "Risk Factors -- Certificate Rating" in the
Prospectus.
It is a condition to the issuance of the Class B Certificates that they be rated in one
of the three highest rating categories by at least one Rating Agency. The rating of
the Class B Certificates is based primarily on the value of the Receivables as
determined by the applicable Rating Agency and the terms of the Collateral
Indebtedness Interest. See "Description of the Certificates -- Subordination of the
Class B Certificates and the Collateral Indebtedness Interest" herein and "Risk
Factors -- Certificate Rating" in the Prospectus.
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NATIONSBANK CREDIT CARD PORTFOLIO
Assessment of Finance and Other Charges
NationsBank currently assesses periodic finance charges based on both
variable and fixed annual percentage rates. Fixed annual percentage rates range
from 14.9% to 18.9%. In the 4th quarter of 1992, NationsBank began offering a
variable rate credit card product to certain new and existing cardholders.
Current variable rates range from 1.9% to 12.9% above the NationsBank prime
rate. NationsBank reserves the right in many of its cardholder agreements to add
up to 400 basis points to the variable rate if an account is in default.
Approximately 78% of all NationsBank accounts are variable rate accounts.
NationsBank may from time to time offer lower introductory rates for promotional
purposes. NationsBank assesses many cardholders annual cardholder fees
(generally ranging from $18 to $55) on their accounts. For most accounts
NationsBank also assesses late and overlimit charges (generally $18) and
returned check charges (generally $25). For most accounts, NationsBank assesses
a cash advance fee of 2% of the cash advance amount with a $2 minimum.
Delinquency and Loss Experience
The following tables set forth the delinquency and loss experience for each
of the periods shown for the portfolio of NationsBank credit card accounts from
which the Trust Portfolio (as of the date hereof) has been selected (the
"Designated Portfolio"). The Designated Portfolio does not include certain
affinity (also known as co-branded) accounts. Because the Trust Portfolio is
only a portion of the Designated Portfolio, and because the Transferor will have
the right, and, in some circumstances, the obligation, to designate Additional
Accounts (and to convey to the Trust all Receivables in such Additional
Accounts), which Additional Accounts may or may not be included in the
Designated Portfolio, actual historical delinquency and loss experience with
respect to the Receivables may be different from that set forth below for the
Designated Portfolio. There can be no assurance that the delinquency and loss
experience for the Receivables in the future will be similar to the historical
experience of the Designated Portfolio set forth below.
Delinquency Experience
Designated Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of December 31,
As of April 30, 1996 1995 1994 1993
Percentage of Percentage of Percentage of
Total Total Total
Receivables Receivables (1) Receivables Receivables (1) Receivables Receivables (1) Receivables
<S> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding........ $5,622,145 $5,327,117 $4,507,165 $3,877,306
Receivables
Delinquent:
31 to 60 days
delinquent....... 77,538 1.38% 77,018 1.45% 59,814 1.33% 48,885
61 to 90 days
delinquent....... 47,460 0.84% 45,412 0.85% 38,254 0.85% 31,987
91 days delinquent
or more.......... 92,244 1.64% 82,809 1.55% 71,852 1.59% 57,689
Total............ $ 217,242 3.86% $ 205,239 3.85% $ 169,920 3.77% $ 138,561
<CAPTION>
Percentage of
Total
Receivables (1)
<S> <C>
Receivables
Outstanding........
Receivables
Delinquent:
31 to 60 days
delinquent....... 1.26%
61 to 90 days
delinquent....... 0.82%
91 days delinquent
or more.......... 1.49%
Total............ 3.57%
</TABLE>
(1) These percentages are the result of dividing the delinquent amounts by
Receivables Outstanding.
S-10
<PAGE>
Loss Experience
Designated Portfolio (1)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Four Months
Ended Year Ended December 31,
April 30, 1996 1995 1994 1993
<S> <C> <C> <C> <C>
Average Receivables Outstanding (2)......................... $5,507,548 $5,132,147 $4,406,044 $3,770,515
Gross Charge Offs (3)....................................... 94,765 246,538 196,516 187,936
Recoveries.................................................. 11,958 33,098 23,984 18,226
Net Charge Offs............................................. 82,807 213,440 172,532 169,710
Net Charge Off Rate......................................... 4.51%(4) 4.16% 3.92% 4.50%
</TABLE>
(1) Losses include charge offs of principal and prior year accrued finance
charge receivables through the end of 1994, and beginning in 1995 include
charge offs of principal only.
(2) Average Receivables Outstanding is the average daily balance of receivables
during the period indicated.
(3) Gross Charge Offs exclude charge offs due to fraud, returned goods, and
customer disputes.
(4) Annualized basis.
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 percentage
equivalent of the ratio the Floating Allocation Percentage bears to the sum of
the floating allocation percentages for all Series outstanding to which
Interchange is allocable. VISA and MasterCard 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 allocating collections of Finance Charge Receivables to Series
1996-1. A portion of such Interchange equal to Servicer Interchange will be used
solely to pay the Servicer. See "Credit Card Activities at
NationsBank -- Interchange" in the Prospectus.
THE RECEIVABLES
The "Minimum Transferor Interest Percentage" applicable to the Certificates
is 7%. The "Minimum Aggregate Principal Receivables" is the sum of the Initial
Invested Amount and the initial invested amounts (or other amounts, if specified
in the applicable Series Supplement) of other Series outstanding from time to
time.
The Receivables included in the Trust Portfolio, as of April 30, 1996,
included $3,973,275,981 of Principal Receivables and $58,692,801 of Finance
Charge Receivables. The Accounts had an average Principal Receivable balance of
$1,089 and an average credit limit of $5,220. The percentage of the aggregate
total Receivables balance to the aggregate total credit limit was 21%. The
average age of the Accounts was approximately 70 months. As of April 30, 1996,
cardholders whose Accounts are to be included in the Trust Portfolio had billing
addresses in 50 States, the District of Columbia and certain U.S. territories.
The following tables describe the Trust Portfolio by various criteria as of
April 30, 1996. Because the future composition of the Trust Portfolio will
change over time, these tables are not necessarily indicative of the composition
of the Trust Portfolio at any subsequent time.
S-11
<PAGE>
Composition by Account Balance
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Account Balance Range Accounts Accounts Receivables Receivables
<S> <C> <C> <C> <C>
Credit Balance................................................ 41,608 1.14% $ (3,949,504) (0.10)%
No Balance.................................................... 1,741,233 47.73 0 0.00
$0.01 - $500.00............................................... 587,959 16.12 116,081,322 2.88
$500.01 - $1,000.00........................................... 254,273 6.97 186,372,588 4.62
$1,000.01 - $2,000.00......................................... 286,922 7.87 421,680,781 10.46
$2,000.01 - $3,000.00......................................... 199,642 5.47 495,119,494 12.28
$3,000.01 - $4,000.00......................................... 149,098 4.09 521,627,133 12.94
$4,000.01 - $5,000.00......................................... 147,580 4.05 666,295,240 16.53
$5,000.01 - $6,000.00......................................... 90,484 2.48 492,435,985 12.21
$6,000.01 - $7,000.00......................................... 54,282 1.49 351,848,240 8.73
$7,000.01 - $8,000.00......................................... 50,693 1.39 378,790,080 9.39
$8,000.01 - $9,000.00......................................... 25,354 0.70 214,136,632 5.31
$9,000.01 - $10,000.00........................................ 11,805 0.32 111,337,137 2.76
$10,000.01 or More............................................ 6,718 0.18 80,193,654 1.99
TOTAL.................................................. 3,647,651 100.00% $4,031,968,782 100.00%
</TABLE>
Composition by Credit Limit
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Credit Limit Range Accounts Accounts Receivables Receivables
<S> <C> <C> <C> <C>
Less than $500.00............................................. 321,975 8.83% $ 38,413,757 0.95%
$500.01 - $1,000.00........................................... 154,383 4.23 50,454,798 1.25
$1,000.01 - $2,000.00......................................... 270,801 7.42 157,019,368 3.89
$2,000.01 - $3,000.00......................................... 297,292 8.15 247,781,275 6.15
$3,000.01 - $4,000.00......................................... 258,326 7.08 284,748,648 7.06
$4,000.01 - $5,000.00......................................... 547,749 15.02 607,429,341 15.07
$5,000.01 - $6,000.00......................................... 335,894 9.21 517,576,319 12.84
$6,000.01 - $7,000.00......................................... 242,817 6.66 342,060,769 8.48
$7,000.01 - $8,000.00......................................... 561,879 15.40 637,924,926 15.82
$8,000.01 - $9,000.00......................................... 328,623 9.01 534,927,790 13.27
$9,000.01 - $10,000.00........................................ 172,594 4.73 362,035,793 8.98
$10,000.01 or More............................................ 155,318 4.26 251,595,998 6.24
TOTAL.................................................. 3,647,651 100.00% $4,031,968,782 100.00%
</TABLE>
Composition by Period of Delinquency
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Period of Delinquency Number of Number of of Total
(Days Contractually Delinquent) Accounts Accounts Receivables Receivables
<S> <C> <C> <C> <C>
Not Delinquent................................................ 3,527,622 96.71% $3,643,093,611 90.35%
Up to 30 Days................................................. 65,371 1.79 203,082,630 5.04
31 to 60 Days................................................. 20,492 0.56 64,087,548 1.59
61 to 90 Days................................................. 11,821 0.32 40,237,738 1.00
91 to 120 Days................................................ 8,973 0.25 32,255,802 0.80
121 to 150 Days............................................... 7,525 0.21 26,975,993 0.67
151 to 180 Days............................................... 5,777 0.16 21,925,842 0.54
181 or More Days.............................................. 70 0.00 309,618 0.01
TOTAL.................................................. 3,647,651 100.00% $4,031,968,782 100.00%
</TABLE>
S-12
<PAGE>
Composition by Account Age
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Account Age Accounts Accounts Receivables Receivables
<S> <C> <C> <C> <C>
Not More than 6 Months........................................ 16 0.00% $ 4,972 0.00%
Over 7 Months to 12 Months.................................... 216,989 5.95 242,071,784 6.00
Over 13 Months to 24 Months................................... 870,255 23.86 791,014,451 19.62
Over 25 Months to 36 Months................................... 504,248 13.82 705,141,063 17.49
Over 37 Months to 48 Months................................... 251,823 6.90 292,118,496 7.25
Over 49 Months to 60 Months................................... 394,240 10.81 454,042,943 11.26
Over 61 Months to 72 Months................................... 173,922 4.77 201,168,184 4.99
Over 73 Months to 84 Months................................... 219,932 6.03 244,170,452 6.06
Over 85 Months to 96 Months................................... 194,743 5.34 205,826,142 5.10
Over 97 Months to 108 Months.................................. 124,954 3.43 151,311,522 3.75
Over 109 Months to 120 Months................................. 96,047 2.63 97,231,171 2.41
Over 120 Months............................................... 600,482 16.46 647,867,602 16.07
TOTAL.................................................. 3,647,651 100.00% $4,031,968,782 100.00%
</TABLE>
Geographic Distribution of Accounts
Trust Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
State Accounts Accounts Receivables Receivables
<S> <C> <C> <C> <C>
Alabama..................................................... 34,759 0.95% $ 42,435,289 1.05%
Alaska...................................................... 1,569 0.04 2,043,815 0.05
Arizona..................................................... 27,859 0.76 34,032,714 0.84
Arkansas.................................................... 16,110 0.44 20,624,646 0.51
California.................................................. 339,463 9.31 432,864,204 10.74
Colorado.................................................... 36,406 1.00 40,257,666 1.00
Connecticut................................................. 23,234 0.64 25,332,778 0.63
Delaware.................................................... 3,080 0.08 3,442,773 0.09
Florida..................................................... 321,891 8.82 308,115,097 7.64
Georgia..................................................... 216,257 5.93 255,009,299 6.32
Hawaii...................................................... 3,328 0.09 4,103,107 0.10
Idaho....................................................... 6,314 0.17 6,882,241 0.17
Illinois.................................................... 106,909 2.93 121,239,785 3.01
Indiana..................................................... 47,015 1.29 58,259,279 1.44
Iowa........................................................ 19,308 0.53 21,322,497 0.53
Kansas...................................................... 19,375 0.53 23,924,063 0.59
Kentucky.................................................... 24,058 0.66 26,008,834 0.65
Louisiana................................................... 29,476 0.81 34,635,834 0.86
Maine....................................................... 8,790 0.24 10,246,307 0.25
Maryland.................................................... 252,319 6.92 200,194,666 4.97
Massachusetts............................................... 36,179 0.99 32,661,333 0.81
Michigan.................................................... 74,040 2.03 95,019,745 2.36
Minnesota................................................... 40,804 1.12 44,108,134 1.09
Mississippi................................................. 17,415 0.48 22,286,892 0.55
Missouri.................................................... 35,435 0.97 43,727,136 1.08
Montana..................................................... 6,981 0.19 7,625,903 0.19
Nebraska.................................................... 10,614 0.29 11,650,448 0.29
Nevada...................................................... 15,013 0.41 23,941,332 0.59
New Hampshire............................................... 5,605 0.15 6,897,819 0.17
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
State Accounts Accounts Receivables Receivables
<S> <C> <C> <C> <C>
New Jersey.................................................. 85,473 2.34% $ 97,446,902 2.42%
New Mexico.................................................. 10,358 0.28 11,709,243 0.29
New York.................................................... 168,415 4.62 192,277,584 4.77
North Carolina.............................................. 289,889 7.95 342,274,658 8.49
North Dakota................................................ 4,538 0.12 4,730,167 0.12
Ohio........................................................ 76,834 2.11 87,547,971 2.17
Oklahoma.................................................... 25,198 0.69 30,448,092 0.76
Oregon...................................................... 24,423 0.67 27,472,931 0.68
Pennsylvania................................................ 79,145 2.17 74,794,146 1.86
Rhode Island................................................ 8,037 0.22 8,387,228 0.21
South Carolina.............................................. 162,568 4.46 172,051,026 4.27
South Dakota................................................ 5,301 0.15 6,028,241 0.15
Tennessee................................................... 106,985 2.93 109,025,205 2.70
Texas....................................................... 408,060 11.19 485,736,105 12.05
Utah........................................................ 10,589 0.29 11,366,976 0.28
Vermont..................................................... 2,428 0.07 2,651,001 0.07
Virginia.................................................... 260,842 7.15 256,823,415 6.37
Washington.................................................. 41,252 1.13 51,108,126 1.27
West Virginia............................................... 11,066 0.30 10,696,673 0.27
Wisconsin................................................... 46,150 1.27 46,000,120 1.14
Wyoming..................................................... 4,013 0.11 4,984,784 0.12
District of Columbia........................................ 30,663 0.85 32,131,419 0.79
Other....................................................... 5,818 0.16 7,383,133 0.18
TOTAL................................................ 3,647,651 100.00% $ 4,031,968,782 100.00%
</TABLE>
MATURITY ASSUMPTIONS
The Agreement provides that Class A Certificateholders will not receive
payments of principal until the June 2003 Distribution Date (the "Class A
Expected Final Distribution Date"), or earlier in the event of an Early
Amortization Event which results in the commencement of the Early Amortization
Period. Class A Certificateholders will receive payments of principal on each
Distribution Date following the Due Period in which an Early Amortization Event
occurs until the Class A Invested Amount has been paid in full or the Stated
Series Termination Date has occurred. The Class B Certificateholders will not
receive payments of principal until the July 2003 Distribution Date (the "Class
B Expected Final Distribution Date"), or earlier in the event of the
commencement of the Early Amortization Period; provided, however, that the Class
B Certificateholders will in no event begin to receive payments of principal
until the final principal payment on the Class A Certificates has been made;
provided, further, that the Class B Certificateholders will receive payments of
principal until the Class B Invested Amount has been paid in full or the Stated
Series Termination Date has occurred.
Should an Early Amortization Period commence with respect to the
Certificates, any amount on deposit in the Principal Funding Account will be
paid to the Certificateholders on the first Distribution Date with respect to
the Early Amortization Period, first to the Class A Certificateholders until the
Class A Certificates have been paid in full and then to the Class B
Certificateholders until the Class B Certificates have been paid in full.
Thereafter, Certificateholders will be entitled to receive collections of
Principal Receivables allocable to Series 1996-1 on each Distribution Date with
respect to such Early Amortization Period (other than Reallocated Principal
Collections required to be used on such Distribution Date), payable first to the
Class A Certificateholders until the Class A Invested Amount has been paid in
full and then to the Class B Certificateholders until the Class B Invested
Amount has been paid in full, until the Stated Series Termination Date occurs.
See "Description of the Certificates -- Early Amortization Events" herein and in
the Prospectus.
S-14
<PAGE>
The ability of Certificateholders to receive payments of principal on the
applicable expected final distribution date depends on the payment rates on the
Receivables, the amount of outstanding Receivables, delinquencies, charge offs
and new borrowings on the Accounts, the potential issuance by the Trust of
additional Series and the availability of Shared Principal Collections. Monthly
payment rates on the Receivables may vary because, among other things,
cardholders may fail to make required minimum payments, may only make payments
as low as the minimum required amount or may make payments as high as the entire
outstanding balance. Monthly payment rates may also vary due to seasonal
purchasing and payment habits of cardholders and to changes in any terms of
rebate programs in which cardholders participate. The Transferor cannot predict,
and no assurance can be given, as to the cardholder monthly payment rates that
will actually occur in any future period, as to the actual rate of payment of
principal of the Certificates or whether the terms of any subsequently issued
Series might have an impact on the amount or timing of any such payment of
principal.
In addition, the amount of outstanding Receivables and the delinquencies,
charge offs and new borrowings on the Accounts may vary from month to month due
to seasonal variations, the availability of other sources of credit, legal
factors, general economic conditions and spending and borrowing habits of
individual cardholders. There can be no assurance that collections of Principal
Receivables with respect to the Trust Portfolio, and thus the rate at which
Certificateholders could expect to receive payments of principal on their
Certificates during the Early Amortization Period or the rate at which the
Principal Funding Account could be funded during the Accumulation Period, will
be similar to the historical experience set forth below.
The Trust, as a master trust, may issue additional Series from time to
time, and there can be no assurance that the terms of any such Series might not
have an impact on the timing or amount of payments received by
Certificateholders. Further, if an Early Amortization Event occurs, the average
life and maturity of the Class A Certificates and Class B Certificates,
respectively, could be significantly reduced.
For the reasons set forth above, there can be no assurance that deposits in
the Principal Funding Account will be made in accordance with the applicable
Controlled Accumulation Amount or that the actual number of months elapsed from
the date of issuance of the Class A Certificates and Class B Certificates to
their respective final Distribution Dates will equal the expected number of
months.
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Designated Portfolio during any month in the period shown
and the average cardholder monthly payment rates for all months during the
periods shown, in each case calculated as a percentage of total opening monthly
account balances during the periods shown. Payment rates shown in the table are
based on amounts which would be deemed payments of Principal Receivables and
Finance Charge Receivables with respect to the Accounts.
Cardholder Monthly Payment Rates
Designated Portfolio (1)
<TABLE>
<CAPTION>
Year Ended
Four Months Ended December 31,
April 30, 1996 1995 1994 1993
<S> <C> <C> <C> <C>
Lowest (2)........................................................... 11.22% 11.35 % 11.54 % 12.03 %
Highest (2).......................................................... 12.35% 14.00 % 14.13 % 13.52 %
Monthly Average...................................................... 11.63% 12.66 % 12.87 % 12.75 %
</TABLE>
(1) Monthly payment rates include amounts which are payments of principal
receivables and finance charge receivables.
(2) Monthly payment rates are the result of dividing total payments received
during a month by beginning receivables outstanding for each month.
S-15
<PAGE>
RECEIVABLE YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts and
estimated interchange collections on accounts in the Designated Portfolio for
each of the three calendar years contained in the period ended December 31, 1995
and the four months ended April 30, 1996 are set forth in the following table.
The historical yields from finance charges and fees billed 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 yields. Conversely, as
delinquencies decrease, cash yields may exceed accrual yields as amounts
collected in a current period may include amounts accrued during prior periods.
However, the Transferor believes that during the three calendar years ended
December 31, 1995 and the four months ended April 30, 1996, 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
cardholder fees and other fees, changes in the delinquency rate on the
Receivables and the percentage of cardholders who pay their balances in full
each month and do not incur monthly periodic finance charges. See "Risk Factors"
in the Prospectus.
Portfolio Yield
Designated Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
Four Months Ended Year Ended December 31,
April 30, 1996 1995 1994 1993
<S> <C> <C> <C> <C>
Average Receivables Outstanding (1)..................... $5,507,548 $5,132,147 $4,406,044 $3,770,515
Finance Charges and Fees Billed......................... 305,399 813,072 662,778 582,090
Yield from Finance Charges and
Fees Billed (2)....................................... 16.64%(3) 15.84% 15.04% 15.44%
Estimated Yield from Interchange........................ 1.31%(3) 1.92% 2.01% 1.94%
Yield from Finance Charges and Fees Billed and
Interchange........................................... 17.95%(3) 17.76% 17.05% 17.38%
</TABLE>
(1) Average Receivables Outstanding is the average daily receivables during the
period indicated.
(2) Yield from Finance Charges and Fees Billed is the result of dividing Finance
Charges and Fees Billed by Average Receivables Outstanding.
(3) Annualized basis.
The revenue for the Designated Portfolio of credit card accounts shown in
the above table is comprised of the following components: monthly periodic
finance charges, annual cardholder fees and other service charges such as late
fees, and estimated Interchange. As payment rates decline, the balances subject
to monthly periodic finance charges tend to grow, assuming no change in the
level of purchasing activity. Accordingly, under these circumstances, the yield
related to periodic finance charges normally increases. The yield related to
service charges varies with the type and volume of activity in and the amount of
each account. As account balances increase, annual cardholder fees, which remain
constant, represent a smaller percentage of the aggregate account balances. The
yield related to Interchange generally varies with the number of credit card
transactions and the amount charged per transaction. See "Credit Card Activities
at NationsBank" in the Prospectus.
NATIONSBANK OF DELAWARE, N.A. AND NATIONSBANK CORPORATION
As of March 31, 1996, NationsBank had assets of $5.858 billion and
shareholder's equity of $440.4 million.
As of March 31, 1996, NationsBank Corporation had consolidated assets of
$194.375 billion and shareholders' equity of $13.557 billion.
S-16
<PAGE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement and the Series
1996-1 Supplement. Pursuant to the Agreement, the Transferor, the Servicer 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 1996-1 Supplement. See
"Description of the Certificates" in the Prospectus for additional information
concerning the Certificates and the Agreement.
Interest Payments
Interest on the principal amount of the Class A Certificates and the
principal amount of the Class B Certificates will accrue from the Closing Date
at the Class A Certificate Rate and Class B Certificate Rate, respectively.
Interest will be distributed on the September 1996 Interest Payment Date, and on
each Interest Payment Date thereafter, to Certificateholders in whose names the
Certificates were registered at the close of business on the preceding Record
Date.
Interest deposits or payments on the Certificates on any Distribution Date
will be calculated on the outstanding principal amount of the Class A
Certificates or the Class B Certificates, as applicable, as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date) based upon the applicable Certificate Rate for the related Interest
Period. On each Distribution Date, interest with respect to the Certificates
will be deposited into a trust account established by the Servicer in the name
of the Trustee, on behalf of the Trust, for the benefit of the
Certificateholders (the "Interest Funding Account") for payment to the
Certificateholders on each Interest Payment Date. Interest due but not paid on
any Interest Payment Date will be payable on the next succeeding Interest
Payment Date together with additional interest on such amount at the applicable
Certificate Rate plus 2.00%.
Interest on the Class A Certificates and the Class B Certificates will be
calculated on the basis of the actual number of days in the related Interest
Period and a 360-day year. The Class A Certificates will bear interest for the
period from the Closing Date through the day preceding the September 1996
Interest Payment Date, and with respect to each Interest Period thereafter, at a
rate of 0.15% per annum above LIBOR determined as set forth below. The Class B
Certificates will bear interest for the period from the Closing Date through the
day preceding the September 1996 Interest Payment Date, and with respect to each
Interest Period thereafter, at the rate of 0.28% per annum above LIBOR
determined as set forth below.
The Trustee will determine LIBOR on June 7, 1996 for the period from the
Closing Date through the day preceding the September 1996 Interest Payment Date,
and for each Interest Period thereafter, on the second Business Day prior to
every third Distribution Date (each, a "LIBOR Determination Date") commencing
with the September 1996 Distribution Date.
"Business Day" means any day other than a Saturday or Sunday or another day
on which banking institutions in Dover, Delaware, Charlotte, North Carolina or
New York, New York (or, with respect to the determination of LIBOR, London,
England) are authorized or obligated by law or executive order to be closed.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a three-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 three-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 the LIBOR Determination Date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that LIBOR Determination Date will be the arithmetic mean of the rates
quoted by 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 three-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).
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"Reference Banks" means three major banks in the London interbank market
selected by the Servicer.
The determination of LIBOR by the Trustee and the Trustee's subsequent
calculation of the applicable Certificate Rate for the relevant Interest Periods
shall (in the absence of manifest error) be final and binding on each
Certificateholder. The Class A Certificate Rate or Class B Certificate Rate
applicable to the then current Interest Period may be obtained by telephoning
the Trustee at its Corporate Trust Office at (212) 815-5737.
On each Distribution Date, Class A Monthly Interest and Class A Monthly
Interest previously due but not deposited in respect of the Class A Certificates
will be deposited in the Interest Funding Account from Class A Available Funds
for the related Due Period for payment to the Class A Certificateholders on each
Interest Payment Date. To the extent Class A Available Funds are insufficient to
pay such interest, Excess Spread and Excess Finance Charge Collections allocated
to Series 1996-1, amounts on deposit in the Cash Collateral Account, if any, and
Reallocated Principal Collections will be used to make such payments. "Class A
Available Funds" means, with respect to any Due Period, an amount equal to the
sum of (i) the Class A Floating Percentage of collections of Finance Charge
Receivables with respect to such Due Period (including net interest and earnings
on funds, if any, on deposit in the Cash Collateral Account and the Interest
Funding Account and any other amounts that are to be treated as collections of
Finance Charge Receivables allocable to Series 1996-1 in accordance with the
Agreement); (ii) if such Due Period relates to a Distribution Date that occurs
on or prior to the payment in full of the Class A Certificates, the Principal
Funding Investment Proceeds, if any, with respect to the related Distribution
Date; and (iii) 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
1996-1 Supplement with respect to such Distribution Date.
On each Distribution Date, Class B Monthly Interest and Class B Monthly
Interest previously due but not deposited in respect of the Class B Certificates
will be deposited in the Interest Funding Account from Class B Available Funds
for the related Due Period for payment to the Class B Certificateholders on each
Interest Payment Date. To the extent Class B Available Funds are insufficient to
pay such interest, Excess Spread and Excess Finance Charge Collections allocated
to Series 1996-1, amounts on deposit in the Cash Collateral Account, if any, and
Reallocated Principal Collections relating to the Collateral Indebtedness
Interest (in each case after application of such amounts in respect of the Class
A Certificates) will be used to make such payments. "Class B Available Funds"
means, with respect to any Due Period, an amount equal to the sum of (i) the
Class B Floating Percentage of collections of Finance Charge Receivables with
respect to such Due Period (including net interest and earnings on funds, if
any, on deposit in the Cash Collateral Account and the Interest Funding Account
and any other amounts that are to be treated as collections of Finance Charge
Receivables allocable to Series 1996-1 in accordance with the Agreement); (ii)
if such Due Period relates to a Distribution Date that occurs on or after the
Class B Principal Commencement Date, the Principal Funding Investment Proceeds,
if any, with respect to the related Distribution Date not applied to make
payments in respect of the Class A Certificates; and (iii) 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 1996-1 Supplement with respect to such
Distribution Date.
Principal Payments
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the Accumulation Period or, if earlier, the
Early Amortization Period), no principal payments will be made to
Certificateholders. During the Accumulation Period (on or prior to the
respective expected final distribution dates), principal will be deposited in
the Principal Funding Account as described below and on the Class A Expected
Final Distribution Date will be distributed to Class A Certificateholders up to
the outstanding principal amount of the Class A Certificates and then to Class B
Certificateholders on the Class B Expected Final Distribution Date up to the
outstanding principal amount of the Class B Certificates. During the Early
Amortization Period, which will begin upon the occurrence of an Early
Amortization Event, and until the Stated Series Termination Date occurs,
principal will be paid first to the Class A Certificateholders until the Class A
Invested Amount has been paid in full, and then to the Class B
Certificateholders until the Class B Invested Amount has been paid in full.
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On each Distribution Date of the Class A Accumulation Period, the Servicer
will deposit in the Principal Funding Account an amount equal to the least of
(a) the Fixed Allocation Percentage of collections of Principal Receivables with
respect to the preceding Due Period plus the amount of any Excess Principal
Collections with respect to other Series that are allocated to Series 1996-1 in
accordance with the Agreement minus the amount of any Reallocated Principal
Collections, (b) for each Distribution Date with respect to the Class A
Accumulation Period prior to the Class A Expected Final Distribution Date, the
Controlled Deposit Amount for such Distribution Date and (c) the Class A
Invested Amount with respect to such Distribution Date (such amount, "Class A
Monthly Principal"). Amounts on deposit in the Principal Funding Account will be
paid to the Class A Certificateholders on the Class A Expected Final
Distribution Date. After the outstanding principal amount of the Class A
Certificates has been paid in full, on each Distribution Date during the Class B
Accumulation Period, the Servicer will deposit in the Principal Funding Account
an amount equal to the least of (a) the Fixed Allocation Percentage of
collections of Principal Receivables with respect to the preceding Due Period
plus the amount of any Excess Principal Collections with respect to other Series
that are allocated to Series 1996-1 in accordance with the Agreement minus the
amount of any Reallocated Principal Collections minus the portion of such
amounts applied to Class A Monthly Principal on such Distribution Date, if any,
(b) for each Distribution Date with respect to the Class B Accumulation Period
prior to the Class B Expected Final Distribution Date, the Controlled Deposit
Amount for such Distribution Date and (c) the Class B Invested Amount with
respect to such Distribution Date (such amount, "Class B Monthly Principal").
Amounts on deposit in the Principal Funding Account in respect of the Class B
Certificates will be paid to the Class B Certificateholders on the Class B
Expected Final Distribution Date. If an Early Amortization Event occurs with
respect to the Certificates during the Accumulation Period, the Early
Amortization Period will commence and any amount on deposit in the Principal
Funding Account will be paid first to the Class A Certificateholders on the
first Distribution Date with respect to the Early Amortization Period and then,
after the Class A Invested Amount is paid in full, to the Class B
Certificateholders.
On each Distribution Date during the Early Amortization Period until the
earlier of payment in full of the Class A Invested Amount or the Stated Series
Termination Date, the Class A Certificateholders will be entitled to receive
Class A Monthly Principal in an amount up to the Class A Invested Amount. After
payment in full of the Class A Invested Amount, the Class B Certificateholders
will be entitled to receive on each Distribution Date Class B Monthly Principal
in an amount up to the Class B Invested Amount until the earlier of payment in
full of the Class B Invested Amount or the Stated Series Termination Date.
Postponement of Accumulation Period
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Accumulation Period, and extend the length of the Revolving
Period, subject to certain conditions including those set forth below. The
Servicer may make such election only if the Accumulation Period Length
(determined as described below) is less than twelve months. On each
Determination Date, until the Accumulation Period begins, the Servicer will
determine the "Accumulation Period Length," which is the number of months
expected to be required to fund the Principal Funding Account up to the Class A
Initial Invested Amount no later than the Class A Expected Final Distribution
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 Accumulation Period. If the
Accumulation Period Length is less than twelve months, the Servicer may, at its
option, postpone the commencement of the Accumulation Period such that the
number of months included in the Accumulation Period will be equal to or exceed
the Accumulation Period Length. The effect of the foregoing calculation is to
permit the reduction of the length of the Accumulation Period based on the
invested amounts of certain other Series which are scheduled to be in their
revolving periods during the Accumulation Period and on increases in the
principal payment rate occurring after the Closing Date. The length of the
Accumulation Period will not be less than one month.
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Subordination of the Class B Certificates and the Collateral Indebtedness
Interest
The Class B Certificates and the Collateral Indebtedness Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Collateral Indebtedness Interest will
be subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain principal payments otherwise allocable to the
Class B Certificateholders may be reallocated to the Class A Certificateholders,
and as a result the Class B Invested Amount may be reduced. Similarly, certain
principal payments allocable to the Collateral Indebtedness Interest may be
reallocated to the Class A Certificateholders and the Class B
Certificateholders, and as a result the Collateral Indebtedness Amount may be
reduced. To the extent the Class B Invested Amount is reduced, the percentage of
collections of Finance Charge Receiveables allocated to the Class B
Certificateholders in subsequent Due Periods will be reduced. Moreover, to the
extent the amount of such reduction in the Class B Invested Amount is not
reimbursed, the amount of principal and interest distributable to the Class B
Certificateholders will be reduced. See " -- Allocation Percentages,"
" -- Reallocation of Cash Flows," and " -- Application of Collections -- Excess
Spread; Excess Finance Charge Collections" herein.
Allocation Percentages
Pursuant to the Agreement, the Servicer will allocate among the
Certificates, the Collateral Indebtedness Interest, the certificateholders'
interest for all other Series of certificates issued and outstanding, the
interest of any Enhancement Providers, if applicable, and the Transferor
Interest all collections of Finance Charge Receivables and Principal Receivables
and Defaulted Receivables with respect to each Due Period.
Collections of Finance Charge Receivables and Defaulted Receivables with
respect to any Due Period will be allocated to Series 1996-1 based on the
Floating Allocation Percentage. The "Floating Allocation Percentage" means, with
respect to any Due Period, the sum of the Class A Floating Percentage, the Class
B Floating Percentage and the Collateral Floating Percentage.
The "Class A Floating Percentage" means, with respect to any Due Period,
the percentage equivalent of a fraction the numerator of which is equal to the
Class A Invested Amount as of the last day of the immediately preceding Due
Period (or the Class A Initial Invested Amount, in the case of the first Due
Period applicable to Series 1996-1) and the denominator of which is equal to the
greater of (i) the aggregate Principal Receivables in the Trust as of the last
day of the immediately preceding Due Period and (ii) the sum of the numerators
used to calculate the invested percentages with respect to Finance Charge
Receivables and Defaulted Receivables for all Series outstanding as of the date
on which such determination is being made.
The "Class B Floating Percentage" means, with respect to any Due Period,
the percentage equivalent of a fraction the numerator of which is equal to the
Class B Invested Amount as of the last day of the immediately preceding Due
Period (or the Class B Initial Invested Amount, in the case of the first Due
Period applicable to Series 1996-1) and the denominator of which is equal to the
greater of (i) the aggregate Principal Receivables in the Trust as of the last
day of the immediately preceding Due Period and (ii) the sum of the numerators
used to calculate the invested percentages with respect to Finance Charge
Receivables and Defaulted Receivables for all Series outstanding as of the date
on which such determination is being made.
"Collateral Floating Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the
Collateral Indebtedness Amount as of the last day of the immediately preceding
Due Period (or the Collateral Initial Indebtedness Amount, in the case of the
first Due Period applicable to Series 1996-1) and the denominator of which is
equal to the greater of (i) the aggregate Principal Receivables in the Trust as
of the last day of the immediately preceding Due Period and (ii) the sum of the
numerators used to calculate the invested percentages with respect to Finance
Charge Receivables and Defaulted Receivables for all Series outstanding as of
the date on which such determination is being made.
Collections of Principal Receivables with respect to any Due Period during
the Revolving Period will be allocated to Series 1996-1 based on the Floating
Allocation Percentage. Collections of Principal Receivables with respect to any
Due Period during the Accumulation Period or the Early Amortization Period will
be allocated to Series 1996-1 based on the Fixed Allocation Percentage. The
"Fixed Allocation Percentage" means, with respect to any Due Period, the sum of
the Class A Fixed Percentage, the Class B Fixed Percentage and the Collateral
Fixed Percentage.
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"Class A Fixed Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the Class
A Invested Amount as of the last day of the Revolving Period and the denominator
of which is equal to the greater of (i) the aggregate Principal Receivables in
the Trust as of the last day of the immediately preceding Due Period and (ii)
the sum of the numerators used to calculate the invested percentages with
respect to Principal Receivables for all Series outstanding as of the date on
which such determination is being made.
"Class B Fixed Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the Class
B Invested Amount as of the last day of the Revolving Period and the denominator
of which is equal to the greater of (i) the aggregate Principal Receivables in
the Trust as of the last day of the immediately preceding Due Period and (ii)
the sum of the numerators used to calculate the invested percentages with
respect to Principal Receivables for all Series outstanding as of the date on
which such determination is being made.
"Collateral Fixed Percentage" means, with respect to any Due Period, the
percentage equivalent of a fraction the numerator of which is equal to the
Collateral Indebtedness Amount as of the last day of the Revolving Period and
the denominator of which is equal to the greater of (i) the aggregate Principal
Receivables in the Trust as of the last day of the immediately preceding Due
Period and (ii) the sum of the numerators used to calculate the invested
percentages with respect to Principal Receivables for all Series outstanding as
of the date on which such determination is being made.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" means, on any date of determination, an amount
equal to (a) the Class A Initial Invested Amount, minus (b) the Principal
Funding Account Balance, minus (c) the aggregate amount of principal payments
made to the Class A Certificateholders prior to such date, minus (d) the excess,
if any, of the aggregate amount of Class A Investor Charge-Offs for all prior
Distribution Dates over the aggregate amount of reimbursed Class A Investor
Charge-Offs; provided, however, that the Class A Invested Amount may not be
reduced below zero.
"Class B Invested Amount" means, on any date of determination, an amount
equal to (a) the Class B Initial Invested Amount, minus (b) after the Class A
Invested Amount has been paid in full, the Principal Funding Account Balance,
minus (c) the aggregate amount of principal payments made to the Class B
Certificateholders prior to such date, minus (d) the aggregate amount of Class B
Investor Charge-Offs for all prior Distribution Dates, minus (e) the amount of
Reallocated Principal Collections used to make payments in respect of the Class
A Certificates on all prior Distribution Dates that have not resulted in a
reduction of the Collateral Indebtedness Amount, minus (f) an amount equal to
the amount by which the Class B Invested Amount has been reduced on all prior
Distribution Dates in respect of the Class A Investor Default Amount, plus (g)
the amount of Excess Spread and Excess Finance Charge Collections allocated and
available on all prior Distribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (d), (e) and (f); provided, however,
that the Class B Invested Amount may not be reduced below zero.
"Collateral Indebtedness Amount" means, on any date of determination, an
amount equal to (a) $85,500,000 (the "Collateral Initial Indebtedness Amount"),
minus (b) the aggregate amount of principal payments made to the Collateral
Indebtedness Holder prior to such date, minus (c) the amount of Reallocated
Principal Collections used to make payments in respect of the Certificates on
all prior Distribution Dates minus (d) an amount equal to the amount by which
the Collateral Indebtedness Amount has been reduced on all prior Distribution
Dates in respect of the Class A Investor Default Amount, the Class B Investor
Default Amount and the Collateral Default Amount, plus (e) the amount of Excess
Spread and Excess Finance Charge Collections allocated and available on all
prior Distribution Dates for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c) and (d); provided, however, that the
Collateral Indebtedness Amount may not be reduced below zero.
"Invested Amount" means, on any date of determination, the sum of the Class
A Invested Amount, the Class B Invested Amount and the Collateral Indebtedness
Amount. "Initial Invested Amount" means the sum of the Class A Initial Invested
Amount, the Class B Initial Invested Amount and the Collateral Initial
Indebtedness Amount.
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Principal Funding Account
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an account for the benefit of the Certificateholders (the
"Principal Funding Account"). During the Accumulation Period, the Servicer shall
transfer collections in respect of Principal Receivables, Shared Principal
Collections allocated to Series 1996-1 and other amounts described herein to be
treated in the same manner as collections of Principal Receivables from the
Collection Account to the Principal Funding Account as described under
" -- Application of Collections" herein.
Unless an Early Amortization Event has occurred with respect to the
Certificates, the principal amount on deposit in the Principal Funding Account
(the "Principal Funding Account Balance") on any Distribution Date (after giving
effect to any deposits to, or withdrawals from the Principal Funding Account to
be made on such Distribution Date) will be invested in Eligible Investments that
mature prior to the following Distribution Date.
On each Distribution Date with respect to the Accumulation Period (on or
prior to the Class B Expected Final Distribution Date), the interest and other
investment income (net of investment expenses and losses) earned on such
investments (the "Principal Funding Investment Proceeds") will be withdrawn from
the Principal Funding Account and will be treated as a portion of Class A
Available Funds, until the Class A Certificates have been paid in full and,
thereafter, Class B Available Funds. If such investments with respect to any
such Distribution Date yield less than the applicable Certificate Rate, the
Principal Funding Investment Proceeds with respect to such Distribution Date
will be less than the Covered Amount for such following Distribution Date. It is
intended that any such shortfall will be funded from Class A Available Funds or
Class B Available Funds, as the case may be (including a withdrawal from the
Reserve Account, if necessary, as described under " -- Reserve Account"), a
withdrawal from the Cash Collateral Account as described under " -- Cash
Collateral Account" herein or from Reallocated Principal Collections. The
Available Reserve Account Amount and the Available Cash Collateral Amount at any
time will be limited (and could be zero) and there can be no assurance that
sufficient funds will be available to fund any such shortfall. The "Covered
Amount" means (a) for any Distribution Date with respect to the Class A
Accumulation Period or the first Distribution Date of the Early Amortization
Period, if such Distribution Date occurs on or prior to the payment in full of
the Class A Invested Amount, an amount equal to the product of (i) a fraction
the numerator of which is the actual number of days in the related Interest
Period and the denominator of which is 360, (ii) the Class A Certificate Rate in
effect for the related Interest Period and (iii) the Principal Funding Account
Balance, if any, as of the preceding Distribution Date and (b) for any
Distribution Date with respect to the Class B Accumulation Period or the first
Distribution Date of the Early Amortization Period, if such Distribution Date
occurs on or after the Class B Principal Commencement Date, an amount equal to
the product of (i) a fraction the numerator of which is the actual number of
days in the related Interest Period and the denominator of which is 360, (ii)
the Class B Certificate Rate in effect for the related Interest Period and (iii)
the Principal Funding Account Balance, if any, as of the preceding Distribution
Date.
Reserve Account
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an account for the benefit of the Certificateholders (the
"Reserve Account"). The Reserve Account is intended to help assure the
subsequent distribution of interest on the Certificates as described in this
Prospectus Supplement during the Accumulation Period. On each Distribution Date
from and after the Reserve Account Funding Date, but prior to the termination of
the Reserve Account, the Trustee, acting pursuant to the Servicer's
instructions, will apply Excess Spread and Excess Finance Charge Collections
allocated to Series 1996-1 (to the extent described below under " -- Application
of Collections" herein) to increase the amount on deposit in the Reserve Account
(to the extent such amount is less than the Required Reserve Account Amount).
The "Reserve Account Funding Date" will be the Distribution Date with respect to
the Due Period which commences three months prior to the Due Period which
commences the Class A Accumulation Period (or earlier, under certain limited
circumstances). The "Required Reserve Account Amount" for any Distribution Date
on or after the Reserve Account Funding Date will be equal to 0.5% of the sum of
the Class A Invested Amount and the Principal Funding Account Balance or any
other amount designated by the Transferor provided that, if such designation is
of a lesser amount, the Transferor shall have received written notice from each
Rating Agency that such designation will not result in a withdrawal or reduction
of its rating of the Certificates and the Transferor shall
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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 an Early
Amortization Event or an event that, after the giving of notice or the lapse of
time, would constitute an Early Amortization Event, to occur with respect to
Series 1996-1. On each Distribution Date, after giving effect to any deposit to
be made to, and any withdrawal to be made from, the Reserve Account on such
Distribution 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 in
accordance with the Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Distribution Date (after
giving effect to any deposits to, or withdrawals from, the Reserve Account to be
made on such Distribution Date) will be invested by the Trustee at the direction
of the Servicer in Eligible Investments that mature prior to the following
Distribution Date. 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 that the amount on deposit therein is less than the
Required Reserve Account Amount) or treated as Class A Available Funds or, after
the Class A Certificates have been paid in full, Class B Available Funds (to the
extent that the amount on deposit therein is greater than the Required Reserve
Account Amount).
On or before each Distribution Date with respect to the Accumulation Period
(on or prior to the Class A Expected Final Distribution Date) and on the first
Distribution Date of the Early Amortization Period, a withdrawal will be made
from the Reserve Account, and the amount of such withdrawal will be deposited in
the Collection Account and included in Class A Available Funds, until the Class
A Certificates have been paid in full, and, thereafter, in Class B Available
Funds, in an amount equal to the lesser of (a) the Available Reserve Account
Amount with respect to such Distribution Date and (b) the excess, if any, of the
Covered Amount with respect to such Distribution Date over the Principal Funding
Investment Proceeds with respect to such Distribution Date; provided that the
amount of such withdrawal shall be reduced to the extent that funds otherwise
would be available to be deposited in the Reserve Account on such Distribution
Date. On each Distribution Date, the amount available to be withdrawn from the
Reserve Account (the "Available Reserve Account Amount") will be equal to the
lesser of the amount on deposit in the Reserve Account (before giving effect to
any deposit to be made to the Reserve Account on such Distribution Date) and the
Required Reserve Account Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur of
(a) the termination of the Trust pursuant to the Agreement, (b) the date on
which the Certificates are paid in full and (c) if the Accumulation Period has
not commenced, the occurrence of an Early Amortization Event with respect to the
Certificates or, if the Accumulation Period has commenced, the earlier of the
first Distribution Date of the Early Amortization Period and the Class B
Expected Final Distribution Date. Upon the termination of the Reserve Account,
all amounts on deposit therein (after giving effect to any withdrawal from the
Reserve Account on such date as described above) will be distributed for
application in accordance with the terms of the Loan Agreement. Any amounts
withdrawn from the Reserve Account and distributed in accordance with the Loan
Agreement will not be available for distribution to the Certificateholders.
Interest Funding Account
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an account for the benefit of the Certificateholders (the
"Interest Funding Account"). On each Distribution Date, interest with respect to
the Certificates will be deposited therein for payment to Certificateholders on
each Interest Payment Date. Amounts on deposit in the Interest Funding Account
will be invested in Eligible Investments that mature prior to the following
Distribution Date. The interest and other investment income (net of investment
expenses and losses) earned on such investments will be withdrawn from such
account on each Distribution Date and will be treated as collections of Finance
Charge Receivables.
Reallocation of Cash Flows
On or before each Distribution Date, the Servicer will determine the amount
(the "Class A Required Amount"), if any, by which (a) the sum of (i) Class A
Monthly Interest for such Distribution Date, (ii) any
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Class A Monthly Interest previously due but not deposited in the Interest
Funding Account for the benefit of the Class A Certificateholders on a prior
Distribution Date, (iii) any Class A Additional Interest for such Distribution
Date and any Class A Additional Interest previously due but not deposited in the
Interest Funding Account for the benefit of the Class A Certificateholders on a
prior Distribution Date, (iv) the Class A Servicing Fee for such Distribution
Date and any unpaid Class A Servicing Fee for a prior Distribution Date and (v)
the Class A Investor Default Amount, if any, for such Distribution Date exceeds
(b) the Class A Available Funds. If the Class A Required Amount is greater than
zero, Excess Spread and Excess Finance Charge Collections allocable to Series
1996-1 and available for such purpose will be used to fund the Class A Required
Amount with respect to such Distribution Date. If such Excess Spread and Excess
Finance Charge Collections available with respect to such Distribution Date are
insufficient to fund the Class A Required Amount, amounts, if any, on deposit in
the Cash Collateral Account will then be used to fund the remaining Class A
Required Amount. If such Excess Spread and Excess Finance Charge Collections and
amounts, if any, on deposit in the Cash Collateral Account are insufficient to
fund the Class A Required Amount, collections of Principal Receivables allocable
first to the Collateral Indebtedness Interest and then to the Class B
Certificates for the related Due Period ("Reallocated Principal Collections")
will then be used to fund the remaining Class A Required Amount. If such
Reallocated Principal Collections with respect to the related Due Period are
insufficient to fund the remaining Class A Required Amount, then the Collateral
Indebtedness Amount will be reduced by the amount of such insufficiency (but not
by more than the Class A Investor Default Amount for such Distribution Date). In
the event that such reduction would cause the Collateral Indebtedness Amount to
be a negative number, the Collateral Indebtedness Amount will be reduced to
zero, and the Class B Invested Amount will be reduced by the amount by which the
Collateral Indebtedness Amount would have been reduced below zero. In the event
that such reduction would cause the Class B Invested Amount to be a negative
number, the Class B Invested Amount will be reduced to zero, and the Class A
Invested Amount will be reduced by the amount by which the Class B Invested
Amount would have been reduced below zero. Any such reduction in the Class A
Invested Amount 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 undivided interest in the Trust. See " -- Defaulted
Receivables; Investor Charge-Offs" herein.
On or before each Distribution Date, the Servicer will determine the amount
(the "Class B Required Amount"), if any, by which (a) the sum of (i) Class B
Monthly Interest for such Distribution Date, (ii) any Class B Monthly Interest
previously due but not deposited in the Interest Funding Account for the benefit
of the Class B Certificateholders on a prior Distribution Date, (iii) any Class
B Additional Interest for such Distribution Date and any Class B Additional
Interest previously due but not deposited in the Interest Funding Account for
the benefit of the Class B Certificateholders on a prior Distribution Date and
(iv) the Class B Servicing Fee for such Distribution Date and any unpaid Class B
Servicing Fee for a prior Distribution Date exceeds (b) the Class B Available
Funds, plus the amount, if any, by which the Class B Investor Default Amount for
such Distribution Date exceeds the amount of Excess Spread and Excess Finance
Charge Collections allocable to Series 1996-1 available to cover the Class B
Investor Default Amount on such Distribution Date. If the Class B Required
Amount is greater than zero, Excess Spread and Excess Finance Charge Collections
allocable to Series 1996-1 not required to fund the Class A Required Amount or
reimburse Class A Investor Charge-Offs will be used to fund the Class B Required
Amount with respect to such Distribution Date. If such Excess Spread and Excess
Finance Charge Collections available with respect to such Distribution Date are
insufficient to fund the Class B Required Amount, amounts, if any, on deposit in
the Cash Collateral Account not required to fund the Class A Required Amount or
reimburse Class A Investor Charge-Offs will then be used to fund the remaining
Class B Required Amount. If such Excess Spread and Excess Finance Charge
Collections and amounts, if any, available in the Cash Collateral Account are
insufficient to fund the Class B Required Amount, Reallocated Principal
Collections allocable to the Collateral Indebtedness Interest not required to
fund the Class A Required Amount will then be used to fund the remaining Class B
Required Amount. If such Reallocated Principal Collections with respect to the
related Due Period are insufficient to fund the remaining Class B Required
Amount, then the Collateral Indebtedness Amount remaining after any adjustments
made thereto for the benefit of Class A Certificateholders will be reduced by
the amount of such insufficiency (but not by more than the Class B Investor
Default Amount for such Distribution Date). In the event that such reduction
would cause the Collateral Indebtedness Amount to be a negative number, the
Collateral Indebtedness Amount will be reduced to zero, and the Class B Invested
Amount remaining after any adjustments made thereto for the benefit of Class A
Certificateholders will be reduced by the amount by which the Collateral
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Indebtedness Amount would have been reduced below zero, and the Class B
Certificateholders will bear directly the credit and other risks associated with
their undivided interest in the Trust. See " -- Defaulted Receivables; Investor
Charge-Offs" herein.
Reductions of the Class A Invested Amount or the Class B Invested Amount,
as the case may be, will thereafter be reimbursed and the Class A Invested
Amount or the Class B Invested Amount, as applicable, increased to the extent of
Excess Spread and Excess Finance Charge Collections allocable to Series 1996-1.
On or before each Distribution Date, the Servicer will determine the amount
(the "Collateral Required Amount"), if any, by which the Collateral Servicing
Fee for such Distribution Date and any unpaid Collateral Servicing Fee for a
prior Distribution Date exceeds the Collateral Available Funds, plus the amount,
if any, by which the Collateral Monthly Interest and the Collateral Default
Amount, if any, for such Distribution Date exceed the amount of Excess Spread
and Excess Finance Charge Collections allocable to Series 1996-1 available on
such Distribution Date as specified under " -- Application of Collections"
herein. If the Collateral Required Amount is greater than zero, Excess Spread
and Excess Finance Charge Collections allocable to Series 1996-1 not required to
fund the Class A Required Amount or the Class B Required Amount or reimburse
Class A Investor Charge-Offs or Class B Investor Charge-Offs or pay certain
other amounts will be used to fund the Collateral Required Amount with respect
to such Distribution Date. If such Excess Spread and Excess Finance Charge
Collections available with respect to such Distribution Date are insufficient to
fund the Collateral Required Amount, amounts, if any, on deposit in the Cash
Collateral Account not required to fund the Class A Required Amount or the Class
B Required Amount or reimburse Class A Investor Charge-Offs or Class B Investor
Charge-Offs or pay certain other amounts will then be used to fund any
Collateral Servicing Fee that remains unpaid. If such Excess Spread and Excess
Finance Charge Collections and amounts, if any, available in the Cash Collateral
Account (to the extent permitted to be used therefor) are insufficient to fund
the Collateral Required Amount, the Collateral Indebtedness Amount will be
reduced by the amount of such insufficiency (but not by more than the Collateral
Default Amount for such Distribution Date).
Application of Collections
Payment of Interest, Fees and Other Items. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds in the
following manner:
(A) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not deposited in the Interest Funding Account for the
benefit of the Class A Certificateholders on a prior Distribution Date,
plus additional interest at the Class A Certificate Rate plus 2% per
annum with respect to amounts that were due but not deposited in the
Interest Funding Account for the benefit of Class A Certificateholders
on a prior Distribution Date ("Class A Additional Interest"), will be
deposited in the Interest Funding Account for distribution on each
Interest Payment Date to Class A Certificateholders;
(ii) an amount equal to the Class A Servicing Fee for such
Distribution Date, plus the amount of any Class A Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount for
such Distribution Date will be treated as a portion of collections of
Principal Receivables allocable to Series 1996-1 for such Distribution
Date; and
(iv) the balance, if any, will constitute Excess Spread and shall
be allocated and distributed as described under " -- Excess Spread;
Excess Finance Charge Collections" below.
(B) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not deposited in the Interest Funding Account for the
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benefit of the Class B Certificateholders on a prior Distribution Date,
plus any additional interest at the Class B Certificate Rate plus 2% per
annum with respect to amounts that were due but not deposited in the
Interest Funding Account for the benefit of Class B Certificateholders
on a prior Distribution Date ("Class B Additional Interest"), will be
deposited in the Interest Funding Account for distribution on each
Interest Payment Date to the Class B Certificateholders;
(ii) an amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer; and
(iii) the balance, if any, will constitute Excess Spread and shall
be allocated and distributed as described under " -- Excess Spread;
Excess Finance Charge Collections" below.
(C) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to the Collateral Servicing Fee for such
Distribution Date, plus the amount of any Collateral Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under " -- Excess Spread; Excess
Finance Charge Collections" below.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i)(A) a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is 360, times (B) the Class A Certificate Rate and (ii) the outstanding
principal amount of the Class A Certificates as of the preceding Record Date
(or, in the case of the July 1996 Distribution Date, as of the Closing Date).
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i)(A) a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is 360, times (B) the Class B Certificate Rate and (ii) the outstanding
principal amount of the Class B Certificates as of the preceding Record Date
(or, in the case of the July 1996 Distribution Date, as of the Closing Date).
"Collateral Available Funds" means, with respect to any Due Period, an
amount equal to the Collateral Floating Percentage of the collections of Finance
Charge Receivables with respect to such Due Period (including net interest and
earnings on funds, if any, on deposit in the Cash Collateral Account and the
Interest Funding Account and any other amounts that are to be treated as
collections of Finance Charge Receivables allocable to Series 1996-1 in
accordance with the Agreement).
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clauses (A)(iv), (B)(iii) and
(C)(ii).
Excess Spread; Excess Finance Charge Collections. On each Distribution
Date, the Trustee, acting pursuant to the Servicer's instructions, will apply
Excess Spread and Excess Finance Charge Collections allocable to Series 1996-1
with respect to the related Due 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 Distribution Date will be used to fund any deficiency
pursuant to clauses (A)(i), (ii) and (iii) above under " -- Payment of
Interest, Fees and Other Items," in that order of priority;
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of collections of Principal Receivables allocable to Series 1996-1
for such Distribution Date as described under " -- Payments of Principal"
below;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Distribution Date will be used to fund any deficiency
pursuant to clauses (B)(i) and (ii) above under " -- Payment of Interest,
Fees and Other Items," in that order of priority;
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(d) an amount equal to the Class B Investor Default Amount for such
Distribution Date will be treated as a portion of collections of Principal
Receivables allocable to Series 1996-1 for such Distribution Date as
described under " -- Payments of Principal" below;
(e) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (d), (e) and (f) of
the definition of "Class B Invested Amount" under " -- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be treated as a
portion of collections of Principal Receivables allocable to Series 1996-1
for such Distribution Date as described under " -- Payments of Principal"
below;
(f) an amount up to the Collateral Required Amount, if any, with
respect to such Distribution Date will be used to fund any deficiency
pursuant to clause (C)(i) above under " -- Payment of Interest, Fees and
Other Items";
(g) an amount equal to Collateral Monthly Interest for such
Distribution Date will be distributed to the Collateral Indebtedness
Holder;
(h) an amount equal to the Collateral Default Amount for such
Distribution Date will be treated as a portion of collections of Principal
Receivables allocable to Series 1996-1 for such Distribution Date as
described under " -- Payments of Principal" below;
(i) an amount equal to the aggregate amount by which the Collateral
Indebtedness Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Collateral Indebtedness Amount" under " -- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be treated as a
portion of collections of Principal Receivables allocable to Series 1996-1
for such Distribution Date as described under " -- Payments of Principal"
below;
(j) an amount up to the excess, if any, of the Required Cash
Collateral Amount over the Available Cash Collateral Amount (without giving
effect to any deposit made on such date under the Agreement) will be
deposited into the Cash Collateral Account;
(k) an amount equal to the aggregate of any other amounts then due to
the Collateral Indebtedness Holder pursuant to the Loan Agreement will be
applied in accordance with the Loan Agreement;
(l) an amount equal to the excess, if any, of the Required Reserve
Account Amount over the amount on deposit in the Reserve Account will be
deposited into the Reserve Account; and
(m) the balance, if any, will constitute "Excess Finance Charge
Collections" to be applied with respect to other Series in accordance with
the Agreement.
"Collateral Monthly Interest" means, with respect to any Distribution Date,
an amount equal to the interest payable to the Collateral Indebtedness Holder
pursuant to the Loan Agreement. Collateral Monthly Interest is generally payable
at the Collateral Rate on the outstanding principal amount of the Collateral
Indebtedness Interest. "Collateral Rate" means a rate equal to the London
interbank offered rate based on quotations for one-month United States dollar
deposits, determined on a monthly basis, plus 1% per annum, or such lesser rate
designated pursuant to the Loan Agreement.
"Collateral Default Amount" means, with respect to any Distribution Date,
the product of the Collateral Floating Percentage applicable during the related
Due Period and the amount of Defaulted Receivables for such Due Period.
"Record Date" means, with respect to any Distribution Date, the last day of
the calendar month preceding such Distribution Date.
Payments of Principal. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute collections of
Principal Receivables allocable to Series 1996-1 (including Excess Principal
Collections allocable to Series 1996-1) available therefor, after giving effect
to any reallocation of Reallocated Principal Collections ("Available Principal
Collections"), on deposit in the Collection Account in the following priority:
(A) On each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections, less any portion thereof relating
to collections of Principal Receivables allocated at the option of
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the Transferor as part of Collateral Monthly Principal to make a payment
with respect to the Collateral Indebtedness Interest (subject to
maintaining the Required Enhancement Amount), will be treated as Shared
Principal Collections with respect to other Series and applied as described
under "Description of the Certificates -- Shared Principal Collections" in
the Prospectus; and
(B) On each Distribution Date with respect to the Accumulation Period
or the Early Amortization Period, all such Available Principal Collections
will be deposited or distributed in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date will, during the Class A Accumulation Period, be
deposited in the Principal Funding Account for payment to the Class A
Certificateholders on the earlier to occur of the Class A Expected Final
Distribution Date and the first Distribution Date with respect to the
Early Amortization Period or, during the Early Amortization Period, be
distributed to the Class A Certificateholders;
(ii) an amount equal to Class B Monthly Principal for such
Distribution Date will, during the Class B Accumulation Period, be
deposited in the Principal Funding Account for payment to the Class B
Certificateholders on the earlier to occur of the Class B Expected Final
Distribution Date and the first Distribution Date with respect to the
Early Amortization Period or, during the Early Amortization Period, be
distributed to Class B Certificateholders;
(iii) an amount equal to Collateral Monthly Principal for such
Distribution Date will be applied in accordance with the Loan Agreement;
and
(iv) the balance, if any, will be treated as Shared Principal
Collections with respect to other Series and applied as described under
"Description of the Certificates -- Shared Principal Collections" in
the Prospectus.
"Collateral Monthly Principal" means (i) on any Distribution Date prior to
the payment in full of the Class B Invested Amount, either (A) during the
Revolving Period, subject to certain limitations specified in the Loan
Agreement, the excess of the sum of the Collateral Indebtedness Amount and the
Available Cash Collateral Amount over the Required Enhancement Amount (such
excess, the "Enhancement Surplus") or any lesser amount (including zero) as the
Transferor may determine, at its option and in its sole discretion, or (B)
during the Accumulation Period, subject to certain limitations specified in the
Loan Agreement, an amount up to the Enhancement Surplus and (ii) beginning with
the Distribution Date on which the Class B Invested Amount is paid in full, all
Available Principal Collections not applied to Class A Monthly Principal or
Class B Monthly Principal; provided, however, that Collateral Monthly Principal
may not exceed the Collateral Indebtedness Amount with respect to any
Distribution Date.
"Controlled Accumulation Amount" means (a) for any Distribution Date with
respect to the Class A Accumulation Period, $63,000,000; provided, however, that
if the commencement of the Accumulation Period is delayed as described above
under " -- Postponement of Accumulation Period," the Controlled Accumulation
Amount will be higher, and (b) for any Distribution Date with respect to the
Class B Accumulation Period, $58,500,000.
"Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the Controlled Accumulation Amount
for such Distribution Date over the amount distributed from the Collection
Account as Class A Monthly Principal or Class B Monthly Principal, as the case
may be, for such Distribution Date and (b) on each subsequent Distribution Date
with respect to the Class A Accumulation Period or the Class B Accumulation
Period, the excess, if any, of the Controlled Deposit Amount for such subsequent
Distribution Date over the amount distributed from the Collection Account as
Class A Monthly Principal or Class B Monthly Principal, as the case may be, for
such subsequent Distribution Date.
"Controlled Deposit Amount" shall mean, for any Distribution Date with
respect to the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.
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Cash Collateral Account
The Cash Collateral Account will be held for the benefit of the
Certificateholders and the Collateral Indebtedness Holder, as their interests
appear in the Series 1996-1 Supplement, and in the case of the Collateral
Indebtedness Holder, in the loan agreement among the Trustee, NationsBank and
the Collateral Indebtedness Holder (the "Loan Agreement") (which interest, in
the case of the Collateral Indebtedness Holder, will be subordinated to the
interests of the Certificateholders as provided in the Series 1996-1
Supplement). Funds on deposit in the Cash Collateral Account will be invested in
Eligible Investments. On each Distribution Date, interest and earnings (net of
losses and investment expenses) on funds on deposit in the Cash Collateral
Account will be deposited into the Collection Account and treated as collections
of Finance Charge Receivables allocable to Series 1996-1.
On each Distribution Date, one or more withdrawals may be made from the
Cash Collateral Account in an amount up to the amount on deposit therein to fund
the amounts specified in clauses (a) through (f) under " -- Application of
Collections -- Excess Spread; Excess Finance Charge Collections" above in the
order of priority specified therein.
On each Distribution Date, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-1 (to the extent available as described
above under " -- Application of Collections -- Excess Spread; Excess Finance
Charge Collections") to increase the amount on deposit in the Cash Collateral
Account up to the Required Cash Collateral Amount. The "Required Cash Collateral
Amount" will be determined in accordance with the Loan Agreement.
Defaulted Receivables; Investor Charge-Offs
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Due Period. The term "Investor Default Amount"
means, for any Due Period, the product of (i) the Floating Allocation Percentage
with respect to such Due Period and (ii) the amount of Defaulted Receivables for
such Due Period. A portion of the Investor Default Amount will be allocated to
the Class A Certificateholders (the "Class A Investor Default Amount") on each
Distribution Date in an amount equal to the product of (i) the Class A Floating
Percentage applicable during the related Due Period and (ii) the amount of
Defaulted Receivables for such Due Period. A portion of the Investor Default
Amount will be allocated to the Class B Certificateholders (the "Class B
Investor Default Amount") in an amount equal to the product of (i) the Class B
Floating Percentage with respect to the related Due Period and (ii) the amount
of Defaulted Receivables for such Due Period.
An amount equal to the Class A Investor Default Amount for each Due Period
will be funded with Class A Available Funds, Excess Spread and Excess Finance
Charge Collections allocable to Series 1996-1, amounts, if any, on deposit in
the Cash Collateral Account and Reallocated Principal Collections applied as
described above in " -- Application of Collections -- Payment of Interest, Fees
and Other Items" and " -- Reallocation of Cash Flows." An amount equal to the
Class B Investor Default Amount for each Due Period will be funded with Class B
Available Funds, Excess Spread and Excess Finance Charge Collections allocable
to Series 1996-1, amounts, if any, on deposit in the Cash Collateral Account and
Reallocated Principal Collections applied as described above in " -- Application
of Collections -- Payment of Interest, Fees and Other Items" and
" -- Reallocation of Cash Flows."
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-1, amounts, if any, on deposit in the Cash
Collateral Account and Reallocated Principal Collections, then the Collateral
Indebtedness Amount will be reduced by the amount of such excess, but not by
more than the Class A Investor Default Amount for such Distribution Date. In the
event that such reduction would cause the Collateral Indebtedness Amount to be a
negative number, the Collateral Indebtedness Amount will be reduced to zero, and
the Class B Invested Amount will be reduced by the amount by which the
Collateral Indebtedness Amount would have been reduced below zero. In the event
that such reduction would cause the Class B Invested Amount to be a negative
number, the Class B Invested Amount will be reduced to zero, and the Class A
Invested Amount will be reduced by the amount by which the Class B Invested
Amount would have been reduced below zero (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 Invested Amount has
been reduced by the amount of any Class A
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Investor Charge-Offs, it will thereafter be increased on any Distribution Date
(but not by an amount in excess of the aggregate Class A Investor Charge-Offs)
by the amount of Excess Spread and Excess Finance Charge Collections allocable
to Series 1996-1 and available for such purpose as described above in
" -- Application of Collections -- Excess Spread; Excess Finance Charge
Collections."
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-1 not required to pay the Class A Required
Amount or reimburse Class A Investor Charge-Offs, amounts, if any, on deposit in
the Cash Collateral Account not required to pay the Class A Required Amount or
reimburse Class A Investor Charge-Offs and Reallocated Principal Collections
(exclusive of Reallocated Principal Collections relating to the Class B Invested
Amount) not required to pay the Class A Required Amount, then the Collateral
Indebtedness Amount remaining after any reduction for the benefit of Class A
Certificates will be reduced by the amount of such excess, but not by more than
the Class B Investor Default Amount for such Distribution Date. In the event
that such reduction would cause the Collateral Indebtedness Amount to be a
negative number, the Collateral Indebtedness Amount will be reduced to zero, and
the Class B Invested Amount will be reduced by the amount by which the
Collateral Indebtedness Amount would have been reduced below zero (a "Class B
Investor Charge-Off"). If the Class B Invested Amount has been reduced by the
amount of any Class B Investor Charge-Offs, it will thereafter be increased on
any Distribution Date (but not by an amount in excess of the aggregate Class B
Investor Charge-Offs) by the amount of Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-1 and available for such purpose as
described above in " -- Application of Collections -- Excess Spread; Excess
Finance Charge Collections."
On each Distribution Date, if the Collateral Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-1 not required to pay the Class A Required
Amount or the Class B Required Amount, to reimburse Class A Investor Charge-Offs
or Class B Investor Charge-Offs or to pay certain other amounts, amounts, if
any, on deposit in the Cash Collateral Account permitted to be used therefor and
not required to pay the Class A Required Amount or the Class B Required Amount,
to reimburse Class A Investor Charge-Offs or Class B Investor Charge-Offs or to
pay certain other amounts, then the Collateral Indebtedness Amount will be
reduced by the amount of such excess, but not by more than the Collateral
Default Amount for such Distribution Date.
Early Amortization Events
As described above, the Revolving Period will continue through the May 2002
Due Period (or such later date determined as described above under
" -- Postponement of Accumulation Period") unless an Early Amortization Event
occurs prior to such date. An "Early Amortization Event" refers to any of the
following events:
(a) failure on the part of the Transferor (i) to make any payment or
deposit on the date required under the Agreement (or within the applicable
grace period) or (ii) duly to observe or perform in any material respect
the covenant of the Transferor not to sell, pledge, assign or transfer to
any person, or grant any prohibited lien on, any Receivable or (iii) duly
to observe or perform in any material respect any other covenants or
agreements of the Transferor set forth in the Agreement or the Series
1996-1 Supplement, which failure in the case of clause (iii) hereof
continues unremedied for a period of 60 days after written notice and
continues to materially and adversely affect the interests of the
Certificateholders for such period; provided, however, that an Early
Amortization Event pursuant to clause (ii) or (iii) shall not be deemed to
occur if the Transferor has accepted reassignment of the related
Receivables within 60 days after written notice to the Transferor (or such
longer period as the Trustee may specify) in accordance with the provisions
of the Agreement;
(b) any representation or warranty made by the Transferor in the
Agreement or any information required to be given by the Transferor to the
Trustee to identify the Accounts proves to have been incorrect in any
material respect when made and 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 and continue to be materially and adversely affected for such
period; provided, however, that an Early Amortization Event pursuant to
this subparagraph (b) shall not be deemed to occur if the Transferor has
accepted reassignment of the related Receivable or all such Receivables, if
applicable,
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during such period (or such longer period as the Trustee may specify) in
accordance with the provisions of the Agreement;
(c) certain events of insolvency, conservatorship or receivership
relating to the Transferor as more fully described in the Prospectus;
(d) failure by the Transferor to transfer Receivables in Additional
Accounts to the Trust when required pursuant to the Agreement;
(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders;
(f) the average Portfolio Yield for any three consecutive Due Periods
is less than the average Base Rate for such period;
(g) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended; or
(h) the Class A Invested Amount shall not be paid in full on the Class
A Expected Final Distribution Date or the Class B Invested Amount shall not
be paid in full on the Class B Expected Final Distribution Date.
In the case of any event described in clause (a), (b) or (e) above, an
Early Amortization Event will be deemed to have occurred with respect to the
Certificates only if, after any applicable grace period, either the Trustee or
Certificateholders (including, for this purpose, the Collateral Indebtedness
Holder) evidencing undivided interests aggregating more than 50% of the Invested
Amount, by written notice to the Transferor and the Servicer (and to the Trustee
if given by the Certificateholders) declare that an Early Amortization Event has
occurred with respect to the Certificates as of the date of such notice. In the
case of any event described in clause (c) or (g), an Early Amortization Event
with respect to all Series then outstanding, and in the case of any event
described in clause (d), (f) or (h), an Early Amortization 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 an Early Amortization Event is deemed to have
occurred, the Early Amortization Period will commence.
For purposes of the Early Amortization Event described in clause (f) above,
the terms "Base Rate" and "Portfolio Yield" will be defined as follows with
respect to the Certificates:
"Base Rate" means, with respect to any Due Period, the sum of (a) the
annualized percentage equivalent of a fraction, the numerator of which is
equal to the sum of Class A Monthly Interest, Class B Monthly Interest and
Collateral Monthly Interest with respect to the Certificates and Collateral
Indebtedness Interest for the related Distribution Date and the denominator
of which is the sum of the Invested Amount and the Principal Funding
Account Balance as of the last day of the preceding Due Period and (b)
2.00% per annum.
"Portfolio Yield" means, with respect to any Due Period, the
annualized percentage equivalent of a fraction, the numerator of which is
equal to (a) an amount equal to the amount of collections of Finance Charge
Receivables (including net interest and earnings on funds, if any, on
deposit in the Cash Collateral Account and the Interest Funding Account)
that are allocated to Series 1996-1 with respect to such Due Period, plus
(b) any Excess Finance Charge Collections that are allocated to Series
1996-1 with respect to such Due Period, plus (c) Principal Funding
Investment Proceeds and the amounts withdrawn from the Reserve Account and
deposited in the Collection Account to be included as part of Class A
Available Funds or Class B Available Funds with respect to such Due Period
minus (d) the Investor Default Amount for the Distribution Date with
respect to such Due Period, and the denominator of which is the sum of the
Invested Amount and the Principal Funding Account Balance as of the last
day of the preceding Due Period.
See "Description of the Certificates -- Early Amortization Events" in the
Prospectus for an additional discussion of the consequences of an insolvency,
conservatorship or receivership of the Transferor.
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Servicing Compensation and Payment of Expenses
The share of the Servicing Fee allocable to the Certificateholders and the
Collateral Indebtedness Interest with respect to any Distribution Date (the
"Monthly Investor Servicing Fee") will be equal to one-twelfth of the product of
(a) 2.00% (the "Servicing Fee Percentage") and (b) the Invested Amount as of the
last day of the Due Period preceding such Distribution Date (the amount
calculated pursuant to this clause (b) is referred to as the "Servicing Base
Amount"); provided, however, with respect to the first Distribution Date, the
Monthly Investor Servicing Fee will be $1,700,000. On each Distribution Date,
Servicer Interchange with respect to the related Due Period that is on deposit
in the Collection Account shall be withdrawn from the Collection Account and
paid to the Servicer in payment of a portion of the Monthly Investor Servicing
Fee with respect to such Due Period. The "Servicer Interchange" for any Due
Period will be equal to the amount of Interchange included as collections of
Finance Charge Receivables allocated to Series 1996-1 with respect to such Due
Period; provided, however, that Servicer Interchange for a Due Period shall not
exceed one-twelfth of the product of (i) the Servicing Base Amount and (ii)
0.75%. In the case of any insufficiency of Servicer Interchange on deposit in
the Collection Account, a portion of the Monthly Investor Servicing Fee with
respect to such Due Period will not be paid to the extent of such insufficiency
and in no event shall the Trust, the Trustee, or the Certificateholders be
liable for the share of the Servicing Fee to be paid out of Servicer
Interchange.
The share of the Monthly Investor Servicing Fee allocable to the Class A
Certificateholders (after giving effect to the distribution of any Servicer
Interchange to the Servicer) with respect to any Distribution Date (the "Class A
Servicing Fee") will be equal to one-twelfth of the product of (a) the Class A
Invested Amount and (b) 1.25% (the "Net Servicing Fee Rate"); provided, however,
that with respect to the first Distribution Date, the Class A Servicing Fee will
be $892,500. The share of the Monthly Investor Servicing Fee allocable to the
Class B Certificateholders (after giving effect to any distribution of Servicer
Interchange to the Servicer) with respect to any Distribution Date (the "Class B
Servicing Fee") will be equal to one-twelfth of the product of (a) the Class B
Invested Amount and (b) the Net Servicing Fee Rate; provided, however, that with
respect to the first Distribution Date, the Class B Servicing Fee will be equal
to $69,062.50. The share of the Monthly Investor Servicing Fee allocable to the
Collateral Indebtedness Holder with respect to any Distribution Date (the
"Collateral Servicing Fee") will be equal to one-twelfth the product of (a) the
Net Servicing Fee Rate and (b) the Collateral Indebtedness Amount; provided,
however, that with respect to the first Distribution Date, the Collateral
Servicing Fee will be equal to $100,937.50. The remainder of the Servicing Fee
shall be paid by the Transferor or the certificateholders of 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, and in no
event shall the Trust, the Trustee or the Certificateholders be liable for the
share of the Servicing Fee to be paid by the Transferor or the
certificateholders of any other Series or to be paid out of Servicer
Interchange. The Class A Servicing Fee, the Class B Servicing Fee and the
Collateral Servicing Fee shall be payable to the Servicer solely to the extent
amounts are available for distribution in respect thereof as described under
"Application of Collections -- Payment of Interest, Fees and Other Items" above.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") between the Transferor and the underwriters named
below (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 Class A Certificates and Class B Certificates set forth
opposite its name.
<TABLE>
<CAPTION>
Principal Amount
Class A Underwriters of Class A Certificates
<S> <C>
NationsBanc Capital Markets, Inc.................................................................... $156,000,000
Chase Securities Inc................................................................................ 150,000,000
Lehman Brothers Inc................................................................................. 150,000,000
Morgan Stanley & Co. Incorporated................................................................... 150,000,000
UBS Securities LLC.................................................................................. 150,000,000
Total........................................................................................ $756,000,000
<CAPTION>
Principal Amount
Class B Underwriter of Class B Certificates
<S> <C>
NationsBanc Capital Markets, Inc.................................................................... $ 58,500,000
</TABLE>
S-32
<PAGE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates
offered hereby if any of the Certificates are purchased.
The Underwriters propose initially to offer the Class A Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of 0.200% of the principal amount of
the Class A Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of 0.175% 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 of the Class A
Certificates may be changed by the Underwriters.
The Underwriters propose initially to offer the Class B Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of 0.250% of the principal amount of
the Class B Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of 0.200% 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 of the Class B
Certificates may be changed by the Underwriters.
The Certificates will be offered simultaneously in the United States and
Europe.
Each Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell any Certificates to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document in connection with the issue or sale of the Certificates to a
person who is of a kind described in Article 8 of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) (No.2) Order 1995 of Great Britain
or is a person to whom the document may otherwise lawfully be issued or passed
on.
The Transferor will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
NationsBanc Capital Markets, Inc. ("NCMI") is a direct wholly-owned
subsidiary of NationsBank Corporation. NCMI is a registered broker/dealer and
not a bank. Any obligations of NCMI are the sole responsibility of NCMI and do
not create any obligation or guarantee on the part of any affiliate of NCMI.
This Prospectus Supplement and the related Prospectus may be used by NCMI
in connection with offers and sales related to market-making transactions in the
Certificates. NCMI 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. NCMI does not have any obligation to make a market in the
Certificates, and it may discontinue any such market-making activities at any
time without notice, in its sole discretion. NCMI is among the underwriters
participating in the initial distribution of the Certificates.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
NationsBank by W. David Harris, Esq., Senior Counsel of NationsBank Corporation.
S-33
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Page
<S> <C>
Accounts........................................................................................................ S-1, S-3
Accumulation Period............................................................................................. S-6
Accumulation Period Length...................................................................................... S-19
Agreement....................................................................................................... S-3
Available Cash Collateral Amount................................................................................ S-7
Available Enhancement Amount.................................................................................... S-7
Available Principal Collections................................................................................. S-27
Available Reserve Account Amount................................................................................ S-23
Base Rate....................................................................................................... S-31
Business Day.................................................................................................... S-17
Cash Collateral Account......................................................................................... S-2, S-7
Certificateholders.............................................................................................. S-3
Certificates.................................................................................................... S-1
Class A Accumulation Period..................................................................................... S-6
Class A Additional Interest..................................................................................... S-25
Class A Available Funds......................................................................................... S-18
Class A Certificate Rate........................................................................................ S-2, S-4
Class A Certificateholders...................................................................................... S-3
Class A Certificates............................................................................................ S-1
Class A Expected Final Distribution Date........................................................................ S-4, S-14
Class A Fixed Percentage........................................................................................ S-21
Class A Floating Percentage..................................................................................... S-20
Class A Initial Invested Amount................................................................................. S-4
Class A Invested Amount......................................................................................... S-4, S-21
Class A Investor Charge-Off..................................................................................... S-29
Class A Investor Default Amount................................................................................. S-29
Class A Monthly Interest........................................................................................ S-26
Class A Monthly Principal....................................................................................... S-19
Class A Required Amount......................................................................................... S-23
Class A Servicing Fee........................................................................................... S-32
Class B Accumulation Period..................................................................................... S-6
Class B Additional Interest..................................................................................... S-26
Class B Available Funds......................................................................................... S-18
Class B Certificate Rate........................................................................................ S-2, S-4
Class B Certificateholders...................................................................................... S-3
Class B Certificates............................................................................................ S-1
Class B Expected Final Distribution Date........................................................................ S-4, S-14
Class B Fixed Percentage........................................................................................ S-21
Class B Floating Percentage..................................................................................... S-20
Class B Initial Invested Amount................................................................................. S-4
Class B Invested Amount......................................................................................... S-4, S-21
Class B Investor Charge-Off..................................................................................... S-30
Class B Investor Default Amount................................................................................. S-29
Class B Monthly Interest........................................................................................ S-26
Class B Monthly Principal....................................................................................... S-19
Class B Principal Commencement Date............................................................................. S-6
Class B Required Amount......................................................................................... S-24
Class B Servicing Fee........................................................................................... S-32
Closing Date.................................................................................................... S-2
Collateral Available Funds...................................................................................... S-26
Collateral Default Amount....................................................................................... S-27
Collateral Fixed Percentage..................................................................................... S-21
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Collateral Floating Percentage.................................................................................. S-20
Collateral Indebtedness Amount.................................................................................. S-21
Collateral Indebtedness Holder.................................................................................. S-3
Collateral Indebtedness Interest................................................................................ S-3
Collateral Initial Indebtedness Amount.......................................................................... S-21
Collateral Monthly Interest..................................................................................... S-27
Collateral Monthly Principal.................................................................................... S-28
Collateral Rate................................................................................................. S-27
Collateral Required Amount...................................................................................... S-25
Collateral Servicing Fee........................................................................................ S-32
Controlled Accumulation Amount.................................................................................. S-28
Controlled Deposit Amount....................................................................................... S-28
Covered Amount.................................................................................................. S-22
Cut Off Date.................................................................................................... S-4
Deficit Controlled Accumulation Amount.......................................................................... S-28
Designated Portfolio............................................................................................ S-10
Distribution Date............................................................................................... S-2, S-5
Due Period...................................................................................................... S-5
Early Amortization Event........................................................................................ S-30
Enhancement Surplus............................................................................................. S-28
ERISA........................................................................................................... S-9
Excess Finance Charge Collections............................................................................... S-27
Excess Principal Collections.................................................................................... S-8
Excess Spread................................................................................................... S-26
Fixed Allocation Percentage..................................................................................... S-20
Floating Allocation Percentage.................................................................................. S-20
Initial Invested Amount......................................................................................... S-21
Interest Funding Account........................................................................................ S-17, S-23
Interest Payment Date........................................................................................... S-2, S-5
Interest Period................................................................................................. S-5
Invested Amount................................................................................................. S-21
Investor Default Amount......................................................................................... S-29
LIBOR........................................................................................................... S-2, S-17
LIBOR Determination Date........................................................................................ S-17
Loan Agreement.................................................................................................. S-29
Minimum Aggregate Principal Receivables......................................................................... S-11
Minimum Transferor Interest Percentage.......................................................................... S-11
Monthly Investor Servicing Fee.................................................................................. S-5, S-32
NationsBank..................................................................................................... S-1
NCMI............................................................................................................ S-33
Net Servicing Fee Rate.......................................................................................... S-32
Portfolio Yield................................................................................................. S-31
Principal Funding Account....................................................................................... S-22
Principal Funding Account Balance............................................................................... S-22
Principal Funding Investment Proceeds........................................................................... S-22
Rating Agency................................................................................................... S-9
Reallocated Principal Collections............................................................................... S-6, S-24
Receivables..................................................................................................... S-1, S-3
Record Date..................................................................................................... S-27
Reference Banks................................................................................................. S-18
Required Cash Collateral Amount................................................................................. S-29
Required Enhancement Amount..................................................................................... S-7
Required Reserve Account Amount................................................................................. S-22
Reserve Account................................................................................................. S-22
</TABLE>
S-35
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Reserve Account Funding Date.................................................................................... S-22
Revolving Period................................................................................................ S-6
Selection Date.................................................................................................. S-4
Series 1996-1................................................................................................... S-3
Series 1996-1 Supplement........................................................................................ S-3
Series Supplement............................................................................................... S-3
Servicer........................................................................................................ S-3
Servicer Interchange............................................................................................ S-32
Servicing Base Amount........................................................................................... S-32
Servicing Fee Percentage........................................................................................ S-32
Stated Series Termination Date.................................................................................. S-5
Telerate Page 3750.............................................................................................. S-17
Transferor...................................................................................................... S-3
Trust........................................................................................................... S-1, S-3
Trustee......................................................................................................... S-1, S-3
Underwriters.................................................................................................... S-32
Underwriting Agreement.......................................................................................... S-32
</TABLE>
S-36
<PAGE>
ANNEX I
OTHER SERIES ISSUED
The table below sets forth the principal characteristics of the three other
Series previously issued by the Trust by means of separate prospectuses, the
Series 1993-1 Certificates, the Series 1993-2 Certificates and the Series 1995-1
Certificates, respectively. For more specific information with respect to any
Series, any prospective investor should contact the Servicer at (704) 386-0634.
The Servicer will provide, without charge, to any prospective purchaser of the
Certificates, a copy of the Disclosure Documents for any previous
publicly-issued Series.
<TABLE>
<S> <C>
1. Series 1993-1
Class A Certificates
Class A Initial Invested Amount...................................................................... $750,000,000
Class A Certificate Rate............................................................................. 4.75% per annum
Class A Expected Final Distribution Date............................................................. December 16, 1996
Class A Controlled Accumulation Amount............................................................... $62,500,000
Servicing Fee Percentage............................................................................. 2.00%
Stated Series Termination Date....................................................................... September 15, 1998
Class B Certificates
Class B Initial Invested Amount...................................................................... $47,873,000
Class B Certificate Rate............................................................................. 4.875% per annum
Class B Expected Final Distribution Date............................................................. January 15, 1997
Class B Controlled Accumulation Amount............................................................... $47,873,000
Servicing Fee Percentage............................................................................. 2.00%
Stated Series Termination Date....................................................................... September 15, 1998
2. Series 1993-2
Class A Certificates
Class A Initial Invested Amount...................................................................... $500,000,000
Class A Certificate Rate............................................................................. 6.00% per annum
Class A Expected Final Distribution Date............................................................. December 15, 2003
Class A Controlled Accumulation Amount............................................................... $41,666,667
Servicing Fee Percentage............................................................................. 2.00%
Stated Series Termination Date....................................................................... December 15, 2005
Class B Certificates
Class B Initial Invested Amount...................................................................... $31,915,000
Class B Certificate Rate............................................................................. 6.25% per annum
Class B Expected Final Distribution Date............................................................. January 15, 2004
Class B Controlled Accumulation Amount............................................................... $31,915,000
Servicing Fee Percentage............................................................................. 2.00%
Stated Series Termination Date....................................................................... December 15, 2005
3. Series 1995-1
Class A Certificates
Class A Initial Invested Amount...................................................................... $1,000,000,000
Class A Certificate Rate............................................................................. 6.45% per annum
Class A Expected Final Distribution Date............................................................. August 15, 2000
Class A Controlled Accumulation Amount............................................................... $83,333,333.34
Servicing Fee Percentage............................................................................. 2.00%
Stated Series Termination Date....................................................................... April 15, 2003
</TABLE>
S-37
<PAGE>
<TABLE>
<S> <C>
Class B Certificates
Class B Initial Invested Amount...................................................................... $51,137,000
Class B Certificate Rate............................................................................. 6.625% per annum
Class B Expected Final Distribution Date............................................................. September 15, 2000
Class B Controlled Accumulation Amount............................................................... $51,137,000
Servicing Fee Percentage............................................................................. 2.00%
Stated Series Termination Date....................................................................... April 15, 2003
</TABLE>
S-38
<PAGE>
ANNEX II
ADDITIONAL INFORMATION FOR NON-U.S. PERSONS
THIS ANNEX II CONTAINS CERTAIN LIMITED INFORMATION ABOUT THE OFFERING OF
THE CERTIFICATES WHICH IS RELEVANT TO NON-U.S. PERSONS. DETAILED INFORMATION
CONCERNING THE OFFERING IS CONTAINED IN THE PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT AND PURCHASERS ARE URGED TO READ THIS ANNEX II AND THE PROSPECTUS AND
THE PROSPECTUS SUPPLEMENT IN FULL.
The distribution of the Prospectus Supplement containing this Annex II and
the Prospectus and the offering of the Certificates in certain jurisdictions may
be restricted by law. Persons into whose possession the Prospectus Supplement
containing this Annex II and the Prospectus come are required by the
Underwriters to inform themselves about and to observe any such restrictions.
The Prospectus Supplement containing this Annex II and the Prospectus do
not constitute an offer to sell or the solicitation of an offer to buy the
Certificates in any jurisdiction in which such offer or solicitation is
unlawful. See "Underwriting" herein.
As used in the Prospectus Supplement containing this Annex II and the
Prospectus, all references to "dollars" and "$" are to United States dollars.
Sales of the Certificates may not be consummated unless the purchaser has
received both the Prospectus Supplement containing this Annex II and the
Prospectus.
The Transferor has taken all reasonable care to insure that the information
contained in the Prospectus Supplement containing this Annex II and the
Prospectus in relation to the Transferor and the Certificates is true and
accurate in all material respects and that in relation to the Transferor and the
Certificates there are no material facts the omission of which would make
misleading any statement herein or therein, whether fact or opinion. The
Transferor accepts responsibility for the information contained in the
Prospectus Supplement containing this Annex II and the Prospectus.
DESCRIPTION OF CERTIFICATES
Reference should be made to the accompanying Prospectus Supplement and
Prospectus for a detailed summary of the provisions of the Certificates. Certain
terms used in this Annex II are defined in the Prospectus Supplement and the
Prospectus.
Distributions on the Certificates
Interest will be computed as set forth in the Prospectus Supplement. See
"Summary of Terms -- Interest Payments" and "Description of the
Certificates -- Interest Payments" in the Prospectus Supplement.
Certificateholders will receive all distributions of principal of and interest
on the Certificates in the manner described under "Description of the
Certificates -- Book-Entry Registration" and " -- Definitive Certificates" in
the Prospectus. In the event any payment date falls on a day which is not a
Business Day, any payment due on such date shall be paid on the next succeeding
Business Day with the same effect as if paid on the payment date. A "Business
Day" is any day other than a Saturday or Sunday or another day on which banking
institutions in Dover, Delaware, Charlotte, North Carolina or New York, New York
(or, with respect to the determination of LIBOR, London, England) are authorized
or obligated by law or executive order to be closed.
The Trustee will cause the Class A Certificate Rate and the Class B
Certificate Rate as well as the amount of Class A Monthly Interest and Class B
Monthly Interest applicable to an Interest Period to be provided to the
Luxembourg Stock Exchange as soon as possible after its determination but in no
event later than the first day of such Interest Period. Such information will
also be included in a statement to Certificateholders of record prepared by the
Servicer. See "Description of the Certificates -- Reports to Certificateholders"
in the Prospectus.
S-39
<PAGE>
So long as the Certificates are listed on the Luxembourg Stock Exchange,
the Trustee will maintain a paying agency in Luxembourg for payments in respect
of Definitive Certificates for so long as they are outstanding. The name and
address of the paying agent which is expected to be appointed in such
circumstances is set forth at the end of this Annex II. If Definitive
Certificates are issued, such paying agent also will act as co-transfer agent
and co-registrar with respect to the Definitive Certificates. In addition, upon
maturity or final payment, such Definitive Certificates may be presented for
payment at the offices of such paying agent in Luxembourg up to two years after
maturity or final payment. Thereafter, the Trustee may take appropriate steps to
contact the remaining Certificateholders regarding the surrender of their
Certificates, and the cost thereof will be paid out of the funds held by the
Trustee for the benefit of such Certificateholders.
No additional amounts will be payable to a Certificateholder in the event
any deduction or withholding for or on account of any present or future tax,
assessment or other governmental charge is imposed upon any payment to such
Certificateholder by the United States, any other jurisdiction or any political
subdivision or taxing authority therein or thereof.
Replacement Certificates
In the event that Definitive Certificates are issued, a Certificate that is
mutilated, destroyed, lost or stolen may be exchanged or replaced, as the case
may be, at the offices of the co-transfer agent and co-registrar in Luxembourg
upon presentation of the Certificate or satisfactory evidence of the
destruction, loss or theft thereof to the co-transfer agent and co-registrar. An
indemnity satisfactory to the co-transfer agent and co-registrar and the Trustee
may be required at the expense of the Certificateholder before a replacement
Certificate will be issued. The Certificateholder will be required to pay any
tax or other governmental charge imposed in connection with such exchange or
replacement and any other expenses (including the fees and expenses of the
Trustee and the co-transfer agent and co-registrar) connected therewith.
Reports; Notices
The Trustee will publish or will cause to be published following each
Distribution Date (including the related expected final distribution date) in a
daily newspaper in Luxembourg (expected to be the Luxemburger Wort) a notice to
the effect that the information set forth in the statement described in the
second paragraph under "Description of the Certificates -- Reports to
Certificateholders" in the Prospectus will be available for review at the main
office of the Listing Agent for the Certificates in Luxembourg City, Luxembourg.
Notices to Certificateholders will be given by publication in a daily
newspaper in Luxembourg, which is expected to be the Luxemburger Wort. In the
event that Definitive Certificates are issued, notices to Certificateholders
will also be given by mail to the addresses of such holders as they appear in
the Certificate Register.
Status of the Certificates
The Certificates constitute general unsecured contractual obligations of
the Trust.
LISTING AND GENERAL INFORMATION
Application will be made to list the Certificates on the Luxembourg Stock
Exchange. In connection with the listing application, the articles of
association and by-laws of the Transferor, as well as legal notice relating to
the issuance of the Certificates will be deposited prior to listing with the
Chief Registrar of the District Court in Luxembourg, where copies thereof may be
obtained upon request. Once the Certificates have been so listed, trading of the
Certificates may be effected on the Luxembourg Stock Exchange.
If Definitive Certificates are issued, payments will be made in Luxembourg
on each Interest Payment Date or, if such Interest Payment Date is not a
business day in Luxembourg, on the next succeeding business day in Luxembourg,
with the same effect as if paid on the Interest Payment Date.
The Luxembourg Stock Exchange will be notified of any change of the
outstanding principal amount of the Class A Certificates or the Class B
Certificates.
The transactions contemplated in the Prospectus Supplement and the
Prospectus were authorized by resolutions adopted by the Transferor on May 3,
1996.
S-40
<PAGE>
The Trust was established on December 16, 1993. The Trust has no assets
other than those described in the Prospectus Supplement and the Prospectus.
Copies of the Agreement, the Series 1996-1 Supplement, the annual report of
independent public accountants, the documents listed under "Available
Information" in the Prospectus and the reports to Certificateholders referred to
under "Reports to Certificateholders" and "Description of the
Certificates -- Reports to Certificateholders" in the Prospectus, will be
available in the office of the Listing Agent in Luxembourg. Financial
information regarding the Trust and the Transferor is also available at the
office of the Listing Agent in Luxembourg.
The Certificates and the Agreement are governed by the laws of the State of
Delaware.
The Class A Certificates and Class B Certificates have been accepted for
clearance through Euroclear and Cedel. The CUSIP number for the Class A
Certificates is 638586AG2 and the CUSIP number for the Class B Certificates is
638586AH0. The Common Code number for the Class A Certificates is 6705391 and
the Common Code number for the Class B Certificates is 6705499. The ISIN number
for the Class A Certificates is US638586AG2-7 and the ISIN number for the Class
B Certificates is US638586AH0-0.
S-41
<PAGE>
PRINCIPAL OFFICE OF THE TRANSFEROR
NationsBank of Delaware, N.A.
Blue Hen Corporate Center
Route 113
Dover, Delaware 19901
TRUSTEE AND REGISTRAR
The Bank of New York
101 Barclay Street
New York, New York 10286
PAYING AGENTS
<TABLE>
<S> <C>
The Bank of New York Kredietbank S.A.
101 Barclay Street Luxembourgeoise
New York, New York 10286 43 Boulevard Royal
L-2955
Luxembourg
</TABLE>
LISTING AGENT
Kredietbank S.A. Luxembourgeoise
43 Boulevard Royal
L-2955
Luxembourg
<TABLE>
<S> <C>
LEGAL ADVISOR TO THE TRANSFEROR LEGAL ADVISOR TO THE UNDERWRITERS
as to United States Law as to United States Law
W. David Harris, Esq. Skadden, Arps, Slate, Meagher & Flom
NationsBank Corporation 919 Third Avenue
NationsBank Corporate Center New York, New York 10022
Charlotte, North Carolina 28255
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
</TABLE>
ACCOUNTANTS TO THE TRANSFEROR
Price Waterhouse LLP
NationsBank Corporate Center
Charlotte, North Carolina 28255
S-42
<PAGE>
PROSPECTUS
NationsBank Credit Card Master Trust
Asset Backed Certificates
NationsBank of Delaware, N.A.
Transferor and Servicer
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement"). The
Certificates of each Series will represent an undivided interest in the
NationsBank Credit Card Master Trust (the "Trust"). The Trust was formed
pursuant to a pooling and servicing agreement between NationsBank of Delaware,
N.A. ("NationsBank"), as transferor and servicer, and The Bank of New York, as
trustee. The property of the Trust includes receivables (the "Receivables")
generated from time to time in a portfolio of revolving credit card accounts
(the "Accounts"), all monies due in payment of the Receivables and certain other
property, as more fully described herein and, with respect to any Series offered
hereby, in the related Prospectus Supplement. NationsBank owns the remaining
undivided interest in the Trust not represented by the Certificates issued by
the Trust and services the Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate Certificates, floating rate
Certificates or other type of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest in
the Trust and the interest of the Certificateholders of each Class or Series
will include the right to receive a varying percentage of each month's
collections with respect to the Receivables at the time, in the manner and to
the extent described herein and, with respect to any Series offered hereby, in
the related Prospectus Supplement. Interest and principal payments with respect
to each Series offered hereby will be made as specified in the related
Prospectus Supplement. One or more Classes of a Series offered hereby may be
entitled to the benefits of a cash collateral account or guaranty, letter of
credit, surety bond, insurance policy or other form of enhancement as specified
in the Prospectus Supplement relating to such Series. In addition, any Series
offered hereby may include one or more Classes which are subordinated in right
and priority to payment of principal of, and/or interest on, one or more other
Classes of such Series or another Series, in each case to the extent described
in the related Prospectus Supplement. Each Series of Certificates or Class
thereof offered hereby will be rated in one of the four highest rating
categories by at least one nationally recognized statistical rating
organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of, the
holders of the Certificates of any previously issued Series.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF NATIONSBANK OF DELAWARE, N.A.
OR ANY AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE
CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Potential investors should consider, among other things, the information set
forth in "Risk Factors" beginning on page 13. Benefit plan investors should
consider, among other things, the information set forth in "ERISA
Considerations."
Certificates may be sold by NationsBank directly to purchasers, through
agents designated from time to time, through underwriting syndicates led by one
or more managing underwriters or through one or more underwriters acting alone.
If underwriters or agents are involved in the offering of the Certificates of
any Series offered hereby, the name of the managing underwriter or underwriters
or agents will be set forth in the related Prospectus Supplement. If an
underwriter, agent or dealer is involved in the offering of the Certificates of
any Series offered hereby, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to NationsBank from such
offering will be the public offering price of such Certificates less such
discount in the case of an underwriter, the purchase price of such Certificates
less such commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other expenses
of NationsBank associated with the issuance and distribution of such
Certificates. Any underwriter of the Certificates will be indemnified by
NationsBank against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Plan of Distribution."
This Prospectus may not be used to consummate sales of any Series of
Certificates unless accompanied by the related Prospectus Supplement.
The date of this Prospectus is June 5, 1996.
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a) the
initial aggregate principal amount of each Class of such Series; (b) the
interest rate (or method for determining it) of each Class of such Series; (c)
certain information concerning the Receivables allocated for such Series; (d)
the expected date or dates on which the principal amount of the Certificates
will be paid to holders of the Certificates (the "Certificateholders"); (e) the
extent to which any Class within a Series is subordinated to any other Class of
such Series or any other Series; (f) the identity of each Class of floating rate
Certificates and fixed rate Certificates included in such Series, if any, or
such other type of Class of Certificates; (g) the Distribution Dates for the
respective Classes; (h) relevant financial information with respect to the
Receivables; (i) additional information with respect to any Enhancement relating
to such Series; and (j) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual reports, containing information concerning the Trust and
prepared by the Servicer, will be sent on behalf of the Trust to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the related Certificates, pursuant to the Agreement. See "Description
of the Certificates -- Book-Entry Registration," " -- Reports to
Certificateholders" and " -- Evidence as to Compliance." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Transferor does not intend to send any of its
financial reports to Certificateholders or to the owners of beneficial interests
in the Certificates ("Certificate Owners"). The Servicer will file with the
Securities and Exchange Commission (the "Commission") such periodic reports with
respect to each Trust as are required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations of the Commission
thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein by
reference as described below under "Incorporation of Certain Documents by
Reference," which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed document which
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person, including any
beneficial owner of Certificates, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any of
or all the documents incorporated herein by reference (other than exhibits to
such documents). Written requests for such copies should be directed to
NationsBank of Delaware, N.A., c/o NationsBank Corporation, One NationsBank
Plaza, Charlotte, North Carolina 28255, Attention: Theresa Rouse. Telephone
requests for such copies should be directed to (704) 386-3446.
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PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus and in the accompanying Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms for Prospectus." Unless the context requires
otherwise, capitalized terms used in this Prospectus and in the accompanying
Prospectus Supplement refer only to the particular Series being offered by such
Prospectus Supplement.
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Type of Securities.................. Asset Backed Certificates (the "Certificates") evidencing an undivided interest in the
assets of the NationsBank Credit Card Master Trust (the "Trust") may be issued from
time to time in one or more series (each, a "Series") which will consist of one or
more classes of Certificates (each, a "Class").
Trust............................... The Trust was formed pursuant to a pooling and servicing agreement dated as of December
1, 1993 (the "Agreement") between NationsBank of Delaware, N.A. ("NationsBank"), as
transferor (in such capacity, the "Transferor") and as servicer (in such capacity,
the "Servicer"), and The Bank of New York, as trustee (the "Trustee"). The Trust was
created as a master trust under which one or more Series will be issued pursuant to a
series supplement to the Agreement (a "Series Supplement"). Any Series issued by the
Trust may or may not be a Series offered pursuant to this Prospectus. Each Prospectus
Supplement will identify all then outstanding Series previously issued by the Trust.
Trust Assets........................ The assets of the Trust include receivables (the "Receivables") arising under certain
MasterCard(Register mark) and VISA(Register mark)* revolving credit card accounts
(the "Accounts") selected by the Transferor from the portfolio of MasterCard and VISA
accounts owned by the Transferor and all monies due or to become due in payment of
the Receivables (including net recoveries on charged-off Receivables), all proceeds
of the Receivables and proceeds of credit insurance policies relating to the
Receivables, and may include the right to receive Interchange, if any, allocable to
the Certificates and all monies on deposit in certain bank accounts of the Trust
(including any eligible investments in which any such monies are invested, but
excluding investment earnings on such amounts unless otherwise specified in the
related Prospectus Supplement), and any Enhancement with respect to any particular
Series or Class, as described in the related Prospectus Supplement. "Interchange"
consists of certain fees received by the Transferor from VISA and MasterCard as
partial compensation for taking credit risk, absorbing fraud losses and funding
receivables for a limited period prior to initial billing. The term "Enhancement"
means, with respect to any Series or Class thereof, any letter of credit, guaranteed
rate agreement, maturity guaranty facility, liquidity facility, cash collateral
account, cash collateral guaranty, surety bond, insurance policy, interest rate cap
agreement, interest rate swap agreement, spread account, reserve account or other
similar arrangement for the benefit of the Certificateholders of such Series or
Class. Enhancement may also take the form of subordination of one or more Classes of
a Series to any other Class or Classes of a Series or a cross-support feature which
requires collections on Receivables of one Series to be paid as principal and/or
interest with respect to another Series. The Receivables included in the Trust may
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* MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
3
consist of Accounts originated and owned by the Transferor and/or Accounts otherwise
acquired by the Transferor, as specified in the related Prospectus Supplement.
At the time of formation of the Trust, the Transferor conveyed to the Trustee all
Receivables existing under certain Accounts owned by NationsBank as of December 1,
1993 (the "Cut Off Date") based on criteria provided in the Agreement and all
Receivables arising under such Accounts from time to time thereafter until
termination of the Trust. In addition, the Agreement provides that the Transferor may
from time to time (subject to certain limitations and conditions), and in some
circumstances will be obligated to, designate additional eligible revolving credit
card accounts to be included as Accounts (the "Additional Accounts") the Receivables
of which will be included in the Trust. See "The Receivables" and "Description of the
Certificates -- Addition of Accounts."
Securities Offered.................. Each Series of Certificates will represent an undivided interest in the assets of the
Trust. Each Certificate of a Series will represent the right to receive payments of
(i) interest at the specified rate or rates per annum (each, a "Certificate Rate"),
which may be fixed, floating or another type of rate and (ii) unless otherwise
provided in the related Prospectus Supplement, principal during the Controlled
Amortization Period, Principal Amortization Period, Accumulation Period or Early
Amortization Period (each, an "Amortization Period"), all as specified in the related
Prospectus Supplement.
Each Series of Certificates will consist of one or more Classes, one or more of which
may be Senior Certificates ("Senior Certificates") and one or more of which may be
Subordinated Certificates ("Subordinated Certificates"). Each Class of a Series may
evidence the right to receive a specified portion of each distribution of principal
or interest or both. The Certificates of a Class may also differ from Certificates of
other Classes of the same Series in, among other things, the amounts allocated to
principal payments, priority of payments, payment dates, maturity, Certificate Rate,
and availability and form of Enhancement.
The assets of the Trust will be allocated among the Certificateholders of each Series,
the holder of the Exchangeable Transferor Certificate (the "Exchangeable Transferor
Certificate") and, in certain circumstances, Enhancement Providers. The aggregate
principal amount of the interest of the Certificateholders of a Series in Receivables
is referred to herein as the "Invested Amount" and is based on the aggregate amount
of the Principal Receivables in the Trust allocated to such Series. The interest of
the holder of the Exchangeable Transferor Certificate in Receivables is referred to
herein as the "Transferor Interest," and is based on the aggregate amount of
Principal Receivables (the "Transferor Amount") in the Trust not allocated to the
Certificateholders or any Enhancement Provider. See "Description of the
Certificates -- General."
The Certificateholders of each Series will have the right to receive (but only to the
extent needed to make required payments under the Agreement and related Series
Supplement and subject to any reallocation of such amounts if the related Series
Supplement so provides) varying percentages of the collections of Finance Charge
Receivables and Principal Receivables for each month and will be allocated a varying
percentage of the amount of Receivables in Accounts which are written off as
uncollectible ("Defaulted
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Accounts") for such month (each such percentage, an "Invested Percentage"). The
related Prospectus Supplement will specify the Invested Percentages with respect to
the allocation of collections of Principal Receivables, Finance Charge Receivables
and Receivables in Defaulted Accounts during the Revolving Period and any
Amortization Period. If the Certificates of a Series offered hereby include more than
one Class of Certificates, the assets of the Trust allocable to the Certificates of
such Series may be further allocated among each Class in such Series as described in
the related Prospectus Supplement. See "Description of the Certificates -- Invested
Percentage and Transferor Percentage."
The Certificates of each Series will represent interests in the Trust only and will not
represent interests in or recourse obligations of NationsBank or any affiliate
thereof. A Certificate is not a deposit and neither the Certificates nor the
underlying Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation (the "FDIC") or any other governmental agency.
Receivables......................... The Receivables will consist of amounts charged by cardholders for merchandise and
services, cash advances and balance transfers (the "Principal Receivables"), plus the
related periodic finance charges and amounts charged to the Accounts in respect of
cash advance fees, annual cardholder fees, credit insurance premiums, late fees,
overlimit fees, return check fees, and other fees and charges (the "Finance Charge
Receivables"); provided, however, that if the Transferor exercises the Discount
Option, an amount equal to the product of the Discount Percentage and the amount of
Receivables arising in the Accounts on and after the date such option is exercised
that otherwise would be Principal Receivables will be treated as Finance Charge
Receivables. See "Description of the Certificates -- Discount Option." In addition,
if so specified in the related Prospectus Supplement, certain amounts of Interchange
attributed to cardholder charges for merchandise and services in the Accounts may be
allocated to the Certificates of a Series or any Class thereof and treated as
collections of Finance Charge Receivables for purposes of such Series or Class
thereof or may be applied in such other manner as described in the related Prospectus
Supplement.
During the term of the Trust, all new Receivables arising in the Accounts will be
transferred automatically to the Trust by the Transferor. The total amount of
Receivables in the Trust will fluctuate from day to day, because the amount of new
Receivables arising in the Accounts and the amount of payments collected on existing
Receivables usually differ each day.
Pursuant to the Agreement, the Transferor has the right (subject to certain limitations
and conditions), and in some circumstances, will be obligated, to designate
Additional Accounts and to convey to the Trust all of the Receivables in the
Additional Accounts, whether such Receivables are then existing or thereafter
created.
Pursuant to the Agreement, the Transferor has the right (subject to certain limitations
and conditions) to designate certain Accounts and to accept the reconveyance of all
the Receivables in such Accounts (the "Removed Accounts").
Exchanges........................... The Agreement authorizes the Trustee to issue two types of certificates: (i) one or
more Series of Certificates which may be in one or more Classes and which will be
transferable and have the characteristics described herein and (ii) the Exchangeable
Transferor Certificate, which initially
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will be held by the Transferor and which generally will not be transferable. The
Agreement also provides that, pursuant to any one or more Series Supplements to the
Agreement, the Transferor may tender the Exchangeable Transferor Certificate or, if
permitted by the applicable Series Supplement, certificates representing any Series
of Certificates and the Exchangeable Transferor Certificate, to the Trustee in
exchange for one or more new Series and a reissued Exchangeable Transferor
Certificate (any such tender, an "Exchange"). Under the Agreement, the Transferor may
define, with respect to any Series, the Principal Terms of the Series. See
"Description of the Certificates -- Exchanges." The Transferor may offer any Series
to the public or other investors under a prospectus or other disclosure document (a
"Disclosure Document") in transactions either registered under the Securities Act of
1933, as amended (the "Act"), or exempt from registration thereunder, directly or
through one or more underwriters or placement agents, in fixed-price offerings or in
negotiated transactions or otherwise.
Under the Agreement and pursuant to a Series Supplement, an Exchange may occur only
upon delivery to the Trustee of the following: (i) a Series Supplement specifying the
principal terms of such Series (the "Principal Terms"), (ii) an opinion of counsel to
the effect that the Certificates of such Series under existing law will be
characterized either as indebtedness or an interest in a partnership (that is not
taxable as a corporation) for Federal income tax purposes and that the issuance of
such Series will not materially adversely affect the Federal income tax
characterization of any outstanding Series or result in the Trust being subject to
Federal or certain state taxes at the entity level, (iii) if required by the related
Series Supplement, a form of Enhancement and any related agreement, (iv) written
confirmation from the applicable Rating Agency that the Exchange will not result in
the Rating Agency reducing or withdrawing its rating on any then outstanding Series
rated by it, and (v) the existing Exchangeable Transferor Certificate and, if
applicable, the Certificates representing the Series to be exchanged.
Denominations....................... Unless otherwise specified in the related Prospectus Supplement, beneficial interests
in the Certificates will be offered for purchase in denominations of $1,000 and
integral multiples thereof.
Registration of Certificates........ Unless otherwise specified in the related Prospectus Supplement, the Certificates of
each Series initially will be represented by Certificates registered in the name of
Cede, as the nominee of DTC. No Certificate Owner will be entitled to receive a
definitive certificate representing such person's interest, except in the event that
Definitive Certificates (as defined herein) are issued under the limited
circumstances described herein. See "Description of the Certificates -- Definitive
Certificates."
Clearance and Settlement............ Unless otherwise provided in the related Prospectus Supplement, Certificate Owners of
each Series offered hereby may elect to hold their Certificates through any of DTC
(in the United States) or CEDEL or Euroclear (in Europe). Transfers within DTC, CEDEL
or Euroclear, as the case may be, will be made in accordance with the usual rules and
operating procedures of the relevant system. Cross-market transfers between persons
holding directly or indirectly through DTC in the United States, on the one hand, and
counterparties holding directly or indirectly through CEDEL or Euroclear, on the
other, will be effected in DTC through the relevant Depositaries of CEDEL or
Euroclear. See "Description of the Certificates -- Book-Entry Registration."
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Transferor and Servicer............. NationsBank of Delaware, N.A. ("NationsBank"). The principal executive offices of
NationsBank are located at Blue Hen Corporate Center, Route 113, Dover, Delaware
19901, telephone number 302-741-1161. The Servicer will receive a fee as servicing
compensation from the Trust in respect of each Series in the amounts and at the times
specified in the related Prospectus Supplement (the "Monthly Investor Servicing
Fee"). The Monthly Investor Servicing Fee may be payable from Finance Charge
Receivables, Interchange or other amounts as specified in the related Prospectus
Supplement. In certain limited circumstances, NationsBank may resign or be removed as
Servicer, in which event the Trustee or a third party servicer may be appointed as
successor servicer (NationsBank, in its capacity as servicer, or any such successor
servicer, is referred to herein as the "Servicer"). NationsBank is an indirect
wholly-owned subsidiary of NationsBank Corporation (the "Corporation"). See
"NationsBank of Delaware, N.A. and NationsBank Corporation."
Collections......................... Unless otherwise specified in the related Prospectus Supplement, with respect to each
Series of Certificates, the Servicer will deposit collections of Receivables
allocable to such Series (subject to certain exceptions) in an account required to be
established for such purposes by the Agreement (the "Collection Account"). All
amounts deposited in the Collection Account will be allocated by the Servicer between
amounts collected on Principal Receivables and amounts collected on Finance Charge
Receivables. If so specified in the related Prospectus Supplement, Principal
Receivables and/or Finance Charge Receivables may be otherwise characterized. See
"Description of the Certificates -- Discount Option." All such amounts will then be
allocated in accordance with the respective interests of the Certificateholders of
such Series or Class thereof. See "Description of the Certificates -- Invested
Percentage and Transferor Percentage."
Interest............................ Interest on each Series of Certificates or Class thereof for each interest accrual
period (each, an "Interest Period") specified in the related Prospectus Supplement
will be distributed in the amounts and on the dates (which may be monthly, quarterly,
semiannually or otherwise as specified in the related Prospectus Supplement) (each, a
"Distribution Date") specified in the related Prospectus Supplement. Interest
payments on each Distribution Date will generally be funded from the collections of
Finance Charge Receivables allocated to the Invested Amount during the preceding
monthly period or periods (each, a "Due Period"), as described in the related
Prospectus Supplement, and may be funded from certain investment earnings on funds in
certain accounts of the Trust, from any applicable Enhancement or from other sources
specified in the related Prospectus Supplement. If the Distribution Dates for payment
of interest for a Series or Class occur less frequently than monthly, such
collections or other amounts allocable to such Series or Class may be deposited in
one or more trust accounts pending distribution to the Certificateholders of such
Series or Class, all as described in the related Prospectus Supplement. See
"Description of the Certificates -- Application of Collections," "Enhancement" and
"Risk Factors -- Enhancement."
Revolving Period.................... Unless otherwise specified in the related Prospectus Supplement, with respect to each
Series and any Class thereof, no principal will be payable to Certificateholders
until the Principal Commencement Date or the Scheduled Payment Date with respect to
such Series or Class. For the period beginning on the date of issuance of the related
Series (the "Closing
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Date") and ending with the commencement of an Amortization Period (the "Revolving
Period"), collections of Principal Receivables otherwise allocable to the Invested
Amount will, subject to certain limitations, be paid from the Trust to the holder of
the Exchangeable Transferor Certificate or, under certain circumstances and if so
specified in the related Prospectus Supplement, will be treated as Shared Principal
Collections and paid to the holders of other Series of Certificates issued by the
Trust, as described herein and in the related Prospectus Supplement. See "Description
of the Certificates -- Early Amortization Events" for a discussion of the events
which might lead to early termination of the Revolving Period.
Principal Payments.................. The principal of the Certificates of each Series offered hereby will be scheduled to be
paid either in installments commencing on a date specified in the related Prospectus
Supplement (the "Principal Commencement Date"), in which case such Series will have
either a Controlled Amortization Period or a Principal Amortization Period, as
described below, or on an expected date specified in the related Prospectus
Supplement (the "Scheduled Payment Date"), in which case such Series will have an
Accumulation Period, as described below. If a Series has more than one Class of
Certificates, a different method of paying principal, Principal Commencement Date or
Scheduled Payment Date may be assigned to each Class. The payment of principal with
respect to the Certificates of a Series or Class may commence earlier than the
applicable Principal Commencement Date or Scheduled Payment Date, and the final
principal payment with respect to the Certificates of a Series or Class may be made
later than the applicable expected payment date, Scheduled Payment Date or other
expected date, if an Early Amortization Event occurs and the Early Amortization
Period commences with respect to such Series or Class or under certain other
circumstances described herein or in the Prospectus Supplement.
Controlled Amortization Period...... If the Prospectus Supplement relating to a Series so specifies, unless an Early
Amortization Period with respect to such Series commences, the Certificates of such
Series or any Class thereof will have an amortization period (the "Controlled
Amortization Period") during which collections of Principal Receivables allocable to
the Invested Amount of such Series (and certain other amounts if so specified in the
related Prospectus Supplement) will be used on each Distribution Date to make
principal distributions in scheduled amounts to the Certificateholders of such Series
or any Class of such Series then scheduled to receive such distributions. The amount
to be distributed on any Distribution Date during the Controlled Amortization Period
will be limited to an amount (the "Controlled Distribution Amount") equal to an
amount specified in the related Prospectus Supplement (the "Controlled Amortization
Amount") plus any existing deficit Controlled Amortization Amount arising from prior
Distribution Dates. If a Series has more than one Class of Certificates, each Class
may have a separate Controlled Amortization Amount. In addition, the related
Prospectus Supplement may describe certain priorities among such Classes with respect
to such distributions. The Controlled Amortization Period will commence at the close
of business on the Principal Commencement Date and continue until the earliest of (a)
the commencement of the Early Amortization Period, (b) payment in full of the
Invested Amount of the Certificates of such Series
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or Class and (c) the Stated Series Termination Date with respect to such Series.
Principal Amortization
Period............................ If the Prospectus Supplement relating to a Series so specifies, unless an Early
Amortization Period with respect to such Series commences, the Certificates of such
Series or any Class thereof will have an amortization period (the "Principal
Amortization Period") during which collections of Principal Receivables allocable to
the Invested Amount of such Series (and certain other amounts if so specified in the
related Prospectus Supplement) will be used on each Distribution Date to make
principal distributions to the Certificateholders of such Series or any Class of such
Series then scheduled to receive such distributions. If a Series has more than one
Class of Certificates, the related Prospectus Supplement may describe certain
priorities among such Classes with respect to such distributions. The Principal
Amortization Period will commence at the close of business on the Principal
Commencement Date and continue until the earliest of (a) the commencement of the
Early Amortization Period, (b) payment in full of the Invested Amount of the
Certificates of such Series or Class and (c) the Stated Series Termination Date with
respect to such Series.
Accumulation Period................. If the Prospectus Supplement relating to a Series so specifies, unless an Early
Amortization Period with respect to such Series commences, the Certificates of such
Series or any Class thereof will have an accumulation period (the "Accumulation
Period") during which collections of Principal Receivables allocable to the Invested
Amount of such Series (and certain other amounts if so specified in the related
Prospectus Supplement) will be deposited prior to each Distribution Date in a trust
account established for the benefit of the Certificateholders of such Series or Class
(a "Principal Funding Account") and used to make distributions of principal to the
Certificateholders of such Series or Class on the Scheduled Payment Date. The amount
to be deposited in the Principal Funding Account on any date will be limited to an
amount (the "Controlled Deposit Amount") equal to an amount specified in the related
Prospectus Supplement (the "Controlled Accumulation Amount") plus the amount of any
shortfalls arising from the failure to pay the Controlled Accumulation Amount on any
prior Distribution Dates. If a Series has more than one Class of Certificates, each
Class may have a separate Principal Funding Account and Controlled Accumulation
Amount. In addition, the related Prospectus Supplement may describe certain
priorities among such Classes with respect to deposits of principal into such
Principal Funding Accounts. The Accumulation Period will commence at the close of
business on a date specified in the related Prospectus Supplement and continue until
the earliest of (a) the commencement of the Early Amortization Period, (b) payment in
full of the Invested Amount of the Certificates of such Series or Class and (c) the
Stated Series Termination Date with respect to such Series.
Funds on deposit in any Principal Funding Account may be invested in eligible
investments or subject to a guaranteed rate or investment agreement or other
arrangement intended to assure a specified return on the investment of such funds.
Investment earnings on such funds may be applied to pay interest on the related
Series of Certificates. In order to enhance the likelihood of payment in full of
principal at the end of an
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Accumulation Period with respect to a Series of Certificates, such Series may be
subject to a principal guaranty or other similar arrangement.
Early Amortization Period........... During the period from the day on which an Early Amortization Event has occurred with
respect to a Series to the earlier of the date on which the Invested Amount of the
Certificates of such Series has been paid in full or the related Stated Series
Termination Date (the "Early Amortization Period"), unless otherwise provided in the
related Prospectus Supplement, collections of Principal Receivables allocable to the
Invested Amount of such Series (and certain other amounts if so specified in the
related Prospectus Supplement) will be distributed as principal payments to the
Certificateholders of such Series monthly on each Distribution Date with respect to
such Series in the manner and order of priority set forth in the related Prospectus
Supplement. During the Early Amortization Period with respect to a Series,
distributions of principal to Certificateholders will not be limited by any
Controlled Distribution Amount or Controlled Deposit Amount. In addition, upon the
commencement of the Early Amortization Period with respect to a Series, unless
otherwise specified in the related Prospectus Supplement, any funds on deposit in a
Principal Funding Account with respect to such Series or any Class thereof will be
paid to the Certificateholders of such Series or Class on the first Distribution Date
in the Early Amortization Period. See "Description of the Certificates -- Early
Amortization Events" for a discussion of the events which might lead to commencement
of the Early Amortization Period.
Shared Excess Finance Charge
Collections....................... If so specified in the related Prospectus Supplement, the Certificateholders of a
Series or any Class thereof may be entitled to receive all or a portion of Excess
Finance Charge Collections with respect to another Series or Class to cover any
shortfalls with respect to amounts payable from collections of Finance Charge
Receivables allocable to such Series or Class. Unless otherwise provided in the
related Prospectus Supplement, with respect to any Series, "Excess Finance Charge
Collections" for any Due Period will equal the excess of collections of Finance
Charge Receivables and certain other amounts allocated to the Invested Amount of such
Series or Class over the sum of (i) interest accrued for the current month ("Monthly
Interest") and overdue Monthly Interest on the Certificates of such Series or Class,
(ii) accrued and unpaid Monthly Investor Servicing Fees with respect to such Series
or Class, (iii) the Investor Default Amount with respect to such Series or Class,
(iv) unreimbursed Investor Charge-Offs with respect to such Series or Class and (v)
other amounts specified in the related Prospectus Supplement. See "Description of the
Certificates -- Application of Collections" and " -- Defaulted Receivables; Rebates
and Fraudulent Charges; Investor Charge-Offs."
Shared Principal Collections........ If so specified in the related Prospectus Supplement, to the extent that collections of
Principal Receivables and certain other amounts that are allocated to the Invested
Amount of any Series are not needed to make payments or deposits with respect to such
Series, such collections may be applied to cover principal payments due to or for the
benefit of Certificateholders of another Series. Any such reallocation will not
result in a reduction in the Invested Amount of the Series to which such collections
were initially allocated.
Funding Period...................... The Prospectus Supplement relating to a Series of Certificates may specify that for a
period beginning on the Closing Date and ending on a specified
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date before the commencement of an Amortization 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 such 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 Principal Receivables to the Trust or pending the reduction of the
Invested Amounts of other Series. The related Prospectus Supplement will specify the
Initial Invested Amount on the Closing Date with respect to such Series, the
aggregate principal amount of the Certificates of such Series (the "Full Invested
Amount") and the date by which the Invested Amount is expected to equal the Full
Invested Amount. The Invested Amount of such a Series will increase as Principal
Receivables are created or as the Invested Amounts of other Series are reduced. The
Invested Amount may also decrease due to Investor Charge-Offs.
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 or its assignees to the
extent of any increases in the Invested Amount. In the event that the Invested Amount
does not for any reason equal the Full Invested Amount by the end of the Funding
Period, any amount remaining in the Pre-Funding Account and any additional amounts
specified in the related Prospectus Supplement will be payable to the
Certificateholders of such Series in a manner and at such time as set forth in the
related Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in the Pre-Funding Account
with respect to any Series will be invested by the Trustee in eligible investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and investment earnings and any applicable payment under any such
investment arrangement will be applied to pay interest on the Certificates of such
Series.
Companion Series.................... If so specified in the related Prospectus Supplement, a Series of Certificates may be
paired with another Series (a "Companion Series"). The Prospectus Supplement for such
Series and the Prospectus Supplement for the Companion Series will each specify the
relationship between the Series.
Enhancement......................... Enhancement with respect to a Series or any Class thereof may be provided as specified
in the related Prospectus Supplement.
The type, characteristics and amount of the Enhancement will be determined based on
several factors, including the characteristics of the Receivables and Accounts
underlying or comprising the Trust Portfolio as of the Closing Date with respect to
any Series, and will be established on the basis of requirements of each Rating
Agency rating the Certificates of such Series. If so specified in the related
Prospectus Supplement, any such Enhancement will apply only in the event of certain
types of losses and the protection against losses provided by such Enhancement will
be limited. See "Enhancement" and "Risk Factors -- Certificate Rating."
Optional Repurchase................. With respect to each Series of Certificates, the Invested Amount will be subject to
optional repurchase by the Transferor on any Distribution Date after the Invested
Amount is reduced to an amount less than or equal to
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5% of the initial Invested Amount (the "Initial Invested Amount") or such other
amount specified in the related Prospectus Supplement, if certain conditions set
forth in the related Agreement are met. Unless otherwise specified in the related
Prospectus Supplement, the repurchase price will be equal to the Invested Amount plus
accrued and unpaid interest on the Certificates. See "Description of the
Certificates -- Final Payment of Principal; Termination."
Tax Status.......................... Except to the extent otherwise specified in the related Prospectus Supplement, special
tax counsel to the Transferor will render an opinion in connection with the issuance
of each Series that under existing law the Certificates of such Series will be
characterized as indebtedness for Federal income tax purposes. Except to the extent
otherwise specified in the related Prospectus Supplement, the Certificate Owners will
agree to treat the Certificates as debt for Federal income tax purposes. See "Certain
Federal Income Tax Consequences" for additional information concerning the
application of Federal income tax laws.
ERISA Considerations................ Under regulations issued by the Department of Labor, the Trust's assets will not be
deemed "plan assets" of any employee benefit plan holding Certificates of a Series if
certain conditions are met. If, in contrast, the Trust's assets were deemed to be
"plan assets" of an employee benefit plan, there is uncertainty as to whether
existing exemptions from the "prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), would apply to all
transactions involving the Trust's assets. No assurance can be made with respect to
any offering of the Certificates of any Series that the conditions which would allow
the Trust assets not to be deemed "plan assets" will be met, although the belief of
the underwriters (but not their assurance) as to whether the Certificates of a
particular Series will be "publicly-offered securities", and therefore subject to an
applicable exception to or exemption from the prohibited transaction rules will be
set forth in the related Prospectus Supplement. Accordingly, employee benefit plans
contemplating purchasing Certificates should consult their counsel before making a
purchase. See "ERISA Considerations."
Certificate Rating.................. It will be a condition to the issuance of each Series of Certificates or Class thereof
offered pursuant to this Prospectus and the related Prospectus Supplement that they
be rated in one of the four highest rating categories by at least one nationally
recognized statistical rating organization (each such rating organization rating any
Series, a "Rating Agency"). The required rating or ratings applicable to the
Certificates of each Series or Class thereof offered hereby will be set forth in the
related Prospectus Supplement.
A rating is not a recommendation to buy, sell or hold Certificates and may be subject
to revision or withdrawal at any time by the assigning Rating Agency. Each rating
should be evaluated independently of any other rating. See "Risk
Factors -- Certificate Rating."
Listing............................. If so specified in the Prospectus Supplement relating to a Series, application will be
made to list the Certificates of such Series, or all or a portion of any Class
thereof, on the Luxembourg Stock Exchange or any other specified exchange.
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RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market in
such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will develop
with respect to the Certificates of any Series offered hereby, or if it does
develop, that it will provide Certificateholders with liquidity of investment or
that it will continue for the life of such Certificates.
Non-Recourse Obligation. No Certificateholder will have recourse for
payment of its Certificates to any assets of any of the Transferor, the Servicer
or any affiliates thereof. Consequently, Certificateholders must rely solely
upon payments on the Receivables and the Enhancement, if any, applicable to the
Series for the payment of principal of and interest on the Certificates of any
Series. Furthermore, under the Agreement, the Certificateholders have an
interest in the Receivables and collections on the Receivables only to the
extent of the Invested Amount. Should the Certificates of any Series not be paid
in full on a timely basis, Certificateholders may not look to any assets of any
of the Transferor, the Servicer or any affiliates thereof to satisfy their
claims.
Transfer of Receivables. The Transferor warrants in the Agreement that the
transfer of such Receivables to the Trust is either a valid transfer and
assignment of the Receivables to the Trust or the grant to the Trust of a
security interest in the Receivables. The Transferor will take all actions as
are required under Delaware law to perfect the Trust's interest in the
Receivables, and the Transferor warrants that if the transfer by the Transferor
to the Trust granted the Trust a security interest in the Receivables, such
security interest constitutes a first priority perfected security interest
therein and, to the extent provided under the Delaware Uniform Commercial Code
(the "UCC"), in proceeds thereof (except for liens for local taxes and
government charges not due and payable or being contested in good faith by the
Transferor). Nevertheless, if the transfer of the Receivables to the Trust is
deemed to create a security interest therein under the UCC, a tax or government
lien on property of the Servicer or the Transferor arising before any Receivable
comes into existence may have priority over the Transferor's or the Trust's
interest in such Receivable. See "Certain Legal Aspects of the
Receivables -- Transfer of Receivables."
Commingling of Collections. In addition, while NationsBank is the Servicer,
collections held by NationsBank may, subject to certain conditions, be
commingled and used for NationsBank's own benefit prior to each Distribution
Date and, in the event of the insolvency or receivership of NationsBank or, in
certain circumstances, the lapse of certain time periods as provided under the
UCC, the Trust may not have a perfected interest in such collections. If
NationsBank fails to maintain the certificate of deposit rating or meet other
criteria required by the applicable Rating Agency, within two business days
thereafter NationsBank will begin depositing a portion of the collections
directly into the Collection Account on the date of processing of such
collections.
Insolvency Related Matters. Subject to certain qualifications, to the
extent that the Trust has a valid perfected security interest in the
Receivables, such security interest of the Trustee should be enforceable (to the
extent of the Trust's "actual direct compensatory damages") notwithstanding the
insolvency of, or the appointment of a receiver or conservator for, the
Transferor, and payments to the Trust with respect to the Receivables (up to the
amount of such damages) should not be subject to recovery by such a conservator
or receiver. "Actual direct compensatory damages" are generally thought to
comprise outstanding principal plus interest accrued to the date of payment, but
a federal district court has held that such damages should be measured by the
fair market value of the repudiated bonds as of the date of repudiation. See
"Certain Legal Aspects of the Receivables -- Certain Matters Relating to
Receivership." If, however, the conservator or receiver 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 established under the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), or the conservator or receiver were to
request a stay of proceedings with respect to the Transferor as provided under
FIRREA, delays in payments on the Certificates and possible reductions in the
amount of those payments could occur. In the event of a Servicer Default, if a
conservator or receiver is appointed for the Servicer, and no Servicer Default
other than such conservatorship or receivership or insolvency of the Servicer
exists, the conservator or receiver may have
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the power to prevent either the Trustee or Certificateholders from effecting a
transfer of servicing to a successor Servicer. If a conservator or receiver were
appointed for the Transferor, pursuant to the Agreement, new Principal
Receivables would not be transferred to the Trust and the Trustee would sell the
portion of the Receivables allocable in accordance with the Agreement to each
Series (subject to certain limited rights of the Certificateholders to instruct
otherwise as described under "Description of the Certificates -- Early
Amortization Events"), thereby causing early termination of the Trust and a pro
rata loss to the Certificateholders if the net proceeds of such sale were
insufficient to pay such Certificates in full. Upon the occurrence of an Early
Amortization Event, if a conservator or receiver were appointed for the
Transferor and no Early Amortization Event other than such conservatorship,
receivership or insolvency of the Transferor existed, the conservator or
receiver may have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of the Early Amortization
Period. In addition, a conservator or receiver for the Transferor may have the
power to cause early payment of the Certificates.
Consumer Laws and Litigation. The Accounts and the Receivables are subject
to numerous Federal and state consumer protection laws which impose requirements
on the making and collection of consumer loans. Such laws, as well as any new
laws or rulings which may be adopted, may adversely affect the Servicer's
ability to collect on the Receivables or maintain previous levels of finance
charges, annual cardholder fees and other charges and fees, and failure by the
Servicer to comply with such requirements also could adversely affect the
Servicer's ability to collect on the Receivables. Pursuant to the Agreement, the
Transferor or, in some circumstances, the Servicer, has covenanted to accept the
transfer of each Receivable that does not comply with all requirements of
applicable law the failure to comply with which would have a material adverse
effect on Certificateholders if such Receivable is charged off as uncollectible
or if the proceeds of such Receivable are not available to the Trust. The
Transferor has also made certain other representations and warranties relating
to the validity and enforceability of the Accounts and the Receivables. The sole
remedy if any such representation or warranty is breached and such breach
continues beyond the applicable cure period, if any, and such Receivables are
charged off as uncollectible or the proceeds of such Receivables are not
available to the Trust is that the Transferor will generally be obligated to
accept the reassignment of such Receivables. In addition, in the event of a
breach of certain representations and warranties, the Transferor may be
obligated to accept the reassignment and transfer of the interest in the Trust
of the holders of all Series. See "Description of the Certificates -- Covenants,
Representations and Warranties" and "Certain Legal Aspects of the Receivables --
Consumer Protection Laws."
Certain jurisdictions may attempt, and private parties are attempting, to
require out-of-state credit card issuers to comply with such jurisdictions'
consumer protection laws. A successful attempt could have an adverse impact on
the credit card operations of out-of-state credit card issuers including
NationsBank. Such a determination could also lead to similar actions in other
states by private parties or governmental agencies and could have an adverse
impact on NationsBank's credit card operations or the yield on the Receivables
in the Trust.
Debtor Relief Laws. Application of Federal and state bankruptcy and debtor
relief laws would affect the interests of the Certificateholders in the
Receivables, if such laws result in any Receivables being written off as
uncollectible. See "Description of the Certificates -- Defaulted Receivables;
Rebates and Fraudulent Charges; Investor Charge-Offs."
Competition in the Credit Card Industry. The credit card industry is highly
competitive. As new credit card issuers enter the market and all issuers seek to
expand their share of the market, there is increased use of advertising, target
marketing and pricing competition (including special promotions). The Trust will
be dependent upon the Transferor's continued ability to generate new
Receivables. If the rate at which new Receivables are generated declines
significantly and the Transferor is unable to designate Additional Accounts with
respect to the Trust, an Early Amortization Event could occur with respect to
each Series, in which case the Early Amortization Period with respect to each
such Series would commence.
Payments and Maturity. The Receivables may be paid at any time, and there
is no assurance that there will be additional Receivables created in the
Accounts or that any particular pattern of cardholder repayments will occur. The
commencement and continuation of a Controlled Amortization Period, a Principal
Amortization
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Period or an Accumulation Period for a Series or Class thereof will be dependent
upon the continued generation of new Receivables to be conveyed to the Trust. A
significant decline in the amount of Receivables generated could result in the
occurrence of an Early Amortization Event for one or more Series and
commencement of the Early Amortization Period for each such Series.
Certificateholders should be aware that the Transferor's ability to continue to
compete in the current industry environment will affect the Transferor's ability
to generate new Receivables to be conveyed to the Trust and may also affect
payment patterns. In addition, changes in periodic finance charges can alter the
monthly payment rates of cardholders. A significant decrease in the monthly
payment rate could slow the return or accumulation of principal during an
Amortization Period. See "Maturity Assumptions."
Social, Legal and Economic Factors. Changes in use of credit and payment
patterns by customers may result from a variety of social, legal and economic
factors. Economic factors include the rate of inflation, unemployment levels and
relative interest rates. Cardholders whose accounts are included in the Trust
Portfolio have addresses in all 50 states, the District of Columbia and certain
U.S. territories. The Transferor, however, is unable to determine and has no
basis to predict whether, or to what extent, social, legal or economic factors
will affect use of credit or repayment patterns.
Effect of Subordination. With respect to Certificates of a Series having a
Class or Classes of Subordinated Certificates, unless otherwise specified in the
related Prospectus Supplement, payments of principal in respect of the
Subordinated Certificates of a Series will not commence until after the final
principal payment with respect to the Senior Certificates of such Series. In
addition, if so specified in the related Prospectus Supplement, if collections
of Finance Charge Receivables or other amounts allocable to the Certificates of
a Series are insufficient to cover required amounts due with respect to the
Senior Certificates of such Series, the Invested Amount with respect to the
Subordinated Certificates will be reduced, resulting in a reduction of the
portion of collections of Finance Charge Receivables allocable to the
Subordinated Certificates in future periods and a possible delay or reduction in
principal and interest payments on the Subordinated Certificates. Moreover, if
so specified in the related Prospectus Supplement, in the event of a sale of
Receivables in the Trust due to the insolvency of the Transferor or the
appointment of a conservator or receiver for the Transferor, the portion of the
net proceeds of such sale allocable to pay principal to the Certificates of a
Series will be used first to pay amounts due to the Senior Certificateholders
and any remainder will be used to pay amounts due to the Subordinated
Certificateholders.
Ability to Change Terms of the Receivables. Pursuant to the Agreement, the
Transferor does not transfer to the Trust the Accounts but only the Receivables
arising in the Accounts. As owner of the Accounts, the Transferor retains the
right to determine the monthly periodic finance charges and other charges and
fees which will be applicable from time to time to the Accounts, to alter the
minimum monthly payment required on the Accounts and to change various other
terms with respect to the Accounts. A decrease in the monthly periodic finance
charge and other charges and fees would decrease the effective yield on the
Accounts and could result in the occurrence of an Early Amortization Event with
respect to a Series and the commencement of the Early Amortization Period with
respect to each such Series. Under the Agreement, the Transferor agrees not to
change the terms of the Accounts unless the change is also made applicable to
the comparable segment of its portfolio of accounts with characteristics similar
to the Accounts. In servicing the Accounts, the Servicer is required to exercise
the same care and apply the same policies that it exercises in handling similar
matters for its own and other comparable accounts. Except as specified above or
in any Prospectus Supplement, there will be no restrictions on the Transferor's
ability to change the terms of the Accounts. No Rating Agency will be asked to
reassess its rating of the Certificates in the event the Transferor changes the
terms of the Accounts. There can be no assurance that a change made in the terms
of the Accounts would not result in a downgrade of the rating of the
Certificates. There can be no assurance that changes in applicable law, changes
in the marketplace or prudent business practice might not result in a
determination by the Transferor to take actions which would change Account
terms.
Master Trust Considerations. The Trust, as a master trust, may issue Series
from time to time. While the principal terms of any Series (the "Principal
Terms") will be specified in a Series Supplement, the provisions of a Series
Supplement and, therefore, the terms of any additional Series, will not be
subject to the prior review by, or consent of, holders of the Certificates of
any previously issued Series. Such Principal Terms may include methods for
determining applicable Invested Percentages and allocating collections,
provisions creating different or additional security or other Enhancement,
provisions subordinating such Series to another Series
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or other Series (if the Series Supplement relating to such Series so permits) to
such Series, and any other amendment or supplement to the related Agreement
which is made applicable only to such Series. It will be a condition precedent
to the issuance of any additional Series by the Trust that each Rating Agency
that has rated any outstanding Series issued by the Trust deliver written
confirmation to the Trustee that the Exchange will not result in such Rating
Agency reducing or withdrawing its rating on any outstanding Series. There can
be no assurance, however, that the Principal Terms of any other Series,
including any Series issued from time to time hereafter, might not have an
impact on the timing and amount of payments received by a Certificateholder of
any other Series or otherwise adversely affect any other Series. See
"Description of the Certificates -- Exchanges."
Control. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the related Agreement or the related Series Supplement. However, the Agreement
or related Series Supplement may provide that under certain circumstances the
consent or approval of a specified percentage of the aggregate Invested Amount
or of the Invested Amount of each Series will be required to direct certain
actions, including amending the Agreement in certain circumstances.
Certificateholders of such other Series may have interests which do not coincide
in any way with the interests of Certificateholders of the subject Series.
Certificate Rating. Any rating assigned to the Certificates of a Series or
a Class by a Rating Agency will reflect such Rating Agency's assessment of the
likelihood that Certificateholders of such Series or Class will receive the
payments of interest and principal required to be made under the Agreement and
will be based primarily on the value of the Receivables in the Trust and the
availability of any Enhancement with respect to such Series or Class. However,
any such rating will not, unless otherwise specified in the related Prospectus
Supplement with respect to any Class or Series offered hereby, address the
likelihood that the principal of, or interest on, any Certificates of such Class
or Series will be paid on a scheduled date. In addition, any such rating will
not address the possibility of the occurrence of an Early Amortization Event
with respect to such Class or Series or the possibility of the imposition of
United States withholding tax with respect to non-U.S. Certificateholders. The
rating will not be a recommendation to purchase, hold or sell Certificates of
such Series or Class, and such rating will not comment as to the marketability
of such Certificates, any market price or suitability for a particular investor.
There is no assurance that any rating will remain for any given period of time
or that any rating will not be lowered or withdrawn entirely by a Rating Agency
if in such Rating Agency's judgment circumstances so warrant.
Enhancement. Although Enhancement may be provided with respect to a Series
of Certificates or any Class thereof, the amount available will be limited and
will be subject to certain reductions. If the amount available under any
Enhancement is reduced to zero, Certificateholders of the Series or Class
thereof covered by such Enhancement will bear directly the credit and other
risks associated with their undivided interest in the Trust. See "Enhancement."
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series initially will be
represented by one or more Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Unless and until Definitive Certificates are issued
for a Series, Certificate Owners relating to such Series will not be recognized
by the Trustee as Certificateholders, as that term will be used in the
Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Certificateholders indirectly through DTC, CEDEL or
Euroclear and their participating organizations. Because DTC can only act on
behalf of individuals who are Participants in DTC's system (or participate
indirectly through a Participant), the ability of a Certificate Owner to pledge
its 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 representing such
Certificates. See "Description of the Certificates -- Book-Entry Registration"
and " -- Definitive Certificates."
THE TRUST
The Trust was formed in accordance with the laws of the State of Delaware
pursuant to the Agreement. The Trust will not engage in any activity other than
acquiring and holding Receivables, issuing Series of Certificates and the
related Exchangeable Transferor Certificate, making payments thereon and
engaging in related
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activities (including, with respect to any Series, obtaining any Enhancement and
entering into an Enhancement agreement relating thereto). As a consequence, the
Trust is not expected to have any need for, or sources of, additional capital
resources other than the assets of the Trust.
CREDIT CARD ACTIVITIES AT NATIONSBANK
General
The Transferor conveyed to the Trust pursuant to the Agreement interests in
Receivables which were generated from transactions made by holders of certain
VISA Classic and VISA Gold credit card accounts and certain Standard MasterCard
and Gold MasterCard credit card accounts. These accounts were generated under
the Visa U.S.A., Inc. ("VISA") or MasterCard International, Inc. ("MasterCard")
programs and were either originated by NationsBank or its predecessors, or
acquired by NationsBank from other credit card issuers, including affiliates of
NationsBank. NationsBank is a member of MasterCard and VISA. NationsBank
currently offers other VISA and MasterCard credit card accounts with various
program features, charges and rate structures. NationsBank services these
accounts at its headquarters located in Dover, Delaware and at its operations
center located in Norfolk, Virginia. Certain data processing and administrative
functions associated with servicing the accounts are performed by Total Systems
Services, Inc. See " -- Description of Total Systems Services, Inc."
The VISA and MasterCard credit cards of the type pursuant to which the
Accounts were established may be used for three types of transactions:
purchases, cash advances and balance transfers. Cardholders make purchases when
using a credit card to buy goods or services. A cash advance is made when a
credit card is used to obtain cash from a financial institution, from an
automated teller machine or by writing a check on an account. A balance transfer
is made when a cardholder requests NationsBank to make payment to another
creditor on the cardholder's behalf. Amounts due with respect to both types of
transactions will be included in the Receivables.
The VISA and MasterCard credit card accounts owned by NationsBank were
principally generated through: (i) applications made available to prospective
cardholders at branches of the Corporation's banking Subsidiaries and its
affiliates and through outlets related to affinity and co-brand partners; (ii)
direct mail solicitations for accounts on an application or pre-approved credit
basis; and (iii) purchases or other acquisitions of accounts from other credit
card issuers.
Before an account is opened in response to an application, the prospective
cardholder's application is reviewed for completeness and creditworthiness.
Generally, a credit report issued by an independent credit reporting agency is
obtained, and information on such report regarding the applicant may be
verified. The ability of the applicant to repay credit card balances is
generally evaluated by applying both custom and generic credit scoring systems
which are intended to provide a general indication, based on the information
available, of the applicant's willingness and ability to repay his obligations;
in addition, NationsBank generally employs traditional credit criteria to
supplement the credit scoring systems. If an application is approved, an initial
credit limit is established for the account based on the applicant's credit
score, income and level of indebtedness.
If an account is opened in response to a direct mail pre-approved
solicitation, the prospective cardholder's name has previously been screened
through a credit bureau to ensure that the person meets certain standards of
creditworthiness and fiscal responsibility. In the case of pre-approved
solicitations, the credit limit is based upon the prospective cardholder's
income and indications of the cardholder's willingness and ability to repay
obligations in a timely manner.
NationsBank also uses affinity marketing (also known as co-branding) as a
means of business development. Affinity marketing involves the solicitation of
prospective cardholders from identifiable groups with a common interest and/or
common affiliation. Affinity marketing is conducted through two approaches; the
first relies on the solicitation of organized membership groups or customers of
certain business organizations with the written endorsement of the group's
leadership or the business organization, as the case may be, and the second
utilizes solicitation of prospective cardholders through the use of purchased
lists. Solicitation activities used in connection with affinity marketing also
include: solicitation in appropriate periodicals, telemarketing
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and applications made available to prospective cardholders in appropriate
locations. In certain cases, pre-approved solicitations will be used in the same
manner as described in the preceding paragraph.
Credit card accounts that have been purchased or otherwise acquired by
NationsBank were originally opened using criteria established by the institution
from which the accounts were purchased or acquired or by the institution from
which the selling institution originally purchased or otherwise acquired the
accounts. NationsBank generally screens accounts to be purchased based on credit
bureau reports to determine which accounts not to purchase. The credit limits on
such accounts are based initially on the limits established or maintained by the
selling institution.
Each cardholder is subject to an agreement governing the terms and
conditions of the accounts. Pursuant to such cardholder agreement, NationsBank
reserves the right to change or terminate any terms, conditions, services or
features of the accounts (including increasing or decreasing periodic finance
charges, other charges and fees or minimum payments) with notice, if required by
law. Credit limits may be adjusted periodically based upon NationsBank's
continuing evaluation of the cardholders' payment history and other factors.
The VISA and MasterCard credit cards of NationsBank are issued pursuant to
NationsBank's membership in VISA and MasterCard. Should either of these
organizations materially curtail their activities, or should NationsBank cease
to be a member of VISA or MasterCard for any reason, an Early Amortization Event
could occur, and delays in payments on the Receivables and possible reductions
in the amounts thereof could also occur.
Collection Efforts
Efforts to collect delinquent credit card receivables are made by
NationsBank personnel and collection agencies and attorneys retained by
NationsBank. Under current practice, NationsBank includes a request for payment
of overdue amounts on all billing statements subsequent to a delinquency.
Collection personnel generally initiate telephone contact with cardholders whose
credit card accounts have become 30 days or more delinquent. Certain cardholders
whom NationsBank considers higher risk may be contacted when their accounts
first become delinquent. In the event that initial telephone contact fails to
resolve the delinquency, NationsBank continues to contact the cardholder by
telephone and by mail. NationsBank may also enter into arrangements with
cardholders to extend or otherwise change payment schedules. The current policy
of NationsBank is to recognize losses no later than the 180th day of
delinquency, although charge-offs may be made earlier in some circumstances. The
credit evaluation, servicing and charge-off policies and collection practices of
NationsBank may change over time in accordance with NationsBank's business
judgment and applicable law.
Description of Total Systems Services, Inc.
Certain data processing and ministerial functions associated with the
servicing of the credit card accounts are performed on behalf of NationsBank by
Total Systems Services, Inc. ("TSYS") from its facilities in Columbus, Georgia.
The majority of TSYS's common stock is owned by Synovus Financial, Inc. A
minority portion of TSYS's common stock is publicly held. TSYS is a bankcard and
bank data processing company. TSYS provides a variety of data processing
services to NationsBank, including processing and settlement of transactions,
maintenance of individual cardholder accounts, processing of cardholder
statements and issuance of plastic cards. TSYS is the nation's second largest
third-party bankcard processor behind First Data Resources, Inc. As of March 31,
1996, cardholder accounts processed by TSYS exceeded 65 million for 133
financial institutions.
Billing and Payments
NationsBank, through TSYS, generates and mails to cardholders monthly
statements summarizing account activity and cardholder payments. Customers
generally receive a 20- to 30-day grace period on purchases provided they pay
their balances in full each month by the due date. Certain eligible cardholders
are given the option periodically to take a payment deferral or prepay minimum
payments. In most cases, the cardholder is not given this option if a payment
deferral has been taken within the last six months.
The finance charges assessed monthly are calculated by multiplying the
account's average daily balance(s) by the applicable daily periodic rate, and
multiplying the result by the number of days in the billing cycle. In most
cases, finance charges are calculated on purchases from the date of the
purchase. Monthly periodic
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finance charges are not assessed in most circumstances on purchases if all
balances shown in the billing statement are paid each month by the due date,
which is generally 20 to 30 days after the billing date. In most cases, finance
charges are calculated on cash advances from the date of the transaction, except
for cash advances and checks, which incur finance charges from the date the
check is posted to the account. In most cases, finance charges are calculated on
balance transfers from the date the balance transfer is posted to the account.
Interchange
Creditors participating in the VISA and MasterCard associations receive
Interchange as partial compensation for taking credit risk, absorbing fraud
losses and funding receivables for a limited period of time prior to initial
billing. Under the VISA and MasterCard systems, a portion of this Interchange in
connection with cardholder charges for goods and services is passed from banks
which clear the transactions for merchants to credit card issuing banks.
Interchange fees are set annually by MasterCard and VISA and are based on the
number of credit card transactions and the amount charged per transaction. The
Transferor may be required, as described in the related Prospectus Supplement,
to transfer to the Trust a percentage of the Interchange attributed 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 related Prospectus Supplement, and, unless otherwise provided in the related
Prospectus Supplement, will be treated as collections of Finance Charge
Receivables and will be used to pay required monthly payments including interest
on the related Series of certificates, and, in some cases, to pay all or a
portion of the Monthly Investor Servicing Fee to the Servicer.
THE RECEIVABLES
The Receivables conveyed to the Trust arise in Accounts selected from the
VISA and MasterCard credit card accounts owned by NationsBank on the basis of
criteria set forth in the Agreement as applied on the Cut Off Date and, with
respect to Additional Accounts, as of the related date of their designation (the
"Trust Portfolio"). The Transferor will have the right (subject to certain
limitations and conditions set forth in the Agreement), and in some
circumstances will be obligated, to designate from time to time Additional
Accounts and to transfer to the Trust all Receivables of such Additional
Accounts, whether such Receivables are then existing or thereafter created. Any
Additional Accounts designated pursuant to the Agreement must be Eligible
Accounts as of the date the Transferor designates such accounts as Additional
Accounts. The Transferor will also have the right (subject to certain
limitations and conditions) to designate certain Accounts as Removed Accounts
and to require the Trustee to reconvey all Receivables in such Removed Accounts
to the Transferor. 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.
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the Trust Portfolio as of the date specified.
Such information will include, but not be limited to, the amount of Principal
Receivables, the amount of Finance Charge Receivables, the range of principal
balances of the Accounts and the average thereof, the range of credit limits of
the Accounts and the average thereof, the range of ages of the Accounts and the
average thereof, the geographic distribution of the Accounts, the types of
Accounts and delinquency and loss statistics relating to the Accounts.
MATURITY ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement, for each
Series, following the Revolving Period, collections of Principal Receivables are
expected to be distributed to the Certificateholders of such Series or any
specified Class thereof on each specified Distribution Date during the
Controlled Amortization Period or the Principal Amortization Period, or are
expected to be accumulated for payment to Certificateholders of such Series or
any specified Class thereof during the Accumulation Period and distributed on a
Scheduled Payment Date; provided, however, that, if the Early Amortization
Period commences, collections of Principal Receivables will be paid to
Certificateholders in the manner described herein and in the related Prospectus
Supplement. The related Prospectus Supplement will specify the date on which the
Controlled Amortization Period, the Principal Amortization Period or the
Accumulation Period, as applicable, will commence, the principal payments
expected or available to be received or accumulated during such Controlled
Amortization
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Period, Principal Amortization Period or Accumulation Period, or on the
Scheduled Payment Date, as applicable, the manner and priority of principal
accumulations and payments among the Classes of a Series of Certificates and the
Early Amortization Events which, if any were to occur, would lead to the
commencement of an Early Amortization Period.
The related Prospectus Supplement will provide certain historical data
relating to payments by cardholders, total charge-offs and other related
information relating to the Trust Portfolio. There can be no assurance that
future events will be consistent with such historical data.
The amount of collections of Receivables may vary from month to month due
to seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of Principal
Receivables with respect to the Trust Portfolio, and thus the rate at which the
related Certificateholders could expect to receive or accumulate payments of
principal on their Certificates during an Amortization Period, or on any
Scheduled Payment Date, as applicable, will be similar to any historical
experience set forth in a related Prospectus Supplement. If an Early
Amortization Event occurs, 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 a specified Class thereof during the
Controlled Amortization Period, the Principal Amortization Period or the
Accumulation Period or on the Scheduled Payment Date, as applicable, or an Early
Amortization Event may occur which would initiate the Early 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.
NATIONSBANK OF DELAWARE, N.A.
AND NATIONSBANK CORPORATION
NationsBank of Delaware, N.A. ("NationsBank"), a national banking
association located in Dover, Delaware, conducts nationwide consumer lending
programs principally comprised of credit card related activities. NationsBank is
an indirect wholly-owned subsidiary of NationsBank Corporation (the
"Corporation"). NationsBank was established on March 31, 1989. The Corporation
is a multi-bank holding company established as a North Carolina corporation in
1968 and is registered under the Bank Holding Company Act of 1956, as amended,
with its principal assets being the stock of its subsidiaries. Through its
banking subsidiaries and various non-banking subsidiaries, the Corporation
provides banking and banking related services primarily throughout the Southeast
and Mid-Atlantic States and Texas. The Prospectus Supplement for each Series of
Certificates will provide additional information, including financial
information, relating to NationsBank, NationsBank's credit card activities and
the Corporation.
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 Exchangeable Transferor Certificate. Each Series
will be issued pursuant to the Agreement entered into by NationsBank and the
Trustee and a Series Supplement to the Agreement, a copy of the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The Prospectus Supplement for each Series will describe any provisions of
the Agreement relating to such Series which may differ materially from the
Agreement filed as an exhibit to the Registration Statement. 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 related Agreement
and Series Supplement.
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General
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable Invested
Percentage of all cardholder payments on the Receivables. For each Series of
Certificates, unless otherwise specified in the related Prospectus Supplement,
the Invested Amount on any date will be equal to the Initial Invested Amount as
of the related 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 Series prior to such
date. If so specified in the Prospectus Supplement relating to any Series of
Certificates, under certain circumstances the Invested Amount may be further
adjusted by the amount of principal allocated to Certificateholders, the funds
on deposit in any specified account, and any other amount specified in the
related Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be Subordinated
Certificates. Each Class of a Series will evidence the right to receive a
specified portion of each distribution of principal or interest or both. The
Invested Amount with respect to a Series with more than one Class will be
allocated among the Classes as described in the related Prospectus Supplement.
The Certificates of a Class may differ from Certificates of other Classes of the
same Series in, among other things, the amounts allocated to principal payments,
maturity date, Certificate Rate and the availability of Enhancement.
For each Series of Certificates, payments of interest and principal will be
made on Distribution Dates specified in the related Prospectus Supplement to
Certificateholders in whose names the Certificates were registered on the record
dates (each, a "Record Date") specified in the related Prospectus Supplement.
Interest will be distributed to Certificateholders in the amounts, for the
periods and on the dates specified in the related Prospectus Supplement.
For each Series of Certificates, the Transferor initially will own the
Exchangeable Transferor Certificate. The Exchangeable 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 Enhancement Providers to receive payments from the Trust. The holder of the
Exchangeable Transferor Certificate will have the right to a percentage (the
"Transferor Percentage") of all cardholder payments from the Receivables in the
Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the
Invested Amount will remain constant except under certain limited circumstances.
See "Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs." The amount of Principal Receivables in the Trust, however, will
vary each day as new Principal Receivables are created and others are paid. The
amount of the Transferor Interest will fluctuate each day, therefore, to reflect
the changes in the amount of the Principal Receivables in the Trust. When a
Series is amortizing, the Invested Amount of such Series will generally decline
as payments of principal are distributed to the Certificateholders. As a result,
the Transferor Interest will generally increase each month during an
Amortization Period for any Series to reflect the reductions in the Invested
Amount of such Series and will also change to reflect the variations in the
amount of Principal Receivables in the Trust. The Transferor Interest may also
be reduced as the result of an Exchange. See " -- Exchanges."
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository") except as set forth
below. Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, beneficial interests in the Certificates
will be available for purchase in minimum denominations of $1,000 and integral
multiples thereof in book-entry form only. The Transferor has been informed by
DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be the
holder of record of each Series of Certificates. No Certificate Owner acquiring
an interest in the Certificates will be entitled to receive a certificate
representing such person's interest in the Certificates unless Definitive
Certificates are issued. Unless and until Definitive Certificates are issued for
any Series under the limited circumstances described herein, all references
herein to actions by Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references herein
to distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be,
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for distribution to Certificate Owners in accordance with DTC procedures. See
" -- Book-Entry Registration" and " -- Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Series of Certificates of such Series, or
all or a portion of any Class thereof, on the Luxembourg Stock Exchange or any
other specified exchange.
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or CEDEL or Euroclear (in
Europe), if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. CEDEL and
Euroclear will hold omnibus positions on behalf of the CEDEL Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in CEDEL's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds securities for its participating organizations ("Participants")
and facilitates the clearance and settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic book-entry changes in Participants' accounts, thereby eliminating the
need for physical movement of securities certificates. Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through CEDEL Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. CEDEL
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits or securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
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Purchases of Certificates under the DTC system must be made by or through
DTC Participants, which will receive a credit for the Certificates on DTC's
records. The ownership interest of each actual Certificate Owner is in turn to
be recorded on the DTC Participants' and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchase, but Certificate Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect Participant through which the
Certificate Owner entered into the transaction. Transfers of ownership interests
in the Certificates are to be accomplished by entries made on the books of DTC
Participants acting on behalf of Certificate Owners. Certificate Owners will not
receive certificates representing their ownership interest in the Certificates,
except in the event that use of the book-entry system for the Certificates is
discontinued.
To facilitate subsequent transfers, all Certificates deposited by DTC
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Certificates with DTC and their registration in the name of Cede
& Co. effects no change in beneficial ownership. DTC has no knowledge of the
actual Certificate Owners of the Certificates; DTC's records reflect only the
identity of the Participants to whose accounts such Certificates are credited,
which may or may not be the Certificate Owners. The DTC Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect Participants, and by DTC Participants and
Indirect Participants to Certificate Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Certificates. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date, which assigns Cede & Co.'s
consenting or voting rights to those DTC Participants to whose accounts the
Certificates are credited on the record date (identified in a listing attached
thereto).
Principal and interest payments on the Certificates will be made to DTC.
DTC's practice is to credit Participants' accounts on the applicable
Distribution Date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
such Distribution Date. Payments by DTC Participants to Certificate Owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name" and will be the responsibility of such DTC Participant and not
of DTC, the Trustee or the Transferor, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of the Trustee, disbursement of such
payments to DTC Participants shall be the responsibility of DTC, and
disbursement of such payments to Certificate Owners shall be the responsibility
of DTC Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Certificates at any time by giving reasonable notice to the
Transferor or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Definitive Certificates are
required to be printed and delivered. The Transferor may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor securities
depository). In that event, Definitive Certificates will be delivered to
Certificateholders. See " -- Definitive Certificates."
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Transferor believes to be reliable, but
the Transferor takes no responsibility for the accuracy thereof.
CEDEL Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled by CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL
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interfaces with domestic markets in several countries. As a professional
depository, CEDEL is subject to regulations by the Luxembourg Monetary
Institute. CEDEL Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may include
the underwriters of any Series of Certificates. Indirect access to CEDEL is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a CEDEL Participant,
either directly or indirectly.
The Euroclear System (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 27 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several 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, S.C., 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 establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters of any Series of Certificates. Indirect access to the Euroclear
System is also available to other firms that clear through or 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 and applicable Belgian law
(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 CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
CEDEL or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the related Agreement on
behalf of a CEDEL Participant or a Euroclear Participant only in accordance with
its relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among Participants of DTC,
CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
Definitive Certificates
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued in fully registered, certificated
form to Certificate Owners or their nominees ("Definitive Certificates"), rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee 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
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other percentage specified in the related Prospectus Supplement) of the Invested
Amount advise the Trustee and DTC through Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
re-registration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments and any
principal payments on each Distribution Date will be made to Holders in whose
names the Definitive Certificates were registered at the close of business on
the related Record Date. Distributions will be made by check mailed to the
address of such Holder as it appears on the register maintained by the Trustee.
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.
Interest Payments
For each Series of Certificates and Class thereof, interest will accrue
from the relevant Closing Date on the applicable Invested Amount, plus, if
applicable, the Pre-Funding Amount (or other amount specified in the related
Prospectus Supplement), at the applicable Certificate Rate, which may be a
fixed, floating or other type of rate as specified in the related Prospectus
Supplement. Interest will be distributed to Certificateholders on the
Distribution Dates specified in the related Prospectus Supplement. Interest
payments on any Distribution Date will generally be funded from collections of
Finance Charge Receivables allocated to the Invested Amount during the preceding
monthly period or periods (each, a "Due Period") and may be funded from certain
investment earnings on funds held in accounts of the Trust, from any applicable
Enhancement, if necessary, or certain other amounts as specified in the related
Prospectus Supplement. If the Distribution Dates for payment of interest for a
Series or Class occur less frequently than monthly, such collections or other
amounts (or the portion thereof allocable to such Class) may be deposited in one
or more trust accounts (each, an "Interest Funding Account") pending
distribution to the Certificateholders of such Series or Class, as described in
the related Prospectus Supplement. If a Series has more than one Class of
Certificates, each such Class may have a separate Interest Funding Account. The
Prospectus Supplement relating to each Series of Certificates and each Class
thereof will describe 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 initial Certificate Rate, the dates and the
manner for determining subsequent Certificate Rates, and the formula, index or
other method by which such Certificate Rates are determined.
Principal Payments
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period for each Series of Certificates (which begins on the Closing
Date relating to such Series and ends on the day before an Amortization Period
begins), no principal payments will be made to the Certificateholders of such
Series. During the Controlled Amortization Period, Principal Amortization Period
or Accumulation Period, as applicable, which will be scheduled to begin on the
date specified in the related Prospectus Supplement, and during the Early
Amortization Period, which will begin upon the occurrence of an Early
Amortization Event, principal will be paid to the Certificateholders in the
amounts and on Distribution Dates specified in the related Prospectus Supplement
or will be accumulated in a Principal Funding Account for later distribution to
Certificateholders
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on the Scheduled Payment Date in the amounts specified in the related Prospectus
Supplement. Principal payments for any Series or Class thereof will be funded
from collections of Principal Receivables received during the related Due Period
or Periods as specified in the related Prospectus Supplement and allocated to
such Series or Class and from certain other sources specified in the related
Prospectus Supplement. In the case of a Series with more than one Class of
Certificates, the Certificateholders of one or more Classes may receive payments
of principal at different times. The related Prospectus Supplement will describe
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 or investment agreement or other arrangement
specified in the related Prospectus Supplement intended to assure a minimum rate
of return on the investment of such funds. In order to enhance the likelihood of
the payment in full of the principal amount of a Series of Certificates or Class
thereof at the end of an Accumulation Period, such Series of Certificates or
Class thereof may be subject to a principal guaranty or other similar
arrangement specified in the related Prospectus Supplement.
Transfer and Assignment of Receivables
On the Closing Date of the initial Series issued, the Transferor
transferred and assigned to the Trust all of its right, title and interest in
and to Receivables in the Accounts outstanding as of the Cut Off Date, all of
the Receivables thereafter created under the Accounts and the proceeds of all of
the foregoing.
In connection with the transfer of the Receivables by the Transferor to the
Trust, the Transferor indicated in its records, including any computer files,
that the Receivables had been transferred from the Transferor to the Trust. In
addition, the Transferor provided to the Trustee a computer file or a microfiche
list containing a true and complete list showing for each Account, as of the Cut
Off Date and for each Additional Account as of each Additional Account Cut Off
Date, (i) its account number and (ii) the amount of Receivables in such Account.
NationsBank, as initial Servicer, will retain and will not deliver to the
Trustee any other records or agreements relating to the Accounts or the
Receivables. Except as set forth above, the records and agreements relating to
the Accounts and the Receivables will not be segregated from those relating to
other credit card accounts and receivables and neither the computer files nor
the physical documentation relating to the Accounts or Receivables will be
stamped or marked to reflect the transfer of Receivables to the Trust. The
Trustee will have reasonable access to such records and agreements as required
by applicable law or to enforce the rights of the Certificateholders. The
Transferor filed one or more UCC-1 financing statements in accordance with
Delaware state law to perfect the Trust's interest in the Receivables. See "Risk
Factors -- Transfer of Receivables" and "Certain Legal Aspects of the
Receivables."
Exchanges
The Agreement provides for the Trustee to issue two types of certificates:
(i) one or more Series of Certificates which are transferable and have the
characteristics described below and (ii) the Exchangeable Transferor
Certificate, a certificate which evidences the Transferor Interest, which will
be held by the Transferor and generally will not be transferable. The Agreement
also provides that, pursuant to any one or more Series Supplements, the
Transferor may tender the Exchangeable Transferor Certificate, or the
Exchangeable Transferor Certificate and the Certificates evidencing any Series
of Certificates, to the Trustee in exchange for one or more newly issued Series
and a reissued Exchangeable Transferor Certificate. Under the Agreement, the
Transferor may define, with respect to any newly issued Series; (i) its name or
designation, (ii) its initial principal amount (or method for calculating such
amount), (iii) its Certificate Rate (or formula for the determination thereof),
(iv) the interest payment date or dates and the date or dates from which
interest shall accrue, (v) the method for allocating collections to
Certificateholders, (vi) the names of any accounts to be used by such Series and
the terms governing the operation of any such accounts, (vii) the percentage
used to calculate servicing fees, (viii) the minimum Transferor Percentage (the
"Minimum Transferor Percentage") applicable to such Series, (ix) the minimum
amount of Principal Receivables required to be maintained through the
designation by the Transferor of Additional Accounts, (x) the issuer and terms
of any Enhancement with respect thereto, (xi) the base rate for such Series, if
applicable, (xii) the terms on which the Certificates of such Series may be
repurchased at the Transferor's option or remarketed to other investors, (xiii)
the Stated Series Termination Date, (xiv) any deposit into any account
maintained for the benefit of Certificateholders, (xv) the number of Classes of
such Series, and if more than one Class, the rights and priorities of each such
Class, (xvi) the extent to which
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the Certificates of such Series will be issuable in temporary or permanent
global form (and, in such case, the depositary for such global certificate or
certificates, the terms and conditions, if any, upon which such global
certificate may be exchanged, in whole or in part, for definitive certificates,
and the manner in which any interest payable on a temporary or global
certificate will be paid), (xvii) whether the Certificates of such Series may be
issued in bearer form and any limitations imposed thereon, (xviii) the priority
of any Series with respect to any other Series, if applicable, (xix) the rights
of the holder of the Exchangeable Transferor Certificate that have been
transferred to Certificateholders of such Series and (xx) any other relevant
terms (all such terms, the "Principal Terms" of such Series). None of the
Transferor, the Servicer, the Trustee or the Trust is required or intends to
obtain the consent of any Certificateholder to issue any additional Series.
However, as a condition of an Exchange, the Transferor will deliver to the
Trustee written confirmation that the Exchange will not result in the applicable
Rating Agency reducing or withdrawing its rating of any outstanding Series. The
Transferor may offer any Series to the public under a Disclosure Document in
transactions either registered under the Act or exempt from registration
thereunder directly, through one or more underwriters or placement agents, in
fixed-price offerings or in negotiated transactions or otherwise. Any such
Series may be issued in fully registered or book-entry form in minimum
denominations determined by the Transferor.
The Agreement provides that the Transferor may perform Exchanges and define
Principal Terms such that each Series has a period during which amortization 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 Revolving Periods while other Series
are not. Thus, certain Series may not be amortizing, while other Series are
amortizing. Each Series may have the benefits of a form of Enhancement issued by
issuers different from the issuers of the form of Enhancement with respect to
any other Series. Under the Agreement, the Trustee shall hold any such
Enhancement only on behalf of the Series with respect to which it relates.
Likewise, with respect to each such Enhancement, the Transferor may deliver a
different form of Enhancement agreement. The Agreement also provides that the
Transferor may specify different Certificate Rates and Monthly Investor
Servicing Fees with respect to each Series. The Transferor also has the option
under the Agreement to vary between Series the terms upon which Series may be
repurchased at the Transferor's option or remarketed to other investors.
Additionally, certain Series may be subordinated to other Series, or Classes
within a Series may have different priorities. There is no limit to the number
of Exchanges that the Transferor may perform under the Agreement. The Trust will
terminate only as provided in the Agreement.
Under the Agreement and pursuant to a Series Supplement, an Exchange may
only occur upon the satisfaction of certain conditions provided in the
Agreement. Under the Agreement, the Transferor may perform an Exchange by
notifying the Trustee at least three business days in advance of the date upon
which the Exchange is to occur. Under the Agreement, the notice will state the
designation of any Series to be issued on the date of the Exchange and, with
respect to each such Series: (i) its Initial Invested Amount and Pre-Funding
Amount, if applicable (or method for calculating such amount) and (ii) its
Certificate Rate (or the method for allocating interest payments or other cash
flow to such Series). On the date of the Exchange, the Trustee will issue any
such Series only upon delivery to it of the following: (i) a Series Supplement
in form satisfactory to the Trustee signed by the Transferor and specifying the
Principal Terms of such Series, (ii) the form of Enhancement and the Enhancement
agreement, if any, with respect thereto executed by the Transferor and the
provider of the form of Enhancement, (iii) an opinion of counsel to the effect
that Certificates of such Series (other than any Class required to be retained
by the Transferor) will be characterized either as indebtedness or an interest
in a partnership (that is not taxable as a corporation) under existing law for
Federal income tax purposes and that the issuance of such Series will not affect
the Federal income tax characterization of any outstanding Series or result in
the Trust being subject to Federal or certain state taxes at the entity level,
(iv) written confirmation from the applicable Rating Agency that the Exchange
will not result in such Rating Agency reducing or withdrawing its rating on any
then outstanding Series and (v) the existing Exchangeable Transferor Certificate
and, if applicable, Certificates of the Series to be exchanged. Upon
satisfaction of such conditions, the Trustee will cancel the existing
Exchangeable Transferor Certificate and the Certificates of the exchanged
Series, if applicable, and issue the new Series and new Exchangeable Transferor
Certificate.
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Covenants, Representations and Warranties
The Transferor has covenanted to the Trustee for the benefit of all
Certificateholders of all Series which from time to time may have an interest in
the Trust that, as to the Receivables and the Accounts, the Transferor will
accept the transfer of any Receivable which is charged off as uncollectible or
any Receivables the proceeds of which are unavailable to the Trust if (i) such
Receivable is not an Eligible Receivable, (ii) such Receivable was not conveyed
to the Trust free and clear of all liens (except such liens as may be permitted
by the Agreement) or in compliance in all material respects with all applicable
requirements of law, (iii) all material information with respect to the
Receivables, and the Accounts related thereto, in the list provided to the
Trustee was not true and correct in all material respects, (iv) the Transferor
did not obtain all consents, licenses, approvals or authorizations required in
connection with the conveyance of the Receivables to the Trust, or (v) as of the
initial Closing Date, and as of the applicable Additional Account Closing Date
with respect to Additional Accounts, the computer file or list of Accounts or
Additional Accounts, as the case may be, provided by the Transferor to the
Trustee was not an accurate and complete listing of all such Accounts in all
material respects or the information contained therein with respect to the
identity of such Accounts and the Receivables existing thereunder was not true
and correct in all material respects as of the Cut Off Date or the Additional
Account Cut Off Date, as applicable, unless cured within 60 days or any longer
period agreed upon by the Trustee (not to exceed an additional 60 days) from the
earlier to occur of the discovery of any such event by the Transferor or the
Servicer, or receipt by the Transferor or the Servicer of written notice of any
such event given by the Trustee. Additionally, the Transferor has covenanted in
the Agreement to accept, under certain conditions, the transfer of each
Receivable which is subject to certain specified liens immediately upon the
discovery of such liens.
The Transferor shall accept the transfer of any Receivable as described
above (an "Ineligible Receivable") by directing the Servicer to deduct the
principal balance of such Ineligible Receivable from the aggregate amount of
Principal Receivables. In the event that the exclusion of an Ineligible
Receivable from the calculation of the Transferor Amount would cause the
Transferor Amount to be reduced below zero, the Transferor will make a deposit
into the Collection Account in an amount equal to the amount by which the
Transferor Amount would be reduced below zero. Any deposit into the Collection
Account in connection with the reassignment of an Ineligible Receivable shall be
deemed a payment in full of the Ineligible Receivable. Any amounts so paid by
the Transferor shall be allocated in respect of Principal Receivables and
Finance Charge Receivables as provided in the Agreement.
The obligation of the Transferor to accept reassignment of any Ineligible
Receivable as described above is the sole remedy with respect to such Receivable
available to Certificateholders of all Series outstanding or the Trustee on
behalf of Certificateholders of all Series outstanding.
The Transferor will represent and warrant as of each Closing Date, to the
Trustee for the benefit of Certificateholders of all Series which from time to
time may have an interest in the Trust, that (i) the Transferor is duly
organized and validly existing in good standing under the laws of the United
States of America, has the full power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under the Agreement and any Series Supplement and to execute and
deliver to the Trustee the Certificates pursuant to the Agreement, (ii) the
Agreement and any Series Supplement constitute legal, valid, binding and
enforceable obligations of the Transferor, and (iii) the Agreement constitutes a
valid transfer to the Trust of all right, title and interest of the Transferor
in and to the Receivables, whether then existing or thereafter created in the
Accounts, and the proceeds thereof, or the grant of a first priority perfected
security interest in such Receivables and, with certain exceptions made for
certain limited time periods, the proceeds thereof, which is effective as to
each Receivable upon the transfer thereof to the Trust or upon its creation, as
the case may be. In the event that (x) any of the representations and warranties
described in clauses (i) through (iii) above are not true and correct or (y) a
material amount of Receivables are not Eligible Receivables, and in either case
such event has a material adverse effect on the interest of holders of the
Certificates of all Series (without regard to the amount of any Enhancement),
either the Trustee or the holders of Certificates evidencing undivided interests
in the Trust aggregating more than 50% of the aggregate Invested Amount of all
Series, by written notice to the Transferor (and to the Trustee and the
Servicer, if given by the Certificateholders), may direct the Transferor to
accept reassignment of all Receivables within 60 days of such notice or any
longer period agreed upon by the Trustee (not to exceed an additional 60 days).
The Transferor will be obligated to accept reassignment of
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all such Receivables on a Distribution Date occurring within such applicable
period, unless the representations and warranties shall then be true and correct
in all material respects or there shall no longer be a material amount of such
Receivables which are not Eligible Receivables, as the case may be. The price
for such transfer of Receivables shall be equal to the sum of the aggregate
Invested Amounts of all Series on the Record Date related to the applicable
Distribution Date on which the transfer is scheduled to be made (less the
aggregate principal amount on deposit in any Principal Funding Account) plus an
amount equal to all interest accrued but unpaid on all Series at the applicable
Certificate Rates through the end of the Interest Periods of such Series plus
certain amounts payable to Enhancement Providers, if applicable. The payment of
such amount into the Collection Account in immediately available funds will be
considered a prepayment in full of all such Receivables and will be paid in full
to the Certificateholders and, if applicable, to Enhancement Providers. The
obligations described above shall be the sole remedies respecting the foregoing
representations, warranties and covenants available to the Trustee or the
Certificateholders.
An "Eligible Receivable" is defined to mean each Receivable (i) which has
arisen under an Eligible Account, (ii) which was created in compliance with all
applicable requirements of law, and pursuant to a cardholder agreement which
complies with all applicable requirements of law in either case the failure to
comply with which would have a material adverse effect upon Certificateholders,
(iii) with respect to which all material consents, licenses, approvals or
authorizations of, or registrations with, any governmental authority required to
be obtained or given by the Transferor in connection with the creation of such
Receivable or the execution, delivery and performance by the Transferor of the
related cardholder agreement have been duly obtained or given and are in full
force and effect as of such date of creation, (iv) as to which at the time of
the transfer of such Receivable to the Trust, the Trust will have good and
marketable title, free and clear of all liens, encumbrances, charges and
security interests (except those permitted by the Agreement), (v) which has been
the subject of either a valid transfer and assignment from the Transferor to the
Trust of all of the Transferor's right, title and interest therein or the grant
of a first priority perfected security interest therein (and in the proceeds
thereof), effective until the termination of the Trust, (vi) which will at all
times be the legal, valid and binding payment obligation of the cardholder
thereof enforceable against such cardholder in accordance with its terms,
subject to certain bankruptcy and equity related exceptions, (vii) which
constitutes an "account" under and as defined in Article 9 of the UCC as then in
effect in the State of Delaware, (viii) which, at the time of its transfer to
the Trust, has not been waived or modified except in accordance with the
policies and procedures of the Transferor relating to the operation of its
consumer credit card business, (ix) which is not subject to any setoff, right of
rescission, counterclaim or other defense (including the defense of usury),
other than certain bankruptcy and equity related defenses, (x) as to which the
Transferor has satisfied all obligations to be fulfilled at the time it is
transferred to the Trust and (xi) as to which the Transferor has done nothing,
at the time of its transfer to the Trust, to impair the rights of the Trust or
Certificateholders therein. In order to qualify as an "Eligible Account," each
such Account must, as of the date of its selection, (i) be in existence and
owned by the Transferor, (ii) be payable in United States dollars, (iii) not
have the related credit card reported lost or stolen or be designated as
fraudulent, (iv) not be identified in the Transferor's computer files as
cancelled due to the obligor's bankruptcy or insolvency, (v) not have the
receivables in such Account written off as uncollectible, (vi) not have the
receivables in such Account assigned, pledged or sold, (vii) have an obligor who
has provided a billing address in the United States or its territories or
possessions and (viii) not be an account with respect to which NationsBank or
any affiliate of NationsBank is the obligor.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of the Receivables or any records relating to the
Receivables for the purpose of establishing the presence or absence of defects,
compliance with the Transferor's representations and warranties or for any other
purpose. In addition, it is not anticipated or required that the Trustee will
make any initial or periodic general examination of the Servicer for the purpose
of establishing the compliance by the Servicer with its representations or
warranties or the performance by the Servicer of its obligations under the
Agreement for any other purpose. The Servicer, however, is required to deliver
to the Trustee on or before April 30 of each calendar year an opinion of counsel
with respect to the validity of the security interest of the Trust in and to the
Receivables.
Addition of Accounts
Subject to the conditions set forth in the third succeeding sentence, the
Transferor will have the right to designate from time to time Additional
Accounts to be included as Accounts and to convey to the Trust on
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designated dates all Receivables in such Additional Accounts (each such date, an
"Additional Account Closing Date"), whether such Receivables are then existing
or thereafter created. In addition, the Transferor will be required to designate
the Receivables of Additional Accounts (to the extent available) and to transfer
the Receivables in such Additional Accounts to the Trust if, as of the end of
any Due Period, the aggregate Principal Receivables minus the sum of the
Invested Amounts (or adjusted Invested Amounts) and any Principal Receivables
allocated to Enhancement Providers for all Series (the "Transferor Amount"), as
a percentage of the aggregate Principal Receivables, is less than the Minimum
Transferor Percentage specified in the Series Supplement for any Series or if,
as of the end of any Due Period, the aggregate Principal Receivables is less
than the minimum amount of Principal Receivables (the "Minimum Aggregate
Principal Receivables") specified in the Series Supplement for any Series.
Failure to make any such required designation will result in an Early
Amortization Event with respect to the related Series. The Minimum Transferor
Percentage and the Minimum Aggregate Principal Receivables are set forth in the
related Prospectus Supplement. The Transferor will in each case convey to the
Trust its interest in all Receivables in such Additional Accounts, whether such
Receivables are then existing or thereafter created, subject to the following
conditions, among others: (i) each such Additional Account at the time of its
selection must be an Eligible Account; (ii) the selection of the Additional
Accounts by the Transferor will be made in a manner which it reasonably believes
will not materially adversely affect the Certificateholders' interest; and (iii)
the Transferor shall have delivered prior written notice of the addition to the
applicable Rating Agency, the Trustee and the Servicer, and if required by the
Agreement, shall have been notified in writing that such addition will not
result in a reduction or withdrawal of the rating of any Series of Certificates.
Although each Additional Account must satisfy certain criteria set forth in
the Agreement at the time of its selection, Additional Accounts may not be of
the same credit quality as the initial Accounts.
Removal of Accounts
Subject to the conditions set forth in the second succeeding sentence, on
each Determination Date with respect to which the Transferor Amount as a
percentage of the aggregate Principal Receivables exceeds the percentage
required by the Agreement at the end of the related Due Period, the Transferor
will have the right to accept removal of Receivables in certain Accounts
designated by the Transferor from the Trust (the "Removed Accounts") and accept
the conveyance of all the Receivables in the Removed Accounts, without notice to
the Certificateholders. The Transferor may, at its sole discretion, accept such
offer in an aggregate amount equal to an amount not greater than the excess of
the Transferor Amount over the percentage of the aggregate Principal Receivables
as of the end of the related Due Period specified in the Prospectus Supplement.
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 Transferor shall have delivered to the Trustee for execution
a written instrument of reassignment and a computer file or microfiche list
containing a true and complete list of all Accounts in the Trust after such
removal, the Accounts to be identified by account number and aggregate amount of
Receivables; (ii) the Transferor shall represent and warrant that no selection
procedure used by the Transferor which is adverse to the interests of the
Certificateholders or any Enhancement Provider was utilized in selecting the
Removed Accounts; (iii) the removal of any Receivables of any Removed Accounts
shall not, in the reasonable belief of the Transferor, cause an Early
Amortization Event to occur; (iv) the Transferor shall have delivered prior
written notice of the removal to each Rating Agency which has rated any
outstanding Series and prior to the date on which such Receivables are to be
removed shall have received notice from each Rating Agency that such removal
will not cause the reduction or withdrawal of its rating of any Series of
Certificates; and (v) the Transferor shall have delivered to the Trustee and
each Rating Agency an officer's certificate confirming the items set forth in
clauses (i) through (iv) above.
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
the Accounts on and after the date such option (the "Discount Option") is
exercised that otherwise would be treated as Principal Receivables to be treated
as Finance Charge Receivables (the "Discount 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
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current rating of each outstanding Series of Certificates. On the date of
processing of any collections, the product of the Discount Percentage and
collections of Receivables that arise in the Accounts on such day on or after
the date such option is exercised that otherwise would be Principal Receivables
will be deemed collections of Finance Charge Receivables and will be applied
accordingly, unless otherwise provided in the related Prospectus Supplement. The
use of such discount option may be discontinued by the Transferor upon
satisfaction of the requirements set forth in the Agreement, including written
confirmation by each Rating Agency of its then current rating of each
outstanding Series of Certificates.
Collection Account
The Trustee will establish and maintain or cause to be established and
maintained, in the name of the Trustee, on behalf of the Trust, a segregated
trust account (the "Collection Account") for the benefit of the
Certificateholders with an Eligible Institution. An "Eligible Institution" means
a depository institution, 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 (or any domestic branches of foreign banks), which at all
times has a short-term unsecured debt or certificate of deposit rating of at
least A-1+ and P-1 by the applicable Rating Agency; provided, however, that no
such rating shall be required of an institution which shall have corporate trust
powers and which maintains the Collection Account, any Principal Funding
Account, any Interest Funding Account or any other account maintained for the
benefit of Certificateholders as a fully segregated trust account with the trust
department of such institution. Funds in the Collection Account may be invested,
at the direction of the Servicer, in (i) obligations fully guaranteed by the
United States of America or its agencies, (ii) time deposits, demand deposits,
certificates of deposit or banker's acceptances of certain depository
institutions or trust companies having the highest rating from the applicable
Rating Agency, (iii) commercial paper having, at the time of the Trust's
investment, a rating in the highest rating category from the applicable Rating
Agency, (iv) money market funds which have a rating in the highest category from
the applicable Rating Agency, (v) Eurodollar time deposits having, at the time
of the Trust's investment or contractual commitment to invest therein, a rating
in the highest rating category from the applicable Rating Agency, (vi)
repurchase agreements involving certain of the above-listed investments so long
as the other party thereto has, at the time of the Trust's investment therein, a
rating in the highest rating category from the applicable Rating Agency and
(vii) any other investments as may be approved in writing by the applicable
Rating Agency prior to the Trust's investment therein (collectively, the
"Eligible Investments"). Any such investment shall be held to maturity. Any
earnings (net of losses and investment expenses) on funds in the Collection
Account shall be paid monthly to the Transferor unless an Early Amortization
Event occurs, in which event such funds will remain on deposit in the Collection
Account. 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 Collection Account for the purpose of carrying out the Servicer's or
the Trustee's duties under the Agreement. So long as no Servicer Default has
occurred and NationsBank or an affiliate of NationsBank maintains certain
short-term credit ratings, or obtains written confirmation of the ratings on the
Certificates from each Rating Agency, the Servicer need not deposit funds into
the Collection Account until the business day preceding the following
Distribution Date and may use such funds for its own purposes. See
" -- Allocation of Collections; Deposits in Collection Account."
Allocation of Collections; Deposits in Collection Account
On the date of processing, the Servicer will, subject to certain
exceptions, deposit collections on the Receivables and payments made by the
Transferor in respect of Ineligible Receivables allocable to the Certificate-
holders' interest into the Collection Account except as described below. So long
as a Servicer Default has not occurred, NationsBank or an affiliate of
NationsBank is the Servicer and NationsBank (i) maintains a certificate of
deposit rating or meets other criteria required by the applicable Rating Agency,
or (ii) obtains a written notification from each Rating Agency to the effect
that such Rating Agency does not intend to downgrade or withdraw its then
current rating of any outstanding Series of Certificates despite the Servicer's
inability to satisfy the rating requirement specified in clause (i), and for the
two business day period following any reduction of either such rating or failure
to satisfy the conditions of clause (ii), the Servicer need not deposit
collections and payments made by the Transferor in respect of Ineligible
Receivables allocable to the Certificateholders' interest into the Collection
Account on the date indicated in the preceding sentence but may use for its own
benefit all such Collections and payments until the business day preceding the
Distribution Date at which
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time the Servicer must deposit such amounts (net of the Monthly Investor
Servicing Fee and net of any amounts to be distributed to the Transferor) into
the Collection Account. Until such collections and payments are deposited in the
Collection Account, such amounts will not be segregated from the assets of the
Servicer, and the proceeds of any short-term investment of such proceeds will
accrue to the Servicer. While the Servicer holds collections and payments made
by the Transferor in respect of Ineligible Receivables and is permitted to use
such collections and payments for its own benefit, the Certificateholders are
subject to risk of loss, including risk resulting from the insolvency of the
Servicer. The Servicer will pay no fee to the Trust or the Certificateholders
for use of collections and payments made by the Transferor in respect of
Ineligible Receivables. Collections on Receivables allocable to the Transferor
Interest will be remitted by the Servicer on each day to the Transferor.
Funding Period
For any Series of Certificates, the related 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 such deficiency (the "Pre-Funding Amount") will be held in a trust
account established with the Trustee for the benefit of the Certificateholders
of such Series (the "Pre-Funding Account") pending the transfer of additional
Receivables to the Trust or pending the reduction of the Invested Amounts of
other Series. The related Prospectus Supplement will specify the Initial
Invested Amount with respect to such Series, the aggregate principal amount of
the Certificates of such Series (the "Full Invested Amount") and the date by
which the Invested Amount is expected to equal the Full Invested Amount. The
Invested Amount will increase as Receivables are delivered to the Trust or as
the Invested Amounts of other Series are reduced. The Invested Amount may also
decrease due to Investor Charge-Offs as provided in the related Prospectus
Supplement.
During the Funding Period, funds on deposit in the Pre-Funding Account for
a Series of Certificates will be withdrawn and paid to the Transferor to the
extent of any increases in the Invested Amount. In the event that the Invested
Amount does not for any reason equal the Full Invested Amount by the end of the
Funding Period, any amount remaining in the Pre-Funding Account and any
additional amounts specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in the
Pre-Funding Account will be invested by the Trustee in Eligible Investments or
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 Due 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 Collection Account for
distribution in respect of interest on the Certificates of the related Series in
the manner specified in the related Prospectus Supplement.
Invested Percentage and Transferor Percentage
The Servicer will allocate between the Invested Amount of each Series (and
between each Class of each Series) and the Transferor Interest and, in certain
circumstances, to Enhancement Providers all amounts collected on Finance Charge
Receivables, all amounts collected on Principal Receivables and all Receivables
in Defaulted Accounts. The Servicer will make each allocation by reference to
the applicable Invested Percentage of each Series and the Transferor Percentage
in each case. The Prospectus Supplement relating to a Series will specify the
Invested Percentage with respect to the allocations of collections of Principal
Receivables, Finance Charge Receivables and Receivables in Defaulted Accounts
during the Revolving Period and any Amortization Period. The Invested Percentage
for a Series may be based on an amount other than the Invested Amount. In
addition, for each Series of Certificates having more than one Class, the
related Prospectus Supplement will specify the method of allocation between
Classes.
The Transferor Percentage will, in all cases, be equal to 100% minus the
aggregate Invested Percentages for all Series then outstanding (and minus any
percentage allocation of any Enhancement Providers).
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Application of Collections
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will apply or cause the Trustee to apply funds deposited in the
Collection Account with respect to each Distribution Date to make the following
distributions:
(a) an amount equal to the applicable Invested Percentage of the
aggregate amount of such deposits in respect of Finance Charge Receivables
will be allocated and distributed as described in the related Prospectus
Supplement;
(b) during the Revolving Period, an amount equal to the applicable
Invested Percentage of the aggregate amount of such deposits in respect of
Principal Receivables will be paid to the holder of the Exchangeable
Transferor Certificate, unless the Transferor Amount would be reduced below
zero, or to any amortizing Series, as described in the related Prospectus
Supplement;
(c) during the Controlled Amortization Period, or Accumulation Period,
as applicable, an amount equal to the applicable Invested Percentage of
such deposits in respect of Principal Receivables up to the amount, if any,
as specified in the related Prospectus Supplement will be allocated and
distributed to Certificateholders or deposited in the Principal Funding
Account as described in the related Prospectus Supplement, provided that if
collections of Principal Receivables exceed the principal payments which
may be distributed to Certificateholders or deposited in the Principal
Funding Account, the amount of such excess will be paid to the holder of
the Exchangeable Transferor Certificate, unless the Transferor Amount would
be reduced below zero, or to other amortizing Series, as described in the
related Prospectus Supplement; and
(d) during the Principal Amortization Period, if applicable, and the
Early Amortization Period, an amount equal to the applicable Invested
Percentage of such deposits in respect of Principal Receivables will be
allocated and distributed to Certificateholders as described in the related
Prospectus Supplement.
In the case of a Series of Certificates having more than one Class, the
amounts in the Collection Account will be allocated and applied to each Class in
the manner and order of priority described in the related Prospectus Supplement.
Any amounts collected in respect of Principal Receivables (and certain
other amounts allocated to any Series but required to be paid to the Transferor)
and not paid to the Transferor because such payment would reduce the Transferor
Amount as a percentage of aggregate Principal Receivables to below zero (with
respect to each Series, "Undistributed Principal Collections") will be held in
the Collection Account until distributable to the Transferor, or if an
Amortization Period with respect to any Series has commenced, will be held for
distribution to the Certificateholders of such Series on the applicable
Distribution Date or accumulated for distribution on the Scheduled Payment Date,
as applicable, in the manner and order of priority specified in the related
Prospectus Supplement.
Shared Excess Finance Charge Collections
If so specified in the related Prospectus Supplement, the
Certificateholders of a Series or any Class thereof may be entitled to receive
all or a portion of Excess Finance Charge Collections with respect to another
Series or Class to cover any shortfalls with respect to amounts payable from
collections of Finance Charge Receivables allocable to such Series or Class.
Shared Principal Collections
If so specified in the related Prospectus Supplement, to the extent that
collections of Principal Receivables and certain other amounts that are
allocated to the Invested Amount of any Series are not needed to make payments
or deposits with respect to such Series, such collections ("Shared Principal
Collections") will be applied to cover principal payments due to or for the
benefit of Certificateholders of another Series. Any such reallocation will not
result in a reduction in the Invested Amount of the Series to which such
collections were initially allocated.
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Companion Series
If so provided in the Prospectus Supplement relating to a Series, each such
Series is subject to being paired with another Series (in such case, a
"Companion Series"). The Prospectus Supplement for such Series and the
Prospectus Supplement for the Companion Series will each specify the
relationship between the Series.
Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs
"Defaulted Receivables" for any Due Period are Receivables which were
charged off as uncollectible in such Due Period. Receivables in an Account will
be considered charged off for the purposes of the Agreement on the earlier of
(i) the date when such Account becomes 180 days delinquent on a contractual
basis and (ii) the date on which such Account is charged off in accordance with
the customary and usual servicing procedures of the Servicer. The amount of
Defaulted Receivables for any Due Period will be an amount (not less than zero)
equal to the result of (a) the amount of the Receivables that were charged off
in such Due Period less (b) the amount of Recoveries received by the Servicer in
such Due Period and less (c) the full amount of any Defaulted Receivables as to
which the Transferor or the Servicer becomes obligated to accept reassignment
for such Due Period unless certain events of bankruptcy, insolvency or
receivership have occurred with respect to the Transferor or the Servicer. A
portion of all Defaulted Receivables (the "Investor Default Amount") will be
allocated to the Certificateholders' interest for each Distribution Date in an
amount equal to the product of (a) the Invested Percentage applicable during the
immediately preceding Due Period and (b) the amount of Defaulted Receivables for
such Due Period. In the case of a Series of Certificates having more than one
Class, the Investor Default Amount will be allocated among the Classes in the
manner described in the related Prospectus Supplement. If so provided in the
related Prospectus Supplement, an amount equal to the Investor Default Amount
for any Due Period may be paid from other amounts, including from Enhancement,
and applied to pay principal to Certificateholders or the holder of the
Exchangeable Transferor Certificate, as appropriate. In the case of a Series of
Certificates having one or more Classes of Subordinated Certificates, the
related Prospectus Supplement may provide that all or a portion of amounts
otherwise allocable to such Subordinated Certificates may be paid to the Senior
Certificateholders to make up any Investor Default Amount allocable to such
Senior Certificateholders.
With respect to each Series of Certificates, if the amount payable on a
Distribution Date or other specified date in respect of interest on the
Certificates, the Monthly Investor Servicing Fee (unless otherwise specified in
the related Prospectus Supplement), the Investor Default Amount and other
required fees exceeds the amount on deposit in the Collection Account available
therefor, available Enhancement amounts, if any, and amounts available from
other specified sources, then the Invested Amount with respect to such Series
will be reduced by the amount of such excess, but not more than the Investor
Default Amount (an "Investor Charge-Off"). Investor Charge-Offs will be
reimbursed on any Distribution Date to the extent amounts on deposit in the
Collection 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 Invested
Amount with respect to such Series. In the case of a Series of Certificates
having more than one Class, the related Prospectus Supplement will describe the
manner and priority of allocating Investor Charge-Offs and reimbursements
thereof among the Invested Amounts of the Classes.
If the Servicer makes a downward adjustment of the amount of any Receivable
because of a rebate, refund, unauthorized charge, billing error or certain other
noncash items, or if the Servicer otherwise adjusts downward the amount of any
Receivable without receiving collections therefor or charging off such amount as
uncollectible, or any Receivable is discovered as having been created through a
fraudulent or counterfeit action (each, an "Adjustment"), the aggregate
Principal Receivables will be reduced by the amount of such Adjustments. To the
extent that such reduction in the aggregate Principal Receivables would cause
the Transferor Amount to be less than zero, the Transferor shall deposit an
amount sufficient to prevent the Transferor Amount from being reduced below
zero. Any such deposit into the Collection Account shall be deemed a collection
of Principal Receivables.
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 Invested Amount
is reduced to an amount less than or equal to 5% (or such other amount specified
in the related Prospectus Supplement) of the initial outstanding principal
amount of such
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Series, if certain conditions set forth in the related Agreement are met. Unless
otherwise specified in the related Prospectus Supplement, the repurchase price
will be equal to the Invested Amount plus accrued and unpaid interest on the
Certificates.
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 will specify the final
date on which principal and interest with respect to the related Series of
Certificates will be scheduled to be distributed (the "Stated Series Termination
Date"); provided, however, that the Certificates may be subject to prior
termination as provided above. If the Invested Amount is greater than zero on
the Stated Series Termination Date, the Trustee will sell or cause to be sold
certain Receivables allocable to such Series (in an amount up to 110% of the
Invested Amount and any other amount specified in the related Series Supplement)
in the manner provided in the Agreement and Series Supplement and pay the net
proceeds of such sale and any collections on the Receivables, up to an amount
equal to the Invested Amount plus accrued interest due on the Certificates and
any other amounts specified in the related Series Supplement, to the
Certificateholders of such Series on such Stated Series Termination Date as
final payment of the Certificates.
Unless the Transferor instructs the Trustee otherwise, the Trust will only
terminate on the earlier to occur of: (a) the day following the day on which the
aggregate Invested Amount of all Series and any amounts payable to Enhancement
Providers is zero or (b) December 1, 2093 (the "Final Termination Date"). Upon
the termination of the Trust and the surrender of the Exchangeable Transferor
Certificate, the Trustee shall convey to the Transferor all right, title and
interest of the Trust in and to the Receivables and other funds of the Trust
(other than amounts in the accounts maintained by the Trust for the final
payment of principal and interest to Certificateholders).
Early Amortization Events
Unless otherwise specified in the related Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the related Prospectus Supplement unless an Early Amortization Event occurs
prior to such date. An "Early Amortization Event" occurs with respect to all
Series issued by the Trust upon the occurrence of either of the following
events:
(a) certain events of insolvency, conservatorship or receivership
relating to the Transferor (such events include the appointment (voluntary
or involuntary) of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings relating to the Transferor or all or substantially all of its
property; the Transferor admitting in writing its inability to pay its
debts as they become due, filing a petition to take advantage of an
insolvency or reorganization statute, making an assignment for the benefit
of its creditors or voluntarily suspending payment of its obligations; and
the Transferor being unable to transfer Receivables to the Trust in
accordance with the Agreement); or
(b) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In addition, an Early Amortization Event may occur with respect to any
specific Series upon the occurrence of any other event specified in the related
Prospectus Supplement. On the date on which an Early Amortization Event is
deemed to have occurred, the Early Amortization Period will commence. If,
because of the occurrence of an Early Amortization Event, the Early 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.
If the only Early Amortization Event to occur is either the insolvency of
the Transferor or the appointment of a receiver or conservator for the
Transferor, the receiver or conservator for the Transferor may have the power to
delay or prevent commencement of the Early Amortization Period.
In addition to the consequences of an Early Amortization Event discussed
above, if the Transferor voluntarily enters liquidation or any person is
appointed a receiver or conservator of the Transferor, on the day of such
liquidation or appointment the Transferor will immediately cease to transfer
Receivables to the Trust and the
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Transferor will promptly give notice to the Trustee of such appointment. Within
15 days, the Trustee will publish a notice of the liquidation or the appointment
stating that the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and to the best of its ability.
With respect to Series issued on December 16, 1993 (each, a "Pre-existing
Series"), unless otherwise instructed within a specified period by the holders
representing undivided interests aggregating more than 50% of the interests in
each Class of a Pre-existing Series and, in certain circumstances, by an
Enhancement Provider with respect to such Pre-existing Series having an interest
in the Receivables, the Trustee will sell, dispose of or otherwise liquidate the
portion of the Receivables allocated to such Pre-existing Series in accordance
with the Agreement in a commercially reasonable manner and on commercially
reasonable terms. Except as otherwise specified in the related Prospectus
Supplement, with respect to each Series other than a Pre-existing Series, unless
otherwise instructed within a specified period by holders representing undivided
interests aggregating more than 50% of the interests in each Class of each such
Series (including a majority in interest in each collateral interest) and
holders of more than 50% of the invested amount of each Class of each
Pre-existing Series, each holder of an interest in the Transferor Interest
(other than the Transferor) and any other person specified in any Series
Supplement, the Trustee will sell, dispose of, or otherwise liquidate the
portion of the Receivables allocable to all Series other than the Pre-existing
Series in a commercially reasonable manner and on commercially reasonable terms.
The proceeds from the sale, disposition or liquidation of the Receivables will
be treated as collections allocable to such Certificateholders and such proceeds
will be distributed to the applicable Certificateholders in the manner provided
in the related Prospectus Supplement. If the Trustee is instructed not to sell a
portion of the Receivables allocable to a Series, as described above, then the
Trust shall continue with respect to such Series pursuant to the terms of the
Agreement and the applicable Series Supplement. See "Certain Legal Aspects of
the Receivables -- Certain Matters Relating to Receivership."
Indemnification
The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of Certificateholders, and the Trustee, including its officers,
directors and employees, from and against any loss, liability, expense, damage
or injury arising out of or relating to any claims, actions or proceedings
brought or asserted by third parties which are suffered or sustained by reason
of any acts or omissions of the Servicer pursuant to the Agreement and any
Series Supplement; provided, however, that the Servicer shall not indemnify the
Trust for the benefit of Certificateholders or the Trustee or its officers,
directors or employees for any liabilities, costs or expenses if any such
claims, actions or proceedings relate to (i) any action taken by the Trustee at
the request of Certificateholders, (ii) any U.S. Federal, state or local income
or franchise taxes required to be paid by the Trust, the Trustee or the
Certificateholders or (iii) with respect to the Trustee and its officers,
directors and employees, any wrongful actions taken by or omissions of the
Trustee.
Under the Agreement, the Transferor will be liable directly to an injured
party for the entire amount of any losses, claims, damages or liabilities (other
than those incurred by a Certificateholder in the capacity of an investor in the
Certificates) arising out of or based on the arrangement created by the
Agreement or the actions of the Servicer taken pursuant to the Agreement as
though the Agreement created a partnership under the Uniform Partnership Act.
The Transferor will also pay, indemnify and hold harmless each Certificateholder
for any such losses, claims, damages or liabilities (other than those incurred
by a Certificateholder in the capacity of an investor in the Certificates)
except to the extent that they arise from any action by any Certificateholder.
In the event of a Service Transfer, the successor Servicer will indemnify the
Transferor for any losses, claims, damages and liabilities of the Transferor as
described in this paragraph arising from the actions or omissions of such
successor Servicer.
Except as provided in the preceding paragraph, the Agreement provides that
none of the Transferor, the Servicer or any of their directors, officers,
employees or agents will be under any liability to the Trust, the Trustee, the
Certificateholders, any Enhancement Provider or any other person for any action
taken, or for refraining from taking any action, in good faith pursuant to the
Agreement. However, none of the Transferor, the Servicer or any of their
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 any such person in the performance of its duties.
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. The
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Servicer may, in its sole discretion, undertake any such legal action which it
may deem necessary or desirable for the benefit of Certificateholders with
respect to the Agreement and the rights and duties of the parties thereto and
the interest of the Certificateholders thereunder.
Collection and Other Servicing Procedures
Pursuant to the Agreement, the Servicer, whether acting itself or through
one or more subservicers, is responsible for servicing, collecting, enforcing
and administering the Receivables in accordance with the policies and procedures
and the degree of skill and care applied or exercised with respect to credit
card receivables owned by the Servicer or any subservicer. The Servicer and any
subservicer each is required to maintain fidelity bond coverage insuring against
losses through wrongdoing of its officers and employees who are involved in the
servicing of receivables covering such actions and in such amounts as the
Servicer believes to be reasonable from time to time.
Servicing activities performed by the Servicer with respect to the Accounts
include collecting and recording payments, communicating with cardholders,
investigating payment delinquencies, providing billing records to cardholders
and maintaining internal records. Managerial and custodial services performed by
the Servicer on behalf of the Trust include providing assistance in any
inspections of the documents and records relating to the Accounts and
Receivables by the Trustee pursuant to the Agreement, maintaining the
agreements, documents and files relating to the Accounts and Receivables as
custodian for the Trust and providing related data processing and reporting
services for Certificateholders and on behalf of the Trustee.
Servicer Covenants
In the Agreement, the Servicer covenants to the Certificateholders and the
Trustee as to each Receivable and related Account that: (i) it will duly fulfill
all obligations on its part to be fulfilled under or in connection with the
Receivable or Account, and will maintain in effect all qualifications required
in order to service the Receivable or Account and will comply with all
applicable requirements of law in connection with servicing the Receivable and
the Accounts, the failure to comply with which would have a material adverse
effect on Certificateholders (without regard to the amount of any Enhancement);
(ii) it will not permit any rescission or cancellation of the Receivable, except
as ordered by a court of competent jurisdiction or except in accordance with the
Servicer's usual and customary servicing practices; and (iii) it will do nothing
to impair the rights of the Certificateholders in the Receivables and will not
reschedule, revise or defer payments due on the Receivables, except in
accordance with the Servicer's usual and customary servicing practices.
Under the terms of the Agreement, the Servicer will be obligated to accept
the transfer of any Receivable if it discovers, or receives written notice from
the Trustee, that (i) any covenant of the Servicer set forth above has not been
complied with in respect of such Receivable or (ii) the Servicer has not
complied in all material respects with all applicable requirements of law
applicable to the Receivables or Accounts, and in either case such noncompliance
has not been cured within 60 days thereafter and the Receivable has been charged
off as uncollectible or the proceeds of the Receivable are not available to the
Trust. Such assignment and transfer will be made when the Servicer deposits an
amount equal to the amount of such Receivable into the Collection Account on the
business day preceding the Distribution Date following the Due Period during
which such obligation arises. The amount of such deposit shall be deemed a
payment in respect of the related Receivable and will be treated under the
Agreement in the same manner as are payments received by the Servicer from
cardholders under the Accounts. Any amounts so paid by the Servicer shall be
allocated in respect of Principal Receivables and Finance Charge Receivables as
provided in the Agreement. This transfer and assignment to the Servicer
constitutes the sole remedy available to the Certificateholders if such covenant
or warranty of the Servicer is not satisfied and the Trust's interest in any
such reassigned Receivables shall be automatically assigned to the Servicer.
Servicing Compensation and Payment of Expenses
The Servicer's compensation for its servicing activities is a monthly
servicing fee (the "Servicing Fee") in an amount, on any Distribution Date,
equal to the sum of, with respect to all Series, one-twelfth of the sum for each
Series of the product of (a) the applicable servicing fee percentages with
respect to each Series and (b) the sum of an allocable portion of the amount of
the Transferor Amount and the Invested Amount with respect to each Series with
respect to the related Due Period. The Servicing Fee will be allocated among the
Transferor
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Interest and Certificateholders of all Series. The portion of the Servicing Fee
allocable to the Certificateholders' interest on each Distribution Date (the
"Monthly Investor Servicing Fee"), which may include all or a portion of the
Interchange allocable to a Series, will be as specified in the related
Prospectus Supplement. The remainder of the Servicing Fee, which will be
allocable to the Transferor Interest, will be paid directly by the holder of the
Exchangeable Transferor Certificate from collections allocated to the Transferor
Interest and neither the Trust nor the Certificateholders will have any
obligations to pay such portion of the Servicing Fee. The Monthly Investor
Servicing Fee will be paid with respect to each Due Period from the Collection
Account (unless such amount has been netted against deposits to the Collection
Account).
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Accounts and the Receivables
including, without limitation, expenses related to enforcement of the
Receivables, payment of fees and disbursements of the Trustee and independent
accountants and all other fees and expenses which are not expressly stated in
the Agreement to be payable by the Trust or the Certificateholders other than
Federal, state and local income and franchise taxes, if any, of the Trust.
Certain Matters Regarding the Servicer and the Transferor
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that such duties are impermissible under
applicable law, regulation or order. 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.
NationsBank, as Servicer, is permitted under the Agreement to delegate
certain of its servicing obligations. Notwithstanding any such delegation,
NationsBank, as Servicer, will continue to be liable for all of its obligations
as Servicer under the Agreement.
Any person into which, in accordance with the Agreement, any of the
Transferor or the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which any of the Transferor or the Servicer
is a party, or any person succeeding to the business of any of the Transferor or
the Servicer, 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 (as defined below), either the Trustee
or Certificateholders evidencing undivided interests aggregating more than 50%
of the aggregate principal amount of all Series, 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, in its capacity as Servicer
under the Agreement, with respect to all of the Receivables held by the Trust
with respect to all Series, and the proceeds thereof, and the Trustee shall
thereafter appoint a new Servicer (a "Service Transfer"). The rights and
interests of the Transferor under the Agreement in the Transferor Interest will
not be affected by any Service Transfer. The Transferor shall have the right,
exercisable at any time within 60 days of the giving of the notice of
termination as described above, to nominate to the Trustee a potential successor
Servicer. The Trustee shall as promptly as possible appoint the entity nominated
by the Transferor if such entity meets certain eligibility criteria set forth in
the Agreement. If the Transferor does not nominate an entity to be successor
Servicer within such 60 day period, the Trustee shall as promptly as possible
appoint a successor Servicer, and if no successor Servicer has been appointed by
the Trustee 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 will pass to, and be vested in, the Trustee. Prior to any Service
Transfer, the Trustee will seek to obtain bids from potential Servicers meeting
certain eligibility requirements set forth in the Agreement to serve as a
successor Servicer for servicing compensation not in excess of the Servicing
Fee. 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 related Servicer Default, then the Trustee will offer the
Transferor the right to accept the retransfer of all of the Receivables. The
deposit amount of such a retransfer shall be equal to the sum of the aggregate
Invested Amount plus accrued and unpaid interest on the Certificates of all
Series plus certain amounts payable to Enhancement Providers, if applicable.
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A "Servicer Default" refers to any of the following events:
(i) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Trustee to make any withdrawal, on the date
the Servicer is required to do so under the Agreement or any Series
Supplement (upon expiration of a five day grace period), provided, however,
that any such failure caused by a nonwillful act of the Servicer shall not
constitute a Servicer Default if the Servicer promptly remedies such
failure within five business days after receiving notice thereof;
(ii) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Agreement or any
Series Supplement which has a material adverse effect on the
Certificateholders (without regard to the amount of any Enhancement), which
continues unremedied for a period of 60 days after written notice and which
continues to materially adversely affect the rights of the
Certificateholders of any Series then outstanding for such period, or the
Servicer assigns its duties under the Agreement, except as specifically
permitted thereunder;
(iii) any representation, warranty or certification made by the
Servicer in the Agreement or any Series Supplement or in any certificate
delivered pursuant to the Agreement or any Series Supplement proves to have
been incorrect when made, which has a material adverse effect on the rights
of the Certificateholders (without regard to the amount of any
Enhancement), and which material adverse effect continues for the
Certificateholders for a period of 60 days after written notice and which
continues to materially adversely affect the rights of the
Certificateholders of any Series (without regard to the amount of any
Enhancement) then outstanding for such period; or
(iv) the occurrence of certain events of bankruptcy or insolvency
relating to the Servicer (such events include the appointment (voluntary or
involuntary) of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings relating to the Servicer or all or substantially all of its
property and the Servicer admitting in writing its inability to pay its
debts as they become due, filing a petition to take advantage of an
insolvency or reorganization statute, making an assignment for the benefit
of its creditors or voluntarily suspending payment of its obligations).
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of 10 business days after the
applicable grace period or a delay in or failure of performance referred to
under clause (ii) or (iii) for a period of 60 business days after the applicable
grace period shall not constitute a Servicer Default, if such delay or failure
could not have been 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 reasonable efforts to perform its obligations in a
timely manner in accordance with the terms of the Agreement or any Series
Supplement and the Servicer shall provide the Trustee and the provider of
Enhancement, if any, applicable to any Series, the Transferor and the
Certificateholders prompt notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations. The Servicer will
immediately notify the Trustee in writing of any Servicer Default.
Reports to Certificateholders
Prior to each Distribution Date, the Servicer will forward to the Trustee a
statement (the "Monthly Servicer Report") prepared by the Servicer (as
determined on the fifth business day prior to such Distribution Date (the
"Determination Date")) setting forth certain information with respect to the
Trust and the Certificates of each Series, including: (a) the aggregate amount
of collections, the aggregate amount of collections of Finance Charge
Receivables and the aggregate amount of collections of Principal Receivables
processed during the immediately preceding Due Period; (b) the Invested
Percentage for such Due Period; (c) the aggregate outstanding balance of the
Accounts which were delinquent by 30 days, 60 days, 90 days and 120 days or more
as of the billing date for each such Account occurring in the Due Period
immediately preceding such Distribution Date; (d) the Investor Default Amount
for such Distribution Date; (e) the amount of Investor Charge-Offs and the
amount of reimbursements thereof for such Distribution Date; (f) the amount of
the Monthly Investor Servicing Fee for such Distribution Date; (g) the aggregate
amount of Receivables in the Trust at the close of business on the last day of
the Due Period preceding such Distribution Date; (h) the Invested Amount at the
close of business on the last day of the Due Period immediately preceding such
Distribution Date; and
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(i) whether an Early Amortization Event shall have occurred. The Trustee will
make such statement available to the Certificateholders or Certificate Owners
upon request.
On each Distribution Date with respect to each Series the Paying Agent, on
behalf of the Trustee, will forward to each Certificateholder of record a
statement (the "Payment Date Statement") prepared by the Servicer setting forth
the information with respect to the Certificates of such Series set forth in the
Monthly Servicer Report supplied to the Trustee as described in the preceding
paragraph since the immediately preceding Distribution Date and the following
additional information (which, in the case of (a), (b) and (c) below, will be
stated on the basis of an original principal amount of $1,000 per Class A
Certificate): (a) the total amount distributed; (b) the amount of such
distribution allocable to principal; (c) the amount of such distribution
allocable to interest; (d) the amount, if any, by which the principal balance of
the Certificates exceeds the Invested Amount as of the Record Date with respect
to such Distribution Date; and (e) the "series factor" as of the end of the
Record Date with respect to such Distribution Date (consisting of an eight-digit
decimal expressing the Invested Amount as of such Record Date (determined after
taking into account any increase or decrease in the Invested Amount which will
occur on the following Distribution Date) as a proportion of the Initial
Invested Amount).
The fiscal year of the Trust ends on December 31 in each year. On or before
January 31 of each calendar year, the Paying Agent, on behalf of the Trustee,
will furnish or cause to be furnished to each person who at any time during the
preceding calendar year was a Certificateholder of record (or, if so provided in
applicable Treasury regulations, made available to Certificate Owners) a
statement prepared by the Servicer containing the information required to be
provided by an issuer of indebtedness under the Code for such calendar year or
the applicable portion thereof during which such person was a Certificateholder,
together with such other customary information as the Servicer deems necessary
or desirable to enable the Certificateholders to prepare their tax returns.
Evidence as to Compliance
The Agreement provides that on or before April 30 of each calendar year, or
such other date as may be specified in the related Prospectus Supplement, the
Servicer will cause a firm of nationally recognized independent accountants to
furnish a report to the effect that such firm has performed an examination in
accordance with generally accepted attestation standards of the Servicer's
internal 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 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 March 1 (or for the initial period, the relevant Closing
Date) of the preceding calendar year to and including the last day of February
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 April 30
of each calendar year, of a statement signed by an officer of the Servicer to
the effect that the Servicer has, or has caused to be, fully performed its
obligations in all material respects under the 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.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
Amendments
The Agreement and any Series Supplement may be amended by the Transferor,
the Servicer and the Trustee, without Certificateholder consent, to cure any
ambiguity, to correct or supplement any provision therein which may be
inconsistent with any other provision therein and to add any other provisions
with respect to matters or questions arising under the Agreement or any Series
Supplement which are not inconsistent with
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the provisions of the Agreement or any Series Supplement. In addition, the
Agreement and any Series Supplement may be amended from time to time by the
Transferor, the Servicer and the Trustee, without Certificateholder consent, for
the purpose of adding any provisions to, changing in any manner or eliminating
any of the provisions of the Agreement or any Series Supplement or of modifying
in any manner the rights of Certificateholders of any Series then issued and
outstanding provided that (i) the Servicer must provide an opinion of counsel to
the Trustee to the effect that such amendment will not materially and adversely
affect the interests of the Certificateholders of any outstanding Series, which
opinion of counsel may rely as to any rated Series solely on the rating
confirmation referred to in clause (iii) below (or 100% of the Class of
Certificateholders so affected shall have consented), (ii) such amendment shall
not, as evidenced by an opinion of counsel, cause the Trust to be characterized
for Federal income tax purposes as an association taxable as a corporation or
otherwise have any material adverse impact on the Federal income tax status of
any outstanding Series of Certificates or the Federal income taxation of any
Certificate Owner and (iii) the applicable Rating Agency shall confirm that such
amendment shall not cause a reduction or withdrawal of the rating of any
outstanding Series of Certificates. Any Series Supplement and any amendments
regarding the addition or removal of Receivables from the Trust will not require
Certificateholder consent under the provisions of the Agreement or any Series
Supplement.
The Agreement and any Series Supplement may also be amended by the
Transferor, the Servicer and the Trustee with the consent of the holders of
Certificates evidencing undivided interests aggregating not less than 66% of the
principal amount of all Series adversely affected for the purpose of adding any
provisions to, changing in any manner or eliminating any of the provisions of
the Agreement or any Series Supplement or of modifying in any manner the rights
of Certificateholders of any Series then issued and outstanding. Any such
amendment shall require that the applicable Rating Agency confirm that such
amendment will not cause a reduction or withdrawal of the rating of any
outstanding Series of Certificates. No such amendment, however, may (i) reduce
in any manner the amount of, or delay the timing of, distributions required to
be made on such Series, (ii) change the definition or the manner of calculating
the Invested Amount, the Invested Percentage, the applicable available amount
under any Enhancement or the Investor Default Amount of such Series, or (iii)
reduce the aforesaid percentage of undivided interests the holders of which are
required to consent to any such amendment, in each case without the consent of
all Certificateholders of all Series adversely affected.
Promptly following the execution of any amendment to the Agreement or any
Series Supplement, the Trustee will furnish written notice of the substance of
such amendment to each Certificateholder of all Series (or with respect to an
amendment of a Series Supplement, to the applicable Series).
List of Certificateholders
Upon written request of any Certificateholder or group of
Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% of the Invested Amount of a Series, the Trustee
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.
The Agreement generally does not provide for any annual or other meetings
of Certificateholders.
The Trustee
The Bank of New York will be Trustee under the Agreement. The Transferor,
the Servicer and their respective affiliates may from time to time enter into
normal banking and trustee relationships with the Trustee and its affiliates.
The Trustee, the Transferor, the Servicer and any of their respective affiliates
may hold Certificates in their own names; however, any Certificates so held
shall not be entitled to participate in any decisions made or instructions given
to the Trustee by the Certificateholders as a group. The Trustee's address is
101 Barclay Street, New York, New York 10286, Attention: Corporate Trust
Division.
For purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee will 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 will be conferred or imposed upon and exercised or performed by
the Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee will be incompetent or unqualified to perform
certain acts, singly upon
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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 a successor Trustee will
be appointed as provided in the Agreement. The Servicer 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, a
successor Trustee will be appointed as provided in the Agreement. Any
resignation or removal of the Trustee and appointment of a successor Trustee
does not become effective until acceptance of the appointment by the successor
Trustee.
ENHANCEMENT
General
For any Series, Enhancement may be provided with respect to one or more
Classes thereof. Enhancement may be in the form of the subordination of one or
more Classes of the Certificates of such Series, the establishment of a cash
collateral guaranty or account, a letter of credit, a surety bond, insurance,
spread account, reserve account, the use of cross-support features or another
method of Enhancement described in the related Prospectus Supplement, or any
combination of the foregoing. If so specified in the related Prospectus
Supplement, any form of Enhancement may be structured so as to be drawn upon by
more than one Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the 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 Enhancement or which are not covered by the Enhancement,
Certificateholders will bear their allocable share of deficiencies.
If Enhancement is provided with respect to a Series, the related Prospectus
Supplement will include a description of (a) the amount payable under such
Enhancement, (b) any conditions to payment thereunder not otherwise described
herein, (c) the conditions (if any) under which the amount payable under such
Enhancement may be reduced and under which such Enhancement may be terminated or
replaced and (d) any provision of any agreement relating to such Enhancement
material to the certificateholders. Additionally, the related Prospectus
Supplement may set forth certain information with respect to the issuer of any
third party Enhancement (the "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, and its stockholders' or policyholders'
surplus, if applicable, and other appropriate financial information as of the
date specified in the Prospectus Supplement.
Subordination
If so specified in the related Prospectus Supplement, one or more Classes
of any Series will be subordinated as described in the related Prospectus
Supplement to the extent necessary to fund payments with respect to the Senior
Certificates or specified Certificates of another Series. The rights of the
holders of any such Subordinated Certificates to receive distributions of
principal and/or interest on any Distribution Date for such Series will be
subordinate in right and priority to the rights of the holders of Senior
Certificates, but only to the extent set forth in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, subordination
may apply only in the event of certain types of losses not covered by another
Enhancement. The related Prospectus Supplement will also set forth information
concerning the amount of subordination of a Class or Classes of Subordinated
Certificates of a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, and the conditions under which amounts available from
payments that would otherwise be made to holders of such Subordinated
Certificates will be distributed to holders of Senior Certificates. If
collections of Receivables otherwise distributable to holders of a Subordinated
Class of a Series will be used as support for a Class of another Series, the
related Prospectus Supplement will specify the manner and conditions for
applying such a cross-support feature.
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Cash Collateral Guaranty or Account
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain permitted
investments in an account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash Collateral Guaranty or by a Cash Collateral Account
alone. The amount available pursuant to the Cash Collateral Guaranty or the Cash
Collateral Account will be the lesser of amounts on deposit in the Cash
Collateral Account and an amount specified in the related Prospectus Supplement.
The related Prospectus Supplement will set forth the circumstances under which
payments are made to beneficiaries of the Cash Collateral Guaranty from the Cash
Collateral Account or from the Cash Collateral Account directly.
Letter of Credit
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain losses
in addition to or in lieu of other Enhancement. The issuer of the letter of
credit (the "L/C Bank") will be obligated to honor demands with respect to such
letter of credit, to the extent of the amount available thereunder, to provide
funds under the circumstances and subject to such conditions as are specified in
the related Prospectus Supplement.
The maximum liability of an L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the related Prospectus
Supplement of the Initial Invested Amount of a Series or a Class thereof. The
maximum amount available at any time to be paid under a letter of credit will be
determined in the manner specified therein and in the related Prospectus
Supplement.
Surety Bond or Insurance Policy
If so specified in the related Prospectus Supplement, insurance with
respect to a Series or one or more Classes thereof will be provided by one or
more insurance companies. Such insurance will guarantee, with respect to one or
more Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond will be
purchased for the benefit of the holders of any Series or Class of such Series
to assure distributions of interest or principal with respect to such Series or
Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
Spread Account
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by the periodic deposit of
certain available excess cash flow from the Trust assets into an account (the
"Spread Account") intended to assure the subsequent distribution of interest and
principal on the Certificates of such Series or Class thereof in the manner
specified in the related Prospectus Supplement.
Reserve Account
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by the establishment of a
reserve account (the "Reserve Account"). The Reserve Account may be funded, to
the extent provided in the related Prospectus Supplement, by an initial cash
deposit, the retention of certain periodic distributions of principal or
interest otherwise payable to one or more Classes of Certificates, including the
Subordinated Certificates, or both, or the provision of a letter of credit,
guaranty, insurance policy or other form of credit or any combination thereof.
The Reserve Account will be established to assure the subsequent distribution of
principal or interest on the Certificates of such Series or Class thereof in the
manner provided in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Transferor has covenanted and warranted that the transfer of
Receivables by it to the Trust constitutes either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor in
and
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to the Receivables, except for the interest of the Transferor as holder of the
Exchangeable Transferor Certificate, or a grant of a security interest to the
Trust in and to the Receivables. The Transferor has also covenanted and
warranted to the Trust 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 UCC and assuming that the Transferor is not at the time the
subject of any insolvency proceedings, there exists a valid, subsisting and
enforceable first priority perfected security interest in the Receivables in
existence since the time of the formation of the Trust in favor of the Trust and
a valid, subsisting and enforceable first priority perfected security interest
in the Receivables created thereafter and, with certain exceptions, and for
certain limited time periods, the proceeds thereof, in favor of the Trust on and
after their creation.
The Receivables are "accounts" as defined in Article 9 of the UCC. Both the
absolute transfer of such Receivables and the transfer of such Receivables 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, including the
filing of financing statements to perfect the Trust's security interest.
Financing statements covering the Receivables will be filed under the UCC as in
effect in Delaware to protect the Trust.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after the date on
which such Receivables are transferred to the Trust could have an interest in
such Receivables with priority over the Trust's interest. A tax or other
government lien on property of the Transferor arising prior to the time a
Receivable comes into existence may also have priority over the interest of the
Trust in such Receivables. Under the Agreement, the Transferor will covenant to
accept the reassignment of the Receivables in any Account containing a
Receivable transferred to the Trust that is not free and clear of the lien of
any third party, except certain permitted tax liens. In addition, the Transferor
covenants that it will not sell, pledge, assign, transfer or grant any lien on
any Receivable (or any interest therein) other than to the Trust.
Unless continuation statements are filed within the time specified in the
UCC in respect of the security interest of the Trust in the Receivables, the
perfection of such interest will lapse.
As set forth under "Risk Factors -- Commingling of Collections," cash
collections of Receivables will, except in certain circumstances, be available
for use by the Servicer until deposited into the Collection Account on each
Distribution Date. In the event of insolvency or receivership of the Servicer
or, in certain circumstances, the lapse of certain time periods, the Trust may
not have a perfected interest in such cash collections.
Certain Matters Relating to Receivership
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), which
became effective August 9, 1989, sets forth certain powers that the FDIC could
exercise if it were appointed as receiver or conservator of the Transferor.
To the extent that (i) the Transferor has granted a security interest in
the Receivables to the Trust, (ii) that interest is validly perfected before the
Transferor's insolvency and is not taken in contemplation of insolvency or with
the intent to hinder, delay or defraud the Transferor or its creditors, (iii)
the Pooling and Servicing Agreement is continuously a record of the Transferor
and (iv) the Pooling and Servicing Agreement represents a bona fide and arm's
length transaction undertaken for adequate consideration in the ordinary course
of business and the Trustee is not an insider or affiliate of the Transferor
such valid perfected security interest of the Trustee would be enforceable (to
the extent of the Trust's "actual direct compensatory damages") notwithstanding
the insolvency of, or the appointment of a receiver or conservator for, the
Transferor and payments to the Trust with respect to the Receivables (up to the
amount of such damages) should not be subject to recovery by the FDIC as
conservator or receiver of the Transferor. If, however, 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 established under FIRREA, delays in payments on the Certificates and
possible reductions in the amount of those payments could occur. The FDIA does
not define the term "actual direct compensatory damages." On April 10, 1990, the
Resolution Trust Corporation (the "RTC"), which administered the resolution of
failed savings associations under the FDIA and which is no longer in existence,
adopted a statement of policy with respect to the payment of interest on
collateralized borrowings. The RTC policy statement states that interest on such
borrowings will be payable at the contract rate up to the redemption or payment
by the conservator, receiver, or the trustee of an amount equal to the principal
owed plus the
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contract rate of interest up to the date of such payment or redemption, plus any
expenses of liquidation if provided for in the contract, to the extent secured
by the collateral. In a 1993 case involving zero-coupon bonds, however, a
federal district court held that the RTC was instead obligated to pay
bondholders the fair market value of repudiated bonds as of the date of
repudiation. The FDIC itself has not adopted a policy statement on payment of
interest on collateralized borrowings.
The Agreement provides that, upon the appointment of a receiver or
conservator for the Transferor, the Transferor will promptly give notice thereof
to the Trustee, and an Early Amortization Event with respect to all Series will
occur. Under the Agreement no new Receivables will be transferred to the Trust
and, unless otherwise instructed within a specified period by the holders of
interests in the Trust as described under "Description of the
Certificates -- Early Amortization Events", or unless otherwise required by the
receiver or conservator for the Transferor, the Trustee will proceed to sell,
dispose of or otherwise liquidate the Receivables in a commercially reasonable
manner and on commercially reasonable terms. The proceeds from the sale of the
Receivables would then be treated by the Trustee as collections on the
Receivables. If the only Early Amortization Event to occur is either the
insolvency of the Transferor or the appointment of a receiver or conservator for
the Transferor, such receiver or conservator may have the power to require the
Transferor to continue to transfer new Receivables to the Trust, and to prevent
the early sale, liquidation or disposition of the Receivables and the
commencement of the Early Amortization Period.
Consumer Protection Laws
The relationship between the cardholder and credit card issuer is
extensively regulated by Federal and state consumer protection statutes. With
respect to credit cards issued by the Transferor the most significant Federal
laws include the Federal Truth-In-Lending and Equal Credit Opportunity Acts.
These statutes and certain state laws impose disclosure requirements before and
when an Account is opened, at the end of monthly billing cycles and at year-end
and, in addition, limit cardholder liability for unauthorized use, prohibit
certain discriminatory practices in extending credit, impose certain limitations
on the type of account-related charges that may be issued and regulate
collection practices. In addition, cardholders are entitled under these laws to
have payments and credits applied to the credit card account promptly 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 Receivables,
either as assignee from the Transferor with respect to obligations arising
before transfer of the Receivables to the Trust or as the 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
the obligation to pay the amount of Receivables owing. The Transferor has agreed
to accept the transfer of all Receivables that have been charged off and that
were not created in compliance in all material respects with the requirements of
such laws. The Servicer has also agreed in the Agreement to indemnify the Trust,
among other things, for any liability arising from such violations. For a
discussion of the Trust's rights if the Receivables were not created in
compliance in all material respects with applicable laws, see "Description of
the Certificates -- Covenants, Representations and Warranties."
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals on
active duty in the military to cap the interest rate on debts incurred before
the call to active duty to 6% per annum. In addition, subject to judicial
discretion, any action or court proceeding in which an individual in military
service is involved may be stayed if the individual's rights would be prejudiced
by denial of such stay.
Application of Federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders, if such laws result in any
Receivables being charged off as uncollectible when there are not funds
available under any Enhancement. See "Description of the
Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion, summarizing certain material Federal income tax
considerations relating to the purchase, ownership and disposition of the
Certificates of a Series, is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the Treasury regulations thereunder, and
published rulings and court decisions in effect as of the date hereof, all of
which are subject to change, possibly retroactively. This
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discussion does not address every aspect of the Federal income tax laws that may
be relevant to Certificate Owners of a Series in light of their personal
investment circumstances or to certain types of Certificate Owners of a Series
subject to special treatment under the Federal income tax laws (for example,
banks and life insurance companies). Accordingly, investors should consult their
own tax advisors regarding Federal, state, local, foreign and any other tax
consequences to them of any investment in the Certificates of a Series.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR ADVISORS WITH REGARD TO THE
FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS
IN CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, FOREIGN COUNTRY, OR OTHER TAXING JURISDICTION.
Characterization of the Certificates as Indebtedness
Unless otherwise specified in the related Prospectus Supplement, special
tax counsel to NationsBank ("Special Tax Counsel") specified in such Prospectus
Supplement will, upon issuance of a Series of Certificates, advise NationsBank,
based upon assumptions and qualifications set forth in its opinion, that the
Certificates of such Series offered pursuant to the related Prospectus
Supplement (the "Offered Certificates") will be treated as indebtedness for
Federal income tax purposes. However, opinions of counsel are not binding on the
Internal Revenue Service (the "IRS") and there can be no assurance that the IRS
could not successfully challenge this conclusion.
The Transferor expresses in the Agreement its intent that for Federal,
state and local income or franchise tax purposes, the Offered Certificates of
each Series will be indebtedness secured by the Receivables. The Transferor
agrees and each Certificateholder and Certificate Owner, by acquiring an
interest in an Offered Certificate of a Series, will be deemed to agree to treat
the Offered Certificates of such Series as indebtedness of NationsBank for
Federal, state and local income or franchise tax purposes (except to the extent
that different treatment is explicitly required under state or local tax
statutes). However, because different criteria are used to determine the non-tax
accounting characterization of the transactions contemplated by the Agreement,
the Transferor expects to treat such transaction, for regulatory and financial
accounting purposes, as a sale of an ownership interest in the Receivables and
not as a debt obligation of the Transferor.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the IRS and the courts have set forth several factors
to be taken into account in determining whether the substance of a transaction
is a sale of property or a secured indebtedness for Federal income tax purposes,
the primary factor in making this determination is whether the transferee has
assumed the risk of loss or other economic burdens relating to the property and
has obtained the benefits of ownership thereof. Unless otherwise set forth in a
Prospectus Supplement, it is expected that, as set forth in its opinion, Special
Tax Counsel will analyze and rely on several factors in reaching its opinion
that the weight of the benefits and burdens of ownership of the Receivables has
not been transferred to the Certificate Owners.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. Unless otherwise specified in a
Prospectus Supplement, it is expected that Special Tax Counsel will advise that
the rationale of those cases will not apply to the transaction evidenced by a
Series of Certificates, because the form of the transaction, as reflected in the
operative provisions of the documents, either is not inconsistent with the
characterization of the Certificates of such Series as debt for Federal income
tax purposes or otherwise makes the rationale of those cases inapplicable to
this situation.
Tax Characterization of the Trust
The Agreement permits the issuance of Classes of Certificates that are
treated for Federal income tax purposes either as indebtedness or as an interest
in a partnership. Accordingly, the Trust could be characterized either as (i) a
security device to hold Receivables securing the repayment of the Certificates
of all Series or (ii) a partnership in which the Transferor and certain classes
of Certificateholders are partners, and which has issued debt represented by
other Classes of Certificates (including, unless otherwise specified in a
related Prospectus Supplement, the Offered Certificates). In connection with the
issuance of Certificates of any Series,
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Special Tax Counsel will render an opinion to NationsBank, based on the
assumptions and qualifications set forth therein, that under then current law,
the issuance of the Certificates of such Series will not cause the Trust to be
characterized for Federal income tax purposes as an association (or publicly
traded partnership) taxable as a corporation.
The opinion of Special Tax Counsel with respect to any Series of
Certificates will not be binding on the courts or the IRS. It is possible that
the IRS could assert that, for purposes of the Code, the transaction
contemplated by this Prospectus and a related Prospectus Supplement constitutes
a sale of the Receivables (or an interest therein) to the Certificate Owners of
such Series and that the proper classification of the legal relationship between
NationsBank and the Certificate Owners of such Series resulting from the
transaction is that of a partnership (including a publicly traded partnership),
a publicly traded partnership taxed as a corporation, or an association taxable
as a corporation. Since Special Tax Counsel, unless otherwise specified in the
related Prospectus Supplement, will advise that the Certificates of a Series
will be treated as indebtedness in the hands of the Certificate Owners of a
Series for Federal income tax purposes, the Transferor generally will not
attempt to comply with the Federal income tax reporting requirements that would
apply if Certificates were treated as interests in a partnership or corporation
(unless, as is permitted by the Agreement, an interest in the Trust is issued or
sold that is intended to be classified as an interest in a partnership).
Moreover, no IRS ruling on the Federal income tax characterization of the
arrangement between the Transferor and the Certificateholders or the holders of
any other interests in the Trust will be sought.
If the Trust were treated in whole or in part as a partnership in which
some or all of the Certificate Owners were treated as partners, that deemed
partnership could be classified as a publicly traded partnership taxable as a
corporation. A partnership will be classified as a publicly traded partnership
taxable as a corporation if equity interests therein are traded on an
"established securities market," or are "readily tradeable" on a "secondary
market" or its "substantial equivalent" unless certain exceptions apply. One
such exception would apply if the Trust is not engaged in a "financial business"
and 90 percent or more of its income consists of interest and certain other
types of passive income. Because Treasury regulations do not clarify the meaning
of a "financial business" for this purpose, it is unclear whether this exception
applies. The Transferor has taken and intends to take measures designed to
enable the Trust to be eligible for exceptions to the publicly traded
partnership provisions; however, there can be no assurance that the Trust could
not become a publicly traded partnership, because certain of the actions
necessary to comply with such exceptions are not fully within the Transferor's
control.
If the arrangement created by the Agreement were treated in whole or in
part as a publicly traded partnership or an association taxable as a
corporation, that entity would be subject to Federal income tax at corporate tax
rates on the taxable income it derives on 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 payment 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. Further, if all
or a portion of the Trust were treated as a publicly traded partnership, all or
a portion of any taxable income allocated to a Certificate Owner that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) might, under certain circumstances,
constitute "unrelated business taxable income" which generally would be taxable
to the holder under the Code. Finally, classification of the Trust as a publicly
traded partnership or an association taxable as a corporation may also have
adverse state and local tax consequences that would reduce amounts available for
distribution to Certificate Owners.
If the arrangement created by the Agreement were characterized as a
partnership (other than a publicly traded partnership taxable as a corporation,
as described above) among the Transferor and some or all of the Certificate
Owners of one or more Series, such a partnership would not itself be subject to
Federal income tax. Rather, each item of income, gain, loss, deduction and
credit arising in respect of the ownership of the Receivables by such a
partnership would be passed through to the Transferor and the Certificate Owners
that are treated as partners in such a partnership in accordance with their
respective interests therein and such persons would be subject to tax thereon.
The amount, timing, and character of income reportable by the Certificate Owners
as partners could differ from the income reportable by the Certificate Owners if
the Offered Certificates were characterized as debt. Moreover, an individual's
share of expenses of the partnership might
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<PAGE>
constitute miscellaneous itemized deductions that, in the aggregate, would be
allowed as deductions only to the extent that they exceed two percent of the
individual's adjusted gross income, and would be subject to reduction under
Section 68 of the Code if the individual's adjusted gross income exceeds certain
limits. As a consequence, the individual might be taxed on an amount of income
that exceeds the stated rate on the Offered Certificates.
Taxation of Interest Income of Certificateholders
As set forth above, it is expected that, unless otherwise specified in a
Prospectus Supplement, Special Tax Counsel will advise NationsBank that the
Offered Certificates of a Series will constitute indebtedness for Federal income
tax purposes, and accordingly, interest thereon will be includible in income by
Certificate Owners as ordinary income when received (in the case of a cash basis
taxpayer) or accrued (in the case of an accrual basis taxpayer) in accordance
with their respective methods of tax accounting. Interest received on the
Offered Certificates of a Series may also constitute "investment income" for
purposes of certain limitations of the Code concerning the deductibility of
investment interest expense.
The Offered Certificates of a Series may be issued at a discount from their
principal amounts, thereby creating original issue discount ("OID"). In
addition, in the case of Certificates not issued at a greater than de minimis
discount, it is possible that under Treasury regulations (the "Regulations") the
Offered Certificates could nevertheless be deemed to have been issued with OID.
This could be the case under the Regulations, for example, if interest payments
for a Series were not deemed to be payments of "qualified stated interest"
because (i) the interest payments were not treated as "unconditionally payable"
as a result of the fact that Certificate Owners do not have available default
remedies ordinarily available to holders of debt instruments and (ii) the
penalties imposed on NationsBank or the Trust as a result of any failure to make
interest payments are not viewed by the IRS as being substantial enough to be
respected for this purpose. The IRS recently issued Revenue Ruling 95-70, in
which it announced its position that stated interest on a debt obligation would
not be considered to be "unconditionally payable" and, thus, would not be
considered to be "qualified stated interest" even if, absent other remedies to
compel payment, interest accrues on past due payments of such stated interest at
a rate that is 2 percent greater than the stated yield on such debt obligation.
Therefore, even though overdue interest payments on the Offered Certificates may
accrue additional interest at a rate 2 percent in excess of the applicable
Certificate Rate, this may, under the reasoning of Revenue Ruling 95-70, be
insufficient to constitute stated interest on the Offered Certificates as
"unconditionally payable" and, consequently, as "qualified stated interest." The
debt instruments where were the subject of Revenue Ruling 95-70 may be
distinguished from the Offered Certificates, however, because the issuer of
those debt instruments had the discretion to defer interest payments. As a
result of this distinction, the Transferor intends to take the position that
interest payments constitute payments of "qualified stated interest" with
respect to Offered Certificates of a Series or Class that are not issued at a
price that is less than a de minimis discount from their stated principal
amount. If, however, stated interest payments for a Series were not classified
as "qualified stated interest," all of the taxable income to be recognized with
respect to the Offered Certificates would be includible in income as OID but
would not be includible again when the interest is actually paid.
If the Offered Certificates are in fact issued at a greater than de minimis
discount or are otherwise treated as having been issued with OID under the
Regulations, the following rules will apply. The excess of the "stated
redemption price at maturity" of an Offered Certificate (generally equal to its
principal amount as of the date of issuance plus all interest other than
"qualified stated interest" payable prior to or at maturity) over the original
issue price (in this case, the initial offering price at which a substantial
amount of the Offered Certificates are sold to the public) will constitute OID.
A Certificate Owner must include OID in income as interest over the term of the
Offered Certificate under a constant yield method. In general, OID must be
included in income in advance of the receipt of cash representing that income.
In the case of a debt instrument as to which the repayment of principal may be
accelerated as a result of the prepayment of other obligations securing the debt
instrument (a "Prepayable Instrument"), the periodic accrual of OID is
determined by taking into account both the prepayment assumptions used in
pricing the debt instrument and the prepayment experience. If this provision
applies to a Class of Certificates (which is not clear), the amount of OID which
will accrue in any given "accrual period" may either increase or decrease
depending upon the actual prepayment rate. Accordingly, each Certificate Owner
should consult its own tax advisor regarding the impact to him of the OID rules
if the Offered Certificates are issued with OID. Under the Regulations, a holder
of an Offered Certificate issued
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<PAGE>
with de minimis OID must include such OID in income proportionately as principal
payments are made on a Class of Certificates.
A subsequent holder who purchases an Offered Certificate at a discount from
its adjusted issue price may be subject to the "market discount" rules of the
Code. These rules provide, in part, for the treatment of gain attributable to
accrued market discount as ordinary income upon the receipt of partial principal
payments or on the sale or other disposition of the Offered Certificate, and for
the deferral of interest deductions with respect to debt incurred to acquire or
carry the market discount Offered Certificate.
A subsequent holder who purchases an Offered Certificate at a premium may
elect to amortize and deduct this premium over the remaining term of the Offered
Certificate in accordance with rules set forth in Section 171 of the Code.
Sale of a Certificate
In general, a Certificate Owner will recognize gain or loss upon the sale,
exchange, redemption, or other taxable disposition of an Offered Certificate
measured by the difference between (i) the amount of cash and the fair market
value of any property received (other than amounts attributable to, and taxable
as, accrued interest) and (ii) the Certificate Owner's tax basis in the Offered
Certificate (as increased by any OID or market discount previously included in
income by the holder and decreased by any deductions previously allowed for
amortizable bond premium and by any payments reflecting principal or OID
received with respect to such Offered Certificate). Subject to the market
discount rules discussed above and to the one-year holding requirement for
long-term capital gain treatment, any such gain or loss generally will be
long-term capital gain, provided that the Offered Certificate was held as a
capital asset; except that if the rules applicable to Prepayable Instruments
apply, any OID not previously accrued with respect to an Offered Certificate
will be treated as ordinary income. The maximum ordinary income rate for
individuals, estates and trusts exceeds the maximum long-term capital gains rate
for such taxpayers. Moreover, capital losses generally may be used only to
offset capital gains.
Legislation is currently being considered by the U.S. Congress which would
create a new type of entity for Federal income tax purposes, the "financial
asset securitization investment trust" (a "FASIT"). Such legislation, if
enacted, would enable trusts such as the Trust to be treated by statute as a
pass-through entity not subject to entity-level tax and to issue securities that
would be treated by statute as debt for Federal income tax purposes. It is
unclear whether such legislation will be enacted, to what extent its provisions
will be modified prior to enactment, and whether its provisions, as enacted,
would enable a FASIT election to be made for all or a portion of the Trust or
the securities issued thereby. To the extent otherwise permitted by the terms
thereof, the Agreement may be amended in accordance with the provisions thereof
to provide that the Transferor may cause a FASIT election to be made for all or
a portion of the Trust if the Transferor delivers to the Trustee an opinion of
counsel to the effect that, for Federal income tax purposes, (i) such election
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, (ii) following such election the Trust will not be deemed to be
an association (or publicly traded partnership) taxable as a corporation and
(iii) such election will not cause or constitute an event in which gain or loss
would be recognized by any Certificateholder, Certificate Owner or the Trust.
Foreign Investors
As set forth above, it is expected that Special Tax Counsel will render an
opinion, upon issuance, that the Certificates of a Series will be treated as
debt for U.S. Federal income tax purposes. The following information describes
the U.S. Federal income tax treatment of investors that are not U.S. persons
("Foreign Investors") if the Certificates are treated as debt. The term "Foreign
Investor" means any person other than (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity organized in or under
the laws of the United States or any state or political subdivision thereof or
(iii) an estate or trust the income of which is includible in gross income for
U.S. Federal income tax purposes, regardless of its source.
Interest, including OID, paid to a Foreign Investor will be subject to U.S.
withholding taxes at a rate of 30% unless (i) the income is "effectively
connected" with the conduct by such Foreign Investor of a trade or business in
the United States or (ii) the Foreign Investor and each securities clearing
organization, bank, or other financial institution that holds the Offered
Certificates on behalf of the customer in the ordinary course
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of its trade or business, in the chain between the Certificate Owner and the
U.S. person otherwise required to withhold the U.S. tax, complies with
applicable identification requirements and, in addition, (i) the non-U.S.
Certificate Owner does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of NationsBank entitled to
vote (or of a profits or capital interest of a Trust characterized as a
partnership), (ii) the non-U.S. Certificate Owner is not a controlled foreign
corporation that is related to NationsBank (or a trust treated as a partnership)
through stock ownership, (iii) the non-U.S. Certificate Owner is not a bank
receiving interest described in Code Section 881(c)(3)(A), (iv) such interest is
not contingent interest described in Code Section 871(h)(4), and (v) the
non-U.S. Certificate Owner does not bear certain relationships to any holder of
the Exchangeable Transferor Certificate other than the Transferor or any holder
of the Certificates of any Series not properly characterized as debt. Applicable
identification requirements generally will be satisfied if there is delivered to
a securities clearing organization (i) IRS Form W-8 signed under penalties of
perjury by the Certificate Owner, stating that the Certificate Owner is not a
U.S. person and providing such Certificate Owner's name and address, (ii) IRS
Form 1001, signed by the Certificate Owner or such Certificate Owner's agent,
claiming exemption from withholding under an applicable tax treaty, or (iii) IRS
Form 4224 signed by the Certificate Owner or such owner's agent, claiming
exemption from withholding of tax on income effectively connected with the
conduct of a trade or business in the United States; provided that in any such
case (x) the applicable form is delivered pursuant to applicable procedures and
is properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the Certificate Owner is a U.S. person.
A Certificate Owner that is a nonresident alien or foreign corporation will
not be subject to U.S. Federal income tax on gain realized upon the sale,
exchange, or redemption of an Offered Certificate, provided that (i) such gain
is not effectively connected with the conduct of a trade or business in the
United States, (ii) in the case of a Certificate Owner that is an individual,
such Certificate Owner is not present in the United States for 183 days or more
during the taxable year in which such sale, exchange, or redemption occurs, and
(iii) in the case of gain representing accrued interest, the conditions
described in the immediately preceding paragraph are satisfied.
If the interests of the Certificate Owners of a Series were reclassified as
interests in a partnership (not taxable as a corporation), such
recharacterization could cause a Foreign Investor to be treated as engaged in a
trade or business in the United States. In such event the Certificate Owner of
such Series would be required to file a Federal income tax return and, in
general, would be subject to Federal income tax, including branch profits tax in
the case of a Certificate Owner that is a corporation, on its distributive share
of the partnership's "effectively connected" income. Further, the partnership
would be required, on a quarterly basis, to pay withholding tax equal to the
sum, for each foreign partner, of such foreign partner's distributive share of
"effectively connected" income of the partnership multiplied by the highest rate
of tax applicable to that foreign partner (currently, 39.6% in the case of a
non-corporate foreign partner and 35% in the case of a corporate foreign
partner). Any such tax withheld from each foreign partner for a taxable year
would be credited against such foreign partner's U.S. income tax liability for
the year.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an applicable
tax treaty.
Backup Withholding
Certain Certificateholders may be subject to backup withholding at the rate
of 31% with respect to interest paid on the Offered Certificates of a Series if
the Certificateholder, upon issuance, fails to supply the Trustee or his broker
with his taxpayer identification number, furnishes an incorrect taxpayer
identification number, fails to report interest, dividends, or other "reportable
payments" (as defined in the Code) properly, or, under the circumstances, fails
to provide the Trustee or his broker with a certified statement, under penalty
of perjury, that he is not subject to backup withholding. Information returns
will be sent annually to the IRS and to each Certificateholder of a Series
setting forth the amount of interest paid on the Certificates of such Series and
the amount of tax withheld thereon.
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STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of the Trust, the
Certificates of any Series, or the Certificate Owners of any Series under state
tax laws. Prospective investors are urged to consult their own tax advisors
regarding state and local tax treatment of the Trust and the Certificates of any
Series, and the consequences of purchase, ownership or disposition of the
Certificates of any Series under any state or local tax law.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on (a) employee benefit
plans (as defined in Section 3(3) of ERISA), (b) plans described in section
4975(e)(1) of the Code, including individual retirement accounts or Keogh plans,
(c) any entities whose underlying assets include plan assets by reason of a
plan's investment in such entities (each of (a), (b) and (c), a "Plan") and (d)
persons who have certain specified relationships to such Plans
("Parties-in-Interest" under ERISA and "Disqualified Persons" under the Code).
Moreover, based on the reasoning of the United States Supreme Court in John
Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993), an
insurance company's general account may be deemed to include assets of the Plans
investing in the general account (e.g., through the purchase of an annuity
contract), and the insurance company might be treated as a Party-in-Interest
with respect to a Plan by virtue of such investment. ERISA also imposes certain
duties on persons who are fiduciaries of Plans subject to ERISA and prohibits
certain transactions between a Plan and parties in interest with respect to such
Plans. Under ERISA, any person who exercises any authority or control respecting
the management or disposition of the assets of a Plan is considered to be a
fiduciary of such Plan (subject to certain exceptions not here relevant). A
violation of the "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding of the
Certificates of a Series and the operation of the Trust would result in direct
or indirect prohibited transactions under ERISA and the Code. The operation of
the Trust could result in prohibited transactions if Plans that purchase the
Certificates of a Series are deemed to own an interest in the underlying assets
of the Trust. There may also be an improper delegation of the responsibility to
manage Plan assets if Plans that purchase the Certificates are deemed to own an
interest in the underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL"), the assets and properties of certain entities in
which a Plan makes an equity investment could be deemed to be assets of the Plan
in certain circumstances. Accordingly, if Plans purchase Certificates of a
Series, the Trust could be deemed to hold Plan assets unless one of the
exceptions under the Final Regulation is applicable to the Trust.
The Final Regulation only applies to the purchase by a Plan of an "equity
interest" in an entity. Assuming that interests in Certificates of a Series are
equity interests, the Final Regulation contains an exception that provides that
if a Plan acquires a "publicly-offered security," the issuer of the security is
not deemed to hold Plan assets. A publicly-offered security is a security that
is (i) freely transferable, (ii) part of a class of securities that is owned by
100 or more investors independent of the issuer and of one another and (iii)
either is (A) part of a class of securities registered under Section 12(b) or
12(g) of the Exchange Act or (B) sold to the plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Act and the class of securities of which such security is a part is
registered under the Exchange Act within 120 days (or such later time as may be
allowed by the Commission) after the end of the fiscal year of the issuer during
which the offering of such securities to the public occurred. In addition, the
Final Regulation provides that if at all times more than 75% of the value of all
classes of equity interests in Certificates of a Series are held by investors
other than benefit plan investors (which is defined as including plans subject
to ERISA, government plans and IRA's), the investing plan's assets will not
include any of the underlying assets of the Trust.
Unless otherwise specified in the related Prospectus Supplement, it is
anticipated that interests in the Certificates of a Series will qualify as
publicly-offered securities as set forth above. The underwriters expect
(although no assurances can be given) that interests in the Certificates of each
Series will be held by at least 100 independent investors at the conclusion of
the offering for such Series; there are no restrictions imposed on the transfer
of interests in the Certificates of such Series; and the Certificates of such
Series will be sold as part
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of an offering pursuant to an effective registration statement under the Act and
then will be timely registered under the Exchange Act.
If interests in the Certificates of a Series fail to qualify as
publicly-offered securities for purposes of the Final Regulation and the Trust's
assets are deemed to include assets of Plans that are Certificateholders,
transactions involving the Trust and "Parties-in-Interest" or "Disqualified
Persons" with respect to such plans might be prohibited under Section 406 of
ERISA and Section 4975 of the Code unless an exemption is applicable. In
addition, the Transferor or any underwriter of such Series may be considered to
be a party in interest, disqualified person or fiduciary with respect to an
investing Plan. Accordingly, an investment by a Plan in Certificates may, in
such case, be a prohibited transaction under ERISA and the Code unless such
investment is subject to a statutory or administrative exemption. Thus, for
example, if a participant in any Plan is a cardholder of one of the Accounts,
under DOL interpretations the purchase of interests in Certificates by such Plan
could constitute a prohibited transaction. Five class exemptions issued by the
DOL that could apply in such event are DOL Prohibited Transaction Exemption
84-14 (Class Exemption for Plan Asset Transactions Determined by Independent
Qualified Professional Asset Managers), 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds), 90-1 (Class Exemption
for Certain Transactions Involving Insurance Company Pooled Separate Accounts),
95-60 (Class Exemption for Certain Transactions Involving Insurance Company
General Accounts), and 96-23 (Class Exemption for Certain Transactions
Determined by In-House Asset Managers). There is no assurance that these
exemptions, even if all of the conditions specified therein are satisfied, or
any other exemption will apply to all transactions involving the Trust's assets.
In light of the foregoing, fiduciaries of a Plan considering the purchase
of interests in Certificates of any Series should consult their own counsel as
to whether the assets of the Trust which are represented by such interests would
be considered Plan assets, and whether, under the general fiduciary standards of
investment prudence and diversification, an investment in Certificates of any
Series is appropriate for the Plan taking into account the overall investment
policy of the Plan and the composition of the Plan's investment portfolio. In
addition, fiduciaries should consider the consequences that would apply if the
Trust's assets were considered Plan assets, the applicability of exemptive
relief from the prohibited transaction rules, and, whether all conditions for
such exemptive relief would be satisfied.
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 a Series of
Certificates, the Transferor will agree to sell to each of the underwriters
named therein and in the related Prospectus Supplement, and each of such
underwriters will severally agree to purchase from the Transferor, the principal
amount of Certificates set forth therein and in the related Prospectus
Supplement (subject to proportional adjustment on the terms and conditions set
forth in the related Underwriting Agreement in the event of an increase or
decrease in the aggregate amount of Certificates offered hereby and by the
related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any of
such Certificates are purchased. In the event of a default by any underwriter,
each Underwriting Agreement will provide that, in certain circumstances,
purchase commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Prospectus Supplement will set forth the price at which each Series of
Certificates or Class being offered thereby initially will be offered to the
public and any concessions that may be offered to certain dealers participating
in the offering of such Certificates. After the initial public offering, the
public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that the Transferor will indemnify
the related underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. The place and time of delivery for
any Series of Certificates in respect of which this Prospectus is delivered will
be set forth in the accompanying Prospectus Supplement.
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NationsBanc Capital Markets, Inc. ("NCMI") is a direct wholly-owned
subsidiary of the Corporation. NCMI is a registered broker/dealer and not a
bank. Any obligations of NCMI are the sole responsibility of NCMI and do not
create any obligation or guarantee on the part of any affiliate of NCMI.
LEGAL MATTERS
It is anticipated that certain legal matters relating to the issuance of
the Certificates of any Series will be passed upon for NationsBank by Robert W.
Long, Jr., Esq., Assistant General Counsel of NationsBank Corporation and by
Skadden, Arps, Slate, Meagher & Flom (or such other counsel specified in the
Prospectus Supplement) and, with respect to the Federal tax consequences of such
issuance, by Special Tax Counsel. Certain legal matters relating to the issuance
of the Certificates of a Series and ERISA matters will be passed upon for the
underwriters by Skadden, Arps, Slate, Meagher & Flom (or such other counsel
specified in the Prospectus Supplement).
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
Term
<S> <C>
Accounts................................................................................................... Cover, 3
Accumulation Period........................................................................................ 9
Act........................................................................................................ 6
Additional Account Closing Date............................................................................ 30
Additional Accounts........................................................................................ 4
Adjustment................................................................................................. 34
Agreement.................................................................................................. 3
Amortization Period........................................................................................ 4
Cash Collateral Account.................................................................................... 43
Cash Collateral Guaranty................................................................................... 43
Cede....................................................................................................... 2
CEDEL...................................................................................................... 23
CEDEL Participants......................................................................................... 23
Certificate Owners......................................................................................... 2
Certificate Rate........................................................................................... 4
Certificateholders......................................................................................... 2
Certificates............................................................................................... Cover, 3
Class...................................................................................................... Cover, 3
Closing Date............................................................................................... 7
Code....................................................................................................... 45
Collection Account......................................................................................... 7, 31
Commission................................................................................................. 2
Companion Series........................................................................................... 11, 34
Controlled Accumulation Amount............................................................................. 9
Controlled Amortization Amount............................................................................. 8
Controlled Amortization Period............................................................................. 8
Controlled Deposit Amount.................................................................................. 9
Controlled Distribution Amount............................................................................. 8
Cooperative................................................................................................ 24
Corporation................................................................................................ 7, 20
Cut Off Date............................................................................................... 4
Defaulted Accounts......................................................................................... 4
Defaulted Receivables...................................................................................... 34
Definitive Certificates.................................................................................... 24
Depositaries............................................................................................... 22
Depository................................................................................................. 21
Determination Date......................................................................................... 39
Disclosure Document........................................................................................ 6
Discount Option............................................................................................ 30
Discount Percentage........................................................................................ 30
Discount Receivables....................................................................................... 30
Distribution Date.......................................................................................... 7
Disqualified Persons....................................................................................... 51, 52
DOL........................................................................................................ 51
DTC........................................................................................................ 2, A-1
Due Period................................................................................................. 7, 25
Early Amortization Event................................................................................... 35
Early Amortization Period.................................................................................. 10
Eligible Account........................................................................................... 29
Eligible Institution....................................................................................... 31
Eligible Investments....................................................................................... 31
Eligible Receivable........................................................................................ 29
</TABLE>
54
<PAGE>
<TABLE>
<S> <C>
Enhancement................................................................................................ 3
Enhancement Provider....................................................................................... 42
ERISA...................................................................................................... 12
Euroclear.................................................................................................. 24
Euroclear Operator......................................................................................... 24
Euroclear Participants..................................................................................... 24
Euroclear System........................................................................................... 24
Excess Finance Charge Collections.......................................................................... 10
Exchange................................................................................................... 6
Exchange Act............................................................................................... 2
Exchangeable Transferor Certificate........................................................................ 4
FASIT...................................................................................................... 49
FDIA....................................................................................................... 44
FDIC....................................................................................................... 5
Final Regulation........................................................................................... 51
Final Termination Date..................................................................................... 35
Finance Charge Receivables................................................................................. 5
FIRREA..................................................................................................... 13, 44
Foreign Investors.......................................................................................... 49
Full Invested Amount....................................................................................... 11, 32
Funding Period............................................................................................. 11, 32
Global Securities.......................................................................................... A-1
Holders.................................................................................................... 25
Indirect Participants...................................................................................... 22
Ineligible Receivable...................................................................................... 28
Initial Invested Amount.................................................................................... 12
Interchange................................................................................................ 3
Interest Funding Account................................................................................... 25
Interest Period............................................................................................ 7
Invested Amount............................................................................................ 4
Invested Percentage........................................................................................ 5
Investor Charge-Off........................................................................................ 34
Investor Default Amount.................................................................................... 34
IRS........................................................................................................ 46
L/C Bank................................................................................................... 43
MasterCard................................................................................................. 17
Minimum Aggregate Principal Receivables.................................................................... 30
Minimum Transferor Percentage.............................................................................. 26
Monthly Interest........................................................................................... 10
Monthly Investor Servicing Fee............................................................................. 7, 38
Monthly Servicer Report.................................................................................... 39
NationsBank................................................................................................ Cover, 3, 7, 20
NCMI....................................................................................................... 53
Offered Certificates....................................................................................... 46
OID........................................................................................................ 48
Participants............................................................................................... 22
Parties-in-Interest........................................................................................ 51, 52
Payment Date Statement..................................................................................... 40
Plan....................................................................................................... 51
Pre-existing Series........................................................................................ 36
Pre-Funding Account........................................................................................ 11, 32
Pre-Funding Amount......................................................................................... 11, 32
Prepayable Instrument...................................................................................... 48
Principal Amortization Period.............................................................................. 9
Principal Commencement Date................................................................................ 8
</TABLE>
55
<PAGE>
<TABLE>
<S> <C>
Principal Funding Account.................................................................................. 9
Principal Receivables...................................................................................... 5
Principal Terms............................................................................................ 6, 15, 27
Prospectus Supplement...................................................................................... Cover
Rating Agency.............................................................................................. 12
Receivables................................................................................................ Cover, 3
Record Date................................................................................................ 21
Regulations................................................................................................ 48
Removed Accounts........................................................................................... 5, 30
Reserve Account............................................................................................ 43
Revolving Period........................................................................................... 8
RTC........................................................................................................ 44
Scheduled Payment Date..................................................................................... 8
Senior Certificates........................................................................................ 4
Series..................................................................................................... Cover, 3, A-1
Series Supplement.......................................................................................... 3
Service Transfer........................................................................................... 38
Servicer................................................................................................... 3, 7
Servicer Default........................................................................................... 39
Servicing Fee.............................................................................................. 37
Shared Principal Collections............................................................................... 33
Special Tax Counsel........................................................................................ 46
Spread Account............................................................................................. 43
Stated Series Termination Date............................................................................. 35
Subordinated Certificates.................................................................................. 4
Terms and Conditions....................................................................................... 24
Transferor................................................................................................. 3
Transferor Amount.......................................................................................... 4, 30
Transferor Interest........................................................................................ 4
Transferor Percentage...................................................................................... 21
Trust...................................................................................................... Cover, 3
Trust Portfolio............................................................................................ 19
Trustee.................................................................................................... 3
TSYS....................................................................................................... 18
UCC........................................................................................................ 13
Undistributed Principal Collections........................................................................ 33
Underwriting Agreement..................................................................................... 52
U.S. Person................................................................................................ A-3
VISA....................................................................................................... 17
</TABLE>
56
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered NationsBank
Credit Card Master Trust Asset Backed Certificates (the "Global Securities") to
be issued in Series from time to time (each, a "Series") will be available only
in book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), CEDEL or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., three calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing corporation
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear
will instruct the respective
A-1
<PAGE>
Depositary to receive the Global Securities against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date. Payment will then be
made by the respective Depositary to the DTC Participant's account against
delivery of the Global Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the CEDEL
Participant's or Euroclear Participant's account. The Global Securities credit
will appear the next day (European time) and the cash debit will be back-valued
to, and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the CEDEL or Euroclear cash debit will be valued instead as of the actual
settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during the
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, CEDEL or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. The payment will then be reflected in the
account of the CEDEL Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the CEDEL Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the CEDEL
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
CEDEL Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase Global
Securities from DTC Participants for delivery to CEDEL Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
A-2
<PAGE>
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the CEDEL Participant
or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
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.
A-3
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained or incorporated by reference in this
Prospectus Supplement or the accompanying Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Transferor or any agent or Underwriter. Neither this Prospectus
Supplement nor the accompanying Prospectus constitutes an offer or solicitation
by anyone in any state in which such offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do so
or to anyone to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus Supplement or the accompanying Prospectus, nor
any sale made hereunder or thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Transferor or
the Receivables or the Accounts since the date hereof or thereof or that the
information contained or incorporated by reference herein or therein is correct
as of any time subsequent to its date.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
<S> <C>
Summary of Terms..................................... S-3
NationsBank Credit Card Portfolio.................... S-10
The Receivables...................................... S-11
Maturity Assumptions................................. S-14
Receivable Yield Considerations...................... S-16
NationsBank of Delaware, N.A. and
NationsBank Corporation............................ S-16
Description of the Certificates...................... S-17
Underwriting......................................... S-32
Legal Matters........................................ S-33
Index of Terms for Prospectus Supplement............. S-34
Annex I: Other Series Issued......................... S-37
Annex II: Additional Information for
Non-U.S. Persons................................... S-39
</TABLE>
Prospectus
<TABLE>
<S> <C>
Prospectus Supplement................................ 2
Reports to Certificateholders........................ 2
Available Information................................ 2
Incorporation of Certain Documents by Reference...... 2
Prospectus Summary................................... 3
Risk Factors......................................... 13
The Trust............................................ 16
Credit Card Activities at NationsBank................ 17
The Receivables...................................... 19
Maturity Assumptions................................. 19
Use of Proceeds...................................... 20
NationsBank of Delaware, N.A. and
NationsBank Corporation............................ 20
Description of the Certificates...................... 20
Enhancement.......................................... 42
Certain Legal Aspects of the Receivables............. 43
Certain Federal Income Tax Consequences.............. 45
State and Local Taxation............................. 51
ERISA Considerations................................. 51
Plan of Distribution................................. 52
Legal Matters........................................ 53
Index of Terms for Prospectus........................ 54
Annex I: Global Clearance, Settlement and Tax
Documentation Procedures........................... A-1
</TABLE>
Until September 3, 1996, all dealers effecting transactions in the Certificates,
whether or not participating in this distribution, may be required to deliver a
Prospectus Supplement and a Prospectus. This delivery requirement is in addition
to the obligation of dealers to deliver a Prospectus Supplement and a Prospectus
when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
NationsBank
Credit Card Master Trust
$756,000,000 Class A
Floating Rate Asset Backed
Certificates, Series 1996-1
$58,500,000 Class B
Floating Rate Asset Backed
Certificates, Series 1996-1
NationsBank of Delaware, N.A.
Transferor and Servicer
PROSPECTUS SUPPLEMENT
NationsBanc Capital Markets, Inc.
Chase Securities Inc.
Lehman Brothers
Morgan Stanley & Co.
Incorporated
UBS Securities LLC
Underwriters of the Class A Certificates
NationsBanc Capital Markets, Inc.
Underwriter of the Class B Certificates
Dated June 5, 1996
