As filed with the Securities and Exchange Commission on March 28, 2001
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------
WACHOVIA BANK, N.A.
(Originator of the trusts described herein)
(Exact name of registrant as specified in its charter)
--------------------------
United States 56-0927594
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
100 North Main Street
Winston-Salem, North Carolina 27150
(336) 770-5000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
--------------------------
Kenneth W. McAllister
Wachovia Bank, N.A.
100 North Main Street
Winston-Salem, North Carolina 27150
(336) 770-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
Copies to:
Joseph C. Carter, III, Esquire Jack Costello, Esquire
McGuireWoods LLP Brown & Wood LLP
One James Center One World Trade Center
901 East Cary Street New York, New York 10048
Richmond, Virginia 23219 (212) 839-5816
(804) 775-4307
--------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable on or after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
==========================================================================================================================
Proposed Maximum
Proposed Maximum Aggregate Amount of
Title of Each Class of Amount to be Offering Price Offering Registration
Securities to be Registered Registered Per Unit(1) Price(1) Fee
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Asset Backed Notes and Certificates................ $1,000,000 100% $1,000,000 $250
============================================================================================================================
(1) Estimated solely for purposes of calculating the Registration Fee.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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WACHOVIA AUTO TRUSTS
Asset-Backed Notes
Asset-Backed Certificates
WACHOVIA BANK, N.A.
Seller and Servicer
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BEFORE YOU PURCHASE THE SECURITIES, Each trust:
BE SURE TO READ THE RISK FACTORS
BEGINNING ON PAGE 6 OF THIS o will issue one or more classes
PROSPECTUS AND THE RISK FACTORS SET of asset-backed notes and/or
FORTH IN THE ACCOMPANYING asset-backed certificates rated
PROSPECTUS SUPPLEMENT. in one of the four highest
rating categories by at least
The securities are not deposits, one nationally recognized
and neither the securities nor the statistical rating
underlying motor vehicle organization;
installment loans are insured or
guaranteed by the FDIC or any other o will own a pool of motor
governmental authority. vehicle installment sale
contracts originated by motor
The securities represent vehicle dealers for assignment
obligations of or interests in the to Wachovia Bank, N.A. and
related trust only and do not secured by new and used motor
represent obligations of or vehicles, the collections on
interests in Wachovia Bank, N.A. or those contracts, the security
any of its affiliates. interests in those vehicles and
the funds in the accounts of
This prospectus may be used to the trust; and
offer and sell the securities only
if accompanied by the prospectus o may benefit from one or more
supplement for the related trust. forms of credit enhancement.
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The motor vehicle installment sale
contracts held by each trust are
referred to in this prospectus and
the accompanying prospectus
supplement as receivables. The main
sources of funds for making payments
on the securities of each trust will
be collections on the receivables
owned by the trust and any credit
enhancement established for the
benefit of the trust.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this prospectus is March [__], 2001
TABLE OF CONTENTS
READING THIS PROSPECTUS AND
THE ACCOMPANYING
PROSPECTUS SUPPLEMENT............................1
WHERE YOU CAN FIND ADDITIONAL INFORMATION...........2
INCORPORATION OF DOCUMENTS BY REFERENCE.............2
SUMMARY.............................................3
RISK FACTORS........................................6
THE TRUSTS.........................................14
PRINCIPAL DOCUMENTS................................14
THE TRUST PROPERTY.................................15
THE BANK...........................................17
Portfolio Acquisitions..........................17
THE BANK'S MOTOR VEHICLE FINANCING PROGRAM.........17
Origination.....................................17
Underwriting....................................18
Servicing.......................................19
Insurance.......................................20
Extensions......................................20
Prepayment Fees.................................21
THE RECEIVABLES....................................21
SIMPLE INTEREST METHOD.............................22
MATURITY AND PREPAYMENT CONSIDERATIONS.............23
USE OF PROCEEDS....................................24
PAYMENTS ON THE SECURITIES.........................24
REGISTRATION OF THE SECURITIES.....................25
Book-Entry Registration.........................25
Depository Trust Company........................26
Clearstream Banking.............................26
Euroclear System................................26
Book-Entry Procedures...........................27
Global Securities...............................29
Definitive Securities...........................29
Reports to Securityholders......................30
DESCRIPTION OF THE INDENTURE.......................32
Events of Default...............................32
Rights Upon Event of Default....................32
Covenants.......................................34
List of Noteholders.............................36
Annual Statements and Reports...................36
Satisfaction and Discharge of Indenture.........36
Modification of Indenture.......................36
The Indenture Trustee...........................39
DESCRIPTION OF THE RECEIVABLES
TRANSFER AND SERVICING
AGREEMENTS......................................39
Sale and Assignment of Receivables..............39
Representations and Warranties..................40
Repurchase Obligation...........................41
Servicing of the Receivables....................41
Trust Accounts..................................41
Servicing Procedures............................42
Collections.....................................43
Servicer Advances...............................43
Servicing Compensation..........................44
Distributions...................................45
Credit Enhancement..............................45
Net Deposits....................................46
Evidence as to Compliance.......................46
Certain Matters Regarding the Servicer..........46
Events of Servicing Termination.................48
Rights Upon Event of Servicing Termination......48
Waiver of Past Events of Servicing Termination..49
Amendment.......................................49
Payment of Notes................................50
Termination.....................................50
List of Certificateholders......................51
Administration Agreement........................51
Duties of Trustee...............................51
The Trustee.....................................52
SECURITY RATINGS...................................53
MATERIAL LEGAL ISSUES RELATING TO THE RECEIVABLES..53
Security Interest in the Receivables............53
Security Interests in the Financed Vehicles.....53
Enforcement of Security Interests in
Financed Vehicles.............................55
Consumer Protection Laws........................56
MATERIAL FEDERAL INCOME TAX CONSEQUENCES...........57
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE.57
Tax Characterization of the Trust as a
Partnership...................................57
Tax Consequences to Holders of the Notes........58
Tax Consequences to Holders of
the Certificates..............................61
TRUSTS IN WHICH ALL CERTIFICATES
ARE RETAINED BY THE SELLER OR
AN AFFILIATE OF THE SELLER....................66
Tax Characterization of the Trust...............66
TRUSTS TREATED AS GRANTOR TRUSTS................67
Tax Characterization of the Trust as a
Grantor Trust.................................67
TRUST FOR WHICH A FASIT ELECTION IS MADE........72
ERISA CONSIDERATIONS...............................73
The Certificates................................75
Special Considerations Applicable to
Insurance Company General Accounts............78
PLAN OF DISTRIBUTION...............................79
LEGAL OPINIONS.....................................80
GLOSSARY OF TERMS..................................81
GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION
PROCEDURES.......................................85
READING THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT
We provide information about your securities in two separate documents
that offer varying levels of detail:
o this prospectus provides general information, some of which may not
apply to your securities; and
o the accompanying prospectus supplement provides specific information
about the terms of your securities.
You must read both this prospectus and the accompanying prospectus
supplement in their entirety to understand fully the structure and terms of your
securities. If the information in this prospectus varies from the information in
the accompanying prospectus supplement, you should rely on the information in
the prospectus supplement.
You should rely only on the information contained in, or incorporated
by reference into, this prospectus and the accompanying prospectus supplement.
We have not authorized anyone to provide you with additional or different
information.
We include in this prospectus and the accompanying prospectus
supplement cross-references to sections in those documents where you can find
further related discussions. You should refer to the table of contents in the
front of each document to locate the referenced sections.
We include in this prospectus and the accompanying prospectus
supplement a number of capitalized terms. You should refer to the glossary of
defined terms on page 81 of this prospectus and the glossary of defined terms
included in the accompanying prospectus supplement for the definitions of these
capitalized terms.
As used in this prospectus, the terms "we," "us," "our" and the "bank"
refer to Wachovia Bank, N.A.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement relating to each trust with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The registration statement includes information not included in this prospectus.
You may inspect and copy the registration statement at:
o the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 (Telephone: 1-800-732-0330);
o the SEC's regional office at Citicorp Center, 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661; and
o the SEC's regional office at Seven World Trade Center, New York,
New York 10048.
In addition, the SEC maintains a Web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference into this prospectus
information contained in documents we file with the SEC, which means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. All information that we file later with the SEC will automatically
update the information in this prospectus. If the information contained in, or
incorporated by reference into, this prospectus or the accompanying prospectus
supplement differs from later information incorporated by reference into this
prospectus or the prospectus supplement, you should rely on the later
information. We incorporate by reference into this prospectus all future annual,
monthly or special SEC reports and proxy materials filed by or on behalf of a
trust until we terminate our offering of the securities by that trust.
You may obtain free copies of any or all of the documents incorporated
by reference into this prospectus or the accompanying prospectus supplement if:
o you received this prospectus; and
o you request copies of the documents from Wachovia Bank, N.A., 100
North Main Street, Winston-Salem, North Carolina 27150, Attention:
Treasury Department, (Telephone: 336-770-5000).
You may obtain copies of exhibits to the documents filed by us with the
SEC only if the exhibits are specifically incorporated by reference into the
filed documents. You may also inspect and copy these documents at the public
reference facilities of the SEC in Washington, D.C. referred to above.
2
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SUMMARY
This summary describes the main structural features that may apply to
your securities. This summary does not contain all of the information that may
be important to you and does not describe all of the terms of your securities.
You will need to read both this prospectus and the accompanying prospectus
supplement in their entirety to understand fully the structure and terms of your
securities.
THE TRUSTS
A separate trust will be formed to issue each series of securities. Each trust
will be formed under a trust agreement between the seller and the trustee.
THE SELLER
Wachovia Bank, N.A. will sell a pool of receivables and other related property
to each trust under a sale and servicing agreement or pooling and servicing
agreement between the bank, as seller and servicer, and the trustee. The
seller's principal executive offices are located at 100 North Main Street,
Winston-Salem, North Carolina 27150.
THE SERVICER
Wachovia Bank, N.A. will service the receivables sold to each trust. The
servicer will be entitled to receive on each payment date with respect to each
trust a servicing fee based on the outstanding principal balance of the
receivables held by that trust and, to the extent specified in the related
prospectus supplement, the net investment income, if any, earned during the
preceding collection period from the reinvestment of amounts on deposit in the
collection account. In addition, the servicer will be entitled to retain as
supplemental servicing compensation any late fees and other administrative fees
and expenses collected with respect to the receivables held by each trust.
For a further discussion of the sale and servicing of the receivables, see
"Description of the Receivables Transfer and Servicing Agreements -- Sale and
Assignment of Receivables" in this prospectus.
THE TRUSTEE
The prospectus supplement for each trust will name the trustee for that trust.
THE INDENTURE TRUSTEE
The prospectus supplement for each trust that issues notes will name the
indenture trustee with respect to those notes.
THE SECURITIES
The securities issued by each trust may include one or more classes of notes
and/or certificates. You will find the following information about each class of
securities in the related prospectus supplement:
o its principal amount;
o its interest rate, which may be fixed or variable or a combination of fixed
and variable rates;
o the timing, amount and priority or subordination of payments of principal
and interest;
o the method for calculating the amount of principal payments;
o its final payment date;
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3
o whether and when it may be redeemed prior to its final payment date; and
o how losses on the receivables are allocated among the classes of securities.
A class of securities may be entitled to:
o principal payments with disproportionate, nominal or no interest payments;
or
o interest payments with disproportionate, nominal or no principal payments.
The prospectus supplement for each trust will identify any class of securities
that is not being offered to the public.
THE TRUST PROPERTY
The property of each trust will consist of the receivables and other related
property, including:
o the right to receive payments made on the receivables after the close of
business on the cut-off date specified in the related prospectus supplement;
o the security interests in the vehicles financed by the receivables;
o the seller's rights of recourse against the dealers under the related dealer
agreements; and
o any proceeds from claims on various related insurance policies.
If so specified in the related prospectus supplement, a trust may use amounts on
deposit in a pre-funding account to purchase additional receivables from the
seller during a specified pre-funding period. If so specified in the related
prospectus supplement, a trust may also use principal collections received on
its receivables to purchase additional receivables from the seller during a
specified revolving period.
The prospectus supplement for each trust will describe the characteristics of
the receivables held by that trust.
For a further discussion of the receivables, including the criteria they must
meet in order to be included in a trust, and the other property supporting the
securities, see "The Receivables" in this prospectus.
In addition to the receivables, each trust will own amounts on deposit in
various trust accounts, which may include:
o a collection account into which collections are deposited;
o a pre-funding account used to fund post-closing purchases of additional
receivables; or
o a reserve account or other account relating to credit enhancement.
CREDIT ENHANCEMENT
The prospectus supplement for each trust will specify the credit enhancement, if
any, for each class of securities issued by that trust. The prospectus
supplement for each trust will describe any limitations or exclusions applicable
to any credit enhancement. In most cases, credit enhancement will not provide
protection against all risks of loss.
For a further discussion of credit enhancement, see "Description of the
Receivables Transfer and Servicing Agreements -- Credit Enhancement" in this
prospectus.
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SERVICER ADVANCES
If interest collections on the receivables are less than the scheduled interest
collections for a collection period, the servicer will advance to the trust that
portion of the collection shortfall that the servicer, in its sole discretion,
expects to recover from future payments and collections on or in respect of the
receivables. The servicer will not be obligated to make any advance with respect
to the principal portion of any delinquent monthly payment.
REPURCHASE OBLIGATIONS
The seller will make various representations and warranties relating to the
receivables when it sells them to a trust. The seller will be required to
repurchase a receivable if one or more of the seller's representations or
warranties is breached with respect to the receivable and the receivable is
materially and adversely affected by the breach.
For a further discussion of the representations and warranties made by the
seller and its related repurchase obligations, see "Description of the
Receivables Transfer and Servicing Agreements -- Sale and Assignment of
Receivables" in this prospectus.
The servicer may, in accordance with its normal servicing procedures, defer a
payment on a receivable or otherwise modify the payment schedule of a
receivable. In some cases, the servicer will be required to repurchase a
receivable as to which it has deferred a payment or otherwise modified a payment
schedule.
For a further discussion of the servicer's repurchase obligations, see
"Description of the Receivables Transfer and Servicing Agreements -- Servicing
of the Receivables" in this prospectus.
TAX STATUS
If a trust issues notes, federal tax counsel to the trust will deliver an
opinion when the notes are issued that for federal income tax purposes:
o the notes will be characterized as debt unless otherwise stated in the
related prospectus supplement; and
o the trust will not be characterized as an association or a publicly traded
partnership taxable as a corporation.
If a trust issues certificates, you will find a discussion of the federal income
tax characterization of the certificates and the trust in this prospectus and
the related prospectus supplement.
For a further discussion of the application of federal tax laws to the notes or
the certificates, see "Material Federal Income Tax Consequences" in this
prospectus.
ERISA CONSIDERATIONS
If you are an employee benefit plan, you should review the matters discussed
under "ERISA Considerations" in this prospectus before investing in the
securities.
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5
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of the securities.
THE INTERESTS OF OTHER PERSONS IN THE We will file financing statements
RECEIVABLES COULD REDUCE THE FUNDS under the UniformS Commercial
AVAILABLE TO MAKE PAYMENT ON YOUR Code reflecting the sale of the
SECURITIES receivables by us to the trust.
We will also mark our accounting
records and computer systems to
reflect a sale of the receivables
to the trust. We will maintain
possession of the receivables as
servicer, however, and will not
segregate or mark the receivables
as belonging to the trust. As a
result, another person could
acquire an interest in a
receivable that is superior to
the trust's interest in that
receivable by obtaining physical
possession of the related
contract documents without
knowledge of the sale of the
receivables to the trust. If
another person acquires an
interest in a receivable that is
superior to the trust's interest
in that receivable, some or all
of the collections on that
receivable may not be available
to make payment on your
securities. Neither the seller
nor the servicer will be required
to repurchase a receivable if the
interest in the receivable
becomes impaired after the
receivable is sold to the trust.
For a further discussion of the
risk that another person will
acquire a superior interest in
the receivables, see "Material
Legal Issues Relating to the
Receivables -- Security Interest
in the Receivables" in this
prospectus.
THE INTERESTS OF OTHER PERSONS IN THE The trust's security interest in
FINANCED VEHICLES COULD REDUCE THE a financed vehicleE could become
FUNDS AVAILABLE TO MAKE PAYMENTS ON impaired for one or more of the
YOUR SECURITIES following reasons:
o we might fail to perfect our
security interest in a
financed vehicle;
o another person might acquire
an interest in a financed
vehicle that is superior to
6
o the trust's security interest
in that vehicle through fraud,
forgery, negligence or error;
o the trust might not have a
security interest in a
financed vehicle in some
states because the
certificates of title for the
financed vehicles will not be
amended to reflect the
assignment of our security
interest in the financed
vehicles to the trust;
o some types of liens, such as
tax liens or mechanics liens,
may have priority over the
trust's security interest in
the financed vehicles; and
o the trust might lose its
security interest in financed
vehicles confiscated by the
government.
If another person acquires a
security or other interest in a
financed vehicle that is superior
to the trust's security interest
in that vehicle, some or all of
the proceeds from the sale of
that vehicle may not be available
to make payments on your
securities. Neither the seller
nor the servicer will be required
to repurchase a receivable if the
security interest in the related
financed vehicle becomes impaired
after the receivable is sold to
the trust. For a further
discussion of the risk that
another person will acquire a
superior interest in the financed
vehicles, see "Material Legal
Issues Relating to the
Receivables -- Security Interests
in the Financed Vehicles" in this
prospectus.
THE APPLICATION OF FEDERAL OR STATE A number of federal and state
CONSUMER PROTECTION LAWS COULD REDUCE consumer protection laws impose
THE FUNDS AVAILABLE TO MAKE PAYMENTS requirements on lenders and
ON YOUR SECURITIES servicers in connection with
extensions of credit and
collections on retail installment
loans. Some of these laws make
the assignee of a loan, such as
the trust, liable to the obligor
for any violation by the lender.
Any liabilities of the trust
under these laws could reduce the
funds that the
7
trust would otherwise have to
make payments on your securities.
For a further discussion of the
application of consumer
protection laws, see "Material
Legal Issues Relating to the
Receivables -- Consumer
Protection Laws" in this
prospectus.
YOU MAY SUFFER LOSSES ON YOUR In general, the servicer will not
SECURITIES IF THE SERVICER IS be required to deposit amounts
PERMITTED TO HOLD COLLECTIONS AND collected with respect to the
COMMINGLE COLLECTIONS WITH ITS OWN receivables into the related
FUNDS collection account until the
business day preceding the
payment date following the
collection period during which
those collections were received.
If the servicer is permitted to
deposit collections on a monthly
basis, it may invest those
collections at its own risk and
for its own benefit pending
deposit and need not segregate
them from its own funds. If the
servicer is unable for any reason
to pay these amounts to the trust
on or before the payment date,
you may suffer a loss on your
securities. For a further
discussion of the servicer's
obligations regarding
collections, see "Description of
the Receivables Transfer and
Servicing Agreements --
Collections" in this prospectus.
YOU MAY SUFFER PAYMENT DELAYS OR If we were to resign or be
LOSSES ON YOUR SECURITIES IF THE BANK removed as servicer, the
CEASES TO BE THE SERVICER processing of payments on the
receivables and information
relating to collections could be
delayed, which could delay
payments on your securities. In
addition, if we were to resign or
be removed as servicer and there
were a material interruption in
collection activities, the
collection rate on the
receivables could decline, which
could result in losses on your
securities. We may resign as
servicer under various
circumstances and may be removed
as servicer if we default on our
servicing obligations. For a
further discussion of the
circumstances under which we may
resign as servicer, see
"Description of the Receivables
Transfer and Servicing Agreements
-- Certain Matters Regarding the
Servicer" in this prospectus. For
a
8
further discussion of the
circumstances under which we may
be removed as servicer, see
"Description of the Receivables
Transfer and Servicing Agreements
-- Events of Servicing
Termination" in this prospectus.
YOU MAY SUFFER PAYMENT DELAYS OR The seller is chartered as a
LOSSES ON YOUR SECURITIES IF THE FDIC national banking association and
IS APPOINTED AS CONSERVATOR OR is subject to regulation and
RECEIVER FOR THE SELLER supervision by the Office of the
Comptroller of the Currency. If
the seller were to become
insolvent or be in an unsound
condition, or if it were to
violate its bylaws or various
federal regulations, the OCC
would be authorized to appoint
the Federal Deposit Insurance
Corporation as receiver or
conservator for the seller.
If the OCC were to appoint the
FDIC as receiver or conservator
for the seller, the FDIC would be
authorized by statute to
repudiate any contract of the
seller upon payment of actual
direct compensatory damages. An
FDIC regulation dealing with the
issuance of asset-backed
securities indicates, however,
that the FDIC would not seek to
reclaim or recover, or to
recharacterize as property of the
seller, receivables transferred
to a trust if various conditions
were met, including that the
transfer qualified for sale
accounting treatment under GAAP,
was made for adequate
consideration and was not made
fraudulently, in contemplation of
insolvency or with the intent to
hinder, delay or defraud the
seller or its creditors. The
seller believes that the
conditions of the FDIC regulation
will be met in connection with
each transfer of receivables to a
trust. If the OCC were to appoint
the FDIC as receiver or
conservator for the seller and
the conditions of the FDIC
regulation were not met in
connection with a transfer of
receivables by the seller to a
trust, payments on your
securities could be delayed or
reduced.
9
If the OCC were to appoint the
FDIC as receiver or conservator
for the seller, the FDIC could,
even if the conditions of the
FDIC regulation were met in
connection with a transfer of
receivables by the seller to a
trust:
o repudiate the seller's ongoing
obligations under the related
sale and servicing agreement
or pooling and servicing
agreement, such as the duty to
collect payments or otherwise
service the receivables;
o require the related trustee to
go through an administrative
claims procedure to establish
its right to amounts collected
on the receivables; or
o request a stay of proceedings
with respect to the trust's
claims against the seller.
If the FDIC were to take any of
these actions, or if a sale and
servicing agreement or pooling
and servicing agreement or a
transfer of receivables by the
seller to a trust were found to
violate the regulatory
requirements of the FDIA,
payments on your securities could
be delayed or reduced.
THE PURCHASE OF ADDITIONAL RECEIVABLES If so specified in the related
AFTER THE CLOSING DATE MAY ADVERSELY prospectus supplement, a trust
AFFECT THE CHARACTERISTICS OF THE may use amounts on deposit in a
RECEIVABLES HELD BY A TRUST OR THE pre-funding account or principal
AVERAGE LIFE OF AND RATE OF RETURN ON collections received on its
YOURl SECURITIES receivables to purchase
additional receivables from the
seller after the related
closing date during a specified
pre-funding or revolving period.
All additional receivables
purchased from the seller must
meet the selection criteria
applicable to the receivables
purchased by the trust on the
closing date. The credit quality
of the additional receivables may
be lower than the credit quality
of the initial receivables,
however, and could adversely
affect the performance of the
receivables pool. In addition,
the rate of prepayments
10
on the additional receivables may
be higher than the rate of
prepayments on the initial
receivables, which could reduce
the average life of and rate of
return on your securities. You
will bear all reinvestment risk
associated with any prepayment of
your securities.
THE USE OF A PRE-FUNDING ACCOUNT MAY If so specified in the related
ADVERSELY AFFECT THE AVERAGE LIFE OF prospectus supplement, a trust
AND RATE OF RETURN ON YOUR SECURITIES may use amounts on deposit in a
pre-funding account to purchase
additional receivables from the
seller after the related closing
date during a specified
pre-funding period. If any
portion of the amount on deposit
in the pre-funding account has
not been used to purchase
additional receivables by the end
of the pre-funding period, the
remaining amount will, to the
extent specified in the related
prospectus supplement, be applied
to prepay the securities, which
could reduce the average life of
and rate of return on your
securities. You will bear all
reinvestment risk associated with
any prepayment of your
securities.
PREPAYMENTS ON THE RECEIVABLES MAY If the rate of prepayments on the
ADVERSELY AFFECT THE AVERAGE LIFE OF receivables held by a trust is
AND RATE OF RETURN ON YOUR SECURITIES higher than expected, the trust
will make payments on its
securities earlier than expected.
If you receive payments on your
securities earlier than expected,
you may not be able to reinvest
those payments at a rate of
return that is equal to or
greater than the rate of return
on your securities. We cannot
predict the effect of prepayments
on the average life of your
securities.
The receivables by their terms
may be prepaid at any time. In
addition, prepayments may occur
as a result of required
repurchases by the seller or
purchases by the servicer for
specified breaches of their
representations or covenants,
rebates of extended warranty
contract costs and insurance
premiums, liquidations following
a default, proceeds
11
from physical damage, credit life
and disability insurance policies
and optional purchases by the
servicer. The rate of prepayments
on the receivables may be
influenced by a variety of
economic, social and other
factors.
The final payment of each class
of securities is expected to
occur prior to its final
scheduled payment date because of
the prepayment and purchase
considerations described above.
If sufficient funds are not
available to pay any class of
notes in full on its final
payment date, an event of default
will occur under the related
indenture and final payment of
that class of notes will occur
later than that date.
For a further discussion of the
timing of repayments of the
securities, see "Maturity and
Prepayment Considerations" in
this prospectus and the
accompanying prospectus
supplement.
YOU MAY BEAR ADDITIONAL CREDIT RISK The rights of the holders of a
IF YOU HOLD SUBORDINATED SECURITIES class of securities to receive
payments of principal and
interest may be subordinated to
the rights of the holders of one
or more other classes of
securities. Subordination may
take one or more of the following
forms:
o interest payments on the
subordinated classes might not
be made on a payment date
until interest payments on the
more senior classes are made
on that payment date;
o interest payments on the
subordinated classes might not
be made on a payment date
until principal payments on
the more senior classes are
made on that payment date;
o principal payments on the
subordinated classes might not
begin until the more senior
classes are paid in full;
12
o subordinated classes will bear
the risk of losses on the
receivables and the resulting
cash shortfalls before the
more senior classes; and
o if the trustee sells the
receivables after an event of
default under an indenture,
the net proceeds of that sale
may be allocated first to pay
principal and interest on the
more senior classes.
o The timing and priority of
payment, seniority,
allocations of losses and
method of determining payments
on the respective classes of
securities of each trust will
be described in the related
prospectus supplement.
YOU MAY NOT CONTROL REMOVAL OF THE In general, the holders of a
SERVICER UPON AN EVENT OF SERVICING majority of a senior class of
TERMINATION IF YOU HOLD SUBORDINATED securities issued by a trust, or
SECURITIES the related trustee acting on
their behalf, can remove the
servicer if an event of servicing
termination has occurred and is
continuing under the related sale
and servicing agreement or
pooling and servicing agreement.
These holders may also waive an
event of servicing termination by
the servicer. The holders of a
subordinate class of securities
do not have any rights to
participate in these
determinations if a more senior
class of securities is
outstanding. The holders of the
subordinate classes of securities
may be adversely affected by
determinations made by the
holders of more senior classes of
securities. For a further
discussion of the events of
servicing termination and removal
of the servicer, "Description of
the Receivables Transfer and
Servicing Agreements -- Events of
Servicing Termination" and "--
Rights Upon Event of Servicing
Termination" in this prospectus.
13
THE TRUSTS
The seller will establish a separate trust to issue each series of
notes and/or certificates. Each trust will be established as either a Delaware
business trust or a common law trust.
The trustee for each trust will be named in the related prospectus
supplement. The trustee's liability in connection with the issuance and sale of
the securities issued by the trust will be limited solely to the express
obligations of the trustee set forth in the related trust agreement or pooling
and servicing agreement, as applicable.
The address of the principal office of each trust and the address of
the related trustee will be specified in the related prospectus supplement.
PRINCIPAL DOCUMENTS
In general, the operations of a trust that issues notes and
certificates will be governed by the following documents:
- --------------------------------------------------------------------------------------------------------
DOCUMENT PARTIES PRIMARY PURPOSES
Trust Agreement Bank, as depositor, and o creates trust
Trustee o provides for issuance of certificates and
payments to certificateholders
o establishes rights and duties of trustee
o establishes rights of certificateholders
Indenture Trust, as issuer of o provides for issuance of notes, terms of
notes, and Indenture notes and payments to noteholders
Trustee o establishes rights and duties of indenture
trustee
o establishes rights of noteholders
Sale and Servicing Bank, as seller and o effects sale of receivables to trust
Agreement servicer, and Trust, as o contains representations and warranties of
purchaser seller concerning receivables
o establishes rights and duties of servicer
o provides for compensation of servicer
o directs how cash flow will be applied to
expenses of trust and payments on securities
- --------------------------------------------------------------------------------------------------------
14
In general, the operations of a trust that is treated as a grantor
trust will be governed by the following document:
- -----------------------------------------------------------------------------------------------------------
DOCUMENT PARTIES PRIMARY PURPOSES
Pooling and Servicing Bank, as seller and o effects sale of receivables to trust
Agreement servicer, and Trustee o contains representations and warranties of
seller concerning receivables
o establishes rights and duties of servicer
o provides for compensation of servicer
o provides for issuance of certificates and
payments to certificateholders
o directs how cash flow will be applied to
expenses of trust and payments to
certificateholders
o establishes rights and duties of trustee
o establishes rights of certificateholders
- -----------------------------------------------------------------------------------------------------------
The material provisions of these principal documents are described in
this prospectus and the related prospectus supplement. The prospectus supplement
for a series will describe any material provisions of the principal documents
used in that series that differ in a material way from the provisions described
in this prospectus.
A form of each of these principal documents has been filed as an
exhibit to the registration statement of which this prospectus forms a part. The
summaries of the principal documents in this prospectus do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the principal documents.
THE TRUST PROPERTY
On the closing date for a trust, the seller will sell a pool of
receivables to the trust in an amount specified in the related prospectus
supplement. In general, the trust will have the right to receive all payments on
the receivables that are received after the close of business on the cut-off
date specified in the prospectus supplement.
If so specified in the related prospectus supplement, a trust may
purchase additional receivables from the seller from time to time after the
related closing date during a specified pre-funding period. If a series of
securities includes a pre-funding period, the servicer will establish and
maintain, in the name of the related indenture trustee on behalf of the related
securityholders or, if the related trust does not issue notes, in the name of
the related trustee on behalf of the related certificateholders, a pre-funding
account into which a portion of the net proceeds received from the sale of the
securities will be deposited and from which funds will be used to purchase
additional receivables from the seller. The amount deposited in the pre-funding
account may not
15
exceed 50% of the net proceeds from the sale of the securities.
The pre-funding period may not exceed 12 months. If any portion of the amount on
deposit in the pre-funding account has not been used to purchase additional
receivables by the end of the pre-funding period, the remaining amount will, to
the extent specified in the related prospectus supplement, be applied to prepay
the securities. All additional receivables purchased during a pre-funding period
will be assets of the related trust. The prospectus supplement for each series
that includes a pre-funding period will specify the terms and conditions on
which the related trust may purchase additional receivables from the seller.
If so specified in the related prospectus supplement, a trust may also
purchase additional receivables from the seller from time to time after the
related closing date during a specified revolving period. If a series of
securities includes a revolving period, the related trust may use principal
collections received on its receivables to purchase additional receivables from
the seller. All additional receivables purchased during a revolving period will
be assets of the related trust. The prospectus supplement for each series that
includes a revolving period will specify the terms and conditions on which the
related trust may purchase additional receivables from the seller.
The property of each trust will also include:
o the security interests in the financed vehicles;
o the seller's rights of recourse against the dealers under the
related dealer agreements;
o the rights to proceeds, if any, from claims on various theft,
physical damage, credit life or credit disability insurance
policies, if any, covering the financed vehicles or the obligors;
o the seller's rights to certain documents and instruments relating
to the receivables;
o any and all amounts as from time to time may be held in one or more
accounts maintained for the trust;
o any credit enhancement specified in the related prospectus
supplement;
o various payments and proceeds with respect to the receivables held
by the servicer;
o various rebates of premiums and other amounts relating to insurance
policies and other items financed under the receivables; and
o any and all proceeds of the above items.
If a trust issues notes, the trust's rights and benefits with respect
to the property of the trust will be assigned to the indenture trustee for the
benefit of the noteholders.
16
THE BANK
Wachovia Bank, N.A. is a national banking association subject to
examination and regulation by federal banking authorities. Its primary federal
bank regulatory authority is the OCC, and its deposits are insured by the FDIC.
The bank is a wholly owned subsidiary of Wachovia Corporation.
The bank's principal executive offices are located at 100 North Main
Street, Winston-Salem, North Carolina 27150, and its telephone number is (336)
770-5000.
Wachovia Corporation, with dual headquarters in Atlanta, Georgia and
Winston-Salem, North Carolina, is a financial holding company serving regional,
national and international markets. At [__________], 2001, Wachovia Corporation
had assets of $[______] billion and deposits of $[______] billion. Member
companies offer consumer and commercial banking, bankcard, asset and wealth
management, capital markets and investment banking, brokerage and insurance
services. As of [__________], 2001, the bank, the principal subsidiary of
Wachovia Corporation, had [____] offices and [____] ATMs in Florida, Georgia,
North Carolina, South Carolina, Tennessee and Virginia. As of [__________],
2001,Wachovia Corporation had [________] employees.
PORTFOLIO ACQUISITIONS
The bank merged with Jefferson Bankshares, Inc., headquartered in
Charlottesville, Virginia, and Central Fidelity Banks, Inc., headquartered in
Richmond, Virginia, on October 31, 1997 and December 15, 1997, respectively. In
connection with these mergers, the bank acquired approximately $229 million in
aggregate outstanding principal balance of installment sale contracts from
Jefferson and approximately $483 million in aggregate outstanding principal
balance of installment sale contracts from Central Fidelity. The receivables
sold to the trusts will not include receivables originated by the bank
subsidiaries of Jefferson or Central Fidelity.
THE BANK'S MOTOR VEHICLE FINANCING PROGRAM
ORIGINATION
The bank purchases motor vehicle installments sale contracts from motor
vehicle dealers pursuant to dealer agreements between the bank and the dealers.
The bank enters into dealer agreements primarily with dealers that are
franchised to sell new motor vehicles and also with some dealers that sell used
motor vehicles. In general, the bank selects each dealer based upon a review of
the dealer's reputation in the marketplace and, in some cases, a financial
review. In addition to purchasing contracts from dealers, the bank also extends
loans and lines of credit to some dealers for, among other things, inventory
financing and other commercial purposes. The bank only extends loans or lines of
credit to dealers based upon a financial review, and those dealers are evaluated
through periodic financial and other formalized review procedures.
Each dealer agreement provides for the repurchase by the related dealer
of any contract for its outstanding principal balance, plus accrued but unpaid
interest, if any representations or warranties made by the dealer relating to
the receivable are breached. The representations and
17
warranties typically relate to the origination of the receivable and the
security interest in the related financed vehicle and not to the collectibility
of the contract or the creditworthiness of the related obligor.
UNDERWRITING
The bank purchases motor vehicle installment sale contracts in
accordance with its credit standards, which are based upon a determination of
the vehicle buyer's ability and willingness to repay the amounts due on the
contract and the value of the vehicle being financed, as well as other factors.
Each application is generated by a dealer and evaluated by the bank using
uniform underwriting policies and procedures developed by the bank.
Dealers initiate credit applications concurrently with the sale of
motor vehicles. The bank requires completion of an application that, in general,
includes such information as the applicant's income, liabilities, credit and
employment history and other personal information. In addition, specific
information with respect to the motor vehicle to be financed is required as part
of the application process.
The bank reviews each credit application for completeness and obtains a
credit report from an independent credit bureau to determine the applicant's
current credit status and past credit performance. The bank then performs an
evaluation of the application using an automated application processing and
scoring system. The bank's automated application processing and scoring system
uses credit scores obtained from the credit bureaus as well as credit scores
derived from proprietary scoring models to objectively assess an applicant's
credit worthiness. In addition, the automated system evaluates each application
for compliance with various criteria in the bank's underwriting guidelines
described below. If the automated review of an application shows that the
applicant meets the criteria in the bank's underwriting guidelines and meets the
minimum combination of credit bureau and proprietary credit score, then the
application is approved. Applications that are not approved during the automated
review process are either automatically declined or routed to a credit manager
to perform a judgmental review using the bank's credit guidelines.
The bank considers, among other things, the following criteria in
evaluating each credit application:
o the applicant's credit history based on information known directly
by the bank or as provided by various credit reporting agencies
with respect to the applicant's present and past debt;
o the stability of the applicant with respect to the applicant's
employment history and time at residence;
o the applicant's capacity to pay, which takes into consideration
the ratio of the proposed monthly payment to gross monthly income
and a debt to income ratio; and
o a loan to value ratio test, which takes into account the type and
market value of the motor vehicle to be financed as well as the
applicant's credit bureau score.
18
Once a decision is rendered, the bank notifies the dealer as to whether
the application has been accepted or declined. If an application is declined,
the applicant will be directly informed of the reasons for that action. If an
application is conditionally approved, the applicant will be informed of the
terms and conditions that must be met for approval.
The bank may, from time to time, approve applications that do not meet
its standard credit guidelines. In general, those approvals require the approval
of a credit manager or, in some cases, the concurrent approval of a second
credit manager of the bank. To be approved, applications that do not comply with
the bank's guidelines must have compensating factors, such as high credit
scores, a strong capacity and willingness to repay the loan or, in some
instances, a strong relationship with the bank.
In general, the bank will not finance more than [___]% of the value of
the motor vehicle. The bank determines the value of a new motor vehicle based
upon the manufacturer's invoice price and the value of various dealer-installed
options. The bank determines the value of a used motor vehicle based upon the
wholesale value reported by a normally accepted used car guide.
The standard maximum term for a motor vehicle installment sale contract
depends upon a combination of factors, including the credit score of the
purchaser, the age of the financed vehicle and the value of the financed
vehicle. The maximum term for financing a new motor vehicle is 84 months. In
general, the bank will not finance a used motor vehicle for more than 72 months.
SERVICING
The bank, in its capacity as servicer, will be responsible for
managing, administering, servicing and making collections on the receivables
held by each trust. The servicer will have the right to delegate any or all of
its servicing duties to any of its affiliates or other third parties, provided,
however, that the servicer will remain obligated and liable for servicing the
receivables as if the servicer alone were servicing the receivables.
The bank initiates collection activities when a contract becomes ten
days past due. In general, collection activities begin with an automated
system-generated late notice issued to the obligor. In addition, attempts to
make telephone contact begin at 15 days past due. Telephone contact with
obligors is prioritized based on the bank's assessment of the highest risk of
loss.
If a contract is between 30 and 120 days delinquent, late stage
collection personnel initiate contact with the delinquent obligor by telephone
and/or letters tailored to specific variables based on the term of the
delinquency and the history of the account. If attempts to contact the
delinquent obligor have failed, the collection officer may attempt to contact
the co-makers, guarantors and other responsible parties on the contract in order
to resolve a delinquency status. The bank begins repossession procedures as
early as 60 days past due but no later than 80 days past due.
The bank carries out repossessions pursuant to applicable state law.
The bank follows specific procedures with respect to repossessions and uses
outside repossession contractors to
19
perform repossessions. The repossessed collateral is sold at various motor
vehicle auctions throughout the Southeast that serve both the general public and
dealers.
The current policy of the bank is to recognize losses when a contract
is deemed uncollectible or during the month the contract becomes 120 days
delinquent, whichever occurs first. Proceeds from the sale of the collateral and
any insurance attached to the contract are applied to the contract balance to
offset the outstanding balance owed. Any deficiencies remaining after full
charge-off of the contract or after repossession and sale of the related
financed vehicle are pursued by collection personnel to establish repayment
schedules to the extent practical and permitted by law.
INSURANCE
Each motor vehicle installment sale contract requires the obligor:
o to keep the financed vehicle insured against loss or damage for
the actual cash value of the vehicle in an amount sufficient to
pay the lesser of either the full insurable interest in the
vehicle or the entire unpaid principal balance of the contract and
any unpaid interest and other charges; and
o to furnish the bank with evidence of insurance, naming the bank as
loss payee.
The dealer agreements require the dealers to establish that the
required insurance coverage is in effect at the time the related contract is
originated and financed by the bank. The bank does not force place insurance.
EXTENSIONS
The bank has specific procedures with respect to contract extensions.
Extensions may be granted to a current or delinquent customer to cure a
short-term cash flow problem and an extension fee may be charged. Extensions are
granted on an individual basis and are reported and monitored closely. In
general, the bank's extension policy requires that:
o at least nine monthly payments must have been made on the contract
and three consecutive monthly payments must have been made during
the last four months for an extension to be granted;
o only one extension may be granted with respect to the contract
during any [twenty-four] month period;
o the contract may be extended no more than six months during its
life;
o the due date for the contract may not be advanced more than 30
days; and
o a request for an extension must be based upon a legitimate
non-recurring reason.
The bank may, from time to time, solicit or offer holiday extensions to
obligors who meet well-defined eligibility criteria. A customer may only accept
one holiday extension per year.
20
The bank charges a processing fee for these extensions in accordance with state
guidelines. The bank does not anticipate initiating more than two holiday
extension solicitations per year.
The bank may also advance the due date for a contract at the request of
an obligor. Due date changes may only occur once every six months. The maximum
number of days a due date may be advanced is 15 days. A change of the due date
is not deemed to be an extension, and no extension fee is charged.
PREPAYMENT FEES
The contracts may provide for prepayment fees of up to $75 in the event
of full prepayment to the extent permitted by law. There are no prepayment fees
imposed in the event of partial prepayments.
THE RECEIVABLES
The bank will acquire the receivables to be sold to each trust,
including any additional receivables to be sold to a trust during any
pre-funding or revolving period, in the ordinary course of business from motor
vehicle dealers who regularly sell motor vehicle installment sale contracts to
the bank. The bank will select the receivables to be sold to each trust from its
portfolio of motor vehicle installment sale contracts on the basis of several
criteria, including the following:
o each receivable is secured by a new or used passenger car,
minivan, sport utility vehicle or light-duty truck;
o each receivable was originated in the United States;
o each receivable provides for level monthly payments that fully
amortize the amount financed over its original term to maturity,
except for the last payment, which may differ slightly from the
level payment, or provides for a different type of amortization
described in the related prospectus supplement;
o no obligor on any receivable was noted in the records of the bank
as of the related cut-off date as being the subject of any pending
bankruptcy or insolvency proceeding;
o no receivable was more than 29 days contractually past due as of
the related cut-off date;
o each receivable is secured by a motor vehicle that was required to
be insured at the inception of the loan and that had not been
repossessed without reinstatement as of the related cut-off date;
and
o each receivable satisfies the other criteria, if any, set forth in
the related prospectus supplement.
The bank will not use any selection procedures that it believes to be
adverse to the securityholders of a trust in selecting the receivables to be
sold to that trust.
21
We will provide information about the receivables to be sold to each
trust in the related prospectus supplement, including, to the extent
appropriate:
o the portion of the receivables secured by new motor vehicles and
by used motor vehicles;
o the aggregate outstanding principal balance of the receivables;
o the average outstanding principal balance of the receivables;
o the number of receivables;
o the average original amount financed and the range of original
amounts financed;
o the weighted average contract rate of interest and the range of
interest rates;
o the weighted average original term and the range of original
terms;
o the weighted average remaining term and the range of remaining
terms; and
o the distribution by outstanding principal balance, by contract
rate of interest, by remaining term and by obligor mailing
address.
SIMPLE INTEREST METHOD
The receivables may provide for the application of payments using the
simple interest method. A simple interest receivable provides for equal monthly
payments that are, in general, applied first to interest accrued to the date of
payment, then to principal due on the date of payment, then to any applicable
late charges, then to any other fees under the receivable and then to reduce
further the principal balance of the receivable.
If the obligor on a simple interest receivable pays a fixed monthly
installment before its scheduled due date:
o the portion of the payment allocable to interest for the period
since the preceding payment was made will be less than it would
have been had the payment been made as scheduled; and
o the portion of the payment applied to reduce the unpaid principal
balance of the receivable will be correspondingly greater.
If the obligor on a simple interest receivable pays a fixed monthly
installment after its scheduled due date:
o the portion of the payment allocable to interest for the period
since the preceding payment was made will be greater than it would
have been had the payment been made as scheduled; and
22
o the portion of the payment applied to reduce the unpaid principal
balance of the receivable will be correspondingly less.
In either case, the obligor on a simple interest receivable pays a
fixed monthly installment until the final scheduled payment date, at which time
the amount of the final installment is increased or decreased as necessary to
repay the then outstanding principal balance of the receivable and any unpaid
late charges or other fees. If a simple interest receivable is prepaid, the
obligor is required to pay interest only to the date of prepayment.
If the receivables sold to a trust are not simple interest receivables,
the related prospectus supplement will describe the method of applying payments
on the receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the securities of any trust will be
influenced by the rate at which the principal balances of the receivables held
by the trust are paid, which payment may be in the form of scheduled
amortization or prepayments. A receivable may be prepaid under the following
circumstances:
o an obligor may repay a receivable at any time subject, in some
cases, to payment of a prepayment fee to the extent permitted by
law;
o the seller may be required to repurchase a receivable from the
trust if various breaches of representations and warranties occur;
o the servicer may be obligated to purchase a receivable from the
trust if various breaches of covenants occur or if the servicer
extends or modifies the terms of a receivable beyond the
Collection Period preceding the final payment date for the
securities specified in the related prospectus supplement;
o a receivable may be prepaid in part in connection with rebates of
extended warranty contract costs and insurance premiums;
o a receivable may be liquidated following a default; and
o a receivable may be prepaid in part with the proceeds of physical
damage, credit life and disability insurance policies.
In light of the above considerations, we cannot assure you as to the
amount of principal payments to be made on the securities of a trust on each
payment date since that amount will depend, in part, on the amount of principal
collected on the trust's receivables during the preceding Collection Period. Any
reinvestment risks resulting from a faster or slower incidence of prepayment of
receivables will be borne entirely by the securityholders. The related
prospectus supplement may set forth certain additional information with respect
to the maturity and prepayment considerations applicable to the receivables and
the securities of the trust.
23
The rate of prepayments on the receivables may be influenced by a
variety of economic, social and other factors. These factors may include
unemployment, servicing decisions, seasoning of loans, destruction of vehicles
by accident, sales of vehicles and market interest rates. A predominant factor
affecting the prepayment of a large group of loans is the difference between the
interest rates on the loans and prevailing market interest rates. If the
prevailing market interest rates were to decrease significantly below the
interest rates on the receivables, the rate of prepayment and refinancings would
be expected to increase. Conversely, if the prevailing market interest rates
were to increase significantly above the interest rates on the receivables, the
rate of prepayments and refinancings would be expected to decrease.
USE OF PROCEEDS
The net proceeds from the sale of the securities of a trust will be
applied by the trust or the seller, as indicated in the related prospectus
supplement:
o to purchase the related receivables from the seller;
o if the trust has a pre-funding account, to make a deposit into
that account;
o if the trust has a yield supplement account, to make a deposit
into that account;
o if the trust has a reserve account, to make a deposit into that
account; and
o for any other purposes specified in the prospectus supplement.
The seller will add the funds received by it to its general funds. The
trust may also issue one or more classes of securities to the seller in partial
payment for the receivables.
PAYMENTS ON THE SECURITIES
The prospectus supplement for each trust will describe:
o the timing, amount and priority or subordination of payments of
principal and interest on each class of securities;
o the interest rate for each class of securities or the formula for
determining the interest rate;
o the method for calculating the principal payments for each class
of securities;
o the priority of the application of the trust's available funds to
its expenses and payments on its securities; and
o the method for allocating losses on the receivables to each class
of securities.
24
The rights of any class of securities to receive payments may be senior
or subordinate to the rights of other classes of securities. A security may be
entitled to:
o principal payments with disproportionate, nominal or no interest
payments; or
o interest payments with disproportionate, nominal or no principal
payments; or
o residual cash flow remaining after all other classes have been
paid.
If a class of securities is redeemable, the related prospectus
supplement will describe when the class may be redeemed and at what price. The
aggregate initial principal amount of the securities issued by a trust may be
greater than, equal to or less than the aggregate initial principal amount of
the receivables held by that trust.
All payments of principal and interest on any class of securities will
be made on a pro rata basis among all the holders of the securities of that
class. If the amount of funds available to make a payment on a class is less
than the required payment, the holders of the securities of that class will
receive their pro rata share of the amount available for that class. A series
may provide for a liquidity facility or similar arrangement that permits one or
more classes of securities to be paid in planned amounts on scheduled payment
dates.
REGISTRATION OF THE SECURITIES
BOOK-ENTRY REGISTRATION
The securities offered through this prospectus and the related
prospectus supplement may initially be issued in book-entry form. Cede & Co.,
the nominee of The Depository Trust Company, is expected to be the holder of
record of any class of securities issued in book-entry form. If a class of
securities is issued in book-entry form, unless and until Definitive Securities
are issued under the limited circumstances described in this prospectus or in
the related prospectus supplement, you will not be entitled to receive a
physical certificate representing your interest in the securities of that class.
If a class of securities is issued in book-entry form, all references
in this prospectus and the related prospectus supplement to actions by holders
of that class refer to actions taken by DTC upon instructions from its
participating organizations and all references in this prospectus and the
related prospectus supplement to distributions, notices, reports and statements
to the holders of that class refer to distributions, notices, reports and
statements to DTC or its nominee, as the case may be, as the registered holder
of that class, for distribution to the holders of that class in accordance with
DTC's procedures.
Any securities owned by the seller or its affiliates will be entitled
to equal and proportionate benefits under the related indenture, trust agreement
or pooling and servicing agreement, except that, unless the seller and its
affiliates own an entire class of securities, the securities will be deemed not
to be outstanding for the purpose of determining whether the requisite
percentage of securityholders have given any request, demand, authorization,
direction, notice, consent or other action under those documents.
25
The prospectus supplement for each trust will specify whether the
securities issued by that trust will be issued in book-entry form. If your
securities are issued in book-entry form, you may hold them through DTC in the
United States or through Clearstream or the Euroclear system in Europe or in any
other manner described in the related prospectus supplement.
DEPOSITORY TRUST COMPANY
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York UCC and a clearing agency
registered under the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. DTC holds securities for its participants and facilitates the
clearance and settlement of securities transactions between participants through
electronic book-entries, eliminating the need for physical movement of
securities. DTC participants include securities brokers and dealers, who may
include one or more underwriters of securities issued by a trust, banks, trust
companies and clearing corporations and may include other organizations.
Indirect access to the DTC system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
CLEARSTREAM BANKING
Clearstream Banking, societe anonyme, is incorporated under the laws of
Luxembourg as a professional depository. Clearstream was created to hold
securities for its customers and to facilitate the clearance and settlement of
securities transactions between Clearstream participants through electronic
book-entry changes in accounts of Clearstream participants, eliminating the need
for physical movement of securities. Transactions may be settled by Clearstream
in any of 36 currencies, including United States dollars. Clearstream provides
to its customers, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Clearstream also deals with domestic securities markets
in a number of countries through established depository and custodial
relationships. Clearstream is registered as a bank in Luxembourg and as such is
subject to regulation by the Commission de Surveillance du Secteur Financier,
which supervises Luxembourg banks.
Clearstream participants are financial institutions recognized around
the world, including underwriters, securities brokers and dealers, who may
include one or more underwriters of securities issued by a trust, banks, trust
companies, clearing corporations and other organizations. Indirect access to
Clearstream is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Clearstream participant, either directly or indirectly.
EUROCLEAR SYSTEM
The Euroclear system was created in 1968 to hold securities for its
participants and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, eliminating
the need for physical movement of securities and the risk from transfers of
securities and cash that are not simultaneous.
26
The Euroclear system has been extended to clear and settle transactions
between Euroclear participants and counterparties both in Clearstream and in a
number of domestic securities markets. Transactions may be settled through the
Euroclear system in any of 34 currencies, including United States dollars. In
addition to safekeeping and securities clearance and settlement services, the
Euroclear system provides securities lending and borrowing and money transfer
services. The Euroclear system is operated by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York under a contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation that establishes
policy on behalf of Euroclear participants. Morgan Guaranty is a New York
banking corporation and a member bank of the Federal Reserve System. Morgan
Guaranty is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department. The Brussels, Belgium
office of Morgan Guaranty is regulated and examined by the Belgian Banking
Commission.
The Terms and Conditions Governing Use of Euroclear, the related
Operating Procedures of the Euroclear system and applicable Belgian law govern
the securities clearance accounts and cash accounts maintained with the operator
of the Euroclear system, transfers of securities and cash within the Euroclear
system, withdrawals 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 securities to specific securities clearance accounts.
Euroclear participants include banks, including central banks,
securities brokers and dealers, who may include one or more underwriters of
securities issued by a trust, and other professional financial intermediaries.
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 operator of the Euroclear system acts under
the Terms and Conditions Governing Use of Euroclear, the related Operating
Procedures of the Euroclear system and applicable Belgian law only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
BOOK-ENTRY PROCEDURES
DTC is required to make book-entry transfers of securities among DTC
participants on whose behalf it acts with respect to the securities and to
receive and transmit distributions of principal and interest on the securities.
DTC direct and indirect participants with which securityholders have accounts
with respect to the securities are also required to make book-entry transfers
and to receive and transmit distributions on behalf of their respective
securityholders. As a result, although securityholders will not possess
book-entry securities, the DTC rules provide a mechanism by which participants
will be able to transfer their interests and receive payments. All persons who
are not DTC participants, either directly or indirectly, but who desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
book-entry securities may do so only through DTC direct or indirect
participants.
The ability of a securityholder to pledge book-entry securities to
persons who do not participate in the DTC system, or otherwise to take actions
with respect to book-entry securities, may be limited because DTC can only act
on behalf of DTC participants, who in turn act on
27
behalf of DTC indirect participants and certain banks, and because the
securityholder will not receive a physical certificate representing their
interest in the securities. In addition, the securityholders may experience
delays in their receipt of payments of principal and interest on book-entry
securities because those payments must be processed through the DTC system. The
indenture trustee or the trustee, as applicable, will forward all payments to
Cede & Co., as nominee of DTC. DTC will then forward all payments to its
participants, who in turn will forward them to DTC indirect participants or
securityholders.
The only noteholder or certificateholder, as applicable, of book-entry
securities will be Cede & Co., as nominee of DTC. The securityholders will not
be recognized by the indenture trustee or the trustee, as applicable, as
noteholders or certificateholders and will only be permitted to exercise the
rights of securityholders indirectly through DTC and its participants. DTC will
advise the related administrator or servicer of each trust that it will take any
action permitted to be taken by a securityholder under the related indenture,
trust agreement or pooling and servicing agreement only at the direction of one
or more DTC participants to whose accounts the securities are credited. DTC may
take conflicting actions with respect to other undivided interests to the extent
that those actions are taken on behalf of DTC participants whose holdings
include those undivided interests.
Clearstream and Euroclear will hold omnibus positions on behalf of
their respective participants through customers' securities accounts in the name
of Clearstream and Euroclear on the books of their respective depositaries. The
depositaries will in turn hold those positions in customers' securities accounts
in the depositaries' names on the books of DTC. Transfers between Clearstream
participants and Euroclear participants will occur in accordance with their
respective 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 Clearstream 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. These cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in that system in accordance
with its rules and procedures and within its established deadlines. 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. Clearstream participants and
Euroclear participants may not deliver instructions directly to the Clearstream
or Euroclear depositaries.
Because of time-zone differences, credits or securities in Clearstream
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 these credits or any transactions in the
securities settled during this processing will be reported to the relevant
Clearstream participant or Euroclear participant on that business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream participant or Euroclear participant to a DTC participant
will be received with value on the DTC settlement
28
date but will be available in the relevant Clearstream or Euroclear cash account
only as of the business day following settlement in DTC.
All distributions of principal and interest on securities held through
Clearstream or Euroclear will be credited to the cash accounts of Clearstream
participants or Euroclear participants in accordance with the relevant system's
rules and procedures, to the extent received by its depositary. These
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. Clearstream or the operator of the
Euroclear system, as the case may be, will take any other action permitted to be
taken by a securityholder under the sale and servicing agreement, the trust
agreement or the indenture, as applicable, on behalf of a Clearstream
participant or Euroclear participant only in accordance with its relevant rules
and procedures and subject to its depositary's ability to effect those actions
on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of the securities among participants
in DTC, Clearstream and the Euroclear system, they are under no obligation to
perform or continue to perform these procedures, and these procedures may be
discontinued at any time.
GLOBAL SECURITIES
The securities offered through this prospectus and the related
prospectus supplement may be issued as global securities registered and held by
a depository. For a discussion of the clearance, settlement and tax
documentation procedures applicable to global securities, see "Annex A - Global
Clearance, Settlement and Tax Documentation Procedures" in this prospectus.
DEFINITIVE SECURITIES
If the securities of a trust are initially issued in book-entry form,
the securities will be issued as Definitive Securities to the related
securityholders or their respective nominees, rather than to DTC or its nominee,
only if:
o the administrator or trustee of the related trust determines that
DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the securities and
the administrator or the seller, as the case may be, is unable to
locate a qualified successor and so notifies the indenture trustee
or the trustee in writing;
o the administrator or the seller, as the case may be, at its
option, elects to terminate the book-entry system through DTC; or
o after the occurrence of an event of default under the indenture or
an event of servicing termination under the sale and servicing
agreement or the pooling and servicing agreement for the trust,
the holders of at least a majority in outstanding principal amount
of the securities advise the indenture trustee or the trustee
through the DTC
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participants in writing that the continuation of a book-entry
system through DTC or its successor is no longer in the best
interest of the securityholders.
If any of these events occurs, the indenture trustee or the trustee
will be required to notify the securityholders of each applicable class, through
the DTC participants, of the availability of Definitive Securities. Upon
surrender by DTC of the physical certificates representing the securities and
receipt of instructions for re-registration, the indenture trustee or the
trustee will reissue the securities as Definitive Securities.
All distributions of principal and interest on the Definitive
Securities will be made by the indenture trustee or the trustee in accordance
with the procedures set forth in the related indenture or the related trust
agreement directly to the holders in whose names the Definitive Securities were
registered at the close of business on the record date specified for the
securities in the related prospectus supplement. All distributions will be made
by check mailed to the address of each securityholder as it appears on the
register maintained by the indenture trustee or the trustee or, if the
securityholder satisfies the requirements set forth in the related indenture or
the related trust agreement, by wire transfer. The final payment on a Definitive
Security, however, will be made only upon presentation and surrender of that
Definitive Security at the office or agency specified in the notice of final
distribution to the related securityholder.
Definitive Securities will be transferable and exchangeable at the
offices of the indenture trustee or the trustee or at the offices of a registrar
named in a notice delivered to the holders of Definitive Securities. No service
charge will be imposed for any registration of transfer or exchange, but the
indenture trustee or the trustee may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection with any
transfer or exchange.
REPORTS TO SECURITYHOLDERS
On or before each payment date, the administrator or the servicer will
prepare and provide to the related indenture trustee and/or trustee a statement
to be delivered to the securityholders on that payment date. Each statement to
be delivered to the securityholders will include, to the extent applicable to
those securityholders, the following information and any other information
specified in the related prospectus supplement, in each case with respect to the
related payment date or the period since the previous payment date, as
applicable:
(1) the amount of the distribution allocable to principal on each
class of the securities;
(2) the amount of the distribution allocable to interest on or with
respect to each class of the securities;
(3) the amount of the distribution allocable to draws from any reserve
account or payments in respect of any other credit enhancement
arrangement;
(4) the aggregate principal balance of the receivables as of the close
of business on the last day of the preceding Collection Period;
(5) any overcollateralization amount or credit enhancement amount;
30
(6) the aggregate outstanding principal amount of each class of the
securities, each after giving effect to all payments reported
under clause (1) above;
(7) the amount of the servicing fee paid to the servicer on the
related payment date and the amount of any unpaid servicing fees;
(8) the aggregate amount of losses realized on the receivables during
the preceding Collection Period calculated as described in the
related prospectus supplement;
(9) the aggregate amount of any previously due and unpaid interest
payments on each class of the securities, plus the amount of
interest accrued on that unpaid interest;
(10) the aggregate amount of any previously due and unpaid principal
payments on each class of the securities, plus the amount of
interest accrued on that unpaid principal;
(11) the aggregate amount to be paid in respect of the receivables, if
any, repurchased during the preceding Collection Period;
(12) the balance of any reserve account on the related payment date,
after giving effect to any changes in that balance on that date;
(13) the aggregate amount of any Advances to be remitted by the
servicer on the related payment date;
(14) for each payment date during any pre-funding period, the amount
remaining in the pre-funding account on that date;
(15) for each payment date during any revolving period and for the
first payment date that immediately follows the last day of any
revolving period, the amount of principal collections used to
purchase additional receivables during the preceding Collection
Period; and
(16) the amount of any cumulative shortfall between the payments due in
respect of any credit enhancement arrangement and the payments
received in respect of that credit enhancement arrangement.
Each amount set forth under clauses (1), (2), (9) and (10) above with
respect to the securities of any trust will be expressed as a dollar amount per
$1,000 of the initial principal amount of those securities.
The indenture trustee or trustee for each trust will, within the
prescribed period of time for federal income tax reporting purposes after the
end of each calendar year during the term of each trust, mail to each person who
at any time during that calendar year was a holder of securities with respect to
the trust and received any payment on those securities a statement containing
information to be used in the preparation of the person's federal income tax
returns.
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DESCRIPTION OF THE INDENTURE
If a trust issues notes, one or more classes of notes will be issued
under the terms of an indenture between the trust and the indenture trustee
specified in the related prospectus supplement. A form of indenture has been
filed as an exhibit to the registration statement of which this prospectus forms
a part. This summary describes the material provisions common to the notes of
each trust that issues notes. The related prospectus supplement will give you
additional information specific to the notes which you are purchasing. This
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the notes and the indenture.
EVENTS OF DEFAULT
The following events will constitute events of default under the
indenture with respect to the notes issued by a trust:
o a default in the payment of any interest on any note for five or
more days, or such longer period as may be specified in the
related prospectus supplement;
o a default in the payment of the principal of or any installment of
the principal of any note when the same becomes due and payable;
o a default in the observance or performance of any covenant or
agreement of the trust made in the indenture, other than those
dealt with specifically elsewhere as an event of default, which
default materially and adversely affects the noteholders and which
default continues for a period of 60 days after notice of that
default is given to the trust by the related indenture trustee or
to the trust and the indenture trustee by the holders of at least
25% of the principal amount of the Controlling Class;
o various events of bankruptcy, insolvency, receivership or
liquidation of the trust or its property as specified in the
indenture; or
o such other events, if any, described in the related prospectus
supplement.
In general, the amount of principal due and payable to the holders of a
class of notes will, until the final scheduled payment date for that class, be
limited to the amounts available to pay principal on that class. As a result,
the failure to pay principal on a class of notes generally will not result in
the occurrence of an event of default under the related indenture until the
final scheduled payment date for that class.
RIGHTS UPON EVENT OF DEFAULT
If an event of default has occurred and is continuing with respect to
the notes issued by a trust, the related indenture trustee or the holders of a
majority of the principal amount of the Controlling Class may declare the
principal of all the notes issued by the trust to be immediately due and
payable. The holders of a majority of the principal amount of the Controlling
Class may rescind any such declaration if:
32
o the issuer has paid or deposited with the indenture trustee enough
money to pay the principal of and interest on all the notes issued
by the trust, all other amounts that would then be due if the
event of default causing the acceleration of maturity had not
occurred, all sums paid or advanced by the indenture trustee and
the reasonable compensation, expenses, disbursements and advances
of the indenture trustee and its agents and counsel; and
o all events of default, other than the nonpayment of principal on
the notes that has become due solely by the acceleration, have
been cured or waived.
If an event of default has occurred and is continuing with respect to
the notes issued by a trust, the related indenture trustee may institute
proceedings to collect amounts due or foreclose on trust property, exercise
remedies as a secured party or sell the related receivables. If the notes issued
by the trust have been accelerated, the indenture trustee may sell the related
receivables if:
o the holders of 100% of the notes, other than notes held by the
seller, the servicer or their affiliates, consent to the sale;
o the proceeds of the sale are sufficient to pay in full the
principal of and interest on the notes at the date of the sale; or
o there has been an event of default arising from the failure to pay
principal or interest and the indenture trustee determines that
the proceeds of the receivables would not be sufficient on an
ongoing basis to make all payments on the notes as those payments
would have become due if the notes had not been accelerated, and
the indenture trustee obtains the consent of the holders of 66
2/3% of the principal amount of the Controlling Class.
Any money received in realizing on trust property will first be applied to pay
any due and unpaid fees and expenses of the indenture trustee.
In addition, if the event of default relates to a default by a trust in
observing or performing any covenant or agreement, other than an event of
default relating to non-payment of interest or principal, insolvency or any
other event which is otherwise specifically dealt with by the indenture, the
indenture trustee is prohibited from selling the receivables unless the holders
of all outstanding notes and certificates issued by the trust consent to the
sale or the proceeds of the sale are sufficient to pay in full the principal of
and interest on the notes and certificates. The indenture trustee may also elect
to have the trust maintain possession of the receivables and apply collections
as received without obtaining the consent of the securityholders.
In general, if an event of default has occurred and is continuing with
respect to the notes issued by a trust, the related indenture trustee will be
under no obligation to exercise any of the rights or powers under the indenture
at the request or direction of the holders of the notes if the indenture trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with that
request. In general, the holders of a majority of the principal amount of the
Controlling Class will have the right to direct the time, method and place of
conducting any proceeding or any remedy available to the
33
related indenture trustee, and the holders of a majority of the principal amount
of the Controlling Class may, in some cases, waive any default with respect to
the notes, except a default in the payment of principal or interest or a default
in respect of a covenant or provision of the related indenture that cannot be
modified without the waiver or consent of the holders of all of the outstanding
notes issued by the trust.
The holder of a note issued by a trust will not have the right to
institute any proceeding with respect to the related indenture unless:
o the holder previously has given to the related indenture trustee
written notice of a continuing event of default under the
indenture;
o the holders of not less than 25% of the principal amount of the
Controlling Class have made written request to the indenture
trustee to institute the proceeding in its own name as indenture
trustee;
o the holder has offered the indenture trustee reasonable indemnity;
o the indenture trustee has for 60 days after the notice, request
and offer of indemnity failed to institute the proceeding; and
o no direction inconsistent with the written request has been given
to the indenture trustee during the 60-day period by the holders
of a majority of the principal amount of the Controlling Class.
Each indenture trustee and the related noteholders, by accepting the
related notes, will covenant that they will not at any time institute against
the related trust any bankruptcy, reorganization or other proceeding under any
federal or state bankruptcy or similar law.
With respect to any trust, neither the related indenture trustee nor
the related trustee in its individual capacity, nor any holder of a certificate
representing an ownership interest in the trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will be personally liable for the payment of the principal
of or interest on the related notes or for the agreements of the trust contained
in the related indenture.
COVENANTS
Each trust will be subject to the covenants discussed below, as
provided in the related indenture.
o Restrictions on merger and consolidation. The trust may not
consolidate with or merge into any other entity unless:
-- the entity formed by or surviving the consolidation or
merger is organized under the laws of the United States,
any state or the District of Columbia;
-- the entity formed by or surviving the consolidation or
merger expressly assumes the trust's obligation to make
due and punctual payments on the notes
34
issued by the trust and the performance or observance of
every agreement and covenant of the trust under the
related indenture;
-- no event that is, or with notice or lapse of time or both
would become, an event of default under the indenture
shall have occurred and be continuing immediately after
the merger or consolidation;
-- each Rating Agency has confirmed in writing that the
merger or consolidation will not result in a reduction or
withdrawal of any rating assigned by that Rating Agency
to any class of securities issued by the trust;
-- the trust has received an opinion of counsel to the
effect that the merger or consolidation would have no
material adverse federal income tax consequence to the
trust or to any related noteholder or certificateholder;
-- any action as is necessary to maintain the lien and
security interest created by the related indenture shall
have been taken; and
-- the trust has received an opinion of counsel and an
officer's certificate each stating that the merger or
consolidation satisfies all requirements under the
related indenture.
o Other negative covenants. The trust will not, among other things:
-- except as expressly permitted by the documents relating
to the trust, sell, transfer, exchange or otherwise
dispose of any of the assets of the trust;
-- claim any credit on or make any deduction from the
principal and interest payable in respect of the notes
issued by the trust, other than amounts withheld under
the Internal Revenue Code of 1986, as amended, or
applicable state law, or assert any claim against any
present or former holder of the notes because of the
payment of taxes levied or assessed upon the trust or its
property;
-- dissolve or liquidate in whole or in part;
-- permit the lien of the related indenture to be
subordinated or otherwise impaired;
-- permit the validity or effectiveness of the related
indenture to be impaired or permit any person to be
released from any covenants or obligations with respect
to the notes under the indenture except as may be
expressly permitted by the indenture; or
-- permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance to be created on
or extend to or otherwise arise upon or burden the assets
of the trust or any part of the trust, or any interest in
the trust or the
35
proceeds of the trust, except for tax, mechanics' or
other specified liens and except as may be created by the
terms of the related indenture.
No trust may engage in any activity other than as described in the
related prospectus supplement. No trust will incur, assume or guarantee any
indebtedness other than indebtedness incurred under the related notes and
indenture, the related certificates and as a result of any Advances made to it
by the servicer or otherwise in accordance with the related sale and servicing
agreement or other documents relating to the trust.
LIST OF NOTEHOLDERS
Any three or more holders of the notes issued by a trust, or one or
more holders of the notes issued by the trust evidencing not less than 25% of
the principal amount of the Controlling Class, may, by written request to the
related indenture trustee accompanied by a copy of the communication that the
applicant proposes to send, obtain access to the list of all noteholders
maintained by the indenture trustee for the purpose of communicating with other
noteholders with respect to their rights under the related indenture or under
the notes. The indenture trustee may elect not to afford the requesting
noteholders access to the list of noteholders if it agrees to mail the desired
communication or proxy, on behalf of and at the expense of the requesting
noteholders, to all noteholders of the trust.
ANNUAL STATEMENTS AND REPORTS
Each trust will be required to file annually with the related indenture
trustee a written statement as to the fulfillment of its obligations under the
related indenture.
Each indenture trustee will be required to mail each year to all
related noteholders a brief report relating to its eligibility and qualification
to continue as indenture trustee under the related indenture, any amounts
advanced by it under the indenture, the amount, interest rate and maturity date
of various indebtedness owed by the related trust to the indenture trustee in
its individual capacity, the property and funds physically held by the indenture
trustee as such and any action taken by the indenture trustee that materially
affects the related notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
Each indenture will be discharged with respect to the collateral
securing the related notes upon the delivery to the related indenture trustee
for cancellation of the notes or, with various limitations, upon deposit with
the indenture trustee of funds sufficient for the payment in full of the notes.
MODIFICATION OF INDENTURE
Each trust, together with the related indenture trustee, may, without
the consent of the noteholders of the trust, execute a supplemental indenture
for any of the following purposes:
o to correct or amplify the description of any property at any time
subject to the lien of the related indenture, or better to convey
to the indenture trustee any property subject
36
or required to be subjected to the lien of the indenture, or to
subject to the lien of the indenture additional property;
o to evidence the succession, in compliance with the applicable
provisions of the indenture, of another person to the trust, and
the assumption by any such successor of the covenants of the trust
in the indenture and in the related notes;
o to add to the covenants of the trust, for the benefit of the
noteholders, or to surrender any right or power in the indenture
conferred upon the trust;
o to convey, transfer, assign, mortgage or pledge any property to or
with the indenture trustee;
o to cure any ambiguity, to correct or supplement any provision in
the indenture or in any supplemental indenture that may be
inconsistent with any other provision in the indenture or in any
supplemental indenture or to make any other provisions with
respect to matters or questions arising under the indenture or
under any supplemental indenture which are not inconsistent with
the provisions of the indenture; provided, however, that such
action may not materially adversely affect the interests of the
noteholders;
o to evidence and provide for the acceptance of the appointment
under the indenture by a successor trustee with respect to the
notes and to add to or change any of the provisions of the
indenture as may be necessary to facilitate the administration of
the trusts under the indenture by more than one trustee; or
o to modify, eliminate or add to the provisions of the indenture to
such extent as may be necessary to effect the qualification of the
indenture under the Trust Indenture Act or under any similar
federal statute enacted after the date of the indenture and to add
to the indenture such other provisions as may be required by the
Trust Indenture Act.
The trust and the related indenture trustee may also enter into
supplemental indentures, without obtaining the consent of the noteholders of the
related trust, for the purpose of, among other things, adding any provisions to
or changing in any manner or eliminating any of the provisions of the related
indenture or modifying in any manner the rights of the noteholders, except with
respect to the matters listed in the next paragraph which require the approval
of the noteholders; provided, however, that:
o the proposed action will not, as evidenced by an opinion of
counsel, materially adversely affect the interest of any
noteholder;
o each Rating Agency has confirmed in writing that the proposed
action will not result in a reduction or withdrawal of any rating
assigned by that Rating Agency to any class of notes issued by the
trust; and
o an opinion of counsel as to various tax matters is delivered.
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A supplemental indenture may not, without the consent of the holder of
each outstanding note affected by the supplemental indenture and in addition to
the satisfaction of each of the conditions set forth in the preceding paragraph:
o change the due date of any installment of principal of or interest
on any note or reduce the principal amount of any note, the
interest rate on any note or the redemption price with respect to
any note, change the application of the proceeds of a sale of the
trust property to payment of principal of and interest on the
notes or change any place of payment where, or the coin or
currency in which, any note or any interest on any note is
payable;
o impair the right to institute suit for the enforcement of various
provisions of the related indenture regarding payment;
o reduce the percentage of the aggregate principal amount of the
notes or of any class of the notes the consent of the holders of
which is required for any supplemental indenture or the consent of
the holders of which is required for any waiver of compliance with
various provisions of the related indenture or of various defaults
or events of default under the indenture and their consequences as
provided for in the indenture;
o modify or alter the provisions of the related indenture regarding
the voting of notes held by the related trust, any other obligor
on the notes, the seller or an affiliate of any of them;
o reduce the percentage of the aggregate principal amount of the
notes or of any class of the notes the consent of the holders of
which is required to direct the related indenture trustee to sell
or liquidate the receivables after an event of default under the
related indenture if the proceeds of the sale would be
insufficient to pay the principal amount of and accrued but unpaid
interest on the outstanding notes and certificates issued by the
related trust;
o reduce the percentage of the aggregate principal amount of the
notes or of any class of the notes the consent of the holders of
which is required to amend the sections of the related indenture
which specify the applicable percentage of aggregate principal
amount of the notes issued by the related trust necessary to amend
the indenture or any of the other documents relating to the trust;
o affect the calculation of the amount of interest or principal
payable on any note on any payment date, including the calculation
of any of the individual components of that calculation;
o affect the rights of the noteholders to the benefit of any
provisions for the mandatory redemption of the notes provided in
the related indenture, or
o permit the creation of any lien ranking prior to or on a parity
with the lien of the related indenture with respect to any of the
collateral for the notes or, except as otherwise permitted or
contemplated in the indenture, terminate the lien of the
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indenture on any of the collateral or deprive the holder of any
note of the security afforded by the lien of the indenture.
THE INDENTURE TRUSTEE
If a trust issues notes, the indenture trustee for the trust will be
specified in the related prospectus supplement. The indenture trustee for any
trust may resign at any time, in which event the administrator of the trust, on
behalf of the trust, will be obligated to appoint a successor trustee. The
administrator of a trust, on behalf of the trust, will be obligated to remove an
indenture trustee if the indenture trustee ceases to be eligible to continue as
such under the related indenture or if the indenture trustee becomes insolvent.
In these circumstances, the administrator of the trust will be obligated to
appoint a successor trustee for the notes issued by the trust. In addition, the
holders of a majority of the principal amount of the Controlling Class may
remove the indenture trustee without cause and may appoint a successor indenture
trustee. If a trust issues a class of notes that is subordinated to one or more
other classes of notes and an event of default occurs under the related
indenture, the indenture trustee may be deemed to have a conflict of interest
under the Trust Indenture Act and may be required to resign as trustee for one
or more classes of notes. In this case, the indenture will provide for a
successor indenture trustee to be appointed for those classes of notes. No
resignation or removal of the indenture trustee will become effective until a
successor indenture trustee has been appointed and has accepted its appointment.
DESCRIPTION OF THE RECEIVABLES TRANSFER
AND SERVICING AGREEMENTS
This summary describes the material provisions of the documents under
which the seller will sell receivables to a trust and the servicer will service
the receivables on behalf of the trust. In the case of a trust that is not a
grantor trust, that document is a sale and servicing agreement. In the case of a
grantor trust, that document is a pooling and servicing agreement. This summary
also describes the material provisions of the trust agreement for a trust that
is not a grantor trust. Forms of those documents have been filed as exhibits to
the registration statement of which this prospectus forms a part. This summary
describes the material provisions common to the securities of each trust. The
related prospectus supplement will give you additional information specific to
the securities which you are purchasing. This summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of those documents.
SALE AND ASSIGNMENT OF RECEIVABLES
The seller will sell and assign to each trust under a sale and
servicing agreement or a pooling and servicing agreement, without recourse, the
seller's entire interest in a pool of receivables, including its security
interests in the related financed vehicles. Each receivable will be identified
in a schedule to the related sale and servicing agreement or pooling and
servicing agreement. The trustee of the trust will not independently verify the
existence and eligibility of any receivables. The trustee of the trust will,
concurrently with the sale and assignment, execute and deliver the related notes
and/or certificates. If a trust may purchase additional receivables
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from the seller after the related closing date during a specified pre-funding or
revolving period, the related prospectus supplement will specify the terms and
conditions on which those purchases may be made.
REPRESENTATIONS AND WARRANTIES
In each sale and servicing agreement or pooling and servicing
agreement, the seller will represent and warrant to the related trust, among
other things, that at the date of issuance of the related notes and/or
certificates or, if applicable, at the date on which additional receivables are
purchased by the trust:
o each receivable has been originated for the retail financing of a
financed vehicle by an obligor located in one of the states of the
United States or the District of Columbia and contains customary
and enforceable provisions such that the rights and remedies of
the holder of the receivable will be adequate for realization
against the collateral of the benefits of the security;
o each receivable and the sale of the related financed vehicle
complies in all material respects with all requirements of
applicable federal, state, and local laws, and regulations
thereunder, including usury laws, and any consumer credit, equal
opportunity and disclosure laws applicable to that receivable and
sale;
o each receivable constitutes the legal, valid and binding payment
obligation in writing of the obligor, enforceable by the holder of
the receivable in all material respects in accordance with its
terms, subject, as to enforcement, to applicable bankruptcy and
other similar laws and equitable principles relating to or
affecting the enforcement of creditors' rights;
o immediately prior to the sale and assignment of each receivable to
the trust, the receivable was secured by a validly perfected first
priority security interest in the related financed vehicle in
favor of the seller as secured party or all necessary action with
respect to the receivable has been taken to perfect a first
priority security interest in the related financed vehicle in
favor of the seller as secured party, which security interest is
assignable and has been assigned by the seller to the trust;
o as of the related cut-off date, there are no rights of rescission,
setoff, counterclaim or defense, and the seller has no knowledge
of those rights being asserted or threatened, with respect to any
receivable;
o as of the related cut-off date, the seller has no knowledge of any
liens or claims that have been filed, including liens for work,
labor, materials or unpaid taxes relating to a financed vehicle,
that would be prior to, or equal or coordinate with, the lien
granted by the related receivable;
o except for payment defaults continuing for a period of not more
than 30 days, or such other number of days as may be specified in
the related prospectus supplement, as of the related cut-off date,
the seller has no knowledge that a default, breach, violation or
event permitting acceleration under the terms of any receivable
exists; the seller has
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no knowledge that a continuing condition that with notice or lapse
of time would constitute a default, breach, violation or event
permitting acceleration under the terms of any receivable exists
and the seller has not waived any of the foregoing;
o each receivable requires that the related obligor obtain
comprehensive and collision insurance covering the related
financed vehicle; and
o each receivable satisfies the criteria for the selection of
receivables for the trust described in the related prospectus
supplement.
REPURCHASE OBLIGATION
As of the last day of the second Collection Period following the
discovery by or notice to the seller of a breach of any representation or
warranty of the seller which materially and adversely affects the interests of
the related trust in any receivable, the seller, unless the breach has been
cured, will repurchase the receivable from the trust for the related Purchase
Amount. The repurchase obligation will constitute the sole remedy available to
the certificateholders or the trustee and, if applicable, the noteholders or the
indenture trustee in respect of the related trust for any uncured breach.
SERVICING OF THE RECEIVABLES
The servicer will service and administer the receivables held by each
trust and, as custodian on behalf of the trust, will maintain possession of the
installment sale contracts and any other documents relating to the receivables.
To assure uniform quality in servicing the receivables, as well as to facilitate
servicing and save administrative costs, the installment sale contracts and
other documents relating to the receivables will not be physically segregated
from other similar documents that are in the servicer's possession or otherwise
stamped or marked to reflect the transfer to the trust. The obligors under the
receivables will not be notified of the transfer. Uniform Commercial Code
financing statements reflecting the sale and assignment of the receivables by
the seller to the trust will be filed, however, and the servicer's accounting
records and computer systems will be marked to reflect the sale and assignment.
Because the receivables will remain in the servicer's possession and will not be
stamped or otherwise marked to reflect the transfer to the trust, if a
subsequent purchaser were to obtain physical possession of the receivables
without knowledge of the transfer, the trust's interest in the receivables could
be defeated. See "Material Legal Issues Relating to the Receivables -- Security
Interests in the Financed Vehicles."
TRUST ACCOUNTS
The servicer will establish and maintain for each trust, in the name of
the related indenture trustee on behalf of the related securityholders or, if
the trust does not issue notes, in the name of the related trustee on behalf of
the related certificateholders, one or more collection accounts. The servicer
will deposit all collections on the receivables into the collection account. If
the trust issues notes, the servicer or the indenture trustee may establish and
maintain, in the name of the indenture trustee on behalf of the noteholders, one
or more distribution accounts, which may be sub-accounts of the collection
account, into which amounts released from the
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collection account and any other accounts of the trust for payment to the
noteholders will be deposited and from which all distributions to the
noteholders will be made. If the trust issues certificates, the servicer or the
trustee may establish and maintain, in the name of the trustee on behalf of the
certificateholders, one or more certificate distribution accounts into which
amounts released from the collection account and any other accounts of the trust
for distribution to the certificateholders will be deposited and from which all
distributions to the certificateholders will be made.
Any other accounts to be established with respect to a trust, including
any pre-funding account, yield supplement account or reserve account, will be
described in the related prospectus supplement.
All amounts on deposit in the accounts established with respect to a
trust will be invested in Permitted Investments as provided in the related sale
and servicing agreement or pooling and servicing agreement. In general,
Permitted Investments are limited to obligations or securities that mature on or
before the next payment date. Amounts on deposit in any reserve account may be
invested in obligations or securities that will not mature on or prior to the
next payment date, however, and that will not be sold to cover any shortfalls in
collections on the related receivables, if each Rating Agency has confirmed in
writing that those investments will not result in a reduction or withdrawal of
any rating assigned by that Rating Agency to any class of securities issued by
the related trust. As a result, the amount of cash available in any reserve
account at any time may be less than the balance of the reserve account. If the
amount required to be withdrawn from any reserve account to cover shortfalls in
collections on the related receivables, as provided in the related prospectus
supplement, exceeds the amount of cash in the reserve account, a temporary
shortfall in the amounts distributed to the related noteholders or
certificateholders could result, which could, in turn, increase the average life
of the related notes or certificates. All net investment earnings on amounts on
deposit in the trust accounts will be deposited in the related collection
account or distributed as provided in the related prospectus supplement.
The trust accounts will be maintained as Eligible Deposit Accounts,
which are accounts at a depository institution satisfying various requirements
of the Rating Agencies.
SERVICING PROCEDURES
The bank will act as servicer and will make reasonable efforts to
collect all payments due with respect to the receivables held by each trust. The
bank will follow the same collection procedures as servicer that it follows with
respect to motor vehicle installment sale contracts that it services for itself,
in a manner consistent with the related sale and servicing agreement or pooling
and servicing agreement.
The servicer may, in accordance with its normal servicing procedures,
defer a payment on a receivable or otherwise modify the payment schedule of a
receivable. In some cases, the servicer will be required to repurchase a
receivable as to which it has deferred a payment or otherwise modified a payment
schedule or to make an Advance with respect to the receivable. The servicer may
be obligated to purchase a receivable if, among other things, it extends the
date for final payment of the receivable beyond the last day of the Collection
Period during which the
42
latest maturing receivable matures, as set forth in the related prospectus
supplement, or changes the contract rate of interest or the total amount or
number of scheduled payments of the receivable. If the servicer determines that
eventual payment in full of a receivable is unlikely, the servicer will follow
its normal practices and procedures to realize upon the receivable, including
the repossession and disposition of the financed vehicle securing the receivable
at a public or private sale, or the taking of any other action permitted by
applicable law.
COLLECTIONS
If the bank is the servicer, it will not be required to deposit amounts
collected with respect to the receivables into the related collection account
until the business day preceding the payment date following the Collection
Period during which those collections were received if:
o there exists no event of servicing termination under the related
sale and servicing agreement or pooling and servicing agreement;
and
o each other condition to making monthly deposits as may be required
by the related sale and servicing agreement or pooling and
servicing agreement is satisfied.
The servicer may, in order to satisfy these conditions with respect to
a trust and to the extent set forth in the related prospectus supplement, obtain
a letter of credit or other security for the benefit of the trust to secure the
timely deposit of collections. If these conditions are not met, the servicer
will be required to deposit all collections into the related collection account
not later than the second business day after receipt. If the servicer is
permitted to deposit collections on a monthly basis, it may invest those
collections at its own risk and for its own benefit pending deposit and need not
segregate them from its own funds.
The servicer or the seller, as the case may be, will remit the
aggregate Purchase Amount of any receivables to be purchased from the trust to
the related collection account on or prior to the business day preceding the
related payment date.
All collections processed during a Collection Period will be applied
first to any outstanding Advances made by the servicer with respect to the
related receivable, second, to the payment of accrued and unpaid interest,
third, to the payment of principal and, fourth, to the payment of any late fees
or other fees or charges.
SERVICER ADVANCES
The servicer will make an Advance with respect to each receivable,
other than a receivable designated as a Defaulted Receivable, equal to the
excess, if any, of
(1) the product of the principal balance of the receivable as of the
first day of the related Collection Period and one-twelfth of its
contract rate of interest over
(2) the interest actually received by the servicer with respect to the
receivable from the obligor or from the payment of the Purchase
Amount during or with respect to the Collection Period
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unless the servicer, in its sole discretion, determines that the Advance is not
recoverable from subsequent payments on the receivable or from funds on deposit
in the related reserve account, if any. In the event that the servicer does not
make an Advance, any payment deficiency on the securities will be funded by the
application of available amounts, if any, in the related reserve account, if
any, or any other available credit enhancement. The servicer will deposit all
Advances into the related collection account on the business day immediately
preceding the related payment date.
To the extent that the amount set forth in clause (2) above with
respect to a receivable exceeds the amount set forth in clause (1) above with
respect to the receivable, that excess will be paid to the servicer on the
related payment date to reimburse the servicer for unreimbursed Advances
previously made with respect to the receivable. Any reimbursement will be from
past due interest paid by the obligor under the receivable. In addition, the
servicer will reimburse itself for an outstanding Advance made with respect to a
receivable out of any funds of the related trust when the receivable is
designated as a Defaulted Receivable.
SERVICING COMPENSATION
The servicer will be entitled to receive on each payment date with
respect to each trust a servicing fee equal to 1/12 of a per annum percentage of
the outstanding principal balance of the receivables held by that trust as of
the first day of the preceding Collection Period and, if so specified in the
related prospectus supplement, the net investment income, if any, earned during
the preceding collection period from the reinvestment of amounts on deposit in
the collection account. The per annum percentage applicable to each trust will
be specified in the related prospectus supplement. In addition, the servicer
will be entitled to retain as supplemental servicing compensation any late fees
and other administrative fees and expenses collected with respect to the
receivables held by each trust.
The servicing fee and the supplemental servicing compensation are
intended to compensate the servicer for performing the functions of a third
party servicer of the receivables as an agent for the related trust, including
collecting and posting all payments, responding to inquiries of obligors on the
receivables, investigating delinquencies, sending payment coupons to obligors,
reporting federal income tax information to obligors, paying costs of
collections and policing the collateral. The servicing fee and the supplemental
servicing compensation will also compensate the servicer for administering the
receivables, including making Advances, accounting for collections, furnishing
monthly and annual statements to the related trustee and indenture trustee with
respect to distributions and generating federal income tax information for the
related trust. In addition, the servicing fee and the supplemental servicing
compensation will reimburse the servicer for various taxes, the fees of the
related trustee and indenture trustee, if any, accounting fees, outside auditor
fees, data processing costs and other costs incurred in connection with
administering the receivables. The amount of the servicing fee will be
determined in light of the foregoing duties of the servicer as well as with a
view toward providing the servicer with a reasonable profit. The servicing fee
and the supplemental servicing compensation will be comparable to the fees and
supplemental compensation that would be paid to parties unaffiliated with the
bank.
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DISTRIBUTIONS
All distributions of principal and interest, or, where applicable, of
principal or interest only, on each class of securities issued by a trust and
entitled to distributions will be made by the related indenture trustee or
trustee to the related noteholders or certificateholders beginning on the
payment date specified in the related prospectus supplement. The timing,
calculation, allocation, order, source, priorities of and requirements for all
payments to each class of securityholders of each trust will be set forth in the
related prospectus supplement.
CREDIT ENHANCEMENT
A class of securities issued by a trust may benefit from one or more
forms of credit enhancement. The presence of credit enhancement is intended to
increase the likelihood that the holders of a class of securities will receive
the full amount of principal and interest due on that class and to decrease the
likelihood that those holders will experience losses. A class of securities may
benefit from one or more of the following forms of credit enhancement:
o subordination of one or more other classes of securities;
o reserve accounts;
o overcollateralization, which exists when the aggregate principal
balance of the receivables held by a trust exceeds the aggregate
principal amount of the securities issued by the trust;
o excess interest collections, which exist when the interest
collections on the receivables held by a trust exceed the
servicing fees required to be paid to the servicer, the interest
required to be paid on the securities issued by the trust and any
amounts required to be deposited in any reserve accounts;
o letters of credit or other credit facilities;
o surety bonds or insurance policies;
o liquidity arrangements;
o interest rate swaps, currency swaps, and other derivative
instruments and interest rate and exchange rate protection
agreements;
o repurchase or put obligations;
o yield supplement accounts or agreements;
o guaranteed investment contracts;
o guaranteed rate agreements; or
o other agreements with respect to third party payments or other
credit support.
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The credit enhancement for a class of securities may not provide
protection against all risks of loss and may not guarantee repayment of the
entire principal amount of and interest on that class. If losses occur which
exceed the amount covered by any credit enhancement or which are not covered by
any credit enhancement, the securityholders will bear their allocable share of
deficiencies as described in the related prospectus supplement. If so provided
in the related prospectus supplement, the seller may replace the credit
enhancement for any class of securities with another form of credit enhancement,
without the consent of the related securityholders, provided each Rating Agency
has confirmed in writing that the substitution will not result in a reduction or
withdrawal of any rating assigned by that Rating Agency to any class of
securities issued by the related trust.
NET DEPOSITS
As an administrative convenience and for so long as various conditions
are satisfied, the servicer will be permitted to deposit collections, Advances
and payments of Purchase Amounts for any trust for or with respect to a
Collection Period net of distributions to be made to the servicer with respect
to that Collection Period as reimbursement of Advances or payment of fees. The
servicer, however, will account to the trustee, the indenture trustee, if any,
the noteholders, if any, and the certificateholders with respect to each trust
as if all deposits, distributions and transfers were made individually.
EVIDENCE AS TO COMPLIANCE
Each sale and servicing agreement and pooling and servicing agreement
will provide that a firm of independent certified public accountants will
furnish to the related trust and to the related indenture trustee or trustee, as
applicable, an annual statement as to compliance by the servicer during the
preceding twelve months, or, in the case of the first such certificate, from the
related closing date, with certain standards relating to the servicing of the
related receivables.
Each sale and servicing agreement and pooling and servicing agreement
will also provide for delivery to the related trust and the related indenture
trustee or trustee, as applicable, substantially simultaneously with the
delivery of the accountants' statement referred to above, of a certificate
signed by an officer of the servicer stating that the servicer has fulfilled its
obligations under that agreement throughout the preceding twelve months, or, in
the case of the first such certificate, from the closing date, or, if there has
been a default in the fulfillment of any such obligation, describing each
default.
The securityholders of each trust may obtain copies of the statements
and certificates described above by a request in writing addressed to the
related trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each sale and servicing agreement and pooling and servicing agreement
will provide that the bank may not resign from its obligations and duties as
servicer, except upon a determination that the bank's performance of those
duties is no longer permissible under applicable law. No resignation by the
servicer will become effective until the related indenture trustee or trustee,
as applicable, or a successor servicer has assumed the bank's servicing
obligations and duties under the sale and servicing agreement or pooling and
servicing agreement. The servicer will also have
46
the right to delegate any or all of its duties under those agreements to a third
party without the consent of any securityholder or the confirmation of any
rating assigned to the securities. Notwithstanding any delegation by the
servicer, the servicer will remain responsible and liable for its duties under
those agreements as if it had made no delegation.
Each sale and servicing agreement and pooling and servicing agreement
will provide that neither the servicer nor any of its directors, officers,
employees and agents will be under any liability to the related trust or the
related noteholders or certificateholders for taking any action or for
refraining from taking any action under the sale and servicing agreement or
pooling and servicing agreement or for errors in judgment; except that neither
the servicer nor any of its directors, officers, employees and agents will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of the
servicer's duties under those agreements or by reason of the servicer's reckless
disregard of its obligations and duties under those agreements, except that
employees of the servicer or its affiliates will be protected against liability
that would otherwise be imposed by reason of negligence.
Each sale and servicing agreement and pooling and servicing agreement
will provide that the servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to its servicing responsibilities
under those agreements and that, in its opinion, may cause it to incur any
expense or liability. The servicer may, however, undertake any reasonable action
that it may deem necessary or desirable in respect of a particular sale and
servicing agreement or pooling and servicing agreement, the rights and duties of
the parties to those agreements and the interests of the related securityholders
under those agreements. In such event, the legal expenses and costs of the
action taken by the servicer and any liability resulting from that action will
be expenses, costs and liabilities of the related trust, and the servicer will
be entitled to be reimbursed for those expenses and costs.
Each sale and servicing agreement and pooling and servicing agreement
will provide that, under the circumstances specified in those agreements, the
following entities will be the successor to the servicer under those agreements:
o any entity into which the servicer may be merged or consolidated
or any entity resulting from any merger or consolidation to which
the servicer is a party; or
o any entity succeeding to the business of the servicer or, with
respect to its obligations as servicer, any entity 50% or more of
the equity of which is owned, directly or indirectly, by the
servicer;
provided, however, that the entity in each of the foregoing cases must assume
the obligations of the servicer under the sale and servicing agreement or
pooling and servicing agreement.
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EVENTS OF SERVICING TERMINATION
The following events will constitute events of servicing termination
under each sale and servicing agreement or pooling and servicing agreement:
o any failure by the servicer, or, so long as the seller is the
servicer, the seller, to deliver to the indenture trustee or the
trustee, as applicable, for distribution to the securityholders of
the related trust or for deposit in any of the trust accounts or
the certificate distribution account any required payment, which
failure continues unremedied for five business days after written
notice from the indenture trustee or the trustee, as applicable,
is received by the servicer or the seller, as the case may be, or
after discovery by an officer of the servicer or the seller, as
the case may be;
o any failure by the servicer, or, so long as the seller is the
servicer, the seller, duly to observe or perform in any material
respect any other covenant or agreement in the sale and servicing
agreement or pooling and servicing agreement, which failure
materially and adversely affects the rights of the noteholders or
the certificateholders of the related trust and which continues
unremedied for 90 days after the giving of written notice of the
failure to the servicer or the seller, as the case may be, by the
indenture trustee or the trustee, as applicable, or to the
servicer, the seller and the indenture trustee or the trustee, as
applicable, by the holders of not less than 25% of the principal
amount of the Controlling Class or, if the notes have been paid in
full or the trust has not issued notes, the holders of not less
than 25% of the certificate balance of the certificates issued by
the trust;
o the occurrence of various insolvency events specified in the sale
and servicing agreement or pooling and servicing agreement with
respect to the servicer; and
o such other events, if any, set forth in the related prospectus
supplement.
RIGHTS UPON EVENT OF SERVICING TERMINATION
If an event of servicing termination has occurred and is continuing
under a sale and servicing agreement or pooling and servicing agreement, the
related indenture trustee or the holders of not less than a majority of the
principal amount of the Controlling Class or, if applicable, the class of notes
specified in the related prospectus supplement, or, after the notes have been
paid in full or if the trust has not issued notes, the related trustee or the
holders of not less than a majority of the certificate balance of the
certificates issued by the trust, may terminate all the rights and obligations
of the servicer under the sale and servicing agreement or pooling and servicing
agreement. If the rights and obligations of the servicer are terminated, the
indenture trustee or trustee or a successor servicer appointed by the indenture
trustee or trustee will succeed to all the responsibilities, duties and
liabilities of the servicer under the sale and servicing agreement or pooling
and servicing agreement and will be entitled to similar compensation
arrangements.
If a receiver, bankruptcy trustee or similar official has been
appointed for the servicer, and no event of servicing termination other than
that appointment has occurred, the receiver,
48
bankruptcy trustee or similar official may have the power to prevent the related
indenture trustee, noteholders, trustee or certificateholders from effecting a
transfer of servicing. If the indenture trustee or trustee is legally unable to
act as servicer, it may appoint, or petition a court of competent jurisdiction
for the appointment of, a successor servicer. The indenture trustee or trustee
may make such arrangements for compensation to be paid to a successor servicer,
which in no event may be greater than the servicing compensation to the servicer
under the sale and servicing agreement or pooling and servicing agreement.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
The holders of not less than a majority of the principal amount of the
Controlling Class or, if applicable, the class of notes specified in the related
prospectus supplement, or, after the notes have been paid in full or if the
trust has not issued notes, the related trustee or the holders of not less than
a majority of the certificate balance of the certificates issued by the trust,
may, on behalf of all related securityholders, waive any event of servicing
termination under the related sale and servicing agreement or pooling and
servicing agreement and its consequences, except for an event of servicing
termination consisting of a failure to make any required deposits to or payments
from any of the trust accounts in accordance with the sale and servicing
agreement or pooling and servicing agreement.
AMENDMENT
The sale and servicing agreement, pooling and servicing agreement,
trust agreement or administration agreement for a trust may be amended, without
the consent of the related securityholders, to add any provisions to or to
change or eliminate any of the provisions of those agreements or to modify the
rights of the securityholders; provided, however, that the amendment will not
materially and adversely affect the interest of any securityholder as evidenced
by:
o either an opinion of counsel or an officer's certificate to that
effect; and
o written confirmation from each Rating Agency that the amendment
will not result in a reduction or withdrawal of any rating
assigned by that Rating Agency to any class of securities issued
by the trust.
The sale and servicing agreement, pooling and servicing agreement,
trust agreement or administration agreement for a trust may also be amended by
the seller, the servicer, the related trustee and any related indenture trustee,
with the consent of the holders of not less than a majority of the principal
amount of the notes then outstanding and the holders of not less than a majority
of the certificate balance of the certificates then outstanding, to add any
provisions to or to change or eliminate any of the provisions of those
agreements or to modify the rights of the securityholders; provided, however,
that no amendment may, without the consent of the holders of all the outstanding
notes and certificates of the trust:
o increase or reduce in any manner the amount of, or accelerate or
delay the timing of, collections of payments on the related
receivables or distributions that are required to
49
be made for the benefit of the securityholders or change any
interest rate on the securities or the amount required to be on
deposit in the reserve account, if any; or
o reduce the percentage of the notes or certificates of the trust
the holders of which are required to consent to any amendment.
PAYMENT OF NOTES
Each indenture trustee will agree in the related indenture that, upon
the payment in full of all outstanding notes issued by the related trust and the
satisfaction and discharge of the related indenture, to continue to carry out
its obligations under the sale and servicing agreement as agent for the trustee
of the trust.
TERMINATION
The obligations of the servicer, the seller, the trustee and the
indenture trustee under each trust agreement, sale and servicing agreement,
pooling and servicing agreement or administration agreement, as applicable, will
terminate upon the earlier of:
o the maturity or other liquidation of the last related receivable
and the disposition of any amounts received upon liquidation of
any remaining receivables; and
o the payment to the noteholders and certificateholders of the
related trust of all amounts required to be paid to them under
those agreements.
If and to the extent provided in the related prospectus supplement, the
servicer will have the option to purchase the receivables of each trust on any
payment date on or after which the aggregate principal balance of the
receivables held by the trust has declined to [__]%, or such other percentage as
may be specified in the related prospectus supplement, or less of the aggregate
principal balance of the receivables as of the close of business on the related
cut-off date. The purchase price will equal the aggregate of the Purchase
Amounts for the receivables as of the end of the preceding Collection Period,
after giving effect to the receipt of any monies collected on the receivables.
If the servicer purchases the receivables of a trust, the related trustee will
apply the purchase price to prepay the related securities in full.
If and to the extent provided in the related prospectus supplement,
each trustee will, within ten days following a payment date as of which the
aggregate principal balance of the receivables held by the related trust is
equal to or less than the percentage of the aggregate principal balance of the
receivables as of the close of business on the cut-off date specified in the
prospectus supplement, solicit bids for the purchase of the receivables
remaining in the trust in the manner and subject to the terms and conditions set
forth in the prospectus supplement. If the trustee receives satisfactory bids as
described in the prospectus supplement, then the receivables remaining in the
trust will be sold to the highest bidder. If a trustee sells the receivables of
a trust, the related securities will be prepaid in full.
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LIST OF CERTIFICATEHOLDERS
Any three or more holders of the certificates issued by a trust, or one
or more holders of the certificates issued by the trust evidencing not less than
25% of the aggregate certificate balance of the certificates, may, by written
request to the related trustee accompanied by a copy of the communication that
the applicant proposes to send, obtain access to the list of all
certificateholders maintained by the trustee for the purpose of communicating
with other certificateholders with respect to their rights under the related
trust agreement or pooling and servicing agreement or under the certificates.
The trustee may elect not to afford the requesting certificateholders access to
the list of certificateholders if it agrees to mail the desired communication or
proxy, on behalf of and at the expense of the requesting certificateholders, to
all certificateholders of the trust.
ADMINISTRATION AGREEMENT
The bank will be the administrator of each trust that is not a grantor
trust and will agree, to the extent provided in the related administration
agreement, to provide various notices and reports and to perform other
administrative obligations of the trust and the trustee required by the related
indenture. The administrator will be entitled to a periodic administration fee
which will be paid by the seller as compensation for the performance of the
administrator's obligations under the administration agreement and as
reimbursement for its related expenses.
The administrator may resign its duties under the related
administration agreement upon at least 60 days' prior written notice. The trust
may remove the administrator without cause upon at least 60 days' prior written
notice. The trust may also remove the administrator if the administrator
defaults in any material respect in its duties under the administration
agreement, which default remains uncured for ten days, or such longer period
acceptable to the trust, or if various insolvency events occur in respect of the
administrator. No resignation or removal of the administrator will become
effective until a successor administrator has been appointed and has accepted
its appointment and each Rating Agency has confirmed in writing that the
appointment will not result in a reduction or withdrawal of any rating assigned
by that Rating Agency to any class of securities issued by the related trust.
DUTIES OF TRUSTEE
The trustee will not make any representations as to the validity or
sufficiency of any agreements, the securities, other than its execution and
authentication of the securities, or the receivables or any related documents,
and will not be accountable for the use or application by the seller or the
servicer of any funds paid to the seller or the servicer in respect of the
securities or the receivables, or any monies prior to the time those monies are
deposited into any account in its name. The trustee will not independently
verify any receivables. The trustee will be required to perform only those
duties specifically required of it under the trust agreement or the pooling and
servicing agreement. In general, those duties will be limited to the receipt of
the various certificates, reports or other instruments required to be furnished
to the trustee under the agreements relating to the trust, in which case the
trustee will only be required to examine them to determine whether they conform
to the requirements of the agreements.
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The trustee will not be under any obligation to exercise any of the
rights or powers vested in it by the trust agreement or the pooling and
servicing agreement or to make any investigation of matters arising under those
documents or to institute, conduct or defend any litigation under or in relation
to those documents at the request, order or direction of any of the
certificateholders, unless the certificateholders have offered to the trustee
reasonable security or indemnity against the costs, expenses and liabilities
which the trustee may incur. No certificateholder will have any right under the
trust agreement or the pooling and servicing agreement to institute any
proceeding with respect to that agreement, unless the certificateholder has
previously given to the trustee written notice of default and unless, with
respect to a class of certificates, the holders of not less than a majority of
the certificate balance of that class of certificates have made written request
upon the trustee to institute the proceeding in its own name as trustee and have
offered to the trustee reasonable indemnity and the trustee for 30 days has
neglected or refused to institute the proceeding.
THE TRUSTEE
The trustee for each trust will be named in the related prospectus
supplement. The trustee may resign at any time by giving written notice to the
seller or the servicer, in which event the seller or the administrator, in the
case of a trust agreement, or the trustee, in the case of a pooling and
servicing agreement, will be obligated to appoint a successor trustee. The
trustee will be obligated to resign if the trustee ceases to be eligible to
continue as trustee under the trust agreement or the pooling and servicing
agreement, becomes legally unable to act or becomes insolvent. In those
circumstances, the seller or the administrator, in the case of a trust
agreement, or the trustee, in the case of a pooling and servicing agreement,
will be obligated to appoint a successor trustee. No resignation or removal of
the trustee will become effective until a successor trustee has been appointed
and has accepted its appointment.
The trust agreement or the pooling and servicing agreement will provide
that the servicer will pay the trustee's fees. The trust agreement or the
pooling and servicing agreement will also provide that the trustee will be
entitled to indemnification by the servicer for, and will be held harmless
against, any loss, liability or expense incurred by the trustee not resulting
from the trustee's own willful misfeasance, bad faith or negligence, other than
by reason of a breach of any of its representations or warranties set forth in
the agreement. If the servicer fails to indemnify the trustee, the trustee will
be entitled to be indemnified by the trust. Any indemnification will be paid on
a payment date only after all amounts required to be paid to the securityholders
have been paid and various other distributions have been made and, with respect
to a successor servicer, if any, after the servicing fee has been paid.
The seller, the servicer and their respective affiliates may have
normal banking relationships with the trustee and its affiliates.
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SECURITY RATINGS
The seller will request one or more Rating Agencies to assign a rating
to the securities offered through this prospectus and the related prospectus
supplement. The securities will not be issued unless they are rated in one of
the four highest rating categories by at least one Rating Agency. The related
prospectus supplement will set forth each rating assigned to your securities.
A rating is not a recommendation to purchase, hold or sell securities
and does not address market price or suitability for a particular investor. The
ratings assigned to the securities will only address the likelihood of the
payment of principal and interest on the securities according to their terms. We
cannot assure you that a rating will remain for any given period of time or that
a rating agency will not reduce or withdraw a rating in the future. A reduction
or withdrawal of a rating assigned to the securities will adversely affect their
market value.
MATERIAL LEGAL ISSUES RELATING TO THE RECEIVABLES
SECURITY INTEREST IN THE RECEIVABLES
The receivables are chattel paper as defined in the Uniform Commercial
Code in effect in the State of North Carolina and the State of New York. Under
the UCC, the sale of chattel paper is treated in a manner similar to perfection
of a security interest in chattel paper. In order to protect a trust's ownership
interest in its receivables, the seller will file UCC-1 financing statements
with the appropriate governmental authorities in the State of North Carolina to
give notice of the trust's ownership of its receivables and their proceeds.
Under the sale and servicing agreement or the pooling and servicing agreement,
the seller will be obligated to maintain the perfection of the trust's ownership
interest in the receivables. A purchaser of chattel paper who gives new value
and takes possession of the chattel paper in the ordinary course of its business
has priority, however, over a security interest in the chattel paper which is
perfected by filing UCC-1 financing statements, and not by possession by the
original secured party, if the purchaser acts in good faith without knowledge
that the chattel paper is subject to a security interest. A purchaser of the
receivables would not be deemed to have knowledge that the receivables are
subject to a security interest by virtue of the UCC-1 financing statements filed
in favor of the trust and would not learn of the sale of the receivables to the
trust from a review of the documents evidencing the receivables since those
documents would not be marked to reflect the sale.
SECURITY INTERESTS IN THE FINANCED VEHICLES
The receivables consist of installment sale contracts entered into with
obligors for the purchase of motor vehicles. The contracts also constitute
personal property security agreements that include grants of security interests
in the financed vehicles under the UCC in the applicable jurisdiction. In
general, perfection of a security interest in a motor vehicle is governed by the
motor vehicle registration laws of the state in which the vehicle is located. In
all states in which the receivables have been originated, a security interest in
a motor vehicle is perfected by notation of the secured party's lien on the
vehicle's certificate of title or by actual possession by the secured party of
the vehicle's certificate of title, depending upon applicable state law. The
practice of the seller is to note its lien on the certificate of title or to
obtain possession of the
53
certificate of title, as appropriate, under the laws of the state in which a
financed vehicle is registered. The receivables prohibit the sale or transfer of
the financed vehicles without the seller's consent.
The seller will assign its security interests in the financed vehicles
to the trust that purchases the related receivables. The certificates of title
for the financed vehicles will not be amended to identify the trust as the new
secured party, however, because of the related administrative burden and expense
and because the seller will continue to service the receivables. As a result,
the seller will continue to be named as the secured party on the certificates of
title for the financed vehicles.
In most states, an assignment of a security interest in a motor vehicle
is effective to convey that security interest to the assignee without noting the
assignment on the related certificate of title. In some states, however, an
assignment of a security interest in a motor vehicle may not be effective to
convey that security interest to the assignee unless the assignment is noted on
the related certificate of title. If the trust does not obtain a perfected
security interest in a financed vehicle because its interest is not noted on the
related certificate of title or because the seller did not have a perfected
security interest in the financed vehicle when it assigned that security
interest to the trust, the only recourse of the trust as against third parties
will be against the related obligor on an unsecured basis or, if the seller did
not have a perfected security interest, against the seller under the seller's
repurchase obligation. If the seller did not have a perfected security interest
in a financed vehicle when it assigned that security interest to the trust, that
security interest will be subordinate to holders of perfected security interests
in the financed vehicle, among others, and subsequent purchasers of the financed
vehicle would take possession free and clear of the security interest of the
trust. In addition, the security interest of the trust could be subordinated or
released as a result of fraud or forgery by a vehicle owner or administrative
error by state recording officials.
In most states, if a motor vehicle is moved to a state other than the
state which issued the current certificate of title, a perfected security
interest in the vehicle continues for four months after that move and thereafter
until the owner re-registers the vehicle in the new state. In most states, the
owner of a motor vehicle is required to surrender the related certificate of
title to re-register the vehicle. As a result, if the owner of a financed
vehicle attempts to re-register the vehicle in a new state, the seller will in
most cases be required to surrender possession of the related certificate of
title and will have the opportunity to re-perfect its security interest in the
vehicle in the new state. In the case of a financed vehicle registered in a
state which provides for notation of a lien but not possession of the
certificate of title by the holder of a security interest in the vehicle, the
seller will receive notice of surrender if the security interest in the vehicle
is noted on the certificate of title and will have a similar opportunity to
re-perfect. In states that do not require a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of motor vehicle installment sale
contracts, the seller takes steps to effect re-perfection upon receipt of notice
of re-registration or information from the obligor as to relocation of a motor
vehicle. In addition, when an obligor under a receivable sells a financed
vehicle, the seller must surrender possession of the certificate of title or
will receive notice as a result of its lien noted on the certificate of title
and, as a result, will have an opportunity to require satisfaction of the
related receivable before release of the lien. Under the sale and servicing
agreement or the pooling and servicing agreement, the servicer will
54
be obligated to take such steps, at the servicer's expense, as are necessary to
maintain perfection of the security interests in the financed vehicles.
In many states, various possessory liens for repairs performed on a
motor vehicle or for storage of a motor vehicle, as well as various rights
arising from the use of a motor vehicle in connection with illegal activities,
may take priority over an existing security interest in that vehicle, even if
that security interest is perfected. In addition, various federal tax liens may
have priority over a perfected security interest in a motor vehicle. The seller
will represent and warrant in the sale and servicing agreement or the pooling
and servicing agreement that, as of the cut-off date, it has no knowledge of any
liens with respect to any financed vehicle that would be prior to or equal with
the security interest granted under the related receivable. A prior or equal
lien could arise at any time during the term of a receivable, however, and no
notice will be given to the indenture trustee or the trustee if a prior or equal
lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN FINANCED VEHICLES
The servicer, on behalf of each trust, may take action to enforce its
security interest in a financed vehicle by repossession and resale of the
vehicle. The actual repossession may be contracted out to third party
contractors. The UCC and laws applicable in most states permit a creditor to
repossess a motor vehicle securing a loan by voluntary surrender, self-help
repossession that is peaceful or, in the absence of voluntary surrender and the
ability to repossess without breach of the peace, judicial process. The UCC and
consumer protection laws in most states place restrictions on repossession
sales, however, including requiring prior notice to the debtor and commercial
reasonableness in effecting the sale. In addition, various other statutory
provisions, including federal and state bankruptcy and insolvency laws, and
general equitable principles may limit or delay the ability of a creditor to
repossess and resell collateral. If the servicer repossesses and resells a
financed vehicle on behalf of a trust, the trust will be entitled to be paid out
of the sale proceeds before those proceeds are applied to the payment of the
claims of unsecured creditors or the holders of subsequently perfected security
interests or to the defaulting obligor.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. In most cases, courts have upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to the consumers.
The UCC and laws applicable in most states permit a creditor to obtain
a deficiency judgment from a debtor for any deficiency on repossession and
resale of a motor vehicle securing the debtor's loan. The laws applicable in
some states impose limitations or prohibitions on deficiency judgments, however,
and a number of other statutory provisions, including federal bankruptcy laws
and related state laws, and general equitable principles may interfere with or
affect the ability of a creditor to realize upon collateral or enforce a
deficiency judgment. In addition, a defaulting obligor may not have sufficient
assets to make the pursuit of a deficiency judgment worthwhile.
55
CONSUMER PROTECTION LAWS
A number of federal and state consumer protection laws impose
requirements on lenders and servicers in connection with extensions of credit
and collections on retail installment loans. These laws include the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, state adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code and state motor vehicle retail
installment sales acts, and other similar laws. In addition, a number of state
laws impose finance charge ceilings and other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. These requirements impose specific statutory liabilities on
creditors who fail to comply with their provisions. In some cases, this
liability could affect an assignee's ability to enforce consumer finance
contracts such as the receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission, most of the provisions of which are duplicated by the Uniform
Consumer Credit Code, other state statutes or state common law, has the effect
of subjecting a seller to all claims and defenses that the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due from the obligor. Most of the receivables will be subject to the
requirements of the FTC rule. As a result, the trustee, as holder of the
receivables, will be subject to any claims or defenses that the obligor of the
related financed vehicle may assert against the seller of the vehicle. These
claims, to the extent based on the FTC rule, are limited to a maximum liability
equal to the amounts paid by the obligor on the receivable. Any claims not based
on the FTC rule, such as assignee direct liability for Truth-In-Lending Act
violations apparent on the face of the required disclosure statement, may not be
so limited.
The seller will represent and warrant in each sale and servicing
agreement and each pooling and servicing agreement that each receivable complies
with all requirements of law in all material respects. As a result, if an
obligor has a claim against a trust for violation of any law and the claim
materially and adversely affects the trust's interest in a receivable, the
violation would constitute a breach of a representation and warranty under the
sale and servicing agreement or the pooling and servicing agreement and would
create an obligation of the seller to repurchase the related receivable, unless
the breach were cured in a timely manner.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the purchase, ownership and disposition of the notes and the
certificates. This summary does not deal with all aspects of federal income
taxation that may be relevant to holders in light of their personal investment
circumstances. In addition, this summary does not purport to deal with federal
income tax consequences applicable to all categories of holders, some of which
may be subject to special rules. For example, it does not discuss the tax
treatment of noteholders or certificateholders that are banks and other
financial institutions, insurance companies, regulated investment companies,
dealers in securities, tax-exempt organizations or persons holding the notes or
the certificates as a hedge against currency risks or as a position in a
straddle for tax purposes. In addition, unless otherwise specified in the
prospectus supplement for a trust, this summary does not deal with holders other
than original purchasers of the notes or the certificates. There are no cases or
Internal Revenue Service rulings on similar transactions involving both debt and
equity interests issued by a trust with terms similar to those of the notes and
the certificates. As a result, the IRS may disagree with all or a part of the
following discussion. YOU SHOULD CONSULT YOUR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO YOU OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury regulations promulgated
thereunder, current administrative rulings, judicial decisions and other
applicable authorities, all of which are subject to change, possibly with
retroactive effect. This summary is directed to beneficial owners who hold the
notes or certificates as capital assets within the meaning of section 1221 of
the Internal Revenue Code. Each trust will be provided with an opinion of
Federal Tax Counsel regarding certain federal income tax matters discussed
below. A legal opinion is not binding on the IRS or the courts, however, and no
ruling on any of the issues discussed below will be sought from the IRS. For
purposes of the following summary, references to the trust, the notes, the
certificates and related terms, parties and documents will be deemed to refer,
unless otherwise specified, to each trust and the notes, certificates and
related terms, parties and documents applicable to that trust.
The prospectus supplement for each trust will specify whether a
partnership election will be made for the trust or the trust will be treated as
a grantor trust.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a trust for which a
partnership election is made will not be an association or publicly traded
partnership taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the trust agreement
and related documents will be complied with, and on counsel's conclusions that
the nature of the income of the trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
57
If a trust were taxable as a corporation for federal income tax
purposes, the trust would be subject to corporate income tax on its taxable
income. The trust's taxable income would include all its income on the
receivables and could be reduced by its interest expense on the notes. Any
corporate income tax could materially reduce cash available to make payments on
the notes and distributions on the certificates, and certificateholders could be
liable for any tax that is unpaid by the trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The seller will agree, and the
noteholders will agree by their purchase of notes, to treat the notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related prospectus supplement, deliver its opinion that the
notes will be classified as debt for federal income tax purposes. The following
discussion assumes that this characterization of the notes is correct.
ORIGINAL ISSUE DISCOUNT. The following discussion assumes that all
payments on the notes are denominated in United States dollars, that the notes
are not indexed securities or strip notes and that principal and interest is
payable on the notes. In addition, the discussion assumes that the interest
formula for the notes meets the requirements for qualified stated interest under
Treasury regulations relating to original issue discount, and that any original
issue discount on the notes, i.e., any excess of the principal amount of the
notes over their issue price, does not exceed a de minimis amount, i.e., 1/4% of
their principal amount multiplied by the number of full years included in their
term, all within the meaning of the original issue discount regulations. If
these conditions are not satisfied with respect to the notes, additional tax
considerations with respect to the notes will be disclosed in the related
prospectus supplement.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the notes will not be considered issued
with original issue discount. The stated interest on a note will be taxable to
the noteholder as ordinary interest income when received or accrued in
accordance with the noteholder's regular method of tax accounting. Under the
original issue discount regulations, a holder of a note issued with a de minimis
amount of original issue discount must include that original issue discount in
income, on a pro rata basis, as principal payments are made on the note. A
purchaser who buys a note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Internal Revenue Code.
A holder of a Short-Term Note may be subject to special rules. An
accrual basis holder of a Short-Term Note, and certain cash method holders,
including regulated investment companies, as set forth in section 1281 of the
Internal Revenue Code, would, in general, be required to report interest income
as interest accrues on a straight-line basis over the term of each interest
period. Other cash basis holders of a Short-Term Note would, in general, be
required to report interest income as interest is paid or, if earlier, upon the
taxable disposition of the Short-Term Note. A cash basis holder of a Short-Term
Note reporting interest income as it is paid may, however, be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under section 1282 of the
Internal Revenue Code to accrue interest income on all non-government debt
obligations with a term of
58
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues but would not be subject to the interest
expense deferral rule referred to in the preceding sentence. Certain special
rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
SALE OR OTHER DISPOSITION. If a noteholder sells a note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder will equal the holder's
cost for the note, increased by any market discount, acquisition discount,
original issue discount, including de minimis original issue discount, and gain
previously included by the holder in income with respect to the note and
decreased by the amount of bond premium, if any, previously amortized and by the
amount of principal payments previously received by the holder with respect to
the note. Any gain or loss will be capital gain or loss if the note was held as
a capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income. Any capital gain recognized
upon a sale, exchange or other disposition of a note will be long-term capital
gain if the seller's holding period is more than one year and will be short-term
capital gain if the seller's holding period is one year or less. The
deductibility of capital losses is subject to certain limitations. You should
consult your own tax advisors regarding the United States federal tax
consequences to you of the sale, exchange or other disposition of a note.
TAX CONSEQUENCES TO FOREIGN PERSONS. Interest payments made or accrued
to a Foreign Person who is the beneficial owner of a note generally will be
considered portfolio interest, and generally will not be subject to United
States federal income tax and withholding tax, if:
o the interest is not effectively connected with the conduct of a
trade or business within the United States by the Foreign Person;
o the Foreign Person is not actually or constructively a 10%
shareholder of the trust or the seller, including a holder of 10%
of the outstanding certificates, a controlled foreign corporation
with respect to which the trust or the seller is a related person
within the meaning of the Internal Revenue Code or a bank
receiving interest described in section 881(c)(3)(A) of the
Internal Revenue Code; and
o the indenture trustee or other person who is otherwise required to
withhold United States tax with respect to the notes receives an
appropriate statement, on IRS Form W-8 BEN or a similar form,
signed under penalties of perjury, certifying that the beneficial
owner of the note is a Foreign Person and providing the Foreign
Person's name and address.
If a note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide the
relevant signed statement to the person required to withhold if the signed
statement is accompanied by an IRS Form W-8 BEN, or a similar form, provided by
the Foreign Person that beneficially owns the note. A partnership that is a
Foreign Person may have additional reporting obligations.
59
Payments of portfolio interest that are effectively connected with the
conduct of a trade or business within the United States by a Foreign Person
generally will not be subject to United States federal withholding tax, provided
that the Foreign Person provides a properly executed IRS Form W-8 ECI, or a
successor form, stating that the interest paid is not subject to withholding tax
because it is effectively connected with the Foreign Person's conduct of a trade
or business within the United States. If the interest is not portfolio interest,
then it will be subject to withholding tax at a rate of 30%, unless the Foreign
Person provides a properly executed IRS Form W-8 BEN, or a successor form,
claiming an exemption from or reduction in withholding under the benefit of a
tax treaty or an IRS Form W-8 ECI, or a successor form, stating that interest
paid is not subject to withholding tax because it is effectively connected with
the Foreign Person's conduct of a trade or business within the United States. If
the interest is effectively connected income, the Foreign Person, although
exempt from the withholding tax discussed above, will be subject to United
States federal income tax on that interest at graduated rates.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Foreign Person will be exempt from United
States federal income and withholding tax, provided that:
o the gain is not effectively connected with the conduct of a trade
or business in the United States by the Foreign Person; and
o in the case of an individual Foreign Person, the Foreign Person is
not present in the United States for 183 days or more in the
taxable year and does not otherwise have a tax home within the
United States.
BACKUP WITHHOLDING. Each holder of a note, other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident, will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject to backup withholding. Certification of the registered
owner's Foreign Person status would usually be made on an IRS Form W-8 BEN under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence. If a nonexempt noteholder fails to provide the
required certification, the trust will be required to withhold 31% of the amount
otherwise payable to the holder and to remit the withheld amount to the IRS as a
credit against the holder's federal income tax liability. Any amounts withheld
under the backup withholding rules from a payment to a beneficial owner would be
allowed as a refund or a credit against the beneficial owner's United States
federal income tax provided the required information had been furnished to the
IRS. You should consult your own tax advisors regarding the withholding
regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the
opinion of Federal Tax Counsel, the IRS successfully asserted that one or more
classes of notes did not represent debt for federal income tax purposes, those
classes of notes might be treated as equity interests in the trust. If so
treated, the trust might be treated as a publicly traded partnership taxable as
a corporation, with potentially adverse tax consequences, and the publicly
traded partnership taxable as a corporation would not be able to reduce its
taxable income by deductions for interest
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expense on notes recharacterized as equity. Alternatively, and most likely in
the view of Federal Tax Counsel, the trust might be treated as a publicly traded
partnership that would not be taxable as a corporation because it would meet
certain qualifying income tests. If the notes were treated as equity interests
in such a partnership, however, they would most likely be treated as guaranteed
payments, which could have adverse tax consequences to certain holders. For
example, income to certain tax-exempt entities, including pension funds, would
be unrelated business taxable income, income to foreign holders generally would
be subject to United States withholding tax and United States tax return filing
requirements, and individual holders might be subject to certain limitations on
their ability to deduct their share of trust expenses. If one or more classes of
notes were treated as equity interests in a partnership, the consequences
governing the certificates as equity interests in a partnership described below
under " -- Tax Consequences to Holders of the Certificates" would apply to the
holders of those classes of notes.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The seller and the servicer
will agree, and the certificateholders will agree by their purchase of
certificates, to treat the trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
trust, the partners of the partnership being the certificateholders, including
the seller in its capacity as recipient of distributions from the reserve
account, and the notes being debt of the related partnership. The proper
characterization of the arrangement involving the trust, the certificates, the
notes, the seller and the servicer is not clear, however, because there is no
authority on transactions closely comparable to the transaction contemplated in
this prospectus.
A variety of alternative characterizations are possible. For example,
because the certificates have certain features characteristic of debt, the
certificates might be considered debt of the seller or the trust. That
characterization would not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
certificates as equity interests in a partnership as described below. The
following discussion assumes that the certificates represent equity interests in
a partnership.
INDEXED SECURITIES, ETC. The following discussion assumes that all
payments on the certificates are denominated in United States dollars, that the
certificates are not indexed securities or strip notes, that principal and
interest are distributed on the certificates and that a series of securities
includes a single class of certificates. If these conditions are not satisfied
with respect to the certificates, additional tax considerations with respect to
the certificates will be disclosed in the related prospectus supplement.
PARTNERSHIP TAXATION. As a partnership, the trust will not be subject
to federal income tax. Rather, each certificateholder will be required to
separately take into account that holder's allocated share of income, gains,
losses, deductions and credits of the trust. The trust's income will consist
primarily of interest and finance charges earned on the receivables, including
appropriate adjustments for market discount, original issue discount and bond
premium, and any gain upon collection or disposition of receivables. The trust's
deductions will consist primarily
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of interest accruing with respect to the notes, servicing and other fees, and
losses or deductions upon collection or disposition of receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Internal Revenue Code, Treasury regulations and the
partnership agreement or, in this case, the trust agreement and related
documents. The trust agreement will provide, in general, that the
certificateholders will be allocated taxable income of the trust for each month
equal to the sum of:
o the interest that accrues on the certificates in accordance with
their terms for that month, including interest accruing at the
applicable pass through rate for that month and interest on
amounts previously due on the certificates but not yet
distributed;
o any trust income attributable to discount on the receivables that
corresponds to any excess of the principal amount of the
certificates over their initial issue price;
o prepayment premium payable to the certificateholders for that
month; and
o any other amounts of income payable to the certificateholders for
that month.
The allocation of taxable income will be reduced by any amortization by
the trust of premium on receivables that corresponds to any excess of the issue
price of certificates over their principal amount. All remaining taxable income
of the trust will be allocated to the seller. Based on the economic arrangement
of the parties, this approach for allocating trust income should be permissible
under applicable Treasury regulations, although no assurance can be given that
the IRS would not require a greater amount of income to be allocated to
certificateholders. Moreover, even under the foregoing method of allocation,
certificateholders may be allocated income equal to the entire pass through rate
plus the other items described above even though the trust might not have
sufficient cash to make current cash distributions of such amount. As a result,
cash basis holders will in effect be required to report income from the
certificates on the accrual basis and certificateholders may become liable for
taxes on trust income even if they have not received cash from the trust to pay
those taxes. In addition, because tax allocations and tax reporting will be done
on a uniform basis for all certificateholders but certificateholders may be
purchasing certificates at different times and at different prices,
certificateholders may be required to report on their tax returns taxable income
that is greater or less than the amount reported to them by the trust.
All of the taxable income allocated to a certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity,
including an individual retirement account will constitute unrelated business
taxable income generally taxable to such a holder under the Internal Revenue
Code.
An individual taxpayer's share of expenses of the trust, including fees
to the servicer but excluding interest expense, would be miscellaneous itemized
deductions. These deductions might be disallowed to the individual in whole or
in part and might result in the holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to the holder over the life of
the trust.
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The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that these calculations be made separately for each receivable, the
trust might be required to incur additional expense but it is believed that
there would not be a material adverse effect on certificateholders.
DISCOUNT AND PREMIUM. Unless otherwise specified in the related
prospectus supplement, the seller will represent that the receivables were not
issued with original issue discount, and, therefore, the trust should not have
original issue discount income. The purchase price paid by the trust for the
receivables may, however, be greater or less than the remaining principal
balance of the receivables at the time of purchase. If so, the receivables will
have been acquired at a premium or discount, as the case may be. As indicated
above, the trust will make this calculation on an aggregate basis but might be
required to recompute it on a receivable-by-receivable basis.
If the trust acquires the receivables at a market discount or premium,
the trust will elect to include that discount in income currently as it accrues
over the life of the receivables or to offset that premium against interest
income on the receivables. As indicated above, a portion of the market discount
income or premium deduction may be allocated to certificateholders.
SECTION 708 TERMINATION. Under section 708 of the Internal Revenue
Code, the trust will be deemed to terminate for federal income tax purposes if
50% or more of the capital and profits interests in the trust are sold or
exchanged within a 12-month period. Under final Treasury regulations issued on
May 9, 1997, if a termination occurs, the trust will be considered to have
contributed the assets of the old partnership to a new partnership in exchange
for interests in the new partnership. The interests would be deemed distributed
to the partners of the old partnership in liquidation of the old partnership,
which would not constitute a sale or exchange.
DISPOSITION OF CERTIFICATES. In general, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificates sold.
A certificateholder's tax basis in a certificate will generally equal the
holder's cost increased by the holder's share of trust income and decreased by
any distributions received with respect to the certificate. In addition, both
the tax basis in the certificates and the amount realized on a sale of the
certificate would include the holder's share of the notes and other liabilities
of the trust. A holder acquiring certificates at different prices may be
required to maintain a single aggregate adjusted tax basis in the certificates,
and, upon sale or other disposition of some of the certificates, allocate a
portion of the aggregate tax basis to the certificates sold, rather than
maintaining a separate tax basis in each certificate for purposes of computing
gain or loss on a sale of that certificate.
Any gain on the sale of a certificate attributable to the holder's
share of unrecognized accrued market discount on the receivables would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets that
would give rise to special reporting requirements. In order to avoid those
special reporting requirements, the trust will elect to include market discount
in income as it accrues.
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If a certificateholder is required to recognize an aggregate amount of
income, not including income attributable to disallowed itemized deductions
described above, over the life of the certificates that exceeds the aggregate
cash distributions with respect to the certificates, that excess will generally
give rise to a capital loss upon the retirement of the certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the
trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the certificateholders
in proportion to the principal amount of certificates owned by them as of the
close of the last day of the month. As a result, a holder purchasing
certificates may be allocated tax items, which will affect its tax liability and
tax basis, attributable to periods before the actual transaction.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed or only applies to transfers
of less than all of the partner's interest, taxable income or losses of the
trust might be reallocated among the certificateholders. The seller is
authorized to revise the trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
SECTION 754 ELECTION. In the event that a certificateholder sells its
certificates at a profit or loss, the purchasing certificateholder will have a
higher or lower basis in the certificates than the selling certificateholder
had. The tax basis of the trust's assets will not be adjusted to reflect that
higher or lower basis unless the trust were to file an election under section
754 of the Internal Revenue Code. In order to avoid the administrative
complexities that would be involved in keeping accurate accounting records, as
well as potentially onerous information reporting requirements, the trust will
not make that election. As a result, certificateholders might be allocated a
greater or lesser amount of trust income than would be appropriate based on
their own purchase price for the certificates.
ADMINISTRATIVE MATTERS. The trustee is required to keep or have kept
complete and accurate books of the trust. The books will be maintained for
financial reporting and tax purposes on an accrual basis, and the fiscal year of
the trust will be the calendar year. The trustee will file a partnership
information return on IRS Form 1065 with the IRS for each taxable year of the
trust and will report each certificateholder's allocable share of items of trust
income and expense to holders and the IRS on Schedule K-1. The trust will
provide the Schedule K-1 information to nominees that fail to provide the trust
with the information statement described below, and those such nominees will be
required to forward that information to the beneficial owners of the
certificates. In general, holders must file tax returns that are consistent with
the information return filed by the trust or be subject to penalties unless the
holder notifies the IRS of all inconsistencies.
Under section 6031 of the Internal Revenue Code, any person that holds
certificates as a nominee at any time during a calendar year is required to
furnish the trust with a statement containing information on the nominee, the
beneficial owners and the certificates so held. The required information
includes:
o the name, address and taxpayer identification number of the
nominee; and
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o as to each beneficial owner, the name, address and identification
number of the beneficial owner, whether the beneficial owner is a
United States person, a tax-exempt entity or a foreign government,
an international organization, or any wholly owned agency or
instrumentality of the foregoing, and certain information on
certificates that were held, bought or sold on behalf of the
beneficial owner throughout the year.
In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the trust information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the trust. The information referred to above for any
calendar year must be furnished to the trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the trust
with the information described above may be subject to penalties.
The seller will be designated as the tax matters partner in the related
trust agreement and, therefore, will be responsible for representing the
certificateholders in any dispute with the IRS. The Internal Revenue Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. In general, the statute of limitations
for partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination following
an audit of the return of the trust by the appropriate taxing authorities could
result in an adjustment of the returns of the certificateholders, and, under
certain circumstances, a certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the trust. An adjustment could
also result in an audit of a certificateholder's returns and adjustments of
items not related to the income and losses of the trust.
TAX CONSEQUENCES TO FOREIGN PERSONS. It is not clear whether the trust
would be considered to be engaged in a trade or business in the United States
for purposes of federal withholding taxes with respect to Foreign Persons
because there is no clear authority dealing with that issue under facts
substantially similar to those described in this prospectus. Although it is not
expected that the trust would be engaged in a trade or business in the United
States for those purposes, the trust will withhold as if it were so engaged in
order to protect the trust from possible adverse consequences of a failure to
withhold. The trust expects to withhold on the portion of its taxable income
that is allocable to foreign certificateholders pursuant to section 1446 of the
Internal Revenue Code, as if such income were effectively connected to a United
States trade or business, at a rate of 35% for foreign holders that are taxable
as corporations and 39.6% for all other foreign holders. Subsequent adoption of
Treasury regulations or the issuance of other administrative pronouncements may
require the trust to change its withholding procedures. In determining a
holder's withholding status, the trust may rely on IRS Form W-8 BEN, IRS Form
W-9 or the holder's certification of non-foreign status signed under penalties
of perjury.
A foreign holder might be required to file a United States individual
or corporate income tax return, including, in the case of a corporation, the
branch profits tax, on its share of the trust's income. A foreign holder must
obtain a taxpayer identification number from the IRS and submit that number to
the trust on IRS Form W-8 BEN, or on a substantially identical form, in order to
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assure appropriate crediting of the taxes withheld. A foreign holder generally
would be entitled to file with the IRS a claim for refund with respect to taxes
withheld by the trust, taking the position that no taxes were due because the
trust was not engaged in a United States trade or business. If and to the extent
that interest payments made or accrued to a foreign holder are determined
without regard to the income of the trust, however, those payments generally
will be considered guaranteed payments. If interest payments are properly
characterized as guaranteed payments, then the interest will not be considered
portfolio interest. As a result, certificateholders will be subject to United
States federal income tax and withholding tax at a rate of 30%, unless reduced
or eliminated pursuant to an applicable treaty. In that case, a foreign holder
would only be entitled to claim a refund for that portion of the taxes in excess
of the taxes that should be withheld with respect to the guaranteed payments.
BACKUP WITHHOLDING. Distributions made on the certificates and proceeds
from the sale of the certificates will be subject to a backup withholding tax of
31% if, in general, the certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Internal Revenue Code. Any amounts withheld under
the backup withholding rules from a payment to a beneficial owner would be
allowed as a refund or a credit against the beneficial owner's United States
federal income tax provided the required information had been furnished to the
IRS. You should consult your own tax advisors regarding the withholding
regulations.
TRUSTS IN WHICH ALL CERTIFICATES ARE RETAINED BY THE SELLER OR AN AFFILIATE OF
THE SELLER
TAX CHARACTERIZATION OF THE TRUST
Federal Tax Counsel will deliver its opinion that a trust which issues
one or more classes of notes to investors and all the certificates of which are
retained by seller or an affiliate of the seller will not be an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes. This opinion will be based on the assumption that the terms of the
trust agreement and related documents will be complied with, and on counsel's
conclusions that the trust will constitute a mere security arrangement for the
issuance of debt by the single certificateholder.
TREATMENT OF THE NOTES AS INDEBTEDNESS. The seller will agree, and the
noteholders will agree by their purchase of notes, to treat the notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related prospectus supplement, advise the trust that the notes
will be classified as debt for federal income tax purposes. Assuming this
characterization of the notes is correct, the federal income tax consequences to
noteholders described above under "TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS
MADE -- Tax Consequences to Holders of the Notes" would apply to the
noteholders.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the
opinion of Federal Tax Counsel, the IRS successfully asserted that one or more
classes of notes did not represent debt for federal income tax purposes, those
classes of notes might be treated as equity interests in the trust. If so
treated, the trust might be treated as a publicly traded partnership taxable as
a corporation, with potentially adverse tax consequences, and the publicly
traded partnership
66
taxable as a corporation would not be able to reduce its taxable income by
deductions for interest expense on notes recharacterized as equity.
Alternatively, and more likely in the view of Federal Tax Counsel, the trust
might be treated as a publicly traded partnership that would not be taxable as a
corporation because it would meet certain qualifying income tests. If the notes
were treated as equity interests in such a partnership, however, they would most
likely be treated as guaranteed payments, which could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities, including pension funds, would be unrelated business taxable income,
income to foreign holders generally would be subject to United States
withholding tax and United States tax return filing requirements, and individual
holders might be subject to certain limitations on their ability to deduct their
share of trust expenses. If one or more classes of notes were treated as equity
interests in a partnership, the consequences governing the certificates as
equity interests in a partnership described above under "TRUSTS FOR WHICH A
PARTNERSHIP ELECTION IS MADE -- Tax Consequences to Holders of the Certificates"
would apply to the holders of those classes of notes.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
If a partnership election is not made, Federal Tax Counsel will deliver
its opinion that the trust will not be classified as an association taxable as a
corporation and that the trust will be classified as a grantor trust under
subpart E, part 1, subchapter J, chapter 1 of subtitle A of the Internal Revenue
Code. In this case, owners of certificates issued by a grantor trust will be
treated for federal income tax purposes as owners of a portion of the trust's
assets as described below.
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated
as the owner of a pro rata undivided interest in the interest and principal
portions of the trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
receivables in the trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with its method of accounting its pro
rata share of the entire income from the receivables in the trust represented by
the Grantor Trust Certificates, including interest, original issue discount, if
any, prepayment fees, assumption fees, any gain recognized upon an assumption
and late payment charges retained by the servicer. Under sections 162 and 212 of
the Internal Revenue Code, each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the servicer, provided that those amounts are reasonable compensation for
services rendered to the trust. A Grantor Trust Certificateholder that is an
individual, estate or trust will be entitled to deduct its share of expenses
only to the extent those expenses plus all other section 212 expenses exceed 2%
of its adjusted gross income. In addition, section 68 of the Internal Revenue
Code provides that the amount of itemized deductions otherwise allowable for an
individual whose adjusted gross income exceeds a specified amount will be
reduced by the lesser of three percent of the excess of the individual's
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adjusted gross income over that amount or 80% of the amount of itemized
deductions otherwise allowable for the taxable year. In addition, a Grantor
Trust Certificateholder, other than a corporation, subject to the alternative
minimum tax may not deduct miscellaneous itemized deductions in determining its
alternative minimum taxable income.
A Grantor Trust Certificateholder using the cash method of accounting
must take into account its pro rata share of income and deductions as and when
collected by or paid to the servicer. A Grantor Trust Certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the servicer, whichever is
earlier. If the servicing fees paid to the servicer are deemed to exceed
reasonable servicing compensation the amount of that excess could be considered
as an ownership interest retained by the servicer, or any person to whom the
servicer assigned for value all or a portion of the servicing fees, in a portion
of the interest payments on the receivables. The receivables would then be
subject to the stripped bond rules of the Internal Revenue Code discussed below.
STRIPPED BONDS. If the servicing fees paid to the servicer are deemed
to exceed reasonable servicing compensation, based on recent guidance by the
IRS, each purchaser of a Grantor Trust Certificate will be treated as the
purchaser of a stripped bond which generally should be treated as a single debt
instrument issued on the day it is purchased for purposes of calculating any
original issue discount. In general, under recently issued Treasury regulations,
if the discount on a stripped bond is larger than a de minimis amount, as
calculated for purposes of the original issue discount rules, the stripped bond
will be considered to have been issued with original issue discount. The
original issue discount on a Grantor Trust Certificate will be the excess of the
certificate's stated redemption price over its issue price. The issue price of a
Grantor Trust Certificate as to any purchaser will be equal to the price paid by
the purchaser of the Grantor Trust Certificate. The stated redemption price of a
Grantor Trust Certificate will be the sum of all payments to be made on the
certificate other than qualified stated interest, if any. Based on the preamble
to recently issued Treasury regulations, Federal Tax Counsel is of the opinion
that, although the matter is not entirely clear, the interest income on the
certificates at the sum of the pass through rate and the portion of the
servicing fee rate that does not constitute excess servicing will be treated as
qualified stated interest within the meaning of those regulations and that
income will be so treated in the trustee's tax information reporting. The
related prospectus supplement will disclose if Grantor Trust Certificates will
be issued with greater than de minimis original issue discount.
ORIGINAL ISSUE DISCOUNT ON STRIPPED BONDS. If the stripped bonds have
more than a de minimis amount of original issue discount, the special rules of
the Internal Revenue Code relating to original issue discount, currently
sections 1271 through 1273 and section 1275 of the Internal Revenue Code, will
be applicable to a Grantor Trust Certificateholder's interest in those
receivables treated as stripped bonds. In general, a Grantor Trust
Certificateholder that acquires an interest in a stripped bond issued or
acquired with original issue discount must include in gross income the sum of
the daily portions, determined as described below, of the original issue
discount on such stripped bond for each day on which it owns a certificate,
including the date of purchase but excluding the date of disposition. In the
case of an original Grantor Trust Certificateholder, the daily portions of
original issue discount with respect to a stripped bond generally would be
determined as follows. A calculation will be made of the portion of original
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issue discount that accrues on the stripped bond during each successive monthly
accrual period, or shorter accrual period in respect of the date of original
issue or the final payment date. This will be done, in the case of each full
monthly accrual period, by adding the present value of all remaining payments to
be received on the stripped bond under the prepayment assumption used in respect
of the stripped bonds and any payments received during the accrual period, and
subtracting from that total the adjusted issue price of the stripped bond at the
beginning of the accrual period. No representation is made that the stripped
bonds will prepay at any prepayment assumption. The adjusted issue price of a
stripped bond at the beginning of the first accrual period is its issue price,
as determined for purposes of the original issue discount rules of the Internal
Revenue Code. The adjusted issue price of a stripped bond at the beginning of a
subsequent accrual period is the adjusted issue price at the beginning of the
immediately preceding accrual period plus the amount of original issue discount
allocable to that accrual period and reduced by the amount of any payment, other
than qualified stated interest, made at the end of or during that accrual
period. The original issue discount accruing during an accrual period will then
be divided by the number of days in the period to determine the daily portion of
original issue discount for each day in the period. With respect to an initial
accrual period shorter than a full monthly accrual period, the daily portions of
original issue discount must be determined according to an appropriate
allocation under either an exact or approximate method set forth in the original
issue discount regulations, or some other reasonable method, provided that the
method is consistent with the method used to determine the yield to maturity of
the stripped bonds.
The method of calculating original issue discount described above will
cause the accrual of original issue discount to either increase or decrease, but
never below zero, in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the stripped bonds. Subsequent purchasers that
purchase stripped bonds at more than a de minimis discount should consult their
own tax advisors regarding the proper method to accrue original issue discount.
MARKET DISCOUNT IF STRIPPED BOND RULES DO NOT APPLY. A Grantor Trust
Certificateholder that acquires an undivided interest in receivables may be
subject to the market discount rules of sections 1276 through 1278 of the
Internal Revenue Code to the extent an undivided interest in a receivable is
considered to have been purchased at a market discount. In general, the amount
of market discount is equal to the excess of the portion of the principal amount
of the receivable allocable to the holder's undivided interest over the holder's
tax basis in that interest. Market discount with respect to a Grantor Trust
Certificate will be considered to be zero if the amount allocable to the Grantor
Trust Certificate is less than 0.25% of the Grantor Trust Certificate's stated
redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued. Investors should consult their
own tax advisors regarding the application of those rules and the advisability
of making any of the elections allowed under sections 1276 through 1278 of the
Internal Revenue Code.
The Internal Revenue Code provides that any principal payment, whether
a scheduled payment or a prepayment, or any gain on disposition of a market
discount bond shall be treated as ordinary income to the extent that it does not
exceed the accrued market discount at the time of the payment. The amount of
accrued market discount for purposes of determining the tax
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treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.
The Internal Revenue Code authorizes the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with original issue discount, the amount of
market discount that accrues during any accrual period would be equal to the
product of the total remaining market discount and a fraction, the numerator of
which is the original issue discount accruing during the accrual period and the
denominator of which is the total remaining original issue discount at the
beginning of the accrual period. For Grantor Trust Certificates issued without
original issue discount, the amount of market discount that accrues during any
accrual period is equal to the product of the total remaining market discount
and a fraction, the numerator of which is the amount of stated interest paid
during the accrual period and the denominator of which is the total amount of
stated interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments, such as the Grantor Trust Certificates, that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing those instruments, the same prepayment assumption applicable to
calculating the accrual of original issue discount will apply. Because the
regulations described above have not been issued, it is impossible to predict
what effect those regulations might have on the tax treatment of a Grantor Trust
Certificate purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry the Grantor Trust Certificate. For these purposes, the de minimis rule
referred to above applies. Any deferred interest expense would not exceed the
market discount that accrues during the taxable year and is, in general, allowed
as a deduction not later than the year in which the market discount is
includible in income. If a holder elects to include market discount in income
currently as it accrues on all market discount instruments acquired by the
holder in that taxable year or thereafter, the interest deferral rule described
above will not apply.
PREMIUM. The price paid for a Grantor Trust Certificate by a holder
will be allocated to the holder's undivided interest in each receivable based on
each receivable's relative fair market value, so that the holder's undivided
interest in each receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in receivables at a premium may
elect to amortize that premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on a Grantor Trust
Certificate. The basis for a Grantor Trust Certificate will be reduced to the
extent that amortizable premium is applied to offset interest payments. It is
not clear whether a reasonable prepayment assumption should be used in computing
amortization of premium allowable under section 171 of the Internal Revenue
Code. A Grantor Trust Certificateholder that makes this election for a Grantor
Trust Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with
70
respect to all debt instruments having amortizable bond premium that the Grantor
Trust Certificateholder acquires during the year of the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Certificate acquired at a
premium should, if a receivable prepays in full, recognize a loss equal to the
difference between the portion of the prepaid principal amount of the receivable
that is allocable to the Grantor Trust Certificate and the portion of the
adjusted basis of the Grantor Trust Certificate that is allocable to the
receivable. If a reasonable prepayment assumption is used to amortize the
premium, it appears that the a loss would be available, if at all, only if
prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be required
to reflect differences between an assumed prepayment rate and the actual rate of
prepayments.
On December 30, 1997, the IRS issued final regulations dealing with
amortizable bond premium. These regulations specifically do not apply to
prepayable debt instruments subject to section 1272(a)(6) of the Internal
Revenue Code. Absent further guidance from the IRS, the trustee intends to
account for amortizable bond premium in the manner described above. You should
consult your own tax advisors regarding the possible application of these
regulations.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. The original
issue discount regulations permit a Grantor Trust Certificateholder to elect to
accrue all interest, discount, including de minimis market or original issue
discount, and premium in income as interest based on a constant yield method. If
this election were to be made with respect to a Grantor Trust Certificate with
market discount, the Grantor Trust Certificateholder would be deemed to have
made an election to include in income currently market discount with respect to
all other debt instruments having market discount that the Grantor Trust
Certificateholder acquires during or after the year of the election. Similarly,
a Grantor Trust Certificateholder that makes this election for a Grantor Trust
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that the Grantor Trust Certificateholder owns or
acquires. The election to accrue interest, discount and premium on a constant
yield method with respect to a Grantor Trust Certificate is irrevocable.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. The sale or exchange
of a Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the seller's
adjusted basis in the Grantor Trust Certificate. The adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the original issue discount included in the seller's gross income
with respect to the Grantor Trust Certificate and reduced by principal payments
on the Grantor Trust Certificate previously received by the seller. The gain or
loss will be capital gain or loss to a seller for which a Grantor Trust
Certificate is a capital asset within the meaning of section 1221 of the
Internal Revenue Code and will be long-term or short-term depending on whether
the Grantor Trust Certificate has been owned for the long-term capital gain
holding period, currently more than twelve months.
The Grantor Trust Certificates will be evidences of indebtedness within
the meaning of section 582(c) (1) of the Internal Revenue Code, so that gain or
loss recognized from the sale of
71
a Grantor Trust Certificate by a bank or a thrift institution to which that
section applies will be treated as ordinary income or loss.
TAX CONSEQUENCES TO FOREIGN PERSONS. In general, to the extent that a
Grantor Trust Certificate evidences ownership in underlying receivables that
were issued on or before July 18, 1984, interest or original issue discount paid
by the person required to withhold tax under section 1441 or 1442 of the
Internal Revenue Code to a beneficial owner that is not a United States Person
or to a Grantor Trust Certificateholder that is a Foreign Person, other than a
qualified intermediary, a United States branch of a Foreign Person, or a
withholding foreign partnership, holding on behalf of an owner that is not a
United States Person will be subject to federal income tax, collected by
withholding, at a rate of 30% or such lower rate as may be provided for interest
by an applicable tax treaty. Accrued original issue discount recognized by the
owner on the sale or exchange of a Grantor Trust Certificate also will be
subject to federal income tax at the same rate. In general, the payments would
not be subject to withholding to the extent that a Grantor Trust Certificate
evidences ownership in receivables issued after July 18, 1984 by natural persons
if the Grantor Trust Certificateholder complies with certain identification
requirements, including delivery of a statement, signed by the Grantor Trust
Certificateholder under penalties of perjury, certifying that the Grantor Trust
Certificateholder is not a United States Person and providing the name and
address of the Grantor Trust Certificateholder. Additional restrictions apply to
receivables if the obligor is not a natural person in order to qualify for the
exemption from withholding.
BACKUP WITHHOLDING. The servicer will furnish or make available, within
a reasonable time after the end of each calendar year, to each person who was a
Grantor Trust Certificateholder at any time during that year such information as
may be deemed necessary or desirable to assist the Grantor Trust
Certificateholders in preparing their federal income tax returns or to enable
holders to make such information available to beneficial owners or financial
intermediaries that hold Grantor Trust Certificates as nominees on behalf of
beneficial owners. If a holder, beneficial owner, financial intermediary or
other recipient of a payment on behalf of a beneficial owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that such person has not reported all interest and dividend income
required to be shown on its federal income tax return, backup withholding at a
rate of 31% may be required with respect to any payments. Any amounts deducted
and withheld from a distribution to a recipient would be allowed as a credit
against the recipient's federal income tax liability. Any amounts withheld under
the backup withholding rules from a payment to a beneficial owner would be
allowed as a refund or a credit against the beneficial owner's United States
federal income tax provided the required information had been furnished to the
IRS. You should consult your own tax advisors regarding the withholding
regulations.
TRUST FOR WHICH A FASIT ELECTION IS MADE
The Small Business and Job Protection Act of 1996 added sections 860H
through 860L to the Internal Revenue Code, which provide for a new type of
entity for United States federal income tax purposes known as a financial asset
securitization investment trust or FASIT. The FASIT provisions of the Internal
Revenue Code became effective on September 1, 1997. On February 4, 2000, the IRS
and the Treasury Department issued proposed regulations on FASITS. In general,
the regulations will not be effective until final regulations are filed with the
federal
72
register. It appears, however, that various anti-abuse rules would apply as of
February 4, 2000. As a result, definitive guidance cannot be provided with
respect to many aspects of the tax treatment of the trust or the holders of
FASIT regular interests. In addition, the qualification as a FASIT of any trust
for which a FASIT election is made will depend on the trust's ability to satisfy
the requirements of the FASIT provisions on an ongoing basis, including, without
limitation, the requirements of any final Treasury regulations that may be
promulgated in the future under the FASIT provisions or as a result of any
change in applicable law.
In general, the FASIT legislation will enable a trust to be treated as
a pass-through entity not subject to United States federal entity-level income
tax, except with respect to various prohibited transactions, and to issue
securities that will be treated as debt for United States federal income tax
purposes. If a FASIT election is made with respect to a trust, the related
prospectus supplement will provide additional information on the FASIT
provisions.
THE FEDERAL TAX DISCUSSIONS SET FORTH ABOVE PROVIDE GENERAL INFORMATION
ONLY AND MAY NOT APPLY TO YOUR TAX SITUATION. YOU SHOULD CONSULT YOUR OWN TAX
ADVISORS REGARDING THE TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP OR
DISPOSITION OF NOTES OR CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL OR FOREIGN TAX LAWS, AND THE POSSIBLE EFFECTS OF CHANGES IN
FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Internal Revenue Code
prohibit a Plan, such as a pension, profit sharing or other employee benefit
plan subject to ERISA, a plan described in Section 4975 of the Internal Revenue
Code, such as an individual retirement account or a Keogh plan, or an entity
whose underlying assets include plan assets by reason of a plan's investment in
that entity or otherwise, from engaging in various transactions involving Plan
assets with persons that are parties in interest under ERISA or disqualified
persons under the Internal Revenue Code with respect to the Plan. In addition,
some governmental plans, although not subject to ERISA or the Internal Revenue
Code, are subject to federal, state or local laws that impose similar
requirements. A violation of these prohibited transaction rules may generate
excise tax and other liabilities under ERISA and the Internal Revenue Code or
under federal, state or local laws that impose similar requirements for those
persons.
Depending on the relevant facts and circumstances, one or more
prohibited transaction exemptions, including the following, may apply to the
purchase, holding or sale of the securities issued by a trust:
o PTCE 96-23, which exempts various transactions effected on behalf
of a Plan by an in-house asset manager;
o PTCE 95-60, which exempts various transactions between insurance
company general accounts and parties in interest;
o PTCE 91-38, which exempts various transactions between bank
collective investment funds and parties in interest;
73
o PTCE 90-1, which exempts various transactions between insurance
company pooled separate accounts and parties in interest; or
o PTCE 84-14, which exempts various transactions effected on behalf
of a Plan by a qualified professional asset manager.
We cannot assure you that any of these exemptions will apply with
respect to a Plan's investment in the securities issued by a trust, or that any
of these exemptions, if it did apply, would apply to all prohibited transactions
that may occur in connection with that investment. In addition, these exemptions
may not apply to transactions involved in the operation of a trust if, as
described below, the assets of the trust were considered to include Plan assets.
In general, pursuant to the Plan Assets Regulation, when a Plan
acquires an equity interest in an entity, such as a trust, and that interest
does not represent a publicly offered security or a security issued by an
investment company registered under the Investment Company Act of 1940, as
amended, the Plan's assets include both the equity interest and an undivided
interest in each of the underlying assets of the entity, unless it is
established either that the entity is an operating company or that equity
participation in the entity by Plans is not significant. In general, an equity
interest is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. The treatment
in this context of the securities issued by a trust will be discussed in the
related prospectus supplement.
ERISA also imposes various duties on persons who are fiduciaries of
Plans subject to ERISA, including the requirements of investment prudence and
diversification and the requirement that the Plan's investments be made in
accordance with the documents governing the Plan. Under ERISA, any person who
exercises any authority or control with respect to the management or disposition
of the assets of a Plan, and any person who provides investment advice for a fee
with respect to Plan assets, is considered to be a fiduciary of the Plan. Each
Plan fiduciary considering an investment in the securities issued by a trust
should determine, among other factors, whether that investment is permitted
under the documents governing the Plan, is appropriate for the Plan in view of
its overall investment policy and the composition and diversification of its
portfolio and is prudent considering the factors discussed in this prospectus
and the related prospectus supplement.
Each Plan fiduciary must also determine whether the acquisition and
holding by the Plan of the securities issued by a trust and the operation of the
trust would result in prohibited transactions if the Plan were deemed to own an
interest in the underlying assets of the trust under the rules discussed above.
There may also be an improper delegation of the responsibility to manage Plan
assets if a Plan that purchases the securities issued by a trust is deemed to
own an interest in the underlying assets of the trust.
THE NOTES
Unless otherwise specified in the related prospectus supplement, the
notes issued by a trust may be purchased by a Plan. Each Plan fiduciary must
determine that the purchase of a note is consistent with its fiduciary duties
under ERISA and does not result in a nonexempt
74
prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code. In addition, because the seller, an underwriter, the
indenture trustee, the trustee or the servicer may benefit from a Plan's
investment in the notes, the notes may not be purchased with the assets of a
Plan if the seller, an underwriter, the indenture trustee, the trustee, the
servicer or any of their affiliates:
o has investment or administrative discretion with respect to those
assets;
o has authority or responsibility to give, or regularly gives,
investment advice with respect to those assets for a fee and
pursuant to an agreement or understanding that the advice will
serve as a primary basis for investment decisions with respect to
those assets and will be based on the particular investment needs
for the Plan; or
o unless PTCE 95-60, PTCE 90-1 or PTCE 91-38 applies, is an employer
maintaining or contributing to the Plan.
Employee benefit plans that are governmental plans, as defined in
Section 3(32) of ERISA, and various church plans, as defined in Section 3(33) of
ERISA, are not subject to ERISA requirements. Any governmental or church plan
which is qualified under Section 401(a) of the Internal Revenue Code and exempt
from taxation under Section 501(a) of the Internal Revenue Code is, however,
subject to the prohibited transaction rules in Section 503 of the Internal
Revenue Code.
Each Plan fiduciary considering the purchase of the securities issued
by a trust should consult its tax and/or legal advisors regarding whether the
assets of the trust would be considered Plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
THE CERTIFICATES
In general, the certificates issued by a trust will be considered
equity interests in the trust for purposes of the Plan Assets Regulation and,
therefore, the assets of the trust will constitute Plan assets if the
certificates are acquired by Plans. In such event, the fiduciary and prohibited
transaction restrictions of ERISA and Section 4975 of the Internal Revenue Code
would apply to transactions involving the assets of the trust. As a result,
except in the case of certificates with respect to which the Exemption is
available as described below, the certificates may not be transferred to a Plan
or a person using Plan assets to acquire the certificates. Each transferee of
certificates to which the Exemption is not applicable will be deemed to
represent that the proposed transferee is not a Plan and is not acquiring the
certificates on behalf of or with the assets of a Plan, including assets that
may be held in an insurance company's separate or general accounts where assets
in those accounts may be deemed Plan assets for purposes of ERISA.
The United States Department of Labor has granted to the lead
underwriter named in the prospectus supplement an exemption from some of the
prohibited transaction rules of ERISA and the Internal Revenue Code with respect
to the initial purchase, holding and subsequent resale by Plans of securities,
including certificates, representing interests in asset-backed pass-through
issuers, including trusts, that consist of various receivables, loans and other
obligations that meet
75
the conditions and requirements of the Exemption. The receivables covered by the
Exemption include motor vehicle installment sale contracts such as the
receivables. The Exemption will apply to the acquisition, holding and resale of
the certificates, and other securities of the issuer, by a Plan when various
conditions, some of which are described below, are met.
The Exemption sets forth several general conditions which must be
satisfied for a transaction involving the purchase, holding or sale of
securities to be eligible for exemptive relief:
o the acquisition of the securities by a Plan is on terms, including
the price for the securities, that are at least as favorable to
the Plan as they would be in an arm's length transaction with an
unrelated party;
o the rights and interests evidenced by the securities acquired by
the Plan are not subordinated to the rights and interests
evidenced by other securities of the issuer, unless the issuer
holds only certain types of assets, such as fully secured motor
vehicle installment loans;
o the securities acquired by the Plan have received a rating at the
time of the acquisition that is in one of the three or, if the
issuer holds only certain types of assets, four highest generic
rating categories from an Exemption Rating Agency;
o the trustee is not an affiliate of any other member of the
Restricted Group;
o the sum of all payments made to the underwriters in connection
with the distribution of the securities represents not more than
reasonable compensation for underwriting the securities, the sum
of all payments made to and retained by the seller pursuant to the
sale of the receivables to the issuer represents not more than the
fair market value of the receivables and the sum of all payments
made to and retained by the servicer represents not more than
reasonable compensation for the servicer's services under the
applicable agreement and reimbursement of the servicer's
reasonable expenses in connection with those services;
o the Plan investing in the securities is an accredited investor as
defined in Rule 501(a)(1) of Regulation D of the SEC under the
Securities Act; and
o for certain types of issuers, the documents establishing the
issuer and governing the transaction include certain provisions
intended to protect the assets of the issuer from creditors of the
seller.
The Exemption, as amended, extends exemptive relief to various
mortgage-backed and asset-backed securities transactions that use pre-funding
accounts and that otherwise meet the requirements of the Exemption. Obligations
supporting payments to securityholders, and having a value equal to no more than
25% of the total principal amount of the securities being offered by the issuer,
may be transferred to the issuer within the Pre-Funding Period, instead of being
required to be either identified or transferred on or before the closing date.
The relief is available when the following conditions are met:
76
o the Pre-Funding Limit must not exceed 25%;
o all additional obligations must meet the same terms and conditions
for eligibility as the original obligations used to create the
issuer, which terms and conditions have been approved by an
Exemption Rating Agency;
o the transfer of additional obligations to the issuer during the
Pre-Funding Period must not result in the securities to be covered
by the Exemption receiving a lower credit rating from an Exemption
Rating Agency upon termination of the Pre-Funding Period than the
rating that was obtained at the time of the initial issuance of
the securities by the issuer;
o solely as a result of the use of pre-funding, the weighted average
annual percentage interest rate for all of the obligations held by
the issuer at the end of the Pre-Funding Period must not be more
than 100 basis points lower than the average interest rate for the
obligations transferred to the issuer on the closing date;
o in order to insure that the characteristics of the additional
obligations are substantially similar to the original obligations
which were transferred to the issuer, the characteristics of the
additional obligations must be monitored by an insurer or other
credit support provider that is independent of the seller or an
independent accountant retained by the seller must provide the
seller with a letter, with copies provided to each Exemption
Rating Agency rating the certificates, the related underwriter and
the related trustee, stating whether or not the characteristics of
the additional obligations conform to the characteristics
described in the related prospectus or prospectus supplement
and/or pooling and servicing agreement or trust agreement, and in
preparing the letter, the independent accountant must use the same
type of procedures as were applicable to the obligations
transferred to the issuer as of the closing date;
o the Pre-Funding Period must end no later than three months or 90
days after the closing date or earlier in some circumstances if
the pre-funding account falls below the minimum level specified in
the pooling and servicing agreement or an event of default occurs;
o amounts transferred to any pre-funding account and/or capitalized
interest account used in connection with the pre-funding may be
invested only in various permitted investments;
o the related prospectus or prospectus supplement must describe any
pre-funding account and/or capitalized interest account used in
connection with a pre-funding account, the duration of the
Pre-Funding Period and the percentage and/or dollar amount of the
Pre-Funding Limit for the issuer and the amounts remaining in the
pre-funding account at the end of the Pre-Funding Period must be
remitted to securityholders as repayments of principal; and
o the related pooling and servicing agreement or trust agreement
must describe the permitted investments for the pre-funding
account and/or capitalized interest account
77
and, if not disclosed in the related prospectus supplement, the
terms and conditions for eligibility of additional obligations.
The Exemption also provides relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when a Plan fiduciary causes
a Plan to acquire securities of an issuer holding receivables on which the
fiduciary or its affiliate is an obligor if, among other requirements:
o in the case of the acquisition of securities in connection with
the initial issuance, at least 50% of the each class of securities
in which Plans invest and at least 50% of the issuer's securities
in the aggregate are acquired by persons independent of the
Restricted Group;
o the fiduciary or its affiliate is an obligor with respect to no
more than 5% of the fair market value of the obligations contained
in the trust;
o the Plan's investment in each class of securities of the issuer
does not exceed 25% of all securities of that class outstanding at
the time of the acquisition; and
o immediately after the acquisition, no more than 25% of the assets
of any Plan with respect to which the fiduciary has discretionary
authority or renders investment advice are invested in securities
representing an interest in one or more issuers containing assets
sold or serviced by the same entity.
This exemptive relief does not apply to Plans sponsored by a member of
the Restricted Group.
The rating of a security may change. If a class of securities is no
longer rated at least BBB- or Baa3, the securities of that class will no longer
be eligible for relief under the Exemption and, consequently, may not be
purchased by or sold to a Plan. A Plan that purchases a security when the
security has an investment-grade rating will not be required by the Exemption to
dispose of the security if the rating of the security declines below BBB- or
Baa3.
Each Plan fiduciary which proposes to cause a Plan to purchase
securities should consult with counsel concerning the impact of ERISA and the
Internal Revenue Code, the effect of the Plan Assets Regulation, the
applicability of the Exemption, as amended, and the potential consequences of
the purchase prior to making the purchase. In addition, each Plan fiduciary
should determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in the securities is appropriate for
the Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
Each Plan fiduciary or other person considering the purchase of
certificates on behalf of an insurance company general account also should
consult their legal advisors regarding the effect of John Hancock Mutual Life
Ins. Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), and the general
account regulations promulgated by the DOL. In John Hancock, the United States
Supreme Court held that, under some circumstances, assets held in an insurance
78
company's general account may be deemed to be assets of Plans that were issued
policies supported by that general account.
The Small Business Job Protection Act of 1996 added a new Section
401(c) of ERISA relating to the status of the assets of insurance company
general accounts under ERISA and the Code. This new section provides that assets
underlying general account policies issued on or before December 31, 1998 will
not be considered assets of a Plan to the extent the criteria set forth in DOL
regulations are satisfied. This new section also requires the DOL to issue
regulations establishing those criteria. On January 5, 2000, the DOL published
final regulations, called the general account regulations, for this purpose. The
general account regulations are not generally applicable until July 5, 2001. The
general account regulations provide that, if a Plan holds a policy issued by an
insurance company on or before December 31, 1998 which is supported by assets of
the insurance company's general account, the assets of the Plan will include the
policy but not the underlying assets of the general account to the extent the
requirements set forth in the general account regulations are satisfied. The
general account regulations do not apply to any general account policies issued
after December 31, 1998. The general account regulations should not adversely
affect this applicability of PTCE 95-60.
PLAN OF DISTRIBUTION
The seller may sell notes and/or certificates, or cause the related
trust to sell notes and/or certificates, through one or more underwriters or
dealers, directly to one or more purchasers or through agents. If underwriters
are used in the sale of securities, the seller will agree to sell, or cause the
related trust to sell, to the underwriters named in the related prospectus
supplement the notes and/or certificates of the trust specified in an
underwriting agreement. Each of the underwriters will severally agree to
purchase the principal amount of each class of notes and/or certificates of the
related trust set forth in the related prospectus supplement and the
underwriting agreement.
Each prospectus supplement will either:
o set forth the price at which each class of notes and/or
certificates, as the case may be, being offered by the prospectus
supplement will be offered to the public and any concessions that
may be offered to dealers participating in the offering of the
notes and/or certificates; or
o specify that the related notes and/or certificates, as the case
may be, are to be resold by the underwriters in negotiated
transactions at varying prices to be determined at the time of
sale.
After the initial public offering of any notes and/or certificates, the
public offering prices and dealer concessions may be changed.
The seller will indemnify the underwriters of securities against
various civil liabilities, including liabilities under the Securities Act, or
contribute to payments the underwriters may be required to make in respect of
those liabilities. Dealers and agents may also be entitled to indemnification
and contribution with respect to those liabilities.
79
Each trust may, from time to time, invest the funds in its trust
accounts in investments acquired from the underwriters or agents or from the
seller.
The closing of the sale of any class of securities issued by a trust
and subject to an underwriting agreement will be conditioned on the closing of
the sale of all other classes of securities of that trust, some of which may not
be registered or may not be publicly offered.
The place and time of delivery for the securities in respect of which
this prospectus is delivered will be set forth in the related prospectus
supplement.
LEGAL OPINIONS
Certain legal matters relating to the securities of any trust will be
passed upon for the seller by McGuireWoods LLP, Richmond, Virginia, and for the
underwriters by Brown & Wood, LLP, New York, New York.
80
GLOSSARY OF TERMS
The following defined terms are used in this prospectus and the
accompanying prospectus supplement.
"Advances" means, with respect to any delinquent receivable and any
payment date, the excess of:
o the product of the principal balance of that receivable as of the
first day of the related Collection Period and one-twelfth of its
contract rate of interest; over
o the interest actually received by the servicer with respect to
that receivable from the obligor or from the payment of the
Purchase Amount during or with respect to that Collection Period.
"Collection Period" means, with respect to each trust, the period
specified in the related prospectus supplement with respect to calculating
payments and proceeds of the related receivables.
"Controlling Class" means, with respect to each trust that issues
notes, the class or classes of notes designated as such in the related
prospectus supplement.
"Defaulted Receivable" means a receivable that the servicer determines
is unlikely to be paid in full, that is 120 or more days delinquent as of the
end of a calendar month or that has been held in repossession inventory for more
than 90 days.
"Definitive Securities" means, with respect to any class of notes or
certificates, as applicable, securities issued in fully-registered, certificated
form to the related noteholders or certificateholders, as applicable, or to
their respective nominees, rather than to DTC or its nominee.
"Eligible Deposit Account" means:
o a segregated account with an Eligible Institution; or
o a segregated trust account with the corporate trust department of
a depository institution organized under the laws of the United
States, or any one of the states of the United States or the
District of Columbia, or any domestic branch of a foreign bank,
having corporate trust powers and acting as trustee for funds
deposited in the account, so long as any of the securities of the
depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies
investment grade.
"Eligible Institution" means:
o the corporate trust department of the indenture trustee or the
related trustee, as applicable; or
81
o a depository institution organized under the laws of the United
States, or any one of the states of the United States or the
District of Columbia, or any domestic branch of a foreign bank,
which has either a long-term unsecured debt rating acceptable to
the Rating Agencies or a short-term unsecured debt rating or
certificate of deposit rating acceptable to the Rating Agencies
and whose deposits are insured by the FDIC.
"Exemption" means, with respect to any trust, the exemption granted to
the lead underwriter named in the related prospectus supplement by the DOL and
described under "ERISA Considerations" in this prospectus.
"Exemption Rating Agency" means Standard & Poor's, a division of The
McGraw-Hill Companies, Inc., Moody's Investors Service or Fitch, Inc.
"FDIA" means the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989.
"Federal Tax Counsel" means the special federal tax counsel to each
trust specified in the related prospectus supplement.
"Foreign Person" means a nonresident alien, foreign corporation or
other non-United States Person.
"Grantor Trust Certificateholder" means the beneficial owner of a
Grantor Trust Certificate.
"Grantor Trust Certificate" means a certificate issued by a trust that
is treated as a grantor trust.
"Permitted Investments" means:
o direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States or its agencies;
o demand deposits, time deposits, certificates of deposit or
bankers' acceptances of various depository institutions or trust
companies having the highest rating from each Rating Agency rating
the notes or certificates of the related trust;
o commercial paper having, at the time of investment, a rating in
the highest rating category from each Rating Agency rating the
notes or certificates of the related trust;
o investments in money market funds having the highest rating from
each Rating Agency rating the notes or certificates of the related
trust;
o repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States or
its agencies, in either case entered into with a depository
institution or trust company having the highest rating from each
Rating Agency rating the notes or certificates of the related
trust; and
82
o any other investment acceptable to each Rating Agency rating the
notes or certificates of the related trust.
"Plan" means:
o any employee benefit plan as defined in Section 3(3) of ERISA that
is subject to ERISA or to federal, state or local laws that impose
requirements similar to ERISA;
o any plan described in Section 4975(e)(1) of the Internal Revenue
Code, including individual retirement accounts and Keogh plans; or
o any entity whose underlying assets include plan assets by reason
of a plan's investment in that entity or otherwise, including,
without limitation, as applicable, an insurance company general
account.
"Plan Assets Regulation" means the plan assets regulation, 29 C.F.R.
Section 2510.3-101, issued by the DOL.
"Pre-Funding Limit" means, with respect to the Exemption, the ratio of
the amount allocated to the pre-funding account to the total principal amount of
the certificates being offered.
"Pre-Funding Period" means, with respect to the Exemption, a 90-day or
three-month period following the closing date during which, subject to various
conditions, additional obligations may be transferred to the trust.
"PTCE" means a Prohibited Transaction Class Exemption under ERISA.
"Purchase Amount" means, with respect to any receivable, the price at
which the seller or the servicer must purchase the receivable from the related
trust, which price is equal to the unpaid principal balance of the receivable
plus accrued and unpaid interest on the receivable to the date of purchase.
"Rating Agency" means, with respect to any trust, a nationally
recognized rating agency providing, at the request of the seller, a rating on
the securities issued by the trust.
"Restricted Group" means, with respect to the Exemption and any issuer,
the seller, any related underwriter, any related trustee, the servicer, any
insurer of the issuer, any obligor with respect to the receivables held by the
trust constituting more than 5% of the aggregate unamortized principal balance
of the assets in the trust, any counterparty to a permitted notional principal
or swap agreement and any affiliate of these parties.
"Short-Term Note" means a note that has a fixed maturity date of not
more than one year from the date of its issuance.
"United States Person" means, in general, a person that is for United
States federal income tax purposes a citizen or resident of the United States, a
corporation or partnership, including an entity treated as a corporation or
partnership for United States federal income tax
83
purposes, created or organized in or under the laws of the United States, any
state of the United States or the District of Columbia, unless, in the case of a
partnership, Treasury regulations are adopted that provide otherwise, an estate
whose income is subject to United States federal income tax regardless of its
source or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust.
84
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
All global securities will initially be issued in book-entry form.
Investors may hold global securities through DTC in the United States or through
Clearstream or the Euroclear system in Europe. All global securities will be
tradable as home market instruments in both the European and United States
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
INITIAL SETTLEMENT OF THE GLOBAL SECURITIES. 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, Clearstream and Euroclear will hold positions
on behalf of their customers or participants through their respective
depositaries, which in turn will hold those positions in accounts as DTC
participants.
Investors electing to hold their global securities through DTC will
follow the settlement practices that apply to United States 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 Clearstream
or Euroclear accounts will follow the settlement procedures that apply 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.
Except as required by law, none of the administrator, if any, the
related trustee or the related indenture trustee, if any, will have any
liability for any aspect of the records relating to payments made on account of
beneficial ownership interests of the securities of any trust held by DTC's
nominee, or for maintaining, supervising or reviewing any records relating to
those beneficial ownership interests.
SECONDARY MARKET TRADING OF THE GLOBAL SECURITIES. 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 United States
corporate debt obligations in same-day funds.
Trading between Clearstream participants and/or Euroclear participants.
Secondary market trading between Clearstream participants or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC seller and Clearstream or Euroclear purchaser. When
global securities are to be transferred from the account of a DTC participant to
the account of a Clearstream participant or a Euroclear participant, the
purchaser will send instructions to
85
Clearstream or Euroclear through a Clearstream participant or Euroclear
participant at least one business day prior to settlement. Clearstream or
Euroclear will instruct the respective depositary, as the case may be, to
receive the global securities against payment. Payment will include interest
accrued on the global securities from and including the last coupon payment date
to and excluding the settlement date. Payment will then be made by the
respective depositary to the DTC participant's account against delivery of the
global securities. After settlement has been completed, the global securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Clearstream participant's or
Euroclear participant's account. The 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 the trade fails and
settlement is not completed on the intended value date, the Clearstream or
Euroclear cash debit will be valued instead as of the actual settlement date.
Clearstream 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 this is to
pre-position funds for settlement, either from cash on hand or existing lines of
credit, as they would for any settlement occurring within Clearstream or
Euroclear. Under this approach, participants may take on credit exposure to
Clearstream or Euroclear until the global securities are credited to their
accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream participants or Euroclear participants can elect not
to pre-position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, participants purchasing global securities
would incur overdraft charges for one day, assuming they cleared the overdraft
when the global securities were credited to their accounts. However, interest on
the global securities would accrue from the value date. Therefore, in many cases
the investment income on the global securities earned during that one-day period
may substantially reduce or offset the amount of such overdraft charges,
although this result will depend on each 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 Clearstream 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 Clearstream or Euroclear seller and DTC purchaser. Due
to time zone differences in their favor, Clearstream 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 Clearstream or Euroclear through a Clearstream participant or
Euroclear
86
participant at least one business day prior to settlement. In these
cases, Clearstream or Euroclear will instruct the respective depositary, as
appropriate, to deliver the securities 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 Clearstream participant or
Euroclear participant the following day, and receipt of the cash proceeds in the
Clearstream 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 Clearstream 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 the trade fails and settlement is not completed on the
intended value date, receipt of the cash proceeds in the Clearstream
participant's or Euroclear participant's account would instead be valued as of
the actual settlement date.
Finally, day traders that use Clearstream or Euroclear and that
purchase global securities from DTC participants for delivery to Clearstream
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:
o borrowing through Clearstream or Euroclear for one day, until the
purchase side of the day trade is reflected in their Clearstream
or Euroclear accounts in accordance with the clearing system's
customary procedures;
o borrowing the global securities in the United States 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 Clearstream or Euroclear account in order to settle the sale
side of the trade; or
o 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
Clearstream participant or Euroclear participant.
MATERIAL UNITED STATES FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of global securities holding securities through
Clearstream or Euroclear, or through DTC if the holder has an address outside
the United States, will be subject to the 30% United States withholding tax that
usually applies to payments of interest, including original issue discount, for
registered debt issued by United States Persons unless:
o 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 the beneficial
owner and the United States entity required to withhold tax
complies with applicable certification requirements; and
o the beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-United States Persons (IRS Form W-8 BEN). Beneficial
owners of global securities that are non-United States Persons can obtain a
complete exemption from the withholding tax by filing a signed Form W-8 BEN,
Certificate of Foreign Status of Beneficial
87
Ownership for United States Tax Withholding. If the information shown on Form
W-8 BEN changes, a new Form W-8 BEN must be filed within 30 days of that change.
Exemption for non-United States Persons with effectively connected
income (IRS Form W-8 ECI). A non-United States Person, including a non-United
States corporation or bank with a United States 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
W-8 ECI, Certificate of Foreign Persons Claim for Exemption from Withholding on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States.
Exemption or reduced rate for non-United States Persons resident in
treaty countries (IRS Form W-8 BEN). Non-United States Persons that are
beneficial owners of global securities 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 W-8 BEN.
Exemption for United States Person (IRS Form W-9). United States
Persons can obtain a complete exemption from the withholding tax by filing Form
W-9, Payer's Request for Taxpayer Identification Number and Certification.
United States Federal Income Tax Reporting Procedure. The beneficial
owner of a global security files by submitting the appropriate form to the
person through whom he holds, which person would be the clearing agency in the
case of persons holding directly on the books of the clearing agency.
Form W-8 BEN, if furnished with a United States taxpayer identification
number, will remain in effect until the status of the beneficial owner changes
or a change in circumstances makes any information in the form incorrect,
provided that the withholding agent reports at least annually to the beneficial
owner on IRS Form 1042-S. Form W-8 BEN, if furnished without a taxpayer
identification number, and Form W-8 ECI will remain in effect for a period
beginning on the date on which the form is signed and ending on the last day of
the third succeeding calendar year, unless a change in circumstances makes any
information in the form incorrect.
THIS SUMMARY DOES NOT DEAL WITH ALL ASPECTS OF UNITED STATES FEDERAL
INCOME TAX WITHHOLDING THAT MAY BE RELEVANT TO FOREIGN HOLDERS OF GLOBAL
SECURITIES. YOU SHOULD CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR HOLDING AND
DISPOSING OF GLOBAL SECURITIES.
88
SUBJECT TO COMPLETION, DATED [____________], 20[__]
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [____________], 20[__])
$[____________]
WACHOVIA AUTO OWNER TRUST 20[__]-[__]
Issuer
WACHOVIA BANK, N.A.
Seller and Servicer
- --------------------------------------- THE TRUST WILL ISSUE THE
BEFORE YOU PURCHASE THE SECURITIES, FOLLOWING SECURITIES:
BE SURE TO READ THE RISK FACTORS
BEGINNING ON PAGE S-[__] OF THIS Principal Interest Final Scheduled
PROSPECTUS SUPPLEMENT AND THE RISK Amount Rate Payment Date
FACTORS SET FORTH IN THE ACCOMPANYING --------- -------- ---------------
PROSPECTUS. Class A-1 Notes.......
Class A-2 Notes.......
The securities are not deposits, and Class A-3 Notes.......
neither the securities nor the Class A-4 Notes.......
underlying motor vehicle installment Certificates..........
sale contracts are insured or guaranteed -----------
by the FDIC or any other governmental o The trust will pay principal
authority. and interest on the securities
on the [15]th day of each
The securities represent obligations of month or, if that day is not a
or interests in the trust only and do business day, on the following
not represent obligations of or business day, beginning
interests in Wachovia Bank, N.A. or any [____________], 20[__].
of its affiliates.
o In general, the trust will pay
This prospectus supplement may be used principal on each class of
to offer and sell the securities only if securities sequentially based
accompanied by the prospectus. on the final scheduled payment
- --------------------------------------- date for that class, beginning
with the class A-1 notes and
ending with the certificates.
o The certificates are
subordinated to the notes.
THE UNDERWRITERS ARE OFFERING THE
FOLLOWING SECURITIES BY THIS
PROSPECTUS SUPPLEMENT:
Initial Public Underwriting Proceeds to the
Offering Price (1) Discount Seller (1)(2)
------------------ -------- -------------
Per Class A-1 Note.....
Per Class A-2 Note.....
Per Class A-3 Note.....
Per Class A-4 Note.....
Per Certificate........
Total..................
-------------
(1) The price of the securities
will also include interest
accrued on the securities, if
any, from [____________],
20[__].
(2) The proceeds to the seller
will be reduced by expenses
payable by the seller, which
expenses are estimated to be
$[____________].
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITERS]
The date of this prospectus supplement
is [____________], 20[__]
TABLE OF CONTENTS
READING THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS...........S-1
SUMMARY......................................................................S-2
RISK FACTORS.................................................................S-8
THE TRUST...................................................................S-15
Limited Purpose and Limited Assets.......................................S-15
Capitalization of the Trust..............................................S-15
The Owner Trustee........................................................S-16
THE RECEIVABLES.............................................................S-16
Selection Criteria.......................................................S-16
Pool Characteristics.....................................................S-17
Delinquency and Loss Experience..........................................S-19
HOW YOU CAN COMPUTE YOUR PORTION OF THE
AMOUNT OUTSTANDING ON THE NOTES OR THE CERTIFICATES.........................S-22
MATURITY AND PREPAYMENT CONSIDERATIONS......................................S-23
Weighted Average Life of the Securities..................................S-24
DESCRIPTION OF THE NOTES....................................................S-29
Interest Payments........................................................S-29
Principal Payments.......................................................S-29
Optional Prepayment......................................................S-30
DESCRIPTION OF THE CERTIFICATES.............................................S-31
Interest Distributions...................................................S-31
Principal Distributions..................................................S-31
Subordination of Certificates............................................S-31
Optional Prepayment......................................................S-32
SOURCES AND APPLICATION OF AVAILABLE FUNDS..................................S-32
Sources of Available Funds...............................................S-32
Application of Available Funds...........................................S-33
DESCRIPTION OF THE SALE AND SERVICING AGREEMENT.............................S-34
Trust Accounts...........................................................S-34
Servicing Compensation...................................................S-34
Rights Upon Event of Servicing Termination...............................S-35
Waiver of Past Events of Servicing Termination...........................S-35
Deposits to the Collection Account.......................................S-35
Reports to the Trustee...................................................S-35
Reserve Account..........................................................S-36
MATERIAL FEDERAL INCOME TAX CONSEQUENCES....................................S-37
STATE TAX CONSEQUENCES......................................................S-37
ERISA CONSIDERATIONS........................................................S-38
The Notes................................................................S-38
The Certificates.........................................................S-38
UNDERWRITING................................................................S-39
LEGAL OPINIONS..............................................................S-41
GLOSSARY OF TERMS...........................................................S-42
READING THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
We provide information about your securities in two separate documents
that offer varying levels of detail:
o the accompanying prospectus provides general information, some of
which may not apply to your securities; and
o this prospectus supplement provides specific information about the
terms of your securities.
You must read both this prospectus supplement and the accompanying
prospectus in their entirety to understand fully the structure and terms of your
securities. If the information in this prospectus supplement varies from the
information in the accompanying prospectus, you should rely on the information
in this prospectus supplement.
You should rely only on the information contained in, or incorporated
by reference into, this prospectus supplement and the accompanying prospectus.
We have not authorized anyone to provide you with additional or different
information.
We include in this prospectus supplement and the accompanying
prospectus cross-references to sections in those documents where you can find
further related discussions. You should refer to the table of contents in the
front of each document to locate the referenced sections.
We include in this prospectus supplement and the accompanying
prospectus a number of capitalized terms. You should refer to the glossary of
defined terms on page S-[__] of this prospectus supplement and the glossary of
defined terms on page [__] of the accompanying prospectus for the definitions of
these capitalized terms.
As used in this prospectus supplement, the term "we" refers to Wachovia
Bank, N.A.
S-1
- --------------------------------------------------------------------------------
SUMMARY
This summary describes the main terms of your securities. This summary
does not contain all of the information that may be important to you and does
not describe all of the terms of your securities. You will need to read both
this prospectus supplement and the accompanying prospectus in their entirety to
understand fully the structure and terms of your securities.
THE ISSUER
Wachovia Auto Owner Trust 20[__]-[__], a Delaware [common law] [statutory]
business trust referred to in this prospectus supplement as the trust, will
issue the securities.
THE SELLER AND THE SERVICER
Wachovia Bank, N.A., a national banking association referred to in this
prospectus supplement as the bank, will sell a pool of motor vehicle installment
sale contracts to the trust and will service the contracts on behalf of the
trust.
THE OWNER TRUSTEE
[_______________], a [_______________], will serve as trustee with respect to
the certificates.
THE INDENTURE TRUSTEE
[_______________], a [_______________], will serve as trustee with respect to
the notes.
CLOSING DATE
The trust expects to issue the securities on or about [____________], 20[__].
PAYMENT DATES
The trust will pay principal and interest on the securities on the [15]th day of
each month or, if that day is not a business day, on the following business day,
beginning [____________], 20[__]. On each payment date, the trust will pay
principal and interest to the holders of the securities as of the related record
date.
RECORD DATES
The record date with respect to any payment date will be the day immediately
preceding that payment date or, if the securities have been issued in
fully-registered, certificated form, the last day of the preceding month.
CUT-OFF DATE
The cut-off date with respect to the trust will be [____________], 20[__].
THE TRUST PROPERTY
The property of the trust will consist of the following:
o a pool of motor vehicle installment sale contracts originated by
dealers for assignment to the bank and secured by new and used motor
vehicles, which contracts are referred to in this prospectus supplement
as the receivables;
o all collections received on the receivables after the close of business
on the cut-off date, other than any collections of late fees and other
administrative fees and expenses retained by the servicer as
supplemental servicing compensation;
o the security interests in the financed vehicles;
- --------------------------------------------------------------------------------
S-2
- --------------------------------------------------------------------------------
o the proceeds, if any, from claims on or refunds of premiums with
respect to the theft, physical damage, credit life or credit disability
insurance policies, if any, covering the financed vehicles or the
related obligors;
o all amounts on deposit from time to time in the accounts maintained for
the trust other than the net investment income, if any, earned from the
reinvestment of amounts on deposit in the collection account; and
o the other property described in this prospectus supplement.
For a further discussion of the receivables and the other property supporting
the securities, see "The Receivables" in this prospectus supplement.
POOL CHARACTERISTICS
The receivables will have the following characteristics as of the closing date:
- -----------------------------------------------------
o Aggregate Outstanding
Principal Balance.........
- -----------------------------------------------------
o Number of
Receivables...............
- -----------------------------------------------------
o Average Outstanding
Principal Balance.........
- -----------------------------------------------------
o Average Original
Amount Financed...........
- -----------------------------------------------------
o Original Amount
Financed (Range)..........
- -----------------------------------------------------
o Weighted Average
Contract Rate.............
- -----------------------------------------------------
o Contract Rate
(Range)...................
- -----------------------------------------------------
o Weighted Average
Original Term.............
- -----------------------------------------------------
o Original Term
(Range)...................
- -----------------------------------------------------
o Weighted Average
Remaining Term............
- -----------------------------------------------------
o Remaining Term (Range)....
- -----------------------------------------------------
For a further discussion of the characteristics of the receivables, see "The
Receivables -- Pool Characteristics" in this prospectus supplement.
INTEREST PAYMENTS
In general, the trust will pay interest on the class A-1 notes on each payment
date in an amount equal to the product of:
o the class A-1 interest rate;
o a fraction, the numerator of which is the actual number of days in the
preceding interest accrual period and the denominator of which is 360; and
o the outstanding principal balance of the class A-1 notes as of the close of
business on the preceding payment date, or, in the case of the first
payment date, as of the close of business on the closing date.
The class A-1 notes will accrue interest from and including each payment date,
or, in the case of the first payment date, from and including the closing date,
to but excluding the following payment date.
The trust will pay interest on the class A-2 notes, the class A-3 notes, the
class A-4 notes and the certificates on each payment date in an amount equal to
the product of:
o the interest rate applicable to that class;
o a fraction, the numerator of which is 30, or, in the case of the first
payment date, [__], and the denominator of which is 360; and
o the outstanding principal balance of that class as of the close of business
on the
- --------------------------------------------------------------------------------
S-3
- --------------------------------------------------------------------------------
preceding payment date, or, in the case of the first payment date, as of
the close of business on the closing date.
Any interest not paid on a payment date will be payable on the following payment
date, together with additional interest on the unpaid amount at the interest
rate applicable to the related class.
PRINCIPAL PAYMENTS
In general, the trust will pay principal on each class of notes sequentially
based on the final scheduled payment date for that class, beginning with the
class A-1 notes and ending with the class A-4 notes, and will not pay principal
on any class of notes until each class with an earlier final scheduled payment
date has been paid in full. The trust will not pay principal on the certificates
until the notes have been paid in full.
In general, the trust will pay principal to the noteholders or the
certificateholders, as applicable, on each payment date in an amount equal to
the sum of:
o the principal collections received on the receivables during the preceding
collection period; plus
o the aggregate principal balance, net of liquidation proceeds applied as
principal collections, of all receivables that became defaulted receivables
during the preceding collection period.
The principal balance of each class of securities will be payable in full on the
final scheduled payment date for that class.
APPLICATION OF AVAILABLE FUNDS
On each payment date, the trust will apply the available collections received on
the receivables during the preceding collection period, other than collections
applied to reimburse servicer advances, and all amounts withdrawn from the
reserve account on that payment date to make the following payments in the
following order of priority:
(1) an amount equal to the monthly servicing fee for that payment date,
plus any unpaid monthly servicing fees for previous payment dates, will
be paid to the servicer;
(2) an amount equal to the interest due to the noteholders on that payment
date, plus any unpaid note interest for previous payment dates, will be
paid to the noteholders;
(3) an amount equal to the interest due to the certificateholders on that
payment date, plus any unpaid certificate interest for previous payment
dates, will be paid to the certificateholders; provided, however, that,
if the notes have been accelerated following an event of default under
the indenture, this payment will not be made until the notes have been
paid in full;
(4) an amount equal to the principal due on that payment date will be
applied to pay principal to the noteholders, sequentially to the class
of notes with the earliest final scheduled payment date, until the
notes have been paid in full and then will be applied to pay principal
to the certificateholders until the certificates have been paid in
full; provided, however, that, if the notes have been accelerated
following an event of default under the indenture, any funds remaining
after payment of the amounts described in clause (2) above will be
applied to pay principal to the
- --------------------------------------------------------------------------------
S-4
holders of each class of notes, pro rata based on the outstanding
principal balance of each class of notes, until the notes have been
paid in full and then will be applied to pay principal to the
certificateholders until the certificates have been paid in full;
(5) if that payment date is the final scheduled payment date for a class of
securities, the amount, if any, necessary to pay that class in full,
after payment of the amounts described in clause (4) above, will be
applied to pay principal to the holders of that class;
(6) the amount, if any, necessary to increase the amount on deposit in the
reserve account to the required amount will be deposited into the
reserve account; and
(7) the amount remaining, if any, will be paid to the seller.
For a further discussion of the sources and application of available funds on
each payment date, see "Sources and Application of Available Funds" in this
prospectus supplement.
CREDIT ENHANCEMENT
The credit enhancement for the notes will be the subordination of the
certificates and the reserve account. The credit enhancement for the
certificates will be the reserve account.
The certificateholders will not receive interest payments on any payment date
until the noteholders have received all interest payments required to be made to
the noteholders on that payment date. If the notes have been accelerated
following an event of default under the indenture, the certificateholders will
not receive interest payments on any payment date until the notes have been paid
in full.
The certificateholders will not receive principal payments on any payment date
until the notes have been paid in full.
For a further discussion of the subordination of the certificates, see "Sources
and Application of Available Funds" in this prospectus supplement.
The servicer will establish with the indenture trustee, for the benefit of the
securityholders, a reserve account into which excess collections on the
receivables will be deposited and from which amounts may be withdrawn to make
required payments on the notes and the certificates. The seller will cause
$[____________] to be deposited into the reserve account on the closing date.
For a further discussion of the reserve account, see "Description of the Sale
and Servicing Agreement -- Reserve Account" in this prospectus supplement.
OPTION TO PURCHASE
The servicer will have the option to purchase the receivables on any payment
date on or after which the aggregate principal balance of the receivables has
declined to [__]% or less of the aggregate principal balance of the receivables
as of the close of business on the cut-off date. The purchase price will equal
the aggregate principal balance of the receivables plus accrued and unpaid
interest on the receivables to the date of purchase at the weighted average
interest rate borne by the securities. If the servicer purchases the
receivables, the trust will apply the purchase price to prepay the securities in
full.
S-5
We expect that the class A-4 notes and the certificates will be the only
securities outstanding on the first payment date on which the servicer will have
the option to purchase the receivables.
SERVICING COMPENSATION
The servicer will be entitled to receive on each payment date a servicing fee
equal to 1/12 of 1.00% of the outstanding principal balance of the receivables
as of the first day of the preceding collection period and the net investment
income, if any, earned during the preceding collection period from the
reinvestment of amounts on deposit in the collection account. In addition, the
servicer will be entitled to retain as supplemental servicing compensation any
late fees and other administrative fees and expenses collected with respect to
the receivables.
SECURITY RATINGS
It is a condition to the issuance of the securities that:
o [the class A-1 notes be rated in the highest short-term category by at
least [two] nationally recognized statistical rating organizations];
o [the class A-2 notes, the class A-3 notes and the class A-4 notes] be
rated in the [highest] long-term category by at least [two] nationally
recognized statistical rating organizations; and
o the certificates be rated "[____]" or its equivalent by at least [two]
nationally recognized statistical rating organizations.
A rating is not a recommendation to purchase, hold or sell securities and does
not address market price or suitability for a particular investor.
MINIMUM DENOMINATIONS
The notes will be issued in minimum denominations of $[1,000] and integral
multiples of $[1,000].
The certificates will be issued in minimum denominations of $[1,000] and
integral multiples of $[1,000].
LEGAL INVESTMENT
[The class A-1 notes will be eligible for purchase by money market funds under
Rule 2a-7 under the Investment Company Act of 1940, as amended.]
REGISTRATION, CLEARANCE AND SETTLEMENT
[The notes will be issued in book-entry form and may be held through DTC in the
United States or through Clearstream or the Euroclear system in Europe.]
[The certificates will be issued in book-entry form and may be held through
DTC.]
TAX STATUS
McGuireWoods LLP will deliver its opinion that for federal income tax purposes:
o the notes will be characterized as debt; and
o the trust will not be characterized as an association or a publicly
traded partnership taxable as a corporation.
If you purchase notes, you will agree by your purchase that you will treat the
notes as indebtedness for federal income tax purposes.
If you purchase certificates, you will agree by your purchase that you will
treat the trust as a partnership in which the
S-6
certificateholders are partners for federal income tax purposes. The
certificates may not be purchased by persons who are not United States persons
for federal income tax purposes.
For a further discussion of the application of federal tax laws to the notes or
the certificates, see "Material Federal Income Tax Consequences" in this
prospectus supplement and the accompanying prospectus .
ERISA CONSIDERATIONS
In general, the notes are eligible for purchase by employee benefit plans or
individual retirement accounts, subject to the considerations discussed under
"ERISA Considerations" in this prospectus supplement and the accompanying
prospectus.
In general, the certificates may not be acquired by employee benefit plans or
individual retirement accounts. An insurance company using its general account,
however, may acquire the certificates, subject to the considerations discussed
under "ERISA Considerations" in this prospectus supplement and the accompanying
prospectus.
INVESTOR INFORMATION
The mailing address of the bank is 100 North Main Street, Winston-Salem, North
Carolina 27150. You may request copies of the transaction documents relating to
the trust by calling (336) 770-5000.
S-7
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of the securities.
THE RESERVE ACCOUNT MAY NOT BE The amount on deposit in the
SUFFICIENT TO PREVENT PAYMENT DELAYS reserve account will be used to
OR LOSSES ON THE NOTES OR THE fund the payment of principal and
CERTIFICATES interest to the securityholders
on each payment date if available
collections received on the
receivables, including amounts
recovered in connection with the
repossession and sale of financed
vehicles that secure defaulted
receivables, are not sufficient
to make that payment. We cannot
assure you, however, that the
amount on deposit in the reserve
account will be sufficient to
prevent payment delays or losses
on your notes or your
certificates.
If the receivables experience
higher losses than were projected
by the rating agencies in rating
the securities, the funds
available on any payment date may
not be sufficient to pay in full
the principal and interest due to
the securityholders on that
payment date. If available
collections received on the
receivables and amounts on
deposit in the reserve account
are not sufficient on any payment
date to pay in full the principal
and interest due to the
securityholders on that payment
date, you will suffer payment
delays with respect to your notes
or your certificates. If the
amount of that insufficiency is
not offset on subsequent payment
dates, you will experience losses
with respect to your notes or
your certificates. For a further
discussion of the reserve
account, see "Description of the
Sale and Servicing Agreement --
Reserve Account" in this
prospectus supplement.
THE SUBORDINATION OF THE CERTIFICATES The subordination of the
MAY NOT BE SUFFICIENT TO PREVENT PAYMENT certificates is intended to
DELAYS OR LOSSES ON THE NOTES increase the likelihood that you
will receive the full amount of
principal and interest due on
your notes and to decrease the
likelihood that you will
experience losses on your notes.
We cannot assure you,
S-8
however, that the subordination
of the certificates will be
sufficient to prevent payment
delays or losses on your notes.
If the receivables experience
higher losses than were projected
by the rating agencies in rating
the notes, the funds available on
any payment date may not be
sufficient to pay in full the
principal and interest due to the
noteholders on that payment date,
even if those funds are not used
to pay interest or principal to
the certificateholders. If
available collections received on
the receivables, including
amounts recovered in connection
with the repossession and sale of
financed vehicles that secure
defaulted receivables, and
amounts on deposit in the reserve
account are not sufficient on any
payment date to pay in full the
principal and interest due to the
noteholders on that payment date,
you will suffer payment delays
with respect to your notes. If
the amount of that insufficiency
is not offset on subsequent
payment dates, you will
experience losses with respect to
your notes. For a further
discussion of the subordination
of the certificates, see
"Description of the Certificates
-- Subordination of Certificates"
in this prospectus supplement.
YOU WILL BEAR ADDITIONAL CREDIT RISK The certificates are subject to
IF YOU HOLD CERTIFICATES greater credit risk than the
notes because payments of
principal and interest on the
certificates are subordinated, to
the extent described below, to
payments of principal and
interest on the notes.
The certificateholders will not
receive interest payments on any
payment date until the
noteholders have received all
interest payments required to be
made to the noteholders on that
payment date. If the notes have
been accelerated following an
event of default under the
indenture, the certificateholders
will not receive interest
payments on any payment date
until the
S-9
notes have been paid in full.
The certificateholders will not
receive principal payments on any
payment date until the notes have
been paid in full.
For a further discussion of the
subordination of the
certificates, see "Sources and
Application of Available Funds"
in this prospectus supplement.
YOU WILL HAVE LIMITED CONTROL OVER THE The trust has pledged its
ACTIONS OF THE TRUST IF YOU HOLD property to the indenture trustee
CERTIFICATES to secure payment on the notes.
As a result, if an event of
default has occurred and is
continuing under the indenture,
the indenture trustee may, and at
the direction of the holders of a
specified percentage of the notes
will, take one or more of the
actions specified in the
indenture relating to the trust
property, including a sale of the
receivables. We cannot assure you
that the interests of the
noteholders will coincide with
the interests of the
certificateholders with respect
to these actions. For a further
discussion of the remedies
available upon an event of
default under the indenture, see
"Description of the Indenture --
Events of Default" and "--Rights
Upon Event of Default" in the
accompanying prospectus.
In addition, the holders of a
majority of the principal amount
of the notes, or the indenture
trustee acting on behalf of the
noteholders, may, under various
circumstances, waive one or more
events of servicing termination
under the sale and servicing
agreement or terminate the
servicer without consideration of
the effect that waiver or
termination would have on the
certificateholders. We cannot
assure you that the interests of
the noteholders will coincide
with the interests of the
certificateholders with respect
to these actions. The
certificateholders will not be
able to waive events of servicing
termination or remove the
servicer until the
S-10
notes have been paid in full. For
a further discussion of the
remedies available upon an event
of servicing termination under
the sale and servicing agreement,
see "Description of the
Receivables Transfer and
Servicing Agreements -- Events of
Servicing Termination", "--Rights
Upon Event of Servicing
Termination" and "--Waiver of
Past Events of Servicing
Termination" in the accompanying
prospectus.
YOU MAY SUFFER REINVESTMENT LOSSES IF THE The receivables may be sold if an
RECEIVABLES ARE SOLD FOLLOWING AN EVENT event of default has occurred
OF DEFAULT UNDER THE INDENTURE and is continuing under the
indenture. If the receivables
are sold following an event of
default, you may receive payments
on your securities earlier than
expected and may not be able to
reinvest those payments at a rate
of return that is equal to or
greater than the rate of return
on your notes or certificates.
For a further discussion of the
remedies available upon an event
of default under the indenture,
see "Description of the Indenture
-- Events of Default" and
"--Rights Upon Event of Default"
in the accompanying prospectus.
YOU MAY SUFFER LOSSES ON YOUR SECURITIES The receivables may be sold if
IF THE RECEIVABLES ARE SOLD FOLLOWING AN an event of default has occurred
EVENT OF DEFAULT UNDER THE INDENTURE and is continuing under the
indenture. If the receivables are
sold following an event of
default, you may suffer losses on
your securities if the sale
proceeds, together with any other
assets of the trust, are
insufficient to pay the amounts
owed on the notes and the
certificates. For a further
discussion of the remedies
available upon an event of
default under the indenture, see
"Description of the Indenture --
Events of Default" and "--Rights
Upon Event of Default" in the
accompanying prospectus.
YOU MAY BEAR ADDITIONAL RISK AS A RESULT As of [____________], 20[__],
OF THE GEOGRAPHIC CONCENTRATION OF THE [____]%, [____]%, [____]%,
OBLIGORS [____]%,[____]% and [____]% of
the receivables, based on
outstanding principal balance,
related to
S-11
obligors with mailing addresses
in Florida, Georgia, North
Carolina, South Carolina,
Tennessee and Virginia,
respectively. As a result of this
geographic concentration,
economic, social, legal and other
factors affecting these states
could cause the number of
delinquent or defaulted
receivables or the rate of
prepayments on the receivables to
increase or could cause the
amount recovered with respect to
defaulted receivables to
decrease. These factors include,
but are not limited to:
o unemployment rates: for
example, if a material
number of obligors located
in one or more concentration
states were to lose their
jobs, the number of
delinquent or defaulted
receivables could increase;
o changes in consumer debt
levels: for example, if
uncertain economic
conditions in one or more
concentration states were to
cause a material number of
obligors located in those
states to begin prepaying
outstanding loans, the rate
of prepayments on the
receivables could increase;
o the enactment of new laws
that further regulate the
motor vehicle lending
industry: for example, if
one or more concentration
states were to enact
legislation imposing
additional restrictions on
the repossession and sale of
financed vehicles, the
amount recovered with
respect to defaulted
receivables governed by the
laws of those states could
decrease; and
o natural disasters: for
example, if a hurricane or
other natural disaster
affecting one or more
concentration states were to
materially adversely affect
commercial and financial
activities in those states,
the number of delinquent or
S-12
defaulted receivables
could increase.
If the receivables experience
higher delinquencies or losses
than were projected by the rating
agencies in rating the
securities, or if the amount
recovered with respect to
defaulted receivables decreases,
the funds available on any
payment date may not be
sufficient to pay in full the
principal and interest due on
that payment date and you may
experience payment delays or
losses with respect to your notes
or your certificates. If
prepayments on the receivables
are more rapid than expected, you
may receive payments on your
securities earlier than expected
and may not be able to reinvest
those payments at a rate of
return that is equal to or
greater than the rate of return
on your notes or certificates.
YOU MAY BE LIMITED IN YOUR ABILITY TO The securities will not be listed
RESELL YOUR SECURITIES BECAUSE OF THE ABSENCE on a securities exchange. The
OF A SECONDARY MARKET. underwriters intend to make a
secondary market for the
securities by offering to
purchase them from investors but
will not be obligated to do so
and may stop offering to purchase
securities at any time. In
addition, the amount, if any,
offered for the securities by the
underwriters might be less than
the amount that other potential
purchasers would offer if given
the opportunity to purchase the
securities. As a result, you may
not be able to sell your
securities at the desired time or
price.
YOU MAY NOT BE ABLE TO EXERCISE DIRECTLY The securities will initially be
YOUR RIGHTS AS A SECURITYHOLDER issued in book-entry form and
will initially be represented by
one or more physical certificates
registered in the name of Cede &
Co., the nominee of The
Depository Trust Company. Unless
and until Definitive Securities
are issued under the limited
circumstances described in the
accompanying prospectus, you will
not be recognized by the
indenture trustee or the owner
trustee, as applicable, as a
noteholder or a certificateholder
and will only be permitted to
exercise the rights of a
S-13
securityholder indirectly through
DTC and its participants. For a
further discussion of the
book-entry registration process,
see "Registration of the
Securities" in the accompanying
prospectus.
S-14
THE TRUST
LIMITED PURPOSE AND LIMITED ASSETS
Wachovia Auto Owner Trust 20[__]-[__] is a [common law] [statutory]
business trust formed under the laws of the State of Delaware under a trust
agreement dated as of [____________], 20[__] between the bank, as depositor, and
[_______________], as owner trustee. The trust will not engage in any activity
other than:
o acquiring, holding and managing the assets of the trust, including
the receivables, and the proceeds of those assets;
o issuing the securities;
o making payments on the securities; and
o engaging in other activities that are necessary, suitable or
convenient to accomplish any of the other purposes listed above or
are in any way connected with those activities.
The trust will be capitalized by the issuance of the securities. The
trust will issue the securities to or upon the order of the seller in exchange
for the receivables and an initial deposit of $[__________] into the reserve
account. The trust property will also include:
o all collections received on the receivables after the close of
business on the cut-off date, other than any collections of late
fees and other administrative fees and expenses retained by the
servicer as supplemental servicing compensation;
o the security interests in the financed vehicles;
o the proceeds, if any, from claims on or refunds of premiums with
respect to the theft, physical damage, credit life or credit
disability insurance policies, if any, covering the financed
vehicles or the related obligors;
o the seller's rights to various documents and instruments relating
to the receivables;
o all amounts on deposit from time to time in the accounts
maintained for the trust, other than the net investment income, if
any, earned from the reinvestment of amounts on deposit in the
collection account; and
o all proceeds of the above items.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of
the closing date as if the issuance and sale of the securities had taken place
on that date:
S-15
- --------------------------------------------------------------------------------
PERCENTAGE OF TOTAL
SECURITIES PRINCIPAL AMOUNT PRINCIPAL AMOUNT
---------- ---------------- ----------------
Class A-1 Notes.......... $[______________] [____]%
Class A-2 Notes.......... $[______________] [____]%
Class A-3 Notes.......... $[______________] [____]%
Class A-4 Notes.......... $[______________] [____]%
Certificates............. $[______________] [____]%
--------------- ------
Total................ $[______________] 100%
- --------------------------------------------------------------------------------
THE OWNER TRUSTEE
[_______________] will be the owner trustee under the trust agreement.
[_______________] is a [_______________], and its principal office is located at
[______________________________]. The seller and its affiliates may maintain
normal commercial banking relations with the owner trustee and its affiliates.
THE RECEIVABLES
The receivables will consist of a pool of motor vehicle installment
sale contracts originated by dealers for assignment to the bank and secured by
new and used passenger cars, minivans, sport utility vehicles or light-duty
trucks. The seller will sell the receivables to the trust on the closing date.
SELECTION CRITERIA
The bank selected the receivables from its portfolio of motor vehicle
installment sale contracts on the basis of several criteria, some of which are
described under "The Receivables" in the accompanying prospectus. These criteria
include the following, in each case as of the close of business on the cut-off
date:
o each receivable is a simple interest receivable;
o each receivable has an original amount financed of not greater
than $[__________];
o each receivable has an outstanding principal balance of not less
than $[__________];
o each receivable has a contract rate of interest of not less than
[____]% and not greater than [____]%;
o each receivable has a scheduled maturity of not later than
[____________], 20[__];
o each receivable has an original term to maturity of not less than
[____] months and not greater than [____] months; and
S-16
o each receivable has a remaining term to maturity of not less than
[____] months and not greater than [____] months.
The bank did not use any selection procedures that it believed to be
adverse to the securityholders in selecting the receivables to be sold to the
trust.
POOL CHARACTERISTICS
The following tables set forth information with respect to the
receivables as of the close of business on the cut-off date. The sum of the
percentages presented may be less than or greater than 100% due to rounding.
COMPOSITION OF THE RECEIVABLES
AS OF THE CUT-OFF DATE
- --------------------------------------------------------------------------------
New Used
Financed Vehicles Financed Vehicles Total
- --------------------------------------------------------------------------------
Aggregate Outstanding
Principal Balance
- --------------------------------------------------------------------------------
Number of Receivables
- --------------------------------------------------------------------------------
Average Outstanding
Principal Balance
- --------------------------------------------------------------------------------
Average Original
Amount Financed
- --------------------------------------------------------------------------------
Original Amount
Financed (Range)
- --------------------------------------------------------------------------------
Weighted Average
Contract Rate
- --------------------------------------------------------------------------------
Contract Rate (Range)
- --------------------------------------------------------------------------------
Weighted Average
Original Term
- --------------------------------------------------------------------------------
Original Term (Range)
- --------------------------------------------------------------------------------
Weighted Average
Remaining Term
- --------------------------------------------------------------------------------
Remaining Term (Range)
- --------------------------------------------------------------------------------
As used in the composition table, weighted average original term and
weighted average remaining term are calculated based on the scheduled maturities
of the receivables and assuming no prepayments of the receivables.
DISTRIBUTION OF THE RECEIVABLES BY REMAINING TERM
AS OF THE CUT-OFF DATE
- --------------------------------------------------------------------------------
Percentage Percentage
of Total of
Remaining Number of Number of Aggregate Aggregate Principal
Term Range Receivables Receivables Principal Balance Balance
- --------------------------------------------------------------------------------
1 to 12 months...........
- --------------------------------------------------------------------------------
13 to 24 months............
- --------------------------------------------------------------------------------
25 to 36 months............
- --------------------------------------------------------------------------------
37 to 48 months............
- --------------------------------------------------------------------------------
49 to 60 months............
- --------------------------------------------------------------------------------
61 to 72 months............
- --------------------------------------------------------------------------------
Total..................
- --------------------------------------------------------------------------------
S-17
DISTRIBUTION OF THE RECEIVABLES BY CONTRACT RATE
AS OF THE CUT-OFF DATE
- --------------------------------------------------------------------------------
Percentage Percentage
of Total of Aggregate
Contract Number of Number of Aggregate Principal
Rate Change Receivables Receivables Principal Balance Balance
- --------------------------------------------------------------------------------
5.000 to 5.999%...
- --------------------------------------------------------------------------------
6.000 to 6.999%...
- --------------------------------------------------------------------------------
7.000 to 7.999%...
- --------------------------------------------------------------------------------
8.000 to 8.999%...
- --------------------------------------------------------------------------------
9.000 to 9.999%...
- --------------------------------------------------------------------------------
10.000 to 10.999%...
- --------------------------------------------------------------------------------
11.000 to 11.999%...
- --------------------------------------------------------------------------------
12.000 to 12.999%...
- --------------------------------------------------------------------------------
13.000 to 13.999%...
- --------------------------------------------------------------------------------
14.000 to 14.999%...
- --------------------------------------------------------------------------------
15.000 to 15.999%...
- --------------------------------------------------------------------------------
16.000 to 16.999%...
- --------------------------------------------------------------------------------
17.000 to 17.999%...
- --------------------------------------------------------------------------------
More than 17.999%...
- --------------------------------------------------------------------------------
Total...........
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE RECEIVABLES BY OBLIGOR MAILING ADDRESS
AS OF THE CUT-OFF DATE
- --------------------------------------------------------------------------------
Percentage Percentage
of Total of Aggregate
Obligor Number of Number of Aggregate Principal
Mailing Address Receivables Receivables Principal Balance Balance
- --------------------------------------------------------------------------------
Florida.............
- --------------------------------------------------------------------------------
Georgia.............
- --------------------------------------------------------------------------------
North Carolina......
- --------------------------------------------------------------------------------
South Carolina......
- --------------------------------------------------------------------------------
Tennessee...........
- --------------------------------------------------------------------------------
Virginia............
- --------------------------------------------------------------------------------
Other...............
- --------------------------------------------------------------------------------
Total...........
- --------------------------------------------------------------------------------
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DISTRIBUTION OF THE RECEIVABLES BY REMAINING PRINCIPAL BALANCE
AS OF THE CUT-OFF DATE
- --------------------------------------------------------------------------------
Percentage Percentage
of Total of
Remaining Number of Number of Aggregate Aggregate Principal
Principal (Range) Receivables Receivables Principal Balance Balance
- --------------------------------------------------------------------------------
$ 2,000 to $ 4,999.......
- --------------------------------------------------------------------------------
$ 5,000 to $ 9,999.......
- --------------------------------------------------------------------------------
$10,000 to $14,999.........
- --------------------------------------------------------------------------------
$15,000 to $19,999.........
- --------------------------------------------------------------------------------
$20,000 to $24,999.........
- --------------------------------------------------------------------------------
$25,000 to $29,999.........
- --------------------------------------------------------------------------------
$30,000 to $34,999.........
- --------------------------------------------------------------------------------
$35,000 to $39,999.........
- --------------------------------------------------------------------------------
$40,000 to $44,999.........
- --------------------------------------------------------------------------------
$45,000 to $49,999.........
- --------------------------------------------------------------------------------
More than $49,999..........
- --------------------------------------------------------------------------------
Total......................
- --------------------------------------------------------------------------------
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth delinquency and loss information with
respect to the bank's portfolio of motor vehicle installment sale contracts.
This information is presented for illustrative purposes only. The delinquency
and loss experience of the receivables may be influenced by a variety of
economic, social and other factors. We cannot assure you that the future
delinquency and loss experience of the receivables will be comparable to the
historical delinquency and loss experience of the bank's portfolio of motor
vehicle installment sale contracts.
S-19
BANK PORTFOLIO
DELINQUENCY EXPERIENCE(1)
- --------------------------------------------------------------------------------
At [__________], At December 31,
- --------------------------------------------------------------------------------
2001 2000 2000 1999 1998 1997(2)
- --------------------------------------------------------------------------------
Number of Contracts
Outstanding........................
- --------------------------------------------------------------------------------
Delinquencies as a Percentage of
Number of Contracts Outstanding....
- --------------------------------------------------------------------------------
30-59 Days....................
- --------------------------------------------------------------------------------
60-89 Days....................
- --------------------------------------------------------------------------------
90 Days or More...............
- --------------------------------------------------------------------------------
Total Delinquencies as a
Percentage of Number of
Contracts Outstanding..............
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At [__________], At December 31,
- --------------------------------------------------------------------------------
2001 2000 2000 1999 1998 1997(2)
- --------------------------------------------------------------------------------
Outstanding Principal Amount.......
- --------------------------------------------------------------------------------
Delinquencies as a Percentage of
Outstanding Principal Amount.......
- --------------------------------------------------------------------------------
30-59 Days....................
- --------------------------------------------------------------------------------
60-89 Days....................
- --------------------------------------------------------------------------------
90 Days or More...............
- --------------------------------------------------------------------------------
Total Delinquencies as a
Percentage of Outstanding
Principal Amount...................
- --------------------------------------------------------------------------------
(1) The delinquency experience tables include delinquency information with
respect to a small number of consumer loans held by the bank that are
not motor vehicle installment sale contracts. The bank believes that
the inclusion of these other consumer loans does not have a material
effect on the information presented.
(2) The delinquency information at December 31, 1997 does not include
information with respect to installment sale contracts acquired by the
bank from Jefferson Bankshares, Inc. on October 31, 1997 or from
Central Fidelity Banks, Inc. on December 15, 1997. The bank believes
that the omission of this information does not have a material effect
on the information presented.
S-20
BANK PORTFOLIO
LOSS EXPERIENCE(1)
- ------------------------------------------------------------------------------------------
[____] Months Ended Year Ended
At [__________], December 31,
- ------------------------------------------------------------------------------------------
2001 2000 2000 1999 1998 1997(2)
- ------------------------------------------------------------------------------------------
Number of Contracts Outstanding at
Period End.........................
- ------------------------------------------------------------------------------------------
Outstanding Principal Amount at
Period End.........................
- ------------------------------------------------------------------------------------------
Average Outstanding Principal
Amount During Period(3)............
- ------------------------------------------------------------------------------------------
Number of Gross Charge-Offs........
- ------------------------------------------------------------------------------------------
Gross Charge-Offs (4)..............
- ------------------------------------------------------------------------------------------
Gross Charge-Offs as a Percentage
of the Outstanding Principal Amount
at Period End......................
- ------------------------------------------------------------------------------------------
Gross Charge-Offs as a Percentage
of the Average Outstanding
Principal Amount...................
- ------------------------------------------------------------------------------------------
Recoveries (5).....................
- ------------------------------------------------------------------------------------------
Net Charge-Offs....................
- ------------------------------------------------------------------------------------------
Net Charge-Offs as a Percentage of
the Outstanding Principal Amount at
Period End.........................
- ------------------------------------------------------------------------------------------
Net Charge-Offs as a Percentage of
the Average Outstanding Principal
Amount.............................
- ------------------------------------------------------------------------------------------
(1) The loss experience table includes loss information with respect to a
small number of consumer loans held by the bank that are not motor
vehicle installment sale contracts. The bank believes that the
inclusion of these other consumer loans does not have a material effect
on the information presented.
(2) The loss information for the year ended December 31, 1997 and for the
period from January 1, 1998 through March 20, 1998 does not include
information with respect to installment sale contracts acquired by the
bank from Jefferson Bankshares, Inc. on October 31, 1997 or from
Central Fidelity Banks, Inc. on December 15, 1997. The bank believes
that the omission of this information does not have a material effect
on the information presented.
(3) The average outstanding principal amount for any period equals the
average of the average outstanding principal amount of the motor
vehicle installment sale contracts for each month during that period.
(4) The gross charge-offs for any period equal the total principal amount
due on all motor vehicle installment sale contracts determined to be
uncollectible during that period minus the total amount recovered
during that period from the repossession and sale of financed vehicles,
net of collection expenses.
S-21
(5) The recoveries for any period equal the total amount recovered during
that period on motor vehicle installment sale contracts previously
charged off, net of collection expenses.
The percentages for the [_____]-month periods ended [__________], 2001
and [__________], 2000 are annualized and are not necessarily indicative of a
full year's actual results.
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT
OUTSTANDING ON THE NOTES OR THE CERTIFICATES
The servicer will provide to you in each servicer report a factor which
you can use to compute your portion of the principal amount outstanding on the
notes or the certificates.
The servicer will compute a separate factor for each class of notes
prior to each payment date. The factor for each class of notes will be a
seven-digit decimal representing the remaining outstanding principal balance of
that class of notes as a fraction of the initial principal balance of that class
of notes, in each case as of the following payment date. The servicer will
compute the factor for each class of notes after giving effect to payments to be
made on the following payment date. For each note you own, your portion of the
related class will equal the product of the original denomination of that note
and the factor for that class computed by the servicer as described above.
The servicer will compute a separate factor for the certificates prior
to each payment date. The factor for the certificates will be a seven-digit
decimal representing the remaining principal balance of the certificates as a
fraction of the initial principal balance of the certificates, in each case as
of the following payment date. The servicer will compute the factor for the
certificates after giving effect to payments to be made on the following payment
date. For each certificate you own, your portion of the certificates will equal
the product of the original denomination of that certificate and the factor for
the certificates computed by the servicer as described above.
Each of the factors described above will initially be 1.0000000. Each
factor will decline over time to reflect reductions, as applicable, in the
outstanding principal balance of the related class of notes or the outstanding
principal balance of the certificates. These amounts will be reduced over time
as a result of scheduled payments, prepayments, purchases of the receivables by
the seller or the servicer and liquidations of the receivables.
S-22
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations
with respect to the securities is set forth under "Maturity and Prepayment
Considerations" in the accompanying prospectus. In addition, no principal
payments will be made:
o on the class A-2 notes until the class A-1 notes have been paid in
full;
o on the class A-3 notes until the class A-2 notes have been paid in
full;
o on the class A-4 notes until the class A-3 notes have been paid in
full; or
o on the certificates until the class A-4 notes have been paid in
full;
provided, however, that, if the notes have been accelerated following an event
of default under the indenture, principal payments will be applied pro rata to
all classes of the notes. For a further discussion of principal payments on the
notes, see "Sources and Application of Available Funds" in this prospectus
supplement.
The rate at which principal is paid on each class of notes and the
certificates depends on the rate at which principal payments, including
prepayments, are made on the receivables. As a result, the final payment of any
class of notes and the final distribution in respect of the certificates could
occur significantly earlier than the related final scheduled payment date.
We expect that the final payment of each class of notes and the final
distribution in respect of the certificates will occur on or prior to the
related final scheduled payment date. A failure to make the final payment of any
class of notes on or before the final scheduled payment date for that class
would constitute an event of default under the indenture. In addition, the
remaining principal balance of the certificates is required to be paid in full
on or prior to the final scheduled payment date for the certificates. We cannot
assure you that sufficient funds will be available to pay each class of notes
and the certificates in full on or prior to the related final scheduled payment
date.
The rate of prepayments on the receivables may be influenced by a
variety of economic, social and other factors. In addition, the seller or the
servicer may be obligated to purchase receivables from the trust if it breaches
various representations, warranties or covenants. A higher than anticipated rate
of prepayments will reduce the aggregate principal balance of the receivables
more quickly than expected and, as a result, reduce the outstanding principal
balance of the securities and the aggregate interest payments on the securities.
The securityholders will bear any reinvestment risks resulting from a faster or
slower rate of prepayments. These reinvestment risks include the risk that
interest rates may be lower at the time the securityholders receive payments
from the trust than interest rates would have been had prepayments not been made
or had prepayments been made at a different time.
The securityholders should consider:
S-23
o in the case of notes or certificates purchased at a discount, the
risk that a slower than anticipated rate of principal payments on
the receivables could result in an actual yield that is less than
the anticipated yield; and
o in the case of notes or certificates purchased at a premium, the
risk that a faster than anticipated rate of principal payments on
the receivables could result in an actual yield that is less than
the anticipated yield.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The following information is presented solely to illustrate the effect
of prepayments of the receivables on the weighted average life of the securities
under the stated assumptions and is not a prediction of the prepayment rate that
might actually be experienced by the receivables.
The rate of prepayments on motor vehicle installment sale contracts,
such as the receivables, can be measured relative to a prepayment standard or
model. The model used in this prospectus supplement is the absolute prepayment
or ABS model. The ABS model represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. The ABS
model further assumes that all of the receivables are the same size and amortize
at the same rate and that each receivable in each month of its life will either
be paid as scheduled or be prepaid in full. For example, in a pool of
receivables originally containing 10,000 receivables, a 1.00% ABS percentage
means that 100 receivables prepay each month. The ABS model does not purport to
describe the historical prepayment experience or to predict the future
prepayment experience of any pool of assets, including the receivables.
The ABS Tables have been prepared on the basis of various assumptions,
including that:
o the receivables prepay in full at the specified monthly ABS
percentage, with no defaults, losses or repurchases;
o each scheduled monthly payment on the receivables is made on the
last day of each month and each month has 30 days;
o payments on the notes and the certificates are made on each
payment date, and each payment date is the [15]th day of a month;
and
o the servicer exercises its option to purchase the receivables on
the earliest payment date on which it is permitted to do so.
The ABS Tables indicate the projected weighted average life of each
class of notes and the certificates and set forth the percent of the initial
principal amount of each class of notes and the percent of the initial principal
balance of the certificates that is projected to be outstanding after each of
the payment dates shown at various constant ABS percentages.
The ABS Tables also assume that the receivables have been aggregated
into hypothetical pools with all of the receivables within each pool having the
characteristics described below, that the level scheduled monthly payment for
each of the pools, which is based on its aggregate principal balance, contract
rate of interest, original term to maturity in months and remaining
S-24
term to maturity in months as of [____________], 20[__], will be such that each
pool will be fully amortized by the end of its remaining term to maturity.
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Pool Aggregate Principal Contract Rate of Original Term Remaining Term
Number Balance Interest to Maturity to Maturity
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1..............
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2..............
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4..............
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Total
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The actual characteristics and performance of the receivables will
differ from the assumptions used in constructing the ABS Tables. The assumptions
used are hypothetical and have been provided only to give a general sense of how
the principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the receivables will prepay at a constant ABS
percentage until maturity or that all of the receivables will prepay at the same
ABS percentage. In addition, the diverse terms of the receivables within each of
the hypothetical pools could produce slower or faster principal distributions
than indicated in the ABS Tables at the various ABS percentages specified, even
if the original and remaining terms to maturity of the receivables are as
assumed. Any difference between the assumptions and the actual characteristics
and performance of the receivables, or the actual prepayment experience of the
receivables, will affect the percentages of initial amounts outstanding over
time and the weighted average lives of each class of notes and the certificates.
THE ABS TABLES HAVE BEEN PREPARED BASED ON, AND SHOULD BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS DESCRIBED ABOVE, INCLUDING THE ASSUMPTIONS
REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES. THE ASSUMED
CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES.
S-25
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT AT VARIOUS ABS PERCENTAGES
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CLASS A-1 NOTES CLASS A-2 NOTES
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PAYMENT DATE 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
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Closing Date...
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Weighted Average
Life(1)......
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Weighted Average
Life to
Call(1)(2)...
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Optional Call
Date.........
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(1) The weighted average life of each class of notes is determined by
multiplying the amount of each principal payment on that class by the
number of years from the date of the issuance of that class to the
related payment date, adding the results and dividing the sum by the
initial principal balance of that class.
(2) This calculation assumes that the servicer purchases the receivables on
the earliest payment date on which it is permitted to do so.
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PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT AT VARIOUS ABS PERCENTAGES
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CLASS A-3 NOTES CLASS A-4 NOTES
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PAYMENT DATE 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
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Closing Date....
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Weighted Average
Life(1).......
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Weighted Average
Life to
Call(1)(2)....
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Optional Call
Date..........
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(1) The weighted average life of each class of notes is determined by
multiplying the amount of each principal payment on that class by the
number of years from the date of the issuance of that class to the
related payment date, adding the results and dividing the sum by the
initial principal balance of that class.
(2) This calculation assumes that the servicer purchases the receivables on
the earliest payment date on which it is permitted to do so.
S-27
PERCENT OF INITIAL PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
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CERTIFICATES
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PAYMENT DATE 0.50% 1.00% 1.50% 2.00%
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Closing Date..................
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Weighted Average Life(1)......
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Weighted Average Life to
Call(1)(2)....................
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Optional Call Date............
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1 The weighted average life of the certificates is determined by
multiplying the amount of each principal payment on the certificates by
the number of years from the date of the issuance of the certificates
to the related payment date, adding the results and dividing the sum by
the initial principal balance of the certificates.
2. This calculation assumes that the servicer purchases the receivables on
the earliest payment date on which it is permitted to do so.
S-28
DESCRIPTION OF THE NOTES
The trust will issue the notes under an indenture to be dated as of
[____________], 20[__] between the trust and [_______________], as indenture
trustee. We will file a copy of the indenture in its execution form with the SEC
after the trust issues the notes. This summary describes some of the important
terms of the notes. This summary is not a complete description of the notes or
the indenture and supplements the description of the general terms and
provisions of the notes of any trust and the related indenture set forth under
"Payments on the Securities" and "Description of the Indenture" in the
accompanying prospectus.
INTEREST PAYMENTS
Interest on the unpaid principal amount of each class of notes will
accrue at the related per annum interest rate and will be payable on each
payment date to the noteholders of record as of the related record date.
Interest will accrue and be calculated on each class of notes as follows:
o [interest on the class A-1 notes will accrue from and including
each payment date, or, in the case of the first payment date, from
and including the closing date, to but excluding the following
payment date and will be calculated on the basis of actual days
elapsed and a 360-day year.]
o interest on the class A-2 notes, the class A-3 notes and the class
A-4 notes will accrue from and including the [15]th day of each
month, or, in the case of the first payment date, from and
including the closing date, to but excluding the [15]th of the
following month and will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
If the interest accrued on any class of notes as of any payment date is
not paid on that payment date, that interest will be due on the following
payment date, together with additional interest on the unpaid amount at the
interest rate applicable to that class. The additional interest will be payable
only to the extent permitted by law.
The trust will pay interest on the notes, without priority among the
note classes, on each payment date with Available Funds in accordance with the
priority described under "Sources and Application of Available Funds --
Application of Available Funds" in this prospectus supplement. If the Available
Funds for any payment date are not sufficient to pay the interest due on the
notes on that payment date, the holders of each class of notes will receive
their pro rata share of the aggregate amount available to be distributed in
respect of interest on the notes. The pro rata share for each class will be
based on the amount of interest due on that class relative to the total amount
of interest due to the noteholders.
PRINCIPAL PAYMENTS
In general, the trust will pay principal on each class of notes
sequentially based on the final scheduled payment date for that class, beginning
with the class A-1 notes and ending with the class A-4 notes, and will not pay
principal on any class of notes until each class with an
S-29
earlier final scheduled payment date has been paid in full. In general, the
trust will pay principal to the noteholders on each payment date in an amount
equal to the sum of:
o the principal collections received on the receivables during the
preceding Collection Period; plus
o the aggregate principal balance, net of Liquidation Proceeds
applied as principal collections, of all receivables that became
Defaulted Receivables during the preceding Collection Period.
An event of default will occur under the indenture if the outstanding
principal balance of any class of notes has not been paid in full on the final
scheduled payment date for that class. The failure to pay principal on any class
of notes will not constitute an event of default under the indenture, however,
until the final scheduled payment date for that class. If the notes have been
accelerated following an event of default under the indenture, the priority and
manner in which the trust makes principal payments to the noteholders will
change as described under "Sources and Application of Available Funds --
Application of Available Funds" in this prospectus supplement.
The principal balance of each class of notes will be payable in full on
the final scheduled payment date for that class. The date on which the
outstanding principal balance of any class of notes is paid may be earlier or
later than the final scheduled payment date for that class based on a variety of
factors, including those described under "Maturity and Prepayment
Considerations" in this prospectus supplement and in the accompanying
prospectus.
OPTIONAL PREPAYMENT
All outstanding notes will be prepaid in whole, but not in part, on any
payment date on or after which the servicer exercises its option to purchase the
receivables. The servicer will have the option to purchase the receivables on
any payment date after the aggregate principal balance of the receivables has
declined to [__]% or less of the aggregate principal balance of the receivables
as of the close of business on the cut-off date. If the servicer purchases the
receivables, you will receive:
o the unpaid principal balance of your notes plus accrued and unpaid
interest on your notes; plus
o interest on any past due interest at the rate of interest on your
notes, to the extent permitted by law.
S-30
DESCRIPTION OF THE CERTIFICATES
The trust will issue the certificates under the trust agreement. We
will file a copy of the trust agreement with the SEC after the trust issues the
certificates. This summary describes some of the important terms of the
certificates. This summary is not a complete description of the trust agreement
or the certificates and supplements the description of the general terms and
provisions of the certificates of any trust and the related trust agreement set
forth under "Payments on the Securities" and "Description of the Receivables
Transfer and Servicing Agreements" in the accompanying prospectus.
INTEREST DISTRIBUTIONS
Interest on the outstanding principal balance of the certificates will
accrue at the related per annum interest rate and will be payable on each
payment date to the certificateholders of record as of the related record date,
provided, however, that, if the notes have been accelerated following an event
of default under the indenture, the trust will not pay interest on the
certificates until the notes have been paid in full. Interest will accrue on the
certificates from and including the [15]th day of each month, or, in the case of
the first payment date, from and including the closing date, to but excluding
the [15]th of the following month and will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
If the interest accrued on the certificates as of any payment date is
not paid on that payment date, that interest will be due on the following
payment date, together with additional interest on the unpaid amount at the
interest rate applicable to the certificates. The additional interest will be
payable only to the extent permitted by law.
PRINCIPAL DISTRIBUTIONS
The trust will not pay principal on the certificates until the notes
have been paid in full. The outstanding principal balance of the certificates
will be payable in full on the final scheduled payment date for the
certificates. The date on which the outstanding principal balance of the
certificates is paid may be earlier or later than the final scheduled payment
date for the certificates based on a variety of factors, including those
described under "Maturity and Prepayment Considerations" in this prospectus
supplement and in the accompanying prospectus.
SUBORDINATION OF CERTIFICATES
The subordination of the certificates is intended to increase the
likelihood that the noteholders will receive the full amount of principal and
interest due on the notes and to decrease the likelihood that the noteholders
will experience losses on the notes. The certificateholders will not receive
interest payments on any payment date until the noteholders have received all
interest payments required to be made to the noteholders on that payment date
and will not receive principal payments on any payment date until the notes have
been paid in full. If the notes have been accelerated following an event of
default under the indenture, the certificateholders will not receive interest
payments on any payment date until the notes have been paid in full. For a
further discussion of the subordination of the certificates, see "Sources and
Application of Available Funds" in this prospectus supplement.
S-31
OPTIONAL PREPAYMENT
All outstanding certificates will be prepaid in whole, but not in part,
on any payment date on which the servicer exercises its option to purchase the
receivables. The servicer will have the option to purchase the receivables on
any payment date on or after which the aggregate principal balance of the
receivables has declined to [__]% or less of the aggregate principal balance of
the receivables as of the close of business on the cut-off date. If the servicer
purchases the receivables, you will receive:
o the outstanding principal balance of your certificates plus
accrued and unpaid interest on your certificates; plus
o interest on any past due interest at the rate of interest on your
certificates, to the extent permitted by law.
SOURCES AND APPLICATION OF AVAILABLE FUNDS
SOURCES OF AVAILABLE FUNDS
The funds available to the trust to make payments on the securities on
each payment date will come from the following sources:
o collections received on the receivables during the preceding
Collection Period, other than any collections of late fees and
other administrative fees and expenses retained by the servicer as
supplemental servicing compensation;
o Liquidation Proceeds received during the preceding Collection
Period;
o Recoveries received during the preceding Collection Period;
o Advances remitted by the servicer on that payment date;
o proceeds of repurchases of receivables by the seller or purchases
of receivables by the servicer because of certain breaches of
representations or covenants; and
o funds, if any, withdrawn from the reserve account and deposited
into the collection account on that payment date.
The precise calculation of the funds available to the trust to make
payments on the securities on each payment date is set forth in the definition
of Available Funds in the "Glossary of Terms" section of this prospectus
supplement. Available Funds will be calculated for each payment date net of the
collections, Liquidation Proceeds and Recoveries applied to reimburse
outstanding Advances and the collections received on receivables previously
repurchased by the seller or purchased by the servicer. For a further discussion
of servicer advances and supplemental servicing compensation, see "Description
of the Receivables Transfer and Servicing Agreements -- Servicer Advances" and
"--Servicing Compensation" in the accompanying prospectus.
S-32
APPLICATION OF AVAILABLE FUNDS
On each payment date, the trust will apply the Available Funds for that
payment date in the following amounts and order of priority:
(1) Servicing Fee -- an amount equal to the monthly servicing fee for
that payment date, plus any unpaid monthly servicing fees for
previous payment dates, will be paid to the servicer;
(2) Note Interest -- an amount equal to the interest due to the
noteholders on that payment date, plus any unpaid note interest
for previous payment dates, will be paid to the noteholders;
provided, however, that, if the Available Funds remaining after
payment of the amounts described in clause (1) above are not
sufficient to pay the note interest due on that payment date in
full, any remaining Available Funds will be applied to pay
interest to the holders of each class of notes pro rata based on
the interest due to the holders of each class of notes;
(3) Certificate Interest -- an amount equal to the interest due to the
certificateholders on that payment date, plus any unpaid
certificate interest for previous payment dates, will be paid to
the certificateholders; provided, however, that, if the notes have
been accelerated following an event of default under the
indenture, this payment will not be made until the notes have been
paid in full;
(4) Principal Payments -- an amount equal to the sum of the principal
collections received on the receivables during the preceding
Collection Period plus the aggregate principal balance, net of
Liquidation Proceeds received during that Collection Period and
applied as principal collections, of all receivables that became
Defaulted Receivables during that Collection Period will be
applied in the following order of priority:
o to pay principal on the class A-1 notes until they are paid in
full;
o to pay principal on the class A-2 notes until they are paid in
full;
o to pay principal on the class A-3 notes until they are paid in
full;
o to pay principal on the class A-4 notes until they are paid in
full; and
o to pay principal on the certificates until they are paid in
full;
provided, however, that, if the notes have been accelerated
following an event of default under the indenture, any Available
Funds remaining after payment of the amounts described in clause
(2) above will be applied to pay principal to the holders of each
class of notes, pro rata based on the outstanding principal
balance of each class of notes, until the notes have been paid in
full and then will be applied to pay principal to the
certificateholders until the certificates have been paid in full;
S-33
(5) Final Scheduled Payment Date -- if that payment date is a final
scheduled payment date for a class of securities, the amount, if
any, necessary to pay that class in full, after payment of the
amounts described in clause (4) above, will be applied to pay
principal to the holders of that class;
(6) Reserve Account Deposit -- the amount, if any, necessary to
increase the amount on deposit in the reserve account to the
Specified Reserve Account Balance for that payment date will be
deposited into the reserve account; and
(7) Remaining Available Funds-- the amount remaining, if any, will be
paid to the seller.
DESCRIPTION OF THE SALE
AND SERVICING AGREEMENT
We will file a copy of the sale and servicing agreement with the SEC
after the trust issues the securities. This summary describes some of the
important terms of the sale and servicing agreement. This summary is not a
complete description of the sale and servicing agreement and supplements the
description of the general terms and provisions of any sale and servicing
agreement set forth under "Description of the Receivables Transfer and Servicing
Agreements" in the accompanying prospectus.
TRUST ACCOUNTS
In addition to the collection account, the servicer will cause to be
established:
o one or more distribution accounts for the benefit of the
noteholders, which accounts may be sub-accounts of the collection
account;
o a distribution account for the benefit of the certificateholders,
which account may be a sub-account of the collection account; and
o the reserve account, which account will be established in the name
of the indenture trustee for the benefit of the securityholders.
SERVICING COMPENSATION
The servicer will be entitled to receive on each payment date a
servicing fee equal to 1/12 of 1.00% of the outstanding principal balance of the
receivables as of the first day of the preceding Collection Period and the net
investment income, if any, earned during the preceding Collection Period from
the reinvestment of amounts on deposit in the collection account. The servicing
fee will be paid on each payment date only to the extent of the funds deposited
into the collection account with respect to the preceding Collection Period plus
the funds, if any, deposited into the collection account on that payment date
from the reserve account. In addition, the servicer will be entitled to retain
as supplemental servicing compensation any late fees and other administrative
fees and expenses collected with respect to the receivables. For a further
S-34
discussion of servicing compensation, see "Description of the Receivables
Transfer and Servicing Agreements -- Servicing Compensation" in the accompanying
prospectus.
RIGHTS UPON EVENT OF SERVICING TERMINATION
If an event of servicing termination has occurred and is continuing
under the sale and servicing agreement, the indenture trustee or the holders of
not less than a majority of the principal amount of the Controlling Class or, if
the notes have been paid in full, the holders of not less than a majority of the
principal balance of the certificates, may remove the servicer without the
consent of any of the other securityholders. The certificateholders will not
have the right to remove the servicer until the notes have been paid in full.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
The holders of not less than a majority of the principal amount of the
Controlling Class or, if the notes have been paid in full, the holders of not
less than a majority of the principal balance of the certificates may, on behalf
of all securityholders and subject to various exceptions set forth in the sale
and servicing agreement, waive any event of servicing termination under the sale
and servicing agreement and its consequences without the consent of any of the
other securityholders, except for an event of servicing termination consisting
of a failure to make any required deposits to or payments from any trust
account. The certificateholders will not have the right to waive any event of
servicing termination under the sale and servicing agreement until the notes
have been paid in full.
DEPOSITS TO THE COLLECTION ACCOUNT
The servicer will establish the collection account as described under
"Description of the Receivables Transfer and Servicing Agreements--Trust
Accounts" in the accompanying prospectus. In general, the servicer will not be
required to deposit amounts collected with respect to the receivables into the
collection account until the business day preceding the payment date following
the Collection Period during which those collections were received. The servicer
will be required to deposit collections on a daily basis if the bank is no
longer the servicer, an event of servicing termination has occurred and is
continuing under the sale and servicing agreement or any other condition set
forth in the sale and servicing agreement is not met. On each payment date, the
servicer will cause all other amounts constituting Available Funds for that
payment date to be deposited into the collection account.
REPORTS TO THE TRUSTEE
On the business day prior to each payment date, the servicer will
provide the indenture trustee with various information with respect to the
preceding Collection Period, including:
o the aggregate amount of collections received on the receivables
during that Collection Period;
o the aggregate amount of receivables that became Defaulted
Receivables during that Collection Period;
S-35
o the aggregate amount of Advances to be remitted by the servicer on
that payment date; and
o the aggregate Purchase Amount of receivables to be repurchased by
the seller or to be purchased by the servicer on that payment
date.
RESERVE ACCOUNT
The servicer will establish the reserve account in the name of the
indenture trustee for the benefit of the securityholders. The seller will cause
$[____________] to be deposited into the reserve account on the closing date.
The amount on deposit in the reserve account may increase from time to time up
to the Specified Reserve Account Balance through the deposit of Available
Collections not needed to pay the Total Required Payment.
On each payment date, the indenture trustee will withdraw from the
reserve account and deposit into the collection account, to the extent of funds
then on deposit in the reserve account, the following amounts:
o the amount, if any, by which the Total Required Payment for that
payment date exceeds the Available Collections for that payment
date; and
o the Reserve Account Excess Amount for that payment date.
All amounts on deposit in the reserve account will be invested by the
indenture trustee, at the direction of the seller, in Permitted Investments. All
investment earnings, net of losses and investment expenses, on amounts on
deposit in the reserve account will be retained in the reserve account until
withdrawn in accordance with the sale and servicing agreement. In general,
Permitted Investments are limited to obligations or securities that will mature
on or before the next payment date. Amounts on deposit in the reserve account
may be invested in obligations or securities that will not mature on or prior to
the next payment date, however, and that will not be sold to cover any
shortfalls in Available Collections, if each Rating Agency has confirmed in
writing that those investments will not result in a reduction or withdrawal of
any rating assigned by that Rating Agency to any class of the securities.
The reserve account is intended to increase the likelihood that the
securityholders will receive the full amount of principal and interest due on
the securities and to decrease the likelihood that the securityholders will
experience losses on the securities. The amount on deposit in the reserve
account is limited, however, and may not be sufficient to cover any shortfalls
in Available Collections. If the amount required to be withdrawn from the
reserve account to cover shortfalls in Available Collections exceeds the amount
available to be withdrawn from the reserve account, a shortfall in the amounts
distributed to the securityholders could result and the securityholders could
suffer a loss on the securities.
After the payment in full, or the provision for the payment in full, of
all accrued and unpaid interest on the notes and the certificates and the
outstanding principal balance of the notes and the certificates, any funds
remaining on deposit in the reserve account will, subject to various limitations
set forth in the sale and servicing agreement, be paid to the seller.
S-36
The seller may at any time, without the consent of the securityholders,
sell, transfer or assign in any manner its rights to and interests in
distributions from the reserve account; provided, however, that:
o each Rating Agency has confirmed in writing that the sale,
transfer or assignment will not result in a reduction or
withdrawal of any rating assigned by that Rating Agency to any
class of the securities;
o the seller provides to the owner trustee and the indenture trustee
an opinion of counsel to the effect that the sale, transfer or
assignment will not cause the trust to be classified as an
association or a publicly traded partnership taxable as a
corporation for federal income tax purposes; and
o the purchaser, transferee or assignee agrees in writing to take
positions for federal income tax purposes consistent with the
federal income tax positions taken by the seller.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of McGuireWoods LLP, counsel for the bank and Federal
Tax Counsel for the trust, for federal income tax purposes, the notes will be
characterized as debt and the trust will not be characterized as an association
or a publicly traded partnership taxable as a corporation. For a further
discussion of the application of federal tax laws to the notes or the
certificates, see "Material Federal Income Tax Consequences" in the accompanying
prospectus.
If you purchase notes, you will agree by your purchase that you will
treat the notes as indebtedness for federal income tax purposes. If you purchase
certificates, you will agree by your purchase that you will treat the trust as a
partnership in which the certificateholders are partners for federal income tax
purposes. The certificates may not be purchased by persons who are not U.S.
Persons for federal income tax purposes.
STATE TAX CONSEQUENCES
The tax discussion in the accompanying prospectus does not address the
tax treatment of the trust, the notes, the certificates, the noteholders or the
certificateholders under any state tax laws. You should consult your own tax
advisors with respect to the state tax treatment of the trust as well as any
state tax consequences to you of the purchase, ownership or disposition of notes
or certificates.
S-37
ERISA CONSIDERATIONS
THE NOTES
In general, the notes may be purchased by or on behalf of Plans.
Although we cannot assure you in this regard, the notes should be treated as
debt and not as equity interests for purposes of the Plan Assets Regulation
because the notes:
o are expected to be treated as indebtedness under local law and
will, in the opinion of Federal Tax Counsel for the trust, be
treated as debt, rather than equity, for federal income tax
purposes; and
o should not be deemed to have any substantial equity features.
The acquisition and holding of notes of any class by or on behalf of or
with plan assets of a Plan could, however, give rise to a prohibited transaction
under ERISA and Section 4975 of the Internal Revenue Code if the trust, the
owner trustee, the indenture trustee, any certificateholder or any of their
respective affiliates is or becomes a party in interest, as defined in ERISA, or
a disqualified person, as defined in the Internal Revenue Code, with respect to
the Plan. In this event, various exemptions from the prohibited transaction
rules could be applicable to the acquisition and holding of notes by a Plan
depending on the type and circumstances of the Plan fiduciary making the
decision to acquire the notes.
The notes may not be purchased with the asset of a Plan if the seller,
an underwriter, the indenture trustee, the owner trustee, the servicer or any of
their affiliates:
o has investment or administrative discretion with respect to those
assets;
o has authority or responsibility to give, or regularly gives,
investment advice with respect to those assets for a fee and
pursuant to an agreement or understanding that the advice will
serve as a primary basis for investment decisions with respect to
those assets and will be based on the particular investment needs
for the Plan; or
o unless PTCE 95-60, PTCE 90-1 or PTCE 91-38 applies, is an employer
maintaining or contributing to the Plan.
Each person that acquires a note on behalf of or with plan assets of a
Plan, by its acceptance of the note, will be deemed to represent that it
satisfies the requirement in the preceding paragraph and that its acquisition
and holding of the note are eligible for exemptive relief under PTCE 84-14, PTCE
90-1, PTCE 91-38, PTCE 95-60 or PTCE 96-23, or a similar exemption. For a
further discussion of the treatment of the notes under ERISA, see "ERISA
Considerations" in the accompanying prospectus.
THE CERTIFICATES
In general, the certificates may not be purchased by or on behalf of
Plans. The characteristics of the certificates may not meet the requirements of
the Exemption or any other prohibited transaction exemption issued under ERISA.
As a result, transfers of the certificates will not be registered by the trustee
unless the trustee receives:
o a representation from the purchaser, acceptable to and in form and
substance satisfactory to the trustee, that the purchaser is not a
Plan, or a person acting on behalf of a Plan or using a Plan's
assets to effect the transfer; or
o if the purchaser is an insurance company, a representation from
the purchaser that the purchaser is an insurance company that is
purchasing the certificates with funds contained in an insurance
company general account, as defined in Section V(a) of PTCE
95-60, and that the purchase and holding of the certificates are
covered under Sections I and III of PTCE 95-60.
Each purchaser of the certificates will be deemed by its acceptance of
a certificate to have made the above representation to the trustee. If the
representation is not true, the attempted transfer or purchase will be void. For
a further discussion of the treatment of the certificates under ERISA, see
"ERISA Considerations" in the accompanying prospectus.
S-38
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each of those underwriters has severally agreed to purchase from the
seller, the initial principal amount of class A-1 notes, class A-2 notes, class
A-3 notes and class A-4 notes set forth opposite its name below:
- --------------------------------------------------------------------------------
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
- --------------------------------------------------------------------------------
...........
- --------------------------------------------------------------------------------
...........
- --------------------------------------------------------------------------------
...........
- --------------------------------------------------------------------------------
...........
- --------------------------------------------------------------------------------
Total......
- --------------------------------------------------------------------------------
The seller has been advised by the underwriters of the notes that they
propose initially to offer the notes to the public at the applicable prices set
forth on the cover page of this prospectus supplement. After the initial public
offering of the notes, the public offering prices may change.
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each of those underwriters has severally agreed to purchase from the
seller, the initial principal balance of the certificates set forth below
opposite its name.
S-39
- ---------------------------------------------------------------
CERTIFICATES
- ---------------------------------------------------------------
...................................
- ---------------------------------------------------------------
...................................
- ---------------------------------------------------------------
...................................
- ---------------------------------------------------------------
...................................
- ---------------------------------------------------------------
Total..............................
- ---------------------------------------------------------------
The seller has been advised by the underwriters of the certificates
that they propose initially to offer the certificates to the public at the
applicable price set forth on the cover page of this prospectus supplement.
After the initial public offering of the certificates, the public offering price
may change.
The underwriting discounts and commissions, the selling concessions
that the underwriters of the notes and the certificates may allow to dealers and
the discounts that those dealers may reallow to other dealers, expressed as a
percentage of the initial principal amount of each class of notes or as a
percentage of the principal balance of the certificates and as an aggregate
dollar amount, will be as follows:
- ---------------------------------------------------------------------------------------------
Underwriting Selling Reallowance
Discounts and Net Proceeds Concessions Not to
Commissions to the Seller(1) Not to Exceed Exceed
- ---------------------------------------------------------------------------------------------
Class A-1 Notes.........
- ---------------------------------------------------------------------------------------------
Class A-2 Notes.........
- ---------------------------------------------------------------------------------------------
Class A-3 Notes.........
- ---------------------------------------------------------------------------------------------
Class A-4 Notes.........
- ---------------------------------------------------------------------------------------------
Certificates............
- ---------------------------------------------------------------------------------------------
Total...................
- ---------------------------------------------------------------------------------------------
(1) The net proceeds to the seller are before deducting other expenses
estimated to be $[____________].
Until the distribution of the notes and the certificates is completed,
rules of the SEC may limit the ability of the underwriters and various selling
group members to bid for and purchase the notes and the certificates. As an
exception to these rules, the underwriters are permitted to engage in various
transactions that stabilize the price of the notes and the certificates. These
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the notes and the certificates.
If the underwriters create a short position in the notes or the
certificates in connection with this offering by selling more notes or
certificates than are set forth on the cover page of this prospectus supplement,
the underwriters may reduce that short position by purchasing notes or
certificates, as the case may be, in the open market.
The underwriters may also impose a penalty bid on various underwriters
and selling group members. If the underwriters purchase notes or certificates in
the open market to reduce their short position or to stabilize the price of
those notes or certificates, they may reclaim the
S-40
amount of the selling concession from any underwriter or selling group member
who sold those notes or certificates, as the case may be, as part of the
offering.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of those purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the seller nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the notes or the
certificates. In addition, neither the seller nor any of the underwriters makes
any representation that the underwriters will engage in the transactions
described above or that those transactions, if commenced, will not be
discontinued without notice.
There currently is no secondary market for the notes or the
certificates. The underwriters expect to make a market in the notes and the
securities but will not be obligated to do so. We cannot assure you that a
secondary market for the notes or the certificates will develop. If a secondary
market for the notes or the certificates does develop, it might end at any time
or it might not be sufficiently liquid to enable you to resell any of your notes
or certificates.
The indenture trustee may, from time to time, invest amounts on deposit
in the collection account and the reserve account in investments acquired from
or issued by the underwriters.
In the ordinary course of business, the underwriters and their
affiliates have engaged and may engage in investment banking and commercial
banking transactions with the seller and its affiliates.
The seller has agreed to indemnify the underwriters against various
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments which the underwriters may be required to
make in respect of those liabilities.
The closings of the sale of each class of notes and the certificates
are conditioned on the closing of the sale of each other class of notes and the
certificates.
Upon receipt of a request by an investor who has received an electronic
prospectus from an underwriter or a request by that investor's representative
within the period during which there is an obligation to deliver a prospectus,
the seller or the underwriter will promptly deliver, without charge, a paper
copy of this prospectus supplement and the accompanying prospectus.
LEGAL OPINIONS
Certain legal and federal income tax matters relating to the notes and
the certificates will be passed upon for the seller and the servicer by
McGuireWoods LLP, Richmond, Virginia. Certain legal matters relating to the
certificates will be passed upon for the seller and the servicer by
[____________________]. Certain legal matters relating to the notes and the
certificates will be passed upon for the underwriters by Brown & Wood, LLP, New
York, New York.
S-41
GLOSSARY OF TERMS
The following defined terms are used in this prospectus supplement. The
additional defined terms used in this prospectus supplement are defined under
"Glossary of Terms" in the accompanying prospectus.
"ABS Tables" means the table on page S-[__] of this prospectus
supplement captioned "Percent of Initial Note Principal Amount at Various ABS
Percentages" and the table on page S-[__] of this prospectus supplement
captioned "Percent of Initial Principal Balance at Various ABS Percentages."
"Available Collections" means, for any payment date, the sum of the
following amounts:
o all collections received on the receivables during the preceding
Collection Period, other than any collections of late fees and
other administrative fees and expenses retained by the servicer as
supplemental servicing compensation;
o all Liquidation Proceeds received during the preceding Collection
Period;
o all Recoveries received during the preceding Collection Period;
o all Advances remitted by the servicer on that payment date;
o the Purchase Amount of each receivable that was repurchased by the
seller or purchased by the servicer under an obligation which
arose during the preceding Collection Period; and
o all partial prepayments of any refunded item included in the
principal balance of a receivable, such as extended warranty
protection plan costs or theft, physical damage, credit life or
credit disability insurance premiums, received during the
preceding Collection Period;
provided, however, that the Available Collections for any payment date will
exclude the following amounts:
o collections received on any receivable to the extent that the
servicer has previously made an unreimbursed Advance with respect
to that receivable and the amount received exceeds the accrued and
unpaid interest on that receivable;
o collections received on any receivable to the extent that the
servicer has previously made an unreimbursed Advance with respect
to that receivable which is not recoverable from collections on
that receivable;
o collections and proceeds, including Liquidation Proceeds and
Recoveries, received on any receivable the Purchase Amount of
which has been included in the Available Collections for a prior
payment date; and
S-42
o Liquidation Proceeds and Recoveries with respect to accrued and
unpaid interest on any receivable, but only to the extent of any
unreimbursed Advances on that receivable.
"Available Funds" means, for any payment date, the sum of the Available
Collections for that payment date and the funds, if any, to be withdrawn from
the reserve account and deposited into the collection account on that payment
date as described under "Description of the Sale and Servicing Agreement --
Reserve Account" in this prospectus supplement.
"Collection Period" means, with respect to the first payment date, the
period from but excluding the cut-off date to and including [____________],
20[__], and, with respect to each subsequent payment date, the calendar month
preceding that payment date.
"Controlling Class" means the class A notes voting together as a single
class.
"Federal Tax Counsel" means McGuireWoods LLP.
"Liquidation Proceeds" means, with respect to any receivable that has
become a Defaulted Receivable, all insurance proceeds received by the servicer
with respect to the related financed vehicle or the related obligor, all amounts
received by the servicer through the exercise of rights under that receivable
and all other monies collected by the servicer with respect to that receivable
from whatever source, including but not limited to proceeds received from the
repossession and sale of the related financed vehicle and amounts recovered from
the related dealer, in each case net of all related expenses incurred by the
servicer and any payments required by law to be remitted to the related obligor;
provided, however, that Liquidation Proceeds with respect to a receivable will
only include amounts received or collected by the servicer during the Collection
Period in which that receivable became a Defaulted Receivable.
"Recoveries" means, with respect to any receivable that has become a
Defaulted Receivable, all insurance proceeds received by the servicer with
respect to the related financed vehicle or the related obligor, all amounts
received by the servicer through the exercise of rights under that receivable
and all other monies collected by the servicer with respect to that receivable
from whatever source, including but not limited to proceeds received from the
repossession and sale of the related financed vehicle and amounts recovered from
the related dealer, in each case net of all related expenses incurred by the
servicer and any payments required by law to be remitted to the related obligor;
provided, however, that Recoveries with respect to a receivable will only
include amounts received or collected by the servicer after the Collection
Period in which that receivable became a Defaulted Receivable.
"Reserve Account Excess Amount" means, with respect to any payment
date, the amount equal to the excess, if any, of:
o the amount of cash or other immediately available funds on deposit
in the reserve account on that payment date, after giving effect
to any withdrawals from the reserve account made on that payment
date to fund the Total Required Payment for that payment date;
over
S-43
o the Specified Reserve Account Balance for that payment date.
"Specified Reserve Account Balance" means, for any payment date,
[____]% of the aggregate principal balance of the receivables as of the last day
of the preceding Collection Period; provided, however, that the Specified
Reserve Account Balance for any payment date will not be less than the lesser of
$[____________] and the aggregate principal balance of the receivables as of the
last day of the preceding Collection Period.
"Total Required Payment" means, for any payment date, the sum of:
o the monthly servicing fee for that payment date, plus any unpaid
monthly servicing fees for previous payment dates;
o the interest due to the noteholders on that payment date, plus any
unpaid note interest for previous payment dates;
o the interest due to the certificateholders on that payment date,
plus any unpaid certificate interest for previous payment dates;
o the sum of the principal collections received on the receivables
during the preceding Collection Period plus the aggregate
principal balance, net of Liquidation Proceeds and Recoveries
received during that Collection Period and applied as principal
collections, of all receivables that became Defaulted Receivables
during that Collection Period; and
o if that payment date is a final scheduled payment date for a class
of securities, the amount, if any, necessary to pay that class in
full, after payment of the amounts described in the preceding
clause;
provided, however, that if the notes have been accelerated following an event of
default under the indenture, the Total Required Payment for any payment date
will equal the sum of:
o the monthly servicing fee for that payment date, plus any unpaid
monthly servicing fees for previous payment dates;
o the interest due to the noteholders on that payment date, plus any
unpaid note interest for previous payment dates;
o the interest due to the certificateholders on that payment date,
plus any unpaid certificate interest for previous payment dates;
and
o the amount necessary to pay each class of securities in full.
S-44
SUBJECT TO COMPLETION, DATED [____________], 20[__]
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [____________], 20[__])
$[------------]
WACHOVIA AUTO GRANTOR TRUST 20[__]-[__]
Issuer
WACHOVIA BANK, N.A.
Seller and Servicer
- ----------------------------------------- THE TRUST WILL ISSUE THE FOLLOWING
BEFORE YOU PURCHASE THE CERTIFICATES, CERTIFICATES:
BE SURE TO READ THE RISK FACTORS
BEGINNING ON PAGE S-[__] OF THIS Principal Interest Final Scheduled
PROSPECTUS SUPPLEMENT AND THE RISK Balance Rate Payment Date
FACTORS SET FORTH IN THE ACCOMPANYING ------- -------- ---------------
PROSPECTUS. Class A Certificates..
Class B Certificates..
The certificates are not deposits, and
neither the certificates nor the -----------
underlying motor vehicle installment o The trust will pay principal and
sale contracts are insured or interest on the certificates on the
guaranteed by the FDIC or any other [15]th day of each month or, if that
governmental authority. day is not a business day, on the
following business day, beginning
The certificates represent interests [____________], 20[__].
in the trust only and do not represent
obligations of or interests in o The class B certificates are
Wachovia Bank, N.A. or any of its subordinated to the class A
affiliates. certificates.
This prospectus supplement may be used THE UNDERWRITERS ARE OFFERING THE
to offer and sell the certificates FOLLOWING CERTIFICATES BY THIS
only if accompanied by the prospectus. PROSPECTUS SUPPLEMENT:
- -----------------------------------------
Initial Public Underwriting Proceeds to the
Offering Price (1) Discount Seller (1)(2)
------------------ -------- -------------
Per Class A Certificate
Per Class B Certificate
Total..................
-------------
(1) The price of the certificates will
also include interest accrued on the
certificates, if any, from
[____________], 20[__].
(2) The proceeds to the seller will be
reduced by expenses payable by the
seller, which expenses are estimated
to be $[____________].
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITERS]
The date of this prospectus supplement is [____________], 20[__]
TABLE OF CONTENTS
READING THIS PROSPECTUS
SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS.........................S-1
SUMMARY...........................................S-2
RISK FACTORS......................................S-7
THE TRUST........................................S-12
Limited Purpose and Limited Assets............S-12
The Trustee...................................S-12
THE RECEIVABLES..................................S-13
Selection Criteria............................S-13
Pool Characteristics..........................S-14
Delinquency and Loss Experience...............S-16
HOW YOU CAN COMPUTE YOUR
PORTION OF THE AMOUNT
OUTSTANDING ON THE CERTIFICATES................S-19
MATURITY AND PREPAYMENT CONSIDERATIONS...........S-19
Weighted Average Life of the Certificates.....S-20
DESCRIPTION OF THE CERTIFICATES..................S-24
Interest Distributions........................S-24
Principal Distributions.......................S-24
Subordination of the Class B Certificates.....S-24
Optional Prepayment...........................S-25
SOURCES AND APPLICATION OF AVAILABLE FUNDS.......S-25
Sources of Available Funds....................S-25
Application of Available Funds................S-26
DESCRIPTION OF THE POOLING AND
SERVICING AGREEMENTS..........................S-27
Trust Accounts................................S-27
Servicing Compensation........................S-27
Rights Upon Event of Servicing Termination....S-28
Waiver of Past Events of Servicing
Termination.................................S-28
Deposits to the Collection Account............S-28
Reports to the Trustee........................S-28
Reserve Account...............................S-29
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.........S-31
STATE TAX CONSEQUENCES...........................S-31
ERISA CONSIDERATIONS.............................S-31
The Class A Certificates......................S-31
The Class B Certificates......................S-31
UNDERWRITING.....................................S-32
LEGAL OPINIONS...................................S-34
GLOSSARY OF TERMS................................S-35
READING THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
We provide information about your certificates in two separate
documents that offer varying levels of detail:
o the accompanying prospectus provides general information, some of
which may not apply to your certificates; and
o this prospectus supplement provides specific information about the
terms of your certificates.
You must read both this prospectus supplement and the accompanying
prospectus in their entirety to understand fully the structure and terms of your
certificates. If the information in this prospectus supplement varies from the
information in the accompanying prospectus, you should rely on the information
in this prospectus supplement.
You should rely only on the information contained in, or incorporated
by reference into, this prospectus supplement and the accompanying prospectus.
We have not authorized anyone to provide you with additional or different
information.
We include in this prospectus supplement and the accompanying
prospectus cross-references to sections in those documents where you can find
further related discussions. You should refer to the table of contents in the
front of each document to locate the referenced sections.
We include in this prospectus supplement and the accompanying
prospectus a number of capitalized terms. You should refer to the glossary of
defined terms on page S-[__] of this prospectus supplement and the glossary of
defined terms on page [__] of the accompanying prospectus for the definitions of
these capitalized terms.
As used in this prospectus supplement, the term "we" refers to Wachovia
Bank, N.A.
S-1
- --------------------------------------------------------------------------------
SUMMARY
This summary describes the main terms of your certificates. This
summary does not contain all of the information that may be important to you and
does not describe all of the terms of your certificates. You will need to read
both this prospectus supplement and the accompanying prospectus in their
entirety to understand fully the structure and terms of your certificates.
THE ISSUER
Wachovia Auto Grantor Trust 20[__]-[__], a Delaware common law trust referred to
in this prospectus supplement as the trust, will issue the certificates.
THE SELLER AND THE SERVICER
Wachovia Bank, N.A., a national banking association referred to in this
prospectus supplement as the bank, will sell a pool of motor vehicle installment
sale contracts to the trust and will service the contracts on behalf of the
trust.
THE TRUSTEE
[_______________], a [_______________], will serve as trustee with respect to
the certificates.
CLOSING DATE
The trust expects to issue the certificates on or about [____________], 20[__].
PAYMENT DATES
The trust will pay principal and interest on the certificates on the [15]th day
of each month or, if that day is not a business day, on the following business
day, beginning [____________], 20[__]. On each payment date, the trust will pay
principal and interest to the holders of the certificates as of the related
record date.
RECORD DATES
The record date with respect to any payment date will be the day immediately
preceding that payment date or, if the certificates have been issued in
fully-registered, certificated form, the last day of the preceding month.
CUT-OFF DATE
The cut-off date with respect to the trust will be [____________], 20[__].
THE TRUST PROPERTY
The property of the trust will consist of the following:
o a pool of motor vehicle installment sale contracts originated by dealers
for assignment to the bank and secured by new and used motor vehicles,
which contracts are referred to in this prospectus supplement as the
receivables;
o all collections received on the receivables after the close of business on
the cut-off date, other than any collections of late fees and other
administrative fees and expenses retained by the servicer as supplemental
servicing compensation;
o the security interests in the financed vehicles;
o the proceeds, if any, from claims on or refunds of premiums with respect to
the theft, physical damage, credit life or
- --------------------------------------------------------------------------------
S-2
- --------------------------------------------------------------------------------
credit disability insurance policies, if any, covering the financed
vehicles or the related obligors;
o all amounts on deposit from time to time in the accounts maintained for the
trust other than the net investment income, if any, earned from the
reinvestment of amounts on deposit in the collection account; and
o the other property described in this prospectus supplement.
For a further discussion of the receivables and the other property supporting
the certificates, see "The Receivables" in this prospectus supplement.
POOL CHARACTERISTICS
The receivables will have the following characteristics as of the closing date:
- ------------------------------------------------------
o Aggregate Outstanding
Principal Balance.........
- ------------------------------------------------------
o Number of
Receivables...............
- ------------------------------------------------------
o Average Outstanding
Principal Balance.........
- ------------------------------------------------------
o Average Original
Amount Financed...........
- ------------------------------------------------------
o Original Amount
Financed (Range)..........
- ------------------------------------------------------
o Weighted Average
Contract Rate.............
- ------------------------------------------------------
o Contract Rate
(Range)...................
- ------------------------------------------------------
o Weighted Average
Original Term.............
- ------------------------------------------------------
o Original Term
(Range)...................
- ------------------------------------------------------
o Weighted Average
Remaining Term............
- ------------------------------------------------------
o Remaining Term (Range)....
- ------------------------------------------------------
For a further discussion of the characteristics of the receivables, see "The
Receivables -- Pool Characteristics" in this prospectus supplement.
INTEREST PAYMENTS
In general, the trust will pay interest on each class of certificates on each
payment date in an amount equal to the product of:
o the interest rate applicable to that class;
o a fraction, the numerator of which is 30, or, in the case of the first
payment date, [__], and the denominator of which is 360; and
o the outstanding principal balance of that class as of the close of business
on the preceding payment date, or, in the case of the first payment date,
as of the close of business on the closing date.
Any interest not paid on a payment date will be payable on the following payment
date, together with additional interest on the unpaid amount at the interest
rate applicable to the related class.
PRINCIPAL PAYMENTS
In general, the trust will pay principal to the holders of each class of
certificates on each payment date in an amount equal to the product of the
principal allocation percentage for that class and the sum of:
o the principal collections received on the receivables during the preceding
collection period; plus
o the aggregate principal balance, net of liquidation proceeds applied as
principal collections, of all receivables that became defaulted receivables
during the preceding collection period.
- --------------------------------------------------------------------------------
S-3
- --------------------------------------------------------------------------------
The principal balance of each class of certificates will be payable in full on
the final scheduled payment date for that class.
APPLICATION OF AVAILABLE FUNDS
On each payment date, the trust will apply the available collections received on
the receivables during the preceding collection period, other than collections
applied to reimburse servicer advances, and all amounts withdrawn from the
reserve account on that payment date to make the following payments in the
following order of priority:
(1) an amount equal to the monthly servicing fee for that payment date, plus
any unpaid monthly servicing fees for previous payment dates, will be paid
to the servicer;
(2) an amount equal to the interest due to the class A certificateholders on
that payment date, plus any unpaid class A certificate interest for
previous payment dates, will be paid to the class A certificateholders;
(3) an amount equal to the interest due to the class B certificateholders on
that payment date, plus any unpaid class B certificate interest for
previous payment dates, will be paid to the class B certificateholders;
(4) an amount equal to the principal due to the class A certificateholders on
that payment date will be applied to pay principal to the class A
certificateholders;
(5) an amount equal to the principal due to the class B certificateholders on
that payment date will be applied to pay principal to the class B
certificateholders;
(6) the amount, if any, necessary to increase the amount on deposit in the
reserve account to the required amount will be deposited into the reserve
account; and
(7) the amount remaining, if any, will be paid to the seller.
For a further discussion of the sources and application of available funds on
each payment date, see "Sources and Application of Available Funds" in this
prospectus supplement.
CREDIT ENHANCEMENT
The credit enhancement for the class A certificates will be the subordination of
the class B certificates and the reserve account. The credit enhancement for the
class B certificates will be the reserve account.
The class B certificateholders will not receive interest payments on any payment
date until the class A certificateholders have received all interest payments
required to be made to the class A certificateholders on that payment date.
The class B certificateholders will not receive principal payments on any
payment date until the class A certificateholders have received all principal
and interest payments required to be made to the class A certificateholders on
that payment date.
For a further discussion of the subordination of the class B certificates, see
"Sources and Application of Available Funds" in this prospectus supplement.
The servicer will establish with the trustee, for the benefit of the
certificateholders, a reserve account into which excess collections on the
receivables will be deposited and from which amounts may be withdrawn to make
required payments on
- --------------------------------------------------------------------------------
S-4
- --------------------------------------------------------------------------------
the certificates. The seller will cause $[____________] to be deposited into the
reserve account on the closing date.
For a further discussion of the reserve account, see "Description of the Pooling
and Servicing Agreement -- Reserve Account" in this prospectus supplement.
OPTION TO PURCHASE
The servicer will have the option to purchase the receivables on any payment
date on or after which the aggregate principal balance of the receivables has
declined to [__]% or less of the aggregate principal balance of the receivables
as of the close of business on the cut-off date. The purchase price will equal
the aggregate principal balance of the receivables plus accrued and unpaid
interest on the receivables to the date of purchase at the weighted average
interest rate borne by the certificates. If the servicer purchases the
receivables, the trust will apply the purchase price to prepay the certificates
in full.
SERVICING COMPENSATION
The servicer will be entitled to receive on each payment date a servicing fee
equal to 1/12 of 1.00% of the outstanding principal balance of the receivables
as of the first day of the preceding collection period and the net investment
income, if any, earned during the preceding collection period from the
reinvestment of amounts on deposit in the collection account. In addition, the
servicer will be entitled to retain as supplemental servicing compensation any
late fees and other administrative fees and expenses collected with respect to
the receivables.
CERTIFICATE RATINGS
It is a condition to the issuance of the certificates that:
o the class A certificates be rated in the [highest] long-term category by at
least [two] nationally recognized statistical rating organizations; and
o [the class B certificates be rated "[____]" or its equivalent by at least
[two] nationally recognized statistical rating organizations].
A rating is not a recommendation to purchase, hold or sell securities and does
not address market price or suitability for a particular investor.
MINIMUM DENOMINATIONS
The certificates will be issued in minimum denominations of $[1,000] and
integral multiples of $[1,000].
REGISTRATION, CLEARANCE AND SETTLEMENT
[The certificates will be issued in book-entry form and may be held through DTC
in the United States or through Clearstream or the Euroclear system in Europe.]
TAX STATUS
McGuireWoods LLP will deliver its opinion that for federal income tax purposes
the trust will be characterized as a grantor trust and not as an association or
a publicly traded partnership taxable as a corporation.
For a further discussion of the application of federal tax laws to the
certificates, see "Material Federal Income Tax Consequences" in this prospectus
supplement and the accompanying prospectus .
ERISA CONSIDERATIONS
In general, the class A certificates are eligible for purchase by employee
benefit plans or individual retirement accounts, subject to the considerations
- --------------------------------------------------------------------------------
S-5
- --------------------------------------------------------------------------------
discussed under "ERISA Considerations" in this prospectus supplement and the
accompanying prospectus.
In general, the class B certificates may not be acquired by employee benefit
plans or individual retirement accounts. An insurance company using its general
account, however, may acquire the certificates, subject to the considerations
discussed under "ERISA Considerations" in this prospectus supplement and the
accompanying prospectus.
INVESTOR INFORMATION
The mailing address of the bank is 100 North Main Street, Winston-Salem, North
Carolina 27150. You may request copies of the transaction documents relating to
the trust by calling (336) 770-5000.
- --------------------------------------------------------------------------------
S-6
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of the certificates.
THE RESERVE ACCOUNT MAY NOT BE The amount on deposit in the
SUFFICIENT TO PREVENT PAYMENT DELAYS reserve account will be used to
OR LOSSES ON THE CERTIFICATES fund the payment of principal and
interest to the
certificateholders on each
payment date if available
collections received on the
receivables, including amounts
recovered in connection with the
repossession and sale of financed
vehicles that secure defaulted
receivables, are not sufficient
to make that payment. We cannot
assure you, however, that the
amount on deposit in the reserve
account will be sufficient to
prevent payment delays or losses
on your certificates.
If the receivables experience
higher losses than were projected
by the rating agencies in rating
the certificates, the funds
available on any payment date may
not be sufficient to pay in full
the principal and interest due to
the certificateholders on that
payment date. If available
collections received on the
receivables and amounts on
deposit in the reserve account
are not sufficient on any payment
date to pay in full the principal
and interest due to the
certificateholders on that
payment date, you will suffer
payment delays with respect to
your certificates. If the amount
of that insufficiency is not
offset on subsequent payment
dates, you will experience losses
with respect to your
certificates. For a further
discussion of the reserve
account, see "Description of the
Pooling and Servicing Agreement
-- Reserve Account" in this
prospectus supplement.
THE SUBORDINATION OF THE CLASS B The subordination of the class
CERTIFICATES MAY B NOT BE SUFFICIENT certificates is intended to
TO PREVENT PAYMENT DELAYS OR LOSSES ON increase the likelihood that you
THE CLASS A CERTIFICATES will receive the full amount of
principal and interest due on
your class A certificates and to
decrease the likelihood that you
will
S-7
experience losses on your class A
certificates. We cannot assure
you, however, that the
subordination of the class B
certificates will be sufficient
to prevent payment delays or
losses on your class A
certificates.
If the receivables experience
higher losses than were projected
by the rating agencies in rating
the class A certificates, the
funds available on any payment
date may not be sufficient to pay
in full the principal and
interest due to the class A
certificateholders on that
payment date, even if those funds
are not used to pay interest or
principal to the class B
certificateholders. If available
collections received on the
receivables, including amounts
recovered in connection with the
repossession and sale of financed
vehicles that secure defaulted
receivables, and amounts on
deposit in the reserve account
are not sufficient on any payment
date to pay in full the principal
and interest due to the class A
certificateholders on that
payment date, you will suffer
payment delays with respect to
your class A certificates. If the
amount of that insufficiency is
not offset on subsequent payment
dates, you will experience losses
with respect to your class A
certificates. For a further
discussion of the subordination
of the class B certificates, see
"Description of the Certificates
-- Subordination of Class B
Certificates" in this prospectus
supplement.
YOU WILL BEAR ADDITIONAL CREDIT RISK The class B certificates are
IF YOU HOLD CLASS B CERTIFICATES subject to greater credit risk
than the class A certificates
because payments of principal and
interest on the class B
certificates are subordinated, to
the extent described below, to
payments of principal and
interest on the class A
certificates.
The class B certificateholders
will not receive interest
payments on any payment date
until the class A
certificateholders have
S-8
received all interest payments
required to be made to the class
A certificateholders on that
payment date. The class B
certificateholders will not
receive principal payments on any
payment date until the class A
certificateholders have received
all principal and interest
payments required to be made to
the class A certificateholders on
that payment date.
For a further discussion of the
subordination of the class B
certificates, see "Sources and
Application of Available Funds"
in this prospectus supplement.
YOU MAY BEAR ADDITIONAL RISK AS A As of [____________], 20[__],
RESULT OF THE GEOGRAPHIC CONCENTRATION [____]%, [____]%, [____]%,
OF THE OBLIGORS [____]%, [____]% and [____]% of
the receivables, based on
outstanding principal balance,
related to obligors with mailing
addresses in Florida, Georgia,
North Carolina, South Carolina,
Tennessee and Virginia,
respectively. As a result of this
geographic concentration,
economic, social, legal and other
factors affecting these states
could cause the number of
delinquent or defaulted
receivables or the rate of
prepayments on the receivables to
increase or could cause the
amount recovered with respect to
defaulted receivables to
decrease. These factors include,
but are not limited to:
o unemployment rates: for
example, if a material number
of obligors located in one or
more concentration states were
to lose their jobs, the number
of delinquent or defaulted
receivables could increase;
o changes in consumer debt
levels: for example, if
uncertain economic conditions
in one or more concentration
states were to cause a
material number of obligors
located in those states to
begin prepaying outstanding
loans, the rate of prepayments
on the receivables
S-9
could increase;
o the enactment of new laws that
further regulate the motor
vehicle lending industry: for
example, if one or more
concentration states were to
enact legislation imposing
additional restrictions on the
repossession and sale of
financed vehicles, the amount
recovered with respect to
defaulted receivables governed
by the laws of those states
could decrease; and
o natural disasters: for
example, if a hurricane or
other natural disaster
affecting one or more
concentration states were to
materially adversely affect
commercial and financial
activities in those states,
the number of delinquent or
defaulted receivables could
increase.
If the receivables experience
higher delinquencies or losses
than were projected by the rating
agencies in rating the
certificates, or if the amount
recovered with respect to
defaulted receivables decreases,
the funds available on any
payment date may not be
sufficient to pay in full the
principal and interest due on
that payment date and you may
experience payment delays or
losses with respect to your
certificates. If prepayments on
the receivables are more rapid
than expected, you may receive
payments on your certificates
earlier than expected and may not
be able to reinvest those
payments at a rate of return that
is equal to or greater than the
rate of return on your
certificates.
YOU MAY BE LIMITED IN YOUR ABILITY TO The certificates will not be
RESELL YOUR CERTIFICATES BECAUSE OF listed on a securities exchange.
THE ABSENCE OF A SECONDARY MARKET The underwriters intend to make a
secondary market for the
certificates by offering to
purchase them from investors but
will not be obligated to do so
and may stop offering to purchase
certificates at any time. In
addition, the
S-10
amount, if any, offered for the
certificates by the underwriters
might be less than the amount
that other potential purchasers
would offer if given the
opportunity to purchase the
certificates. As a result, you
may not be able to sell your
certificates at the desired time
or price.
YOU MAY NOT BE ABLE TO EXERCISE The certificates will initially
DIRECTLY YOUR RIGHTS AS A be issued in book-entry form and
CERTIFICATEHOLDER will initially be represented by
one or more physical certificates
registered in the name of Cede &
Co., the nominee of The
Depository Trust Company. Unless
and until Definitive Securities
are issued under the limited
circumstances described in the
accompanying prospectus, you will
not be recognized by the trustee
as a certificateholder and will
only be permitted to exercise the
rights of a certificateholder
indirectly through DTC and its
participants. For a further
discussion of the book-entry
registration process, see
"Registration of the Securities"
in the accompanying prospectus.
S-11
THE TRUST
LIMITED PURPOSE AND LIMITED ASSETS
Wachovia Auto Grantor Trust 20[__]-[__] will be formed under a pooling
and servicing agreement dated as of [____________], 20[__] between the bank, as
seller and servicer, and [_______________], as trustee. The trust will not
engage in any activity other than acquiring, holding and managing the assets of
the trust, including the receivables, and the proceeds of those assets, issuing
the certificates and making payments on the certificates.
The trust will issue the certificates to or upon the order of the
seller in exchange for the receivables and an initial deposit of $[__________]
into the reserve account. The trust property will also include:
o all collections received on the receivables after the close of
business on the cut-off date, other than any collections of late
fees and other administrative fees and expenses retained by the
servicer as supplemental servicing compensation;
o the security interests in the financed vehicles;
o the proceeds, if any, from claims on or refunds of premiums with
respect to the theft, physical damage, credit life or credit
disability insurance policies, if any, covering the financed
vehicles or the related obligors;
o the seller's rights to various documents and instruments relating
to the receivables;
o all amounts on deposit from time to time in the accounts
maintained for the trust, other than the net investment income, if
any, earned from the reinvestment of amounts on deposit in the
collection account; and
o all proceeds of the above items.
Each certificate will represent a fractional undivided interest in the
trust.
THE TRUSTEE
[_______________] will be the trustee under the pooling and servicing
agreement. [_______________] is a [_______________], and its principal office is
located at [______________________________]. The seller and its affiliates may
maintain normal commercial banking relations with the trustee and its
affiliates.
S-12
THE RECEIVABLES
The receivables will consist of a pool of motor vehicle installment
sale contracts originated by dealers for assignment to the bank and secured by
new and used passenger cars, minivans, sport utility vehicles or light-duty
trucks. The seller will sell the receivables to the trust on the closing date.
SELECTION CRITERIA
The bank selected the receivables from its portfolio of motor vehicle
installment sale contracts on the basis of several criteria, some of which are
described under "The Receivables" in the accompanying prospectus. These criteria
include the following, in each case as of the close of business on the cut-off
date:
o each receivable is a simple interest receivable;
o each receivable has an original amount financed of not greater
than $[__________];
o each receivable has an outstanding principal balance of not less
than $[__________];
o each receivable has a contract rate of interest of not less than
[____]% and not greater than [____]%;
o each receivable has a scheduled maturity of not later than
[____________], 20[__];
o each receivable has an original term to maturity of not less than
[____] months and not greater than [____] months; and
o each receivable has a remaining term to maturity of not less than
[____] months and not greater than [____] months.
The bank did not use any selection procedures that it believed to be
adverse to the certificateholders in selecting the receivables to be sold to the
trust.
S-13
POOL CHARACTERISTICS
The following tables set forth information with respect to the
receivables as of the close of business on the cut-off date. The sum of the
percentages presented may be less than or greater than 100% due to rounding.
COMPOSITION OF THE RECEIVABLES
AS OF THE CUT-OFF DATE
- --------------------------------------------------------------------------------------------------------------------
New Used
Financed Vehicles Financed Vehicles Total
- --------------------------------------------------------------------------------------------------------------------
Aggregate Outstanding Principal Balance
- --------------------------------------------------------------------------------------------------------------------
Number of Receivables
- --------------------------------------------------------------------------------------------------------------------
Average Outstanding Principal Balance
- --------------------------------------------------------------------------------------------------------------------
Average Original Amount Financed
- --------------------------------------------------------------------------------------------------------------------
Original Amount Financed (Range)
- --------------------------------------------------------------------------------------------------------------------
Weighted Average Contract Rate
- --------------------------------------------------------------------------------------------------------------------
Contract Rate (Range)
- --------------------------------------------------------------------------------------------------------------------
Weighted Average Original Term
- --------------------------------------------------------------------------------------------------------------------
Original Term (Range)
- --------------------------------------------------------------------------------------------------------------------
Weighted Average Remaining Term
- --------------------------------------------------------------------------------------------------------------------
Remaining Term (Range)
- --------------------------------------------------------------------------------------------------------------------
As used in the composition table, weighted average original term and
weighted average remaining term are calculated based on the scheduled maturities
of the receivables and assuming no prepayments of the receivables.
S-14
DISTRIBUTION OF THE RECEIVABLES BY REMAINING TERM
AS OF THE CUT-OFF DATE
- -------------------------------------------------------------------------------------
Percentage Percentage
of Total of
Remaining Number of Number of Aggregate Aggregate
Term Range Receivables Receivables Principal Balance Principal Balance
- -------------------------------------------------------------------------------------
1 to 12 months...
- -------------------------------------------------------------------------------------
13 to 24 months...
- -------------------------------------------------------------------------------------
25 to 36 months...
- -------------------------------------------------------------------------------------
37 to 48 months...
- -------------------------------------------------------------------------------------
49 to 60 months...
- -------------------------------------------------------------------------------------
61 to 72 months...
- -------------------------------------------------------------------------------------
Total.........
- -------------------------------------------------------------------------------------
DISTRIBUTION OF THE RECEIVABLES BY CONTRACT RATE
AS OF THE CUT-OFF DATE
- --------------------------------------------------------------------------------
Percentage Percentage
of Total of
Contract Number of Number of Aggregate Aggregate
Rate Change Receivables Receivables Principal Balance Principal Balance
- --------------------------------------------------------------------------------
5.000 to 5.999%..
- --------------------------------------------------------------------------------
6.000 to 6.999%..
- --------------------------------------------------------------------------------
7.000 to 7.999%..
- --------------------------------------------------------------------------------
8.000 to 8.999%..
- --------------------------------------------------------------------------------
9.000 to 9.999%..
- --------------------------------------------------------------------------------
10.000 to 10.999%..
- --------------------------------------------------------------------------------
11.000 to 11.999%..
- --------------------------------------------------------------------------------
12.000 to 12.999%..
- --------------------------------------------------------------------------------
13.000 to 13.999%..
- --------------------------------------------------------------------------------
14.000 to 14.999%..
- --------------------------------------------------------------------------------
15.000 to 15.999%..
- --------------------------------------------------------------------------------
16.000 to 16.999%..
- --------------------------------------------------------------------------------
17.000 to 17.999%..
- --------------------------------------------------------------------------------
More than 17.999%..
- --------------------------------------------------------------------------------
Total..........
- --------------------------------------------------------------------------------
S-15
DISTRIBUTION OF THE RECEIVABLES BY OBLIGOR MAILING ADDRESS
AS OF THE CUT-OFF DATE
- -----------------------------------------------------------------------------------
Percentage Percentage
of Total of
Obligor Number of Number of Aggregate Aggregate
Mailing Address Receivables Receivables Principal Balance Principal Balance
- -----------------------------------------------------------------------------------
Florida...........
- -----------------------------------------------------------------------------------
Georgia...........
- -----------------------------------------------------------------------------------
North Carolina....
- -----------------------------------------------------------------------------------
South Carolina....
- -----------------------------------------------------------------------------------
Tennessee.........
- -----------------------------------------------------------------------------------
Virginia..........
- -----------------------------------------------------------------------------------
Other.............
- -----------------------------------------------------------------------------------
Total.........
- -----------------------------------------------------------------------------------
DISTRIBUTION OF THE RECEIVABLES BY REMAINING PRINCIPAL BALANCE
AS OF THE CUT-OFF DATE
- ----------------------------------------------------------------------------------------
Percentage Percentage
Remaining of Total of
Principal Number of Number of Aggregate Aggregate Principal
Balance (Range) Receivables Receivables Principal Balance Balance
- ----------------------------------------------------------------------------------------
$ 2,000 to $ 4,999.......
- ----------------------------------------------------------------------------------------
$ 5,000 to $ 9,999.......
- ----------------------------------------------------------------------------------------
$10,000 to $14,999.........
- ----------------------------------------------------------------------------------------
$15,000 to $19,999.........
- ----------------------------------------------------------------------------------------
$20,000 to $24,999.........
- ----------------------------------------------------------------------------------------
$25,000 to $29,999.........
- ----------------------------------------------------------------------------------------
$30,000 to $34,999.........
- ----------------------------------------------------------------------------------------
$35,000 to $39,999.........
- ----------------------------------------------------------------------------------------
$40,000 to $44,999.........
- ----------------------------------------------------------------------------------------
$45,000 to $49,999.........
- ----------------------------------------------------------------------------------------
More than $49,999..........
- ----------------------------------------------------------------------------------------
Total......................
- ----------------------------------------------------------------------------------------
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth delinquency and loss information with
respect to the bank's portfolio of motor vehicle installment sale contracts.
This information is presented for illustrative purposes only. The delinquency
and loss experience of the receivables may be influenced by a variety of
economic, social and other factors. We cannot assure you that the future
delinquency and loss experience of the receivables will be comparable to the
historical delinquency and loss experience of the bank's portfolio of motor
vehicle installment sale contracts.
S-16
BANK PORTFOLIO
DELINQUENCY EXPERIENCE(1)
- --------------------------------------------------------------------------------------
At [__________], At December 31,
- --------------------------------------------------------------------------------------
2001 2000 2000 1999 1998 1997(2)
- --------------------------------------------------------------------------------------
Number of Contracts
Outstanding........................
- --------------------------------------------------------------------------------------
Delinquencies as a Percentage of
Number of Contracts Outstanding....
- --------------------------------------------------------------------------------------
30-59 Days....................
- --------------------------------------------------------------------------------------
60-89 Days....................
- --------------------------------------------------------------------------------------
90 Days or More...............
- --------------------------------------------------------------------------------------
Total Delinquencies as a
Percentage of Number of
Contracts Outstanding..............
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
At [__________], At December 31,
- --------------------------------------------------------------------------------------
2001 2000 2000 1999 1998 1997(2)
- --------------------------------------------------------------------------------------
Outstanding Principal Amount.......
- --------------------------------------------------------------------------------------
Delinquencies as a Percentage of
Outstanding Principal Amount.......
- --------------------------------------------------------------------------------------
30-59 Days....................
- --------------------------------------------------------------------------------------
60-89 Days....................
- --------------------------------------------------------------------------------------
90 Days or More...............
- --------------------------------------------------------------------------------------
Total Delinquencies as a
Percentage of Outstanding
Principal Amount...................
- --------------------------------------------------------------------------------------
(1) The delinquency experience tables include delinquency information with
respect to a small number of consumer loans held by the bank that are
not motor vehicle installment sale contracts. The bank believes that
the inclusion of these other consumer loans does not have a material
effect on the information presented.
(2) The delinquency information at December 31, 1997 does not include
information with respect to installment sale contracts acquired by the
bank from Jefferson Bankshares, Inc. on October 31, 1997 or from
Central Fidelity Banks, Inc. on December 15, 1997. The bank believes
that the omission of this information does not have a material effect
on the information presented.
S-17
BANK PORTFOLIO
LOSS EXPERIENCE(1)
- --------------------------------------------------------------------------------
[_____] Months Ended Year Ended
[__________], December 31,
- --------------------------------------------------------------------------------
2001 2000 2000 1999 1998(2) 1997(2)
- --------------------------------------------------------------------------------
Number of Contracts Outstanding at
Period End.........................
- --------------------------------------------------------------------------------
Outstanding Principal Amount at
Period End.........................
- --------------------------------------------------------------------------------
Average Outstanding Principal
Amount During Period(3)............
- --------------------------------------------------------------------------------
Number of Gross Charge-Offs........
- --------------------------------------------------------------------------------
Gross Charge-Offs (4)..............
- --------------------------------------------------------------------------------
Gross Charge-Offs as a Percentage
of the Outstanding Principal Amount
at Period End......................
- --------------------------------------------------------------------------------
Gross Charge-Offs as a Percentage
of the Average Outstanding
Principal Amount...................
- --------------------------------------------------------------------------------
Recoveries (5).....................
- --------------------------------------------------------------------------------
Net Charge-Offs....................
- --------------------------------------------------------------------------------
Net Charge-Offs as a Percentage of
the Outstanding Principal Amount at
Period End.........................
- --------------------------------------------------------------------------------
Net Charge-Offs as a Percentage of
the Average Outstanding Principal
Amount.............................
- --------------------------------------------------------------------------------
(1) The loss experience table includes loss information with respect to a
small number of consumer loans held by the bank that are not motor
vehicle installment sale contracts. The bank believes that the
inclusion of these other consumer loans does not have a material effect
on the information presented.
(2) The loss information for the year ended December 31, 1997 and for the
period from January 1, 1998 through March 20, 1998 does not include
information with respect to installment sale contracts acquired by the
bank from Jefferson Bankshares, Inc. on October 31, 1997 or from
Central Fidelity Banks, Inc. on December 15, 1997. The bank believes
that the omission of this information does not have a material effect
on the information presented.
(3) The average outstanding principal amount for any period equals the
average of the average outstanding principal amount of the motor
vehicle installment sale contracts for each month during that period.
(4) The gross charge-offs for any period equal the total principal amount
due on all motor vehicle installment sale contracts determined to be
uncollectible during that period minus the total amount recovered
during that period from the repossession and sale of financed vehicles,
net of collection expenses.
S-18
(5) The recoveries for any period equal the total amount recovered during
that period on motor vehicle installment sale contracts previously
charged off, net of collection expenses.
The percentages for the [_____]-month periods ended [__________], 2001
and [__________], 2000 are annualized and are not necessarily indicative of a
full year's actual results.
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT
OUTSTANDING ON THE CERTIFICATES
The servicer will provide to you in each servicer report a factor which
you can use to compute your portion of the outstanding principal balance of the
certificates. The servicer will compute a separate factor for each class of
certificates prior to each payment date. The factor for each class of
certificates will be a seven-digit decimal representing the remaining principal
balance of that class of certificates as a fraction of the initial principal
balance of that class of certificates, in each case as of the following payment
date. The servicer will compute the factor for each class of certificates after
giving effect to payments to be made on the following payment date. For each
certificate you own, your portion of the related class will equal the product of
the original denomination of that certificate and the factor for that class
computed by the servicer as described above.
Each of the factors described above will initially be 1.0000000. Each
factor will decline over time to reflect reductions in the outstanding principal
balance of the related class of certificates. These amounts will be reduced over
time as a result of scheduled payments, prepayments, purchases of the
receivables by the seller or the servicer and liquidations of the receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations
with respect to the certificates is set forth under "Maturity and Prepayment
Considerations" in the accompanying prospectus. In addition, no principal
payments will be made on the class B certificates on any payment date until all
principal and interest payments required to be made to the class A
certificateholders on that payment date have been made. For a further discussion
of principal payments on the certificates, see "Sources and Application of
Available Funds" in this prospectus supplement.
The rate at which principal is paid on each class of certificates
depends on the rate at which principal payments, including prepayments, are made
on the receivables. As a result, the final payment of either class of
certificates could occur significantly earlier than the related final scheduled
payment date.
S-19
We expect that the final payment of each class of certificates will
occur on or prior to the related final scheduled payment date. We cannot assure
you, however, that sufficient funds will be available to pay each class of
certificates in full on or prior to the related final scheduled payment date.
The rate of prepayments on the receivables may be influenced by a
variety of economic, social and other factors. In addition, the seller or the
servicer may be obligated to purchase receivables from the trust if it breaches
various representations, warranties or covenants. A higher than anticipated rate
of prepayments will reduce the aggregate principal balance of the receivables
more quickly than expected and, as a result, reduce the outstanding principal
balance of the certificates and the aggregate interest payments on the
certificates. The certificateholders will bear any reinvestment risks resulting
from a faster or slower rate of prepayments. These reinvestment risks include
the risk that interest rates may be lower at the time the certificateholders
receive payments from the trust than interest rates would have been had
prepayments not been made or had prepayments been made at a different time.
The certificateholders should consider:
o in the case of certificates purchased at a discount, the risk that
a slower than anticipated rate of principal payments on the
receivables could result in an actual yield that is less than the
anticipated yield; and
o in the case of certificates purchased at a premium, the risk that
a faster than anticipated rate of principal payments on the
receivables could result in an actual yield that is less than the
anticipated yield.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The following information is presented solely to illustrate the effect
of prepayments of the receivables on the weighted average life of the
certificates under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced by the receivables.
The rate of prepayments on motor vehicle installment sale contracts,
such as the receivables, can be measured relative to a prepayment standard or
model. The model used in this prospectus supplement is the absolute prepayment
or ABS model. The ABS model represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. The ABS
model further assumes that all of the receivables are the same size and amortize
at the same rate and that each receivable in each month of its life will either
be paid as scheduled or be prepaid in full. For example, in a pool of
receivables originally containing 10,000 receivables, a 1.00% ABS percentage
means that 100 receivables prepay each month. The ABS model does not purport to
describe the historical prepayment experience or to predict the future
prepayment experience of any pool of assets, including the receivables.
The ABS Tables have been prepared on the basis of various assumptions,
including that:
o the receivables prepay in full at the specified monthly ABS
percentage, with no defaults, losses or repurchases;
o each scheduled monthly payment on the receivables is made on the
last day of each month and each month has 30 days;
S-20
o payments on the certificates are made on each payment date, and
each payment date is the [15]th day of a month; and
o the servicer exercises its option to purchase the receivables on
the earliest payment date on which it is permitted to do so.
The ABS Tables indicate the projected weighted average life of each
class of certificates and set forth the percent of the initial principal balance
of each class of certificates that is projected to be outstanding after each of
the payment dates shown at various constant ABS percentages.
The ABS Tables also assume that the receivables have been aggregated
into hypothetical pools with all of the receivables within each pool having the
characteristics described below, that the level scheduled monthly payment for
each of the pools, which is based on its aggregate principal balance, contract
rate of interest, original term to maturity in months and remaining term to
maturity in months as of [____________], 20[__], will be such that each pool
will be fully amortized by the end of its remaining term to maturity.
- --------------------------------------------------------------------------------
Pool Aggregate Principal Contract Rate of Original Term to Remaining
Number Balance Interest Maturity Term to Maturity
- --------------------------------------------------------------------------------
1......
- --------------------------------------------------------------------------------
2......
- --------------------------------------------------------------------------------
3......
- --------------------------------------------------------------------------------
4......
- --------------------------------------------------------------------------------
5......
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6......
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7......
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8......
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9......
- --------------------------------------------------------------------------------
10.......
- --------------------------------------------------------------------------------
11.......
- --------------------------------------------------------------------------------
12.......
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
The actual characteristics and performance of the receivables will
differ from the assumptions used in constructing the ABS Tables. The assumptions
used are hypothetical and have been provided only to give a general sense of how
the principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the receivables will prepay at a constant ABS
percentage until maturity or that all of the receivables will prepay at the same
ABS percentage. In addition, the diverse terms of the receivables within each of
the hypothetical pools could produce slower or faster principal distributions
than indicated in the ABS Tables at the various ABS percentages specified, even
if the original and remaining terms to maturity of the receivables are as
assumed. Any difference between the assumptions and the actual characteristics
and performance of the receivables, or the actual prepayment experience of the
receivables, will affect the percentages of initial amounts outstanding over
time and the weighted average lives of each class of certificates.
S-21
THE ABS TABLES HAVE BEEN PREPARED BASED ON, AND SHOULD BE READ IN
CONJUNCTION WITH, THE ASSUMPTIONS DESCRIBED ABOVE, INCLUDING THE ASSUMPTIONS
REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES. THE ASSUMED
CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES.
S-22
PERCENT OF INITIAL PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
CLASS A CERTIFICATES CLASS B CERTIFICATES
- --------------------------------------------------------------------------------
PAYMENT DATE 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- --------------------------------------------------------------------------------
Closing Date....
- --------------------------------------------------------------------------------
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................
- --------------------------------------------------------------------------------
................
- --------------------------------------------------------------------------------
Weighted Average
Life(1).......
- --------------------------------------------------------------------------------
Weighted Average
Life to
Call(1)(2)....
- --------------------------------------------------------------------------------
Optional Call
Date..........
- --------------------------------------------------------------------------------
1 The weighted average life of each class of certificates is determined
by multiplying the amount of each principal payment on that class by
the number of years from the date of the issuance of that class to the
related payment date, adding the results and dividing the sum by the
initial principal balance of that class.
2. This calculation assumes that the servicer purchases the receivables on
the earliest payment date on which it is permitted to do so.
S-23
DESCRIPTION OF THE CERTIFICATES
The trust will issue the certificates under the pooling and servicing
agreement. We will file a copy of the pooling and servicing agreement with the
SEC after the trust issues the certificates. This summary describes some of the
important terms of the certificates. This summary is not a complete description
of the certificates and supplements the description of the general terms and
provisions of the certificates of any trust set forth under "Payments on the
Securities" in the accompanying prospectus.
INTEREST DISTRIBUTIONS
Interest on the outstanding principal balance of each class of
certificates will accrue at the related per annum interest rate and will be
payable on each payment date to the certificateholders of record as of the
related record date. Interest will accrue on each class of certificates from and
including the [15]th day of each month, or, in the case of the first payment
date, from and including the closing date, to but excluding the [15]th of the
following month and will be calculated on the basis of a 360-day year consisting
of twelve 30-day months.
If the interest accrued on either class of certificates as of any
payment date is not paid on that payment date, that interest will be due on the
following payment date, together with additional interest on the unpaid amount
at the interest rate applicable to that class. The additional interest will be
payable only to the extent permitted by law.
PRINCIPAL DISTRIBUTIONS
In general, the trust will pay principal to the holders of each class
of certificates on each payment date in an amount equal to the product of the
principal allocation percentage for that class and the sum of:
o the principal collections received on the receivables during the
preceding Collection Period; plus
o the aggregate principal balance, net of Liquidation Proceeds
applied as principal collections, of all receivables that became
Defaulted Receivables during the preceding Collection Period.
The principal balance of each class of certificates will be payable in
full on the final scheduled payment date for that class. The date on which the
outstanding principal balance of either class of certificates is paid may be
earlier or later than the final scheduled payment date for that class based on a
variety of factors, including those described under "Maturity and Prepayment
Considerations" in this prospectus supplement and in the accompanying
prospectus.
SUBORDINATION OF THE CLASS B CERTIFICATES
The subordination of the class B certificates is intended to increase
the likelihood that the class A certificateholders will receive the full amount
of principal and interest due on the class A certificates and to decrease the
likelihood that the class A certificateholders will experience losses on the
class A certificates. The class B certificateholders will not receive interest
S-24
payments on any payment date until the class A certificateholders have received
all interest payments required to be made to the class A certificateholders on
that payment date and will not receive principal payments on any payment date
until the class A certificateholders have received all principal and interest
payments required to be made to the class A certificateholders on that payment
date.
OPTIONAL PREPAYMENT
All outstanding certificates will be prepaid in whole, but not in part,
on any payment date on which the servicer exercises its option to purchase the
receivables. The servicer will have the option to purchase the receivables on
any payment date on or after which the aggregate principal balance of the
receivables has declined to [__]% or less of the aggregate principal balance of
the receivables as of the close of business on the cut-off date. If the servicer
purchases the receivables, you will receive:
o the outstanding principal balance of your certificates plus
accrued and unpaid interest on your certificates; plus
o interest on any past due interest at the rate of interest on your
certificates, to the extent permitted by law.
SOURCES AND APPLICATION OF AVAILABLE FUNDS
SOURCES OF AVAILABLE FUNDS
The funds available to the trust to make payments on the certificates
on each payment date will come from the following sources:
o collections received on the receivables during the preceding
Collection Period, other than any collections of late fees and
other administrative fees and expenses retained by the servicer as
supplemental servicing compensation;
o Liquidation Proceeds received during the preceding Collection
Period;
o Recoveries received during the preceding Collection Period;
o Advances remitted by the servicer on that payment date;
o proceeds of repurchases of receivables by the seller or purchases
of receivables by the servicer because of certain breaches of
representations or covenants; and
o funds, if any, withdrawn from the reserve account and deposited
into the collection account on that payment date.
The precise calculation of the funds available to the trust to make
payments on the certificates on each payment date is set forth in the
definitions of Available Interest Collections and Available Principal
Collections in the "Glossary of Terms" section of this prospectus
S-25
supplement. Available Funds will be calculated for each payment date net of
the collections, Liquidation Proceeds and Recoveries applied to reimburse
outstanding Advances and the collections received on receivables previously
repurchased by the seller or purchased by the servicer. For a further discussion
of servicer advances and supplemental servicing compensation, see "Description
of the Receivables Transfer and Servicing Agreements -- Servicer Advances" and
"--Servicing Compensation" in the accompanying prospectus.
APPLICATION OF AVAILABLE FUNDS
On each payment date, the trust will apply the Available Interest
Collections for that payment date, the funds, if any, withdrawn from the reserve
account on that payment date and, to the extent described in clause (2) below,
the Available Principal Collections for that payment date in the following
amounts and order of priority:
(1) Servicing Fee -- an amount equal to the monthly servicing fee for
that payment date, plus any unpaid monthly servicing fees for
previous payment dates, will be paid to the servicer, first from
the Available Interest Collections for that payment date and then,
if necessary, from the funds, if any, withdrawn from the reserve
account on that payment date;
(2) Class A Certificate Interest-- an amount equal to the interest due
to the class A certificateholders on that payment date, plus any
unpaid class A certificate interest for previous payment dates,
will be paid to the distribution account for the class A
certificateholders, first from the remaining Available Interest
Collections for that payment date, then, if necessary, from the
remaining funds, if any, withdrawn from the reserve account on
that payment date and finally, if necessary, from the Class B
Percentage of Available Principal Collections for that payment
date;
(3) Class B Certificate Interest -- an amount equal to the interest
due to the class B certificateholders on that payment date, plus
any unpaid class B certificate interest for previous payment
dates, will be paid to the distribution account for the class B
certificateholders, first from the remaining Available Interest
Collections for that payment date and then, if necessary, from the
remaining funds, if any, withdrawn from the reserve account on
that payment date;
On each payment date, the trust will apply the Available Interest
Collections for that payment date, the funds, if any, withdrawn from the reserve
account on that payment date and the Available Principal Collections for that
payment date, in each case after giving effect to the application of Available
Funds under clauses (1), (2) and (3) above, in the following amounts and order
of priority:
(4) Class A Certificate Principal -- an amount equal to the Class A
Principal Distribution for that payment date will be paid to the
distribution account for the class A certificateholders, first
from the remaining Available Principal Collections for that
payment date, then from the remaining Available Interest
Collections for that payment date and finally, if necessary, from
the remaining funds, if any, withdrawn from the reserve account on
that payment date;
S-26
(5) Class B Certificate Principal -- an amount equal to the Class B
Principal Distribution for that payment date will be paid to the
distribution account for the class B certificateholders, first
from the remaining Available Principal Collections for that
payment date, then from the remaining Available Interest
Collections for that payment date and finally, if necessary, from
the remaining funds, if any, withdrawn from the reserve account on
that payment date;
(6) Reserve Account Deposit -- the amount, if any, necessary to
increase the amount on deposit in the reserve account to the
Specified Reserve Account Balance for that payment date will be
deposited into the reserve account; and
(7) Remaining Available Funds-- the amount remaining, if any, will be
paid to the seller.
On each payment date, the trust will distribute all amounts on deposit
in the distribution account for the class A certificateholders to the class A
certificateholders and will distribute all amounts on deposit in the
distribution account for the class B certificateholders to the class B
certificateholders.
DESCRIPTION OF THE POOLING
AND SERVICING AGREEMENT
We will file a copy of the pooling and servicing agreement with the SEC
after the trust issues the certificates. This summary describes some of the
important terms of the pooling and servicing agreement. This summary is not a
complete description of the pooling and servicing agreement and supplements the
description of the general terms and provisions of any pooling and servicing
agreement set forth under "Description of the Receivables Transfer and Servicing
Agreements" in the accompanying prospectus.
TRUST ACCOUNTS
In addition to the collection account, the servicer will cause to be
established:
o one or more distribution accounts for the benefit of the
certificateholders, which accounts may be sub-accounts of the
collection account; and
o the reserve account, which account will be established in the name
of the trustee for the benefit of the certificateholders.
SERVICING COMPENSATION
The servicer will be entitled to receive on each payment date a
servicing fee equal to 1/12 of 1.00% of the outstanding principal balance of the
receivables as of the first day of the preceding Collection Period and the net
investment income, if any, earned during the preceding Collection Period from
the reinvestment of amounts on deposit in the collection account. The servicing
fee will be paid on each payment date only to the extent of the funds deposited
into the collection account with respect to the preceding Collection Period plus
the funds, if any,
S-27
deposited into the collection account on that payment date from the reserve
account. In addition, the servicer will be entitled to retain as supplemental
servicing compensation any late fees and other administrative fees and expenses
collected with respect to the receivables. For a further discussion of servicing
compensation, see "Description of the Receivables Transfer and Servicing
Agreements -- Servicing Compensation" in the accompanying prospectus.
RIGHTS UPON EVENT OF SERVICING TERMINATION
If an event of servicing termination has occurred and is continuing
under the pooling and servicing agreement, the trustee or the holders of not
less than a majority of the principal balance of the Controlling Class may
remove the servicer without the consent of any of the other certificateholders.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
The holders of not less than a majority of the principal balance of the
Controlling Class may, on behalf of all certificateholders and subject to
various exceptions set forth in the pooling and servicing agreement, waive any
event of servicing termination under the pooling and servicing agreement and its
consequences without the consent of any of the other certificateholders, except
for an event of servicing termination consisting of a failure to make any
required deposits to or payments from any trust account.
DEPOSITS TO THE COLLECTION ACCOUNT
The servicer will establish the collection account as described under
"Description of the Receivables Transfer and Servicing Agreements--Trust
Accounts" in the accompanying prospectus. In general, the servicer will not be
required to deposit amounts collected with respect to the receivables into the
collection account until the business day preceding the payment date following
the Collection Period during which those collections were received. The servicer
will be required to deposit collections on a daily basis if the bank is no
longer the servicer, an event of servicing termination has occurred and is
continuing under the pooling and servicing agreement or any other condition set
forth in the pooling and servicing agreement is not met. On each payment date,
the servicer will cause all other amounts constituting Available Funds for that
payment date to be deposited into the collection account.
REPORTS TO THE TRUSTEE
On the business day prior to each payment date, the servicer will
provide the trustee with various information with respect to the preceding
Collection Period, including:
o the aggregate amount of collections received on the receivables
during that Collection Period;
o the aggregate amount of receivables that became Defaulted
Receivables during that Collection Period;
o the aggregate amount of Advances to be remitted by the servicer on
that payment date; and
S-28
o the aggregate Purchase Amount of receivables to be repurchased by
the seller or to be purchased by the servicer on that payment
date.
RESERVE ACCOUNT
The servicer will establish the reserve account in the name of the
trustee for the benefit of the certificateholders. The seller will cause
$[____________] to be deposited into the reserve account on the closing date.
The amount on deposit in the reserve account may increase from time to time up
to the Specified Reserve Account Balance through the deposit of Available
Collections not needed to pay the amounts described in clauses (1) through (5)
under "Sources and Application of Available Funds -- Application of Available
Funds" in this prospectus supplement.
On each payment date, the trustee will withdraw from the reserve
account and deposit into the collection account, to the extent of funds then on
deposit in the reserve account, the following amounts:
o the amount, if any, by which the amount described for that payment
date in clause (1) under "Sources and Application of Available
Funds -- Application of Available Funds" in this prospectus
supplement exceeds the Available Interest Collections for that
payment date;
o the amount, if any, by which the amount described for that payment
date in clause (2) under "Sources and Application of Available
Funds -- Application of Available Funds" in this prospectus
supplement exceeds the sum of the Available Interest Collections
for that payment date, other than any such Available Interest
Collections applied to pay the amount described for that payment
date in clause (1) under "Sources and Application of Available
Funds -- Application of Available Funds" in this prospectus
supplement, plus the Class B Percentage of the Available Principal
Collections for that payment date;
o the amount, if any, by which the amount described for that payment
date in clause (3) under "Sources and Application of Available
Funds -- Application of Available Funds" in this prospectus
supplement exceeds the Available Interest Collections for that
payment date, other than any such Available Interest Collections
applied to pay the amounts described for that payment date in
clauses (1) and (2) under "Sources and Application of Available
Funds -- Application of Available Funds" in this prospectus
supplement;
o the amount, if any, by which the sum of the Class A Principal
Distribution for that payment date plus the Class B Principal
Distribution for that payment date exceeds the Available
Collections for that payment date, other than any such Available
Collections applied to pay the amounts described for that payment
date in clauses (1), (2) and (3) under "Sources and Application of
Available Funds -- Application of Available Funds" in this
prospectus supplement; and
o the Reserve Account Excess Amount for that payment date.
S-29
All amounts on deposit in the reserve account will be invested by the
trustee, at the direction of the seller, in Permitted Investments. All
investment earnings, net of losses and investment expenses, on amounts on
deposit in the reserve account will be retained in the reserve account until
withdrawn in accordance with the pooling and servicing agreement. In general,
Permitted Investments are limited to obligations or securities that will mature
on or before the next payment date. Amounts on deposit in the reserve account
may be invested in obligations or securities that will not mature on or prior to
the next payment date, however, and that will not be sold to cover any
shortfalls in Available Collections, if each Rating Agency has confirmed in
writing that those investments will not result in a reduction or withdrawal of
any rating assigned by that Rating Agency to either class of certificates.
The reserve account is intended to increase the likelihood that the
certificateholders will receive the full amount of principal and interest due on
the certificates and to decrease the likelihood that the certificateholders will
experience losses on the certificates. The amount on deposit in the reserve
account is limited, however, and may not be sufficient to cover any shortfalls
in Available Collections. If the amount required to be withdrawn from the
reserve account to cover shortfalls in Available Collections exceeds the amount
available to be withdrawn from the reserve account, a shortfall in the amounts
distributed to the certificateholders could result and the certificateholders
could suffer a loss on the certificates.
After the payment in full, or the provision for the payment in full, of
all accrued and unpaid interest on the certificates and the outstanding
principal balance of the certificates, any funds remaining on deposit in the
reserve account will, subject to various limitations set forth in the pooling
and servicing agreement, be paid to the seller.
The seller may at any time, without the consent of the
certificateholders, sell, transfer or assign in any manner its rights to and
interests in distributions from the reserve account; provided, however, that:
o each Rating Agency has confirmed in writing that the sale,
transfer or assignment will not result in a reduction or
withdrawal of any rating assigned by that Rating Agency to either
class of certificates;
o the seller provides to the trustee an opinion of counsel to the
effect that the sale, transfer or assignment will not cause the
trust to be classified as an association or a publicly traded
partnership taxable as a corporation for federal income tax
purposes; and
o the purchaser, transferee or assignee agrees in writing to take
positions for federal income tax purposes consistent with the
federal income tax positions taken by the seller.
S-30
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of McGuireWoods LLP, counsel for the bank and Federal
Tax Counsel for the trust, for federal income tax purposes, the trust will be
characterized as a grantor trust and not as an association or a publicly traded
partnership taxable as a corporation. For a further discussion of the
application of federal tax laws to the certificates, see "Material Federal
Income Tax Consequences" in the accompanying prospectus.
STATE TAX CONSEQUENCES
The tax discussion in the accompanying prospectus does not address the
tax treatment of the trust, the certificates or the certificateholders under any
state tax laws. You should consult your own tax advisors with respect to the
state tax treatment of the trust as well as any state tax consequences to you of
the purchase, ownership or disposition of certificates.
ERISA CONSIDERATIONS
The Class A Certificates
In general, the class A certificates may be purchased by or on behalf
of Plans. Although we cannot assure you in this regard, it is expected that the
Exemption will apply to the acquisition and holding by Plans of the class A
certificates and that all conditions of the Exemption other than those within
the control of the investors will be met. In addition, as of the date of this
prospectus supplement, there is no single obligor that is the obligor on 5% or
more of the fair market value of the obligations contained in the trust. To rely
on the Exemption, a Plan must be an accredited investor as defined in Rule
501(a)(1) of Regulation D under the Securities Act.
The rating of the class A certificates may change. If the class A
certificates are no longer rated at least BBB- or Baa3, the class A certificates
will no longer be eligible for relief under the Exemption and, consequently, may
not be purchased by or sold to a Plan. A Plan that purchases a class A
certificate when the class A certificates have an investment-grade rating will
not be required by the Exemption to dispose of that certificate if the rating of
the class A certificates declines below BBB- or Baa3.
For a further discussion of the Exemption and the treatment of the
class A certificates under ERISA, see "ERISA Considerations" in the accompanying
prospectus.
The Class B Certificates
In general, the class B certificates may not be purchased by or on
behalf of Plans. The characteristics of the class B certificates may not meet
the requirements of the Exemption or any other prohibited transaction exemption
issued under ERISA. As a result, transfers of the class B certificates will not
be registered by the trustee unless the trustee receives:
o a representation from the purchaser, acceptable to and in form and
substance satisfactory to the trustee, that the purchaser is not a
Plan, or a person acting on behalf of a Plan or using a Plan's
assets to effect the transfer; or
o if the purchaser is an insurance company, a representation from
the purchaser that the purchaser is an insurance company that is
purchasing the class B certificates with funds contained in an
insurance company general account, as defined in Section V(a) of
PTCE 95-60, and that the purchase and holding of the class B
certificates are covered under Sections I and III of PTCE 95-60.
Each purchaser of the class B certificates will be deemed by its
acceptance of a class B certificate to have made the above representation to the
trustee. If the representation is not true, the attempted transfer or purchase
will be void. For a further discussion of the treatment of the class B
certificates under ERISA, see "ERISA Considerations" in the accompanying
prospectus.
S-31
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each of those underwriters has severally agreed to purchase from the
seller, the initial principal amount of class A certificates and class B
certificates set forth opposite its name below:
- --------------------------------------------------------------------------------
CLASS A CERTIFICATES CLASS B CERTIFICATES
- --------------------------------------------------------------------------------
....................
- --------------------------------------------------------------------------------
....................
- --------------------------------------------------------------------------------
....................
- --------------------------------------------------------------------------------
....................
- --------------------------------------------------------------------------------
Total...............
- --------------------------------------------------------------------------------
The seller has been advised by the underwriters that they propose
initially to offer the certificates to the public at the applicable prices set
forth on the cover page of this prospectus supplement. After the initial public
offering of the certificates, the public offering prices may change.
The underwriting discounts and commissions, the selling concessions
that the underwriters may allow to dealers and the discounts that those dealers
may reallow to other dealers, expressed as a percentage of the principal balance
of each class of certificates and as an aggregate dollar amount, will be as
follows:
- ------------------------------------------------------------------------------------------
Underwriting Selling Reallowance
Discounts and Net Proceeds Concessions Not to
Commissions to the Seller(1) Not to Exceed Exceed
- ------------------------------------------------------------------------------------------
Class A Certificates........
- ------------------------------------------------------------------------------------------
Class B Certificates........
- ------------------------------------------------------------------------------------------
Total.......................
- ------------------------------------------------------------------------------------------
(1) The net proceeds to the seller are before deducting other expenses
estimated to be $[____________].
Until the distribution of the certificates is completed, rules of the
SEC may limit the ability of the underwriters and various selling group members
to bid for and purchase the certificates. As an exception to these rules, the
underwriters are permitted to engage in various transactions that stabilize the
price of the certificates. These transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the certificates.
S-32
If the underwriters create a short position in the certificates in
connection with this offering by selling more certificates than are set forth on
the cover page of this prospectus supplement, the underwriters may reduce that
short position by purchasing certificates in the open market.
The underwriters may also impose a penalty bid on various underwriters
and selling group members. If the underwriters purchase certificates in the open
market to reduce their short position or to stabilize the price of those
certificates, they may reclaim the amount of the selling concession from any
underwriter or selling group member who sold those certificates as part of the
offering.
In general, purchases of a certificate for the purpose of stabilization
or to reduce a short position could cause the price of the certificate to be
higher than it might be in the absence of those purchases. The imposition of a
penalty bid might also have an effect on the price of a certificate to the
extent that it were to discourage resales of the certificate.
Neither the seller nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the certificates. In
addition, neither the seller nor any of the underwriters makes any
representation that the underwriters will engage in the transactions described
above or that those transactions, if commenced, will not be discontinued without
notice.
There currently is no secondary market for the certificates. The
underwriters expect to make a market in the certificates but will not be
obligated to do so. We cannot assure you that a secondary market for the
certificates will develop. If a secondary market for the certificates does
develop, it might end at any time or it might not be sufficiently liquid to
enable you to resell any of your certificates.
The trustee may, from time to time, invest amounts on deposit in the
collection account and the reserve account in investments acquired from or
issued by the underwriters.
In the ordinary course of business, the underwriters and their
affiliates have engaged and may engage in investment banking and commercial
banking transactions with the seller and its affiliates.
The seller has agreed to indemnify the underwriters against various
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments which the underwriters may be required to
make in respect of those liabilities.
The closing of the sale of each class of certificates is conditioned on
the closing of the sale of the other class of certificates.
Upon receipt of a request by an investor who has received an electronic
prospectus from an underwriter or a request by that investor's representative
within the period during which there is an obligation to deliver a prospectus,
the seller or the underwriter will promptly deliver, without charge, a paper
copy of this prospectus supplement and the accompanying prospectus.
S-33
LEGAL OPINIONS
Certain legal and federal income tax matters relating to the
certificates will be passed upon for the seller and the servicer by McGuireWoods
LLP, Richmond, Virginia. Certain legal matters relating to the certificates will
be passed upon for the underwriters by Brown & Wood, LLP, New York, New York.
S-34
GLOSSARY OF TERMS
The following defined terms are used in this prospectus supplement. The
additional defined terms used in this prospectus supplement are defined under
"Glossary of Terms" in the accompanying prospectus.
"ABS Tables" means the table on page S-[__] of this prospectus
supplement captioned "Percent of Initial Principal Balance at Various ABS
Percentages."
"Available Collections" means, for any payment date, the sum of the
Available Interest Collections for that payment date and the Available Principal
Collections for that payment date.
"Available Funds" means, for any payment date, the sum of the Available
Collections for that payment date and the funds, if any, to be withdrawn from
the reserve account and deposited into the collection account on that payment
date as described under "Description of the Pooling and Servicing Agreement --
Reserve Account" in this prospectus supplement.
"Available Interest Collections" means, for any payment date, the sum
of the following amounts:
o all collections received on the receivables during the preceding
Collection Period that are allocable to interest in accordance
with the terms of the receivables and the servicer's customary
servicing procedures, other than any collections of late fees and
other administrative fees and expenses retained by the servicer as
supplemental servicing compensation;
o all Liquidation Proceeds and Recoveries received during the
preceding Collection Period that are allocable to interest in
accordance with the servicer's customary servicing procedures;
o all Advances remitted by the servicer on that payment date; and
o the Purchase Amount of each receivable that was repurchased by the
seller or purchased by the servicer under an obligation which
arose during the preceding Collection Period, in each case to the
extent allocable to interest in accordance with the servicer's
customary servicing procedures;
provided, however, that the Available Interest Collections for any payment date
will exclude the following amounts:
o collections received on any receivable to the extent that the
servicer has previously made an unreimbursed Advance with respect
to that receivable and the amount received exceeds the accrued and
unpaid interest on that receivable;
o collections received on any receivable to the extent that the
servicer has previously made an unreimbursed Advance with respect
to that receivable which is not recoverable from collections on
that receivable;
S-35
o collections and proceeds, including Liquidation Proceeds and
Recoveries, received on any receivable the Purchase Amount of
which has been included in the Available Collections for a prior
payment date; and
o Liquidation Proceeds and Recoveries with respect to accrued and
unpaid interest on any receivable, but only to the extent of any
unreimbursed Advances on that receivable.
"Available Principal Collections" means, for any payment date, the sum
of the following amounts:
o all collections received on the receivables during the preceding
Collection Period that are allocable to principal in accordance
with the terms of the receivables and the servicer's customary
servicing procedures;
o all Liquidation Proceeds and Recoveries received during the
preceding Collection Period that are allocable to principal in
accordance with the servicer's customary servicing procedures;
o the Purchase Amount of each receivable that was repurchased by the
seller or purchased by the servicer under an obligation which
arose during the preceding Collection Period, in each case to the
extent allocable to principal in accordance with the servicer's
customary servicing procedures; and
o all partial prepayments of any refunded item included in the
principal balance of a receivable, such as extended warranty
protection plan costs or theft, physical damage, credit life or
credit disability insurance premiums, received during the
preceding Collection Period;
provided, however, that the Available Principal Collections for any payment date
will exclude collections and proceeds, including Liquidation Proceeds and
Recoveries, received on any receivable the Purchase Amount of which has been
included in the Available Principal Collections for a prior payment date:
"Class A Percentage" means [____]%.
"Class A Principal Distribution" means, with respect to any payment
date, the sum of:
o the Class A Percentage of the Available Principal Collections for
that payment date plus the Class A Percentage of the Realized
Losses for that payment date; plus
o any unpaid Class A Principal Distribution for previous payment
dates;
provided, however, that the Class A Principal Distribution for the final
scheduled payment date for the class A certificates will equal the amount, if
any, necessary to pay the class A certificates in full.
"Class B Percentage" means [____]%.
S-36
"Class B Principal Distribution" means, with respect to any payment
date, the sum of:
o the Class B Percentage of the Available Principal Collections for
that payment date plus the Class B Percentage of the Realized
Losses for that payment date; plus
o any unpaid Class B Principal Distribution for previous payment dates;
provided, however, that the Class B Principal Distribution for the final
scheduled payment date for the class B certificates will equal the amount, if
any, necessary to pay the class B certificates in full.
"Collection Period" means, with respect to the first payment date, the
period from but excluding the cut-off date to and including [____________],
20[__], and, with respect to each subsequent payment date, the calendar month
preceding that payment date.
"Controlling Class" means the class A certificates.
"Federal Tax Counsel" means McGuireWoods LLP.
"Liquidation Proceeds" means, with respect to any receivable that has
become a Defaulted Receivable, all insurance proceeds received by the servicer
with respect to the related financed vehicle or the related obligor, all amounts
received by the servicer through the exercise of rights under that receivable
and all other monies collected by the servicer with respect to that receivable
from whatever source, including but not limited to proceeds received from the
repossession and sale of the related financed vehicle and amounts recovered from
the related dealer, in each case net of all related expenses incurred by the
servicer and any payments required by law to be remitted to the related obligor;
provided, however, that Liquidation Proceeds with respect to a receivable will
only include amounts received or collected by the servicer during the Collection
Period in which that receivable became a Defaulted Receivable.
"Recoveries" means, with respect to any receivable that has become a
Defaulted Receivable, all insurance proceeds received by the servicer with
respect to the related financed vehicle or the related obligor, all amounts
received by the servicer through the exercise of rights under that receivable
and all other monies collected by the servicer with respect to that receivable
from whatever source, including but not limited to proceeds received from the
repossession and sale of the related financed vehicle and amounts recovered from
the related dealer, in each case net of all related expenses incurred by the
servicer and any payments required by law to be remitted to the related obligor;
provided, however, that Recoveries with respect to a receivable will only
include amounts received or collected by the servicer after the Collection
Period in which that receivable became a Defaulted Receivable.
"Reserve Account Excess Amount" means, with respect to any payment
date, the amount equal to the excess, if any, of:
o the amount of cash or other immediately available funds on deposit
in the reserve account on that payment date, after giving effect
to any withdrawals from the reserve account made on that payment
date to fund the amounts described for that payment
S-37
date in clauses (1) through (5) under "Sources and Application of
Available Funds -- Application of Available Funds" in this
prospectus supplement; over
o the Specified Reserve Account Balance for that payment date.
"Specified Reserve Account Balance" means, for any payment date,
[____]% of the aggregate principal balance of the receivables as of the last day
of the preceding Collection Period; provided, however, that the Specified
Reserve Account Balance for any payment date will not be less than the lesser of
$[____________] and the aggregate principal balance of the receivables as of the
last day of the preceding Collection Period.
S-38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Expenses in connection with the offering of the securities being
registered herein are estimated as follows:
Registration Fee .......................$ 250
Legal Fees and Expenses ................$ *
Accounting Fees and Expenses ...........$ *
Blue Sky Fees and Expenses .............$ *
Rating Agency Fees .....................$ *
Trustee's Fees and Expenses ............$ *
Printing ...............................$ *
Miscellaneous ..........................$ *
Total..............................$ 250
=======
--------------------------------
* To be supplied by amendment.
All amounts except for the Registration Fee are estimates of expenses
in connection with the issuance and distribution of two series of securities in
an aggregate principal amount assumed for these purposes to equal
$2,000,000,000.
Item 15. Indemnification of Directors and Officers
The laws and regulations applicable to national banking associations
pursuant to which the registrant is organized permit it to indemnify its
directors and officers against certain liabilities.
Article TENTH of the registrant's Articles of Association provides that
any person, and his or hers heirs, executors or administrators, may be
indemnified or reimbursed by the registrant for all liability and reasonable
expense actually incurred in connection with any action, suit or proceeding,
civil or criminal, to which that person shall be made a party by reason of being
or having been a director, officer or employee of the registrant or of any firm,
corporation or organization which that person served in any of those capacities
at the request of the registrant; provided, however, that no person shall be
indemnified or reimbursed in relation to any administrative proceeding or action
instituted by an appropriate bank regulatory agency which results in a final
order assessing civil money penalties or requiring affirmative action by an
individual or individuals in the form of payments to the registrant. This right
of indemnification or reimbursement is not exclusive of other rights to which
that person may be entitled as a matter of law.
Article TENTH of the registrant's Articles of Association provides that
the registrant may, upon the affirmative vote of a majority of its Board of
Directors, purchase insurance for the purpose of indemnifying its directors,
officers and other employees to the extent that indemnification is allowed by
applicable law or regulation; provided, however, that no person shall be
indemnified or reimbursed in relation to any administrative proceeding or action
instituted by an appropriate bank regulatory agency which proceeding or action
results in a formal order assessing civil money penalties against a director or
employee of the registrant. This insurance may, but need not, be for the benefit
of all directors, officers, or employees.
Article TENTH of the registrant's Articles of Association also provides
that to the full extent from time to time permitted by North Carolina law with
respect to North Carolina business corporations, and subject to the laws and
regulations applicable to national banking associations, no person who is
serving or who has served as a director of the registrant shall be personally
liable in any action for monetary damages for breach of his or her duty as a
director, whether such action is brought by or in the right of the registrant or
otherwise. Neither the amendment or repeal of Article TENTH, nor the adoption of
any provision of the registrant's Articles of Association inconsistent with the
current Article TENTH, shall eliminate or reduce the protection afforded by
Article TENTH to a director of the registrant with respect to any matter which
occurred, or any cause of action, suit or claim which but for Article TENTH
would have accrued or arisen, prior to that amendment, repeal or adoption.
The current Bylaws of the registrant provide that any person who at any
time serves or has served as a director, officer or employee of the registrant
or of any wholly owned subsidiary or affiliate of the registrant, shall be
indemnified and held harmless by the registrant to the fullest extent from time
to time permitted by law against all liabilities and litigation expenses in the
event a claim shall be made or threatened against that person in, or that person
is made or threatened to be made a party to, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether or not brought by or on behalf of the registrant,
seeking to hold that person liable by reason of the fact that he or she is or
was serving in any of those capacities; provided, however, that this
indemnification shall not be effective with respect to that portion of any
liabilities or litigation expenses with respect to which that person is entitled
to receive payment under any insurance policy other than a directors' and
officers' insurance policy maintained by the registrant or any liabilities or
litigation expenses incurred on account of any of that person's activities which
were at the time taken known or believed by that person to be clearly in
conflict with the best interests of the registrant.
There is directors and officers insurance currently outstanding which
insures directors and officers of the registrant. Within the limits of their
coverage, these policies insure the directors and officers of the registrant
against certain losses resulting from claims against them in their capacity as
directors or officers to the extent that these losses are not indemnified by the
registrant. The losses covered by these policies are subject to various
exclusions and do not include fines or penalties imposed by law or other matters
uninsurable under applicable law.
In the Underwriting Agreement, a proposed form of which is attached as
Exhibit 1.1 to this Registration Statement, the underwriters will agree to
indemnify, under various conditions, the registrant, its directors, its officers
and persons who control the registrant within the meaning of the Securities Act
against various liabilities.
For the undertaking with respect to indemnification, see Item 17
herein.
Item 16. Exhibits and Financial Statement
(a) Exhibits
1.1 Form of Underwriting Agreement (Owner Trust).*
1.2 Form of Underwriting Agreement (Grantor Trust).*
3.1 Articles of Association of the Registrant.*
3.2 Bylaws of the Registrant.*
4.1 Form of Pooling and Servicing Agreement between the Registrant and the Trustee (including forms of
certificates).*
4.2 Form of Indenture between the Trust and the Indenture Trustee (including forms of notes).*
4.3 Form of Trust Agreement between the Trustee and the Registrant (including form of certificates).*
4.4 Form of Certificate of Trust (included in Exhibit 4.3).
5.1 Opinion of McGuireWoods LLP with respect to legality.*
5.2 Opinion of _________________ with respect to legality.*
8.1 Opinion of McGuireWoods LLP with respect to federal income tax matters.*
23.1 Consent of McGuireWoods LLP (included as part of Exhibits 5.1 and 8.1).
23.2 Consent of _________________ (included as part of Exhibit 5.2).
24.1 Powers of Attorney.
25.1 Form of Statement of Eligibility under the Trust Indenture Act of 1939 of the Indenture Trustee.*
99.1 Form of Sale and Servicing Agreement between the Registrant and the Trust.*
99.2 Form of Administration Agreement among the Trust, the Administrator and the Indenture Trustee.*
--------------------------------
* To be filed by amendment.
(b) Financial Statements
Not applicable.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein , and the
offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will by governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the
trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations
prescribed by the Commission.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and that the security rating
requirement set forth in Transaction Requirement B.5 of Form S-3 will be met by
the time of the sale of the securities registered hereunder and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Winston-Salem, State of North
Carolina, on March 28, 2001.
WACHOVIA BANK, N.A.
By: /s/ L.M. Baker, Jr.*
----------------------------------------
L.M. Baker, Jr.
Chairman, President and Chief Executive
Officer
(Principal Executive Officer)
By: /s/ Robert S. McCoy, Jr.*
---------------------------------------
Robert S. McCoy, Jr.
Vice Chairman, Chief Financial Officer
and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
*By: /s/ John H. Loughridge, Jr.
---------------------------------------
John H. Loughridge, Jr.
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registrant Statement has been signed by the following persons in the capacities
and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ L.M. Baker, Jr.* Chairman and Director March 28, 2001
- ------------------------------------
L.M. Baker, Jr.
/s/ F. Duane Ackerman* Director March 28, 2001
- ------------------------------------
F. Duane Ackerman
/s/ James S. Balloun* Director March 28, 2001
- ------------------------------------
James S. Balloun
/s/ Peter C. Browning* Director March 28, 2001
- ------------------------------------
Peter C. Browning
/s/ John T. Casteen, III* Director March 28, 2001
- ------------------------------------
John T. Casteen, III
/s/ Thomas K. Hearn, Jr.* Director March 28, 2001
- ------------------------------------
Thomas K. Hearn, Jr.
/s/ George W. Henderson, III* Director March 28, 2001
- ------------------------------------
George W. Henderson, III
/s/ W. Hayne Hipp* Director March 28, 2001
- ------------------------------------
W. Hayne Hipp
/s/ Robert A. Ingram* Director March 28, 2001
- ------------------------------------
Robert A. Ingram
/s/ George R. Lewis* Director March 28, 2001
- ------------------------------------
George R. Lewis
/s/ Elizabeth Valk Long* Director March 28, 2001
- ------------------------------------
Elizabeth Valk Long
/s/ Lloyd U. Noland, III* Director March 28, 2001
- ------------------------------------
Lloyd U. Noland, III
/s/ Morris W. Offit* Director March 28, 2001
- ------------------------------------
Morris W. Offit
/s/ Sherwood H. Smith, Jr.* Director March 28, 2001
- ------------------------------------
Sherwood H. Smith, Jr.
/s/ John C. Whitaker, Jr.* Director March 28, 2001
- ------------------------------------
John. C. Whitaker, Jr.
/s/ Dona Davis Young* Director March 28, 2001
- ------------------------------------
Dona Davis Young
*By: /s/ John H. Loughridge, Jr.
-----------------------------------
John H. Loughridge, Jr.
Attorney-in-Fact
March 28, 2001
- -----------------
*Note: Powers of Attorney appointing Kenneth W. McAllister, William M. Watson,
Jr. and John H. Loughridge, Jr., or any one of them acting singly, to execute
this Registration Statement and any amendments hereto on behalf of the
above-named individuals, are filed as Exhibit 24.1 to this Registration
Statement.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
1.1 Form of Underwriting Agreement (Owner Trust).*
1.2 Form of Underwriting Agreement (Grantor Trust).*
3.1 Articles of Association of the Registrant.*
3.2 Bylaws of the Registrant.*
4.1 Form of Pooling and Servicing Agreement between the Registrant and the Trustee (including
forms of certificates).*
4.2 Form of Indenture between the Trust and the Indenture Trustee (including forms of notes).*
4.3 Form of Trust Agreement between the Trustee and the Registrant (including form of certificates).*
4.4 Form of Certificate of Trust (included in Exhibit 4.3).
5.1 Opinion of McGuireWoods LLP with respect to legality.*
5.2 Opinion of _________________ with respect to legality.*
8.1 Opinion of McGuireWoods LLP with respect to federal income tax matters.*
23.1 Consent of McGuireWoods LLP (included as part of Exhibits 5.1 and 8.1).
23.2 Consent of _________________ (included as part of Exhibit 5.2).
24.1 Powers of Attorney.
25.1 Form of Statement of Eligibility under the Trust Indenture Act of 1939 of the Indenture Trustee.*
99.1 Form of Sale and Servicing Agreement between the Registrant and the Trust.*
99.2 Form of Administration Agreement among the Trust, the Administrator and the Indenture Trustee.*
- --------------------------------
* To be filed by amendment.